/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220617.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, June 17, 2022, Vol. 23, No. 115 Headlines I T A L Y ICCREA BANCA: S&P Assigns 'B+' Rating on Senior Non-Preferred Notes N E T H E R L A N D S CASPER DEBTCO: Moody's Alters Outlook on 'Caa1' CFR to Negative S P A I N WIZINK MASTER 2019-03 : DBRS Confirms BB(high) Rating on C Notes S W E D E N PREEM HOLDING: S&P Assigns 'B+' Rating; Outlook Positive U K R A I N E VF UKRAINE: S&P Lowers ICR to 'CCC+' After Sovereign Downgrade U N I T E D K I N G D O M ACE BUILDINGS: Directors Face Ban Over Bounce Back Loans BESTIVAL: Rob Da Bank Gets Favorable Ruling in TicketLine Dispute CANADA SQUARE 2020-2: S&P Raises Rating on Class E Notes to 'B+' KCA DEUTAG: S&P Affirms 'B' LongTerm ICR on Saipem Acquisition KENTMERE PLC 1: Moody's Ups Rating on Class E Notes From Ba1 MISSGUIDED: Administrators Not in Position to Honor Any Refunds POLARIS PLC 2022-2: Moody's Gives Caa2 Rating to Class Z Notes SBERBANK CIB: UK Court Grants Special Administration Order TOWER BRIDGE 4: DBRS Hikes Class F Notes Rating to BB(high) URBAN SPLASH: Owes Creditors More Than GBP8.3 Million WIRRALCO: Enters Administration, June 21 Asset Auction Set X X X X X X X X [*] BOOK REVIEW: Bankruptcy and Secured Lending in Cyberspace - - - - - ========= I T A L Y ========= ICCREA BANCA: S&P Assigns 'B+' Rating on Senior Non-Preferred Notes ------------------------------------------------------------------- S&P Global Ratings assigned its 'B+' issue credit rating to the senior nonpreferred notes that Iccrea Banca issued under its EUR3 billion debt issuance program, according to current terms and conditions. S&P said, "In our view, holders of senior nonpreferred notes face a higher default risk than holders of senior preferred notes and other senior liabilities, since the former would be bailed in before more senior debt in the event of a resolution. "The issue rating is therefore two notches below Gruppo Bancario Cooperativo's 'bb' group credit profile (GCP), as per our standard notching for speculative-grade ('BB+' and below) entities issuing an instrument contractually or statutorily subordinated to preferred senior unsecured debt. "A GCP is our opinion of a group's creditworthiness as if it were a single legal entity. It is not a rating but a component contributing to the determination of issuer credit ratings (ICRs) on group members. We therefore use the GCP to determine the ICR on Iccrea Banca, based on our view of its core status within the group." ===================== N E T H E R L A N D S ===================== CASPER DEBTCO: Moody's Alters Outlook on 'Caa1' CFR to Negative --------------------------------------------------------------- Moody's Investors Service has changed to negative from stable the outlook on the ratings of Casper Debtco B.V. ("Dummen Orange" or "the company"), the holding company of the Dummen Orange group, the leading floriculture breeding company globally, domiciled in the Netherlands. Concurrently, the rating agency affirmed the company's Caa1 corporate family rating, its Caa1-PD probability of default rating and the B2 rating on the EUR55 million super senior secured term loan due March 2026 and the Caa2 rating on the EUR195.6 million senior secured term loan due September 2026, both borrowed by Casper Debtco B.V. "The outlook change to negative reflects Dummen Orange's weaker than expected operating performance in 2022 and the expectation that credit metrics will remain very weak over the next one to two years. The rating action also reflects the deteriorated liquidity profile, owing to sustained negative free cash flow and increasing reliance on the trading working capital facility that is due in March 2024," says Valentino Balletta, a Moody's Analyst and lead analyst for Dummen Orange. RATINGS RATIONALE The rating action follows Dummen Orange's continued operating underperformance against Moody's expectations, leading to an estimated Moody's-adjusted leverage of around 14x at financial year ending September 30, 2022 (from 9.8x as of financial year ending September 30, 2021). Moody's expects the company's capital structure to remain highly levered, with Moody's-adjusted gross debt/EBITDA only modesty declining and expected to remain above 10x over the next one to two years. The rating agency's calculation of Dummen Orange's EBITDA deducts development costs of around EUR12 million per year that are capitalized in the company's financial statements. Despite the positive trend in sales in the last 12 months (LTM) to April 2022 (+4%), the company is facing substantial headwinds, stemming from higher raw material costs, energy, wages and freight costs, which are currently difficult to be passed on to final customers through price increases. In addition, the company's operating performance has been materially impacted by operational challenges in the tropical business and by phytosanitary issues. As a result, the company's EBITDA (as adjusted by the company) for the last 12 months has materially declined (-24%) and is expected to remain under pressure over the next 12 to 18 months. In addition, rising input and energy costs could lead to loss of volumes as growers delay or shorten their growing season, mainly in Europe. This creates uncertainty around the timing and ability of the company to achieve a sustained recovery in EBITDA and cash flow generation. Moody's expects the company's free cash flow generation to remain substantially negative by around EUR40 million in fiscal year ending September 2022 and by EUR15-10 million each year thereafter, increasing the reliance on the newly established $30 million trade working capital facility due in March 2024, which provides some flexibility to fund seasonal working capital needs. As a result, the company will have limited time to demonstrate positive trading momentum ahead of the refinancing of the trade working capital facility in March 2024 and the term loan in March 2026. Dummen Orange's Caa1 CFR continues to be constrained by (1) its relatively small scale and niche business focus on floriculture breeding; (2) its exposure to phytosanitary issues, which creates risk of earnings volatility; (3) its very high financial leverage, with Moody's-adjusted gross debt/EBITDA expected to be above 10x through 2024; (4) Moody's expectation that the company will maintain negative free cash flow over the next 2-3 years, which will gradually erode its cash cushion and create pressure on its liquidity, particularly given the high seasonality of the business; and (5) its track record of defaults and restructuring. However, the rating remains supported by (1) its leading position in the niche floriculture breeding market globally; (2) its strong R&D capabilities, which represent a significant competitive advantage and should support a progressively growing recurring revenue stream over time; (3) its ample portfolio of intellectual property rights, which protect its revenue stream; (4) the company's position in the high-margin upstream segment of the floricultural value chain; and (5) supportive, though sluggish, end-market demand patterns in the long term. LIQUIDITY Dummen Orange's liquidity is weak. With a cash balance of around EUR10 million (including EUR20 million drawings under the new trade working capital facility) as of end April 2022, the company's liquidity position has significantly weakened in recent months, because of lower than-previously expected operating performance, higher one-off costs linked to phytosanitary issues and higher working capital needs. The company's funds from operations of around EUR5 million in financial 2022 and EUR10-15 million per year thereafter (after around EUR13-14 million annual interest payments) will be insufficient to cover its capital spending, including capitalized R&D costs and lease repayments, totaling EUR25 million - EUR30 million per year, resulting in significant negative free cash flow. Although the company has no material debt maturities until March 2026, its significant negative free cash flow generation expected in the next years increases the reliance on the newly established $30 million trade working capital facility maturing in March 2024 (currently drawn by EUR20 million). This creates liquidity risks in case of unexpected weakening in internal cash flow generation, particularly given the company's high cash flow seasonality. More positively, the company's debt facilities do not contain any financial maintenance covenants. STRUCTURAL CONSIDERATIONS Dummen Orange's capital structure primarily comprises a EUR195.6 million senior secured term loan due September 2026, a EUR55 million super