/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220708.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, July 8, 2022, Vol. 23, No. 130 Headlines B O S N I A A N D H E R Z E G O V I N A KHK LUKAVAC: Coast Line Commodities Offers to Repay Debt D E N M A R K DKT HOLDINGS: S&P Places 'B' LongTerm ICR on Creditwatch Negative G R E E C E ALPHA BANK: S&P Assigns 'B+' Rating on Senior Unsecured Notes I R E L A N D DRYDEN 51 EURO 2017: Moody's Affirms B2 Rating on Class F Notes FRANKLIN IRELAND: S&P Affirms 'B-' ICR & Alters Outlook to Stable SOUND POINT IX: Moody's Assigns (P)Ba3 Rating to Class E Notes L U X E M B O U R G ARENA LUXEMBOURG: Moody's Alters Outlook on 'B1' CFR to Stable S W E D E N SAS AB: Hundreds of Flights Cancelled Due to Pilot Strike U N I T E D K I N G D O M ABSURD BIRD: Goes Into Administration, Five Restaurants Closed BURY FC: May Return to Gigg Lane, Supporters Asked to Back Merger FIRECLAD LTD: Enters Administration, All Employees Made Redundant MACMERRY300: Staff at Two Bars Made Redundant Following Collapse ZELLIS HOLDINGS: Moody's Alters Outlook on 'Caa1' CFR to Positive X X X X X X X X [*] BOOK REVIEW: Transnational Mergers and Acquisitions - - - - - =========================================== B O S N I A A N D H E R Z E G O V I N A =========================================== KHK LUKAVAC: Coast Line Commodities Offers to Repay Debt -------------------------------------------------------- Dragana Petrushevska at SeeNews reports that Malta-based Coast Line Commodities Ltd has offered to take control of Bosnian metallurgical coke producer Global Ispat Coking Industry Lukavac (GIKIL) by repaying debt of one of its shareholders, state-controlled coking plant KHK Lukavac, local media reported. Coast Line Commodities has sent a letter of intent to the government of the Tuzla Canton to repay BAM7.54 million (US$3.93 million/EUR3.85 million) owed to the cantonal government by KHK Lukavac, news agency Faktor reported on July 6, SeeNews relates. KHK, which currently is in bankruptcy proceedings, owes BAM7.26 million to the canton's ministry of industry, energy and mining and BAM278,762 to the canton's finance ministry, the media report reads, SeeNews notes. In the letter of intent, Coast Line Commodities acts in the capacity of an entity related to a company that is a major shareholder of Croatian Adriatic port operator Luka Ploce, Faktor, as cited by SeeNews, said, without elaborating. ============= D E N M A R K ============= DKT HOLDINGS: S&P Places 'B' LongTerm ICR on Creditwatch Negative ----------------------------------------------------------------- S&P Global Ratings placed its 'B' long-term issuer credit rating on telecom operator DKT Holdings ApS on CreditWatch negative. The CreditWatch negative reflects the possibility that S&P could lower the rating on DKT Holdings by at least one notch over the next few months if DKT Finance is unable to refinance its subordinated debt due June 2023. Danish telecommunications operator TDC Holding's holding company DKT Finance ApS has Danish krone (DKK) 10.4 billion high-yield bonds (CCC+) due in less than 12 months in June 2023. In addition, S&P anticipates the company will use existing internal resources to repay the GBP425 million unsecured notes (B+) due March 2023 and issued by TDC Holding. Absent refinancing, the near-term maturity of the subordinated high-yield notes leads to less than adequate liquidity over the next 12 months. DKT Finance's DKK10.400 million high-yield notes mature in June 2023. S&P said, "We understand that the current virtually closed high-yield bond market means the company has yet to refinance but aims to in the next few months and is currently considering funding options. At the same time, the lack of proactive liquidity management weighs on our liquidity assessment. Therefore, we have revised down our liquidity score to less than adequate from adequate." The separation of the group was successfully completed in 2021, with Nuuday A/S and TDC Net A/S operating as stand-alone companies. New boards were appointed and employees from other companies within DKT Group were transferred to one of the two entities. On Jan. 31 2022, TDC Net also secured an aggregate EUR3.3 billion of committed new bank facilities and established a new secured infrastructure financing platform. In addition, Nuuday raised a revolving credit facility (RCF) with a syndicate of banks and is currently looking at options for stand-alone loans, which would be used to repay part of the high-yield notes at TDC Finance. However, since no financing has been secured so far, S&P sees liquidity risks for the group. S&P said, "In 2021, DKT Holdings reported stabilizing revenue and EBITDA and we expect similar performance for 2022.The group posted a modest revenue decline of 0.5% last year, primarily spurred by mature services within internet and network, TV, and landline voice. This was partly offset by growth in mobility services. We expect broadly stable revenue in 2022-2023. However, top line pressure was to a large extent balanced by cuts in operating expenses--particularly nonrecurring items, given that the separation of two business units, TDC Net and Nuuday, was completed. Accordingly, we expect adjusted EBITDA to modestly increase toward DKK6.4 billion-DKK6.5 billion by year-end 2023 from DKK6.3 billion in 2021. "We anticipate negative free operating cash flow (FOCF) in 2022-2023, mainly due to high capital expenditure (capex) needs. After negative DKK17 million of FOCF in 2021, we estimate similar performance in 2022 and 2023 due to significant annual capex of about DKK4.3 billion–DKK4.8 billion, which was delayed. Despite resilient EBITDA, we expect that capex will remain high to cover fiber network investments at TDC Net as well as significant investments at Nuuday to replace current complex IT systems and digitalize services. We expect the combination of negative FOCF and slightly increasing adjusted EBITDA will result in leverage of about 6.1x in 2022-2023, in line with 2021 and well below the maximum 'B' Rating threshold of below 7.0x. Including the shareholder loan, we expect leverage will increase toward 10.0x by year-end 2023 from 9.4x in 2021." DKT Holdings still has a strong market position despite high competition in the Danish telecom market from challengers in mobile and utility companies in fixed. The group has leading market shares in fixed broadband (45%), pay TV (51%), mobile (38%), and landline voice services (65%), based on end-user subscriptions of consumer, business, and wholesale customers. S&P expects continued pressure on market share in the TV and broadband segments before fiber investments reach certain levels in 2022 and 2023, but DKT Holdings' market position should still be broadly stable in the next few years. CreditWatch S&P said, "The CreditWatch negative placement reflects the possibility that we could lower the rating on DKT Holdings by at least one notch over the next few months if DKT Finance cannot refinance its subordinated debt due June 2023 and therefore the group continues to show a significant liquidity deficit. "We could remove the ratings from CreditWatch if DKT Finance successfully refinances its subordinated debt while the group keeps sufficient liquidity to repay TDC Holding's notes at maturity." ESG credit indicators: E2, S2, G2 =========== G R E E C E =========== ALPHA BANK: S&P Assigns 'B+' Rating on Senior Unsecured Notes ------------------------------------------------------------- S&P Global Ratings assigned long-term issue ratings to Alpha Bank S.A. and Alpha Services and Holdings Societe Anonyme's proposed $15 billion-euro medium-term note program (EMTN). As the long-term issuer credit rating on Alpha Bank (B+) and nonoperating holding company (NOHC) Alpha Services and Holdings' (B-) are different, the rating on the instruments issued under the program will depend on the issuer. The two-notch difference between our Alpha Bank and Alpha Services and Holdings ratings stems from the structural subordination of the NOHC under the bank's corporate structure. Consequently, the ratings for proposed instruments issued under the program by Alpha Bank would be: -- 'B+' for senior unsecured preferred notes. -- 'B-' for senior subordinated debt notes. -- 'CCC+' for subordinated debt notes. The ratings for proposed instruments issued under the program by the NOHC would be: -- 'B-' for senior unsecured preferred notes. -- 'CCC' for senior subordinated debt notes. -- 'CCC' for subordinated debt notes. S&P said, "In addition, we note that the NOHC's double leverage significantly increased last year. At year-end 2021, Alpha Services and Holdings' double leverage--measured as its equity investment in Alpha Bank divided by its unconsolidated shareholders' equity--stood at 98%, compared to 65% when the hive-down occurred in April 2021. This is because large nonperforming exposure (NPE) transactions heavily affected the NOHC's capital base, including the Galaxy and Cepal deconsolidations, which represented an about EUR2.1 billion capital hit. Although not our base-case scenario, a continuous increase in double leverage in the coming years could lead to increased liquidity pressures on the NOHC and a widening notching difference between Alpha Bank and the NOHC. This is because of potential operational constraints on upstreaming resources, especially since Tier 2 instruments are retained at the NOHC level and coupon payments depend on cash flows from Alpha Bank. That said, back-to-back Tier 2 instruments issued by the operating company and fully subscribed by the NOHC mitigate this risk. "A positive rating action on Alpha Services and Holdings would follow a positive rating action on Alpha Bank unless we see a potential increase in liquidity risks, most likely in a scenario where the NOHC's investments in Alpha Bank materially exceed 120% of the NOHC's equity on a sustained basis. In this case, we might eventually widen the notching difference between Alpha Bank and Alpha Services and Holdings. "We could lower the rating on Alpha Services and Holdings over the next 12 months if macroeconomic conditions in Greece substantially worsen, causing asset quality to come under strain again and NPEs to rise to levels like those in the previous downturn. In addition, we could lower the rating on Alpha Services and Holdings if we see a lower likelihood of Alpha Bank meeting its obligations toward the NOHC." ============= I R E L A N D ============= DRYDEN 51 EURO 2017: Moody's Affirms B2 Rating on Class F Notes --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Dryden 51 Euro CLO 2017 Designated Activity Company: EUR31,500,000 Class B-1 Senior Secured Floating Rate Notes due 2031, Upgraded to Aaa (sf); previously on Jun 2, 2020 Affirmed Aa2 (sf) EUR21,053,000 Class B-2 Senior Secured Fixed Rate Notes due 2031, Upgraded to Aaa (sf); previously on Jun 2, 2020 Affirmed Aa2 (sf) EUR27,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2031, Upgraded to A1 (sf); previously on Jun 2, 2020 Affirmed A2 (sf) Moody's has also affirmed the ratings on the following notes: EUR205,500,000 (Current outstanding balance EUR174,847,569) Class A-1 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Jun 2, 2020 Affirmed Aaa (sf) EUR31,579,000 (Current outstanding balance EUR26,868,669) Class A-2 Senior Secured Fixed Rate Notes due 2031, Affirmed Aaa (sf); previously on Jun 2, 2020 Affirmed Aaa (sf) EUR20,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2031, Affirmed Baa2 (sf); previously on Jun 2, 2020 Confirmed at Baa2 (sf) EUR22,000,000 Class E Mezzanine Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on Jun 2, 2020 Confirmed at Ba2 (sf) EUR12,500,000 Class F Mezzanine Secured Deferrable Floating Rate Notes due 2031, Affirmed B2 (sf); previously on Jun 2, 2020 Confirmed at B2 (sf) Dryden 51 Euro CLO 2017 Designated Activity Company, issued in May 2017, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by PGIM Limited. The transaction's reinvestment period ended in July 2021. RATINGS RATIONALE The rating upgrades on the Class B-1, Class B-2 and Class C Notes are primarily a result of deleveraging of the Class A-1 and Class A-2 Notes following amortisation of the underlying portfolio since the end of the reinvestment period in July 2021. The Class A-1 and Class A-2 Notes have paid down by approximately EUR35.4 million (14.9%) since the end of the reinvestment period in July 2021. As a result of the deleveraging, over-collateralisation (OC) has increased across the capital structure. According to the trustee report dated April 2022 [1] the Senior Principal, Class C, Class D, Class E and Class F OC ratios are reported at 143.56%, 129.78%, 121.16%, 112.92% and 108.71% compared to July 2021 [2] levels of 139.00%, 127.15%, 119.59%, 112.26% and 108.47%, respectively. In light of reinvestment restrictions during the amortisation period, and therefore the limited ability to effect significant changes to the current collateral pool, Moody's analysed the deal assuming a higher likelihood that the collateral pool characteristics would maintain an adequate buffer relative to certain covenant requirements. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR365.7 millions Defaulted Securities: EUR0.4 milions Diversity Score: 50 Weighted Average Rating Factor (WARF): 3008 Weighted Average Life (WAL): 3.9 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.7% Weighted Average Coupon (WAC): 4.7% Weighted Average Recovery Rate (WARR): 43.4% Par haircut in OC tests and interest diversion test: none The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Moody's notes that the May 2022 trustee report was published at the time it was completing its analysis of the April 2022 data. Key portfolio metrics such as WARF, diversity score, weighted average spread and life, and OC ratios exhibit little or no change between these dates. Of the incremental EUR1.76 million of principal proceeds reported in May 2022, EUR1.5 million was a unscheduled payment which had been incorporated in Moody's model runs. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank and swap provider, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in June 2022. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. FRANKLIN IRELAND: S&P Affirms 'B-' ICR & Alters Outlook to Stable ----------------------------------------------------------------- S&P Global Ratings revised its outlook on Franklin Ireland Topco Ltd., Planet's parent, to stable from negative. At the same time, S&P affirmed its 'B-' issuer credit rating on Planet and its 'B-' rating on its debt. The outlook revision reflects S&P's expectation that in 2022-2023, Planet's leverage will decrease due to recovery in international travel and the group's earnings. S&P said, "We expect that in 2022-2023, Planet's revenue and EBITDA will significantly improve from depressed levels during the pandemic. In 2022, we anticipate gross revenue will recover to about EUR330 million and adjusted EBITDA will improve to about EUR40 million from a negative amount in 2021. In the first five months of 2022, Planet reported EBITDA of EUR29 million, nearly EUR3.5 million above budget. This will lead the group's leverage to decrease significantly to 12x-14x in 2022 from very high levels in 2020-2021, making its capital structure more sustainable over the longer term. We also assume Planet's liquidity will remain adequate, as we expect its free cash flow generation will improve in the second half 2022 and will become breakeven in 2023. "Full recovery of the group's credit metrics to pre-pandemic levels will take longer than we previously anticipated. Planet's operating performance in 2021 was weaker than we had expected because of the continued disruption to international travel due to subsequent waves of COVID-19 infections and related travel restrictions. In the first half 2022, travel has resumed in most Planet's markets, but we think a full recovery to pre-pandemic levels will take until 2024. In 2022, we expect a strong recovery of tax-free revenue to just under 50% of pre-pandemic levels, more than doubling from 2021. Revenue from payments processing services will also grow strongly due to travel recovery, dynamic currency conversion (DCC) improvements, and a gain in market share of merchant acquiring and processing. Hence, we believe the group's S&P Global Ratings-adjusted EBITDA in 2022 will rebound but still be about 55% short of 2019 levels and 10%-20% lower in 2023." The recent bolt-on acquisition of French retail software platform Proximis will help diversify beyond exposure to travel. In November 2021, Planet acquired Proximis, a French company that offers a combined software solution for sale and e-commerce activities for retailers. The solution operates as one single platform, allowing clients to have an integrated payments and inventory management system. Planet's shareholders have fully funded the EUR35 million acquisition value with equity. In our view, integrating this business will allow Planet to somewhat diversify from exposure to travel. At the same time, in 2022 S&P expected that about EUR24 million of exceptional costs related to the acquisition will depress Planet's adjusted EBITDA. Large cash outflows in 2022 are balanced by a shareholder equity injection, mitigating any liquidity concerns. S&P said, "We believe Planet's liquidity remains adequate despite our forecast that reported FOCF (after capital leases) in 2022 will remain negative at EUR25 million-EUR35 million. This will be due to recovering EBITDA depressed by exceptional costs and a planned increase in capex to EUR50 million-EUR60 million. To support liquidity, shareholders provided a EUR29 million equity injection in February 2022. We anticipate that in 2023, following continued improvement in EBITDA and lower exceptional costs, FOCF could become breakeven." The new group structure has no impact on our view of Planet's credit quality. Planet's shareholders, private equity firms Advent and Eurazeo, own the group through a holding company that also owns other operating assets in the software industry. Since the October 2021 reorganization, when Advent acquired a 47.5% stake in Planet, the group undertook a series of acquisitions. In November 2021 and January 2022, it acquired three business software companies: Hoist group, Datatrans, and Protel. S&P said, "We understand that two parts of the business continue operating independently, with separate management teams and financing. At the same time, we think the shareholders could support either part of the group through an equity injection via the holding company, as they already did this year. We view the combined group's credit quality as in line with that of Planet on a stand-alone basis, and therefore the group currently has no impact on our rating on Planet." S&P said, "The stable outlook reflects our expectation that Planet's adjusted leverage will decrease to about 12.0x-14.0x in 2022 and 6.0x–8.0x in 2023, and FOCF will become breakeven in 2023. This reflects continued recovery in international travel, the group's EBITDA growth, and the adjusted EBITDA margin (on gross revenues) improving to 10%-12% in 2022 and 15%-18% 2023. The outlook also assumes liquidity will remain adequate, with sufficient headroom under the covenant. "We could lower the rating if the recovery in international travel and in Planet's operating performance and credit metrics is weaker than we expect, resulting in sustained negative FOCF and very high leverage beyond 2023, making its capital structure unsustainable. We could also downgrade Planet if liquidity weakened substantially, or covenant headroom deteriorated. "We could raise the rating if Planet's leverage decreases below 7.0x on a sustainable basis and it generates positive FOCF." To E-2, S-3, G-3 from E-2, S-4, G-3 S&P said, "Social factors are now a moderately negative consideration in our credit rating analysis of Planet, reflecting the company's revenue recovery. The S3 incorporates the ongoing health and safety risks and potential for further travel disruption. Although the COVID-19 pandemic led to unprecedented declines in revenue, a material spike in leverage, and cash burn, this was an extreme disruption not likely to recur. However, we do not expect Planet to recover to 2019 revenue until 2024. In addition, risk remains around regional health concerns and uncertainty about permanent disruption to group and business travel. "Governance factors are a moderately negative consideration. Our assessment of the company's financial risk profile as highly leveraged reflects corporate decision-making that prioritizes the interests of the controlling owners, which is the case for most rated entities owned by private-equity sponsors. Our assessment also reflects their generally finite holding periods and a focus on maximizing shareholder returns." SOUND POINT IX: Moody's Assigns (P)Ba3 Rating to Class E Notes -------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following provisional ratings to the notes to be issued by Sound Point Euro CLO IX Funding DAC (the "Issuer"): EUR272,000,000 Class A Senior Secured Floating Rate Notes due 2032, Assigned (P)Aaa (sf) EUR23,000,000 Class B Senior Secured Floating Rate Notes due 2032, Assigned (P)Aa2 (sf) EUR22,250,000 Class C Senior Secured Deferrable Floating Rate Notes due 2032, Assigned (P)A2 (sf) EUR23,920,000 Class D Senior Secured Deferrable Floating Rate Notes due 2032, Assigned (P)Baa3 (sf) EUR23,800,000 Class E Senior Secured Deferrable Floating Rate Notes due 2032, Assigned (P)Ba3 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in Moody's methodology. The Issuer is a static CLO. The issued notes will be collateralized primarily by broadly syndicated senior secured corporate loans. Moody's expect the portfolio to be 100% ramped as of the closing date. Sound Point CLO C-MOA, LLC (the "Collateral Manager") may sell assets on behalf of the Issuer during the life of the transaction. Reinvestment is not permitted and all sales and unscheduled principal proceeds received will be used to amortize the notes in sequential order. In addition, the Issuer will issue EUR12,000,000 of Class F Senior Secured Deferrable Floating Rate Notes due 2032 and EUR13,220,000 of Subordinated Notes due 2032 which are not rated. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology underlying the rating action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Collateral Manager's investment decisions and management of the transaction will also affect the debt's performance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in December 2021. Moody's used the following base-case modeling assumptions: Par Amount: EUR400,000,000.00 Diversity Score: 46 Weighted Average Rating Factor (WARF): 2930 Weighted Average Spread (WAS): 4.17% (actual spread vector of the portfolio) Weighted Average Coupon (WAC): 4.68% (actual spread vector of the portfolio) Weighted Average Recovery Rate (WARR): 44.11% Weighted Average Life (WAL): 5.65 years (actual amortization vector of the portfolio) =================== L U X E M B O U R G =================== ARENA LUXEMBOURG: Moody's Alters Outlook on 'B1' CFR to Stable -------------------------------------------------------------- Moody's Investors Service revised its outlook to stable from negative on Arena Luxembourg Investments S.a r.l. (Arena) and affirmed Arena's B1 long-term Corporate Family Rating and B1-PD probability of default rating. In addition, the B1 ratings of Arena Luxembourg Finance S.a.r.l.'s (Arena Finance) backed senior secured notes were affirmed and the outlook was revised to stable from negative. The company is indirectly owned by Macquarie European Infrastructure Fund 5 (MEIF5) and other minority investors and the ratings primarily reflect the credit quality of its main operating subsidiary Empark Aparcamientos y Servicios S.A. (Empark). RATINGS RATIONALE The rating affirmation with a stable outlook reflects the improved revenue and credit metric performance of the company and Moody's expectation that Arena will be able to achieve and then maintain credit metrics in line with the current rating over the next 12 to 18 months. Arena's revenue increased by 18% YOY to reach EUR161m in the year ending December 2021, and total like-for-like revenues stood at around 85% of 2019 levels. The improvement was driven by easing of mobility restrictions, vaccine roll-out and strong domestic tourism, especially in Spain, that drove revenues to pre-pandemic levels during the summer months and beyond until the last two weeks of December, when the Omicron wave commenced. Furthermore, in December 2021 the company fully repaid its Revolving Credit facility (RCF) of EUR100 million that it had fully drawn in 2020. The company's good performance has continued into 2022. As of end-March, total revenues increased by 33% YOY and reported total like-for-like revenues reached 97% of 2019 levels. Debt metrics have improved, in particular, Moody's adjusted Gross Debt/EBITDA has decreased from 20.2x in 2020 to 12.8x in 2021. Further deleveraging will mainly depend on EBITDA growth as most of the debt matures only after 2026, which is expected given the continued recovery in traffic volumes and revenues. Subject to the pace of traffic recovery, Moody's expects that by 2023-2024 the company's consolidated funds from operations (FFO)/debt ratio will rise to at least 8%, while Moody's adjusted debt/EBITDA will likely fall between 7.5x-8.0x , which is considered commensurate with a B1 rating. More generally, the B1 CFR continues to reflect (1) the long track record of operations and Arena's well-established position as a leading car park operator in Spain and Portugal; (2) the strategic location of Empark's assets, which somewhat mitigates competitive threats and demand risk; (3) a significant number of long-term off-street concessions which accounted for around 90% of the group's consolidated EBITDA in 2021 and which provide a degree of medium-term visibility for the group's future cash flow generation; (4) a track record of cost control implemented by the management, which has enabled the company to maintain a relatively stable recurring EBITDA and (5) the positive operating track record prior to the current coronavirus crises, as evidenced by like-for-like off-street revenue growing annually at around 4% between 2017-2019. However, the CFR remains susceptible to downside risks linked to the weaker macroeconomic environment that could delay further traffic recovery. In addition, the CFR is constrained by (1) the high financial leverage of the consolidated Arena group, with a pro-forma Moody's-adjusted Gross debt/EBITDA expected to remain above 7.5x; (2) the execution risks inherent in the delivery of the company's multiyear business plan; (3) the renewal risk associated with Empark's maturing concessions and contracts; (4) the competitive and fragmented nature of the car parking sector in Iberia; and (5) Empark's relatively small size and limited geographic diversification. LIQUIDITY AND DEBT COVENANTS Arena's liquidity position is adequate. As of March 31, 2022, Arena had around EUR60 million of available cash. In addition, the company can also draw the EUR100 million RCF that is due in 2026. Arena's major debt maturities relate to the EUR100 million floating rate notes due in 2027 and the EUR475 million fixed rate notes due in 2028. Hence, Arena does not face any substantial debt maturity over at least the next eighteen months and Moody's expects that the company will be able to cover upcoming interest expense and other obligations with its available resources. The company is subject to one springing financial covenant, a net consolidated debt/EBITDA ratio, tested quarterly if the RCF is 40% drawn. Arena shall ensure that the ratio is no more than 12x at each calculation date. The financial covenant only acts as a drawstop to new drawings under the RCF and, if breached, does not trigger an event of default under the RCF. Given Arena repaid the RCF in full in December 2021, the drawstop condition only applies to future drawdowns. Moody's currently anticipates that Arena will remain compliant with the financial covenant over at least the next 12-18 months although the risk of breach may increase in case of reinstated mobility restrictions and lower than expected further demand recovery. STRUCTURAL CONSIDERATIONS The B1 ratings of the backed senior secured notes issued by Arena Finance are in line with Arena's B1 CFR. This reflects the upstream guarantees and share pledges from material subsidiaries of the group. The B1 ratings also take into account the presence of the relatively small super senior RCF ranking ahead in the event of enforcement and the pari-passu ranking with other liabilities in the structure, such as trade payables. Accordingly, Moody's loss given default estimate for the rated notes is LGD4. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectation that Arena Luxembourg will be able to achieve and then maintain a financial profile commensurate with the current rating, with FFO/debt of at least 8% and a Moody's adjusted Debt to EBITDA ratio of no more than 8.5x. The outlook could move to positive in the scenario of a stronger than anticipated revenue recovery and sustainable improvement in the operating performance. In future, Moody's would consider an upgrade of the ratings if the company is able to maintain, on a sustained basis, a Moody's adjusted Debt to EBITDA ratio below 7.5x and an FFO to Debt ratio above 10%, and sound liquidity. Arena's ratings could be downgraded if Arena's Moody's adjusted Debt to EBITDA ratio would likely remain above 8.5x and the FFO to Debt ratio below 8% over the medium term. This could result from weaker than anticipated recovery in demand for parking services. A significant deterioration of Arena's liquidity profile would exert negative pressure on the ratings. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Privately Managed Toll Roads Methodology published in December 2020. COMPANY PROFILE Arena is the parent company of Empark, which is the largest car parking operator in the Iberian Peninsula for number of parking spaces. The group's major geographic focus is Spain and Portugal, where it generated some 72% and 25% of Gross Margin, respectively, in the twelve months ended December 31, 2021. On the same date, Empark reported around EUR161 million of adjusted revenue and EUR64.6 million of adjusted EBITDA. =========== S W E D E N =========== SAS AB: Hundreds of Flights Cancelled Due to Pilot Strike --------------------------------------------------------- Anna Ringstrom and Dietrich Knauth at Reuters report that hundreds of SAS flights were cancelled on Thursday, July 7, as the airline wrestled with a strike by pilots at its main SAS Scandinavia arm, overshadowing a traffic surge during June. Talks between the airline and pilots over a new collective bargaining agreement collapsed on Monday, July 4, prompting a strike which adds to travel chaos in Europe and deepens the financial crisis at SAS, which estimated it would ground half its flights, Reuters relates. The troubled airline, whose biggest owners are the Swedish and the Danish states, filed for Chapter 11 bankruptcy protection in the United States on Tuesday, July 5, Reuters discloses. According to Reuters, SAS on July 7 made its first appearance in U.S. bankruptcy court in Manhattan, where it received permission to maintain routine business operations such as honoring fuel supply contracts and paying employee wages. SAS, Reuters says, expects the U.S. bankruptcy process to take between nine and 12 months. The