/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220601.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 Wednesday, June 1, 2022, Vol. 23, No. 103 Headlines F R A N C E VALLOUREC SA: S&P Affirms 'B/B' ICRs & Alters Outlook to Positive G E R M A N Y CARGOLOGIC GERMANY: Enters Insolvency Following LBA Airspace Ban CONSUS REAL ESTATE: Adler Group Explores Rescue Options for Unit FORTUNA CONSUMER 2022-1: Fitch Assigns B- Rating on Class F Notes I R E L A N D CARLYLE EURO 2022-3: S&P Assigns Prelim. B- Rating on E Notes MADISON PARK VII: Moody's Affirms B2 Rating on EUR13.5MM F Notes K A Z A K H S T A N KMF LLC: Fitch Affirms 'B+' LongTerm IDR, Outlook Stable S W E D E N PERSTORP HOLDING: S&P Puts 'B-' ICR on Watch Positive on PCG Deal S W I T Z E R L A N D DE GRISOGONO: DAMAC Group Acquires Business Following Bankruptcy T U R K E Y ZORLU YENILENEBILIR: Fitch Affirms 'B-' LT IDR, Outlook Stable U N I T E D K I N G D O M BOWER & CHILD: Enters Liquidation, To Hold Auction Sale P&O FERRIES: UK Government Scraps Contract Over Mass Redundancies RRE 12 LOAN: Fitch Assigns 'BB-(EXP)' Rating on Class D Debt [*] UK: Gov't Creates New Accounting Watchdog Following Scandals - - - - - =========== F R A N C E =========== VALLOUREC SA: S&P Affirms 'B/B' ICRs & Alters Outlook to Positive ----------------------------------------------------------------- S&P Global Ratings revised its outlook to positive from stable and affirmed its 'B/B' long- and short-term issuer credit ratings on French steel tube producer Vallourec S.A. S&P also affirmed its 'B+' issue rating on Vallourec's senior unsecured notes and our 'B' rating on its commercial paper program. The positive outlook indicates that S&P could raise the rating in the coming six to 12 months if the company starts to deliver the transformation change in its industrial footprint and there are no material changes in the macroeconomic environment. The outlook revision is based on Vallourec's transformational decision, coupled with strong market conditions. On May 18, 2022, Vallourec decided to launch the closure process for its German sites, and intends to supply its oil country tubular goods products from Brazil. According to the company, the transformation will reduce its cost structure and should complete in first-quarter 2024. Combined with additional cost-cutting initiatives, the company hopes to generate an additional EUR230 million of recurring EBITDA, resulting in a recurring cash flow impact of EUR250 million, including EUR20 million from capital expenditure (capex) savings. The new strategy is intended to be cycle-proof and to benefit from a reshaped cost base. S&P said, "At this stage, we prefer to take more time before incorporating the benefits of the program in our base case. In the past, Vallourec has been slow to implement cost structure programs. In addition, there is some uncertainty regarding the associated costs and related environmental, social, and governance (ESG) risks. If the company delivers on its relocation and restructuring efforts, we expect that profitability and cash flows will be much less sensitive to market cycles." Market fundamentals support a longer-lasting uptick in profitability. Under S&P's base-case scenario, it now projects adjusted EBITDA will be EUR670 million-EUR720 million in 2022 (previous projection was for EUR440 million). The revised figure is bolstered by strong demand for the company's products because of high oil prices and bans on Russian pipes, combined with elevated prices for iron ore and oil. In the first quarter of 2022, the company reported EBITDA of only EUR45 million, mainly because there was an outage at its Brazilian iron ore mining operations. The North American market remains hot. In 2021, the North American division contributed about 24% of revenue. S&P said, "In the short term, we expect it to continue to fuel growth, given that rig counts increased by 17% between January and April of 2022, according to Baker Hughes. We understand that Vallourec's order book is filled until the third quarter of 2022. We expect markets in Europe, the Middle East, and Africa, which lag those in North America by 12 months, to deliver better results in 2022 than in 2021." S&P said, "The positive outlook indicates that we could raise the rating in the coming six to 12 months if the company transforms its portfolio and there are no material changes in the macroeconomy environment. "Under our base-case scenario, in 2022, we expect EBITDA of EUR670 million-EUR720 million and almost break-even cash flow, including massive working capital outflow. In 2023, we forecast that EBITDA will be about EUR700 million or above, and that free operating cash flow (FOCF) will be substantial and positive. As a result, we expect adjusted debt to EBITDA to be below 3.0x (or below 2.0x if we net all cash except for EUR150 million, which we consider to be a sustainable minimum cash position). "For the existing rating, we expect the company to maintain an adjusted debt to EBITDA of 4x-5x (using sustainable cash levels) over the cycle and that this metric will not exceed 5x during the downturn of the cycle." S&P could revise the outlook back to stable if: -- A sharp decline in demand for the company's product, or operational issues, caused EBITDA to drop to EUR500 million or below. -- Implementation of the transformation program was more complex than expected. Triggers for an upgrade could include: -- The company's ability to maintain adjusted debt to EBITDA of 3x-4x (taking into account the cash and working capital levels) over the cycle. Our more prudent credit metrics assume still-high levels of capex and a potential material increase in working capital. -- Some progress on the transformation program, and indications that Vallourec will be able reduce the volatility of earnings through the cycle; -- Positive free cash flow (excluding changes in working capital); and -- Prudent liquidity management. ESG credit indicators: E-3, S-2, G-3 ============= G E R M A N Y ============= CARGOLOGIC GERMANY: Enters Insolvency Following LBA Airspace Ban ---------------------------------------------------------------- Luke Bodell at Simple Flying reports that Russian-owned CargoLogic Germany has entered insolvency less than two months after it was handed an airspace ban by Germany's civil aviation authority (LBA). The airline applied for insolvency restructuring on May 10 after it was banned from flying in EU airspace in early March, Simple Flying relates. According to Simple Flying, the District Court of Leipzig has appointed Lucas Floether as the provisional administrator. CargoLogic Germany could return to the skies earlier than thought, with a return to operations still very much on the cards, Simple Flying notes. The carrier still maintains a valid Air Operator's Certificate (AOC) and could restart with new investors, Simple Flying states. The cargo airline's revenues effectively dried up after its ban, yet it still had to pay overheads such as staff salaries and leasing fees, Simple Flying