senior term loan due March 2026 and a newly established $30 million trade working capital facility maturing in March 2024. These facilities share a common security package, with the super senior facility and the trade working capital facility having a priority claim over the proceeds from enforcement of security. The security package primarily comprises pledges over shares, bank accounts and intragroup receivables. In addition, the facilities are guaranteed by the group's operating subsidiaries representing at least 75% of consolidated EBITDA and gross assets. Moody's considers the security package to be weak, in line with its standard approach for share pledges. The B2 rating on the super senior facility is two notches above the CFR, reflecting the presence of a significant junior debt cushion, equal to almost 70% of the total financial debt. Conversely, the Caa2 rating on the senior secured facility is one notch below the CFR, reflecting the presence of a meaningful layer of prior-ranking debt in the capital structure. The Caa1-PD PDR assigned to Dummen Orange reflects Moody's assumption of a 50% family recovery rate, as is customary for covenant-lite bank debt capital structures. RATIONALE FOR NEGATIVE OUTLOOK The negative outlook reflects the risk that ongoing weakness in profitability and liquidity could lead to a sustained very high leverage and a further deterioration in Dummen Orange's credit quality. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be downgraded if (1) the company fails to achieve sustainable revenue and earnings growth, so that its Moody's-adjusted gross debt/EBITDA does not improve; (2) recovery expectations deteriorate to levels not commensurate with the current Caa1 rating; or (3) the company's free cash flow remains negative with no signs of improvement and/or its liquidity deteriorates. An upgrade, although considered unlikely in the near term, would be possible if (1) the company demonstrates stability of operating and financial performance, including sustainable topline growth and improved profitability, as well as cost and working capital control; (2) the company reduces its Moody's-adjusted gross debt/EBITDA below 7.0x on a sustainable basis; (3) its EBITA/interest coverage increases above 1.0x; and (4) its cash flow generation improves, so that its Moody's-adjusted free cash flow turns neutral or positive. LIST OF AFFECTED RATINGS Affirmations: Issuer: Casper Debtco B.V. Probability of Default Rating, Affirmed Caa1-PD LT Corporate Family Rating, Affirmed Caa1 Senior Secured Bank Credit Facility, Affirmed B2 Senior Secured Bank Credit Facility, Affirmed Caa2 Outlook Actions: Issuer: Casper Debtco B.V. Outlook, Changed To Negative From Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Consumer Packaged Goods Methodology published in February 2020. COMPANY PROFILE Dummen Orange, headquartered in the Netherlands, is a leading Dutch flower breeder specializing in the breeding and propagation of cut flowers, pot plants and bedding plants, with a global network of breeding, propagation, rooting and sales and marketing locations. In the financial year ended September 30, 2021, the company generated revenue of EUR386 million (2020: EUR338 million) and EBITDA of EUR45.1 million (2020: EUR19.9 million), as adjusted for non-recurring items by the company. Dummen Orange is controlled by funds managed by private equity firm BC Partners, which acquired the company from H2 Equity Partners and the founding Dummen family in December 2015. ========= S P A I N ========= WIZINK MASTER 2019-03 : DBRS Confirms BB(high) Rating on C Notes ---------------------------------------------------------------- DBRS Ratings GmbH confirmed its ratings of the notes issued by Wizink Master Credit Cards Fondo de Titulización (the Issuer) as follows: -- Series 2019-02, Class A Notes at AA (high) (sf) -- Series 2019-02, Class C Notes at BB (high) (sf) -- Series 2019-03, Class A Notes at AA (sf) -- Series 2019-03, Class C Notes at BB (high) (sf) The ratings address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. The rating confirmations follow an annual review of the transaction and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, losses, payment rates, and collateral yield, as of the February 2022 payment date; -- The ability of programme- and series-specific structures to withstand stressed cash flow assumptions. -- Current credit enhancement to cover the expected losses at the respective rating levels of the notes series. -- No programme revolving termination event has occurred. The Issuer is a securitization programme of credit card receivables granted to individuals in Spain and serviced by WiZink Bank SA (the seller). PROGRAMME AND TRANSACTION STRUCTURE The programme incorporates separate interest and principal waterfalls during the programme revolving and programme amortization periods that allocate the available funds including reserve fund and collections of interest, principal, and recoveries from receivables to each specific notes series. The programme has an indefinite revolving period. During this period, additional receivables may be purchased by the Issuer, provided that the eligibility criteria set out in the transaction documents are satisfied. For the Issuer, the revolving termination events are set at the programme level, instead of series-specific ones. Occurrence of such events would lead to early amortization of all outstanding notes at the same time, subject to series-specific waterfalls and allocation percentages. Credit enhancement available to the notes series during the amortization period consists of subordination of the junior notes and SICF note, potential over-collateralization, and excess spread. The programme also includes a general reserve that is available to cover the shortfalls in senior expenses, and interest on the Class A Notes of the entire programme. The general reserve is amortizing, subject to a floor amount of 0.6% of the initial Class A Notes balance of all the notes series. A commingling reserve facility is also available following the servicer's breach of its payment obligations. The required amount is equal to 1.5% of the outstanding receivables. DBRS Morningstar notes that the seller established another securitization programme, aZul Master Credit Cards DAC, in July 2020 and the collateral outstanding balance of the Issuer has been gradually declining following the repayment of the outstanding series. COUNTERPARTIES Banco Santander S.A. is the issuer account bank and BNP Paribas Securities Services, Sucursal en España, is the excess account bank for the programme. Based on DBRS Morningstar's ratings of Banco Santander S.A. and BNP Paribas Securities Services, and the downgrade provisions outlined in the transaction documents, DBRS Morningstar considers the risk arising from the exposure to both account banks to be consistent with the ratings assigned to the notes as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS The monthly principal payment rate (MPPR) has been in the range of 10% to 15%, which is higher than many continental European credit card programmes and is influenced by the inclusion of full payments made during the interest-free grace period. Based on the historical trends, DBRS Morningstar maintained the expected MPPR at 12.0% and a customized nonlinear stress is applied in the cash flow analysis. The portfolio yield has historically been above 21% since the programme inception until February 2020 when a noticeable reduction of approximately 4% started, mainly driven by the moratoria related to the Coronavirus Disease (COVID-19) outbreak and a Spanish supreme court ruling in March 2020. The ruling deems the 26.82% contractual interest rate of one specific WiZink Bank's credit card agreement to be usurious as it was considered notably higher than the average normal money interest rate published by Bank of Spain for the credit card segment at the inception of this specific agreement. After considering the recent trends, and potential impact from further usury rate litigation, DBRS Morningstar reduced the expected yield to 16.7% from 17.0%. The charge-offs reported by the Issuer since the programme inception have been historically lower than the entire managed book by approximately 3%. The noticeable better performance is due to the eligibility criteria that specify non-delinquent receivables. The most recent investor report of this Issuer shows three- and six-month average annualized charge-off rates of 9.1% and 9.7% as of February 2022, respectively. Based on the analysis of historical trends, DBRS Morningstar increased the expected charge-off rate to 9.75% from 9.25%. As the receivables are