Swedish pilots union said that the pilot associations had proposed making an exception for several weeks to SAS in order to repatriate stranded charter passengers, Reuters notes. Charter companies have warned thousands of people could be stranded unless a solution for their return flights, which were due to be operated by SAS, could be reached. The airline's stock has lost more than a quarter of its value since the strike began and has tumbled more than 60% since the start of the year as the Ukraine conflict disrupted Asian routes and the threat of strike action clouded the outlook, Reuters states. According to Reuters, SAS has said the strike will cost it US$10 million to US$13 million per day and accelerated its decision to seek bankruptcy protection, which it said will help it accelerate restructuring plans, including deep cost cuts, announced in February. The striking pilots have said they would consider pay cuts, but cannot accept SAS hiring new pilots through two new subsidiaries, under what unions say are worse terms, Reuters notes. Talks, which ended on Monday, July 4, have yet to restart, although unions said they had offered concessions, Reuters discloses. SAS is a Scandinavian airline with main hubs in Copenhagen, Oslo and Stockholm, flying to destinations in Europe, USA and Asia. In addition to flight operations, SAS offers ground handling services, technical maintenance and air cargo services. =========================== U N I T E D K I N G D O M =========================== ABSURD BIRD: Goes Into Administration, Five Restaurants Closed -------------------------------------------------------------- BigHospitality reports that fried chicken brand Absurd Bird has entered administration with the closure of its five dine-in restaurants. The brand is believed to have appointed FRP Advisory as administrators to the business on July 1, BigHospitality relays, citing a notice on the Gazette public record. Absurd Bird had restaurants in 3 Stock Exchange, Nelson Mandela Place, Glasgow; 25 Peter Street, London; 54 Commercial Street, London; Guildhall, Exeter; and 27 Albion St. Leeds. BURY FC: May Return to Gigg Lane, Supporters Asked to Back Merger ----------------------------------------------------------------- Thomas George at Manchester Evening News reports that Bury Football Club could finally be on the verge of a return to Gigg Lane after supporters were asked to back a merger. According to Manchester Evening News, two fan groups, Bury Football Club Supporters Society and Shakers Community Society, are proposing to unite to ensure men's football returns to its spiritual home in the town after a three-year absence. The famous ground lay empty for almost three years after Bury FC were thrown out of the Football League and later entered administration in 2019, Manchester Evening News notes. However, earlier this year, a group of fans announced they had purchased Gigg Lane alongside Bury FC's assets, Manchester Evening News recounts. The club's women's team has since played some of its matches at the 12,000-capacity stadium but the wait for men's football continues. While some supporters refused to give up on the original club, another group set up a new outfit -- Bury AFC, Manchester Evening News states. The fan-owned club won promotion from the North West Counties League First Division North -- English football's tenth tier -- last season. But hostile words were exchanged as a divide emerged between the two factions, Manchester Evening News relays. Now, a merger of Bury Football Club Supporters Society -- which helped buy Gigg Lane and Bury FC's assets including its name -- and the Shakers Community Society -- which founded Bury AFC -- could see supporters finally unite behind one club again, Manchester Evening News discloses. As the original Bury FC remains in administration -- its name was recently changed to CCFB Realisations 2022 Limited, according to Companies House -- the merger is likely to mean renaming Bury AFC as Bury FC, Manchester Evening News notes. It is hoped that a majority fan-owned club will then return to Gigg Lane in time for the 2023/24 season, Manchester Evening News states. Should the plans go ahead, Bury council has pledged to provide GBP450,000 alongside a GBP300,000 government grant to support the new club, Manchester Evening News relates. According to Manchester Evening News, Coun Charlotte Morris, cabinet member for culture and the economy, said: "Senior men's professional football needs to come home to Gigg Lane, and this is not only a golden chance but the best chance to make this happen." FIRECLAD LTD: Enters Administration, All Employees Made Redundant ----------------------------------------------------------------- Ian Weinfass at Construction News reports that sister companies that turned over a combined GBP51.6 million three years ago have gone into administration, with material and labour inflation blamed for their demise. Drylining and fire-protection specialist Fireclad Limited and fit-out firm Harrison Jorge Limited have both gone under, Construction News relates. Some 72 employees across both companies were made redundant prior to Interpath Advisory being appointed to take over the administration process, Construction News discloses. The companies, based in Southend, Essex, were part of Adparo Group, which has not filed for administration, Construction News notes. Fireclad turned over GBP13.2 million in the year to March 31, 2021, a drop from GBP23.4 million in 2020, with the decline blamed on the impact of the pandemic, Construction News states. Pre-tax profit was GBP250,288 in 2021, down from GBP411,528 in 2020, according to Construction News. Harrison Jorge turned over GBP21.1 million in 2021 and GBP23 million in 2020, Construction News relays. Its pre-tax profit in the 12 months to March 31, 2021, was just GBP8,746, down from GBP160,762 in 2020, Construction News says. In 2019, amid a push for growth, Harrison Jorge turned over GBP31.8 million, while Fireclad's revenue was GBP19.8 million, Construction News discloses. According to Construction News, an Interpath Advisory spokesperson said: "During 2020 and 2021, the companies were adversely impacted by the COVID-19 pandemic and associated lockdown measures. However, recent rises in the cost of materials and labour have placed an additional burden on both Fireclad Limited and Harrison Jorge Limited, which ultimately resulted in both companies being unable to service their debts as and when they fell due. "After reviewing their options, the directors took the decision [to] place the companies into administration. All employees were made redundant prior to the appointment of administrators." MACMERRY300: Staff at Two Bars Made Redundant Following Collapse ---------------------------------------------------------------- James McAllister at BigHospitality reports that staff working at two bars owned and operated by collapsed Scottish pub and bar group MacMerry300 have been made redundant despite recent assurances their jobs would be safe. According to BigHospitality, staff working at MacMerry's Abandon Ship bars in Glasgow and London were told earlier this week that both sites would be closing and they were being made redundant, with the group's boss, Phil Donaldson, blaming "extremely challenging" trading conditions. It comes after the Dundee-based MacMerry300 group, which operated bar brands including Abandon Ship, the Luchador, the Draffens and the Bird and Bear, fell into liquidation late last month, BigHospitality notes. ZELLIS HOLDINGS: Moody's Alters Outlook on 'Caa1' CFR to Positive ----------------------------------------------------------------- Moody's Investors Service has affirmed Zellis Holdings Limited's Caa1 corporate family rating and Caa1-PD probability of default rating, as well as the Caa1 ratings on the guaranteed senior secured bank credit facilities. The outlook on all ratings has changed to positive from stable. "The change of outlook to positive largely reflects the strengthening in Zellis' operating performance over the past year leading to a material reduction in leverage and broadly break-even free cash flow levels" says Luigi Bucci, Moody's lead analyst for Zellis. "At the same time, while we expect a continued improvement in credit metrics over the next 12-18 months, the company's interest coverage remains weak and its Moody's-adjusted leverage is still very high when expensing capitalized R&D costs." adds Mr Bucci. RATINGS RATIONALE Zellis' Caa1 CFR mainly reflects its (1) leading position in the niche market for payroll and HR software and services in the UK; (2) high degree of recurring revenue and large exposure to SaaS; (3) track record to date of receiving financial support from Bain Capital; and (4) adequate liquidity supported by Moody's expectation of positive free cash flow (FCF) over the next 12-18 months. Conversely, the rating also takes into consideration the company's (1) high Moody's-adjusted leverage, which is likely to remain elevated at around 6x-7x over the next 12-18 months (8.5x-9.5x on a R&D expensed basis); (2) low product diversification; (3) high geographical concentration in the UK market; and (4) weak interest coverage metrics. Moody's expects Zellis' revenue to grow organically at around 6%-7% over fiscal 2023-24, ending April. On a reported basis, growth in fiscal 2023 will also be complemented by the acquisition of WRKIT. Current organic growth estimates are driven by the rating agency's assumption of a mid-single digit growth in percentage terms for the core Zellis division as well as low-teens and low-to-mid-teens percentages for the SMB division, Moorepay, and Benefex, respectively. On a company-adjusted basis, Moody's expects EBITDA to grow towards GBP65-70 million by fiscal 2024 from GBP58 million in fiscal 2022 supported by top-line growth, particularly for high margin cloud solutions, in spite of the negative impact from ongoing wage inflation. The ongoing weakening in the macroeconomic environment represents a potential source of downside pressure to current Moody's estimates, especially in fiscal 2024 as visibility on fiscal 2023 revenues is high. The rating agency gains comfort, however, from the recurring nature of Zellis' revenue base as well as the repricing clauses connected to most of the company's contracts. The rating agency also notes that performance in Moorepay is likely to be the one more subject to potential pressure because of its exposure to the SMB sector. The rating agency forecasts Moody's-adjusted FCF (excluding pension contributions) to continue improving in fiscal 2023 and 2024 towards GBP10 million and GBP10-15 million, respectively, although still relying on the interest deferral. While fiscal 2023 will continue to benefit from the full year impact of the interest deferral as part of distressed exchange in 2020, fiscal 2024 will be favourably impacted by this only in the first part of the year. Ongoing improvements will continue to be driven by EBITDA growth but also the reduction in exceptional charges towards GBP2-3 million per year. This is likely to translate into a Moody's-adjusted FCF/debt of around 2%-3% and 3%-4% in fiscal 2023 and 2024, respectively (fiscal 2022: 1.5%). Moody's-adjusted debt/EBITDA is expected to reduce towards 6.5x and 6x in fiscal 2023 and fiscal 2024, respectively, largely driven by EBITDA growth (fiscal 2022: 7.2x). These levels are somewhat dependent to future levels of debt-funded M&A, as the recent cases of Galileo and WRKIT demonstrate. While credit metrics continue to evidence a general improvement, Moody's-adjusted leverage on a R&D expensed basis remains very high (fiscal 2022: 10.1x). Moreover, interest cover will remain weak with Moody's-adjusted EBITDA - capex/interest of around 1x-1.5x in fiscal 2023-24 (fiscal 2022: 1x). ENVORONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS In terms of governance, Bain Capital has been the key shareholder in the company since the carve-out of Zellis from NGA Human Resources in 2017. Bain Capital has actively supported Zellis over the course of fiscals 2020 and 2021 through the injection of GBP60 million into the business to offset liquidity pressures which came from underperformance and higher-than-expected exceptional costs related to the carve-out and business transformation. LIQUIDITY Moody's views Zellis' liquidity as adequate, based on the company's expected positive, although limited, FCF over the next 12-18 months, available cash resources of GBP9 million and a guaranteed first lien senior secured revolving credit facility (RCF) of GBP40 million (GBP8 million drawn) as of April 2022. Moody's expects internal sources