/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220422.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, April 22, 2022, Vol. 23, No. 75 Headlines F R A N C E LOXAM SAS: S&P Upgrades ICR to 'BB-' on Performance Recovery R U S S I A [] RUSSIA: Ruble Bond Payment a Potential Failure-to-Pay Event S E R B I A GENERALEXPORT: Serbia Puts Assets Up for Sale for RSD2.1 Billion MAKOVICA: Serbia Offers Assets Up for Sale for RSD628.1 Million SLOBODA APARATI: Serbia Puts Assets Up for Sale for RSD126.3MM U N I T E D K I N G D O M CENTRAL CRAIGAVON: Enters Administration Following GBP32.6MM Loss CROSSLEY WEBB: Oak Touch Acquires Business, 10 Jobs Saved ENERGY HELPLINE: Goes Into Administration Amid Energy Crisis HNVR MIDCO: S&P Alters Outlook to Stable, Affirms 'CCC+' ICR METRO BANK: Fitch Lowers LongTerm IDR to B, Outlook Stable MORTIMER BTL 2022-1: S&P Assigns Prelim B- (sf) Rating to X Notes NEWDAY FUNDING 2022-1: Fitch Gives Final 'B+sf' Class F Debt Rating X X X X X X X X [*] BOOK REVIEW: Transnational Mergers and Acquisitions - - - - - =========== F R A N C E =========== LOXAM SAS: S&P Upgrades ICR to 'BB-' on Performance Recovery ------------------------------------------------------------ S&P Global Ratings raised its long-term issuer credit and issue ratings on Loxam SAS and its senior secured notes to 'BB-' from 'B+', with the '3' recovery rating unchanged. S&P also raised its issue ratings on the senior unsecured debt to 'B' from 'B-', with the '6' recovery rating unchanged. S&P said, "The stable outlook reflects our view that Loxam will continue demonstrating mid-to-high single-digit revenue growth in 2022-2023 and margins above 37%, and will rapidly pull back on its capital expenditure (capex) in the event of softening in construction end-markets. "We forecast Loxam will continue to deliver resilient operating performance in 2022 and 2023, meaning the company's leverage will remain broadly commensurate with the 'BB-' rating. "Loxam continues to exhibit good operating performance, in line with our expectations, and we forecast revenue growth of about 9% for 2022 driven by infrastructure projects. Despite a slight decrease of the S&P Global Ratings-adjusted EBITDA margin to 35.5% in 2021 due to the demand increase and related need to partially pause the sale of equipment and reduce staff costs, we forecast adjusted margins of more than 37% in 2022. We believe the group will continue to benefit from some cost-cutting efforts undertaken in 2020. Our adjusted debt figure in 2022 includes the existing EUR2.1 billion senior secured debt, about EUR554 million of senior subordinated notes, about EUR183 million government loans, about EUR850 million of bilateral loans and financial leases, EUR94 million of commercial paper, and EUR40 million of pensions net of about EUR200 million of cash. We believe that, given the high expected capex spending of about EUR900 million this year, that the group could issue more bilateral loans instead of drawing its revolving credit facility (RCF). Despite this, we forecast that Loxam's S&P Global Ratings-adjusted debt to EBITDA will remain below 4.5x. In 2023, we forecast about 5% top-line growth, with margins above 37% and leverage trending toward 4x. "With Loxam investing heavily in its fleet to capture rising rental volumes, we expect FOCF to turn negative in 2022 but recover in 2023. In our base-case scenario, we forecast about EUR900 million capex in 2022 and EUR750 million-EUR800 million in 2023, up from EUR557 million in 2021. In 2022, the company will likely generate negative FOCF of about EUR215 million before this returns to neutral in 2023 as capex decreases. However, Loxam continuously invests in a high amount of expansion capex that it could scale back rapidly if volumes were to soften, as rental equipment companies demonstrated during the pandemic. Furthermore, we estimate funds from operations (FFO) cash interest coverage to remain robust, surpassing 5x for 2022 and 2023. "We estimate that Loxam has no material exposure to Russia or Ukraine. We understand from management that the group does not have any operations in Ukraine. The group has a small activity in Russia linked to Ramirent (about EUR25 million of revenues) but consolidated through the use of the equity method. Within an intercompany loan, the entity owes EUR800,000 to Loxam. Furthermore, we do not expect first-quarter 2022 revenue to be affected. In the medium term, the situation could undermine European activity through shortages of construction materials, delays in equipment delivery, and increased costs. However, we believe the group has enough cash to face this and will decrease its forecast capex to preserve its liquidity. "The stable outlook reflects our view that Loxam will continue demonstrating mid-to-high single-digit revenue growth in 2022-2023 and margins above 37%, and will rapidly pull back on its capex spend in the event of softening in construction end-markets. We expect that the company will sustain debt to EBITDA below 4.5x in 2022 and 2023. "This scenario does not incorporate any acquisitions that are larger than anticipated under our base-case scenario or shareholder-friendly actions. We will evaluate any actions exceeding forecast figures separately. "We could lower the rating if Loxam's credit metrics deteriorate such that debt to EBITDA was trending toward 5.0x, with sustainable negative FOCF and an adjusted EBITDA margin below 35%. This could occur if the group deviates from our base-case scenario through debt-financed acquisitions or shareholder-friendly actions, leading to higher leverage. We might consider a negative rating action if Loxam cannot timely and sufficiently balance growth and capex amid weaker market conditions, which could lead to higher debt levels. The rating could also come under pressure if, at any time, the company's liquidity is no longer at least adequate. "We do not see upside rating potential in the next 12 months. We might see ratings upside