unsecured and no static vintage data was provided, DBRS Morningstar used a zero-recovery assumption in its cash flow analysis. Set-off risk exists for this programme as the seller also takes deposits. While the set-off exposure would crystalize when the borrowers are notified of the receivables assignment, which is, however, not an effective mitigant for set-off risk as the borrowers are not likely to be notified until the seller insolvency occurs. To assess the potential set-off impact, DBRS Morningstar assumes the borrowers would rather apply to the deposit protection scheme than to set off directly against the seller should the seller become insolvent. As such, the Issuer would only in theory have set-off exposure of the deposit amount above the protection scheme limit of EUR 100,000. The potential impact is assessed in the cash flow analysis. DBRS Morningstar analyzed the program and transaction structure in its proprietary cash flow tool. DBRS Morningstar expects the Series 2019-02 notes to enter into the scheduled amortization in May 2022. Based on the current payment rates, Series 2019-02 notes are expected to be fully repaid by the next annual review date in April 2023. Notes: All figures are in euros unless otherwise noted. =========== S W E D E N =========== PREEM HOLDING: S&P Assigns 'B+' Rating; Outlook Positive -------------------------------------------------------- S&P Global Ratings assigned its 'B+' long-term issuer credit rating to Sweden-Based Oil Refining Company Preem Holding AB (publ). S&P also assigned its 'B+' issue rating, with a recovery rating of '4', to the company's senior notes. The positive outlook reflects that S&P could upgrade Preem if abnormal market conditions persist, resulting in improved cash from operations, and the company uses this cash to reduce leverage. The rating reflects Preem's relatively high exposure to one key asset (the Lysekil refinery) and the company's participation and relative concentration in the highly cyclical refining industry. It also reflects its relatively moderate leverage compared with peers and well-invested assets that Preem has continuously improved over the past decades. Although positioned in a fairly remote area (northern Europe), with specific fuel standards in terms of environment requirements, Preem remains exposed to the volatile refining industry. Like other companies in the sector, it will remain exposed to changes in global supply capacity, economic growth, and consumption. Therefore, S&P expects earnings and profitability to remain highly volatile, with EBITDA generally fluctuating between Swedish krona (SEK) 1 billion and SEK5 billion. A steep increase in gasoline and, in particular, diesel crack margins support the rating. These increases stem from tight supplies and inventories, since exports from Russia to Europe have materially diminished due to the Russia/Ukraine conflict. Although this situation is abnormal and S&P anticipates ongoing uncertainty reflected in volatile fuel prices, Preem could be set to benefit from the tensions by generating higher operating cash flows. The company is continuing to invest in biofuel capacity aimed at boosting profitability. Under its 2030 strategy, Preem aims to become the world's first climate-neutral refining company, targeting climate neutrality throughout its value chain by 2035. To achieve this, it targets renewable production capacity of 3 million cubic meters (more than 50 thousand barrels of oil equivalent per day) by 2030 and up to 5 million cubic meters by 2035. In 2020, renewable production capacity increased by 40% to 350,000 cubic meters per year at Gothenburg after Preem rebuilt an existing plant for renewable production. At Lysekil, the company is undertaking a major rebuild of the SynSat facility, with the goal of reaching renewable production capacity of 900,000 cubic meters per year by 2024. S&P's assessment considers the relatively well-invested assets and utilization that provide relatively good operating efficiency. In particular, Preem has flexibility in terms of crude sourcing, which is very important in the refining business, since access to cheaper crude supports margins. The Lysekil refinery is flexible when it comes to crude slate used, and can process a high share (up to 100%) of heavy sour. However, all Russian crude intake has ceased. With capital expenditure (capex) of SEK2.0 billion-SEK2.5 billion in 2022 and SEK2.5 billion-SEK3.0 billion in 2023, leverage reduction in those years will depend on market conditions and capital allocation. S&P said, "We anticipate the company should be able to maintain S&P Global Ratings-adjusted debt to EBITDA of 2x-3x, commensurate with a financial risk profile at the lower end of our significant category. The financial risk profile is characterized by volatile cash flows (including working capital variations) and credit metrics, reflecting the volatility of the refining industry, regulations, and other external factors. We understand the company intends to have relatively conservative financial policies, keeping debt to EBITDA close to current levels, which supports the rating." S&P said, "We do not anticipate any changes to the ownership structure. Preem is owned by a single investor, Mr. Mohammed Hussein Al- Amoudi, a Saudi Arabian national who owns numerous much larger assets. The company's financial policies, in terms of leverage targets or shareholder distributions, may not be fully set, in our view. The bond documentation does not allow for dividend payments outside the restricted group." The positive outlook reflects that Preem could continue to benefit from abnormal market conditions stemming from diesel market imbalances on the back of import cuts from Russia. If this situation continues, cash from operations could materially surpass our base-case scenario. If Preem were to use this cash for debt reduction, the company's debt could drop sustainably below SEK10 billion, which would in turn allow Preem to maintain leverage at a lower level through the cycle, which could lead us to raise the ratings on the company. S&P said, "We could also consider raising the ratings if the company reduced adjusted debt to EBITDA sustainably below 2x under our assumed mid-cycle market conditions, with sustainably lower gross debt. We could also consider an upgrade if, over time, Preem improved its business--which currently has a concentrated product and asset base, and limited scale by global standards--notably through the delivery of superior profitability from the increasing share of renewable fuels in its product mix. "We could lower the rating if crack spreads weakened materially, operating expenses were greater than we expect, or the company implemented unplanned downtime such that performance deteriorated, leading to total adjusted debt to EBITDA remaining closer to 5x for a prolonged period. This would represent a meaningful deviation from its current financial policy." ESG credit indicators: E-4, S-2, G-2. Environmental factors are a negative consideration in S&P's credit rating analysis of Preem. Deriving the majority of its cash flow from its refining segment, Preem is exposed to pollution risk and other environmental incidents. Although the company faces stringent regulation on fuels in the Nordics, its refineries are adapted to its home markets, and the structural decline of fossil fuel demand in Europe calls for increasing renewable fuels, in which the company invests to increase its production capacity, thereby reducing its exposure to energy transition risks. ============= U K R A I N E ============= VF UKRAINE: S&P Lowers ICR to 'CCC+' After Sovereign Downgrade -------------------------------------------------------------- S&P Global Ratings lowered its ratings on VF Ukraine and its debt to 'CCC+' from 'B-'. S&P removed all ratings from CreditWatch negative, where it had placed them on March 7, 2022. The outlook is negative, mirroring the negative outlook on Ukraine. On May 27, 2022, S&P lowered its long-term foreign currency sovereign rating on Ukraine to 'CCC+' from 'B-', and revised down the transfer and convertibility (T&C) assessment to 'CCC+' from 'B-'. S&P said, "We lowered the ratings on VF Ukraine and its debt following the negative rating action on Ukraine. We cap our issuer credit rating on VF Ukraine at the level of the 'CCC+' transfer and convertibility (T&C) assessment on Ukraine. This reflects our view that the Ukrainian government would likely restrict access to foreign exchange liquidity for Ukrainian companies, including VF Ukraine." Positive cash flow and stable ratios underpin VF Ukraine's stand-alone credit quality. S&P's 'b+' assessment of VF Ukraine's stand-alone