discloses. If CargoLogic Germany is to restart operations, it will need to do so under new ownership, according to Simple Flying. While the company may not be under direct Russian ownership, its links to Russia are clear enough through UK-registered CargoLogic Holding, Simple Flying notes. This holding company is not directly owned by Volga-Dnepr Group. Instead, it is under the personal ownership of Volga-Dnepr co-founder Alexej Isaykin, who has dual Russian and Cypriot nationality, Simple Flying discloses. CargoLogic Germany has contested the airspace ban and claims of Russian ownership, claiming that its staff, headquarters and taxes are all based in Germany, Simple Flying relates. The administrator confirmed in a statement that the cargo carrier is considered to be Russian-owned, supporting a previous declaration from the LBA, Simple Flying notes. CargoLogic Germany is a subsidiary of Cargo Logic Holding, which also manages UK-based CargoLogicAir. The German cargo carrier was established in 2013 and initially named Value Cargo Logistics before adopting its current name in 2018. CONSUS REAL ESTATE: Adler Group Explores Rescue Options for Unit ---------------------------------------------------------------- Matthias Inverardi at Reuters reports that German real estate investor Adler Group is looking at options to deal with its troubled subsidiary Consus Real Estate, but rules out winding down the unit, Adler Chairman Stefan Kirsten said on May 14. "We are working through potential restructuring plans," Reuters quotes Mr. Kirsten as saying, referring to the real estate developer. "As a matter of principle, I do not rule in or out any measures at Consus -- apart from insolvency." FORTUNA CONSUMER 2022-1: Fitch Assigns B- Rating on Class F Notes ----------------------------------------------------------------- Fitch Ratings has assigned Fortuna Consumer Loan ABS 2022-1 DAC's class A to F notes final ratings with Stable Outlooks. DEBT RATING PRIOR ---- ------ ----- Fortuna Consumer Loan ABS 2022-1 A XS2473716210 LT AAAsf New Rating AAA(EXP)sf B XS2473716723 LT AAsf New Rating AA(EXP)sf C XS2473717028 LT A-sf New Rating A-(EXP)sf D XS2473717457 LT BBB-sf New Rating BBB-(EXP)sf E XS2473717614 LT BBsf New Rating BB(EXP)sf F XS2473718000 LT B-sf New Rating B-(EXP)sf G XS2473718349 LT NRsf New Rating NR(EXP)sf R XS2473718695 LT NRsf New Rating NR(EXP)sf X XS2473719073 LT NRsf New Rating NR(EXP)sf TRANSACTION SUMMARY Fortuna Consumer Loan ABS 2022-1 DAC is a true-sale securitisation of a static pool of unsecured consumer loans sold by auxmoney Investments Limited. The securitised consumer loan receivables are derived from loan agreements entered into between Süd-West-Kreditbank Finanzierung GmbH (SWK) and individuals located in Germany and brokered by auxmoney GmbH via its online lending platform. KEY RATING DRIVERS Large Loss Expectations: auxmoney targets higher-risk borrowers compared with traditional lenders of German unsecured consumer loans. Fitch determined the risk score calculated by auxmoney as the key asset performance driver. Fitch assumes a slightly higher weighted average (WA) default base case of 13% compared with 12.8% in the predecessor deal. This considers the negative impact that rising costs of living will have, particularly on low-income borrowers in the pool. Fitch applied a below the range WA default multiple of 3.8x at 'AAAsf' for the total portfolio. Fitch assumed a recovery base case of 35% and a high recovery haircut of 60% at 'AAAsf'. The resulting loss rates are the highest among Fitch-rated German unsecured loans transactions. Pro Rata Paydown Adds Risk: All collateralised notes start amortising pro rata from closing. In Fitch's modelling, full repayment of the notes is highly dependent on the length of the pro rata period, which is driven not only by the level of credit losses, but also by the timing of losses and prepayment rates. Fitch views the principal deficiency ledger-based trigger as the most effective of the performance triggers to stop the pro rata period in case of a meaningful performance deterioration. Operational Risks: auxmoney operates a data- and technology-driven lending platform that connects borrowers and investors on a fully-digitalised basis. Fitch conducted an operational review, during which auxmoney showed a robust corporate governance and risk approach. Two warehouse facilities are in place, for which auxmoney Investments Limited as seller holds a share in the junior tranche. Assets for the transaction are selected from one of the warehouse facilities according to the transaction's eligibility criteria, ensuring that the seller retains sufficient risk on its own book. Servicing Continuity Risk Addressed: CreditConnect GmbH, a subsidiary of auxmoney, is the servicer. Loancos GmbH acts as back-up servicer from closing, reducing the risk of servicing discontinuity. The back-up servicing agreement covers two scenarios: one where CreditConnect is replaced; and one where both CreditConnect and SWK no longer perform their contractual duties. The high level of standby arrangements, combined with a liquidity reserve, reduce the risk of payment interruptions of senior expenses and interest on the notes. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: Downside risks have increased and Fitch has published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major structured finance and covered bond sub-sectors (see "What a Stagflation Scenario Would Mean for Global Structured Finance" dated April 2022). Fitch expects the EMEA ABS unsecured sector in the assumed adverse scenario to experience a "Medium Impact" on asset performance, and a "Mild to Modest Impact" on rating performance, indicating a low risk of rating changes. However, transactions with exposure to non-prime borrowers may see increased negative pressure on their non-investment-grade tranches in the adverse case. Ratings may be negatively affected if defaults and losses are larger and significantly more front- (for senior notes) or back-loaded (for junior notes) than assumed, leading to higher excess spread compression or a longer pro rata period. Below Fitch shows the model-implied sensitivities the transaction faces when one assumption is stressed, while holding others equal. Expected impact on the notes' ratings of increased defaults (class A/B/C/D/E/F) Increase default rate by 10%: 'AAAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'B-sf'/'CCCsf' Increase default rate by 25%: 'AA+sf'/'Asf'/'BBBsf'/'BB+sf'/'CCCsf'/'NRsf' Increase default rate by 50%: 'AA-sf'/'A-sf'/'BBB-sf'/'BBsf'/'NRsf'/'NRsf' Expected impact on the notes' ratings of decreased recoveries (class A/B/C/D/E/F) Reduce recovery rates by 10%: 'AAAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'Bsf'/'CCCsf' Reduce recovery rates by 25%: 'AAAsf'/'AA-sf'/'A-sf'/'BB+sf'/'CCCsf'/'NRsf' Reduce recovery rates by 50%: 'AAAsf'/'A+sf'/'BBB+sf'/'BB+sf'/'NRsf'/'NRsf' Expected impact on the notes' ratings of increased defaults and decreased recoveries (class A/B/C/D/E/F) Increase default rates by 10% and decrease recovery rates by 10%: 'AAAsf'/'A+sf'/'BBB+sf'/'BB+sf'/'CCCsf'/'NRsf' Increase default rates by 25% and decrease recovery rates by 25%: 'AA+sf'/'Asf'/'BBB-sf'/'BBsf'/'NRsf'/'NRsf' Increase default rates by 50% and decrease recovery rates by 50%: 'A+sf'/'BBBsf'/'BBsf'/'NRsf'/'NRsf'/'NRsf' Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Lower actual defaults and smaller losses than assumed would be positive for the ratings. Reduction in inflationary pressure on food and energy and improving growth prospects for western European economies due to a solution in the Ukrainian war would be positive for the ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ============= I R E L A N D ============= CARLYLE EURO 2022-3: S&P Assigns Prelim. B- Rating on E Notes ------------------------------------------------------------- S&P Global Ratings assigned preliminary credit ratings to the class A-1A to E European cash flow CLO notes issued by Carlyle Euro CLO 2022-3 DAC. At closing, the issuer will issue unrated subordinated notes. The preliminary ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which S&P expects to be bankruptcy remote. -- The transaction's counterparty risks, which S&P expects to be in line with its counterparty rating framework. Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will permanently switch to semi-annual payments. The portfolio's reinvestment period will end approximately 4.5 years after closing and the non-call period will end 1.5 years after closing. S&P understands that at closing, the portfolio will be well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, S&P has conducted its credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. Under the transaction documents, the issuer can purchase loss mitigation obligations, which are assets of an existing collateral obligation held by the issuer offered in connection with bankruptcy, workout, or restructuring of an obligation, to improve the related collateral obligation's recovery value. The issuer may purchase loss mitigation obligations using either interest proceeds, principal proceeds, or amounts standing to the credit of the supplemental reserve account. The use of interest proceeds to purchase loss mitigation obligations is subject to all the coverage tests passing following the purchase and the manager determining there are sufficient interest proceeds to pay interest on all the rated notes on the upcoming payment date. The usage of principal proceeds is subject to the following conditions: -- The par coverage tests (including the reinvestment overcollateralization test) pass following the purchase. -- The purchase happens only above reinvestment target par balance. -- The obligation to be acquired is a debt obligation. -- The obligation is pari passu or senior to the obligation already held by the issuer. -- The obligation's maturity falls before the rated notes' maturity date. -- It is not purchased at a premium. S&P said, "In our cash flow analysis, we used the EUR335 million target par amount, the covenanted weighted-average spread (4.00%), the reference weighted-average coupon (3.50%), and the actual weighted-average recovery rate calculated in line with our CLO criteria. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Our credit and cash flow analysis show that the class A-2A, A-2B, B, C, and D notes benefit from break-even default rate (BDR) and scenario default rate cushions that we would typically consider to be in line with higher ratings than those assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our preliminary ratings on these classes of notes. "The class E notes' current BDR cushion is negative at the assigned preliminary rating. Nevertheless, based on the portfolio's actual characteristics and additional overlaying factors, including our long-term corporate default rates and recent economic outlook, we believe this class is able to sustain a steady-state scenario, in accordance with our criteria." S&P's analysis further reflects several factors, including: -- The class E notes' available credit enhancement, which is in the same range as that of other CLOs S&P has rated and that has recently been issued in Europe. -- S&P said, "Our model-generated portfolio default risk, which is at the 'B-' rating level at 22.81% (for a portfolio with a weighted-average life of 5.02 years) versus 15.562% if we were to consider a long-term sustainable default rate of 3.1% for 5.02 years." -- Whether the tranche is vulnerable to non-payment in the near future. -- If there is a one-in-two chance for this note to default. -- If S&P envisions this tranche to default in the next 12-18 months. S&P said, "Following this analysis, we consider that the available credit enhancement for the class E notes is commensurate with the assigned preliminary 'B- (sf)' rating. Under S&P's structured finance sovereign risk criteria, it considers that the transaction's exposure to country risk is sufficiently mitigated at the assigned preliminary rating levels. Until the end of the reinvestment period on Jan. 13, 2027, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and compares that with the default potential of the current portfolio plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager can, through trading, deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. At closing, S&P expects that the transaction's documented counterparty replacement and remedy mechanisms will adequately mitigate its exposure to counterparty risk under its current counterparty criteria. S&P expects the transaction's legal structure to be bankruptcy remote, in line with its legal criteria. S&P said, "Considering the above-mentioned factors and following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our preliminary ratings are commensurate with the available credit enhancement for each class of notes. "The transaction securitizes a portfolio of primarily senior secured leveraged loans and bonds, and will be managed by CELF Advisors LLP, a wholly owned subsidiary of Carlyle Investment Management LLC, which is a Delaware limited liability company, indirectly owned by The Carlyle Group L.P. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A-1A to D notes to five of the 10 hypothetical scenarios we looked at in our publication, "How Credit Distress Due To COVID-19 Could Affect European CLO Ratings," published on April 2, 2020. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class E notes." Environmental, social, and governance (ESG) S&P said, "We regard the exposure to ESG credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to the following industries: production or marketing of controversial weapons, tobacco or tobacco-related products, nuclear weapons, thermal coal production, speculative extraction of oil and gas, pornography or prostitution, illegal drugs, physical casinos and online gambling, endangered wildlife, palm oil, oil and gas extraction, oil exploration, opioid manufacturing and distribution, coal, transportation of tar sands, private prisons, soft commodities, adversely affecting animal welfare, predatory lending, and controversial practices in land use. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." Ratings List CLASS PRELIM. PRELIM. INTEREST RATE* CREDIT RATING AMOUNT ENHANCEMENT (MIL. EUR) (%) A-1A AAA (sf) 174.30 Three-month EURIBOR plus 1.20% 40.51 A-1B AAA (sf) 25.00 Three-month EURIBOR plus 1.48%§ 40.51 A-2A AA (sf) 25.10 Three-month EURIBOR plus 2.50% 28.00 A-2B AA (sf) 16.80 3.15% 28.00 B A (sf) 20.10 Three-month EURIBOR plus 3.70% 22.00 C BBB- (sf) 21.10 Three-month EURIBOR plus 6.00% 15.70 D BB- (sf) 15.40 Three-month EURIBOR plus 8.19% 11.10 E B- (sf) 12.90 Three-month EURIBOR plus 10.62% 7.31 Sub notes NR 27.00 N/A N/A * The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. § EURIBOR is capped at 2.50%. EURIBOR -- Euro Interbank Offered Rate. NR -- Not rated. N/A -- Not applicable. MADISON PARK VII: Moody's Affirms B2 Rating on EUR13.5MM F Notes ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Madison Park Euro Funding VII DAC: EUR14,500,000 Class B-1 Senior Secured Floating Rate Notes due 2031, Upgraded to Aaa (sf); previously on May 25, 2018 Definitive Rating Assigned Aa2 (sf) EUR15,000,000 Class B-2 Senior Secured Floating Rate Notes due 2031, Upgraded to Aaa (sf); previously on May 25, 2018 Definitive Rating Assigned Aa2 (sf) EUR20,000,000 Class B-3 Senior Secured Fixed Rate Notes due 2031, Upgraded to Aaa (sf); previously on May 25, 2018 Definitive Rating Assigned Aa2 (sf) EUR20,500,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to A1 (sf); previously on May 25, 2018 Definitive Rating Assigned A2 (sf) EUR10,000,000 Class C-2 Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to A1 (sf); previously on May 25, 2018 Definitive Rating Assigned A2 (sf) Moody's has also affirmed the ratings on the following notes: EUR272,000,000 Class A Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on May 25, 2018 Definitive Rating Assigned Aaa (sf) EUR25,500,000 Class D Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Baa2 (sf); previously on May 25, 2018 Definitive Rating Assigned Baa2 (sf) EUR27,500,000 Class E Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on May 25, 2018 Definitive Rating Assigned Ba2 (sf) EUR13,500,000 Class F Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed B2 (sf); previously on May 25, 2018 Definitive Rating Assigned B2 (sf) Madison Park Euro Funding VII DAC, issued in May 2016, refinanced in May 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Credit Suisse Asset Management Limited. The transaction's reinvestment period will end in August 2022. RATINGS RATIONALE The rating upgrades on the Class B-1, B-2, B-3, C-1 and C-2 Notes are primarily a result of the benefit of the shorter period of time remaining before the end of the reinvestment period in August 2022. In light of reinvestment restrictions during the amortisation period, and therefore the limited ability to effect significant changes to the current collateral pool, Moody's analysed the deal assuming a higher likelihood that the collateral pool characteristics would maintain an adequate buffer relative to certain covenant requirements. In particular, Moody's assumed that the deal will benefit from a shorter amortisation profile than it had assumed at the last rating action in May 2018. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR441.9m Defaulted Securities: EUR1.8m Diversity Score: 64 Weighted Average Rating Factor (WARF): 2841 Weighted Average Life (WAL): 4.55 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.67% Weighted Average Coupon (WAC): 4.97% Weighted Average Recovery Rate (WARR): 44.5% The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank and swap providers, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in May 2021. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: 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. Additional uncertainty about performance is due to the following: Portfolio amortisation: Once reaching the end of the reinvestment period in August 2022, The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. Weighted average life: The notes' ratings are sensitive to the weighted average life assumption of the portfolio, which could lengthen as a result of the manager's decision to reinvest in new issue loans or other loans with longer maturities, or participate in amend-to-extend offerings. Moody's tested for a possible extension of the actual weighted average life in its analysis. The effect on the ratings of extending the portfolio's weighted average life can be positive or negative depending on the notes' seniority. Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. =================== K A Z A K H S T A N =================== KMF LLC: Fitch Affirms 'B+' LongTerm IDR, Outlook Stable -------------------------------------------------------- Fitch Ratings has affirmed Microfinance organisation KMF LLC's (KMF) Long-Term Issuer Default Rating (IDR) at 'B+' with a Stable Outlook. Fitch has also upgraded KMF's Long-Term National Rating to 'BBB(kaz)' from 'BBB-(kaz)' with a Stable Outlook. KEY RATING DRIVERS IDRs KMF's ratings reflect a business model that is focused on under-banked and higher-risk micro-SMEs, modest scale (compared with domestic banks), competition from banks with access to cheaper funding, limited product diversification and reliance on confidence-sensitive wholesale funding. Rating strengths are KMF's leading market share in Kazakhstan's microfinance sector, a long record of stable operations in an often volatile operating environment, healthy profitability, modest credit losses for the business model, a granular and short-term loan portfolio, low exposure to direct market risk and access to domestic and international funding. KMF has a leading market share in the domestic microfinance sector but increasingly competes against Kazakh banks, with the latter benefiting from structurally stronger funding profiles and franchises. Online lenders also present challenges to some of the KMF's loan products. Positively, management has responded to the challenges with a coherent strategy of diversifying funding away from reliance on international creditors towards domestic funding and gradually diversifying its product offering and sales channels. Anticipated regulatory tightening, such as lower lending caps and higher capital requirements, would also benefit KMF by reducing competition from payday and online lenders. KMF's profitability is supported by its high net interest margin (26% in 2021), which is reflective of its business model and target market. Operational efficiency is sound, with a cost/income ratio of 34% in 2021, despite a labour-intensive business model. KMF's pre-tax income/average assets ratio was healthy at 10% in 2021. KMF operates in a high-risk segment, but with modest credit losses for the business model. Fitch estimates that impaired loans generation averaged about 2% of gross loans annually during the past four years indicating cautious underwriting standards and