/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/220727.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, July 27, 2022, Vol. 23, No. 143 Headlines I R E L A N D SOUND POINT IX: Moody's Gives Ba3 Rating to EUR23.8MM Cl. E Notes I T A L Y ATLANTIA SPA: S&P Raises Long-Term ICR to 'BB+', Outlook Stable L U X E M B O U R G MANGROVE LUXCO III: Moody's Cuts CFR, Sr. Sec. Notes Rating to Caa2 S P A I N JOYE MEDIA: S&P Ups ICR to 'CCC-' on Completed Debt Restructuring U K R A I N E NAFTOGAZ: Fails to Make Payments Due on International Bonds U N I T E D K I N G D O M AW CURTIS: Liquidation Affects About 60 Jobs DLG ACQUISITIONS: Moody's Affirms B2 CFR, Alters Outlook to Stable EDGE DBS: Enters Administration, Owes Trade Creditors GBP7.4 Mil. HIGH STREET: Owes More Than GBP211 Million to Creditors MID GROUP: To Undergo Liquidation, 37 Jobs Affected SOPHOS INTERMEDIATE II: Moody's Upgrades CFR to B2, Outlook Stable VENN MEDIA: Goes Into Voluntary Liquidation, Halts Trading - - - - - ============= I R E L A N D ============= SOUND POINT IX: Moody's Gives Ba3 Rating to EUR23.8MM Cl. E Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to the notes issued by Sound Point Euro CLO IX Funding DAC (the "Issuer"): EUR272,000,000 Class A Senior Secured Floating Rate Notes due 2032, Definitive Rating Assigned Aaa (sf) EUR23,000,000 Class B Senior Secured Floating Rate Notes due 2032, Definitive Rating Assigned Aa2 (sf) EUR22,250,000 Class C Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned A2 (sf) EUR23,920,000 Class D Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned Baa3 (sf) EUR23,800,000 Class E Senior Secured Deferrable Floating Rate Notes due 2032, Definitive Rating Assigned 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. The portfolio will 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 Servicer'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: EUR402,148,901.18 Diversity Score: 47 Weighted Average Rating Factor (WARF): 2931 Weighted Average Spread (WAS): 4.14% (actual spread vector of the portfolio) Weighted Average Coupon (WAC): 4.71% (actual spread vector of the portfolio) Weighted Average Recovery Rate (WARR): 44.08% Weighted Average Life (WAL): 5.59 years (actual amortization vector of the portfolio) ========= I T A L Y ========= ATLANTIA SPA: S&P Raises Long-Term ICR to 'BB+', Outlook Stable --------------------------------------------------------------- S&P Global Ratings raised its long-term issuer and issue ratings on Atlantia SpA to 'BB+' from 'BB', and affirmed its short-term rating at 'B'. Additionally, S&P raised its long-term ratings on its subsidiary Aeroporti di Roma (AdR) to 'BBB' from 'BBB-', and raise its short-term rating to 'A-2' from 'A-3'. The stable outlook on Atlantia reflects its expectation that the company will be able to maintain FFO to debt above 9% while continuing to manage solid infrastructure assets. The stable outlook on AdR is linked to that on its parent Atlantia, given the current two-notch differential we reflect in our rating on AdR. S&P said, "The Autostrade per l'Italia (ASPI) disposal completed in early May lifted the liquidity risks stemming from the ASPI concession and we see limited legacy risk. Atlantia's disposal of its entire stake in ASPI (88%), for EUR8.2 billion, settles the dispute with the grantor on the ASPI concession started in the aftermath of Genoa bridge collapse on Aug. 14, 2018. It also relieves the liquidity risk stemming from a potential termination of the ASPI concession. Following the settlement, we believe legacy risks from civil and criminal investigations on Atlantia are limited. While criminal investigations continue on specific individuals, in March 2022, ASPI settled claims under law 231/2001 for EUR29 million, well below the maximum risk-sharing indemnification agreed by Atlantia in the disposal agreement with CDP-led consortium. In our view, this limits the risk of large indemnification payments by Atlantia. The disposal has also removed any financing ties between Atlantia and ASPI, as expected, which could have extended a liquidity risk to Atlantia's debt in case the ASPI concession termination. "Our view of Atlantia's business is supported by the strong quality of the infrastructure assets in its portfolio, albeit constrained by the large minorities within the group, particularly its 50% stake in Abertis. Following the ASPI disposal, we expect global toll road operator Abertis to contribute to 80% of Atlantia's full consolidated adjusted EBITDA, reducing toward 70%-75% in 2024-2025 on the back of anticipated air passenger traffic recovery. Our business assessment for Atlantia does not factor in the full strengths of Abertis portfolio since Atlantia's access to Abertis' cash flow is limited to a 50% plus one share, and the governance in place grants veto power to ACS/Hochtief on reserved matters such as acquisitions and dividend distributions. The business risk assessment is also weakened by the fact that within Atlantia's portfolio, the overseas toll road network faces some concession maturity, with the expiry in 2023 of Los Lagos (fully owned subsidiary in Chile) and Triangulo do Sol (50% plus one share owned in Brazil), which contributed to about EUR80 million EBITDA in 2021. At the same time, we consider the settlement of the long-lasting dispute on the ASPI concession as improving Atlantia's operating environment and we understand the company remains focused on consolidating its position as a global infrastructure company. This underpins our view of its business strengths, while we consider mobility services provided by Telepass and recently acquired Yunex as ancillary to the core business. Being a holding company, our assessment of Atlantia's business relies on the quality of the assets in its portfolio, the largest ones being Abertis, followed by AdR (almost 100% owned) and overseas toll road operators Grupo Costanera in Chile and Brazilian AB Concessoes (both 50% owned). "In case Atlantia pursued new significant investments, directly or through its subsidiaries, we would assess how they are financed as well as their implication on Atlantia's business risk profile. "We now proportionally consolidate Abertis' figures in Atlantia's credit metrics to better reflect the presence of a large minority shareholder in its largest subsidiary and potentially capture future additional debt or acquisitions by Atlantia. In our view, Abertis' proportional consolidation into Atlantia's metrics better represents Atlantia's credit quality, particularly if additional debt is raised at the holding company level or new assets are acquired outside Abertis' perimeter. "As long as these events do not materialize, we don't expect any significant deviation between full consolidation and proportionate consolidation (about 9.3%-9.5% FFO to debt in 2021). Nevertheless, given Abertis' large amount of debt (about EUR25 billion S&P Global Ratings-adjusted debt in 2021), we expect proportionate consolidation could result in 0.5%-1.0% stronger metrics over the next few years based on expected traffic recovery at Atlantia's airports. As part of this revised approach, we no longer extend the intermediate equity content of Abertis' EUR2 billion hybrid notes to Atlantia's consolidated credit metrics. While a deferred coupon payment on Abertis' hybrids could preserve cash at Abertis, potentially reducing the need of shareholder support, this would not be credit supportive for Atlantia which, following the ASPI disposal, strongly relies on Abertis' dividends to service its debt. The deferral of a coupon would indeed trigger a dividend stopper at Abertis. Furthermore, the balanced governance in place with ACS/Hochtief could restrict potential support to Atlantia, in case of a financial stress, as reflected in our delinking the rating on Abertis from that on Atlantia. "We expect the use of ASPI proceeds for the voluntary tender offer announced by Edizione and BIP to constrain Atlantia's financial flexibility, absent future support from the new shareholders. As per Edizione's and BIP's announcement, the offer, which is for a maximum of EUR12.7 billion, will be funded through equity by BIP (EUR4.5 billion) and bank debt (EUR8.2 billion). If successful, the transaction would absorb ASPI proceeds as these would be used to repay the bridge-to-cash facility raised by the acquisition vehicle. We see the transaction as credit negative as it will absorb ASPI proceeds without replacing ASPI's cash flow generation, reducing Atlantia's financial flexibility and most likely requiring equity support from its shareholders, should it pursue significant new investments. Under these terms, and by using a proportionate consolidation of Abertis forecasts, we expect Atlantia's FFO to debt to remain at 10%-11% in 2022-2023. The improvement compared to 2021 ratios mainly reflects expected recovery at Atlantia's airports and doesn't include the impact of any additional debt or new acquisitions by Atlantia, on which we don't currently have visibility. The offer is subject to, among other conditions, a 90% acceptance and is intended to de-list Atlantia. Edizione indirectly owns a 33% stake in Atlantia, through its fully owned subsidiary Sintonia, followed by Singapore's sovereign wealth fund GIC (8.29%) and Fondazione Cassa di Risparmio di Torino (about 4.5%), with the remaining as free float (53%). "If successful, we will analyze the final terms of the offer to confirm the impact on Atlantia's credit metrics as well as the supportiveness of the governance and financial policy announced by the potential new shareholders. In particular, we will assess the final terms of the offer to confirm that the equity contributions announced as part of the transaction (about EUR4.5 billion) will be injected as cash and will not constitute additional debt under our methodology. Otherwise, this could reduce FFO to debt toward 8%, which would not be commensurate with the current rating. We will also assess the terms of the governance to confirm that Edizione's majority stake wouldn't constrain our view of Atlantia's credit quality. For now, we understand Edizione and BIP intend to implement balanced governance on Atlantia, with certain veto powers on strategic decisions that could protect Atlantia from potential negative influence by its largest shareholder. With respect to financial policy, we understand it is intended to support an investment-grade rating on Atlantia. Considering the presence of large minorities within the group (in addition to Abertis' 50% plus one share ownership, overseas toll road operators Grupo Costanera in Chile, and AB Concessoes in Brazil are both 50% owned), we would consider FFO to debt at 13% as commensurate with an investment-grade rating on Atlantia. This is higher than the trigger on Abertis (9% to maintain a 'BBB-' rating) as most of Atlantia's consolidated assets are exposed to cash flow leakages due to the presence of large minorities. Future credit metrics will also hinge on Atlantia's investment strategy and dividend distributions decided by the potential new shareholders. In our base case, we assume about EUR0.9 billion-EUR1.1 billion dividend distributions per year, including dividends paid to minorities. We understand that Edizione and GIP announced their intention to support Atlantia and its subsidiaries to extend the concession life of their portfolios and we will need to analyze how this will be financed by the new shareholders and how it would impact our credit metrics and view of the business risk profile. "We continue to rate AdR two notches above Atlantia.As a result, we have raised our issuer and issue rating on AdR by one notch to 'BBB' and revised our outlook to stable from positive. The two-notch insulation reflects our opinion that, despite AdR being almost fully owned, the regulatory oversight exercised by the grantor, and certain covenants in the concession agreement and loan financing, protect the company from potential negative intervention by its shareholder. "The stable outlook on Atlantia reflects our expectation that the company will continue to generate cash flows from stable infrastructure assets and will replace expiring concessions within its subsidiaries with assets having solid asset quality. "We expect the group will be able to generate FFO to debt of 10%-11% in 2022-2023 if the tender offer announced by Edizione and BIP is successful and absorbs ASPI proceeds. These metrics are based on Abertis' proportionate consolidation. "The outlook on AdR is linked to that on its parent Atlantia, given the current two-notch differential we reflect in our rating on AdR. "We could take a negative rating action if we expect that the company won't be able to maintain FFO to debt comfortably above 9%. "Considering the tender offer, this could happen if the transaction includes more debt than we currently assume or if under our methodology we were to consider Blackstone equity injections as debt. "We could also take a negative rating action if Edizione's majority stake were to constrain our view of Atlantia's credit quality and this were not mitigated by the terms of the governance implemented by the new potential shareholders. "We could raise our issuer credit rating on Atlantia by one notch if the company strengthens its FFO to debt to 13%. "We don't expect this to materialize in 2022-2023, based on our forecasts for Abertis, our expected traffic recovery on airports, and some expiring concessions in Brazil and Chile. "If Atlantia pursues new significant investments, directly or through its subsidiaries, we would assess how they are financed as well as their implication on Atlantia's business risk profile. "We don't expect a positive rating action to lead us to raise the issue rating on Atlantia, given the structural subordination of Atlantia's debt to the large amount of debt within its subsidiaries." Environmental, Social, And Governance -- Atlantia's ESG credit indicators: To E-2, S-3, G-3; From E-2, S-4, G-3 S&P said, "In our view, the ASPI disposal removes the ramification risks that a termination of the concession could have triggered on Atlantia, including liquidity risk. In our view, social factors now have a moderately negative influence (S-3) on our credit rating analysis on Atlantia, compared to a negative influence previously (S-4), as we see legacy risk as limited, from a financial perspective. Nevertheless, we will monitor that no unexpected payments or indemnification become due." Governance factors remain a moderately negative consideration in our credit analysis, due to the short track record since the company revised its internal governance and risk management procedures. =================== L U X E M B O U R G =================== MANGROVE LUXCO III: Moody's Cuts CFR, Sr. Sec. Notes Rating to Caa2 ------------------------------------------------------------------- Moody's Investors Service has downgraded Mangrove LuxCo III S.a r.l.'s corporate family rating to Caa2 from Caa1 and its probability of default rating to Caa2-PD from Caa1-PD. Concurrently, the rating agency downgraded to Caa2 from Caa1 the rating on the company's EUR356 million guaranteed senior secured notes due 2025. The outlook was changed to stable from negative. RATINGS RATIONALE The ratings downgrade reflects Mangrove's considerably strained liquidity, high financial leverage, weak credit metrics and poor track record of free cash flow (FCF) generation. The downgrade also incorporates Moody's concerns about sustainability of the company's operating cash flow generation amid materially slower global economic growth, lower consumer and business sentiment, persistently high inflation, and renewed supply chain disruptions. This could result in a liquidity shortfall and an increased probability of default. At the beginning of Q2 2022, Mangrove faced a significant working capital consumption, which was driven by inventory buildup amid supply chain challenges and high materials prices and some delay in customer payments. To support its liquidity the company drew the remaining EUR55 million under its EUR65 million committed long-term revolving credit facility (RCF), which left Mangrove with no external sources to absorb any potential liquidity crunch. After some working capital improvements during May and June, as of June 30, 2022, Moody's estimates that the company had around EUR80 million of cash on balance (including around EUR20 million outside of cash pooling and not immediately available to the parent). Despite a very high order backlog and continuously strong order intake in H1 2022, Mangrove's EBITDA came under pressure because of cost inflation, which the company was only able to mitigate with a delayed cost passthrough to customers. As a result, the headroom under the company's maintenance financial covenants has considerably tightened. Moody's expects Mangrove's FCF to remain persistently negative at least through 2023. The agency expects the company's margins to remain under pressure, only partly mitigated by cost passthrough and restructuring initiatives. The high 2021 order intake does not fully capture incurred cost inflation and it will take time to trade it out, hence offsetting gains from the new orders. To avoid liquidity stress, Mangrove will have to maintain focus on tight working capital management and balanced growth capital spending. The risks are skewed to the downside given the softening macroeconomic environment. Potential gas curtailment in Europe represents additional downside risks to the company's performance. This would mostly have an indirect impact on Mangrove from weakening demand and intensified supply chain issues. The company's own production process is not energy intensive (in relative terms). The Caa2 CFR is constrained by Mangrove's weak liquidity; high leverage of around 8.5x as of end-March 2022 and expected to remain elevated (in the high single-digits) through at least 2023; the cyclical nature of its end markets; and the event risk because of the ongoing legal dispute following the restructuring of Galapagos Holding S.A. The rating also takes into account Mangrove's established position in the global heat exchanger market, with a broad product portfolio, global production capability and geographical diversification; the criticality of the heat exchanger product, which typically accounts for a small percentage of the overall cost of a large power plant or asset; the company's recent expansion into the data center application market, which has solid growth fundamentals; and potential support from the shareholder in case of need. LIQUIDITY In the agency's view, Mangrove's liquidity has weakened, considering no available external sources to address liquidity needs in an increasingly softening economic environment. As of June 30, 2022, Moody's estimates that the company had around EUR80 million of cash on balance (including around EUR20 million outside of cash pooling and not immediately available to the parent). Over the next 12 months, Moody's expects Mangrove to generate around EUR30 million in funds from operations (after interest payments), which, together with available cash on balance, will be just enough to cover the expected liquidity needs, including working cash, working capital needs, capital expenditure (including lease payments). The liquidity sources are very tight to absorb additional growth capital spending and extraordinary working capital swings stemming from continuing supply chain challenges or delay in customer payments. Through the end of 2023 Mangrove does not have any material debt maturities. The EUR65 million fully drawn RCF is due October 2023 but has a one-year auto extension option if the audit report for 2022 financial result does not raise any questions regarding the company's going concern status. The company's guaranteed senior secured bonds mature in October 2025. The RCF requires compliance with several maintenance financial covenants, including minimum EBITDA, net leverage and minimum cash, which are tested quarterly. Mangrove is likely to breach the first two covenants in H2 2022 and is currently negotiating a covenant reset with its lenders. If the new covenant test levels are agreed by the lenders, as proposed by the company, Moody's expects Mangrove to comply with its covenants through the end 2023, but the headroom will be modest. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS Governance considerations are material to the rating action. The company's financial policy remains aggressive reflected in very high financial leverage and weak liquidity. STRUCTURAL CONSIDERATIONS In the assessment of the priority of claims in a default scenario for Mangrove, Moody's distinguish among three layers of debt in the capital structure: the senior secured EUR65 million RCF ranks on top of the capital structure, followed by the EUR356 million guaranteed senior secured notes and trade payables, and behind these debt instruments are pension liability and current lease obligations. The Caa2 rating of the guaranteed senior secured notes is in line with the CFR. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that over the next 12-18 months Mangrove's sizeable order backlog will support its earnings generation helping to mitigate further pressure on liquidity. The stable outlook assumes Mangrove will successfully renegotiate its covenant reset before the Q3 2022 covenant test. The absence of debt maturity until October 2024 further mitigates liquidity risk and also supports the stable outlook. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Further downward pressure on the ratings could materialise should operating performance deteriorate or liquidity continue to weaken or should Moody's assessment of the likelihood of a default increase. The ratings could also be downgraded if there is an adverse court ruling regarding the claims by the senior unsecured bondholders of Galapagos, leading to higher debt for Mangrove. The ratings could be upgraded if there is a meaningful improvement in operating performance with Mangrove turning its large order backlog into profitable revenue and the company's liquidity strengthens. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Manufacturing published in September 2021. COMPANY PROFILE Luxembourg-based Mangrove LuxCo III S.a r.l. (Mangrove) is the parent of companies that operate under the name Kelvion. The company is a leading global manufacturer of heat exchangers for a variety of industrial applications. These primarily include the HVAC and refrigeration, power generation, and oil and gas sectors but also the data center, food and beverages, chemicals and marine businesses. The company is owned by a fund managed by Triton Partners, a private equity group. In the 12 months that ended March 31, 2022, Mangrove generated around EUR916 million in revenue and around EUR70 million in company-adjusted EBITDA (including IFRS16 effect). ========= S P A I N ========= JOYE MEDIA: S&P Ups ICR to 'CCC-' on Completed Debt Restructuring ----------------------------------------------------------------- S&P Global Ratings raised, from 'D' (default), its long-term issuer credit ratings on Joye Media S.L., parent of European audio-visual group Mediapro, to 'CCC-', its issue credit rating on the group's first-lien debt to 'CCC', and its issue credit rating on the second-lien debt to 'CC' and placed them on CreditWatch with developing implications. The CreditWatch placement reflects the uncertainty over Joye Media's ability to refinance its capital structure and maintain adequate liquidity in the next few months; it indicates that S&P could raise, lower, or affirm the ratings in the next 90 days depending on progress of its refinancing, as well as the timing of the release of audited financial statements. A EUR620 million equity injection allowed Joye Media to repay half of its first-lien debt and complete its financial restructuring. On June 8, 2022, Joye Media announced the completion of its debt restructuring, consisting of the pro rata repayment of about EUR415 million of its senior secured debt instruments, including pending amortization of term loan A (TLA). The EUR415 million came from a EUR620 million equity injection provided by Southwind Media Holdings Ltd. Hong Kong, which became the group's new controlling shareholder with about 70% of the shares. The remaining amount from the equity injection (about EUR205 million) consisted of EUR115 million of fresh liquidity in December 2021 to alleviate working capital pressure, and about EUR90 million to cover missed interest payments, cure equity, and meet advisory and consent fees. The EUR180 million second-lien facility remains in the capital structure. S&P understands that, as part of the restructuring agreement, some terms of the original debt documentation were amended to provide an incentive for the company to refinance its capital structure as soon as possible. Restructuring has reduced leverage, but leaves the company exposed to refinancing risk and limited financial flexibility. Following the EUR415 million debt repayment, we estimate that Joye Media's S&P Global Ratings-adjusted leverage dropped to around 4.5x from about 8.4x on Dec. 31, 2021. This level is comparable to the company's leverage in 2019. However, the short tenor of the outstanding debt leaves the company exposed to significant refinancing risk. For this reason, despite the deleveraging, S&P believes the current capital structure is unsustainable and reliant on favorable developments, including the company's ability to refinance in the current market environment. Additionally, elevated interest expenses could leave the group's liquidity exposed to potential shortfalls in the worsening macroeconomic environment. S&P said, "Lack of audited accounts for the last two years materially constrains our ratings. Joye Media was unable to produce audited financial reports in 2020 and 2021 because, as we understand, the restructuring process jeopardized the auditors' going-concern assumption. With the restructuring process now finalized, the group is expected to provide audited accounts for both years by the end of August 2022. However, we understand the auditors are likely to issue a qualified opinion due to the classification of short- and long-term debt. We consider the lack of audited accounts for more than one year as a severe governance and information deficiency. This limits our visibility regarding the accuracy of financial performance and the group's business prospects, constraining our assessment of Joye's management and governance factors, as well as our ratings. "We understand Southwind Media Holdings took control of the group from private-equity fund Hontai Capital. We understand that Southwind Media Holdings Ltd. Hong Kong, which injected the EUR620 million of equity, is a family firm linked to Mr. Hao Tang that was previously a minority investor through Kunshan Technology Investment Ltd. The capital increase made Southwind the controlling shareholder of the group, with 70% of the shares, while diluting the stakes of other shareholders. These include private-equity fund Orient Hontai Capital, whose equity participation dropped to 10.5%, advertisement group WPP, whose participation dropped to 9.5%, and the two founders, Mr. Josep Maria Benet and Mr. Jaume Roures, whose participation dropped to 5.0% each. "Joye Media is a smaller company than before the pandemic and generates the majority of its operating profits from audio-visual and studio activities. We expect Joye Media will report about EUR1.15 billion in revenue and EUR155 million of EBITDA in 2022, in line with 2021, but between 30% and 40% lower than in 2018-2019. The drop is mostly due to the contraction of the sport rights business, linked to the expiration of the domestic Spanish La Liga broadcasting rights in 2019 and the abrupt ending of the French League contract that was supposed to replace it in 2020. We also note that the majority of the sport rights EBITDA is now linked to the international La Liga broadcasting rights, which expires in 2024 and whose renewal is, in our view, uncertain following the deal between CVC and La Liga earlier this year. As such, Joye Media's revenue and operating profits are now mostly generated by its audio-visual, studio, and innovation segments, which accounted for about three-quarters of reported EBITDA (excluding the negative contribution of holding companies) in first-quarter 2022. We consider that these business lines have good growth prospects and are less exposed to single-contract renewal risk than the sport rights business." CreditWatch The CreditWatch developing status reflects uncertainty about Joye Media's ability to refinance its capital structure in the next few months and maintain adequate liquidity. It indicates that S&P could raise, lower, or affirm the ratings in the next 90 days depending on progress of its refinancing, as well as on the timing of the release of audited financial statements. S&P said, "If Joye Media manages to refinance its entire capital structure in the next 90 days, extending its average debt maturity beyond 24 months and strengthening its liquidity profile, we could affirm or raise our ratings on the company. Any ratings upside would require the review of up-to-date audited financial accounts. "If we consider that Joye will be unable to execute its refinancing before the end of 2022 or believed liquidity could weaken materially, we could lower our ratings, signaling increased default risk. "We expect to resolve the CreditWatch in the next few months, once the company's ability to refinance in the current environment becomes clearer." ESG credit indicators: E-2, S-3, G-5 S&P said, "Governance factors are a very negative consideration in our credit rating analysis of Joye Media. The group was historically involved in various litigations, which we think resulted in reputational and financial losses. The company, including former employees and members of senior management, was involved in criminal misconduct and corruption. Since then, the company has sought to further strengthen risk controls and processes. Social factors are a moderately negative consideration." The pandemic, for example, placed strong pressure on customers in the group's value chain, particularly sports and media companies, and therefore also on Joye Media's working capital management. ============= U K R A I N E ============= NAFTOGAZ: Fails to Make Payments Due on International Bonds ----------------------------------------------------------- Reuters reports that Ukraine's Naftogaz has become the first Ukrainian government entity to default since the start of the war after the state-owned energy firm failed to make payments due on international bonds before the expiry of a grace period on Tuesday, July 26. According to Reuters, the company said in a statement that it had failed to get creditors' support for a proposal to freeze payments on some of its bonds for two years which it had launched last week. "Naftogaz has not received consent from the cabinet of ministers of Ukraine to make the necessary payments," Reuters quotes the company as saying in a statement. "Certain events of default have or will occur as a result of the resolution and the resulting failure to pay." Naftogaz also said that it was working with relevant parties to launch a fresh proposal for debt treatments that had been drafted by the Cabinet, Reuters notes. Naftogaz, which accounted for almost 17% of Ukraine's public revenue last year, had submitted two requests to the government to approve payments to creditors and avoid a hard default, though both were rejected, Reuters relates. =========================== U N I T E D K I N G D O M =========================== AW CURTIS: Liquidation Affects About 60 Jobs -------------------------------------------- Paul Whitelam at LincolnshireLive reports that former Lincoln factory workers who are being made redundant as AW Curtis Bakers & Butchers Limited goes into liquidation fear they may struggle to find new employment. About 60 jobs at the bakery in Long Leys Road are affected due to rising cost pressures on the business, LincolnshireLive states. The factory had long been financially supported by the other companies within the group -- the retail business Curtis of Lincoln Ltd and the A W Curtis & Sons Ltd holding company, LincolnshireLive discloses. Curtis of Lincoln's chain of shops are to remain open, LincolnshireLive notes. According to LincolnshireLive, one woman, aged in her mid-40s, who worked for 15 years at the factory, said staff were told the bad news of the liquidation at a meeting on Thursday, July 21. The woman, who asked not to be named, said: "There was a memo where you clock on asking all staff to go to a meeting in the loading bay at 12noon. "Director Neil Curtis gave us a speech saying AW Curtis Bakers & Butchers Limited is going into liquidation, it starts today, and goodbye. It was a shock. We knew it was going to happen but not straight away. "It had been going downhill since before the start of the pandemic in 2020. You get supermarkets selling a whole packet of biscuits for 50p but the Curtis shops charge 99p for one gingerbread man. There's Cooplands and Gadsby's out there too, as well as rising costs and more competition from the supermarkets selling cheaper goods. It's all killing us. "We are now waiting for letters from the liquidators as to what happens next. I'm in the older age group of workers and I don't think many employers will look at me because I'm looking for the higher rates of pay. I'm also in poor health and I was well-supported by Curtis'." The woman said that the products the factory made for the shops are to be made by another company. Curtis of Lincoln previously confirmed it would be making "the bestselling ranges of Curtis products going forward" itself to sell in the stores. DLG ACQUISITIONS: Moody's Affirms B2 CFR, Alters Outlook to Stable ------------------------------------------------------------------ Moody's Investors Service has affirmed DLG Acquisitions Limited's (All3Media or the company) B2 corporate family rating and B2-PD probability of default rating. Concurrently Moody's has affirmed the B2 instrument ratings on the EUR405 million senior secured first lien term loan due 2026 and the GBP50 million senior secured revolving credit facility due 2025 (RCF) and the Caa1 instrument rating on the GBP75 million senior secured second lien term loan due 2027, all issued by DLG Acquisitions Limited. The outlook has been changed to stable from negative. RATINGS RATIONALE "The change of outlook to stable from negative reflects (1) the strong recovery of All3Media's revenue and EBITDA in 2021 following a period of severe disruptions in 2020 resulting from the outbreak of the COVID-19 pandemic, (2) Moody's expectation for sustained revenue and EBITDA growth in the next two years supported by the increasing demand for content reflecting increasing competition from streaming platforms, (3) the rating agency's assumption that sustained EBITDA growth in 2022 and 2023 will help bring adjusted gross leverage to below 6.0x - within the triggers set for the B2 CFR - from a peak of 13.4x at the end of 2020, and (4) the continued support provided by the company's shareholders through the funding of earn-outs related to acquisitions and the purchasing of content from the company", says Sebastien Cieniewski, a Moody's Vice President - Senior Credit Officer, and lead analyst for All3Media. However, the rating remains constrained by (1) All3Media's relatively modest scale compared with international competitors, (2) the company's geographical concentration of production revenues (by destination) around the UK and the US, and (3) the risk of M&A which may constrain de-leveraging from a high level. All3Media experienced a strong rebound of activity in 2021 following significant disruptions, including lockdowns and social distancing measures, which affected operations in 2020 when top line declined by 12%. Revenue of GBP867 million in 2021 was up 32% on the prior year and above pre-COVID levels. Such a strong growth in production revenue of GBP668 million (up 36% year-on-year) was due to the resumption of production following the lifting of COVID-19 restrictions. Secondary revenue also grew in the year and was up 19% on 2020. The recovery continued in the first half of 2022 with revenues 5.6% up on the prior year. The recovery of EBITDA (as reported by the company pre-IFRS 16) was steeper than for revenues following a larger drop in 2020. Indeed, EBITDA increased to GBP71.7 million in 2021 from GBP43 million in 2020 reflecting revenue growth and the intrinsic operating leverage within the business. While the EBITDA margin (as reported by the company pre-IFRS 16) at 8.3% in 2021 was above the trough at 6.6% reached in 2020 in the midst of the pandemic it was still significantly below the level of 11.3% reached in 2019. This reflects the weak gross profit margin for the production segment partly due to additional covid costs which were not covered by insurance or broadcaster/distributor and the revenue and cost recognition in 2021 for productions started in 2020. Moody's projects that based on sustained revenue growth projected in 2022 and 2023 and a gradual recovery of the production gross profit margin, All3Media will deliver a double-digit EBITDA growth and an EBITDA margin approaching 10% by the end of 2023 despite higher costs related to overheads to support the growth of the business. Thanks to the strong growth in EBITDA, Moody's projects that All3Media's adjusted gross leverage (as adjusted by Moody's mainly for costs and liabilities related to deferred compensation, consideration and put & call options in the profit and loss and cash flow statements, respectively, and redundancy, restructuring and transactional costs) will decrease to below 6.5x in 2022 and towards 5.5x in 2023 from 7.7x in 2022. The rating agency notes however that it will consider EBITDA post redundancy, restructuring and transaction costs for the calculation of Moody's adjusted leverage going forward adding approximately 0.5x to the forecast leverage ratios. Although Moody's projects de-leveraging on an organic basis, All3Media will remain subject to M&A risk. All3Media has received considerable support from shareholders (Warner Bros. Discovery, Inc. and Liberty Global plc [Ba3 stable]) to build the business by acquisition, both in terms of upfront costs and earn-outs. The parent companies have provided such funds in the form of long-dated shareholder loans (structured to receive 100% equity credit under Moody's Hybrid Equity Credit methodology). Most recently, in Q1 2022, All3Media received GBP55 million of cash from its shareholders, of which GBP12.7 million was paid out in the same quarter for earn-outs with the balance paid in April 2022. Moody's considers that All3Media's liquidity is adequate. Liquidity is supported by its on-balance sheet cash of GBP91 million (excluding GBP49 million production cash) at the end of March 2022 of which a portion was used in April 2022 for earn-outs. As of the end of Q1 2022, availability under the GBP50 million RCF was limited at only GBP10 million – this availability had increased to GBP17.5 million by the end of Q2 2022 following a GBP7.5 million repayment during the quarter. Additionally, All3Media should generate positive free cash flow (FCF) over the next two years. STRUCTURAL CONSIDERATIONS Given the presence of a second lien loan in this all bank loan structure and a springing financial covenant, the rating agency has used a 50% family recovery rate reflecting its Loss Given Default for Speculative-Grade Companies methodology. The B2 instrument rating on the RCF and the first lien term loan – in line with the CFR – reflects the relatively limited loss absorption cushion provided by the second lien term loan ranking behind and rated Caa1. The RCF and first lien term loan benefit from guarantees from operating subsidiaries and a security package composed mostly of share pledges. The second lien term loan benefits from the same guarantee and security package but on a subordinated basis. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects Moody's expectation that All3Media will experience sustained revenue and EBITDA growth in 2022 and 2023 supporting a de-leveraging to below 6.0x over the period. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The B2 CFR is currently weakly positioned due to high leverage and no upgrade in the near term is anticipated. However, positive rating momentum may arise over time, if (1) the company continues to increase its scale and geographical diversification; (2) its Moody's-adjusted leverage falls sustainably below 5.0x; (3) its RCF/Net Debt improves above 10% and (4) liquidity improves such that All3Media is able to meet earn-out obligations on a self-financing basis. Negative rating momentum may develop if (1) Moody's adjusted leverage remains well above 6.0x on a sustained basis; (2) free cash flow is negative for a prolonged period of time; (3) All3Media fails to deliver growth in its core markets; and (4) the shareholders rein in their strategic and financial support particularly for funding future acquisition earn-out payments. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE DLG Acquisitions Limited is a joint venture of Warner Bros. Discovery, Inc. and Liberty Global plc. Through its subsidiaries, the company operates as an active producer and distributor of television programming with international presence. EDGE DBS: Enters Administration, Owes Trade Creditors GBP7.4 Mil. ----------------------------------------------------------------- Grant Prior at Construction Enquirer reports that London-based M&E contractor Edge DBS Ltd has gone into administration. Stunned staff were given the news on July 22 and a raft of suppliers now fear they will be left holding worthless invoices, The Enquirer relates. Administrators Andrew Andronikou and Brian Burke of Quantuma Advisory Limited are now in charge of the company, The Enquirer discloses. The Enquirer understands one of Edge DBS's largest contracts was at the London South Bank University upgrade programme. According to The Enquirer, a site source said: "A lot of people have been strung along there and a lot of people are very unhappy about how this has panned out." Edge DBS has been in business since 2008 and the director with significant control is David Smith. Latest accounts for Edge DBS for the year to May 31 2020 show it made a pre-tax profit of just over GBP1 million from a turnover of GBP21.4 million and employed 18 people, The Enquirer relays. The accounts also show the amount owed to trade creditors had risen to GBP7.4 million from GBP1.8 million the previous year, The Enquirer states. HIGH STREET: Owes More Than GBP211 Million to Creditors ------------------------------------------------------- Graeme Whitfield at BusinessLive reports that creditors who are owed more than GBP211 million have been identified by administrators dealing with collapsed North East property firm High Street Group, but they have been warned that it could take years to settle the company's affairs. The company -- best known for leading the Hadrian's Tower development in Newcastle -- was placed in administration last year after suffering major financial problems before and during the pandemic, BusinessLive recounts. According to BusinessLive, a newly published administrators' report has highlighted that loan note holders with investments totalling GBP123.6 million have come forward, while the company had non-preferential unsecured creditors totalling GBP87.7 million. It is unclear whether creditors will receive any pay-out from the administration process, BusinessLive notes. Before its collapse, High Street Group had been involved in a number of high-profile developments in the North East, including plans to build a hotel, office and flats near St James' Park and a scheme to build housing on the former Brett Oils site on the banks of the Tyne in Gateshead, BusinessLive discloses. But it suffered a string of problems that saw one of its subsidiaries put into administration in 2019 after failing to repay an overseas lender, while the company's accounts were delayed on a number of occasions and two separate auditors resigned, BusinessLive relays. It said that the loss of institutional funding for many of its schemes during the pandemic had caused its eventual failure, according to BusinessLive. The new administrators' report reveals that a creditors' committee has been formed to provide representation for the small investors who put money into High Street Group through various financing schemes, BusinessLive states. But it also outlines concerns that loan note holders are being targeted in what appear to be scams by companies saying they can help people recover investment into the company, BusinessLive notes. MID GROUP: To Undergo Liquidation, 37 Jobs Affected --------------------------------------------------- Grant Prior at Construction Enquirer reports that all 37 staff at Mid Group were made redundant on July 26 with the offsite specialist set to cease trading imminently. Parent company Mid Holding Co UK Ltd went into administration last week and the decision has now been made to place Mid Group Services Ltd (MGSL) into liquidation, Construction Enquirer relates. According to Construction Enquirer, Jason Elliott of accountant Cowgills is joint administrator of Mid Holding Co UK Ltd and will also be appointed as liquidator of MGSL. Staff worked the first two weeks of this month before they were told not to come into the office as the firm faced a cash flow crisis, Construction Enquirer recounts. The directors confirmed there was no money to pay the staff for July, Construction Enquirer notes. Latest accounts for Mid Holding Co for the year to December 30 2020 show it made a pre-tax loss of GBP2.5 million from a turnover of GBP55.7 million, Construction Enquirer discloses. SOPHOS INTERMEDIATE II: Moody's Upgrades CFR to B2, Outlook Stable ------------------------------------------------------------------ Moody's Investors Service has upgraded Sophos Intermediate II Limited's (Sophos or the company) corporate family rating to B2 from B3 and probability of default rating to B2-PD from B3-PD. Concurrently, the rating agency has upgraded the instrument ratings on the guaranteed senior secured first lien term loan and the guaranteed senior secured first lien revolving credit facility (RCF) borrowed by Sophos Holdings, LLC to B2 from B3. Outlook on all ratings is stable. "The rating action reflects the strengthening in Sophos' operating performance over the past year leading to a substantial reduction in leverage and a step-up in free cash flow generation" says Luigi Bucci, Moody's lead analyst for Sophos. "That said, a continued improvement in credit metrics over the next 12-18 months might be challenged by the weakening macro-economic environment, particularly because of the company's exposure to the small and medium sized businesses, together with the ongoing wage inflation and the increase in sales and marketing costs" adds Mr Bucci. RATINGS RATIONALE The B2 CFR of Sophos primarily reflects the company's (1) strong position in the cybersecurity sector and its large exposure to the small and medium-sized enterprise (SME) segment; (2) wide range of converged product offering in the endpoint and networks security market; (3) strong renewal and retention rates; and (4) good liquidity, supported by good free cash flow (FCF) generation and access to an ample revolving credit facility (RCF) currently undrawn. Counterbalancing these strengths are the company's (1) still high Moody's-adjusted leverage (on a cash-EBITDA basis) of 6x (accounting basis: 9.3x); (2) reliance on channel partners for the execution of its sales strategy; (3) exposure to the fast-growing, although very competitive, cybersecurity market; and (4) exposure to increasing costs for technical staff, reducing EBITDA growth potential. Moody's anticipates Sophos' revenue growth, before purchase price allocation adjustments, to remain sustained in the low-teens and high-single digit percentages over fiscal 2023 and 2024, respectively, driven by the company's next-generation products and MSP as well as cross sell and upsell. The rating agency forecasts Moody's-adjusted cash EBITDA to stand at around $330-$350 million in fiscals 2023 and 2024 (fiscal 2022: $313 million) as wage inflation but also a step up in marketing and go-to-market costs will partially offset the positive impact from revenue growth. Conversely, accounting EBITDA will likely decline over fiscal 2023 when excluding the positive impact from deferred revenues, reflecting the increasing cost base, before a general improvement over fiscal 2024. Moody's expects Moody's-adjusted FCF to be in the $100-150 million range over fiscal 2023 and 2024 compared with $176 million in fiscal 2022. Relative to 2022, FCF over the next two fiscal years will be negatively affected by pressures on EBITDA as well as the rise in interest and tax payments. Cash flow generation will also be impacted by the increase in capital spending due to special software implementation projects. This is likely to translate into a Moody's-adjusted FCF/debt of around 6%-7% over the same time frame (fiscal 2022: 9.3%). The rating agency estimates Moody's-adjusted leverage on a cash EBITDA basis in the 5.5x-6x range in fiscal 2023 before a further reduction in fiscal 2024 to below 5.5x. On an accounting basis, Moody's-adjusted leverage will likely be higher at around 8x-10x. Moody's-adjusted cash EBITDA includes an adjustment whereby deferred revenues and expenses are included. The rating agency considers this adjustment gives a realistic representation of the underlying profitability and cash generation of the company for the purposes of leverage metrics. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS In terms of governance, after the closing of the LBO in March 2020, Sophos became a private company fully owned by the private equity firm Thoma Bravo. Over the past several years, the company's growth strategy has been largely organic and supplemented by a number of bolt-on acquisitions funded through excess cash flows. LIQUIDITY Moody's views Sophos' liquidity as good, based on the company's cash flow generation, available cash resources of around $250 million as of March 2022 and a $125 million committed RCF, as well as an long-dated maturity profile. The rating agency expects the company to generate good FCF through fiscal 2024, supporting the liquidity of the business. The company's RCF has a springing first lien leverage covenant, which will be tested only when the facility is drawn by more than 35%. Headroom is currently ample. STRUCTURAL CONSIDERATIONS The B2-PD probability of default rating reflects Moody's assumption of a 50% family recovery rate given the covenant-lite structure of the term loan. The B2 instrument ratings on the guaranteed senior secured first term loan and the RCF are in line with the corporate family rating, reflecting the pari passu capital structure of the company. Moody's sees the security package as reasonably weak because security primarily consists of material assets of the company's US operations, as well as guarantees from material subsidiaries (accounting for at least 80% of consolidated EBITDA). RATIONALE FOR STABLE OUTLOOK The stable rating outlook reflects Moody's view that Sophos' operating performance will remain resilient over the next 12-18 months. As a result, the rating agency expects Moody's-adjusted debt/EBITDA (on a cash basis) to remain at around 5.5x-6x and Moody's-adjusted FCF/debt to remain in the mid-to-high single digit percentages. The stable outlook incorporates the rating agency's assumption that there will be no transformational acquisition and no deterioration in the company's liquidity profile. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A rating upgrade would depend on a consistent and sustainable improvement in the company's underlying operating performance. Positive pressure on Sophos' ratings could arise if: (1) Moody's-adjusted FCF/debt improves sustainably towards 15%; and (2) Moody's-adjusted debt/EBITDA (on a cash-EBITDA basis) declines well below 5x. Conversely, the ratings would come under negative pressure if: (1) Moody's-adjusted FCF/debt reduces to below 5%; or (2) cash-based Moody's-adjusted leverage were greater than 6.5x for a sustained period; or (3) liquidity weakens. LIST OF AFFECTED RATINGS Issuer: Sophos Holdings, LLC Upgrades: BACKED Senior Secured Bank Credit Facility, Upgraded to B2 from B3 Outlook Actions: Outlook, Remains Stable Issuer: Sophos Intermediate II Limited Upgrades: LT Corporate Family Rating, Upgraded to B2 from B3 Probability of Default Rating, Upgraded to B2-PD from B3-PD Outlook Actions: Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Software published in June 2022. COMPANY PROFILE Headquartered in Abingdon-on-Thames (United Kingdom), Sophos is a global provider of endpoint and network security solutions. Primarily focusing on the SME market, Sophos sells all of its products through its channel of more than 50,000 partners worldwide. In fiscal 2022, Sophos generated $926 million in reported revenue and $264 million in company-adjusted EBITDA. The company is owned by private equity firm Thoma Bravo after the completion of the LBO in March 2020. VENN MEDIA: Goes Into Voluntary Liquidation, Halts Trading ---------------------------------------------------------- Emily Wallin at Exhibition News reports that Venn Media has announced it has ceased trading and cancelled the London Dessert Festival. The consumer event was due to be held at the Business Design Centre on Aug. 12 to Aug. 14, EN discloses. Speaking exclusively to EN about the decision to go into voluntary liquidation, founder Lyndon Baptiste said: "We are absolutely heartbroken to have to cancel the London Dessert Festival. Having launched Venn Media during the global pandemic, the team put everything into planning the execution of an exciting and interactive event to capture audiences craving face-to-face interaction after two years of intermittent lockdowns and social distancing. "Sadly, due to the ongoing impact of the pandemic on the sector and the current financial crisis, we have found that whilst exhibitors are booking, they prefer to keep funds in their accounts as long as possible and are paying later than ever before. This, teamed with ticket sales which are coming in much later than anticipated, as is reflected across the whole industry, caused a cash flow issue which led us to take the decision to cancel the event and put Venn Media into insolvency in a bid to minimise the impact across the whole supply chain." In a statement the company said that due to financial difficulties following from the pandemic and financial crisis it had been unable to achieve the sponsors or ticket sales to go ahead with the event, EN relates. The company has appointed Libertas insolvency practitioners and the company was placed into voluntary liquidation on July 20, EN discloses. Consumers with tickets were advised to seek refunds from their bank or credit card providers in the first instance, EN states. Creditors were warned they would be unlikely to be reimbursed any losses, EN notes. According to EN, in a statement Venn Media said: "Libertas Associates Limited a firm of licensed insolvency practitioners has been instructed to assist in placing the company into creditors' voluntary liquidation. Formal notice of the meetings will be despatched to all known creditors. "Unfortunately, from information currently available Libertas have advised that it is unlikely that sufficient funds will be realised to facilitate a payment to creditors from the Liquidation. Creditors will be updated if this position changes." "Please accept our apologies for not being able to send out a personal message but as we trust you will appreciate, there are a significant number of people that will be affected by this and we were keen to put the message out as swiftly as possible. All known creditors will be contacted in due course." ********* 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 * * *