credit profile (SACP) reflects the group's No. 2 position in the Ukrainian mobile market, solid profitability, strong free cash flow conversion, and well-invested retail network. During the first quarter of 2022, the company reported year-on-year growth of about 10% in revenue and 15% in operating income before depreciation and amortization (OIBDA). However, exposure to very high country risk, regulatory and foreign exchange risk, and limited scale and diversification constrain the SACP. High uncertainty stemming from the Russia-Ukraine conflict will weigh on the operating environment, and S&P expects 2022 revenue could decline 15%-30%, alongside an 8%-12% contraction in the EBITDA margin. That said, debt ratios should remain stable, with S&P Global Ratings-adjusted leverage below 3.0x and free operating cash flow (FOCF) to debt of 5%-10%. This will likely be underpinned by positive FOCF, pointing to the business' resilience. VF Ukraine has maintained the majority of its infrastructure given the critical nature of their service.To date, about 90% of VF Ukraine's sites are operating and 2% have been destroyed. The company strives to keep its infrastructure operational given the critical service. As of March 31, 2022, VF Ukraine had 18.4 million subscribers (-2.5% y-o-y); some of the subscriber loss was mitigated through increase in ARPU that increased to UAH88(+10% year-on-year) in first-quarter 2022 driven by monetization initiatives. So far, about 1.6 million of its subscribers have moved outside Ukraine (out of a total 5 million Ukrainians who left the country) but continue to use their roaming service. S&P believes the company could lose more subscribers and revenue if the conflict persists or escalates. Excessive foreign exchange volatility creates liquidity risks. These is because all the company's debt is in hard currency while its bond documentation includes an incurrence covenant set at 2.5x net debt to EBITDA (its reported leverage was 1.1x as of first-quarter 2022). However, for the time being, S&P still assesses VF Ukraine's liquidity as adequate given positive cash flow, significant proportion of its cash balance is held in hard currency (11% in U.S. dollars and 55% in euros as of March 31, 2022), and no debt maturities until February 2025. S&P Global Ratings acknowledges a high degree of uncertainty about the extent, outcome, and consequences of the military conflict between Russia and Ukraine. Irrespective of the duration of military hostilities, related risks are likely to remain in place for some time. Potential effects could include dislocated commodities markets, supply chain disruptions, inflationary pressures, weaker growth, and capital market volatility. As the situation evolves, S&P will update its assumptions and estimates accordingly. See our macroeconomic and credit updates here: Russia-Ukraine Macro, Market, & Credit Risks. Note that the timing of publication for rating decisions on European issuers is subject to European regulatory requirements. S&P said, "Our negative outlook mirrors that on Ukraine, capturing the multiple risks to the domestic economy and financial stability from the military conflict with Russia. This also includes our expectation that FOCF to debt will remain above 5% and leverage will remain below 3x. "We could lower the rating on VF Ukraine if we lowered our T&C assessment on Ukraine. "We could raise the rating on VF Ukraine if we raised our sovereign rating and T&C assessment on Ukraine and VF Ukraine continues to maintain adequate liquidity." ESG credit indicators: E-4, S-2, G-4 =========================== U N I T E D K I N G D O M =========================== ACE BUILDINGS: Directors Face Ban Over Bounce Back Loans -------------------------------------------------------- The Insolvency Service on June 16 disclosed that David Garry Harrison (48) and Paul Hudson (47) both received 11-year bans after they did not dispute they caused their company to apply for GBP100,000 worth of bounce back loans it was not entitled to. The pair, both from Cullompton, Devon, are now disqualified from directly, or indirectly, becoming involved in the promotion, formation or management of a company, without the permission of the court. David Harrison's ban became effective on May 31, while Paul Hudson's disqualification began on June 9. Ace Buildings and Maintenance Services Limited was incorporated in June 2017 and carried out general building and maintenance work. Ace Building and Maintenance Services Limited, however, began to struggle and by October 2019 had a winding-up petition presented against it because it could not pay its debts. The directors entered into discussions about insolvency arrangements before causing Ace Buildings and Maintenance Services Limited to first enter into a company voluntary arrangement in February 2020. A creditors voluntary liquidation in December 2020 followed, with the company stating liabilities of more than GBP340,000. The building firm's insolvency, however, triggered an investigation by the Insolvency Service before investigators discovered David Harrison and Paul Hudson caused Ace Building and Maintenance Services Limited to submit two sham applications for bounce back loans it was not entitled to. On May 4, 2020, David Harrison and Paul Hudson successfully applied for a GBP50,000 bounce back loan but did not declare the company was distressed and had entered into a company voluntary arrangement with close to GBP110,000 worth of liabilities. The two directors submitted a second bogus application on June 16, 2020. Again, they did not declare Ace Building and Maintenance Service Limited's difficulties or that it has already received the maximum amount allowed under the bounce back loan scheme. Mike Smith, Chief Investigator for the Insolvency Service, said: "Bounce back loans provided a vital lifeline to help viable businesses during the pandemic. David Harrison and Paul Hudson, however, cynically applied for government support they were not entitled to when they were fully aware their company was insolvent and was not able to pay its debts. "11-years is a substantial amount of time to be removed from the corporate arena and their disqualifications will protect the public and creditors, while also serving as a clear warning to other rogue directors that we will robustly tackle financial misconduct." Ace Buildings and Maintenance Services Limited's Liquidator is considering the bounce back loans and recovery of funds. BESTIVAL: Rob Da Bank Gets Favorable Ruling in TicketLine Dispute ----------------------------------------------------------------- Chris Cooke at Complete Music Update reports that a London court ruled in favour of Rob Da Bank in his dispute with ticketing firm TicketLine Network Ltd over money it loaned his Bestival company prior to its collapse in 2018. The Bestival company -- which promoted both Bestival and its sister event Camp Bestival -- went into administration in 2018 after facing various financial challenges in the preceding years, CMU recounts. It was actually forced into administration by a money-lender, which for a short time looked like it might take over the Bestival brand from da Bank -- real name Robert Gorham -- despite the festival being very closely linked to its co-founders, Gorham and his wife Josie, CMU relates. However, in the end the Gorhams teamed up with Live Nation and SJM to buy the Bestival brand from that money-lender, albeit in order to continue staging the more family orientated Camp Bestival, rather than Bestival itself, CMU notes. As it went into administration, the Bestival company also owed money to Ticketline, which had advanced a million pounds to the festival business via two payments between 2016 and 2018, CMU relays. With no company left to go after, the ticketing firm sought to recover the GBP650,000 it was still owed directly from Gorham and his fellow Bestival director John Hughes, CMU discloses. It did so based on the argument that, aware of the Bestival company's financial problems, when it advanced cash to the festival it did so on the condition that Gorham and Hughes would personally guarantee the loan, CMU states. But Mr. Gorham insisted he had never agreed to personally guarantee any advanced monies, CMU relays. Which is why Ticketline went legal, CMU notes. In court last month, Ticketline claimed that it was clearly stated when it advanced Bestival its monies between 2016 and 2018 that Messrs. Gorham and Hughes were personally liable for the debt, CMU recounts. But Mr. Gorham argued that he was not hands-on involved in the finances of the Bestival events -- being focused on the creative and consumer-facing side of the business -- so was not part of the negotiations with the ticketing company, according to CMU. And more importantly, he stressed in court: "I never signed up for a personal loan." Having heard both side's arguments, the court ruled that Mr. Gorham was right, he hadn't agreed to take on any personal liabilities in relation to monies being advanced to the Bestival company, CMU relates. CANADA SQUARE 2020-2: S&P Raises Rating on Class E Notes to 'B+' ---------------------------------------------------------------- S&P Global Ratings raised its credit ratings on Canada Square Funding 2020-2 PLC's class B-Dfrd notes to 'AA+ (sf)' from 'AA- (sf)', C-Dfrd notes to 'AA- (sf)' from 'A- (sf)', D-Dfrd notes to 'BBB+ (sf)' from 'BBB- (sf)', and E-Dfrd notes to 'B+ (sf)' from 'B (sf)'. At the same time, S&P affirmed its 'AAA (sf)' rating on the class A notes. The rating actions reflect the transaction's consistent stable credit performance since closing in July 2020. The transaction has been amortizing sequentially since closing and this has resulted in increased credit enhancement for the outstanding notes, most notably for the senior and mezzanine notes. S&P's credit and cash flow results indicate that the available credit enhancement for the class A notes continues to be commensurate with the assigned rating. S&P therefore affirmed its 'AAA (sf)' rating on the class A notes. Total arrears (0.09%) in the transaction have remained low and stable. Total arrears are below S&P's U.K. BTL index for post-2014 originations. S&P said, "Since closing, our weighted-average foreclosure frequency (WAFF) assumptions have decreased at all rating levels. Firstly, we have decreased our total originator adjustment assumption since closing. Secondly, the weighted-average indexed current loan-to-value (LTV) of the pool has declined by 6.2 percentage points since closing. The reduction in the weighted-average indexed current LTV ratio has a positive effect on our WAFF assumptions as the LTV ratio applied is calculated with a weighting of 80% of the original LTV ratio and 20% of the current LTV ratio. "This reduction in the weighted-average current LTV ratio has also led to a reduction in our weighted-average loss severity (WALS) assumptions." Credit Analysis Results RATING LEVEL WAFF (%) WALS (%) CREDIT COVERAGE (%) AAA 22.10 46.32 10.24 AA 14.92 38.19 5.70 A 11.24 25.21 2.83 BBB 7.74 17.39 1.35 BB 4.05 11.84 0.48 B 3.22 7.27 0.23 WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. There are no counterparty constraints on the ratings on the notes in this transaction. The replacement language in the documentation is in line with our counterparty criteria. The upgrades of the class B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes reflect that credit coverage at all rating levels has declined since closing. S&P said, "As a result, our cash flow analysis indicated that the class B-Dfrd, C-Dfrd, class D-Dfrd, and E-Dfrd notes could withstand stresses at a higher rating than the previously assigned ratings. We have therefore raised our ratings on these classes of notes." The ratings on the class D-Dfrd notes and E-Dfrd notes are below the levels indicated by our cash flow analysis due to the limited build-up in credit enhancement for these notes since closing. In addition to this, S&P's rating on the class D-Dfrd notes reflects their ability to withstand the potential repercussions of extended recovery timing, and itsrating on the class E-Dfrd notes reflects that these notes do not have hard credit enhancement. S&P said, "We expect U.K. inflation to reach 7.6% in 2022. Although high inflation is overall credit negative for all borrowers, inevitably some borrowers will be more negatively affected than others and to the extent inflationary pressures materialize more quickly or more severely than currently expected, risks may emerge. This transaction is a BTL transaction and although underlying tenants may be affected by inflationary pressures, the borrowers in the pool are generally considered to be professional landlords and will benefit from diversification of properties and rental streams. Borrowers in this transaction are largely paying a fixed rate of interest on average until 2025. As a result, in the short to medium term borrowers are protected from rate rises but will feel the effect of rising cost of living pressures. We have considered these risks in our loan characteristic and originator adjustments. In addition to this, based on our most recent macroeconomic forecasts, we have maintained our mortgage market outlook the U.K. to reflect uncertain economic conditions and increased credit risk. These continue to affect our 'B' foreclosure frequency assumptions for the archetypal pool." KCA DEUTAG: S&P Affirms 'B' LongTerm ICR on Saipem Acquisition -------------------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term issuer credit rating on U.K.-headquartered oilfield services company KCA Deutag Alpha Ltd. (KCAD). KCAD announced the acquisition of Saipem Onshore Drilling, for a cash component of $550 million and a 10% equity stake in the combined group. While the transaction will somewhat improve KCAD's competitive position, especially in the Middle East, it leads to some increase in the company's overall debt level. The acquisition of Saipem Onshore Drilling's assets has a mixed impact on KCAD's business and financial risk profile, which supports the 'B' rating. KCAD signed a sale and purchase agreement on June 1, 2022, to acquire Saipem Onshore Drilling, which has 84 rigs and generated about 80% of its 2021 $98 million EBITDA from the Middle East—specifically, Saudi Arabia and Kuwait. The total consideration consists of a $550 million cash component and a 10% equity stake in the combined group. The estimated closing date for the Middle East and rest of world business is October 2022, while for the Latin America business it is December 2022. On a pro forma basis, the combined entity will have a backlog of over $7 billion (split roughly equally between offshore and land), with a fleet of 155 rigs, and pro forma company-calculated EBITDA of more than $400 million in 2022. While Saipem's onshore drilling assets improve KCAD's portfolio, their addition is not a game changer when compared with the entire oil and gas (O&G) universe. S&P said, "In general, we view the drilling industry as a risky subsegment of the O&G industry, leading to a relatively low business risk assessment--typically weak. This is partly because of the volatile nature of the activities and the lack of bargaining power, among other factors. Our assessment of KCAD's business risk profile as weak reflects the scale of its operations versus that of the overall O&G peers, as well as its good market position and diversification of business between onshore and offshore drilling. The combined group has a land drilling fleet of 155 rigs, which is larger than many of its peers. We also factor in the lack of a distinct competitive advantage (given the dynamics of the industry) and KCAD's concentration in the Middle East." Credit metrics will remain elevated until 2024 with the additional acquisition debt. S&P said, "Under our projections, we expect the company's adjusted debt (no cash netting and adjustments for leases and pensions) to increase to about $1.3 billion by the end of 2022 (from our previous forecast of about $720 million). With expected S&P Global Ratings-adjusted EBITDA of $330 million-$360 million in 2022 and $370 million-$390 million in 2023 (pro forma), the company would be able to report adjusted funds from operations (FFO) to debt in the range of 15%-20%, which is below the threshold of comfortably above 20% that we consider commensurate with a one-notch higher rating of 'B+'." There is additional upside from unlocking synergies or reactivating more rigs at better prices. At the same time, KCAD's ability to generate positive free operating cash flow (FOCF) and management's gearing objective of a reported net debt to EBITDA of up to 2.0x (equivalent to adjusted FFO to debt of about 25%) are likely to translate into a positive rating action over time. S&P said, "The positive outlook indicates that we could upgrade KCAD in the coming 12 months, upon its meeting our deleveraging expectations and integrating the acquisition. Our outlook also considers the currently very supportive oil prices, which could accelerate the company's growth. "Under our base case, we project adjusted FFO to debt of 15%-18% in 2022 and 17%-20% in 2023. "We could revise the outlook to stable if market conditions do not bolster the company's credit metrics over time. We could also take this action if the group engaged in aggressive shareholder distributions or inorganic growth." Other key factors that could weigh on the rating are the integration risk of the Saipem onshore drilling asset and the group's lack of meaningful geographical diversification, with sizable exposure to the Middle East, particularly Saudi Arabia. Any impairment of the Russia operations will not affect the rating or outlook. A higher rating would hinge on KCAD's ability to achieve and maintain adjusted FFO to debt of comfortably above 20% throughout the cycle. Based on S&P's current base case (excluding the Russian operations), the company would only reach this level in 2024. The company's ability to achieve and maintain this threshold will depend on: -- Maintaining and, over time, increasing the backlog with stronger market dynamics; -- A track record of reducing its reported net debt to EBITDA toward 2x and remaining committed to maintaining it below 2x over the medium term; and -- Preserving adequate liquidity, including with access to committed credit lines. While S&P excludes the Russian operations from its current base-case scenario, a resolution to the geopolitical situation between Russia and Ukraine could increase the company's cash flow and accelerate the timeline for an upgrade. ESG credit indicators: E-4, S-2, G-3 S&P said, "Environmental factors are a negative consideration in our credit rating analysis of KCAD. Like other oil field services and drilling companies, KCAD is exposed to climate transition risk. The increasing adoption of renewable energy sources raises uncertainty about the trajectory of O&G supply and demand and could therefore affect medium- to long-term growth prospects of such oil field services companies. The company is evaluating opportunities in the renewable energy industry, and has already made some initial investments, but does not have a significant presence in that sector at present. "Governance factors are a moderately negative consideration in our credit rating analysis. The company underwent restructuring at the end of 2020. The previous debt holders received control of the company and reshaped the board of directors. We therefore see KCAD governance as still evolving." KENTMERE PLC 1: Moody's Ups Rating on Class E Notes From Ba1 ------------------------------------------------------------ Moody's Investors Service has upgraded the ratings of six notes in Kentmere No. 1 plc and Kentmere No. 2 plc. The rating action reflects better than expected collateral performance as well as the increased levels of credit enhancement for the affected notes. Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain their current ratings. Issuer: Kentmere No. 1 plc GBP672.767M Class A Notes, Affirmed Aaa (sf); previously on Aug 6, 2021 Affirmed Aaa (sf) GBP22.551M Class B Notes, Affirmed Aaa (sf); previously on Aug 6, 2021 Upgraded to Aaa (sf) GBP22.551M Class C Notes, Affirmed Aa1 (sf); previously on Aug 6, 2021 Upgraded to Aa1 (sf) GBP13.531M Class D Notes, Upgraded to Aa3 (sf); previously on Aug 6, 2021 Upgraded to A3 (sf) GBP7.517M Class E Notes, Upgraded to Baa2 (sf); previously on Aug 6, 2021 Upgraded to Ba1 (sf) Issuer: Kentmere No.2 plc GBP153.244M Class A Notes, Affirmed Aaa (sf); previously on Oct 22, 2019 Assigned Aaa (sf) GBP5.993M Class B Notes, Upgraded to Aaa (sf); previously on Oct 22, 2019 Assigned Aa1 (sf) GBP4.281M Class C Notes, Upgraded to Aa1 (sf); previously on Oct 22, 2019 Assigned A2 (sf) GBP2.568M Class D Notes, Upgraded to A1 (sf); previously on Oct 22, 2019 Assigned Baa2 (sf) GBP1.712M Class E Notes, Upgraded to Baa2 (sf); previously on Oct 22, 2019 Assigned Ba2 (sf) RATINGS RATIONALE The rating action is prompted by decreased key collateral assumptions due to better than expected collateral performance and an increase in credit enhancement for the affected tranches. Revision of Key Collateral Assumptions As part of the rating action, Moody's reassessed its lifetime loss expectation for the portfolio reflecting the collateral performance to date. Total delinquencies with 90 days plus arrears are currently standing at 3.07% of current pool balance for Kentmere No. 1 plc and 2.29% for Kentmere No. 2 plc, from 2.99% and 1.79% a year ago respectively. Cumulative losses currently stand at 0.0% of original pool balance for both deals. For Kentmere No. 1 plc, Moody's decreased the expected loss assumption to 0.95% as a percentage of original pool balance from 1.11% due to the improving performance. Moody's assumed an expected loss of 1.60% as a percentage of current pool balance. For Kentmere No. 2 plc, Moody's decreased the expected loss assumption to 1.0% as a percentage of original pool balance from 1.15% due to the improving performance. Moody's assumed an expected loss of 1.50% as a percentage of current pool balance. Moody's has also assessed loan-by-loan information as a part of its detailed transaction review to determine the credit support consistent with target rating levels and the volatility of future losses. As a result, Moody's has maintained the MILAN CE assumption at 9.5% for Kentmere No. 1 plc and decreased the MILAN CE assumption to 10% from 11% for Kentmere No. 2 plc. Increase in Available Credit Enhancement Sequential amortization and non-amortizing reserve fund led to the increase in the credit enhancement available in both transactions. For Kentmere No. 1 plc, the credit enhancement for the Classes D and E affected by today's rating action increased to 7.1% and 5.4% from 6.1% and 4.6% respectively since the last rating action in August 2021. For Kentmere No. 2 plc, the credit enhancement for the Classes B, C, D and E affected by today's rating action increased to 12.8%, 9.0%, 6.8% and 5.25% from 8.5%, 6.0%, 4.5% and 3.5% respectively since closing. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in February 2022. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) performance of the underlying collateral that is better than Moody's expected, (2) an increase in available credit enhancement, (3) improvements in the credit quality of the transaction counterparties and (4) a decrease in sovereign risk. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. MISSGUIDED: Administrators Not in Position to Honor Any Refunds --------------------------------------------------------------- Rachel Williams at Daily Record reports that Missguided shoppers have taken to social media to slam the online retailer, as the brands administrator has confirmed it is not in a position to honour any refunds. The troubled fast-fashion brand collapsed into administration earlier this month, following accusations it owed suppliers millions of pounds, Daily Record recounts. Following its collapse, it was bought over by the Mike Ashley owned Frasers Group in a multi-million pound deal that is said to be worth around GBP20 million, Daily Record notes. Since falling into administration, shoppers have been worried about what it means for their refunds for any returned items, as many of them have been left chasing returns, refunds and orders, Daily Record relates. According to Daily Record, the brands administrators Teneo has since confirmed it is "not in a position" to honour customers unfulfilled orders or refunds. Multiple shoppers have been left fuming at the decision and have taken to Twitter to slam the brand for not honouring their refunds for items they have since returned, Daily Record states. It comes just after the brand suspended their website, app and comments from social media, which left customers unable to track any orders or returns, Daily Record relays. Other shoppers have accused the retailer of "robbing" them and asked them to return the items to customers since they have been paid for, according to Daily Record. POLARIS PLC 2022-2: Moody's Gives Caa2 Rating to Class Z Notes -------------------------------------------------------------- Moody's Investors Service has assigned definitive long-term credit ratings to Notes issued by Polaris 2022-2 plc: GBP302.67M Class A Mortgage Backed Floating Rate Notes due May 2059, Definitive Rating Assigned Aaa (sf) GBP19.47M Class B Mortgage Backed Floating Rate Notes due May 2059, Definitive Rating Assigned Aa2 (sf) GBP12.39M Class C Mortgage Backed Floating Rate Notes due May 2059, Definitive Rating Assigned Aa3 (sf) GBP7.08M Class D Mortgage Backed Floating Rate Notes due May 2059, Definitive Rating Assigned Baa2 (sf) GBP8.85M Class E Mortgage Backed Floating Rate Notes due May 2059, Definitive Rating Assigned Ba3 (sf) GBP3.54M Class Z Notes due May 2059, Definitive Rating Assigned Caa2 (sf) GBP3.894M Class X Floating Rate Notes due May 2059, Definitive Rating Assigned Caa1 (sf) Moody's has not assigned ratings to the Residual Certificates. The Notes