adequate risk controls. Its impaired loans ratio (Stage 3 loans) was 4.7% at end-2021, while its impaired loans reserve coverage stood at a sound 95% at the same date (end-2020: 6% and 91%, respectively). Lending is granular and in local currency with a high share of repeat customers (84%). Resumption of growth at 18% yoy and large dividend pay-outs in 2021 have increased KMF's leverage. Its gross debt/tangible equity ratio weakened to 3.2x at end-2021 from 2.2x a year earlier, which Fitch still considers adequate for KMF's rating. Management intends to keep KMF's equity/assets ratio at about 25% (end-2021: 23%). Relative to its peers, KMF has a more developed funding profile, helped by the length of its relationships with creditors, reputable shareholders, increasing access to domestic sourced funding and a short-term loan portfolio (76% matured within two years as of end-2021). However, Fitch assesses refinancing risk as sensitive to covenants imposed by foreign creditors that are tested on a monthly basis, exposing the company to the risk of accelerated debt repayments if waivers are not received. NATIONAL RATING The upgrade of the Long-Term National Rating reflects KMF's record of maintaining a diversified funding profile in challenging operating conditions and Fitch's view that its competitive position has incrementally improved due to the scaling down of Russian financial institutions in Kazakhstan and tightening prudential regulation which will challenge smaller non-bank competitors. It also considers KMF's strategy to improve product diversification and funding access by obtaining a banking license. Exposure to Social Impacts: KMF's business model is focused on under-banked borrowers and its positive social impact supports KMF's franchise and funding profile. This facilitates KMF's access to favourable funding from a range of international developmental institutions and impact investors. This is reflected in Fitch's ESG score of '4[+]' for Exposure to Social Impacts. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Sustained, profitable growth supported by a more diversified product offering and improved funding diversification (including access to deposits), in conjunction with stable or improved financial metrics, could support positive rating action. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A deterioration in KMF's operating environment, leading to a material deterioration in profitability or asset quality, coupled with an increase in leverage (debt/tangible equity) to above 3.5x; -- An increased risk appetite with expansion in higher-risk products for instance in response to continuing competition from domestic banks; -- A weakening of the funding profile such as constrained funding access, marked increase in funding costs, higher concentrations, shorter maturities; -- A realisation of the regulatory risk, adding significant constrains to KMF's business model. 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 KMF has an ESG Relevance Score of '4[+]' for Exposure to Social Impacts due to its business model focused on under-banked borrowers and its positive social impact supports KMF's franchise and funding profile. This facilitates KMF's access to favourable funding from a range of international developmental institutions and impact investors, which has a positive impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. DEBT RATING PRIOR ---- ------ ----- Microfinance organization KMF LLC LT IDR B+ Affirmed B+ ST IDR B Affirmed B LC LT IDR B+ Affirmed B+ LC ST IDR B Affirmed B Natl LT BBB(kaz) Upgrade BBB-(kaz) =========== S W E D E N =========== PERSTORP HOLDING: S&P Puts 'B-' ICR on Watch Positive on PCG Deal ----------------------------------------------------------------- S&P Global Ratings placed its 'B-' issuer credit rating on Sweden-based specialty chemicals producer Perstorp Holding AB on CreditWatch with positive implications. At the same time, S&P affirmed its 'B-' issue ratings on the senior secured facilities issued by Perstorp Holding AB. Perstorp is being acquired by Malaysia-based Petronas Chemical Group Berhad (PCG) from PAI Partners and Landmark Partners at an enterprise value of EUR2.3 billion. S&P plans to resolve the CreditWatch when the transaction closes, which management anticipates occurring in the second half of 2022. The result of our CreditWatch resolution will depend on its assessment of Perstorp's status within PCG, as well as its future stand-alone credit quality. The CreditWatch placement follows PCG's announcement on May 17, 2022 that it had entered into an agreement to acquire the entire equity interest in Perstorp Holding AB, which is currently owned by private equity firms including PAI Partners and Landmark Partners. At an enterprise value of EUR2.3 billion, the group is valued at a multiple of around 8.5x Perstorp's last 12 months EBITDA of EUR268 million, excluding synergies. S&P understands that PCG will fully finance the acquisition using cash on balance sheet. S&P expects the transaction to close in the second half of the year, subject to shareholder and regulatory approvals. The transaction should enable PCG to broaden their exposure to end-markets that Perstorp currently is served such as paints and coatings, construction, plastic additives, personal care and food, and feed and nutrition. S&P said, "We understand that PCG intends to operate Perstorp as a stand-alone entity, and that it will repay all outstanding debt of Perstorp upon closing. Details on the new owner's planned capital structure for Perstorp and its medium-term leverage tolerance are unavailable at this stage, but we anticipate that leverage, if any, may be more conservative than under the private-equity ownership. "The positive CreditWatch placement reflects our view that we may raise the rating on Perstorp when the transaction closes, which management anticipates occurring in the second half of 2022. The result of our CreditWatch resolution will depend on our assessment of Perstorp's status within Petronas, as well as its future stand-alone credit quality." ===================== S W I T Z E R L A N D ===================== DE GRISOGONO: DAMAC Group Acquires Business Following Bankruptcy ---------------------------------------------------------------- Dubai's DAMAC Group has purchased celebrated Swiss jewellery brand, de GRISOGONO. The brand, which filed for bankruptcy early 2020, was identified by Hussain Sajwani, Founder and Chairman of the DAMAC Group, who became the top bidder amongst several others bidding for the acquisition. Most known for its "Creation I" necklace, which featured the largest D flawless diamond in the world and fetched a staggering $33.7 million at an auction in 2017, de GRISOGONO is a name synonymous with glamour. The jeweller has adorned many celebrities on the red-carpet including Hollywood actress Natalie Portman and supermodel Naomi Campbell. "Keeping in line with our ambitions to expand our business into the luxury and high-end fashion realm, bidding for de GRISOGONO came to us