and cash flow generation through fiscals 2023 and 2024 to be more than sufficient to cover cash requirements over the period. There are no significant debt maturities before January 2024 when the RCF comes due. Guaranteed first-lien senior secured term loan B and second-lien term loan will mature in January 2025 and 2026, respectively. Moody's notes that a successful refinancing of Zellis' capital structure will likely be dependent on the company being able to demonstrate full cash servicing of its current interest costs. STRUCTURAL CONSIDERATIONS The senior secured first-lien bank credit facilities, comprising the term loan B and the RCF, are rated Caa1, in line with the CFR, reflecting the relatively small size of the second-lien facility ranking behind. Pension claims worth GBP25 million benefit from a security ranking pari passu with the senior secured first-lien facilities. RATIONALE FOR POSITIVE OUTLOOK The positive outlook reflects Moody's expectation of a continued improvement in operating performance over fiscal 2023 and 2024 leading to deleveraging from current high levels and continued positive FCF generation. The positive outlook also assumes that the company will maintain an adequate liquidity profile while being able to address its upcoming debt maturities. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward rating pressure could materialise should Zellis: 1) demonstrate a sustainable track record of revenue and Moody-adjusted EBITDA growth; 2) deliver sustainable FCF generation on a trailing twelve months basis (after interest and exceptional items); 3) reduce Moody's-adjusted gross debt/EBITDA (after the capitalisation of software development costs) sustainably towards 7.0x. Conversely, Zellis' ratings could be downgraded if the company's: (1) Moody's-adjusted FCF were to turn negative on a sustained basis; (2) Moody's-adjusted leverage were to remain above 7x; and more generally (3) chances of a default increased. LIST OF AFFECTED RATINGS Affirmations: Issuer: Zellis Holdings Limited Probability of Default Rating, Affirmed Caa1-PD LT Corporate Family Rating, Affirmed Caa1 Senior Secured Bank Credit Facility, Affirmed Caa1 Outlook Actions: Issuer: Zellis Holdings Limited Outlook, Changed To Positive From Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Software published in June 2022. COMPANY PROFILE Based in Bristol (UK), Zellis is a provider of payroll and HR software, as well as outsourcing services underpinned by its proprietary software, to private and public sector clients in the UK and Ireland. In the twelve months ended April 2022, the group had GBP176 million of revenue and GBP58 million of company-adjusted EBITDA. =============== X X X X X X X X =============== [*] BOOK REVIEW: Transnational Mergers and Acquisitions ------------------------------------------------------- Author: Sarkis J. Khoury Publisher: Beard Books Softcover: 292 pages List Price: $34.95 Order your personal copy today at http://is.gd/hl7cni Transnational Mergers and Acquisitions in the United States will appeal to a wide range of readers. Dr. Khoury's analysis is valuable for managers involved in transnational acquisitions, whether they are acquiring companies or being acquired themselves. At the same time, he provides a comprehensive and large-scale look at the industrial sector of the U.S. economy that proves very useful for policy makers even today. With its nearly 100 tables of data and numerous examples, Khoury provides a wealth of information for business historians and researchers as well. Until the late 1960s, we Americans were confident (some might say smug) in our belief that U.S. direct investment abroad would continue to grow as it had in the 1950s and 1960s, and that we would dominate the other large world economies in foreign investment for some time to come. And then came the 1970s, U.S. investment abroad stood at $78 billion, in contrast to only $13 billion in foreign investment in the U.S. In 1978, however, only eight years later, foreign investment in the U.S. had skyrocketed to nearly #41 billion, about half of it in acquisition of U.S. firms. Foreign acquisitions of U.S. companies grew from 20 in 1970 to 188 in 1978. The tables had turned an Americans were worried. Acquisitions in the banking and insurance sectors were increasing sharply, which in particular alarmed many analysts. Thus, when it was first published in 1980, this book met a growing need for analytical and empirical data on this rapidly increasing flow of foreign investment money into the U.S., much of it in acquisitions. Khoury answers many of the questions arising from the situation as it stood in 1980, many of which are applicable today: What are the motives for transnational acquisitions? How do foreign firms plans, evaluate, and negotiate mergers in the U.S.? What are the effects of these acquisitions on competition, money and capital markets; relative technological position; balance of payments and economic policy in the U.S.? To begin to answer these questions, Khoury researched foreign investment in the U.S. from 1790 to 1979. His historical review includes foreign firms' industry preferences, choice of location in the U.S., and methods for penetrating the U.S. market. He notes the importance of foreign investment to growth in the U.S., particularly until the early 20th century, and that prior to the 1970s, foreign investment had grown steadily throughout U.S. history, with lapses during and after the world wars. Khoury found that rates of return to foreign companies were not excessive. He determined that the effect on the U.S. economy was generally positive and concluded that restricting the inflow of direct and indirect foreign investment would hinder U.S. economic growth both in the short term and long term. Further, he found no compelling reason to restrict the activities of multinational corporations in the U.S. from a policy perspective. Khoury's research broke new ground and provided input for economic policy at just the right time. Sarkis J. Khoury holds a Ph.D. in International Finance from Wharton. He teaches finance and international finance at the University of California, Riverside, and serves as the Executive Director of International Programs at the Anderson Graduate School of Business. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *