/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220217.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 Thursday, February 17, 2022, Vol. 23, No. 29 Headlines F R A N C E SIGFOX: Placed Into Receivership, Seeks Potential Buyers G E R M A N Y BLITZ F21-433: Moody's Assigns First Time B3 Corp. Family Rating VEONET GMBH: S&P Assigns Preliminary 'B' LT ICR, Outlook Stable I R E L A N D AQUEDUCT EUROPEAN 3-2019: Fitch Affirms B- Rating on Cl. F-R Notes BNPP AM EURO 2021: Fitch Affirms B- Rating on Class F Notes CARLYLE GLOBAL 2014-2: Fitch Raises Class E-R Notes to 'B' CVC CORDATUS XIV: Fitch Raises Rating on Class F Notes to 'B' PROVIDUS CLO II: Fitch Raises Class F Notes Rating to 'B' SCULPTOR EUROPEAN IX: Fitch Gives 'B-(EXP)' Rating on F Notes SOUND POINT II: Fitch Assigns Final B- Rating on Class F-R Notes SOUND POINT II: Moody's Assigns B3 Rating to EUR12MM Cl. F-R Notes I T A L Y INTER MEDIA: S&P Assigns 'B' Rating on EUR415MM Secured Bond N E T H E R L A N D S BANK OF INDUSTRY: Fitch Gives Final 'B' Rating on EUR700MM Notes S P A I N EL CORTE INGLES: S&P Affirms 'BB+' ICR & Alters Outlook to Stable U N I T E D K I N G D O M CAFFE NERO: Acquires SA Brain's Remaining 33% Stake in Coffee#1 CARILLION: FRC Allegedly Fails to Give Ex-Auditors Fair Chance FARMDROP: Creditors Owed GBP21.2 Million at Time of Collapse H BEARDSLEY: Goes Into Administration, 32 Jobs Affected MULBURY HOMES: Enters Administration, Ceases Trading - - - - - =========== F R A N C E =========== SIGFOX: Placed Into Receivership, Seeks Potential Buyers -------------------------------------------------------- James Blackman at Enterprise IOT reports that Sigfox has been placed into receivership in France, with a six-month window to find a new owner. The company's chief executive, Jeremy Prince, instructed the Toulouse Commercial Court to open the procedure on Jan. 26 to place Sigfox, as well as local Sigfox operator Sigfox France into receivership, in bid to find new buyers to take the business forward, Enterprise IOT relates. It cited a corporate slowdown as a result of the Covid-19 pandemic and global chip shortages, Enterprise IOT discloses. According to Enterprise IOT, a statement from Sigfox said: "The Toulouse Commercial Court opened on Jan. 27, at the request of the CEO, a receivership procedure for the benefit of Sigfox and its subsidiary Sigfox France, accompanied by an initial observation period of six months . . . to make it possible to identify, thanks to the implementation of a transfer plan, new buyers with the capacity to work for the long-term development of Sigfox and . . . the maintenance of jobs." The news, since confirmed, was first reported in French publication Notre Temps, which quoted a "slower adoption cycle" as the reason for the firm's financial crisis, Enterprise IOT notes. Elsewhere, Sigfox was quoted to state: "The IoT sector has been marked by the Covid-19 crisis, which has slowed activity over the past two years, and an electronic component market that has been in short supply for several months." It added: "These factors have weighed heavily on the company's financial situation and in particular its level of indebtedness, which today makes it difficult to accelerate the development of Sigfox and its world-renowned technology in an increasingly competitive market." Sigfox will continue with its commercial activities, it said, and to serve its customers. Sigfox has 350 staff, across offices in Boston, Dallas, Dubai, Madrid, Paris, Sao Paulo, Singapore, and Tokyo, as well as its base in Toulouse. It claims to process 80-odd million messages per day from 20-odd million devices, on Sigfox networks in 72 countries (covering 1.3 billion people, it reckons). In 2019, it had set itself a frankly bonkers target of connecting one billion IoT devices by 2023. ============= G E R M A N Y ============= BLITZ F21-433: Moody's Assigns First Time B3 Corp. Family Rating ---------------------------------------------------------------- Moody's Investors Service assigned a first time B3 corporate family rating and a B3-PD probability of default rating to Blitz F21-433 GmbH (veonet), the new top entity of veonet's restricted group. Concurrently, Moody's has assigned B2 ratings to the proposed EUR795 million senior secured term loan B (split in two EUR and GBP tranches), the proposed EUR150 million senior secured revolving credit facility and the proposed EUR50 million senior secured capex facility borrowed by Blitz F21-433 GmbH. The outlook is stable. The proceeds from the proposed senior secured term loan B along with EUR170 million second lien notes (unrated) and an equity injection from the new sponsors (Ontario Teachers' Pension Plan Board and PAI Partners) and the management, will be used to finance the acquisition of veonet. RATINGS RATIONALE veonet's B3 CFR is supported by (1) its good market positioning as #1 private operator of ophthalmology clinics in Germany, #1 in the UK, #1 in Switzerland, and #2 in the Netherlands, (2) its good diversification across different regulatory regimes in Europe that mitigates the risk of potential negative impact of any regulatory change or reimbursement decline, (3) defensive demand drivers since medical procedures are necessary and services mostly reimbursed and positive underlying trends supporting volumes such as ageing population and outsourcing towards private operators in the UK and the Netherlands, (4) barriers to entry and (5) high margin level which should translate into positive free cash flow generation going forward despite the high interest burden and planned growth capex. veonet's rating is constrained by (1) its high opening leverage reaching 7.1x under company definition or 8.6x as adjusted by Moody's (8.3x without the earn-out adjustment), the main difference being the treatment of some of the management normalizations and opening losses that Moody's includes as recurring costs in its definition of EBITDA, (2) the relative short track record of the group in its current size since the company undertook a large amount of M&A over the recent 2019-21 period, (3) the risk of future debt-funded acquisitions given the company's M&A history, its ambitious growth plans, the fragmented market structure, its private equity ownership and the flexibility in the debt documentation when it comes to raise future incremental debt and (4) the execution risks linked to its ambitious growth plans especially in the UK. The high level of M&A activity translated into a gap between pro forma and latest available audited credit metrics, a credit negative in Moody's view since it limits the rating agency's ability to track the past organic performance and the integration of past acquisitions. On balance, veonet is well positioned in the B3 rating category. OUTLOOK The stable outlook assumes that the demand drivers and the regulatory environment will remain mostly favorable, that the company will successfully integrate the large number of acquisitions closed over the last years and that it will smoothly execute on its ambitious growth plans. The stable outlook also assumes that any future debt-funded acquisitions will not translate into an increase in the leverage from the already high opening level. LIQUIDITY veonet's liquidity is adequate and it is supported by EUR20 million of cash on balance pro forma for the contemplated transaction, a new and fully undrawn EUR150 million senior secured revolving credit facility, a new fully available EUR50 million senior secured capex facility, a new fully available EUR50 million second lien capex facility (unrated) and long dated debt maturities once the proposed financing transaction is closed. STRUCTURAL CONSIDERATIONS The B2 ratings assigned to the senior secured instruments are one notch above the B3 CFR, reflecting the loss absorption buffer from the second lien debt (unrated). ESG CONSIDERATIONS veonet is predominantly exposed to social risks, given the highly regulated nature of the healthcare industry and the sensitivity to societal pressures related to the affordability of, access to and quality of healthcare services. veonet is mostly exposed to regulation and reimbursement schemes in Europe, which are important drivers of its credit profile. Human capital is also an important social consideration since veonet's business is labor intensive (personnel costs represented around 45% of revenue). Any legislative measures, such as an increase in minimum wages or collective bargaining pressure to significantly increase wages could exert pressure on veonet's margins. Moreover, veonet's revenue generation depends on its ability to attract and retain skilled physicians and assistants. Most of veonet's physicians in Germany and Switzerland are employed by the group and get fixed salaries with some incentive fees. This is to some extent different from the UK and Netherlands market structure where most of the doctors would be freelancers. The average staff tenure at veonet is 6 years in Germany and 7 years in Switzerland and the Netherlands. The company indicated that it experienced low churn rates of physicians in recent years. In case turnover would increase, there is the risk that veonet might not be able to answer the market demand or that quality standards might suffer. veonet should benefit from positive demographic trends, given the continued aging of the population. Governance considerations are important drivers of veonet's credit profile. Governance risks include any potential failure in internal control that could result in a loss of accreditation or reputational damage and, as a result, could harm veonet's credit profile. veonet has a good track record in terms of quality of services provided as illustrated by a lower level of complication post cataract surgery than the market, according to the company. Moody's considers that veonet has an aggressive financial strategy as illustrated by its tolerance for high financial leverage, which is common for companies under private equity ownership. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward rating pressure could arise over time if (1) the Moody's-adjusted debt/EBITDA falls below 6.0x on a sustained basis; (2) the Moody's-adjusted free cash flow / debt improves to 5% on a sustained basis. Downward rating pressure could develop if (1) the Moody's-adjusted debt/EBITDA remains above 8.0x on a sustained basis; (2) free cash flow remains negative for a prolonged period or (3) liquidity deteriorates. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE veonet, headquartered in Munich, is a pan-European ophthalmology platform, operating c.190 clinics across Germany, the UK, the Netherlands and Switzerland. The company focuses on outpatient cataract and intravitreal injection procedures treating more than 1.2 million patients every year. Veonet generated EUR401.7m of net sales for the twelve months that ended in November 2021. VEONET GMBH: S&P Assigns Preliminary 'B' LT ICR, Outlook Stable --------------------------------------------------------------- S&P Global Ratings assigned its 'B' long-term issuer credit rating on German-based ophthalmology group Veonet GmbH and its 'B' issue rating and '3' recovery rating to the company's term loan B (TLB) and revolving credit facility (RCF). The stable outlook reflects S&P's views that Veonet will expand profitably, leveraging on scale while generating solid free operating cash flow (FOCF) and comfortable fixed interest charge ratios. Ontario Teachers' Pension Plan Board and PAI Partners are acquiring leading pan-European group of ophthalmology clinics Veonet from Nordic Capital. The company is set to issue a EUR795 million seven-year pound and euro TLB and a EUR170 million eight-year second-lien term loan to support the transaction. There will also be a EUR150 million RCF and two first- and second-lien capital expenditure (capex) facilities totaling EUR100 million, all undrawn at close. Veonet has rapidly expanded, making it the leader in the fragmented European ophthalmology market. Over the past three years, the company passed from being a local Southern German ophthalmology service provider of EUR60 million-EUR70 million EBITDA to a pan-European player doubling its size (pro forma company-adjusted). Veonet concentrates in four main markets with stable regulatory systems. Germany represents the largest contributor, with about 44% of sales in the fiscal year (FY) ending Dec. 31, 2021, with the U.K. in second place at about 27%. Switzerland and the Netherlands represent 15% and 14% of sales, respectively. In all markets, Veonet has established itself as a leading ophthalmology player, being the no. 1 or no. 2 private provider in its regions, building its reputation as a trusted partner for health care authorities and public and private insurers. The fragmentation of the European ophthalmologist market and tight competition has made the company's strategy to keep on building in size and gain market share a key differentiator. Veonet has the majority of the total outpatient U.K market, 37% of the total Dutch market, and about 8% and 7% of the total German and Swiss markets, respectively. S&P said, "The consolidation, in our view, allowed the company to gain operational efficiencies and become the provider of choice ripping off the benefits of an increasing outsourcing trend to independent outpatient providers, especially in the U.K. We expect pro forma sales for 2022-2023 at EUR550 million-EUR600 million, S&P Global Ratings-adjusted EBITDA of EUR140 million-EUR160 million, and EBITDA margins of 25%-27% on average." An ambitious growth strategy in the U.K with an easy-to-replicate industrial model will be key to continue building on profitability. Given the attractive market growth rates, fragility in the U.K. health care system, unmet demand, and greenfield whitespace in the country, Veonet has the potential to significantly benefit, as an independent service provider, from certain underlying dynamics. Before the pandemic, the National Health Service (NHS) depended heavily on independent service providers (ISPs) like Veonet to address shortages and undertreatment of some eye-related conditions like cataracts, outsourcing about 27% of the total cataract procedures in 2019. The difficulties were exacerbated during COVID-19, which created a huge backlog of undertreatments. Outsourcing passed to about 40% in 2021. S&P believes the NHS will not expand its capacity and continue relying on trusted ISPs to serve the unmet demand with a potential to further increase penetration to about 52% by 2026. Veonet, through its quality service, has built strong relationships with clinical commissioning groups and the NHS to have access to the growing patient flow and clear the backlog. More recently, certain procedures like intravitreal injections (IVIs) that were exclusively the domain of the NHS given its urgency and criticality, are beginning to be outsourced too. The potential for ISPs' penetration in IVI procedures could pass to 10%-25% in 2026 from 6% in 2021, giving Veonet a further push opportunity in its sales growth. S&P expects growth in the U.K. to average 16%-17% per year over 2022-2026. The company has also identified significant whitespace in the U.K., planning to open additional greenfield that could represent EUR60 million-EUR65 million additional sales by 2026. Finally, the standardized operations due to the greenfield nature of the U.K. business allows for higher profitability versus other markets, making it highly attractive. The critical nature of eye-related conditions and mix in regulatory systems give the company earnings stability. The European ophthalmology market, with projected growth trends of about 4.5%-5.5% per year, is a very attractive market driven by an aging population with an increasing incidence in sight-threatening eye conditions like cataracts and age-related macular degeneration and an urgent need for treatment. Veonet operates in strategic treatment areas split into cataracts surgical services (about 40%), IVI (20%), other surgical procedures (10%), and consultations for diagnosis (30%). Some of the conditions suffered by patients such as wet age-related macular degeneration, which can result in unreversible blindness, represents a recurring and stable revenue stream given the usual treatment through IVIs consists of six-to-eight injections per year. The mix in regulatory systems with different reimbursement procedures provides a shield from changing regulations. Also, the internal referral systems, like in Switzerland and Germany, through consultations allows for stable and highly predictable revenue. In Germany, 75% of total demand is through internal referrals. S&P considers the industry's barriers to entry high. This is because of the regulatory requirements in each market that set conditions such as licenses, which are required in Germany as a prerequisite for reimbursement, or restrictions on the limit of physicians per region like in Switzerland. Longstanding relationships are also necessary to negotiate reimbursement budgets in the Netherlands or to receive patient flow transferred from the public system like in the U.K. All of these represent hurdles for new market entrants. In certain countries like in the U.K., an initial investment is needed before having all official approvals, providers need to spend on staff, and clinics should be running before receiving official approval from the public system to operate. Exposure to tariffs cuts remain a risk. Although most markets have stable regulatory systems, tariff cuts and regulatory changes could become issues. In Switzerland, a new TARMED Suisse (the Swiss tariff system) was introduced in 2018, which reduced reimbursement for several ophthalmology procedures including cataract and IVI operations and caused a 10% reduction in cataract reimbursement. The TARDOC proposal that would replace the TARMED tariff could represent a further reduction of 10% in cataract tariffs in the next three-to-five years, potentially pressuring sales in the Swiss market. However, these tariff cuts, when enacted, did not materially affect the company's profitability. Financial sponsor ownership and an expansion strategy limit the case for pronounced deleveraging. S&P said, "We anticipate the company will continue its consolidation and expansion strategy to build on market share and maintain its leadership position. The financial sponsor ownership, high start adjusted-leverage level above 5x, and growth strategy make rapid deleveraging unlikely. Deleveraging will be conditional on the company's ability to execute a spotless growth plan and seamless integrate all bolt-ons and clinics. We expect that as Veonet expands in scale and profitability, it will absorb extraordinary costs linked to bolt-on or acquisitions linked to opening of new clinics. Therefore, we expect leverage to be about 8x in 2022, 6.6x in 2023, and around 6x in 2024." The 'B' rating reflects the company's asset-light model with solid cash flow. Before Veonet's expansion strategy, the company had already benefited from a good cash conversion of 70%-80% on average. S&P said, "Considering the expansion phase, we assume a moderate cash absorption to support organic top-line growth with a peak in capex from 2022-2023. Veonet has low maintenance capex of about 2.4% of sales on average that, together with a disciplined capex plan after 2022 when greenfield expansion will slow down, will translate into solid cash conversion. We expect FOCF of EUR40 million-EUR50 million in 2023." S&P said, "The final ratings will depend on our receipt and satisfactory review of all final documentation and final terms of the transaction. The preliminary ratings should therefore not be construed as evidence of final ratings. If we do not receive final documentation within a reasonable time, or if the final documentation and final terms of the transaction depart from the materials and terms reviewed, we reserve the right to withdraw or revise the ratings. Potential changes include, but are not limited to, utilization of the proceeds, maturity, size and conditions of the facilities, financial and other covenants, security, and ranking. "The stable outlook reflects our view that Veonet will post sustainable profitable growth. In our base-case scenario, we assume a seamless execution of its expansion plan in the U.K as well as ongoing organic growth in its clinics in Germany, Switzerland, and the Netherlands. We therefore assume a robust top-line growth with profitability building up in 2022 and 2023. We assume S&P Global Ratings-adjusted debt to EBITDA will be high, at 7.9x in 2022, but will improve to below 7x as early as in 2023 if Veonet delivers on its expansion plan. "We would lower the rating over the next 12 months if Veonet fails to execute its top-line growth strategy, which would mean delays in ramping up the new greenfield sites or regulatory hurdles in operating them. We also believe that cuts in tariffs or a regulatory change in any of its current markets could hamper the company's profitable growth. As well, failure to deliver positive free cash flow and an inability to quickly deleverage below 7x could lead us to consider a negative rating action." An upgrade would depend on reducing adjusted leverage to below 5x as well as a supportive financial policy. Also, a prerequisite for a positive rating action would be increasing sales and