are backed by a static portfolio of UK non-conforming residential mortgage loans originated by Pepper Money Limited (not rated) or UK Mortgage Lending Ltd (not rated). This is the fifth securitisation from Pepper Money Limited in the UK. The total provisional portfolio as of the end of April 2022 is equal to approximately GBP355M inclusive of accrued interest of approximately GBP0.9M. It also includes around GBP123M loans originated by Pepper (UK) Limited (not rated) which might be bought out of the Polaris 2019-1 plc transaction between closing and few days after the first interest payment date (July 25, 2022). RATINGS RATIONALE The ratings of the Notes are based on an analysis of the characteristics and credit quality of the underlying mortgage pool, sector wide and originator specific performance data, protection provided by credit enhancement, the roles of external counterparties and the structural features of the transaction. MILAN CE for this pool is 13.5% and the expected loss is 2.4%. The expected loss is 2.4%, which is in line with the UK non-conforming sector average and is based on Moody's assessment of the lifetime loss expectation for the pool taking into account: (i) the WA LTV of 69.4%; (ii) the above average percentage of loans with an adverse credit history; (iii) the performance of outstanding Polaris transactions; (iv) the current macroeconomic environment in the UK; and (v) benchmarking with similar UK non-conforming RMBS. MILAN CE for this pool is 13.5%, which is in line with the UK non-conforming sector average and follows Moody's assessment of the loan-by-loan information taking into account the following key drivers: (i) the WA LTV of 69.4%; (ii) the above average percentage of loans with an adverse credit history; (iii) the WA seasoning of 1.4 years; (iv) the arrears level; (v) the historic data does not cover a full economic cycle; and (vi) benchmarking with similar UK non-conforming RMBS. The transaction benefits from a liquidity reserve fund which is funded at closing to represent 1% of the Class A Notes. The liquidity reserve fund will be replenished using revenues fund. After the step-up date the liquidity reserve fund will be equal to 1.0% of the outstanding balance of the Class A notes and will amortise in line with the Class A notes; the excess amount is released through the principal waterfall. The liquidity reserve does not cover any other class of notes in the event of financial disruption of the servicer and therefore limits the achievable ratings of the Class B Notes. Interest Rate Risk Analysis: 86.6% of the loans in the pool are fixed rate loans in the combined pool reverting to the Lender Managed Rate (LMR) or Legacy Reference Rate (LRR). The Notes are floating rate securities with reference to compounded daily SONIA. To mitigate the fixed-floating mismatch between the fixed-rate assets and floating liabilities, there will be a scheduled notional fixed-floating interest rate swap provided by National Australia Bank Limited (Aa2(cr)/P-1(cr)). Linkage to the Servicer: Pepper (UK) Limited (NR) is the servicer in the transaction. To help ensure continuity of payments in stressed situations, the deal structure provides for: (1) a back-up servicer facilitator (CSC Capital Markets UK Limited (NR)); (2) an independent cash manager (Citibank, N.A., London Branch (Aa3(cr),P-1(cr))); (3) liquidity for the Class A Notes; and (4) estimation language whereby the cash flows will be estimated from the three most recent servicer reports should the servicer report not be available. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in February 2022. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Factors that would lead to an upgrade or downgrade of the ratings: Significantly different loss assumptions compared with Moody's expectations at close due to either a change in economic conditions from Moody'scentral scenario forecast or idiosyncratic performance factors would lead to rating actions. For instance, should economic conditions be worse than forecast, the higher defaults and loss severities resulting from a greater unemployment, worsening household affordability and a weaker housing market could result in downgrade of the ratings. Deleveraging of the capital structure or conversely a deterioration in the Notes available credit enhancement could result in an upgrade or a downgrade of the ratings, respectively. SBERBANK CIB: UK Court Grants Special Administration Order ---------------------------------------------------------- Lorna Bramich, a senior associate at Taylor Wessing, disclosed that the UK Court recently granted a special administration order over Sberbank CIB (UK) Limited (the Company) following the impact of Russian sanctions imposed by the UK on its indirect Russian parent, PJSC Sberbank. Background PJSC Sberbank is subject to an asset freeze in the UK and the Company cannot carry on its business without the benefit of licences granted by the Office of Financial Sanctions Implementation (OFSI). The Company had faced difficulty engaging professionals willing to act. As an OFSI licence was about to expire, the directors applied for an urgent special administration order on grounds that the Company appeared or was likely to become unable to pay its debts (Ground A) and/or it was fair to put the Company into special administration (Ground B). Decision The Court was satisfied with Ground A and B and placed the Company into special administration. While the Company was balance sheet solvent, ". . . Basically, as a result of the sanctions, the company cannot function in any normal way and has no means to pay its debts". The operational difficulties were such that it was 'fair' to place the Company into administration. It was in the interests of creditors that administrators were appointed to engage with banks, apply for licences and ensure compliance with sanctions while winding up the Company in an orderly way. Key takeaways This case demonstrates the flexibility of the special administration regime and the Court's broad discretion when considering whether to make an order, including compliance with sanctions. Where insolvency proceedings are necessary due to the impact of Russian sanctions on UK companies, it may take time to find professionals willing/able to act and to apply for licences. TOWER BRIDGE 4: DBRS Hikes Class F Notes Rating to BB(high) ----------------------------------------------------------- DBRS Ratings Limited took the following rating actions on the notes issued by Tower Bridge Funding No. 4 PLC (the Issuer): -- Class A confirmed at AAA (sf) -- Class B upgraded to AAA (sf) from AA (high) (sf) -- Class C upgraded to AA (sf) from A (sf) -- Class D upgraded to A (high) (sf) from BBB (high) (sf) -- Class E upgraded to A (low) (sf) from BBB (low) (sf) -- Class F upgraded to BB (high) (sf) from BB (sf) The ratings on the Class A and Class B notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The ratings on the Class C, Class D, Class E, and Class F notes address the ultimate payment of interest and principal on or before the legal final maturity date while junior, and timely payment of interest while the senior-most class outstanding. The rating actions follow an annual review of the transaction and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults, and losses as of the March 2022 payment date. -- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables. -- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels. The transaction is a securitization of mortgage loans originated by Belmont Green Finance Limited (BGFL), a specialist UK mortgage lender that offers a full suite of mortgage products including owner-occupied, buy-to-let, adverse-credit-history, and interest-only loans. The securitized mortgage portfolio comprises first-lien home loans originated by BGFL through its Vida Homeloans brand. BGFL is the named mortgage portfolio servicer but delegates its day-to-day servicing activities to Computershare Limited (formerly known as Homeloan Management Limited). The legal final maturity date is on the December 2062 payment date. PORTFOLIO PERFORMANCE As of the March 2022 payment date, loans two to three months in arrears represented 0.3% of the outstanding portfolio balance and the 90+ delinquency ratio was 1.5%, slightly up from 0.2% and 1.2%, respectively, at the last annual review. The cumulative loss ratio was zero. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has decreased its base case PD and LGD assumptions to 5.1% and 21.3%, respectively, from 8.5% and 23.2%, respectively. CREDIT ENHANCEMENT Credit enhancement (CE) is provided by subordination of junior classes and the general reserve fund, and increased as follows since the last annual review as of the March 2022 payment date: -- Class A to 29.3% from 23.5% -- Class B to 21.3% from 17.1% -- Class C to 15.0% from 12.0% -- Class D to 11.2% from 8.9% -- Class E to 8.8% from 7.0% -- Class F to 6.7% from 5.4% The transaction benefits from a reserve fund of GBP 12.5 million and a liquidity reserve fund of GBP 4.4 million. The liquidity reserve fund covers senior fees and interest on the Class A and Class B notes, while the general reserve fund covers senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes. BNP Paribas Securities Services SCA, London Branch (BNPSS London) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of BNPSS London, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology. NatWest Markets Plc (NatWest Markets) acts as the swap counterparty for the transaction. DBRS Morningstar's public Long-Term Critical Obligations Rating of NatWest Markets at A (high) is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology. DBRS Morningstar analyzed the transaction structure in Intex DealMaker. Notes: All figures are in British pound sterling unless otherwise noted. URBAN SPLASH: Owes Creditors More Than GBP8.3 Million ----------------------------------------------------- Jon Robinson at BusinessLive reports that the scale of the financial woes that faced a modular housing joint venture between Urban Splash and a Japan-based giant as it collapsed into administration has been revealed for the first time. Urban Splash Housing Holdings was a joint venture between the Manchester-headquartered property company, Sekisui House UK -- a subsidiary of the Japan-based Sekisui -- and Homes England which owned 4% of shares. The group owned a number of development sites and a modular building factory in Alfreton, Derbyshire. The joint venture entered administration in May with 160 people made redundant, BusinessLive recounts. Its modular homes have been used on sites such as Wirral Waters and New Islington in Manchester. Teneo Financial Advisory, which has recently overseen the sale of Studio Retail Group and Missguided, was appointed as administrator, BusinessLive relates. Now, newly-filed documents with Companies House have revealed how much the joint venture owed to its creditors when it collapsed, BusinessLive notes. According to the documents, which were filed by Teneo, the joint venture owed creditors more than GBP8.3 million and had an estimated total deficiency of GBP4.4 million, BusinessLive states. The joint venture had more than GBP4 million available to distribute to preferential creditors but the over GBP8.3 million it owed to unsecured non-preferential creditors led it to having a total deficiency of GBP4.4 million, BusinessLive discloses. WIRRALCO: Enters Administration, June 21 Asset Auction Set ---------------------------------------------------------- Richard Stuart-Turner at Printweek reports that Merseyside trade printer WirralCo has gone into liquidation and shut its doors after becoming the latest victim of the pandemic. Registered as Wirral Continuous Ltd and based at leased premises in Bromborough, the business had been bought by co-owner Kevin Hickey together with Chris Riley in October 2018. Mr. Hickey told Printweek: "We posted a loss last year after Covid and unfortunately then credit limits were cut by some of the paper companies. "Being a trade house, we were working off our bottom line and the paper [prices were increasing]. We were going through the paper [and credit] that we used to use in a month in less than two weeks." The business closed its doors at the end of March, with all 21 staff -- who were paid up to March 31 -- made redundant, Printweek relates. It subsequently entered creditors' voluntary liquidation on May 23, with Jason Mark Elliott and Craig Johns of Cowgill Holloway Business Recovery in Bolton appointed as the liquidators. The business had a turnover of GBP1.4 million prior to the pandemic but had since seen this drop to GBP800,000, Printweek discloses. The company's unencumbered assets, including several finishing machines, are set for auction via Robson Kay on June 21, Printweek states. This will take place at the WirralCo site. According to its statement of affairs, filed at Companies House, WirralCo had a GBP137,000 CBILS loan via Close Brothers, plus another GBP56,000 loan from the finance company, as well as a GBP50,000 Bounce Back Loan from Lloyds, Printweek notes. The company's estimated deficiency is just over GBP1 million, with trade and expense creditors owed nearly GBP169,000 in total, Printweek relays. =============== X X X X X X X X =============== [*] BOOK REVIEW: Bankruptcy and Secured Lending in Cyberspace ------------------------------------------------------------- Author: Warren E. Agin Publisher: Bowne Publishing Co. List price: $225.00 Review by Gail Owens Hoelscher Red Hat Inc. finds itself with a high of 151 5/8 and low of 20 over the last 12 months! Microstrategy Inc. has roller-coasted from a high of 333 to a low of 7 over the same period! Just when the IPO boom is imploding and high-technology companies are running out of cash, Warren Agin comes out with a guide to the legal issues of the cyberage. The word "cyberspace" did not appear in the Merriam-Webster Dictionary until 1986, defined as "the on-line world of computer networks." The word "Internet" showed up that year as well, as "an electronic communications network that connects computer networks and organizational computer facilities around the world." Cyberspace has been leading a kaleidoscopic parade ever since, with the legal profession striding smartly in rhythm. There is no definition for the word "cyberassets" in the current Merriam-Webster. Fortunately, Bankruptcy and Secured Lending in Cyberspace tells us what cyberassets are and lays out in meticulous detail how to address them, not only for troubled technology companies, but for all companies with websites and domain names. Cyberassets are primarily websites and domain names, but also include technology contracts and licenses. There are four types of assets embodied in a website: content, hardware, the Internet connection, and software. The website's content is its fundamental asset and may include databases, text, pictures, and video and sound clips. The value of a website depends largely on the traffic it generates. A domain name provides the mechanism to reach the information provided by a company on its website, or find the products or services the company is selling over the Internet. Examples are Amazon.com, bankrupt.com, and "swiggartagin.com." Determining the value of a domain name is comparable to valuing trademark rights. Domain names can come at a high price! Compaq Computer Corp. paid Alta Vista Technology Inc. more than $3 million for "Altavista.com" when it developed its AltaVista search engine. The subject matter covered in this book falls into three groups: the Internet's effect on the practice of bankruptcy law; the ways substantive bankruptcy law handles the impact of cyberspace on basic concepts and procedures; and issues related to cyberassets as secured lending collateral. The book includes point-by-point treatment of the effect of cyberassets on venue and jurisdiction in bankruptcy proceedings; electronic filing and access to official records and pleadings in bankruptcy cases; using the Internet for communications and noticing in bankruptcy cases; administration of bankruptcy estates with cyberassets; selling bankruptcy estate assets over the Internet; trading in bankruptcy claims over the Internet; and technology contracts and licenses under the bankruptcy codes. The chapters on secured lending detail technology escrow agreements for cyberassets; obtaining and perfecting security interests for cyberassets; enforcing rights against collateral for cyberassets; and bankruptcy concerns for the secured lender with regard to cyberassets. The book concludes with chapters on Y2K and bankruptcy; revisions in the Uniform Commercial Code in the electronic age; and a compendium of bankruptcy and secured lending resources on the Internet. The appendix consists of a comprehensive set of forms for cyberspace-related bankruptcy issues and cyberasset lending transactions. The forms include bankruptcy orders authorizing a domain name sale; forms for electronic filing of documents; bankruptcy motions related to domain names; and security agreements for Web sites. Bankruptcy and Secured Lending in Cyberspace is a well-written, succinct, and comprehensive reference for lending against cyberassets and treating cyberassets in bankruptcy cases. ********* 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 * * *