if Loxam improved its credit metrics to debt to EBITDA comfortably and sustainably below 4.0x. An upgrade would also be contingent on the group generating at least neutral FOCF. Stronger credit metrics could result from substantially reduced absolute debt, combined with better-than-anticipated operating performance and a more conservative financial policy." ESG credit indicators: E-2, S-2, G-2 S&P said, "ESG factors are an overall neutral consideration in our credit rating analysis of Loxam. Despite concentration in the construction sector (about 60% of total revenue), the long-term growth prospects are favorable, supported by the structural shift toward equipment rental instead of each customer owning its own fleet, with the reuse of equipment. It allows Loxam's customers to meet their corporate social responsibility targets in terms of compliance with regulations, safety, and carbon footprint reduction. In our view, the group will comfortably meet the capex required for a new fleet that meets rising demand from its customers for more environmentally sustainable rental equipment." =========== R U S S I A =========== [] RUSSIA: Ruble Bond Payment a Potential Failure-to-Pay Event -------------------------------------------------------------- Laura Benitez and Irene Garcia Perez at Bloomberg News report that Russia was judged to have breached the terms of two bonds by a derivatives panel, marking another milestone on the nation’s path to its first foreign debt default in a century. The Credit Derivatives Determinations Committee said on April 20 that its payment of rubles on two dollar bonds was a "Potential Failure-to-Pay" event for credit-default swaps, Bloomberg relates. According to Bloomberg, the group, which includes Goldman Sachs Group Inc., Barclays Plc and JPMorgan Chase & Co., said the potential failure happened on April 4. The nation could still avert a default if it pays bondholders in dollars before a 30-day grace period ends on May 4, Bloomberg states. "The bond covenants were pretty clear that ruble payments on dollar debt would constitute default," Bloomberg quotes Brendan Mckenna, a currency strategist at Wells Fargo Securities in New York, as saying. "Come May 4 -- unless the logistical challenges around actually making debt payments are cleared, which seems unlikely -- I would expect Russia to be declared in default on its external debt." The payment issue is just one example of the fallout from the sanctions imposed on the country because of its invasion of Ukraine, Bloomberg notes. The extensive restrictions have cut it off from the financial system and complicated transactions that were previously executed smoothly and with little attention, Bloomberg discloses. That means for now, Russia is on the brink of its first default on foreign borrowings since the Bolshevik repudiation of Czarist debt in 1918, according to Bloomberg. The clock is ticking on the grace period before the sovereign is likely to be officially declared in default, Bloomberg notes. Holders of the swaps can then start the process of getting paid on contracts covering about US$40 billion of debt, Bloomberg discloses. =========== S E R B I A =========== GENERALEXPORT: Serbia Puts Assets Up for Sale for RSD2.1 Billion ---------------------------------------------------------------- Branislav Urosevic at SeeNews reports that Serbia's Bankruptcy Supervision Agency said on April 21 it is offering for sale assets of holding company Generalexport at a starting price of RSD2.1 billion (EUR17.7 million/US$19.4 million). According to SeeNews, the agency said in a statement the assets include the bankrupt company's office component of the Genex Tower building in Belgrade, with an aggregate area of approximately 16,400 square meters, as well as office equipment. The auction will take place in Belgrade on May 23, SeeNews discloses. The company was declared bankrupt in 2015, SeeNews relays, citing agency data. MAKOVICA: Serbia Offers Assets Up for Sale for RSD628.1 Million --------------------------------------------------------------- Branislav Urosevic at SeeNews reports that Serbia's Bankruptcy Supervision Agency said on April 20 it is offering for sale assets of bankrupt bread and pastry producer and wholesaler Makovica for RSD628.1 million (EUR5.3 million/US$5.8 million). According to SeeNews, the agency said in a statement the auction's starting price has been set at RSD125.6 million. The assets offered for sale include a 908-square meter office building, silos, a flour mill, animal feed plant and various pieces of equipment, SeeNews discloses. Serbia unsuccessfully attempted to sell Makovica's assets in late March at a starting price of RSD314.1 million, SeeNews relates. The company, based in Belgrade's municipality of Mladenovac on the city's outskirts, went bankrupt in 2020. SLOBODA APARATI: Serbia Puts Assets Up for Sale for RSD126.3MM -------------------------------------------------------------- Branislav Urosevic at SeeNews reports that assets of bankrupt Serbian appliances manufacturer Sloboda Aparati are being put up for sale at a starting price of RSD126.3 million (US$1.2 million/EUR1.1 million), the country's Deposit Insurance Agency said on April 21. According to SeeNews, the agency said in a statement the assets offered for sale include an electric components manufacturing facility, a plant for the manufacture of plastic parts, as well as storage and office spaces, and various pieces of equipment. The auction will take place on May 25, SeeNews discloses. The company, based in Serbia's central city of Cacak, was declared bankrupt in 2018, SeeNews recounts. =========================== U N I T E D K I N G D O M =========================== CENTRAL CRAIGAVON: Enters Administration Following GBP32.6MM Loss ----------------------------------------------------------------- Margaret Canning at Belfast Telegraph reports that the trading company behind Rushmere Shopping Centre in Craigavon has gone into administration following a GBP32.6 million loss in 2019. Administrators from business advisory firm Grant Thornton were appointed to Central Craigavon Ltd in the High Court in Belfast on April 7, the Belfast Telegraph relates. A notice of their appointment has now been filed with Companies House, the Belfast Telegraph states. Grant Thornton confirmed their appointment in a statement, adding that they have also been appointed as administrators to its sister company, Moyallen Properties Ltd, which owns Magowan West Shopping Centre in Portadown, the Belfast Telegraph notes. Related companies, Moyallen Woking and Peacocks Centre, which own and operate the Peacocks Centre in Woking, were placed into administration on the same date. They are all part of the Moyallen Holdings group. David Warnock and Stephen Tennant of Grant Thornton are the joint administrators, the Belfast Telegraph dsiclsoes. Tenants of Rushmere were informed of the appointment of administrators in a letter dated April 12, which has been seen by the Belfast Telegraph. Central Craigavon company accounts for 2019 were filed in June 2021 and record a loss of GBP32.6 million, compared to a loss of GBP8 million in 2018, the Belfast Telegraph relays. Moyallen Properties suffered a loss of GBP1.5 million, according to the Belfast Telegraph. Group company Moyallen Holdings Ltd made a loss of GBP93 million in 2019, compared to a profit of GBP7 million in 2018, the Belfast Telegraph states. CROSSLEY WEBB: Oak Touch Acquires Business, 10 Jobs Saved --------------------------------------------------------- Miran Rahman at TheBusinessDesk.com reports that administrators have found a buyer for Crossley Webb Contracts (CWC), an established West Yorkshire-based joinery company. Bob Maxwell and Louise Longley, from Begbies Traynor, were appointed joint administrators of the Elland commercial joinery and shop fitting firm on April 11, TheBusinessDesk.com relates. According to TheBusinessDesk.com, they have now sold the firm to the Oak Touch -- also in Elland -- as a going concern, saving the jobs of all 10 employees. "The business ran into financial difficulties as a supplier to the fitness and gyms sector, which itself suffered from severe trading restrictions during successive Covid lockdowns," TheBusinessDesk.com quotes Mr. Maxwell as saying. Founded in 2002, CWC specialises in bespoke furniture and specialist joinery, fit-out and refurbishment contracts for a range of well-known clients in the corporate workplace, hospitality, hotel and leisure sectors. ENERGY HELPLINE: Goes Into Administration Amid Energy Crisis ------------------------------------------------------------ Daily Mail reports that comparison site Energy Helpline has become the latest casualty of the energy crisis after collapsing into administration. The 20-year-old website provides a free energy switching service to help customers find the best gas and electricity deal. But soaring energy prices prompted suppliers to withdraw their cheapest tariffs in September, Daily Mail relates. And since then, consumer experts have advised households against switching, Daily Mail notes. Many major comparison sites were forced to halt their energy switching services as a result, Daily Mail discloses. Even though some are up and running again, the only deals available are hundreds of pounds more expensive than if customers just remained on their provider's standard tariff, Daily Mail states. HNVR MIDCO: S&P Alters Outlook to Stable, Affirms 'CCC+' ICR ------------------------------------------------------------ S&P Global Ratings affirmed its 'CCC+' long-term issuer credit rating and issue ratings on business-to-business accommodation distributor HNVR Midco Ltd. (Hotelbeds), reflecting what S&P still sees as an unsustainable capital structure. Despite the expected improvement in operating performance, its gross debt will remain very elevated at EUR2.1 billion as of Dec. 31, 2021. The company therefore depends heavily on continuing support from its shareholders. The stable outlook reflects S&P's view that Hotelbeds will post a solid operating performance in the fiscal year 2022, with TTV at 70% of pre-pandemic levels. It also reflects that, following the two-year extension of its debt instruments, it now maintains adequate liquidity. The travel industry has started to recover from the pandemic, although macroeconomic pressures could dampen growth. Hotelbeds' revenues fell by more than 50% during fiscal 2021 and are expected to start recovering in 2022, reaching pre-pandemic levels by 2024. Despite the impact of omicron in early 2022, the group has grown across all its business divisions as demand recovers quicker than expected. Demand trends and the group's working capital position had already started to improve in the first quarter of fiscal 2022. S&P said, "Over the next few years, we expect the group will unwind the large negative working capital cash outflow seen in 2020 as the global economy recovers and bookings steadily increase. Nevertheless, macroeconomic pressures (including inflation and higher energy costs) may hinder overall demand for travel. We therefore remain cautious, albeit optimistic, about the outlook for the travel industry and more specifically lodging." Hotelbeds' liquidity profile was enhanced by support from shareholders during the pandemic and the extension of its debt maturities. During the pandemic, the group raised EUR175 million in the form of shareholder loans as well as EUR400 million in the form of a Term Loan D (TLD) maturing in 2027 (initially subscribed by its private sponsors and later syndicated). Shareholder support helped offset the negative impact on earnings and working capital flows caused by government-imposed mobility restrictions that diminished international travel. S&P now views the shareholder loans as akin to equity as they meet all the conditions under its criteria and the financial sponsors no longer hold any debt within the capital structure. Hotelbeds has extended the maturity of its debt instruments by two years. Its TLB now matures in 2025 and the TLC and TLD now mature in 2027. This limits its liquidity risks in the short term. S&P said, "We therefore currently assess the group's liquidity as adequate with sources of liquidity remaining above 1.2x uses over the next 12-24 months. We do not expect Hotelbeds will need to issue further debt in the short to medium term as the group returns to positive cash flow generation in line with the travel industry's recovery." Hotelbeds' capital structure includes: -- EUR250 million RCF maturing in September 2024; -- EUR1 billion TLB maturing in September 2025; -- EUR400 million TLC maturing in September 2027; and -- EUR400 million TLD maturing in September 2027. As of December 2021, cash balances stood at EUR403 million of which EUR344 million remain available after the minimum liquidity covenant. This follows a first-quarter of fiscal 2022 that was above expectations despite omicron and with the first quarter historically the most working-capital-intensive time of year. The group's capital structure remains fragile, and leverage remains very high. The 'CCC+' rating reflects S&P views that, unless its performance improves markedly, the group's capital structure appears unsustainable in the medium term and the company remains highly reliant on the continuing support of its shareholders. However, the two-year extension of its debt instruments has enabled the group to limit liquidity risk in the short term (until at least 2024). The group's strategy is now focused on recovery to pre-pandemic activity, as well as on the end-to-end optimization of processes and technology, and adapting its regional offering. The group has focused, over the last two years, on mitigating the effects of the pandemic on its trading performance and balance sheet. The group is now focused on improving end-to-end optimization and delivering its digitalization strategy. S&P said, "As a consequence, we expect capital expenditure (capex) to increase significantly but gradually to EUR60 million by fiscal 2023, from about EUR20 million in fiscal 2021. We expect the group to have realize the synergies from its previous acquisitions and for the cost structure to have stabilized." S&P said, "The stable outlook reflects our expectation that the leisure travel sector's recovery will remain solid in 2022, with increased activity and booking momentum. We expect Hotelbeds will start to recover its trading performance in fiscal 2022 and return to pre-pandemic levels by fiscal 2024. This should see FOCF turn positive in fiscal 2023 before significantly increasing in fiscal 2024 on improving performance and positive working capital movements, reflected in S&P Global Ratings-adjusted leverage of about 10x by fiscal 2024. The outlook also reflects our view that the group has sufficient liquidity to handle potential headwinds from macroeconomic uncertainty in the short-term including those arising from the Russia-Ukraine conflict, and cost inflation and/or additional headwinds due to fuel prices. "We could lower our long-term issuer credit rating on Hotelbeds if the recovery in trading conditions for global travel does not advance in line with our base case, heightening the risk of underperformance and liquidity shortfalls in the foreseeable future. A negative rating action could also arise if we believed a conventional default event would likely take place over the next 12 months." This could be the result of: -- Another wave of COVID-19 slowing the rebound in the travel sector and overall economy; -- The company spending significant cash or debt for uses other than deleveraging, such as shareholder remuneration or M&A activity; or -- Macroeconomic uncertainty created by the conflict between Ukraine and Russia in the form of higher inflation and/or higher fuel costs, which could jeopardize international travel. S&P said, "We could also lower our ratings if the group or its financial sponsor were to consider buying back a proportion of its outstanding loans at a discount to its par value. We would likely consider this as akin to a distressed exchange and therefore tantamount to a default. "Although unlikely over the next 12 months, we could consider a positive rating action if the group achieved a substantial recovery in its top line and earnings significantly above our base case, fuelled by a swift recovery in the travel industry and consumer confidence. We would also need to see trading return to levels commensurate with its capital structure, resulting in S&P Global Ratings-adjusted leverage below 8.0x on a sustained basis, and positive sustainable FOCF generation." ESG credit indicators: E-2, S-4, G-3 S&P said, "Social factors are a negative consideration in our rating analysis of HNVR Midco (Hotelbeds). A material drop in bookings during the pandemic caused large operating cash outflows due to negative earnings and large negative working capital movements. Health and safety risks will likely remain relevant in the short to medium term, alongside complications due to a slow recovery in air traffic volumes over 2022-2024 and we therefore do not envision earnings will recover to pre-pandemic levels until 2024. "Governance is a moderately negative consideration, as is the case for most rated entities owned by private-equity sponsors. We believe the company's highly leveraged financial risk profile points to corporate decision-making that prioritizes the interests of the controlling owners. This also reflects generally finite holding periods and a focus on maximizing shareholder returns, as well as somewhat weaker public communication and transparency than publicly owned peers." Environmental, social, and governance (ESG) credit factors for this change in credit rating/outlook: -- Social - Health and Safety METRO BANK: Fitch Lowers LongTerm IDR to B, Outlook Stable ---------------------------------------------------------- Fitch Ratings has downgraded Metro Bank Plc's Long-Term Issuer Default Rating (IDR) to 'B' from 'B+' and Viability Rating (VR) to 'b' from 'b+'. The Outlook on the Long-Term IDR is Stable. Fitch has withdrawn Metro Bank's Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'No Floor', as these are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria on 12 November 2021. In line with the updated criteria, Fitch have assigned Metro Bank a Government Support Rating (GSR) of 'no support (ns)'. KEY RATING DRIVERS Metro Bank's Viability Rating (VR) is below its implied VR of 'bb-' because of the continued challenges it faces in becoming structurally profitable and because it is operating within regulatory capital buffers. Fitch considers both its weak capitalisation and profitability to have higher influences over its VR. The ratings also consider the bank's moderately healthy asset quality, sound liquidity and funding profile, and improving risk management. Business Profile Weaknesses: Metro Bank has generated around GBP730 million in net losses over the past three years in restructuring and rehabilitating the bank, as well as in improving governance and risk controls. The bank's strategy is now focused on strengthening its revenue by targeting higher-yielding loans (including specialist mortgage loans, unsecured and other consumer loans), and, in the short term, trying to reduce its high fixed cost base. Return to Profitability Still Uncertain: Fitch expects the bank to remain loss-making for at least one more year (in 2022) and to gradually become profitable from 2023, based on wider net interest margins, helped by higher policy rates in the UK and a changed loan mix. The bank expects the majority of restructuring costs to have been expensed or capitalised, with a return to a more normalised cost base from 2022. Loan impairment charges ( LICs) are budgeted to remain low over the next two years, although uncertainties remain in the current macroeconomic environment. Capital Constrains Growth: Metro Bank's common equity Tier 1 (CET1) capital ratio and its total capital ratios at 1 January 2022 were 11.5% and 14.8%, respectively, after transitional measures were removed (end-2021 CET1 ratio: 12.6%; total capital ratio: 15.9%). These provide it with a moderate headroom over its 7.6% CET1 and 11.6% total capital minimum requirements including the capital conservation buffer, but excluding the UK countercyclical capital buffer, which is due to rise to 1% by end-2022 from 0%. The bank's capitalisation is constrained by insufficient internal capital generation. Weakened Asset Quality: The bank reported a higher impaired loans (Stage 3) ratio of 3.7% at end-2021 from 2.1% at end-2020. The deterioration was driven by a combination of a number of single name commercial customers and non-performing government guaranteed Bounce Back Loan Scheme (BBLS) loans. The majority of loans are to retail customers, mainly in the form of mortgage lending, and continue to perform well. There is uncertainty over the level at which LICs will normalise, given the bank's fairly new loan mix, with a greater focus on higher-yielding and higher-risk loans. Mainly Deposit Funded: Metro Bank obtains funding primarily through customer deposits, which are a mixture of retail and SMEs, resulting in a moderate gross loans/deposits ratio of 76%. It also obtained around GBP3.8 billion through the Bank of England's Term Funding Scheme. Currently access to the debt markets is limited and expensive. No Support: The GSR reflects Fitch's view that senior creditors cannot rely on extraordinary support from the UK authorities if Metro Bank becomes non-viable. This is because of UK legislation and regulations that provide a framework that is likely to require senior creditors to participate in losses after a failure. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: The ratings would be downgraded if losses or other setbacks threaten Metro Bank's ability to meet capital or minimum requirement for own funds and eligible liabilities (MREL) requirements in 2022, without the prospect of a swift remedy, or if Fitch believes that implementation of the bank's turnaround strategy has been impaired with the likelihood of additional losses into 2023. The latter could be caused by higher-than-expected funding costs or an inability to build up the targeted lending mix within its stated risk appetite, or significant exceptional provisions or write-downs. Factors that could, individually or collectively, lead to positive rating action/upgrade: An upgrade would require continued progress in Metro Bank's strategy to achieve structural profitability. This requires additional headroom over the current minimum capital requirements including buffers, which should provide capital relief to support volume and margin growth. This combined with adherence to the bank's cost guidance would together demonstrate execution discipline and provide rating stability. An upgrade would also likely require a sustained record of improving the bank's business model, leading to near-term prospects of becoming profitable on a sustained basis, and reduced risk over availability of capital and MREL resources for growth. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS Senior Preferred and Non-Preferred Debt: Metro Bank's senior non-preferred (SNP) debt is rated in line with the bank's Long-Term IDR and has thus been downgraded to 'B' from 'B+', with a Recovery Rating of 'RR4'. The rating reflects Fitch's assumption that the bank will met its MREL with SNP and more junior debt and equity, and average recoveries. The long-term rating of the senior preferred (SP) debt programme is one notch above the bank's Long-Term IDR and has thus been downgraded to 'B+' from 'BB-'. Its rating reflects the additional protection afforded to external senior creditors by the presence of SNP and more junior debt instruments. The bank's MREL is currently 18% of RWAs (20.5% including non-confidential buffers) and is set to rise to 18.2% of RWAs (20.7% of RWAs including non-confidential buffers) by 1 January 2023 using end-June 2021 data. The bank's MREL ratio at end-2021 was 20.5%; however, by January 2022, due to a reduction in the CET1 ratio, it does not meet the requirement including non-confidential buffers. Tier 2 Debt: Metro Bank's dated Tier 2 notes are rated two notches below the VR at 'CCC+' with a Recovery Rating of 'RR6' to reflect poor recovery prospects for the notes in a non-viability event. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: Metro Bank's SNP debt ratings are mainly sensitive to the bank's Long-Term IDR, as well as to Fitch's assessment of recovery prospects. They could be downgraded if loss-severity expectations increase, for example, if Metro Bank is unable to meet its MREL or if requirements are materially reduced or removed. Metro Bank's notched-up senior preferred debt rating could also be downgraded in these scenarios. The Tier 2 subordinated debt rating is primarily sensitive to changes in the bank's VR and would be downgraded if the bank's VR is downgraded. Factors that could, individually or collectively, lead to positive rating action/upgrade: Metro Bank's SNP debt, SP debt programme and Tier 2 debt would be upgraded if the bank's VR, and hence the LT IDR, are upgraded. VR ADJUSTMENTS The Operating Environment score of 'aa-' has been assigned in line with the 'aa' implied score. The sovereign rating was identified as a relevant negative factor in the assessment. The business profile score of 'b+' has been assigned below the 'bbb' implied score of due to the following adjustment reasons: Business Model (negative), Strategy and Execution (negative). The asset quality score of 'bbb' has been assigned below the 'a' implied score due to the following adjustment reasons: Underwriting Standards and Growth (negative), Historical and Future Metrics (negative). The capitalisation & leverage score of 'b' has been assigned below the 'a' implied score due to the following adjustment reasons: Internal Capital Generation and Growth (negative) and Regulatory capitalisation (negative). The funding & liquidity score of 'bb+' has been assigned below the 'a' implied score due to the following adjustment reasons: Non-Deposit Funding (negative). BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. DEBT RATING RECOVERY PRIOR ---- ------ -------- ----- Metro Bank Plc LT IDR B Downgrade B+ ST IDR B Affirmed B Viability b Downgrade b+ Support WD Withdrawn 5 Support Floor WD Withdrawn NF Government Support ns New Rating Subordinated LT CCC+ Downgrade RR6 B- Senior preferred LT B+ Downgrade BB- Senior non-preferred LT B Downgrade RR4 B+ Senior preferred ST B Affirmed B MORTIMER BTL 2022-1: S&P Assigns Prelim B- (sf) Rating to X Notes ----------------------------------------------------------------- S&P Global Ratings has assigned preliminary credit ratings to Mortimer BTL 2022-1 PLC's (Mortimer 2022-1) class A notes and class B-Dfrd to X-Dfrd interest deferrable notes. Mortimer 2022-1 is a static RMBS transaction that a portfolio of BTL mortgage loans secured on properties in the U.K. LendInvest originated the loans in the pool between June 2020 and March 2022. At closing, the issuer will use the issuance proceeds to purchase the full beneficial interest in the mortgage loans from the seller. The issuer will grant security over all of its assets in favor of the security trustee. Credit enhancement for the rated notes will consist of subordination from the closing date and overcollateralization following the step-up date, which will result from the release of the excess amount from the liquidity reserve fund to the principal priority of payments. The transaction will feature a liquidity reserve fund to provide liquidity in the transaction. There are no rating constraints in the transaction under S&P's counterparty, operational risk, or structured finance sovereign risk criteria. S&P considers the issuer to be bankruptcy remote. Ratings List CLASS PRELIM. RATING* CLASS SIZE (% OF COLLATERAL) A AAA (sf) 87.00 B-Dfrd AA- (sf) 6.00 C-Dfrd A (sf) 3.50 D-Dfrd BBB (sf) 1.50 E-Dfrd BB (sf) 2.00 X-Dfrd B- (sf) 1.75 Certificates NR N/A *NR--Not rated. N/A--Not applicable. NEWDAY FUNDING 2022-1: Fitch Gives Final 'B+sf' Class F Debt Rating ------------------------------------------------------------------- Fitch Ratings has assigned NewDay Funding Master Issuer Plc - Series 2022-1 notes final ratings. The outlooks on the notes are stable. Fitch has simultaneously taken rating actions on notes from the 2019-1, 2019-2, 2021-1, 2021-2, 2021-3, VFN-F1 V1 and VFN-F1 V2 series. At closing, a portion of the proceeds from the series 2022-1 issuance were used to fully defease series 2019-1. Funds will be held on the series 2019-1 principal funding ledger of the receivables trustee investment account until the series 2019-1 scheduled redemption date in June 2022. This means that series 2019-1 is cash collateralised. An accumulation reserve has been funded to cover series 2019-1 notes' monthly interest payments and senior expenses. The series 2019-1 class F notes and the originator OVFN, which were retained by the originator, have been cancelled. As such, the rating for the series 2019-1 class F notes has been withdrawn. DEBT RATING PRIOR ---- ------ ----- NewDay Funding Master Issuer Plc 2019-1 Class A XS2001273668 LT AAAsf Affirmed AAAsf 2019-1 Class B XS2001274559 LT AAsf Affirmed AAsf 2019-1 Class C XS2001274393 LT Asf Affirmed Asf 2019-1 Class D XS2001275101 LT BBBsf Affirmed BBBsf 2019-1 Class E XS2001275879 LT BBsf Affirmed BBsf 2019-1 Class F XS2001276257 LT WDsf Withdrawn B+sf 2019-2 Class A 65120KAA1 LT AAAsf Affirmed AAAsf 2019-2 Class B XS2052209256 LT AAsf Affirmed AAsf 2019-2 Class C XS2052209413 LT Asf Affirmed Asf 2019-2 Class D XS2052209769 LT BBBsf Affirmed BBBsf 2019-2 Class E XS2052210189 LT BBsf Affirmed BBsf 2019-2 Class F XS2052210346 LT B+sf Affirmed B+sf 2021-1 Class A1 XS2296139798 LT AAAsf Affirmed AAAsf 2021-1 Class A2 65120LAA9 LT AAAsf