EBITDA, in particular in the U.K., the most important growth market for the group. ESG credit indicators: E-2, S-2, G-3 S&P said, "Governance factors are a moderately negative consideration in our rating analysis of Veonet, as is the case for most rated entities owned by private-equity sponsors. We believe the group's highly leveraged financial risk profile points to corporate decision making that prioritizes the interests of the controlling owners. This also reflects the generally finite holding periods and a focus on maximizing shareholder returns. "We assigned our 'B' issue and '3' recovery ratings to the proposed senior secured TLB and RCF, reflecting our expectations of meaningful recovery (50%-70% rounded estimate: 60%) in the event of default." The recovery rating is supported by the negligible priority debt, while constrained by the significant quantum of secured debt. The senior secured TLB is secured by share pledges, intercompany loans, and bank accounts. The documentation also includes comprehensive guarantor package with guarantor coverage test of minimum 80% of EBITDA and a springing financial covenant on the RCF. In S&P's hypothetical default scenario, it assumes changes in regulatory systems, tariff cuts, and higher competition leading to declining operational performance. S&P values Veonet as a going concern, underpinned by the company's strong position in European outpatient ophthalmology with an integrated platform. -- Year of default: 2025 -- Emergence EBITDA after recovery adjustments: About EUR118 million -- Implied enterprise value multiple: 5.5x -- Jurisdiction: Germany -- Gross enterprise value at default: About EUR649 million -- Net value available to debtors after 5% administrative costs: EUR616 million -- Senior secured debt claims: About EUR1.01 billion --Recovery expectations: 50%-70% (rounded estimate: 60%) --Recovery rating: 3 All debt amounts include six months' prepetition interest. The RCF is assumed to be 85% drawn at default. Recovery expectations are rounded down to the nearest 5%. ============= I R E L A N D ============= AQUEDUCT EUROPEAN 3-2019: Fitch Affirms B- Rating on Cl. F-R Notes ------------------------------------------------------------------ Fitch Ratings has upgraded Aqueduct European CLO 3-2019 DAC's class D-R and E-R notes and affirmed all other classes. The class B-1R, B-2R, C-R, D-R, E-R and F-R notes were removed from Under Criteria Observation (UCO). The Rating Outlook for all classes is Stable. DEBT RATING PRIOR ---- ------ ----- Aqueduct European CLO 3-2019 DAC A-R Loan LT AAAsf Affirmed AAAsf A-R Notes XS2340855498 LT AAAsf Affirmed AAAsf B-1R XS2340855654 LT AAsf Affirmed AAsf B-2R XS2340856207 LT AAsf Affirmed AAsf C-R XS2340856892 LT Asf Affirmed Asf D-R XS2340857510 LT BBBsf Upgrade BBB-sf E-R XS2340858161 LT BBsf Upgrade BB-sf F-R XS2340858328 LT B-sf Affirmed B-sf TRANSACTION SUMMARY Aqueduct European CLO 3-2019 DAC is a cash flow collateralized loan obligation (CLO) backed by a portfolio of mainly European leveraged loans and bonds. The transaction is actively managed by HPS Investment Partners CLO (UK) LLP and will exit its reinvestment period in February 2026. KEY RATING DRIVERS CLO Criteria Update: The rating actions mainly reflect the impact of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria and the shorter risk horizon incorporated into Fitch's updated stressed portfolio analysis. The analysis considered cash flow modelling results for the stressed portfolio based on Fitch collateral quality matrices specified in the transaction's documentation. The transaction has four Fitch collateral quality matrices based on top 10 obligor concentration limits of 16.0% and 22.5% and fixed-rate collateral obligation limits of 10% and 0%. Fitch's analysis was based on the two matrices specifying a 16.0% top 10 obligor concentration limit and 10% and 0% fixed-rate collateral obligation limits, as the agency considered these matrices as the most relevant. The Stable Outlooks reflect that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with the respective classes' ratings. Deviation from Model-Implied Ratings: The ratings assigned to the class B-1R, B-2R, C-R and E-R notes are one notch below their respective model-implied ratings. The deviations reflect the long remaining reinvestment period until February 2026, during which the portfolio can change due to reinvestment or negative portfolio migration. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The largest single issuer and largest 10 issuers in the portfolio as reported by the trustee, represent 1.5% and 12.6% of the portfolio, respectively. Stable Asset Performance: The transaction is passing all collateral quality, portfolio profile and coverage tests. Exposure to assets with a Fitch-derived rating of 'CCC+' and below is reported by the trustee at 2.7%, below the 7.5% limit. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the obligors to be at the 'B'/'B-' rating level. The trustee calculated Fitch weighted-average rating factor (WARF) is at 33.8, below the covenant maximum limit of 35.0. The Fitch calculated WARF is at 25.4 after applying the updated Fitch CLOs and Corporate CDOs Rating Criteria. High Recovery Expectations: 98.9% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as being more favorable than for second-lien, unsecured and mezzanine assets. The Fitch weighted-average recovery rate of the current portfolio is reported by the trustee at 67.0%, compared with the covenant minimum of 62.9%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the rating default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the rating recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of up to four notches, depending on the notes; -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortization does not compensate for a higher loss expectation than initially assumed due to unexpected high level of default and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in upgrades of up to five notches, depending on the notes; -- Except for the tranches already at the highest 'AAAsf' rating, upgrades may occur in case of better-than-expected portfolio credit quality and deal performance, leading to higher CE available to cover for losses on the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. BNPP AM EURO 2021: Fitch Affirms B- Rating on Class F Notes ----------------------------------------------------------- Fitch Ratings has upgraded BNPP AM Euro CLO 2021 DAC's class E notes and affirmed the class X, A, B-1, B-2, C, D and F notes. The class B-1 through F notes have been removed from Under Criteria Observation (UCO), and all Rating Outlooks are Stable. DEBT RATING PRIOR ---- ------ ----- BNPP AM Euro CLO 2021 DAC A XS2345036938 LT AAAsf Affirmed AAAsf B-1 XS2345037076 LT AAsf Affirmed AAsf B-2 XS2345037316 LT AAsf Affirmed AAsf C XS2345037589 LT Asf Affirmed Asf D XS2345037662 LT BBB-sf Affirmed BBB-sf E XS2345038124 LT BBsf Upgrade BB-sf F XS2345038041 LT B-sf Affirmed B-sf X XS2345036854 LT AAAsf Affirmed AAAsf TRANSACTION SUMMARY BNPP AM Euro CLO 2021 DAC is a cash flow CLO comprised of mostly senior secured obligations. The transaction is actively managed by BNP Paribas Asset Management France and will exit its reinvestment period in September 2025. KEY RATING DRIVERS CLO Criteria Update: The rating actions mainly reflect the impact of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria, and the shorter risk horizon incorporated in Fitch's updated stressed portfolio analysis. The analysis considered cash flow modelling results for the stressed portfolio based on the Dec. 31, 2021 trustee report. The transaction has four matrices, based on 17% and 20% top 10 obligor limits with 0% and 10% fixed-rate assets. Fitch analyzed the matrices specifying the 17% top 10 obligor limit with 0% and 10% fixed-rate assets as the agency viewed these as the most rating relevant. The Stable Outlooks on all classes reflect Fitch's expectation that the classes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with such class's rating. Deviation from Model-Implied Ratings: The ratings assigned to all notes, except the class X, A and F notes, are one notch below their respective model implied ratings. The deviations reflect the remaining reinvestment period until September 2025, during which the portfolio can change due to reinvestment or negative portfolio migration. Stable Asset Performance: The transaction metrics indicate stable asset performance. The transaction is passing all coverage tests, collateral quality tests and portfolio profile tests. Exposure to assets with a Fitch-derived rating (FDR) of 'CCC+' or below is 0% excluding non-rated assets, as calculated by Fitch. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors in the 'B'/'B-' category. The Fitch weighted-average rating factor (WARF), as calculated by the trustee, was 33.3, which is below the maximum covenant of 35.0. The WARF, as calculated by Fitch under the updated criteria, was 24.9. High Recovery Expectations: Senior secured obligations comprise 100.0% of the portfolio as calculated by the trustee. Fitch views the recovery prospects for these assets as more favorable than for second-lien, unsecured and mezzanine assets. The Fitch WARR reported by the trustee was 63.2%, against the covenant at 60.8%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 13.2%, and no obligor represents more than 1.5% of the portfolio balance, as reported by the trustee. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the rating default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the rating recovery rate (RRR) by 25% at all rating levels in the stressed portfolio will result in downgrades of up to four notches, depending on the notes; -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) does not compensate for a larger loss expectation than initially assumed due to unexpectedly high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in an upgrade of up to five notches, depending on the notes; -- Except for the tranches already at the highest 'AAAsf' rating, upgrades may occur in the case of better than expected portfolio credit quality and deal performance that leads to higher CE and excess spread available to cover losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY BNPP AM Euro CLO 2021 DAC Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. CARLYLE GLOBAL 2014-2: Fitch Raises Class E-R Notes to 'B' ---------------------------------------------------------- Fitch Ratings has upgraded Carlyle Global Market Strategies Euro CLO 2014-2 DAC 's class E-R notes and affirmed the others. The class A-2A-RRR to E-R notes have been removed from Under Criteria Observation (UCO). DEBT RATING PRIOR ---- ------ ----- Carlyle Global Market Strategies Euro CLO 2014-2 DAC A-1-RRR XS2339017688 LT AAAsf Affirmed AAAsf A-2A-RRR XS2339019031 LT AAsf Affirmed AAsf A-2B-RRR XS2339019890 LT AAsf Affirmed AAsf B-1-R XS1898112922 LT Asf Affirmed Asf B-2-R XS1898113227 LT Asf Affirmed Asf C-R XS1898113656 LT BBBsf Affirmed BBBsf D-R XS1898116162 LT BBsf Affirmed BBsf E-R XS1898116246 LT Bsf Upgrade B-sf TRANSACTION SUMMARY Carlyle Global Market Strategies Euro CLO 2014-2 DAC is a cash flow collateralised loan obligations (CLO) backed by a portfolio of mainly European leveraged loans and bonds. The transaction is actively managed by CELF Advisors LLP and is within its reinvestment period. KEY RATING DRIVERS CLO Criteria Update: The rating actions mainly reflect the impact of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria and the shorter risk horizon incorporated in Fitch's updated stressed portfolio analysis. The analysis considered cash flow modelling results for the current and stressed portfolios based on the 10 January 2022 trustee report. The rating actions are based on Fitch's updated stressed portfolio analysis, which applied the agency's collateral quality matrix specified in the transaction documentation. The transaction has two matrices based on 18% and 20% top 10 borrower concentration. Fitch analysed the matrix that corresponds to a top 10 obligor concentration at 18%, since the top 10 obligor concentration of the portfolio is well below 18%. The weighted average life (WAL) used for the transaction's stressed portfolio and matrices analysis is floored at six years after a 1.3-month reduction from the WAL covenant. This is to account for structural and reinvestment conditions after the reinvestment period, including the satisfaction of the coverage and Fitch 'CCC' limit tests, together with a progressively decreasing WAL covenant. In Fitch's opinion, these conditions reduce the effective risk horizon of the portfolio during stress periods. The Stable Outlooks on the notes reflect Fitch's expectation of sufficient credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios that are commensurate with the notes' ratings. Furthermore, the transaction is still in its reinvestment period, so no deleveraging is expected. Model-implied Rating Deviation: The class A-2A-RRR to E-R notes' ratings are one notch below their model-implied ratings. The deviation reflects the remaining reinvestment period until May 2023, during which the portfolio can change significantly due to reinvestment or negative portfolio migration. Stable Asset Performance: The transaction's metrics indicate stable asset performance. According to the trustee report, the transaction is below par by around 1% but it is passing all coverage, collateral quality and portfolio profile tests. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors at 'B'/'B-'. The weighted average rating factor (WARF) as calculated by the trustee was 35.9, which is below the maximum covenant of 37.0. The WARF as calculated by Fitch under the updated criteria was 26.2. High Recovery Expectations: Senior secured obligations comprise 99.9% of the portfolio as calculated by the trustee. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch WARR reported by the trustee was 63.7%, against a minimum covenant at 63.4%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 12.94%, and no obligor represents more than 1.58% of the portfolio balance, as calculated by Fitch. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of up to four notches depending on the notes. -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortization does not compensate for a higher loss expectation than initially assumed due to unexpected high level of default and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in upgrades of up to three notches depending on the notes. -- Except for the tranches already at the highest 'AAAsf' rating, upgrades may occur in case of better-than-expected portfolio credit quality and deal performance, leading to higher CE available to cover for losses on the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Carlyle Global Market Strategies Euro CLO 2014-2 DAC Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. CVC CORDATUS XIV: Fitch Raises Rating on Class F Notes to 'B' ------------------------------------------------------------- Fitch Ratings has upgraded CVC Cordatus Loan Fund XIV DAC's class D-R and E and F notes and affirmed all other classes. The class B-1-R, B-2-R, C-R, D-R, E and F notes were removed from Under Criteria Observation (UCO). The Rating Outlook for all classes is Stable. DEBT RATING PRIOR ---- ------ ----- CVC Cordatus Loan Fund XIV DAC A-1-R XS2350860693 LT AAAsf Affirmed AAAsf A-2-R XS2350861238 LT AAAsf Affirmed AAAsf A-3-R XS2350862129 LT AAAsf Affirmed AAAsf B-1-R XS2350862475 LT AAsf Affirmed AAsf B-2-R XS2350863366 LT AAsf Affirmed AAsf C-R XS2350864174 LT Asf Affirmed Asf D-R XS2350864414 LT BBBsf Upgrade BBB-sf E XS1964661422 LT BBsf Upgrade BB-sf F XS1964661851 LT Bsf Upgrade B-sf TRANSACTION SUMMARY CVC Cordatus Loan Fund XIV DAC is a cash flow collateralized loan obligation (CLO) backed by a portfolio of mainly European leveraged loans and bonds. The transaction is actively managed by CVC Credit Partners European CLO Management LLP and will exit its reinvestment period in November 2023. KEY RATING DRIVERS CLO Criteria Update: The rating actions mainly reflect the impact of Fitch's recently updated CLOs and Corporate CDOs Rating Criteria and the shorter risk horizon incorporated into Fitch's updated stressed portfolio analysis. The analysis considered cash flow modelling results for the stressed portfolio based on a Fitch collateral quality matrix specified in the transaction's documentation. The transaction has two Fitch collateral quality matrices based on top 10 obligor concentration limits of 18.0% and 26.5%. Fitch's analysis was based on the matrix specifying an 18.0% top 10 obligor concentration limit, as the agency considered this matrix as the most relevant. The Stable Outlooks reflect that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with the respective classes' ratings. Deviation from Model-Implied Ratings: The ratings assigned to all notes, except the class A-1-R, A-2-R and A-3-R notes, are one notch below their respective model-implied ratings. The deviations reflect the remaining reinvestment period until November 2023, during which the portfolio can change due to reinvestment or negative portfolio migration. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The largest single issuer and largest 10 issuers in the portfolio represent 1.9% and 15.7% of the portfolio, respectively. Stable Asset Performance: The transaction is passing all collateral quality, portfolio profile and coverage tests. Exposure to assets with a Fitch-derived rating of 'CCC+' and below is reported by the trustee at 3.2%, below the 7.5% limit. 'B' Portfolio: Fitch assesses the average credit quality of the obligors to be at the 'B' rating level. The trustee calculated Fitch weighted-average rating factor (WARF) is at 32.7, below the covenant maximum limit of 34.0. The Fitch calculated WARF is at 24.4 after applying the updated Fitch CLOs and Corporate CDOs Rating Criteria. High Recovery Expectations: 98.9% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as being more favorable than for second-lien, unsecured and mezzanine assets. The Fitch weighted-average recovery rate of the current portfolio is reported by the trustee at 65.20%, compared with the covenant minimum of 61.18%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the rating default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the rating recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of up to four notches, depending on the notes; -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortization does not compensate for a higher loss expectation than initially assumed due to unexpected high level of default and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in upgrades of up to four notches, depending on the notes; -- Except for the tranches already at the highest 'AAAsf' rating, upgrades may occur in case of better-than-expected portfolio credit quality and deal performance, leading to higher CE available to cover for losses on the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY CVC Cordatus Loan Fund XIV DAC Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. PROVIDUS CLO II: Fitch Raises Class F Notes Rating to 'B' --------------------------------------------------------- Fitch Ratings has upgraded Providus CLO II DAC's class D, E and F notes and affirmed the class A-R, B-1-R, B-2-R and C-R notes. The class B-1-R through F notes have been removed from Under Criteria Observation (UCO). DEBT RATING PRIOR ---- ------ ----- Providus CLO II DAC A-R XS2323296702 LT AAAsf Affirmed AAAsf B-1-R XS2323297346 LT AAsf Affirmed AAsf B-2-R XS2323298070 LT AAsf Affirmed AAsf C-R XS2323298666 LT Asf Affirmed Asf D XS1905536980 LT BBBsf Upgrade BBB-sf E XS1905537368 LT BBsf Upgrade BB-sf F XS1905537525 LT Bsf Upgrade B-sf TRANSACTION SUMMARY Providus CLO II DAC is a cash flow CLO comprised of mostly senior secured obligations. The transaction is actively managed by Permira Credit Group Holdings Limited and will exit its reinvestment period in January 2023. KEY RATING DRIVERS CLO Criteria Update: CLO Criteria Update: The rating actions mainly reflect the impact of the recently updated Fitch CLOs and Corporate CDOs Rating Criteria and the shorter risk horizon incorporated in Fitch's updated stressed portfolio analysis. The analysis considered cash flow modelling results for the current and stressed portfolios based on the Jan. 5, 2022 trustee report. Fitch's updated analysis applied the agency's collateral quality matrix specified in the transaction documentation. The transaction has four matrices, based on 16% and 26% top 10 obligor concentration limit and a 0% and 10% fixed rate limit. Fitch's updated analysis applied the agency's collateral quality matrix specifying the 16% top 10 obligor limit and the 10% fixed rate limit as the agency viewed this as the most rating relevant. The Stable Outlook on all classes of notes reflects Fitch's expectation that the class has a sufficient level of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with the class' rating. Deviation from Model-Implied Ratings: The rating actions for the class B-1-R through F notes are one notch below their respective model implied ratings (MIR) produced from Fitch's cash flow analysis. The deviations reflect the remaining reinvestment period until January 2023, during which the portfolio can change due to reinvestment or negative portfolio migration. The rating actions for the class A-R of notes are in line with their MIR. Stable Asset Performance: The transaction metrics indicate stable asset performance. The transaction is passing all coverage tests, collateral quality tests, and portfolio profile tests. Exposure to assets with a Fitch-derived rating (FDR) of 'CCC+' and below is 2.0% excluding non-rated assets, as calculated by Fitch. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors in the 'B'/'B-' category. The weighted average rating factor (WARF) as calculated by the trustee was 33.1, which is below the maximum covenant of 35.0. The WARF, as calculated by Fitch under the updated criteria, was 24.9. High Recovery Expectations: Senior secured obligations comprise 96.6% of the portfolio as calculated by the trustee. Fitch views the recovery prospects for these assets as more favorable than for second-lien, unsecured and mezzanine assets. The Fitch WARR reported by the trustee was 68.2%, against the covenant at 64.9%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 16.7%, and no obligor represents more than 2.2% of the portfolio balance, as reported by the trustee. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the rating default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the rating recovery rate (RRR) by 25% at all rating levels in the stressed portfolio will result in downgrades of up to two notches, depending on the notes; -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) does not compensate for a larger loss expectation than initially assumed due to unexpectedly high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in an upgrade of up to four notches, depending on the notes; -- Except for the tranche already at the highest 'AAAsf' rating, upgrades may occur in the case of better than expected portfolio credit quality and deal performance that leads to higher CE and excess spread available to cover losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SCULPTOR EUROPEAN IX: Fitch Gives 'B-(EXP)' Rating on F Notes -------------------------------------------------------------- Fitch Ratings has assigned Sculptor European CLO IX DAC's notes expected ratings. DEBT RATING ---- ------ Sculptor European CLO IX DAC A LT AAA(EXP)sf Expected Rating B-1 LT AA(EXP)sf Expected Rating B-2 LT AA(EXP)sf Expected Rating C LT A(EXP)sf Expected Rating D LT BBB-(EXP)sf Expected Rating E LT BB-(EXP)sf Expected Rating F LT B-(EXP)sf Expected Rating Subordinated Notes LT NR(EXP)sf Expected Rating Z LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY Sculptor European CLO IX DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of corporate rescue loans, senior unsecured, mezzanine, second-lien loans and high-yield bonds. Net proceeds from the note issuance will be used to fund a portfolio with a target par of EUR400 million. The portfolio will be actively managed by Sculptor Europe Loan Management Limited. The collateralised loan obligation (CLO) has a 4.6-year reinvestment period and 8.5-year weighted average life (WAL). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch places the average credit quality of obligors in the 'B'/'B-' category. The Fitch weighted average rating factor of the identified portfolio is 24.7. High Recovery Expectations (Positive): At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate of the identified portfolio is 63.5%. Diversified Portfolio (Positive): The indicative maximum exposure of the 10 largest obligors for assigning the expected ratings is 22.5% of the portfolio balance and maximum fixed rated obligations are limited at 10% of the portfolio. The transaction also includes various concentration limits, including the maximum exposure to the three largest (Fitch-defined) industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a 4.6-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Reduced Risk Horizon (Neutral): Fitch's analysis of the matrices is based on a stressed-case portfolio with a 8.5-year WAL. Under the agency's CLOs and Corporate CDOs Rating Criteria, the WAL used for the transaction stress portfolio was 12 months less than the WAL covenant to account for structural and reinvestment conditions after the reinvestment period, including the overcollateralisation tests and Fitch 'CCC' limitation passing after reinvestment, together with a linearly decreasing WAL covenant. Combined with loan pre-payment expectations, this ultimately reduces the maximum possible risk horizon of the portfolio. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the rating default rate (RDR) at all rating levels by 25% of the mean RDR and a 25% decrease of the recovery rate at all rating levels would lead to a downgrade of up to four notches for the rated notes; -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortisation does not compensate for a larger loss expectation than initially assumed due to unexpectedly high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and a 25% increase of the recovery rate at all rating levels, would lead to an upgrade of up to three notches for the rated notes, except the class A notes, which are already the highest rating on Fitch's scale and cannot be upgraded; -- After the end of the reinvestment period, upgrades may occur in case of a better-than-initially expected portfolio credit quality and deal performance, leading to higher CE and excess spread available to cover for losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOUND POINT II: Fitch Assigns Final B- Rating on Class F-R Notes ---------------------------------------------------------------- Fitch Ratings has assigned Sound Point Euro CLO II Funding DAC's refinancing notes final ratings. DEBT RATING PRIOR ---- ------ ----- Sound Point Euro CLO II Funding DAC A XS2032700978 LT PIFsf Paid In Full AAAsf A-R XS2439759130 LT AAAsf New Rating B-1 XS2032701513 LT PIFsf Paid In Full AAsf B-1-R XS2439759213 LT AAsf New Rating B-2 XS2032701943 LT PIFsf Paid In Full AAsf B-2-R XS2439759304 LT AAsf New Rating C XS2032702248 LT PIFsf Paid In Full A+sf C-R XS2439759486 LT Asf New Rating D XS2032702677 LT PIFsf Paid In Full BBB-sf D-R XS2439759643 LT BBB-sf New Rating E XS2032702917 LT PIFsf Paid In Full BB-sf E-R XS2439759569 LT BB-sf New Rating F XS2032702594 LT PIFsf Paid In Full B-sf F-R XS2439759726 LT B-sf New Rating TRANSACTION SUMMARY Sound Point Euro Funding II CLO DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds were used to redeem the old notes (excluding subordinated notes). The portfolio is actively managed by Sound Point CLO C-MOA, LLC. The collateralised loan obligation has a 4.7-year reinvestment period and a nine-year weighted average life (WAL). KEY RATING DRIVERS Above Average Portfolio Credit Quality (Positive): Fitch places the average credit quality of obligors in the 'B' category. The Fitch weighted average rating factor (WARF) of the current portfolio is 24.1. High Recovery Expectations (Positive): At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate (WARR) of the current portfolio is 64.8%. Diversified Asset Portfolio (Positive): The transaction has a concentration limit for the 10 largest obligors of 18%. The transaction also includes various concentration limits, including the maximum exposure to the three largest (Fitch-defined) industries in the portfolio at 40%. These covenants ensure the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a 4.7-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Cash Flow Modelling (Neutral): The WAL used for the transaction's stress portfolio analysis is 12 months less than the WAL covenant at the issue date. This reduction to the risk horizon accounts for the strict reinvestment conditions envisaged after the reinvestment period. These include passing both the coverage tests and the Fitch 'CCC' limit after reinvestment and a WAL covenant that progressively steps down, both before and after the end of the reinvestment period. In Fitch's opinion, these conditions would reduce the effective risk horizon of the portfolio during the stress period. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An increase of the default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of no more than four notches. -- Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortisation does not compensate for a larger loss expectation than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A reduction of the RDR at all rating levels by 25% of the mean RDR and a 25% increase of the recovery rate at all rating levels would lead to an upgrade of up to three notches for the rated notes, except the class A notes, which are already at the highest rating on Fitch's scale and cannot be upgraded. -- Upgrades could occur after the end of the reinvestment period if portfolio credit quality and deal performance were better than expected, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. DATA ADEQUACY Sound Point Euro CLO II Funding DAC Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOUND POINT II: Moody's Assigns B3 Rating to EUR12MM Cl. F-R Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has assigned the following definitive ratings to refinancing notes issued by Sound Point Euro CLO II Funding Designated Activity Company (the "Issuer"): EUR248,000,000 Class A-R Senior Secured Floating Rate Notes due 2036, Assigned Aaa (sf) EUR25,000,000 Class B-1-R Senior Secured Floating Rate Notes due 2036, Assigned Aa2 (sf) EUR15,000,000 Class B-2-R Senior Secured Fixed Rate Notes due 2036, Assigned Aa2 (sf) EUR27,000,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned A2 (sf) EUR26,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned Baa3 (sf) EUR20,000,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned Ba3 (sf) EUR12,000,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned B3 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in Moody's methodology. As part of this reset, the Issuer has amended the base matrix and modifiers that Moody's has taken into account for the assignment of the definitive ratings. The Issuer is a managed cash flow CLO. At least 90% of the portfolio must consist of secured senior loans or senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, high yield bonds and mezzanine loans. The underlying portfolio is fully ramped as of the closing date and comprises predominantly corporate loans to obligors domiciled in Western Europe. Sound Point CLO C-MOA, LLC will continue to manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's 4.7-year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations and credit improved obligations. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. In addition to the seven classes of notes rated by Moody's, the Issuer has originally issued EUR33.75M of Subordinated Notes which remain outstanding and are not rated. 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 rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in December 2021. Moody's used the following base-case modeling assumptions: Target Par Amount: EUR400,000,000 Defaulted Par: EUR0 as of January 7, 2022 Diversity Score: 50 Weighted Average Rating Factor (WARF): 2950 Weighted Average Spread (WAS): 3.60% Weighted Average Coupon (WAC): 4.00% Weighted Average Recovery Rate (WARR): 44.0% Weighted Average Life (WAL): 8.0 years ========= I T A L Y ========= INTER MEDIA: S&P Assigns 'B' Rating on EUR415MM Secured Bond ------------------------------------------------------------ S&P Global Ratings assigned a 'B' long-term issue rating to Inter Media And Communication SpA (MediaCo)'s EUR415 million five-year secured bond. The stable outlook reflects S&P's expectation that Inter will continue playing in Italian football's top division, allowing MediaCo to benefit from sufficient cash flows to service its new debt issuance and support its refinancing needs when the bonds mature in 2027. MediaCo is the main financing vehicle for Italian football club F.C. Internazionale (Inter or TeamCo). MediaCo services its bond issuances through media and sponsorship contracts receivables. TeamCo depends on the distributions it receives from MediaCo to fund part of its operations. -- TeamCo's long track record of participation in Serie A, Italian football's top division that generates the fourth-highest broadcasting revenue among European domestic football leagues. -- The security package comprises TeamCo's trademark and intellectual property, a key business asset. -- The structural seniority of MediaCo-issued debt to TeamCo's financial and operational expenses, including players' salaries. -- The short-term nature of the broadcasting and sponsorship contracts, typical of the live sports industry, exposes cash flow to potential volatility. -- The substantial refinancing risk for MediaCo's debt. -- MediaCo's ability to repay its debt is somewhat dependent on TeamCo's operations and financial conditions. -- TeamCo's unstable capital structure, which gives rise to a dependency on shareholder support to avoid liquidity shortfalls. MediaCo's issuance will help alleviate near term liquidity risks at TeamCo, but substantial refinancing risk exposure will remain on the bond maturity date. The bond issuance will extend TeamCo's debt tenor and remove contractual debt maturities inside of the next 12 months. S&P said, "This, in conjunction with our expectation that TeamCo will receive limited support from its shareholders, somewhat alleviates liquidity pressures over the next 12-18 months. On the negative side, most principal will remain outstanding on the February 2027 bond maturity date, exposing creditors to substantially larger refinancing risk. We anticipate that approximately $390 million (more than 90% of the issuance amount) will remain outstanding on its maturity date. This refinancing risk, combined with somewhat limited visibility on long-term operating and financial performance, as well as a reliance on access to additional financing to service its quasi-bullet debt, constrains our rating assessment. That said, we also note that the project life coverage ratio (PLCR) at maturity of about 2.50x, which denotes some coverage and project value beyond the debt life." MediaCo is exposed to high cashflow volatility given its dependence on TeamCo's on-pitch performance. A significant portion of MediaCo's revenue entitlement is associated with TeamCo's media rights revenue from Serie A and the Union of European Football Associations (UEFA) competitions. Such revenues depend to different degrees on TeamCo's on-pitch performance, which S&P considers inherently unpredictable and, to a significant degree, on TeamCo's economic resources and investment in players. That said, Serie A revenue is moderately stable based on the current allocation method, in which 50% of the proceeds are shared equally among the Series A teams, while historical and current performance, in addition to a club's social roots, are considered for the allocation of the remaining share. In contrast, UEFA revenue is strictly dependent on Inter's Serie A ranking in each season and, thereafter, on its progress in either the UEFA Champions League or UEFA Europa League. Consequently, this revenue is more exposed to on-pitch performance compared to Serie A revenue. The commercial exploitation of the F.C. Internazionale brand through sponsorship contracts is also strictly related to sport performance and especially on the club's international visibility, which it can improve through successful participation in UEFA competitions. Poor performance by TeamCo's first team could adversely affect its popularity, brand, and ability to attract and retain top players. As a result, being associated with the team may be of less value to sponsors. Nevertheless, TeamCo's long standing position in Serie A, Italian football's top division, provides some stability to MediaCo's revenue base. Inter has participated in all Serie A seasons since its inception and it is the only club that has never been relegated to Serie B. Provided that TeamCo continues to play in Serie A, we expect that MediaCo will have access to a moderately stable revenue from Serie A media rights, which represents its main line of income. S&P said, "We also believe that MediaCo benefits from a strong brand that promotes sponsorship revenue and mitigates renewal risks. Inter is one of the most popular teams in Serie A, making its brand one of the most recognizable and valuable. Although sponsorship contracts tend to have short-term maturities, we believe that the team's performance, combined with the strength of Inter's brand, can mitigate the risk that such contracts may not be renewed or replaced by new sponsors on similar terms. With limited live sports because of the COVID-19 pandemic, MediaCo has faced a tougher sponsorship market, following the expiration of its longstanding contract with Pirelli and the termination of its lucrative Asian sponsorship contract with iMedia that was worth about EUR25 million a year." Nonetheless, the club has been able to leverage its strong brand and alleviate the impact, with a beneficial multi-sponsor strategy for the main shirt sponsorship, partnering with Socios.com (not rated), Zytara Labs (not rated), and Lenovo Group Ltd. (BBB-/Positive/--) from 2022. Despite its structurally senior position to the majority of Inter's financial and operational expenses, MediaCo's and TeamCo's financial conditions are closely related. If the first team, which TeamCo manages and pays for, does not compete, MediaCo's cash flow may suffer, since it has priority access to most of TeamCo's revenue. In turn, if MediaCo does not collect its receivables, or if it is prevented from upstreaming cash to TeamCo, TeamCo may not have sufficient resources to fund its operating costs and operations, since MediaCo is only responsible for marginal operating costs. Employee wages--most of which are player salaries--represent the bulk of operating costs for a football club, being the responsibility of TeamCo. This, and the fact that MediaCo owns the Inter brand, provides creditors with some protection if TeamCo enters a financial distress scenario. However, in S&P's opinion, this does not completely eliminate the risk associated with TeamCo's operating and financial performance. Compared with most secured financing that S&P rates, the creation and perfection of security interests is more challenging. Italian law does not permit the grant of security over the receivables arising from future contracts or arrangements. Therefore, MediaCo and TeamCo will be required to enter into future security assignment agreements in respect of receivables arising under future sponsorship agreements and media contracts. The recurrent need to create and perfect security interests under Italian law exposes creditors to an ongoing risk of potential challenges by an insolvency administrator or by other creditors of TeamCo under the rules of avoidance or clawback in Italian bankruptcy law. S&P said, "The stable outlook reflects our expectation that Inter will continue playing in Italian football's top division, allowing MediaCo to benefit from sufficient cash flows to service its new debt issuance and support its refinancing needs at that point. "We could lower the issue-level ratings if we consider that the pandemic could cause permanent operational and financial damage to Italian football or if there are liquidity concerns at TeamCo. This could occur, for example, if we expect a significant repricing of key contracts or if any key stakeholders take steps that demonstrate elevated risk to TeamCo's business model." An upgrade is unlikely in the near future, given the rating is driven by the post-refinancing phase. This would require greater visibility regarding the long-term cash flow, supported by contracted revenue. ===================== N E T H E R L A N D S ===================== BANK OF INDUSTRY: Fitch Gives Final 'B' Rating on EUR700MM Notes ----------------------------------------------------------------- Fitch Ratings has assigned Bank of Industry Limited's (BOI) EUR700 million 7.50% senior note participation notes due 2027 a final long-term rating of 'B' with a Recovery Rating of 'RR4'. The notes will be issued by BOI Finance B.V., a Netherlands-based special purpose vehicle established solely to provide funding for BOI. The assignment of the final rating follows the receipt of documents confirming to information already received. The final rating is the same as the expected rating Fitch assigned to the notes on 4 February 2022. KEY RATING DRIVERS SENIOR DEBT The notes' final rating is in line with BOI's and Nigeria's 'B' Long-Term Issuer Default Ratings (IDRs) due to the transaction's features. Under the transaction's structure, BOI Finance will use the proceeds of the notes to purchase a senior note issued by BOI. BOI's financial obligations under the senior note will be irrevocably and unconditionally guaranteed by the Federal Government of Nigeria (FGN). The FGN guarantee does not apply to the notes issued to investors by BOI Finance but to BOI's obligations to BOI Finance under the senior note. However, given the guarantee and structural features of the transaction, in Fitch's view if BOI fails to meet its obligations under the senior note, the FGN's guarantee would serve to ensure the full and timely repayment of principal and interest on the notes issued by BOI Finance. Any further series could be rated differently, in the absence of a similar guarantee. BOI's Long-Term IDR is equalised with Nigeria's sovereign rating (B/Stable). This reflects Fitch's view that the Nigerian authorities have a high propensity to support BOI, if required, given BOI's 99.9% state ownership, long-lasting policy role and strategic importance to the country's economic development, and the entirety of its wholesale funding being either provided or guaranteed by the Nigerian state. However, Fitch views the ability of the authorities to support BOI as limited, as indicated by the level of Nigeria's sovereign rating. RATING SENSITIVITIES Factor that could, individually or collectively, lead to negative rating action/downgrade: -- The notes' rating would be downgraded if both Nigeria's and BOI's Long-Term IDRs were downgraded. Factor that could, individually or collectively, lead to positive rating action/upgrade: -- The notes' rating would be upgraded if either BOI's or Nigeria's Long-Term IDR was upgraded. ========= S P A I N ========= EL CORTE INGLES: S&P Affirms 'BB+' ICR & Alters Outlook to Stable ----------------------------------------------------------------- S&P Global Ratings revised its outlook on El Corte Ingles S.A. (ECI) to stable from negative, and affirmed its 'BB+' issuer credit rating on the company. S&P also affirmed its 'BBB-' rating on the company's senior unsecured notes. S&P said, "The stable outlook reflects our expectations that, despite cost inflation and supply chain disruptions over the near term, ECI will maintain solid performance and continue to strengthen its balance sheet through debt reduction. This should enable the group to deleverage toward 3.0x and generate funds from operations (FFO) to debt of about 25% over the next 12 months. "We expect ECI to close fiscal 2021 with stronger credit metrics and solid cash flow compared with the already solid results in the six months to August 2021. "The improvements stem from cost optimization, despite COVID-19-related headwinds, notable growth in the retail segment, and working capital improvements. As such, we believe ECI's performance will surpass our previous expectations for fiscal 2021. We anticipate revenue of nearly EUR12.0 billion, versus EUR10.4 billion in fiscal 2020, and S&P Global ratings-adjusted EBITDA of EUR750 million-EUR800 million. The latter excludes the insurance business since we understand it will be classified as discontinued operations. Moreover, we expect reported free operating cash flow (excluding nonrecurring items) to surpass prepandemic levels." S&P understands that ECI, in an effort to reduce debt, will designate the full EUR1.1 billion in proceeds as part of the transaction with Mutua Madrileña (Mutua) for debt reduction. This should result in S&P Global Ratings-adjusted leverage of about 3x in fiscal 2022. According to the agreement announced last October, ECI will divest 50.01% of its insurance business to Mutua and sell the insurer an 8% equity stake. ECI's insurance segment will be deconsolidated, and the company will begin to receive dividends from the alliance, similar to the joint venture with Banco Santander. If completed as expected, the Mutua transaction will create synergies and should improve ECI's positioning in the insurance sector. S&P said, "We assume that, in the first few years of this venture, ECI's EBITDA will contract markedly and that projected dividend income won't make up for the loss. However, we project some savings on capital expenditure (capex), taxes, and interest. We understand that any pension deficit will be covered by the insurance's capital release, as part of the transaction. We therefore do not incorporate any additional pension deficit in our consolidated figures. If that was not the case, our adjusted debt figures would have to be adjusted by the potential corresponding pension deficit. We note the transaction remains subject to regulatory approvals and is unlikely to close until summer 2022." Although these developments confirm ECI's recovery from COVID-19-related setbacks, uncertainties persist regarding cost inflation and potential execution risks tied to strategic initiatives. S&P said, "We consider ECI as well positioned to capitalize on its brand name, client base, and infrastructure to further its ongoing projects. These include the Mutua transaction, the Logitravel merger, the Sanchez Romero acquisition, and expansion into home security through SICOR brand. But we recognize that executing these numerous projects will come with some challenges. In addition, we note that rising input costs due to supply chain challenges, together with increases in electricity and wages in Spain, will notably drive cost inflation for ECI. We anticipate that the group will attempt to offset it with efficiencies in logistics, distribution, and in-store operations, as well as partially pass through the heightened costs to its customers via selective price increases. That said, some margin strain will be inevitable over the next 12-18 months, hindering profitability metrics and earnings growth. We also believe the travel segment (approximately 20% of prepandemic revenue) remains the most affected, and the timing and scale of a comeback are uncertain as new variants of the coronavirus emerge. Furthermore, we believe business travel will take longer to bounce back considering that some demand has most likely been lost permanently to the uptick in videoconferencing, a green agenda, and smaller budgets, among other factors. Moreover, the announced merger with Logitravel signals that ECI's travel segment will undergo some restructuring in fiscal 2022." S&P said, "We anticipate ECI will retain adequate liquidity and that its financial policy will continue to target reducing leverage. ECI's cash balances, its revolving credit facility (RCF) of up to EUR1.1 billion, and additional access to the alternative fixed-income market (MARF) support its liquidity position. As of Dec. 31, 2021, ECI had EUR1.2 billion of cash and equivalents, alongside about EUR745 million availability under its RCF. We expect recurring operating cash flow to improve markedly in fiscal 2021, supported by recovery trends. This, together with expected working capital inflow and contained investments, should bring reported free operating cash flow for the fiscal year to almost EUR600 million. At the same time, we consider some exceptional outflows during the year, namely redundancies (which were provisioned in fiscal 2020), large surface retailer tax and ADIF land plot outflows, and the first payment of Dimas Gimeno's 5% equity stake, among others. We note fiscal 2022 will be marked by inflationary pressure, ongoing hikes in electricity, logistic and staff costs, as well as online and offline competitive constraints. In addition, we expect working capital to normalize from relatively high inflow expected in fiscal 2021, which will weigh on ECI's cash flow capabilities for the year. We understand that, as part of the agreement with Mutua, ECI's financial policy will target an investment-grade status and the strengthening of its balance sheet by focusing on reducing debt. At the same time, we expect the financial policy as it relates to dividend payout to be in line with market practices of similar entities. "The stable outlook reflects our expectations that, despite cost inflation and supply chain disruptions over the near term, ECI will maintain solid performance and continue to strengthen its balance sheet through debt reduction. This should enable the group to deleverage toward 3.0x and generate funds from operations (FFO) to debt of about 25% over the next 12 months. "We could raise the rating on ECI if the group's operating performance and financial policy led to a sustained improvement in credit metrics, including a permanent reduction in its debt burden through earnings growth and cash flow." This would hinge on: -- Leverage reducing to below 3.0x on a sustained basis; -- Adjusted FFO to debt to increase towards 30%; -- Reported FOCF after lease payments to be consistently positive and grow at a sufficient pace to cover dividend payments; and -- ECI to display a financial policy commitment to maintain these ratios. S&P could also consider an upgrade if a potential IPO were to occur and ECI used some of the proceeds to repay debt, thereby reducing S&P Global Ratings-adjusted leverage to well below 3.0x, accompanied by a commitment to maintain these metrics. S&P could lower the ratings on ECI if the group experiences operating problems, failing to maintain topline performance, or experiences operational setbacks, causing profitability to fall materially beyond our base case such that: -- Adjusted debt to EBITDA remains over 4.0x; -- Adjusted FFO to debt remains below 20%; or -- Reported FOCF after lease payments weakens substantially or turns negative for a prolonged period. In addition, S&P could also lower the ratings if the group were to pursue a more aggressive financial policy, for example with mergers, acquisitions, or generous dividend distributions. Environmental, Social, And Governance ESG credit indicators: To: E-2, S-2, G-3 From: E-2, S-3, G-3 Social factors are now a neutral consideration in S&P's credit rating analysis of ECI. Because of strict travel and mobility restrictions during the pandemic, the group had extensive store closures that led to a 31.6% contraction of group revenue in fiscal 2020, and both EBITDA and free operating cash flow turned negative. ECI restored its earnings once restrictions were lifted, and it has advanced its e-commerce reach, achieving over 130% growth in its online sales and boosting its logistic capabilities. We expect ECI to expand its earnings and recover its margins to prepandemic levels over the next two years. At the same time, although the extreme disruption due to the pandemic is a likely one-off, we note that the group's higher reliance on tourism in its retail and travel segments compared with the general retail sector increases its exposure to global or regional disease outbreaks, terrorist attacks, and other health and safety risks. Governance factors are a moderately negative consideration. As a privately owned company, S&P perceives ECI faces a higher risk of its corporate and financial decision-making prioritizing the interests of the controlling owners than is typical for a publicly listed company of a similar size. The group is working to strengthen its corporate governance and risk management framework. Environmental, social, and governance (ESG) credit factors for this change in credit rating/outlook and/or CreditWatch status: -- Health and safety =========================== U N I T E D K I N G D O M =========================== CAFFE NERO: Acquires SA Brain's Remaining 33% Stake in Coffee#1 --------------------------------------------------------------- Katherine Price at The Caterer reports that Caffe Nero has agreed to acquire SA Brain's remaining 33% stake in Coffee#1, having originally bought 67% of the coffee chain in 2019 from the Welsh brewer. Coffee#1 operates 102 stores across Wales, the Midlands and Southern England. Since buying the majority share of the business in 2019, Caffe Nero has managed the brand. The group said Coffee#1 had averaged 104% of pre-pandemic sales over the last four months and the plan was for it to continue to operate as a standalone brand alongside the Nero Group's other brands: Caffe Nero, Harris+Hoole and Aroma, The Caterer discloses. Caffe Nero completed a GBP330 million debt refinancing in January, effectively ending a takeover bid from the Issa brothers' EG Group, The Caterer relates. Last April Mohsin and Zuber Issa, who own the Leon restaurant chain, acquired GBP160 million of Nero Holdings' mezzanine debt, which they used to try and gain control of the company from Ford, and backed a legal challenge to the coffee chain's company voluntary arrangement (CVA), but a judge dismissed the case, The Caterer recounts. The Nero Group operates over 1,000 stores across 10 countries with more than 650 Caffe Nero stores across the UK and 5,500 employees. CARILLION: FRC Allegedly Fails to Give Ex-Auditors Fair Chance -------------------------------------------------------------- Michael O'Dwyer at The Financial Times reports that former KPMG auditors at the centre of a legal claim relating to their work for outsourcer Carillion have argued that the UK accounting regulator failed to give them a fair chance to respond to the allegations against them, dealing a potential blow to the watchdog's case. The Financial Reporting Council has accused the Big Four firm and six of its former auditors of misleading its inspectors, including by fabricating and backdating documents, at an industry tribunal, the FT relates. The watchdog's closing arguments on Feb. 8 were delayed as some of the defendants claimed the FRC did not give them an opportunity to answer all of the allegations against them, the FT notes. According to the FT, defendant lawyers said the FRC had also failed to properly plead parts of its case to the tribunal, which has been running since Jan. 10. Following the objections, tribunal chair Sir Stanley Burnton rejected an FRC request to recall one of the defendants, former KPMG senior manager Alistair Wright, to put more allegations to him, the FT discloses. Bringing Wright back for a second round of cross-examination would not be "fair or appropriate", Mr. Burnton, as cited by the FT, said. Mark Ellison QC for the FRC said he did not concede that a decision to prevent further cross-examination of Wright "irretrievably poisons the allegation", the FT relays. Lawyers for some of Wright's fellow defendants -- audit partner Peter Meehan, senior manager Richard Kitchen and junior auditor Pratik Paw -- also told the tribunal that their clients had not been given a chance to respond to all the allegations against them, the FT discloses. However, the FRC did not seek to call back the trio for further questioning, the FT notes. The question over whether the FRC presented its case properly raises the possibility that the tribunal could effectively throw out some of the allegations against the defendants, the FT says. According to the FT, a barrister with FRC tribunal experience said it was "a fairly fundamental trial procedure" that a prosecutor should give a defendant an opportunity to respond to all allegations against them during cross-examination. Such a finding would not necessarily prevent the tribunal from imposing sanctions on the auditors because it is not disputed that some of the allegations were properly pleaded, the FT states. Mr. Wright is expected to be penalized in any case because he has already admitted to two other allegations, the tribunal heard, the FT notes. Carillion collapsed four years ago after receiving clean audit opinions from KPMG, which is defending a GBP1.3 billion lawsuit by the company's liquidators, the FT recounts. It had liabilities of GBP7 billion and GBP29 million of cash, triggering calls for an overhaul of the UK audit sector and boardroom regulation, the FT discloses. FARMDROP: Creditors Owed GBP21.2 Million at Time of Collapse ------------------------------------------------------------ Edward Devlin at The Grocer reports that Farmdrop suppliers, lenders, staff and shareholders are set to lose out on millions of pounds as a result of the online grocer's dramatic Christmas collapse, with the company racking up losses of more than GBP50 million in its 10-year history, according to a new report lifting the lid on the administration. Creditors of the company were owed GBP21.2 million at the time of Farmdrop's failure on December 17, 2021, with 450 trade suppliers out of pocket by GBP2.6 million, The Grocer relays, citing the report by administrator RMT Accountants and Business Advisors. Dozens of grocery brands, including the likes of Oatly, Manilife, Cawston Press, East London Liquor Company and Lily's Kitchen, were among the list of unsecured creditors, as well as hundreds of independent farmers and suppliers, The Grocer discloses. RMT said, after taking into account the anticipated costs for a managed wind-down of the business, it did not expect unsecured creditors to receive any money back, The Grocer notes. Shareholders will not see any return on the GBP36 million invested in the business, including thousands of crowd backers at Seedrs who sank GBP3 million into Farmdrop, The Grocer states. The substantial investment, raised over a number of rounds, was used to build the infrastructure of the business, market the brand and win customers, according to The Grocer. As revealed by The Grocer last year, Farmdrop ceased trading on Dec. 16, leaving thousands of customers without their Christmas orders. Suppliers, who delivered stock worth thousands of pounds for the Christmas rush, were also left struggling to retrieve products from shuttered Farmdrop warehouses, The Grocer states. The company -- formed in 2012 by former City broker Ben Pugh -- had a long history of growing losses as ballooning costs raced ahead faster than rapidly expanding sales, The Grocer discloses. The new report from RMT, which was appointed administrator on Dec. 17, revealed losses continued to escalate up until its failure, The Grocer relays. Revenues, which had more than doubled to GBP12 million in the 2019/20 financial year thanks to Covid-driven demand for online food shopping, soared 52% to GBP18 million in the 12 months ended June 30, 2021, according to unaudited figures, The Grocer notes. However, losses also ramped up from GBP10 million in the prior year to GBP12.8 million as a result of the huge costs involved in running the business, which employed about 200 staff, The Grocer states. It also made a loss of GBP4.7 million on sales of GBP5.3 million in the six months from July 1, to its collapse, according to The Grocer. It takes Farmdrop's total losses in the past six-and-a-half years to GBP52.3 million, with losses made from 2012 to its first full set of audited accounts filed at Companies House in 2016 not recorded, The Grocer relates. H BEARDSLEY: Goes Into Administration, 32 Jobs Affected ------------------------------------------------------- Sam Metcalf at TheBusinessDesk.com reports that H Beardsley, a Nottinghamshire-based logistics firm which had been trading for more than 90 years, has slipped into administration, with all 32 staff being made redundant. Lee Lockwood and James Miller of RSM Restructuring Advisory were appointed joint administrators to H Beardsley on Feb. 4, TheBusinessDesk.com relates. The firm was a warehouse and logistics business, supplying and distributing warehouse facilities and goods to customers across the UK for more than 90 years. According to TheBusinessDesk.com, due to a combination of increased fuel and property costs and staff retention challenges, the directors took the decision to cease trading. The company made all 32 staff redundant prior to the appointment of Administrators, TheBusinessDesk.com discloses. Following the appointment of RSM, administrators secured the sale of the company's assets together with a license to occupy the company's leasehold site at Huthwaite to Taylor & Sons Transport, TheBusinessDesk.com notes. MULBURY HOMES: Enters Administration, Ceases Trading ---------------------------------------------------- Business Sale reports that house builder Mulbury Homes has fallen into administration, after suffering from cash flow issues and rising costs, among other pressures. Andrew Knowles and Steve Clancy of Kroll have been appointed as joint administrators and will now seek to realise assets and distribute funds to the firm's creditors after it ceased trading, Business Sale relates. Mulbury was founded in 2010 and is headquartered in Lymm, Cheshire. The business was known for procurement and delivery of affordable housing projects. At the time of its administration, the company had a strong pipeline of existing and future projects, with 1,089 homes under construction, Business Sale notes. According to Business Sale, in its most recent financial accounts, for the year ending March 31 2020, the company reported turnover of GBP38.4 million, a slight increase from GBP38.2 million a year earlier, but saw its post-tax profits fall from GBP14,130 in 2019 to GBP4,322. At the time, the firm's fixed assets were valued at GBP33,895 and current assets at GBP11.5 million, while total equity stood at GBP1.17 million, Business Sale states. Despite its strong pipeline of projects, Kroll said that Mulbury had been "struggling with trading and cash flow issues brought by the pandemic, planning delays and rising costs", Business Sale discloses. Upon appointment, the joint administrators ceased trading the business as a going concern, with existing staff made redundant, Business Sale recounts. "The continued difficult trading conditions, rising costs, and financial pressures as a result of bad debt has led to a weakened cashflow position which has led to the appointment of the joint administrators," Business Sale quotes joint administrator Andrew Knowles as saying. "The joint administrators are continuing with their duties following the sale, realising assets, and distributing funds to creditors as well as investigating the financial affairs of the company as part of their statutory duties." ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *