/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220622.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 22, 2022, Vol. 23, No. 118 Headlines B E L G I U M LSF XI MAGPIE: Moody's Assigns First Time 'B2' Corp. Family Rating C R O A T I A VJESNIK: To Propose Liquidation, Posts HRK7.8MM Loss in 2021 F R A N C E PIERRE & VACANCES: July 8 Meeting to Vote on Restructuring Set G E R M A N Y HSE FINANCE: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable I R E L A N D NORDIC AVIATION: Completed $6-Bil. Restructuring Effective June 1 PERRIGO COMPANY: Fitch Affirms 'BB+' IDR, Outlook Stable L U X E M B O U R G CELESTE MIDCO 1: S&P Assigns B+ Issuer Credit Rating, Outlook Neg. N E T H E R L A N D S CELESTE BIDCO: Moody's Assigns B2 CFR & Rates EUR600MM Term Loan B2 T U R K E Y ALBARAKA TURK: S&P Affirms 'B-/B' ICRs, Outlook Negative U N I T E D K I N G D O M AUTORESTORE LIMITED: Goes Into Administration Following Losses CARRIAGES CAFE: Goes Into Liquidation ICONIC LABS: Joint Administrators Provide Update on Proposed CVA MINERVA INDUSTRIES: Enters Administration, Seeks Buyer for Assets - - - - - ============= B E L G I U M ============= LSF XI MAGPIE: Moody's Assigns First Time 'B2' Corp. Family Rating ------------------------------------------------------------------ Moody's Investors Service assigned a B2 corporate family rating and a B2-PD probability of default rating to LSF XI Magpie Bidco BV/SRL (Manuchar or the company), and a B3 instrument rating to the proposed EUR350 million senior secured notes, to be issued by LSF XI Magpie Bidco BV/SRL. The outlook is stable. The proceeds from the bond issuance will be used primarily to finance Lone Star's purchase of Manuchar NV, refinance some existing debt, pay for transaction-related fees, and finance general corporate purposes to the extent of any overfunding at the closing date. Additional sources of funding include a cash contribution from Lone Star and rolled-over equity from the management team. Moody's anticipates equity funding to be in form of common equity and a shareholder loan, which Moody's expects to meet the requirements for equity treatment under Moody's Hybrid Equity Credit methodology. RATINGS RATIONALE The assigned B2 CFR reflects Moody's expectation that Manuchar's gross leverage, as adjusted and defined by Moody's, will be around 5x over the next 12 to 18 months after closing of the proposed debt issuance, higher than the pro-forma starting gross leverage for the new capital structure of 3.3x for the last 12 months ended March 2022. Earnings for the last 12 months were exceptionally strong, especially for the company's chemical distribution business unit, mainly because the company was able to deliver chemicals to customers while underlying demand was strong and supply of chemicals was constrained given the ongoing global supply chain disruptions. Moody's believes that company-adjusted EBITDA over the next 12 to 18 months is likely to normalize above pre-pandemic levels but below peak levels for the last 12 months ended March 2022. The company benefitted from strong demand growth from existing and new customers, better product mix and higher pricing, leading to an exceptionally high gross profit per ton. Manuchar recorded a strong increase in company-adjusted EBITDA to $180 million for the last 12 months ended March 2022 from $140 million, $70 million and $65 million in 2021, 2020 and 2019, respectively. Based on Moody's assumption that gross profit per ton is likely to decrease from its peak levels, Moody's forecasts company-adjusted EBITDA to be around $110 million, on an annualized basis, over the next 12 months after closing of the proposed debt issuance. In addition, Manuchar's pro-forma opening cash balance of around $50 million and its ability to generate positive free cash flow given its low capital expenditure requirements somewhat mitigate the absence of a multi-year committed revolving credit facility, which Moody's views as negatively. The company uses non-recourse factoring and short-term bilateral financing arrangements, including transactional lines, to fund its working capital. Non-recourse factoring and amounts drawn under the transactional funding lines are viewed as debt-like items and therefore included in Moody's adjusted debt calculations. Non-recourse factoring and transaction lines are currently at high levels given high commodity prices and high demand for the company's services. More generally, Manuchar's position as one of the largest chemicals distributors in emerging markets; solid capacity to generate free cash flow given its low capex requirements, albeit working capital requirements are significant; long-standing relationships with customers, including multinational corporations, and suppliers; and the diverse end-market exposure support its B2 CFR. The credit profile also benefits from the positive growth fundamentals of the third-party chemicals distribution markets given the ongoing outsourcing trend which has been accelerated by the current supply chain disruptions. However, Moody's expectation that Manuchar's gross leverage, as adjusted and defined by Moody's, will be around 5x over the next 12 to 18 months after closing of the proposed debt issuance; high reliance on non-recourse factoring and other short-term bilateral financing arrangements to fund working capital, and the absence of a committed revolving credit facility; relatively small size compared to other rated distributors; limited track record of maintaining profitability and earnings at current levels; and the risk of debt-funded acquisitions or other shareholder friendly activities constrain the CFR. LIQUIDITY PROFILE Manuchar's liquidity profile is adequate, supported by an estimated opening cash balance of around $50 million. In combination with forecasted funds from operations and working capital release over the next 12 months, these sources are sufficient to cover capital spending and day-to-day cash needs. In addition, the company has access to various non-recourse factoring agreements and mixed-use facilities to manage working capital swings. Most of these lines are committed for a short-term horizon ranging from less than one year to three years, but Manuchar has continuously renewed and extended in the past. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that the company´s gross leverage will be around 5x over the next 12 to 18 months and the liquidity profile will improve. ESG CONSIDERATIONS Moody's governance assessment for Manuchar incorporates its leveraged capital structure, reflecting high risk tolerance of its private equity owners. The private equity business model typically involves an aggressive financial policy and a highly leveraged capital structure to extract value. Additional governance considerations include, positively, management's long experience in operating the company and, negatively, the lack of audited cash flow statements for the historical periods. Moody's assessment includes the expectation that the company will provide audited cash flow statement in the future. In addition, Manuchar's annual reports are prepared under Belgian GAAP, which, to a degree, limits full comparability of its credit metrics with those of the companies reporting under US GAAP or IFRS. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure, though unlikely over the next 12 months, could arise if the company built a track record of sustainable organic EBITDA growth and maintaining Moody's-adjusted total debt/EBITDA sustainably below 4.5x, and continues to generate meaningful positive free cash flow, while also maintaining an adequate or better liquidity profile. Negative pressure on the ratings could arise with evidence of inability to generate sustained positive free cash flow or deterioration of the liquidity profile. A downgrade also would be likely if Moody's-adjusted total debt/EBITDA increases above 5.5x or EBITA/interest expense is below 1.75x on a sustainable basis. STRUCTURAL CONSIDERATIONS Moody's rates LSF XI Magpie Bidco BV/SRL's proposed senior secured notes B3, one notch below the B2 CFR, reflecting structural subordination risk. Given the moderate guarantor coverage, trade claims and debt at operating subsidiaries rank ahead of bondholders in Moody's priority of claim waterfall. Following successful completion of the acquisition, the senior secured notes will be guaranteed by Manuchar NV, Manuchar Comercio Exterior LTDA and Manuchar Steel NV, entities representing roughly 39% of adjusted EBITDA for the last 12 months ended March 2022. The security package of the senior secured notes includes shares pledges as well as pledges over certain intercompany receivables. Moody's views the security package as weak and therefore considers the notes unsecured in the loss given default analysis. Furthermore, additional financing at the level of operating companies could lead to a higher notching difference between the instrument rating and the CFR. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Distribution & Supply Chain Services Industry published in June 2018. COMPANY DESCRIPTION Headquartered in Antwerpen, Belgium, LSF XI Magpie Bidco BV/SRL (Manuchar or the company) is a commodity chemicals distributor which operates mainly in emerging markets and covers the full distribution value chain from purchase to local delivery. The company complements its chemical distribution activities with trade services for other basic materials, mainly steel and polymers. Manuchar operates 123 warehouses in 37 countries. In 2021, the company generated revenues of $2.5 billion and company-adjusted EBITDA of $140 million. In January 2022, Lone Star agreed to acquire Manuchar NV from Ackermans & van Haaren Growth Capital and the Maas family. ============= C R O A T I A ============= VJESNIK: To Propose Liquidation, Posts HRK7.8MM Loss in 2021 ------------------------------------------------------------ SeeNews reports that Croatian printing and publishing company Vjesnik said on June 3 it will propose to its shareholders to launch a liquidation procedure. The company booked a loss of some HRK7.8 million (US$1.1 million/EUR1.0 million) for 2021, SeeNews relates. The shareholders will vote on the proposal on July 5, SeeNews discloses. The company stopped publishing its daily Vjesnik in 2012, SeeNews notes. However, it offers printing services and owns a real estate complex in Zagreb, SeeNews states. =========== F R A N C E =========== PIERRE & VACANCES: July 8 Meeting to Vote on Restructuring Set -------------------------------------------------------------- Following the announcements made by Pierre & Vacances - Center Parcs Group on March 10, April 22 and May 25, 2022, regarding the progress of the Group's restructuring process, the Company on June 3 announced the convening of its shareholders and creditors on July 8, 2022 for the purpose of approving the transactions provided for in the agreement entered into on March 10, 2022 (the "Restructuring Transactions"). By judgment dated May 31, 2022, the Commercial Court of Paris approved the Company's request and opened an accelerated safeguard procedure to its benefit. As a reminder, this procedure only affects financial creditors directly concerned by the Restructuring Transactions, to the exclusion of any other partner, notably lessors or suppliers. In this context, the Board of Directors of the Company has decided to convene a general meeting of its shareholders and a special meeting of those shareholders holding double voting rights in order to vote on the resolutions necessary for the implementation of the Restructuring Transactions. The court-appointed administrator of the accelerated safeguard procedure, SCP Abitbol et Rousselet, represented by Frederic Abitbol and Joanna Rousselet, has convened the classes of parties affected by said procedure in order to obtain their approval of the draft accelerated safeguard plan. Each of these meetings will be held on Friday July 8, 2022. Those notices of meeting which are subject to legal publication were published, inter alia, in the BALO (Bulletin des Annonces Legales Obligatoires) and are available on the Company's website (www.groupepvcp.com) in the "Finance / Publications / Restructuring" section. To date, the target date for settlement of the Restructuring Transactions remains September 16, 2022. Groupe Pierre & Vacances Center Parcs (Paris:VAC) specializes in tourism services, providing holiday and entertainment villages, leisure activity residences and hotels under the brands Pierre & Vacances, Maeva, Center Parcs, Sunparks, and Adagio. ============= G E R M A N Y ============= HSE FINANCE: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings affirmed its ratings on three European retailers. S&P Global Ratings affirmed its ratings on ELO, Metro AG, and HSE Finance S.A.R.L.; S&P has also revised its outlook on Metro to negative from stable since it believes that in the scenario of an exit from Russia, Metro's leverage and cash flow metrics would be weaker than the levels commensurate with the current ratings. The stable outlooks on ELO and HSE Finance reflect S&P's view that these companies' exposure to Russia is not material enough to trigger a negative rating action. European retailers Metro, ELO (Auchan Holding), and HSE Finance generate 10%-20% of their revenue and profits in Russia, and S&P regards the cash flows generated there as inaccessible to service the parent companies' debt. S&P said, "Sanctions on Russia and our expectation of depressed earnings for ELO, Metro, and HSE Finance in Russia raise doubts about the companies' ability to expand and access earnings generated there. For each company, Russia represents a material exposure of about 10% in terms of revenue and profitability. We understand that, because of international sanctions imposed on Russia and measures taken by the Russian government in response, cash flows generated in Russia can no longer be used to service debt located at the parent companies. Furthermore, apart from the current disruption to economic activity linked to the sanctions, we expect second-round effects to weigh materially on Russia's long-term growth prospects, reducing these companies' incentive to invest in that country. We understand all three companies have stopped expansionary capital expenditure (capex) in Russia and we see it as unlikely that this might resume soon. For these reasons, we present the financial metrics for these companies including and excluding Russia to reflect the increasing risk of an exit from Russia. The impact of ceasing business in Russia would cause our adjusted leverage ratio for each company to increase by 0.4x-0.9x. While not included in our calculations, we also believe that, if these companies were to leave Russia, they could receive some form of financial compensation that could help cushion the impact on our credit ratios, although we would expect a material discount in the event of a disposal." Key Metrics--Base Case And Russian Operations Deconsolidation Scenarios FISCAL YEAR 2022 ELO METRO AG HSE FINANCE Debt-to-EBITDA – base case scenario 2.3x-2.7x 3.4x-3.6x 5.0x-5.5x Debt-to-EBITDA – deconsolidation scenario 2.7x-3.1x 4.1x-4.5x 5.5x-6.0x Downgrade trigger 3.5x 3.5x 6.5x Source: S&P Global Ratings. S&P said, "At this stage, our base-case scenario incorporates the full contribution from earnings generated in Russia, but excludes from surplus cash the cash on the balance sheet outstanding in Russia, which results in an increase in our adjusted debt figures for ELO and Metro. For HSE Finance, in line with our approach for all sponsor-owned companies we rate, we don't deduct surplus cash from debt. The alternative deconsolidation scenario captures the deconsolidation of revenue, EBITDA, debt, and cash on the balance sheet of the Russian operations. It is only an estimate, since we don't have full details of cash flow items (working capital and capex) for these operating subsidiaries. "Unlike for HSE and ELO, a hypothetical deconsolidation of Metro's Russian operations would exhaust the group's rating headroom, which explains our revision of the outlook to negative.In the deconsolidation scenario, which excludes Metro's Russian operations' revenue, EBITDA, local debt, and cash, Metro's S&P Global Ratings-adjusted debt-to-EBITDA ratio would increase to 4.1x-4.5x in 2022, exceeding our downgrade trigger of 3.5x, whereas for both HSE and ELO the headroom against our downgrade triggers would remain comfortable. This leverage estimate for Metro includes one-off costs associated with the group's recent decision to exit the Belgian market. We believe it is now much harder for Metro to pool the cash generated in Russia to service its parent company's debt and that the Russian market has less appealing value-creation potential for the group, which raises doubts about its long-term presence there. However, several factors currently limit risk, in our view. First, Metro's management has historically acted prudently, as demonstrated during the pandemic by scaling down capex and cutting dividends to ensure credit ratios' stability over time; second, we cannot rule out the possibility that if Metro were to exit Russia, there could be some form of financial compensation; and third, the group's operations in other countries are recording strong trading activity, which would help cushion the impact on credit metrics in the scenario of an exit from Russia. "The Russian subsidiaries are self-sufficient, limiting the risk of local and cross defaults. We understand that all three Russian subsidiaries are financially self-sufficient and able to operate locally without support from their parent companies. This is because of their predominantly locally based sourcing, proactive liquidity management, access to local funding, and robust trading to date. Although, initially, we expected the sanctions would hamper the local operations, we understand that performance in Russia in first-quarter 2022 was good. This was fueled by consumers' stockpiling food and other products in anticipation of potential shortages and inflation. As such, year-to-date trading volumes have helped the companies meet near-term obligations such as supplier payments, salaries, and rent. We understand that ELO, Metro, and HSE's local subsidiaries have no foreign-currency-denominated debt with banks located outside Russia, limiting the likelihood of a local default due to inability to access funding in foreign currency. Even in the scenario of a default of the Russian entity, which is currently not our base case, we believe all three companies would benefit from language in debt documentation that prevent the triggering of cross-default provisions." Continuing operations in Russia poses significant event risk. Although these firms have mostly local suppliers, there is limited visibility about where these suppliers source their goods and to what extent they are capable of continuing to source them, considering restrictions to purchasing foreign currencies to buy merchandize linked to the sanctions against Russia. S&P also notes that continuing to operate in Russia presents some degree of legal risks because some companies may be in danger of inadvertently breaching sanctions, since the regulatory landscape is still evolving and is subject to some degree of interpretation. However, to date, these companies' decision to stay in Russia has not dampened trading in other countries where they operate. Metro AG Metro continues operating in Russia, despite the operational and financial challenges. As of March 31, 2022, Metro operated 93 stores in Russia, where it generated revenue of EUR2.4 billion (10% of the group's total) and EBITDA (defined by Metro) of EUR197 million (17% of the total) for the fiscal year ended Sept. 30, 2021. For now, the group has no plan to leave the country, where its second-quarter performance (January–March 2022) was good, thanks to growth in all consumer groups (as well as consumers stockpiling), strong development in food service delivery, and inflation. S&P said, "We understand the Russian subsidiary has no external debt and EUR97 million of cash on the balance sheet, which we believe is adequate to operate the usually cash-flow positive business and intrayear working capital needs. We understand that more than 90% of Metro's sales are food items that are locally sourced and we therefore expect limited constraints on its supply chain." S&P said, "That said, we believe the operational and financial challenges to continue operating in Russia are elevated. These include currency volatility, legal risk of dealing with sanctions, reputation risk, and potential political pressure. As such, we cannot exclude that the group may leave the country at a later stage. Under the current circumstances, we also believe the group will not be able to use the EBITDA and cash flows generated in Russia to service its debt. Therefore, we complement our ratio analysis by excluding from our adjusted leverage ratio the Russian contribution, so as to quantify the potential impact of an exit from Russia. This ratio is about 0.8x higher than the group's consolidated leverage and translated into a decrease of our adjusted EBITDA margin to 4.3% from 4.7 % as of fiscal year ended Sept. 30, 2021. Although we expect the group to maintain a financial policy consistent with an investment-grade rating, we note that this additional pressure on credit metrics occurs shortly after Metro has announced its strategic plan, sCore, which, through renewed operating expenditure and capex, aims to boost top-line sales to EUR40 billion by 2030, thereby accentuating the execution risk associated with this plan." Outlook S&P said, "The negative outlook reflects the uncertainty regarding Metro's Russian operations, and our assumption that Metro's credit metrics will remain elevated in fiscal year 2022 following the divestment in Belgium. As a result, we expect that S&P Global Ratings-adjusted leverage will remain at 3.4x-3.6x in fiscal year 2022 and 3.2x-3.5x in fiscal year 2023. In our adjusted debt calculation, we exclude the cash held at the Russian subsidiary. Excluding the Russian subsidiary's contribution from the group's results would increase leverage to 4.1x-4.5x in fiscal year 2022 before it reduces to 3.5x-3.9x in fiscal year 2023." Downside scenario: S&P could lower the rating if: -- S&P Global Ratings-adjusted debt to EBITDA exceeds 3.5x for a prolonged period; -- Adjusted funds from operations (FFO) to debt decreases below 20%; -- There's operating underperformance, notably a material deviation from an adjusted EBITDA margin of 4.7%-4.9%, as per S&P's base case, and the company does not take financial policy measures to mitigate the impact on credit metrics; or -- The financial policy becomes more aggressive, for instance if EPGC were to gain control over Metro's strategy and prevent deleveraging. Upside scenario: S&P could revise the outlook to stable if: -- The adjusted debt-to-EBITDA ratio fell and stayed below 3.5x; -- Adjusted FFO to debt approached 20%; -- Adjusted EBITDA margins stayed close to 5% while the group met its sales and growth objectives; and -- The company maintained a conservative financial policy, reflecting a stable operating portfolio and a clear view on the shareholder structure. ELO ELO continues operating in Russia, despite the operational and financial challenges. As of Dec. 31, 2021, ELO subsidiary Auchan Retail operated 231 stores in Russia, which generated about 10% of the group's revenue, representing its third-largest country of operations after France and Spain. The exposure of its other subsidiary New Immo Holding (NIH) is lower, with Russia representing only about 5.0% of its total gross asset value and net rental income. For now, the group has no plans to leave the country, where first-quarter performance was good, thanks to consumers' stockpiling and price increases linked to booming inflation. S&P said, "We understand the Russian subsidiary has no external debt and adequate liquidity, supported by two local credit lines, currently undrawn, that it put in place in March to manage its treasury and working capital needs independently from the rest of the group, which stopped all investment in the country. We also understand that 80% of its sales constitute food items, which are locally sourced, and that only a very small portion of nonfood supplies are denominated in euros and U.S. dollars. As such, we expect supply-chain issues and currency mismatches should be relatively limited. That said, we believe the operational and financial challenges to continue operating in Russia are elevated. These include currency volatility, the legal risk of dealing with sanctions, reputation risk, and potential political pressure. As such, we cannot exclude that the group may leave the country at a later stage." Outlook The stable outlook reflects our anticipation that, despite challenging operating trends in the retail and real estate businesses, ELO will maintain consolidated S&P Global Ratings-adjusted leverage below 3.5x and FFO to debt well above 20%. S&P also anticipates that the group will use proceeds from asset disposals to manage its credit metrics while reinvesting in its core European retail operations to reinforce its competitive positioning. This should translate into positive like-for-like revenue, robust profitability growth, and improved cash flow. Downside scenario: S&P could lower the rating if: -- The group's retail operations deteriorate materially in the next 24 months, due to a weakening of its business position, translating into negative like-for-like growth and a lack of success in sustaining profitability and restoring material positive free operating cash flow (FOCF) before asset disposals; -- The real estate business' performance and credit ratios deteriorate more than S&P anticipates because of the challenging economic and retail conditions; or -- Consolidated adjusted leverage exceeds 3.5x or FFO to debt deteriorates to below 20% because of delays in asset disposals and the return to a more aggressive financial policy. Upside scenario: S&P could revise the outlook to positive if ELO maintained its business risk profile despite structural pressure, and its deleveraging efforts continued such that debt to EBITDA remained below 3.0x. This would be due to continuing asset disposals but also supportive financial policy and a sustainable improvement in profitability and organic FOCF, indicating durable strengthening of credit quality. HSE Finance S&P said, "In our view, the Russian operations on their own poses limited risk to HSE Finance's credit standing at the moment. HSE Finance's Russian subsidiary comprises about 10% of revenue and EBITDA. It operates a stand-alone activity, independent from its German parent, carrying its own brand, contracting its own suppliers, and managing relationships with local banks. Similar to several retailers in the country, HSE Finance's volume sales have continued to hold up since the conflict began and business has remained profitable, which is expected to support liquidity in the next few months. The Russian entity does not have debt outstanding, which removes the risk of default. That said, we remain cautious about the longer-term sustainability of those operations considering the uncertainties regarding the sanctions. We understand that management is currently studying all options, including an exit from Russia." Pressure on profits and cash flow would come from the confluence of rising inflation, weakening consumer confidence, and a potential exit from Russia. The company's first-quarter 2022 results showed an immediate decline in volume sales after the Russian-Ukraine conflict started, leading to a year-on-year revenue decline of 7.4% (-6.8% in Germany, Austria, and Switzerland and -11% in Russia). Supply chain issues and a surge in COVID-19 cases contributed to the 32% decline in profitability year on year. S&P said, "We do not expect an immediate rebound from this weakness and anticipate subdued trading activity and increased input costs over the next 12-18 months, which results in our base-case forecast of S&P Global Ratings-adjusted leverage at 5.0x-5.5x in 2022. In the event of a Russian deconsolidation, the leverage figure is forecast to rise by about 0.5x, yet at this stage we still expect the group to generate positive FOCF after leases under both scenarios." Outlook S&P said, "The stable outlook reflects our view that, although trading will likely stay depressed considering inflation headwinds, deteriorating consumer confidence, and increasing uncertainties regarding the Russian operations, HSE Finance should still be able to generate healthy margins of around 17%, with FOCF after lease payments of EUR45 million-EUR55 million in 2022 and 2023. Subsequently, this should lead to S&P Global Ratings-adjusted debt to EBITDA of 5.0x-5.5x for 2022 (or 5.5x-6.0x for 2022, excluding the contribution of the Russian subsidiary) before reducing to around 5.0x in 2023." Downside scenario: S&P could lower the rating if consumer confidence further deteriorates and the cost impact of inflation increases, which could result in weaker earnings and cash flows than we currently anticipate. In particular, S&P could lower the ratings if: -- The company's adjusted debt to EBITDA remains significantly higher than 6.5x for a prolonged period; -- FOCF weakens toward zero; or -- The company adopts a more aggressive financial policy with material debt-financed investments or dividends. Upside scenario: S&P said, "We see an upgrade as remote in the next 12 months considering the operational and macroeconomic headwinds that HSE Finance faces. That said, a positive rating action would hinge on the company's ability to maintain consistent organic sales growth, translating into rising EBITDA to smooth profit volatility and material positive reported FOCF on an annual basis after accounting for all lease-related payments. Any upgrade would also be contingent on the financial sponsor's commitment not to exceed S&P Global Ratings-adjusted leverage of 5x." Ratings List RATINGS AFFIRMED ELO Issuer Credit Rating BBB-/Stable/A-3 AUCHAN COORDINATION SERVICES S.A. Issuer Credit Rating --/--/A-3 RATINGS AFFIRMED HSE FINANCE S.A.R.L. Issuer Credit Rating B/Stable/-- RATINGS AFFIRMED; OUTLOOK ACTION TO FROM METRO AG Issuer Credit Rating BBB-/Negative/A-3 BBB-/Stable/A-3 ============= I R E L A N D ============= NORDIC AVIATION: Completed $6-Bil. Restructuring Effective June 1 ----------------------------------------------------------------- Nordic Aviation Capital Designated Activity Company announced June 1, 2022, that it has successfully exited from the Chapter 11 restructuring process, having received confirmation of its Plan of Reorganization from the Bankruptcy Court on April 19, 2022. The Company emerges well-positioned for the future having eliminated nearly $4.1 billion of debt, while significantly enhancing its liquidity, with access to approximately $537 million in additional capital to fund operations and growth opportunities. Since September 2021, NAC has focused on four key strategic initiatives, including right sizing the balance sheet, driving organizational change, stabilizing the portfolio and pivoting towards growth. Progress has been made across all initiatives and the Company is on track for recovery and growth, supporting its aim to remain the global leader in regional aircraft leasing and expand into adjacent single-aisle areas by leveraging its world-class asset management platform. As outlined in NAC's Plan of Reorganization, NAC has appointed a new board of directors effective immediately. The board will be led by Chairman Klaus Heinemann and President & CEO Norman C.T. Liu with the support of non-executive directors Justin Bickle, Patrick Blaney, Martin Cooke, Paul O'Donnell, Catherine Duffy and Dermot Mannion. Klaus Heinemann, Chairman of the Board, said, "I am delighted to join the NAC Board at this pivotal time in the Company's history. I would like to thank the outgoing NAC Board for their diligent guidance through what has been a complex and challenging process. Today we begin a new chapter at NAC with a strategy focused on growth and I look forward to working with the NAC team to help drive the Company's strategic plan and achieve sustainable, long-term success." Norman C.T. Liu, President & CEO of NAC said, "Substantial progress has been made to ensure that we are moving forward with a solid financial foundation, a leaner and more efficient operating model and access to growth capital to invest in our business. I look forward to the months ahead as we reposition ourselves for growth. I want to thank our employees, customers and business partners for their steadfast support, which allowed us to maintain normal operations throughout this process." The exit follows recent rating announcements for the Company. S&P assigned Issuer Credit Ratings of 'B' to Nordic Aviation Capital DAC and Nordic Aviation Capital 29 and a 'B' issue-level rating to Nordic Aviation Capital 29 Senior Secured Notes and Senior Secured Term Loan B, with a stable outlook. Moody's assigned a Corporate Family Rating of 'B2' to Nordic Aviation Capital DAC and a 'B2' issue-level rating to Nordic Aviation Capital 29 Senior Secured Notes and Senior Secured Term Loan B, with a stable outlook. Kirkland & Ellis LLP served as the Company's restructuring counsel, Clifford Chance and William Fry LLP served as legal counsel, Ernst & Young served as restructuring advisor, and Rothschild & Co acted as investment banker. Norton Rose Fulbright (NRF), Weil, Gotshal & Manges and Dillon Eustace advised an ad hoc secured creditors group with USD1 billion in combined claims, which included Deutsche Bank, Development Bank of Japan, Export Development Canada, Investec, JPMorgan, Korea Development Bank, MUFG and New York Life, and a number of other lenders with syndicated involvement. Milbank acted for a syndicate of secured lenders led by BNP Paribas. NRF used a team led by its London and Paris offices. Global head of aviation Duncan Batchelor advised, with additional local law input from the Luxembourg, New York and Singapore offices. Weil Gotshal used a London and New York team. Dillon Eustace advised on Irish law issues. London-based partners James Cameron and Karen McMaster led Milbank's input, with support from a number of associates. About Nordic Aviation Capital Nordic Aviation Capital is the leading regional aircraft lessor serving almost 70 airlines in approximately 45 countries. Its fleet of 475 aircraft includes ATR 42, ATR 72, De Havilland Dash 8, Mitsubishi CRJ900/1000, Airbus A220 and Embraer E-Jet family aircraft. On Dec. 17, 2021, Nordic Aviation Capital Pte. Ltd., NAC Aviation 17 Limited, NAC Aviation 20 Limited, and Nordic Aviation Capital A/S each filed petitions seeking relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. E.D. Va.). On Dec. 19, 2021, Nordic Aviation Capital Designated Activity Company and 112 affiliated companies also filed petitions seeking Chapter 11 relief. The lead case is In re Nordic Aviation Capital Designated Activity Company (Bankr. E.D. Va. Lead Case No. 21-33693). Judge Kevin R. Huennekens oversees the cases. The Debtors tapped Kirkland & Ellis and Kutak Rock, LLP as bankruptcy counsel and the law firms of Clifford Chance, LLP, William Fry, LLP and Gorrissen Federspiel as corporate counsels. N.M. Rothschild & Sons Limited, Ernst & Young, LLP and PricewaterhouseCoopers, LLP serve as the Debtors' financial advisor, restructuring advisor and tax advisor, respectively. Epiq Corporate Restructuring, LLC is the claims and noticing agent. PERRIGO COMPANY: Fitch Affirms 'BB+' IDR, Outlook Stable -------------------------------------------------------- Fitch Ratings has affirmed Perrigo Company plc's Issuer Default Rating (IDR) at 'BB+' with a Stable Rating Outlook and the debt ratings of its subsidiaries including Perrigo Company plc's senior unsecured notes at 'BB+'/'RR4', and Perrigo Finance Unlimited Company's senior unsecured notes at 'BB+'/'RR4'. Fitch has also assigned final ratings to Perrigo Investments LLC's Senior Secured Revolver and Term Loans at 'BBB-'/'RR1'. The rating actions follow the company's successful financing of the HRA Pharma acquisition. Fitch has withdrawn the 'BB+(EXP)'/'RR4' on Perrigo Investments LLC's proposed senior unsecured notes, as the issuance is no longer expected to proceed as previously envisaged. Fitch has also withdrawn the 'BB+'/'RR4' ratings on Perrigo Finance Unlimited Company's senior unsecured revolver and term loan, as it has been replaced by Perrigo Investments LLC's senior secured revolver and term loans. KEY RATING DRIVERS Acquisition and Elevated Leverage: The acquisition of HRA Pharma adds three category-leading self-care brands in blister care, women's health and scar care to Perrigo's product portfolio. These platforms offer higher growth and margins relative to Perrigo's base business. Fitch expects that the company will be able to generate at least $40 million in annual cost synergies during the next three years. There are likely some attainable revenue synergies, but Fitch has not incorporated any into its forecast. The acquisition will consume balance sheet cash, which will prevent Perrigo from reducing debt in the near term, causing leverage to remain above 3.5x for more than 18-24 months. Business Transformation/Restructuring: The company has largely completed its effort to transform its business. In 2019, the company initiated a reorganization plan in order to refocus on priorities, increase efficiencies and improve growth, targeting $100 million in net savings by 2022. Perrigo divested its generic prescription pharmaceuticals business for $1.5 billion in cash in 2021. In addition, the company divested its animal health, international prescription drug businesses and other businesses. On the growth side, the company completed a number of targeted acquisitions in existing or adjacent product categories, and Fitch expects this strategy to continue. Pandemic Challenging but Manageable: The company has been able to sustain operations during the coronavirus pandemic. Adjustments to scheduling and social distancing modestly challenged operating efficiency, but Perrigo has largely satisfied consumer demand. Alternative sourcing helped to mitigate any supply constraints. E-commerce revenues grew rapidly during the pandemic as consumers increased their level of online shopping. Scale and Diversification: Perrigo is by far the largest manufacturer of private label over-the-counter (OTC) medicines. The company's significant scale positions it well to serve a broad range of customers, including large retailers. Perrigo serves Walmart, Target, Walgreens, CVS, Sam's Club, Amazon, Costco and a number of large drug distributors. Walmart is Perrigo's largest customer and accounts for roughly 13% of sales and the next five largest customers account of 25% of sales. In addition, no product category accounts for more than 10% of total sales. The company generates roughly 68% of its revenues in the U.S., 27% in Europe and 5% in other geographies. Contingent Tax Liability Reduced: The company has resolved its Irish Tax Assessment risk for EUR266 million in cash. Perrigo plc funded it with the proceeds of a EUR350 million Belgian arbitration award. The Irish Office of the Revenue Commissioners issued a Notice of Amended Assessment on in November 2018 that assesses a tax liability against Perrigo of EUR1,636 million. and subsequently reduced it by EUR600 million. Consistently Positive FCF: Perrigo is a consistent generator of positive FCF. The company benefits from relatively reliable demand, generally stable margins and manageable capital expenditures. Fitch expects the company to generate roughly $250 million in annual FCF during the forecast period. However, contingent liability and tax disputes could offset the expected results at some point in the future. Dependable Demand: Consumer health care products and prescription medicines benefit from relatively reliable demand. Sales tend to be recession-resistant as most people prioritize health care needs. OTC medicines can be purchased without a physician's prescription and offer relief for some non-critical medical issues. In addition, private label brands offer less costly alternatives to brand-name products, attracting cost-conscious consumers, while at the same time offering higher margins to retailers. Consumers have been gradually switching to private-label alternatives. DERIVATION SUMMARY Perrigo's most relevant peer is P&L Development Holdings, LLC's (B-/Stable), as both manufacture and market private label OTC health care products. Perrigo is significantly larger and more diverse in terms of products and geographies. Nevertheless, P&L Development Holdings, LLC offers an alternative to retailers as the second-largest player in the space. In addition, Perrigo operates with leverage (total debt/EBITDA) significantly lower than P&L Development Holdings. Both companies' products are mainly paid for by large retailers with meaningful negotiating power. Perrigo divested its prescription generic drug business in 2021 and now focuses on consumer health care. It also has a portfolio of branded products. However, Perrigo and generic prescription drug manufacturers have some similar manufacturing processes and offer lower cost private label/generic products compared to branded products. Viatris (f/k/a Mylan N.V; BBB/Stable) and Teva Pharmaceutical Industries Limited (BB-/Stable) are much larger than Perrigo in terms of size and scope of operations in the generic prescription drug market. Both companies' products are mainly paid for by large commercial and public payers with significant negotiating power. KEY ASSUMPTIONS -- Revenues grow organically about 3% annually driven by digestive health products and nutritional products in CSCA segment; -- Moderately increasing margins; -- Annual FCF of roughly $200 million-$300 million; -- Small tuck-in acquisitions targeting OTC products; -- Near-term debt maturities to be refinanced; -- Total debt with equity credit/EBITDA remains above 3.5x during the next 24 months. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Gross leverage (total debt/EBITDA) is sustained below 3.5x, driven by EBITDA growth and some debt reduction; -- Successful integration of HRA Pharma; -- Near-term M&A is targeted and doesn't negatively affect Perrigo's deleveraging ability. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Gross leverage (total debt/EBITDA) sustainably above 4.0x 18- 24 months post acquisition; -- Integration issues with HRA that would materially and durably stress operating or financial performance; -- Additional leveraging M&A in the near-term. 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 Fitch expects Perrigo to maintain adequate liquidity throughout the forecast period. At April 4, 2022, PRGO had balance sheet cash of approximately $1.97 billion and full availability on its revolving credit agreement and Fitch's expectation of $200 million to $300 million of FCF per year. After the recent refinancing, debt maturities are manageable with $700 million due in 2024 and $2.81 billion thereafter. It is worth noting that the company completed its acquisition of HRA on May 2, 2022. Recovery Assumptions Fitch applies a generic approach to rate and assign RRs to instruments for issuers rated 'BB-' or above. Perrigo Investments LLC's first liens security on its bank facility are considered Category 1 first liens as they are not contractually, structurally or practically junior to ABL facilities and warrant a 'BBB-'/'RR1', one notch above the IDR. The unsecured debt is rated 'BB+'/RR4', the same as the IDR. ISSUER PROFILE Perrigo is the largest manufacturer of private label OTC medicines. The company focuses on the quality and affordability of its products. P&L Development, the second-largest firm in the space is significantly smaller and less diversified than Perrigo. 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 ---- ------ -------- ----- Perrigo Finance Unlimited Company senior unsecured LT WD Withdrawn BB+ senior unsecured LT BB+ Affirmed RR4 BB+ Perrigo Company LT IDR BB+ Affirmed BB+ plc senior unsecured LT BB+ Affirmed RR4 BB+ Perrigo Investments LLC senior unsecured LT WD Withdrawn BB+(EXP) senior secured LT B BB- New Rating RR1 BBB-(EXP) =================== L U X E M B O U R G =================== CELESTE MIDCO 1: S&P Assigns B+ Issuer Credit Rating, Outlook Neg. ------------------------------------------------------------------ S&P Global Ratings assigned its 'B+' long-term issuer credit rating to Celeste Midco 1 B.V., the new parent of European advanced diagnostics imaging and cancer care services provider Affidea B.V. S&P also assigned its 'B+' issue rating and '3' recovery rating to the proposed EUR600 million term loan due 2029 and to EUR150 million committed revolving credit facility (RCF) due 2028 to be issued by Celeste Bidco B.V. The negative outlook indicates that S&P could lower the ratings to 'B' within the next 12-18 months if the company's performance deviates from its base case, such that adjusted debt to EBITDA is not on track to fall below 5.5x by the end of 2023. On April 19, 2022, Belgium-based investment holding company Groupe Bruxelles Lambert (GBL) announced it had signed a definitive agreement to acquire a majority stake in European advanced diagnostics imaging and cancer care services provider Affidea B.V. from existing owner B-Flexion. Affidea's management will retain a minority stake in the business. The ratings reflect the relatively high S&P Global Ratings-adjusted debt leverage of close to 6x after the transaction closes and our forecast of leverage falling below 5.5x by 2023, with the company largely reinvesting free cash flows in growth. S&P said, "For the fiscal year ending Dec. 31, 2022, we project overall revenues of EUR670 million-EUR680 million and S&P Global Ratings-adjusted EBITDA of EUR145 million-EUR150 million, with FOCF (after lease payments) of EUR30 million-EUR40 million. The projected revenue growth of 13%-15% mainly reflects the full-year contribution of the sizeable acquisitions completed over 2021 (notably Gruppo CDC in Italy), with some business disposals and abating COVID-19 testing contribution offsetting organic growth. For 2023 and 2024, on which we place more emphasis in our base-case and ratings analysis, we project overall annual revenue growth of 6%-8% per annum with adjusted EBITDA margins improving towards 22.5%-23.0% by 2024, close to the pre-pandemic level of 23%. This should help debt leverage reduce to below 5.5x by 2023, and close to or below 5.0x by 2024, metrics that would support Affidea at the 'B+' rating level. This trajectory should be supported by abating COVID-related costs, the continued flow of patients on diagnostics imaging and outpatient services from public to private, and profitability improvement measures planned by the new owners. Revenue growth should be to a lesser extent supported by bolt-on acquisitions of around EUR30 million in 2022 and EUR40 million-EUR45 million per annum from 2023 onwards, as the company continues to consolidate the fragmented diagnostics imaging sector in Europe. Our base-case currently does not incorporate potential impact from further COVID-19-led business decline we observed in 2020. We understand that the focus of the new owners and management in the near term is on integrating the recent acquisitions and achieve cost efficiencies. While acquisitions will remain a building block of the medium- to long-term growth strategy, the company's intention is to focus on bolt-ons in the near term. This should help reduce debt leverage towards the medium-term financial policy target of 4.0x (excluding IFRS 16). After leases, we equate this to close to 5.0x, which supports a 'B+' rating." Affidea's business position is underpinned by its good geographic diversity, which mitigates single-payor risk, and good revenue visibility. Founded in 1991 as a one-center diagnostics imaging company, Affidea has expanded primarily by adopting a buy-and-build strategy under successive ownership structures. The company has over 300 centers across 15 countries in Western, Southern, and Central and Eastern Europe. Its top three countries--Italy, Portugal, and Poland--accounted for about 47% of group revenues in 2021. S&P said, "We consider geographic diversity as important because it mitigates the exposure to regulatory risks that we always see as present for single-jurisdiction operators. The company has been steadily expanding through successive acquisitions and organic initiatives away from public payors, which accounted for as much as 70% of total revenues in 2017. We expect this to decrease to around 50% in 2022 with full year consolidation effect of 2021 acquisitions. The steady shift towards private payors supports profitability improvement and cash flow generation, as generally there is less reimbursement pressure and receivables days are less than with national health care authorities and public hospitals. There is generally good business visibility, with contracts in place stipulating minimum reimbursement tariffs (typically subject to annual review following national health care budget reviews) and/or quotas (for volume of patients). In countries such as Poland, Italy, and, to a certain extent, Romania -- together comprising about 40% of revenues in 2021 -- the group benefits from increased over-quota allocations with relatively less pressure on the public reimbursement rates due to increased outsourcing trends from public hospitals. In our overall analysis, we also factor in the strong local management teams across countries of operation, which is important given often diverging regulatory frameworks, making country know-how critical for managing business continuity." Affidea's earnings potential benefits from the large and growing European diagnostics imaging and cancer care services. According to external research, estimated at about EUR18 billion in 2021, the European private diagnostics imaging market is expected to grow by 4%-5% on a constant adjusted growth (CAGR) basis over 2021-2025. Affidea's growth prospects in diagnostics imaging (73% of total revenues in 2021, including laboratory services) are supported by continued outsourcing from public hospitals in mature developed markets, while Central and Eastern Europe offers scope for even higher growth in the mid-single-digit percentage area due to improving accessibility. The company recovered relatively quickly from the COVID-19 pandemic impact in 2020 underlying its temporary effect, as patients opted to postpone elective procedures, particularly, in the diagnostics imaging, laboratory services and specialist consultations part of the business. Diagnostics imaging's growth prospects are very solid because it is the natural connection between a patient and required treatment. Growth prospects in cancer care (9% of Affidea's revenues in 2021) are also solid, expected at 5%-6% CAGR over the same period due to growing prevalence. S&P said, "We anticipate the company to outpace the market growth rate, particularly on diagnostics imaging due to overflow of patients from public hospitals where backlogs are still very large from the pandemic, and in some cases were large even prior to it. Private providers like Affidea are critical in the reduction of backlogs. In that respect, we consider the management's envisaged overall 6%-7% annual revenue growth over its business plan from 2023 onwards as aligned with the growth prospects of the end markets." The company and new owners intend to focus more on organic profitability improvement initiatives over the next 12-18 months. This entails materializing cost synergies from recent acquisitions and investing in productivity initiatives across clinics aiming to improve sustainably profitability levels. The latter includes optimizing scheduling across end clinics to ensure maximum productivity per scan and standardization of common practices. On an overall organizational level, the company intends to remove duplication of duties at the central cost level and also across countries. The company also intends to further pursue a shift towards variable compensation for radiologists across end markets, with currently about 88% of medical doctor salaries (about 53% of total medical salary costs) being of broadly variable nature. The company also anticipates further growth of the privately reimbursement business mix to contribute towards improving the margin profile, while expanding existing offering across clinics on the outpatient services side to drive incremental referrals and revenues. S&P said, "Our rating reflects the potential for larger acquisitions that are not currently in our base case, but are plausible beyond the next 12 months and could slow down the debt reduction trajectory. We note that the company operates in a very fragmented market, across both diagnostics imaging and cancer care. For example, the company is present in about 33% of the total European addressable market in diagnostics imaging, with top three players across its current end markets generally accounting for less than or just over 10% of the local market. The company could also contemplate entry into new markets if the right targets emerge at suitable valuations. This creates scope for further larger acquisitions like those in 2021 than we currently anticipate in our base-case. In that respect, under GBL's ownership, we anticipate a likely continuation of the buy-and-build strategy the company has been pursuing in recent years. In terms of acquisitions, we understand that diagnostics imaging remains core target growth for the business, with intention to build integrated platform that includes prevention, specialist consultations and potentially low complex treatment and rehabilitation services. "We consider GBL as a strategic owner that is committed to reinvestment for business growth, which could support upside rating potential over time. The acquisition of Affidea marked the entrance of GBL (A+/Stable) into the health care industry. It is also in line with its stated targets of increasing exposure to ESG (environmental, social and governance) friendly assets, with long-term objective to grow its private and alternative investments to 40% of its portfolio (versus 25% in reported terms at the end of 2021). We note that the holding boasts equity positions in some very large publicly listed companies (including the world's second-largest spirits company Pernod Ricard and global sportswear maker Adidas) that ensure recurring and solid dividend distributions that satisfy its investment needs. We understand the holding is not interested in collecting dividends from Affidea, and we therefore anticipate available cash flows to be reinvested in growth initiatives. Moreover, we understand that, for larger acquisitions, GBL could contemplate the optimal funding mix to ensure preservation of debt leverage metrics for Affidea to support a 'B+' rating. Our ratings on Affidea are not linked to that on GBL. This is because we assume the holding, while likely engaged actively in the setting of the overall strategy of Affidea, will remain at arms length from the day-to-day management of the business. "The negative outlook reflects the limited room for underperformance we see under the current rating within the next 12-18 months, since we expect our adjusted debt to EBITDA to be above 5.5x in 2022, and below 5.5x by the end 2023. "We could lower the rating on Affidea to 'B' within the next 12-18 months if we observed a material deviation from our current base case, such that adjusted debt to EBITDA remained above 5.5x by 2023. In our view, this would most likely occur if the company failed to continue to capture volumes of patients within private business mix from large backlogs in public hospitals, and that we do not observe tangible benefits from envisaged cost efficiency measures from recent acquisitions. Rating pressure could also occur if Affidea were to undertake further sizable acquisitions beyond our current forecast, jeopardizing expected deleveraging. "We could revise the outlook back to stable if we thought the company could reduce its adjusted debt to EBITDA sustainably below 5.5x by the end of 2023. This would occur if the company continues to post profitable growth after the COVID-19 pandemic induced decline in 2020, and it reaps the benefits from synergies from recent acquisitions. In this scenario, we would expect solid FOCF generation allowing the company to self-fund its growth initiatives, supported by prudent management of working capital." ESG credit indicators: E-2, S-2, G-2 ESG factors are an overall neutral consideration in S&P's credit rating analysis of Affidea. As an advanced diagnostics services provider, Affidea plays a crucial role in medical outcomes and connecting patients with required treatments. The company is mitigating social risks from the ongoing shortage of qualified radiologists by investing in its digital capabilities to ensure uninterrupted patient access for critical care services. Governance risks from private ownership are balanced by our view that GBL is a strategic investor with a long-term investment horizon, with lack of pressure to generate quick returns for outside investors. The holding boasts stakes in some large and very profitable publicly listed assets that generate sufficient returns to serve its investments needs. ===================== N E T H E R L A N D S ===================== CELESTE BIDCO: Moody's Assigns B2 CFR & Rates EUR600MM Term Loan B2 ------------------------------------------------------------------- Moody's Investors Service has assigned a new B2 corporate family rating and a new B2-PD probability of default rating to Celeste BidCo B.V. (Affidea), the new top entity of Affidea's restricted group. Concurrently, Moody's has assigned a B2 instrument rating to the proposed EUR600 million senior secured term loan and a B2 instrument rating to the proposed EUR150 million senior secured revolving credit facility (RCF), issued by Celeste BidCo B.V. The outlook on all ratings is stable. The proceeds from the proposed senior secured term loan along with EUR1,000 million equity will be used to finance the acquisition of Affidea B.V. by Groupe Bruxelles Lambert (GBL, A1 Stable) alongside the current management, which will hold a minority stake. At the same time, Moody's has withdrawn the B2 CFR and B2-PD PDR on Affidea B.V., the former parent of Affidea group. The existing B2 rating and stable outlook on senior secured term loan B and revolving credit facility will be withdrawn upon the completion of the transaction. RATINGS RATIONALE The rating action reflects the neutral impact of the transaction on Affidea's credit metrics as well as the expectation that Moody's gross leverage will trend below 6x in the next 12 to 18 months; a level commensurate with the current B2 rating level. Pro forma for the proposed refinancing, Moody's-adjusted debt/EBITDA stands at 6.1x, based on December 2021 EBITDA and pro forma 2021 as well as recently closed acquisitions, down from 8.5x as of the same period last year. Moody's expects leverage to decline below 6.0x in the next 12 to 18 months driven by the integration of the recent acquisitions, volume growth as well as the benefits from costs-cutting related initiatives. That being said, Moody's believes it is likely that the company pursues bolt-on acquisitions, which is both a growth and a defensive strategy because increasing scale is necessary to compete on a pan-European basis in a market that remains fragmented and highly competitive. Affidea's rating is well positioned in the B2 rating category and is supported by its position as the largest provider of advanced diagnostic imaging (ADI) services in Europe, with leading positions in its main markets; a relatively high level of geographic diversification; favorable demand for Affidea's services, given the demographic and outsourcing trends; and its position to continue the consolidation of the European diagnostic imaging industry. Conversely, the B2 CFR is constrained by the company's high Moody's adjusted gross leverage of 6.1x as of year-end 2021 pro forma for all 2021 and closed 2022 acquisitions, with deleveraging dependent on earnings growth and adequate integration of acquisitions; limited size and scale compared to the broader healthcare services sector with a relatively high fixed-cost base; significant exposure to public-sector clients even if the share of private clients increased over the last years (44% in 2021), which could potentially limit its pricing power. Financial policy is a key rating driver for the ratings. M&A has been a key pillar of Affidea's growth strategy historically. In a regulated sector continuously subject to tariff cuts, inorganic growth has allowed large networks to mitigate this risk by achieving economies of scale and efficiency gains. Business rationale, acquisition multiples and funding will be key drivers of the ratings of Affidea going forward. Moody's takes comfort in GBL's commitment to demonstrate disciplined M&A and funding strategy going forward. OUTLOOK RATIONALE The stable outlook reflects Moody's expectations that Affidea's operating performance will continue to improve over the next 12 to 18 months, and together with an adequate integration of acquisitions, will allow earnings growth, positive FCF generation and a decrease in Moody's-adjusted gross leverage to below 6x in the next 12 to 18 months. The outlook assumes that the company will not undertake any shareholder distributions, or any major debt-funded acquisitions besides those considered in Moody's assumptions, and that its debt funding mix will not materially differ from Moody's expectations. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure could emerge if (1) the company's Moody's-adjusted (gross) leverage ratio falls to well below 5.0x on a sustained basis while delivering solid operating performance, including the efficient integration of bolt-on acquisitions; (2) Affidea maintains a strong liquidity profile, including Moody's-adjusted FCF to debt improving to 10% on a sustained basis; (3) Affidea significantly increases its scale such that it can achieve greater economies of scale and reduce its significant operating leverage. Conversely, downward rating pressure could emerge if (1) the company's Moody's-adjusted (gross) leverage ratio remains sustainably above 6.0x; (2) its liquidity deteriorates or its Moody's-adjusted FCF/debt does not improve toward 5% on a sustained basis; (3) its profitability were to deteriorate because of regulatory developments, competitive pressure or significant cost inflation; or (4) the company performs large debt-financed acquisitions or engages in significant distributions to shareholders. LIQUIDITY Affidea has adequate liquidity supported by (1) EUR25 million of cash on balance sheet after closing of the proposed transaction, (2) a new EUR150 million senior secured revolving credit facility undrawn at closing with a comfortable covenant headroom set at 9.2x when the RCF is drawn at more than 50%, (3) positive free cash flow expected for the next 12-18 months and (4) long dated maturities post contemplated refinancing. STRUCTURAL CONSIDERATIONS The B2 rating assigned to the EUR600 million senior secured term loan and EUR150 million senior secured RCF reflects their Pari passu ranking, with upstream guarantees from material subsidiaries and collateral comprising essentially share pledges. The B2-PD PDR, in line with the CFR, reflects Moody's assumption of a 50% family recovery rate, typical for covenant lite secured loan structures. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Affidea B.V. is the leading, pan-European provider of advanced diagnostic imaging (ADI), outpatient, laboratory and cancer care services. In 2021, the company generated EUR659 million revenue and EUR122 million EBITDA pro forma for the 2021 and 2022 closed acquisitions. =========== T U R K E Y =========== ALBARAKA TURK: S&P Affirms 'B-/B' ICRs, Outlook Negative -------------------------------------------------------- S&P Global Ratings affirmed its 'B-/B' long- and short-term issuer credit ratings on Turkish financial institution Albaraka Turk Katilim Bankasi AS (ABT). The outlook remains negative. S&P also affirmed its 'CC' issue ratings on ABT's debt. On May 17, 2022, ABT strengthened its capital through rights issuances, with the help of its parent, Albaraka Banking Group (ABG). Rationale The recent change of ABG's license, to that of an investment firm from a bank, has contributed to further support for its Turkish subsidiary ABT. Lower capital requirements due to the license conversion has freed up some capital at ABG, allowing the Bahrain-based parent to participate in ABT's recent rights issuance. Of the Turkish lira (TRY) 1.15 billion (about $75 million) rights issue, ABG effectively subscribed to up to TRY 518 million or 45% of the total amount, increasing its shares in ABT's equity to 45.1% from 38%. S&P said, "The capital strengthening initiative, which was already factored into our projections, will only partly alleviate the medium-term risks. Consequently, we are maintaining our negative outlook. We still consider ABT to have limited capital buffers to absorb the risks it faces amid a toughening operating environment. We believe ABT's already weak capitalization will further deteriorate due to surging credit losses amid record high inflation, slowing economic activity, and the weakening lira. Specifically, we expect credit losses will increase, averaging 230 basis points (bps) to 270 bps over 2022-2023, compared with 169 bps at year-end 2021. Securities linked to consumer price inflation and a lower cost of funding will continue benefitting ABT's net profit share margin and operating revenue. However, we regard this as insufficient to materially improve ABT's profitability, which we expect will remain low and below that of domestic peers. As such, we expect ABT's risk-adjusted capital (RAC) ratio will remain just below 2% in 2022, slightly improved from 1.87% on Dec. 31, 2021--thanks to the capital increase--but decrease toward 1.6% by 2023." The gradual normalization of rules on regulatory capital ratio calculations will also result in capital erosion for the entire banking system, including ABT. ABT remains vulnerable to the deteriorating operating conditions. S&P said, "Our rating continues to reflect ABT's lack of scale in the highly competitive Turkish banking market, and the high concentration of its operations in Turkey, which makes it vulnerable to economic instability in that country. ABT remains reliant on short-term wholesale funding, which--although declining and lower than that of larger domestic peers--leaves it exposed to pricing and refinancing risks. We note that, in an adverse scenario, the bank has ample foreign currency liquidity, allowing it to withstand restrained access to external funding. However, in line with the banking system, we see a risk that a lower rollover rate could shift problems to the central bank's balance sheet." Outlook S&P said, "The negative outlook on ABT reflects the pressure we see on the bank's capitalization, asset quality, and liquidity from the deteriorating domestic operating environment. It also reflects our view that Turkish supervisors' ability to effectively oversee the banking sector could weaken, and the implications of this for ABT's creditworthiness." Downside scenario S&P said, "We could lower our ratings on ABT if its business stability and compliance with capital adequacy or other prudential ratios are at risk over the next 12 months, and we perceived lower-than-expected support from the parent group, ABG. This could materialize if ABT's asset-quality indicators deteriorate more than we currently anticipate, and its parent's ability to support ABT in a timely manner weakens. We could also lower our ratings if market turbulence further exacerbates ABT's already high refinancing risks and we see pressure on its deposit base." Upside scenario S&P said, "Although remote, we could revise the outlook to stable if we anticipated pressure on ABT's financial profile would abate, and we considered that the bank's strategic initiatives had sufficiently strengthened its capitalization with no major decline in asset quality or funding profile." =========================== U N I T E D K I N G D O M =========================== AUTORESTORE LIMITED: Goes Into Administration Following Losses -------------------------------------------------------------- Sam Metcalf at TheBusinessDesk.com reports that a major vehicle repair service has slipped into administration, with scores of jobs lost. According to TheBusinessDesk.com, Autorestore, which is based in Rushden, Northamptonshire, has called in Turpin Baker Armstrong to look after the day-to-day running of the company. In its latest available accounts, to the end of December 2020, Autorestore employed 182 people. During the year, the firm made a loss of GBP899,000 -- down from a profit of GBP116,000 the previous year -- while turnover dropped from GBP16.2 million to GBP11.3 million, TheBusinessDesk.com discloses. The company noted at the time that it had been affected by the Covid-19 lockdowns which had affected consumer demand, TheBusinessDesk.com relays. Autorestore's staff took to LinkedIn late last week to confirm that the company had made redundancies, TheBusinessDesk.com recounts. According to TheBusinessDesk.com, a spokesperson from Turpin Baker Armstrong said: "Martin Armstrong and Andrew Bailey of Turpin Barker Armstrong have been appointed as administrators to AutoRestore Limited, a motor vehicle maintenance and repair business. Significant losses in recent years due to challenging economic conditions mean that, despite undertaking a marketing exercise, the business ceased trading on June 14, 2022." AutoRestore had been one of the UK's leading providers of mobile body repair services. It had operated a fleet of over 130 mobile repair rigs and provided over 30,000 body repairs a year. CARRIAGES CAFE: Goes Into Liquidation ------------------------------------- Lynette Pinchess at NottinghamshireLive reports that Carriages Cafe, an "outstanding" cafe that provided a lifeline to vulnerable people during the Covid pandemic, has been forced to close after going into liquidation. Even before the lockdowns of 2020, it did its bit by running a regular community cafe providing a three-course meal for just GBP3 for those who were most at need. But it become a tour de force during the pandemic, providing hundreds of two-course meals to make sure the most vulnerable and isolated didn't go hungry during the crisis, NottinghamshireLive discloses. When they reopened the cafe after lockdown they found many people were too apprehensive to go out for their usual coffee and cake or lunch, so they reduced operating hours but were faced with rudeness from some who said they should be open, NottinghamshireLive relates. ICONIC LABS: Joint Administrators Provide Update on Proposed CVA ---------------------------------------------------------------- The Joint Administrators of Iconic Labs Plc on June 8 provided the following update on the administration and the adjournment of General Meeting: Administration extension Following consent from the Secured Creditor, the Administration has been extended for a further 6 months to December 3, 2022. Disputes The Joint Administrators confirm that negotiations between the Company, Arch Capital Partners LLP and the European High Growth Opportunities Securitization Fund are progressing. Proposed Company Voluntary Arrangement The terms of the proposed Company Voluntary Arrangement have now been agreed, subject to the outcome of the negotiations, referred to above. As soon as the negotiations are successfully concluded the CVA will be issued, with a view to returning control of the Company back to its Board, if agreed by creditors and shareholders. It is hoped that a further update will be issued shortly. Iconic Labs Plc is a media, data, information, internet, security, and technology company headquartered in the United Kingdom. MINERVA INDUSTRIES: Enters Administration, Seeks Buyer for Assets ----------------------------------------------------------------- Business Sale reports that Wolverhampton-based automotive supplier Minerva Industries UK has fallen into administration, with a buyer now being sought for the business and its assets. Interpath Advisory's Chris Pole and Ryan Grant have been appointed as joint administrators to the firm, which began trading in the early 1980s. Initially called Wolverhampton Pressings, the company has grown to become a leading supplier of cosmetic parts for the UK automotive sector, with clients including such major names as Jaguar Land Rover, Aston Martin and Bentley. Despite this prominent position within the UK industry, however, administrators say that the company had been hit over recent months by issues impacting the wider automotive sector, including supply chain problems, rising costs and the ongoing semiconductor shortage, Business Sale relates. This led to the business running into trading difficulties, with the company's directors ultimately deciding that appointing administrators represented the best option for its creditors, Business Sale discloses. Upon the appointment of the joint administrators, 21 staff were made redundant, with 38 retained to assist with trading the company in the immediate term, Business Sale notes. In its financial accounts for the year ending December 31 2020, Minerva Industries reported turnover of GBP6 million, down from GBP10.4 million a year earlier, Business Sale states. Having reported a post-tax profit of GBP102,900 in 2019, the company fell to a GBP234,292 loss for 2020, Business Sale relays. At the time, the company's fixed assets were valued at GBP687,316, while current assets were valued at GBP1.65 million and net assets amounted to GBP319,610, according to Business Sale. ********* 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. 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