Affirmed AAAsf 2021-1 Class B XS2296139954 LT AAsf Affirmed AAsf 2021-1 Class C XS2296140028 LT Asf Affirmed Asf 2021-1 Class D XS2296140291 LT BBBsf Affirmed BBBsf 2021-1 Class E XS2296140374 LT BBsf Affirmed BBsf 2021-1 Class F XS2296140457 LT B+sf Affirmed B+sf 2021-2 Class A1 XS2358473374 LT AAAsf Affirmed AAAsf 2021-2 Class A2 65120LAB7 LT AAAsf Affirmed AAAsf 2021-2 Class B XS2358473887 LT AAsf Affirmed AAsf 2021-2 Class C XS2358474000 LT Asf Affirmed Asf 2021-2 Class D XS2358474182 LT BBBsf Affirmed BBBsf 2021-2 Class E XS2358474422 LT BBsf Affirmed BBsf 2021-2 Class F XS2358474778 LT B+sf Affirmed B+sf 2021-3 Class A1 XS2399701254 LT AAAsf Affirmed AAAsf 2021-3 Class A2 65120LAD3 LT AAAsf Affirmed AAAsf 2021-3 Class B XS2399700447 LT AAsf Affirmed AAsf 2021-3 Class C XS2399700793 LT Asf Affirmed Asf 2021-3 Class D XS2399791149 LT BBBsf Affirmed BBBsf 2021-3 Class E XS2399827604 LT BBsf Affirmed BBsf 2021-3 Class F XS2399973176 LT B+sf Affirmed B+sf 2022-1 Class A1 XS2452635209 LT AAAsf New Rating AAA(EXP)sf 2022-1 Class A2 65120LAK7 LT AAAsf New Rating AAA(EXP)sf 2022-1 Class B XS2452635621 LT AAsf New Rating AA(EXP)sf 2022-1 Class C XS2452635894 LT Asf New Rating A(EXP)sf 2022-1 Class D XS2452636199 LT BBBsf New Rating BBB(EXP)sf 2022-1 Class E XS2452636355 LT BBsf New Rating BB(EXP)sf 2022-1 Class F XS2452636512 LT B+sf New Rating B+(EXP)sf VFN-F1 V1 Class A LT BBB-sf Affirmed BBB-sf VFN-F1 V1 Class E LT BBsf Affirmed BBsf VFN-F1 V1 Class F LT B+sf Affirmed B+sf VFN-F1 V2 Class A LT BBBsf Affirmed BBBsf VFN-F1 V2 Class E LT BBsf Affirmed BBsf VFN-F1 V2 Class F LT Bsf Affirmed Bsf TRANSACTION SUMMARY The series 2022-1 notes issued by NewDay Funding Master Issuer Plc are collateralised by a pool of non-prime UK credit card receivables. NewDay is one of the largest specialist credit card companies in the UK, where it is also active in the retail credit card market. However, the co-brand retail card receivables do not form part of this transaction. The collateralised pool consists of an organic book originated by NewDay Ltd, with continued originations of new accounts, and a closed book consisting of two legacy pools acquired by the originator in 2007 and 2010. The legacy pools now only account for a small portion of the total pool. The securitised pool of assets is beneficially held by NewDay Funding Receivables Trustee Ltd. Fitch has withdrawn NewDay Funding's series 2019-1 class F notes' rating, as the notes have been cancelled. KEY RATING DRIVERS Non-Prime Asset Pool The portfolio consists of non-prime UK credit card receivables. Fitch assumes a steady-state charge-off rate of 18%, with a stress on the low end of the spectrum (3.5x for 'AAAsf'), considering the high absolute level of the steady-state assumption and lower historical volatility in charge-offs. As is typical in the non-prime credit card sector, the portfolio had low payment rates and high yield. Fitch assumed a steady-state monthly payment rate of 10% with a 45% stress at 'AAAsf', and a steady-state yield of 30% with a 40% stress at 'AAAsf'. Fitch also assumed a 0% purchase rate in the 'Asf' category and above, considering that the seller is unrated and there is reduced probability of a non-prime portfolio being taken over by a third party in a high-stress environment. Good Performance, Uncertainties Ahead Delinquency and charge-off rates are below pre-pandemic levels and the monthly payment rate has been strong, but significant uncertainties remain. The global energy supply shock is increasing inflationary pressures, affecting households' purchasing power, especially those with less financial flexibility, a key demographic for this portfolio. Cards may be one of the main means of bridging temporary household finance pressure, which in Fitch's view could store up performance stress. Fitch will monitor for notable shifts in historical usage patterns but, although downside risks have increased, the portfolio's good performance provides some headroom for potential deterioration before reaching the long-term steady-state level. On balance current assumptions therefore remain adequate. Variable Funding Notes Add Flexibility The structure employs a separate Originator VFN, purchased and held by NewDay Funding Transferor Ltd (the transferor), in addition to Series VFN-F1 and VFN-F2 providing the funding flexibility that is typical and necessary for credit card trusts. It provides credit enhancement to the rated notes, adds protection against dilution by way of a separate functional transferor interest and meets the UK and US risk-retention requirements. Key Counterparties Unrated The NewDay Group acts in several capacities through its various entities, most prominently as originator, servicer and cash manager. The degree of reliance is mitigated in this transaction by the transferability of operations, agreements with established card service providers, a back-up cash management agreement and a series-specific liquidity reserve. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: Long-term asset performance deterioration, such as increased charge-offs, reduced MPR or reduced portfolio yield, which could be driven by changes in portfolio characteristics, macroeconomic conditions, business practices, credit policy or legislative landscape, would contribute to negative revisions of Fitch's asset assumptions. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in upside and downside environments. The results below should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Rating sensitivity to increased charge-off rate: Increase steady state by 25%/50%/75% Series 2022-1 A: 'AAsf' / 'AA-sf' / 'A+sf' Series 2022-1 B: 'A+sf' / 'Asf' / 'A-sf' Series 2022-1 C: 'BBB+sf' / 'BBBsf' / 'BBB-sf' Series 2022-1 D: 'BB+sf' / 'BBsf' / 'BB-sf' Series 2022-1 E: 'B+sf' / 'Bsf' / N.A. Series 2022-1 F: 'Bsf' / N.A. / N.A. Rating sensitivity to reduced monthly payment rate (MPR): Reduce steady state by 15% / 25% / 35% Series 2022-1 A: 'AAsf' / 'AA-sf' / 'A+sf' Series 2022-1 B: 'A+sf' / 'Asf' / 'A-sf' Series 2022-1 C: 'BBB+sf' / 'BBBsf' / 'BBB-sf' Series 2022-1 D: 'BBB-sf' / 'BB+sf' / 'BBsf' Series 2022-1 E: 'BB-sf' / 'B+sf' / 'B+sf' Series 2022-1 F: 'B+sf' / 'Bsf' / 'Bsf' Rating sensitivity to reduced purchase rate: Reduce steady state by 50% / 75% / 100% Series 2022-1 D: 'BBB-sf' / 'BBB-sf' / 'BBB-sf' Series 2022-1 E: 'BB-sf' / 'BB-sf' / 'BB-sf' Series 2022-1 F: 'B+sf' / 'B+sf' / 'Bsf' No rating sensitivities are shown for the class A to C notes, as Fitch is already assuming a 100% purchase rate stress in these rating scenarios. Rating sensitivity to increased charge-off rate and reduced MPR: Increase steady-state charge-offs by 25% / 50% / 75% and reduce steady-state MPR by 15% / 25% / 35% Series 2022-1 A: 'A+sf' / 'A-sf' / 'BBB-sf' Series 2022-1 B: 'Asf' / 'BBBsf' / 'BB+sf' Series 2022-1 C: 'BBBsf' / 'BB+sf' / 'BB-sf' Series 2022-1 D: 'BBsf' / 'B+sf' / N.A. Series 2022-1 E: 'Bsf' / N.A. / N.A. Series 2022-1 F: N.A. / N.A. / N.A. Factors that could, individually or collectively, lead to positive rating action/upgrade: Long-term asset performance improvement, such as decreased charge-offs, increased monthly payment rate or increased portfolio yield driven by a sustainable positive change of the underlying asset quality would contribute to positive revisions of Fitch's asset assumptions. The credit card portfolio consists of several card products that target slightly different demographics. Certain products attract better credit-quality borrowers than others and contribute to better portfolio performance. If those products continue to increase their sizes to levels that materially improve the overall portfolio performance, Fitch would expect to revise its asset assumptions, which may have a positive impact on the notes' ratings. Fitch will continue to monitor the evolution of the portfolio composition and will reassess its asset assumptions when there is significant change. Rating sensitivity to reduced charge-off rate: Reduce steady state by 25% Series 2022-1 B: 'AAAsf' Series 2022-1 C: 'AA-sf' Series 2022-1 D: 'A-sf' Series 2022-1 E: 'BBB-sf' Series 2022-1 F: 'BBsf' The class A notes cannot be upgraded given the notes are already rated at 'AAAsf', which is the highest level on Fitch's scale. 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. =============== X X X X X X X X =============== [*] BOOK REVIEW: Transnational Mergers and Acquisitions ------------------------------------------------------- Author: Sarkis J. Khoury Publisher: Beard Books Softcover: 292 pages List Price: $34.95 Order your personal copy today at http://is.gd/hl7cni Transnational Mergers and Acquisitions in the United States will appeal to a wide range of readers. Dr. Khoury's analysis is valuable for managers involved in transnational acquisitions, whether they are acquiring companies or being acquired themselves. At the same time, he provides a comprehensive and large-scale look at the industrial sector of the U.S. economy that proves very useful for policy makers even today. With its nearly 100 tables of data and numerous examples, Khoury provides a wealth of information for business historians and researchers as well. Until the late 1960s, we Americans were confident (some might say smug) in our belief that U.S. direct investment abroad would continue to grow as it had in the 1950s and 1960s, and that we would dominate the other large world economies in foreign investment for some time to come. And then came the 1970s, U.S. investment abroad stood at $78 billion, in contrast to only $13 billion in foreign investment in the U.S. In 1978, however, only eight years later, foreign investment in the U.S. had skyrocketed to nearly #41 billion, about half of it in acquisition of U.S. firms. Foreign acquisitions of U.S. companies grew from 20 in 1970 to 188 in 1978. The tables had turned an Americans were worried. Acquisitions in the banking and insurance sectors were increasing sharply, which in particular alarmed many analysts. Thus, when it was first published in 1980, this book met a growing need for analytical and empirical data on this rapidly increasing flow of foreign investment money into the U.S., much of it in acquisitions. Khoury answers many of the questions arising from the situation as it stood in 1980, many of which are applicable today: What are the motives for transnational acquisitions? How do foreign firms plans, evaluate, and negotiate mergers in the U.S.? What are the effects of these acquisitions on competition, money and capital markets; relative technological position; balance of payments and economic policy in the U.S.? To begin to answer these questions, Khoury researched foreign investment in the U.S. from 1790 to 1979. His historical review includes foreign firms' industry preferences, choice of location in the U.S., and methods for penetrating the U.S. market. He notes the importance of foreign investment to growth in the U.S., particularly until the early 20th century, and that prior to the 1970s, foreign investment had grown steadily throughout U.S. history, with lapses during and after the world wars. Khoury found that rates of return to foreign companies were not excessive. He determined that the effect on the U.S. economy was generally positive and concluded that restricting the inflow of direct and indirect foreign investment would hinder U.S. economic growth both in the short term and long term. Further, he found no compelling reason to restrict the activities of multinational corporations in the U.S. from a policy perspective. Khoury's research broke new ground and provided input for economic policy at just the right time. Sarkis J. Khoury holds a Ph.D. in International Finance from Wharton. He teaches finance and international finance at the University of California, Riverside, and serves as the Executive Director of International Programs at the Anderson Graduate School of Business. ********* 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 * * *