naturally. A relatively young, but established brand it has immense potential that needs to be uncovered and leveraged. I believe that with DAMAC's expertise and know-how, we will be able to bring the brand to a justifiable success, by strengthening its global development and network," says Mr. Sajwani. A Luxurious Undertaking Headquartered in Geneva, Switzerland, de GRISOGONO, was established in 1993 by Fawaz Gruosi. Over the past 30 years, the brand earned a reputation with its signature use of black diamonds. Shortly after acquiring the Swiss brand, the DAMAC Group announced the launch of a twin-project featuring a design inspired by the well-known "Creation I" design. Defining "The Nature of Luxury", the project will bring to life the masterpiece that was created by founder, Grousi. Safa One by de GRISOGONO will feature exclusive attractions such as cascading waterfalls, hanging gardens, and a manmade-beach on the podium level, as well as tropical features spread across the length and breadth of the towers. The interiors will resonate with de GRISOGONO's signature style and the essence of emerald across private and public spaces, all adding to the brand's ubiquitous luxury factor. The project will feature two towers featuring luxury, as well as the 'Prestige Collection' super-luxury floors. Paving a Plan for the Future The DAMAC Group has been taking interest in expanding their portfolio by adding distressed luxury assets, to turn them over to profit-making investments. The acquisition comes closely after the Dubai-based billionaire purchased Italian fashion house Roberto Cavalli in Q4 2019, and most recently winning the $120 million bid to acquire land in the upscale Miami neighbourhood of Surfside where the developer plans an ultra-luxurious CAVALLI branded condominium project. These acquisitions are part of the Group's vision to extend its global footprints across sectors and geographies. Currently, the brand portfolio covers high-end fashion, luxury real estate, hospitality, and data centres among more, with a presence in North America, Europe, Asia, Middle East and Africa. =========== T U R K E Y =========== ZORLU YENILENEBILIR: Fitch Affirms 'B-' LT IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Zorlu Yenilenebilir Enerji Anonim Sirketi's (Zorlu RES) Long Term Issuer Default Rating (LT IDR) at 'B-' with a stable Outlook. Fitch has also affirmed the company's USD300 million 9% notes due 2026 at a senior secured rating of 'B-', with a Recovery Rating of 'RR4'. The ratings are constrained by Zorlu RES's small size and scale of operations, and rising exposure to merchant prices and foreign-exchange (FX) fluctuations as feed-in-tariffs (FiT) gradually expire. Rating strengths are good asset quality, low volume risk, supportive regulation for renewable energy producers, high profitability, and naturally hedged revenue mitigating its FX exposure on debt. Fitch's assessment of the links between Zorlu RES and its ultimate parent Zorlu Holding A.S under Fitch's Parent Subsidiary Linkage (PSL) Criteria leads to a standalone rating approach. Zorlu RES has ring-fencing mechanisms including covenants, restrictions on dividend payments, loans to the parent and other affiliate transactions. Fitch believes Zorlu RES's cash flows are sufficiently insulated to support a standalone view. KEY RATING DRIVERS Deconsolidated Group Profile: Fitch's analysis of Zorlu RES fully deconsolidates subsidiary Zorlu Dogal, but includes dividends from it. This reflects the large amount of project-finance debt at Zorlu Dogal of USD692 million (including revolving facilities), which are senior to Zorlu RES's bond. Zorlu Dogal's cash flows are mainly used for servicing its own interest and debt amortisation, which, together with bank covenants, will limit cash upstream to Zorlu RES. Fitch assumes Zorlu Dogal will upstream dividends averaging USD6 million (TRY112 million) annually for 2023-2025. For 2022 Fitch forecasts that Zorlu Dogal's cash flows will only be sufficient to service the company's own debt. Other subsidiaries Zorlu Jeotermal and Rotor are fully consolidated. Operating Cash Flows Support Deleveraging: Zorlu RES's deconsolidated financial profile is weaker than most rated utility peers', which affects its ratings. However, Fitch expects strong operating cash flows, the lack of dividend pay-outs and minimal capex to support deleveraging in the medium term. While funds from operations (FFO) net leverage reached 13.3x at end-2021, significantly above Fitch's negative rating sensitivity of 7.0x, Fitch expects it to improve to 6.3x in 2022 and to 4.5x in 2025. FFO net leverage will average 5.1x between 2022 and 2025, which is commensurate with the current rating. Risks to Deleveraging: Zorlu RES has currently several potential projects under consideration, which are not included in Fitch's current forecast. As such, higher capex , the payment of high dividends, or significantly lower merchant prices will lead to slower deleveraging. Fitch understands from the company that it is committed to reducing debt to within its net leverage target of 4.0x (on a consolidated basis). Small Renewables Producer: Zorlu RES is a small renewable energy producer with a total installed capacity of 559 MW, operating in a single volatile market (Turkey) with a share of less than 1%. The company generates the majority of its revenue (84% of 2021 revenue) and net generation volumes (73%) from geothermal power plants (GPP), which benefit from more stable generation and lower dependence on weather conditions than solar or wind plants. It is one of the leaders in a small, but fast-growing geothermal sector in Turkey with an 18% share. Zorlu RES plans to construct an additional 22MW of capacity, including 18.5MW GPP, by 2023. Rising Merchant Exposure: Fitch expects US dollar FiT-linked revenue to fall to 72% of total revenue in 2024-2025 and around 60% in 2026-2027, from 83% in 2021 as FiT for GPP capacity of 80MW, 45MW and 165MW expire at the end of 2023, 2025 and 2027, respectively. Its rising exposure to merchant prices and FX mismatch will increase the business risk profile of Zorlu RES. This is partially mitigated by the amortisation of around 44% of consolidated debt by 2025. Also, new plants constructed after 2021 will benefit from a new Turkish lira FiT mechanism with inflation and FX-based price escalation mechanism for 10 years. High Merchant Prices Unsustainable: The positive impact of high market prices in Turkey on Zorlu RES will be moderate. This is due to its still small revenue share of merchant output (around 17% of 2021 revenue) and Fitch's expectations that pricing pressure will ease in the medium term. Electricity spot prices will remain below the company's FiT for GPP of USD105 per MW (without a local content bonus), which somewhat mitigate the risk of political interference to cap renewable energy prices. Standalone Profile Drives Rating: Zorlu RES adopts the corporate governance structure of its direct parent company, Zorlu Enerji Elektik Uretim A.S and has common senior management positions (including CEO and CFO). However, Zorlu RES's cash flows have ringfencing mechanisms including covenants that will restrict dividend payments, loans to the parent and other affiliate transactions. As such, Fitch concludes that the links with parent are sufficiently weak to support a standalone rating approach. DERIVATION SUMMARY Fitch assesses the renewable energy producer Aydem Renewables (B+/Negative) as Zorlu RES's closest peer. The two companies share the same operating and regulatory environment and have similar scale. In addition, both benefit from FiT under the YEKDEM mechanism, which contributes to their revenue visibility and mitigates FX risks. However, FiT will expire gradually and lead to a higher merchant exposure at both companies. Zorlu RES's GPPs provide more stable generation volumes than Aydem Renewables' hydro plants, but this is balanced by the latter's slightly higher geographical diversification across Turkey. The rating differential reflects Aydem Renewables' lower forecast leverage. Zorlu RES has a slightly weaker business profile than its Turkish peer Enerjisa Enerji A.S.'s AA+(tur) with Stable Outlook. While Zorlu RES generates its earnings from a mix of quasi-regulated FiT and merchant exposure, Enerjisa operates in regulated electricity distribution and has therefore fairly predictable cash flows. Zorlu RES's business profile is also comparable to that of Uzbekistan-based hydro power generator Uzbekhydroenergo JSC (BB-/Stable), which operates in an evolving regulatory regime with a limited record in Uzbekistan. Zorlu RES's leverage and coverage ratios are much weaker than that of its peers, which Fitch views as a rating constraint. This is partially offset by its strong profitability and positive free cash flow (FCF) expectations, which should support deleveraging. KEY ASSUMPTIONS -- GDP growth in Turkey of 3% in 2022, 3.9% in 2023 and 3.7% annually in 2024-2025 and inflation of 54% in 2022, 17% in 2023,12% in 2024 and 10.5% in 2025; -- Electricity generation volumes 3% below management forecasts to 2025; -- US dollar-denominated tariffs approved by the regulator and merchant price of USD70/MWh in 2022 and USD50-USD55/MWh in 2023-2025; -- Operating expenses in Turkish lira to increase slightly below inflation rate to 2025; -- Dividends received from Zorlu Dogal averaging USD6 million over 2023-2025; -- Capex of USD16 million in 2022 and averaging USD4.6 million annually in 2023-2025; - No dividend distribution as per management forecast and reflecting the covenants. KEY RECOVERY RATING ASSUMPTIONS For issuers with IDRs of 'B+' and below, Fitch performs a recovery analysis for each class of obligations of the issuer. The issue rating is derived from the IDR and the relevant Recovery Rating (RR) and notching, based on the going-concern enterprise value (EV) of the company in a distressed scenario or its liquidation value. -- Zorlu RES would be a going concern (GC) in bankruptcy and that the company would be reorganised rather than liquidated; -- A 10% administrative claim; -- The assumptions cover the guarantor group only and includes Zorlu Jeotermal and Rotor Elektrik Uretim. GC Approach -- The GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch bases the valuation of Zorlu RES; -- The GC EBITDA is estimated at around USD27 million; -- An enterprise value (EV) multiple of 5x; -- With these assumptions, Fitch's waterfall generated recovery computation (WGRG) for the senior secured notes is in the 'RR4' band, indicating a 'B-' instrument rating. The WGRC output percentage on current metrics and assumptions was 41%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Improved financial profile with FFO gross and net leverage below 6.5x and 5.5x, respectively, and FFO interest cover above 1.7x on a sustained basis. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Liquidity ratio falling below 1x; -- Generation volumes well below current forecasts, a sustained reduction in profitability or a more aggressive financial policy leading to FFO gross and net leverage above 8x and 7x, respectively, and FFO interest cover below 1x on a sustained basis; -- Disruption of payments from Energy Market Regulatory Authority, reduction of FiT or cancellation of FiT's hard- currency linkage or assets switching to merchant prices faster than assumed in the existing business plan. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Zorlu RES had on a deconsolidated basis TRY182.2 million (USD14 million) of available cash as of end- 2021, which will be sufficient to cover Fitch's forecast negative FCF for 2022 of TRY73.1 million. The nearest debt repayment is in 2024 of USD38 million. Fitch believes that Zorlu RES will be able to fund its capex programme between 2022 and 2024 of TRY225.6 million and debt repayment in 2024 (USD38 million) from its internal cash and operating cash flow. Zorlu RES's FX exposure will gradually increase as the share of the US dollar-linked revenue falls to about 72% in 2024-2025 (on a consolidated basis). This will limit financial flexibility and increase its exposure to the volatile USD/TRY exchange rate. ISSUER PROFILE Zorlu RES is a small renewable energy producer founded in 2020 and operating geothermal, hydro and wind power plants across Turkey. It has an installed capacity of 559MW, comprising geothermal (55% of total installed capacity), wind (24%) and hydro (21%). 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 ---- ------ -------- ----- Zorlu Yenilenebilir LT IDR B- Affirmed B- Enerji Anonim Sirketi senior secured LT B- Affirmed RR4 B- =========================== U N I T E D K I N G D O M =========================== BOWER & CHILD: Enters Liquidation, To Hold Auction Sale ------------------------------------------------------- Robert Sutcliffe at YorkshireLive reports that an auction is taking place of more than 800 lots of high-end range cookers after the Huddersfield company that sold them was forced to shut after more than 150 years. Bower & Child, a family-run business, which dates back to 1870, had a shop in Wakefield Road, Moldgreen, and specialised in the sale of LACANCHE and AGA cookers, stoves and fireplaces. Walker Singleton is organising the sale of the entire contents, YorkshireLive discloses. According to YorkshireLive, Dan Hey, Director of Walker Singleton, said: "The company traded in premium range cookers and woodburning stoves -- the auction sale is in the final stages of preparation and will provide a catalogue of in excess of 800 Lots. We are sure there will be plenty of appeal to both the public and trade, whether it be a range cooker retailing at over GBP12,000 or a cookware set, there will be something for everyone. All Lots will be available on our website with images. Bids close at noon, Thursday, June 9, and there will be a viewing from 12 noon to 8:00 p.m,, Wednesday, June 8." Directors of the business say the pandemic caused significant difficulties and it then experienced problems with its supply chain, YorkshireLive relates. Although there was a short-lived boom with pent-up demand after lockdown this year sales slumped to below pre-pandemic levels, forcing the company to go into liquidation, YorkshireLive states. Ultimately they had to concede that the business was making significant trading losses and running out of cash so the decision was made to cease trading and put the company into liquidation, YorkshireLive relays. Charles Brook, a partner at Huddersfield-based Poppleton & Appleby, was appointed as liquidator, YorkshireLive discloses. P&O FERRIES: UK Government Scraps Contract Over Mass Redundancies ----------------------------------------------------------------- Molly Dyson at BTN Europe reports that the UK government has scrapped a contract with P&O Ferries over its firing of nearly 800 workers without notice earlier this year. According to the Home Office, an agreement between the ferry company and the UK Border Force would end "with immediate effect", BTN Europe relates. The contract saw P&O operate contingency travel services to transport border staff to so-called juxtaposed ports in northern France if there was an issue with the Channel Tunnel, BTN Europe states. P&O Ferries came under scrutiny in March when it made nearly 800 staff members redundant with no notice, replacing them with foreign agency workers who are paid less than the UK's minimum wage, BTN Europe recounts. Its ferry services were suspended after several of its vessels failed safety inspections, BTN Europe discloses. CEO Peter Hebblethwaite, who has faced calls to resign following the controversy, has insisted the redundancies were necessary to keep the company going and said all the sacked workers were offered compensation packages, BTN Europe notes. The firm is under criminal and civil investigations by The Insolvency Service over the move, BTN Europe relays. RRE 12 LOAN: Fitch Assigns 'BB-(EXP)' Rating on Class D Debt ------------------------------------------------------------ Fitch Ratings has assigned RRE 12 Loan Management DAC expected ratings. The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. DEBT RATING ---- ------ RRE 12 Loan Management Designated Activity Company A-1 LT AAA(EXP)sf Expected Rating A-2A LT AA(EXP)sf Expected Rating A-2B LT AA(EXP)sf Expected Rating B LT A(EXP)sf Expected Rating C-1 LT BBB(EXP)sf Expected Rating C-2 LT BBB-(EXP)sf Expected Rating D LT BB-(EXP)sf Expected Rating Sub-notes LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY RRE 12 Loan Management DAC is a securitisation of mainly senior secured obligations (at least 92.5%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds will be used to purchase a portfolio with a target par of EUR450 million. The portfolio is actively managed by Redding Ridge Asset Management (UK) LLP. The collateralised loan obligation (CLO) has a five-year reinvestment period and a nine-year weighted average life (WAL). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch places the average credit quality of obligors at 'B'/'B-'. The Fitch-calculated weighted average rating factor (WARF) of the identified portfolio is 25.6. High Recovery Expectations (Positive): At least 92.5% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate (WARR) of the identified portfolio is 62.5%. Diversified Asset Portfolio (Positive): The transaction will have a Fitch test matrix corresponding to top- 10 obligors' concentration limit of 20% and fixed-rate asset limit at 10%. The transaction also includes various concentration limits, including a maximum exposure to the three-largest Fitch-defined industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a five-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Cash Flow Modelling (Positive): At closing, the WAL covenant according to the transaction document will be nine years but the WAL used for the transaction's stressed case portfolio analysis will then be reduced by 12 months. This reduction to the risk horizon accounts for the strict reinvestment conditions envisaged after the reinvestment period. These include passing the coverage tests, the Fitch WARF test and the Fitch 'CCC' maximum limit and a WAL covenant that progressively steps down over time, both before and after the end of the reinvestment period. These conditions would in the agency's opinion 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: A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings would result in downgrades of up to four notches. Downgrades may occur if the loss expectation is larger than initially assumed due to unexpected high levels of defaults and portfolio deterioration. Factors that could, individually or collectively, lead to positive rating action/upgrade: A 25% reduction of the mean RDR across all ratings and a 25% increase in the RRR across all ratings would result in upgrades of up to two notches across the structure except for 'AAAsf' rated notes, which are already at the highest rating on Fitch's scale and cannot be upgraded. Except for the tranche already at the highest 'AAAsf' rating, upgrades may occur on better-than-expected portfolio credit quality and deal performance, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. [*] UK: Gov't Creates New Accounting Watchdog Following Scandals ---------------------------------------------------------------- BBC News reports that a review into how company books are inspected has been announced in a bid to prevent future accounting scandals and business collapses. Ministers have been under pressure to overhaul auditing rules after failures like Carillion, BHS and Thomas Cook, BBC notes. According to BBC, the government has created a new watchdog, the Audit, Reporting and Governance Authority (ARGA). But critics called the plan "watered down" and said auditors should be doing their jobs properly in the first place, BBC relates. The government, as cited by BBC, said the reforms "will help prevent sudden large-scale collapses like Carillion and BHS, which hurt countless small businesses and led to job losses". The collapses of Carillion and BHS cost in excess of 20,000 jobs and saw their auditors fined more than GBP25 million in total, BBC discloses. The companies failed despite their accounts being signed off by one of the so-called "Big Four" globally recognised auditors -- EY, KMPG, PWC and Deloitte, BBC notes. The government promised change and after several independent investigations, it has finally announced a revamp, BBC states. The new ARGA will replace the Financial Reporting Council, BBC relays. It will now cover unlisted companies with more than 750 employees and a greater than GBP750 million annual turnover, according to BBC. To break up the dominance of the Big Four auditors companies listed on the FTSE 100 and FTSE 250 will be forced to assign at least part of their audits to smaller firms, BBC states. ARGA, BBC says, will also have new powers to be able to investigate and fine directors of large companies if they breach their duties around corporate reporting and audit. ********* 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 * * *