/raid1/www/Hosts/bankrupt/TCREUR_Public/220804.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
Thursday, August 4, 2022, Vol. 23, No. 149
Headlines
D E N M A R K
DFDS A/S: Egan-Jones Retains B+ Senior Unsecured Ratings
F R A N C E
ACCOR SA: Egan-Jones Retains BB+ Senior Unsecured Ratings
I R E L A N D
JUBILEE CLO 2022-XXVI: S&P Assigns Prelim B-(sf) Rating to F Notes
KINBANE 2022-RPL 1: S&P Assigns B- (sf) Rating to Class F Notes
I T A L Y
ENEL SPA: Egan-Jones Retains BB Senior Unsecured Ratings
K A Z A K H S T A N
LEASING GROUP: Fitch Lowers LongTerm IDRs to 'B-', Outlook Stable
N O R W A Y
NORWEGIAN AIR: Egan-Jones Retains BB Senior Unsecured Ratings
R U S S I A
RUSSIA: EU to Add Sberbank, UMMC to Sanctions List
XALQ BANK: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
S L O V E N I A
SLOVENIA: Insolvency Law Draft Amendment in Limbo, Says Atty.
S P A I N
EL CORTE INGLES: S&P Withdraws 'BB+' Issuer Credit Rating
S W E D E N
SAS AB: Egan-Jones Retains C Senior Unsecured Ratings
T U R K E Y
TAKASBANK: Fitch Cuts LongTerm IDRs to 'B', Outlook Negative
TAM FINANS: Fitch Cuts LT Foreign Curr. IDR to B-, Outlook Neg.
TURKIYE IS BANKASI: Fitch Lowers LT Foreign Currency IDR to B-
VOLKSWAGEN DOGUS: Fitch Lowers LongTerm IDRs to B, Outlook Neg.
YAPI KREDI YATIRIM: Fitch Cuts LT Foreign Currency IDR to 'B-'
U K R A I N E
CITY OF KYIV: S&P Affirms 'CCC+' Long-Term ICR, Outlook Negative
NAFTOGAZ UKRAINY: Attempts to Negotiate Deal After Missing Payment
U N I T E D K I N G D O M
COUNTY WINDOWS: Enters Liquidation, Customers Affected
LIAM RUSSELL: Goes Into Liquidation Following Staff Embezzlement
NOT FOR PROFIT: Goes Into Liquidation, 700 Plan Holders Affected
STOLT-NIELSEN LTD: Egan-Jones Retains CCC+ Sr. Unsecured Ratings
STRATTON 2022-1: S&P Assigns Prelim CCC (sf) Rating on Two Notes
UK: Company Insolvencies Rise in Second Quarter of 2022
VALARIS PLC: Reactivates 4 Floaters a Year After Chapter 11 Exit
- - - - -
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D E N M A R K
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DFDS A/S: Egan-Jones Retains B+ Senior Unsecured Ratings
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Egan-Jones Ratings Company, on July 25, 2022, retained its 'B+'
foreign currency and local currency senior unsecured ratings on
debt issued by DFDS A/S.
Headquartered in Copenhagen, Denmark, DFDS A/S operates focused
transport corridors combining ferry infrastructure, including port
terminals and rail connections, and logistics solutions including
door-door full/part loads for dry goods and cold chain as well as
contract logistics for select industries.
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F R A N C E
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ACCOR SA: Egan-Jones Retains BB+ Senior Unsecured Ratings
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Egan-Jones Ratings Company, on July 29, 2022, retained its 'BB+'
foreign currency and local currency senior unsecured ratings on
debt issued by Accor SA.
Headquartered in Issy-les-Moulineaux, France, Accor SA, doing
business as AccorHotels, operates a chain of hospitality company.
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I R E L A N D
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JUBILEE CLO 2022-XXVI: S&P Assigns Prelim B-(sf) Rating to F Notes
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S&P Global Ratings assigned preliminary credit ratings to Jubilee
CLO 2022-XXVI DAC's class A, B-1, B-2, C, D, E, and F notes. At
closing, the issuer will issue subordinated notes.
The preliminary ratings reflect S&P's assessment of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior-secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio Benchmarks
CURRENT
S&P weighted-average rating factor 2,784.12
Default rate dispersion 486.84
Weighted-average life (years) 5.13
Obligor diversity measure 106.82
Industry diversity measure 17.23
Regional diversity measure 1.27
Transaction Key Metrics
CURRENT
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.13
Covenanted 'AAA' weighted-average recovery (%) 35.90
Covenanted weighted-average spread (%) 4.05
Covenanted weighted-average coupon (%) 4.65
Rating rationale
S&P said, "Under the transaction documents, the rated notes will
pay quarterly interest unless a frequency switch event occurs.
Following this, the notes will switch to semiannual payments. The
portfolio's reinvestment period will end approximately four and
half years after closing.
"We understand that at closing the portfolio will be
well-diversified, primarily comprising broadly syndicated
speculative-grade senior-secured term loans and senior-secured
bonds. Therefore, we have conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR400 million target par
amount, the covenanted weighted-average spread (4.05%), the
reference weighted-average coupon (4.65%), and the weighted-average
recovery rates of the portfolio. We applied various cash flow
stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"The transaction also features a principal redemption mechanism for
the class F notes (turbo redemption). Via the turbo redemption, 30%
of remaining interest proceeds available before equity distribution
are used to pay down principal on the class F notes. We have not
given credit to turbo redemption in our cash flow analysis,
considering some of the senior payments in the waterfall and the
ability to divert interest proceeds to purchase workout loans and
bankruptcy exchange.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned preliminary ratings."
Until the end of the reinvestment period on March 12, 2027, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, as long as the initial ratings
are maintained.
S&P said, "At closing, we expect that the transaction's documented
counterparty replacement and remedy mechanisms will adequately
mitigate its exposure to counterparty risk under our current
counterparty criteria.
"We expect the transaction's legal structure and framework to be
bankruptcy remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our preliminary ratings
are commensurate with the available credit enhancement for the
class A to E notes. Our credit and cash flow analysis indicates
that the available credit enhancement for the class B-1, B-2, C, D,
E, and F notes could withstand stresses commensurate with higher
rating levels than those we have assigned. However, as the CLO will
be in its reinvestment phase starting from closing, during which
the transaction's credit risk profile could deteriorate, we have
capped our preliminary ratings assigned to the notes.
"Taking the above factors into account and following our analysis
of the credit, cash flow, counterparty, operational, and legal
risks, we believe that our preliminary ratings are commensurate
with the available credit enhancement for all the rated classes of
notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A-1 to E notes
to five of the 10 hypothetical scenarios we looked at in our
publication, "How Credit Distress Due To COVID-19 Could Affect
European CLO Ratings," published on April 2, 2020. The results
shown in the chart below are based on the actual weighted-average
spread, coupon, and recoveries.
"For the class F notes, our ratings analysis makes additional
considerations before assigning ratings in the 'CCC' category, and
we would assign a 'B-' rating if the criteria for assigning a 'CCC'
category rating are not met."
Environmental, social, and governance (ESG) factors
S&P said, "We regard the exposure to ESG credit factors in the
transaction as being broadly in line with our benchmark for the
sector. Primarily due to the diversity of the assets within CLOs,
the exposure to environmental credit factors is viewed as below
average, social credit factors are below average, and governance
credit factors are average. For this transaction, the documents
prohibit (and or for some of these activities there are revenue
limits or can't be the primary business activity) assets from being
related to certain activities, including, but not limited to, the
following: coal, speculative extraction of oil and gas, private
prisons, controversial weapons, non-sustainable palm oil
production, speculative transactions in soft commodities, tobacco,
hazardous chemicals and pesticides, trade in endangered wildlife,
pornography, adult entertainment or prostitution, civilian weapons
or firearms, payday lending, activities that adversely affect
animal welfare. Accordingly, since the exclusion of assets from
these industries does not result in material differences between
the transaction and our ESG benchmark for the sector, no specific
adjustments have been made in our rating analysis to account for
any ESG-related risks or opportunities."
The transaction securitizes a portfolio of primarily senior-secured
leveraged loans and bonds, and it will be managed by Alcentra Ltd.
Ratings List
CLASS PRELIM. PRELIM. AMOUNT INTEREST RATE CREDIT
RATING (MIL. EUR) (%) ENHANCEMENT(%)
A AAA (sf) 230.80 3mE + 2.12 42.30
B-1 AA (sf) 43.40 3mE + 3.68 30.20
B-2 AA (sf) 5.00 6.00 30.20
C A (sf) 21.80 3mE + 4.77 24.75
D BBB- (sf) 25.90 3mE + 6.67 18.28
E BB- (sf) 17.90 3mE + 8.20 13.80
F B- (sf) 9.60 3mE + 11.00 11.40
Sub NR 37.40 N/A N/A
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
KINBANE 2022-RPL 1: S&P Assigns B- (sf) Rating to Class F Notes
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S&P Global Ratings assigned its credit ratings to Kinbane 2022-RPL
1 DAC's (Kinbane's) class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and
F-Dfrd notes. At closing, Kinbane also issued unrated class RFN and
Z notes.
S&P said, "Our ratings address the timely payment of interest and
the ultimate payment of principal on the class A notes. Our ratings
on the class B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd notes
address the ultimate payment of interest and principal on these
notes. The class B-Dfrd to F-Dfrd notes can continue to defer
interest even when they become the most senior class outstanding.
Interest will accrue on any deferred interest amounts at the
respective note rate.
"Our ratings on the class B-Dfrd to F-Dfrd notes also address the
payment of interest based on the lower of the stated coupon and the
net weighted-average coupon."
Senior fees and interest due on the class A notes are supported by
a liquidity reserve fund, the general reserve fund and available
principal.
Kinbane is a static RMBS transaction that securitizes a portfolio
of EUR574.1 million loans, which comprises mostly (92.95%)
owner-occupied and some buy-to-let (BTL) mortgage loans secured
over residential properties in Ireland. KBC Bank Ireland PLC and
Premier Homeloans Ltd. (a division of KBC) originated the loans.
At closing, the issuer used the issuance proceeds to purchase the
beneficial interest in the mortgage loans from the seller. The
issuer grants security over all its assets in the security
trustee's favor. S&P considers the issuer to be a bankruptcy remote
entity, and it has received legal opinions confirming that the sale
of the assets would survive the seller's insolvency.
Pepper Finance Corporation (Ireland) DAC acts as servicer for all
of the loans in the transaction. It assumed servicing
responsibility for the portfolio from KBC in February 2022. S&P has
considered this in light of its operational risk criteria, and it
does not constrain its ratings. Pepper will also act as legal title
holder until a perfection event occurs.
There are no rating constraints in the transaction under S&P's
structured finance sovereign risk criteria.
The documented replacement triggers and collateral posting
framework under the cap agreement support a maximum rating of 'AAA'
under our counterparty risk criteria.
Although the loans in the pool were originated as prime mortgages,
the portfolio has been characterized by high arrears levels
(currently 45.23%) and a significant number of restructures
(currently 95.46%). S&P has accounted for this in its analysis.
Ratings Assigned
CLASS RATING* AMOUNT (MIL. EUR) CLASS SIZE (%)
A AAA (sf) 399.126 69.50
B-Dfrd AA (sf) 40.199 7.00
C-Dfrd A (sf) 30.149 5.25
D-Dfrd BBB (sf) 18.664 3.25
E-Dfrd BB (sf) 18.664 3.25
F-Dfrd B- (sf) 11.485 2.00
RFN NR 11.485 2.00
Z NR 55.992 9.75
*S&P said, "Our ratings address timely receipt of interest and
ultimate repayment of principal on the class A notes and the
ultimate payment of interest and principal on the other rated
notes. Our ratings on the class B-Dfrd to F-Dfrd notes also address
the payment of interest based on the lower of the stated coupon and
the net weighted-average coupon."
§Credit enhancement includes subordination and a general reserve
fund.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
Dfrd--Deferrable.
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I T A L Y
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ENEL SPA: Egan-Jones Retains BB Senior Unsecured Ratings
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Egan-Jones Ratings Company, on July 26, 2022, retained its 'BB'
foreign currency and local currency senior unsecured ratings on
debt issued by Enel SpA.
Headquartered in Rome, Italy, Enel SpA operates as a multinational
power company and an integrated player in the global power, gas,
and renewables markets.
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K A Z A K H S T A N
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LEASING GROUP: Fitch Lowers LongTerm IDRs to 'B-', Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has downgraded Leasing Group JSC's (LG) Long-Term
Issuer Default Ratings (IDRs) to 'B-' from 'B' and National
Long-Term Rating to 'BB-(kaz)' from 'BB+(kaz)' and maintained the
Stable Rating Outlook.
KEY RATING DRIVERS
The downgrade reflects the presence of a new material related-party
exposure amounting 44% of LG's capital at end-1Q22 which in Fitch's
view has undermined the company's quality of capital and earnings.
In particular, LG's capitalisation and leverage profile had been
viewed as a credit strength by Fitch and this has now been weakened
by the presence of this transaction which is secured with related
party equity shares. The presence of this transaction and its
rating impact has meant Fitch has increased its ESG relevance score
for Governance Structure to '5'.
LG's ratings are driven by the company's standalone
creditworthiness, reflecting its small franchise with low market
share, concentrated and unseasoned portfolio, as well as
related-party exposure, which could pressure capital and earnings.
Additional risks include low provision coverage of impaired
exposures that could further pressure company's earnings and
capital, as well as high single name concentrations making company
vulnerable to sudden asset quality deterioration. At the same time,
the ratings are underpinned by a record of stable profitability
through the economic cycle, as well as improving funding and sound
liquidity profiles.
The assessment does not factor in potential support from LG's two
largest shareholders, Samruk-Kazyna Invest (SK Invest), a 100%
subsidiary of Kazakhstan's sovereign wealth fund Samruk-Kazyna
(BBB/Stable/F2), which holds a 32% stake in LG, and Tengri Capital
& its affiliates (TC) (not rated). In Fitch's view LG would not
receive government support as Fitch understands SK Invest's stake
to be a portfolio investment with a probable exit in 1H24, with TC
likely acquiring the stake. TC currently manages SK Invest's stake,
with the latter's participation in company's operations being
minimal.
LG's lease book is concentrated, with the largest 10 borrowers
accounting for 33% of the lease book at end-1Q22. Lease book
remained stable in 1Q22 but grew by 28% in 2021. The company
largely finances standard and fairly liquid equipment, with motor
vehicles accounting for 48% at end-1Q22 and agricultural equipment
exposure being minimal at 9%. This lifts some of the residual value
risks pressure in case of lessor defaults. About 44% of the
portfolio benefits from government subsidies on interest rates
and/or purchase prices, which partly reduces default risk on these
contracts.
Impaired assets are high and asset quality weakened to 20.2% at
end-1Q22 from 15.7% at end-2021 (four-year average of 20.5%).
Management says around a third of impaired assets are legacy
exposures and are fully provisioned. Total provisions were modest
covering only 32% of total impaired assets at end-1Q22 (42% at
end-2021) as management believes that the underlying collateral
partly balances final credit losses.
LG's profitability was supported by a healthy net interest margins
of 12.4% at end-1Q22 annualised (13.6% at end-2021) and pre-tax
return on average assets at 7.8% in 1Q22 annualised (6.4% in 2021;
2020: 7.4%). This was partly a function of low leverage leading to
minimal interest expenses, which could increase, should LG attract
more of market funding. In Fitch's view LG's quality of earnings
and profitability will likely come under pressure in light the
related party exposure, higher inflationary and interest rate
environment, affecting company's margins, as well as higher
provisioning needs from asset quality pressures.
LG's debt/tangible equity increased to 0.9x at end-1Q22 (0.5x at
end-2020), as company issued its debut bond in 2021. Management
says, they target to maintain the leverage ratio within 1.5x-2.0x
range. LG's absolute capital level is modest (USD13
million-equivalent at end-1Q22). The company has not paid dividends
and management says they intend to maintain equity to asset ratio
at around 50% with no dividends planned to support company's
growth. Notwithstanding the relatively conservative leverage
position, Fitch's view the presence of a new material related party
exposure as undermining LG's capital and leverage position, as does
the low provisioning coverage of impaired assets.
LG is largely funded through equity with non-equity funding
denominated in Kazakhstani tenge and coming from state-owned funds
JSC Agrarian Credit Corporation (BBB-/Stable/F3, 1% of total
funding including equity at end-1Q22), DAMU (32%) as well as
short-term bonds (16%). State funding is at favourable conditions
with relatively low interest rates, which could be pressured as key
rate increases and long maturities. LG has plans to attract more of
market funding in the short to medium-term.
LG has an ESG Relevance Score of '5' for governance structure due
to the recent material increase in related-party transactions,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Sustained growth of LG's franchise and business scale, with
material diversification of the loan portfolio away from
single-name concentrations, while maintaining solid financial
metrics and solid asset quality, could be credit positive;
-- Strengthening of corporate governance and a reduction in
related-party activity coupled with other factors could be rating
positive;
-- Proven record of material and stable funding from an
international financial institution or participation of such
institution in company's equity could be rating positive.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Material deterioration in quality of equity capital position,
compromising the business-model viability and threatening the
solvency of the company as a whole. Operational events that
potentially reduces funding market access that raises refinancing
risks.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
LG has an ESG Relevance Score of '5' for governance structure due
to the recent material increase in related-party transactions,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Rating Prior
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Leasing Group JSC LT IDR B- Downgrade B
ST IDR B Affirmed B
LC LT IDR B- Downgrade B
LC ST IDR B Affirmed B
Natl LT BB-(kaz) Downgrade BB+(kaz)
Gov't. Support ns New Rating
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N O R W A Y
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NORWEGIAN AIR: Egan-Jones Retains BB Senior Unsecured Ratings
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Egan-Jones Ratings Company, on July 26, 2022, retained its 'BB'
foreign currency and local currency senior unsecured ratings on
debt issued by Norwegian Air Shuttle ASA.
Headquartered in Baerum, Norway, Norwegian Air Shuttle ASA provides
airline services.
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R U S S I A
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RUSSIA: EU to Add Sberbank, UMMC to Sanctions List
--------------------------------------------------
Francesco Guarascio at Reuters reports that the EU is set to add
Russia's top lender Sberbank and the head of giant zinc and copper
firm UMMC to its list of individuals and companies banned for
supporting Moscow's invasion of Ukraine, according to draft
documents seen by Reuters.
According to Reuters, the 48 individuals and nine entities to be
added to the sanctions list, prepared by the EU foreign affairs
service, also include a motorcycle club, actors, politicians and
family members of previously sanctioned businesspeople.
Adding Sberbank would freeze its assets in the West and completely
prevent transactions with the exception of financial operations for
the trade in food and fertiliser, an EU official told Reuters.
Russia's largest lender had already been excluded from the SWIFT
bank messaging system, hampering its ability to conduct business,
Reuters states.
Transactions for the wind-down of its subsidiary in Europe will
continue to be allowed for six months, according to the official
and one of the documents, Reuters notes.
Sanctions rules will however be revised to ensure Russian banks
previously added to the list can use some frozen funds to trade
food and fertilizers, a measure meant to eliminate inadvertent
hurdles to global food trade, Reuters discloses.
The head of zinc and copper giant UMMC, Andrei Kozitsyn, is being
added to the list as deemed to be "involved in economic sectors
providing a substantial source of revenue to the government",
Reuters quotes the document as saying.
The move, expected to be adopted last July 20, would take to 1,229
the total number of individuals banned by the EU over the war in
Ukraine, and increase to 110 the number of listed companies,
according to Reuters.
XALQ BANK: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
------------------------------------------------------------
Fitch Ratings has downgraded Joint Stock Commercial Xalq Bank of
the Republic of Uzbekistan's (Xalq) Viability Rating (VR) to 'ccc+'
from 'b-'. Fitch has also affirmed the bank's Long-Term Issuer
Default Ratings (IDRs) at 'BB-' with Stable Outlooks.
Fitch has withdrawn Xalq's Support Rating and Support Rating Floor
as they are no longer relevant to the agency's coverage following
the publication of its updated Bank Rating Criteria on November 12,
2021. In line with the updated Criteria, Fitch has assigned Xalq a
Government Support Rating (GSR) of 'bb-'.
KEY RATING DRIVERS
State Support Drives IDRs: The affirmation of Xalq's IDRs reflects
Fitch's view of a moderate probability of support from the
government of Uzbekistan (BB-/Stable), in case of need, as
reflected by the bank's GSR of 'bb-'. This view is based on its
majority state ownership, important policy role as the government's
agent for pension distribution and management and social
development lending as well as the low cost of potential support
relative to the sovereign's international reserves. The Stable
Outlook on the ratings reflects that on the sovereign.
VR Downgrade: Xalq's VR downgrade reflects material deficiencies in
the bank's business model and risk-management framework that
significantly eroded its asset quality over the past year and
resulted in a large net loss in 2021. The bank has recently
remodeled its underwriting standards and risk controls. However,
the quality of newly issued loans remains untested while its large
stock of legacy problems will continue to weigh on Xalq's
performance and capitalisation, in Fitch's view.
Risky Operating Environment: Fitch considers Uzbekistan's operating
environment as volatile and vulnerable to external shocks,
including those related to the Russia-Ukraine conflict. Fitch also
factors in the dominance of state-owned banks, high dollarisation,
a considerable share of external debt, and rapid lending growth in
recent years while underwriting standards remain weak.
Medium-Sized Bank, Policy Lending: Xalq is Uzbekistan's
sixth-largest bank as of end-1Q22, making up 6% of sector assets
and loans. It has been designated as one of several state-owned
banks responsible for subsidised lending under government
development programs, with a focus on family entrepreneurship loans
in Uzbekistan's rural areas. The bank has also been actively
developing commercial franchise in the SME segment.
High-Risk Lending, Growth Moderated: Xalq's active participation in
subsidised development lending evokes substantial asset-quality
risk given weak underwriting standards on these loans. Risks also
stem from rapid lending growth in previous years (averaging over
100% in 2019-2020, FX-adjusted) and an untested nature of issued
loans as many of them are still on grace periods. Given capital
constraints, loan growth has moderated since 2021, and Fitch
expects it be more aligned with that of the sector in 2022-2023.
Impaired Loans Spike: While 2021 IFRS accounts are not yet
available, we estimate that Xalq's impaired loans (Stage 3 loans
under IFRS9) soared in 2021 to 20%-25% of gross loans at end-2021.
This is based on a significant loan quality deterioration in Local
GAAP accounts, with problem loans (those in the three
lowest-quality brackets) increasing to a high 20% at end-2021, up
from 3% at end-2020, before stabilising at 19% of gross loans at
end-1Q22. Problem exposures were only 40% covered by loan loss
allowances at end-1Q22, which implies the need for further
provisioning, in Fitch's view.
Fitch expects impaired loans to remain about 20% in 2022, despite
large write-offs as the bank continues to recognise impairment in
its loan book.
Impairment Charges Cause Losses: Xalq's net interest margin under
Local GAAP reduced by about 100bp to 5% in 2021 due to higher
funding costs. Large country-wide branch network constrains the
bank's operating efficiency, with the cost-to-income ratio at above
70% in 2021. Pre-impairment profit made up a limited 2% of average
gross loans, which provides only a modest buffer against high
asset-quality risks. The cost of risk increased substantially in
2021, reaching 13% of average loans and translating into a large
net loss.
Fitch expects the bank could also be loss-making in 2022 given
continued provisioning needs and weak operational performance.
State Support Underpins Capital: Given weak internal profit
generation, Xalq relies on regular capital contributions from the
government to support its capitalisation and provide room for loan
growth. The bank has received over UZS6 trillion (about USD600
million) since 2018, including UZS3.2 trillion in 2021 to remedy
negative performance. As a result, Tier 1 and Total capital ratios
under Local GAAP improved to 17% and 19%, respectively, at
end-2021. However, we assess the bank's capital buffer as limited
in view of remaining asset-quality pressures and high encumbrance.
Stable Funding, Adequate Liquidity: Xalq is funded by a mix of
state-related loans and deposits (30% of total liabilities at
end-1Q22), non-state deposits (40%) and wholesale obligations
(another 27%). The bank's deposit base is very stable as it mainly
comprises mandatory pension savings accounts, which cannot be
freely drawn. However, legislation obliges Xalq to accrue
above-inflation interest rates on these accounts, which inflates
its funding costs (17% in 2021 under Local GAAP). The bank's
liquidity cushion made up a good 18% of total assets at end-2021
and, net of planned wholesale debt repayments in the next 12
months, covered a sizeable 40% of non-state deposits.
Sovereign Support: The authorities' ability to provide support is
underpinned by the moderate size of the banking sector relative to
the economy (total assets were 57% of GDP at end-2021) and large
international reserves (USD35 billion at end-2021). However, our
assessment of support ability also factors in high concentrations
in the banking sector (with state-owned banks accounting for 82% of
end-1Q22 sector assets), high sector loan dollarisation (50% at
end-1Q22), a high share of external funding in the banking sector
and vulnerability to external shocks in a volatile operating
environment, as government finances are sensitive to commodity
exports and remittances.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Xalq's support-driven IDRs could be downgraded if Uzbekistan's
sovereign IDR is downgraded. Fitch could also downgrade the bank's
IDRs and notch them off the sovereign IDR in case of a marked
weakening of the bank's policy role or of its association with the
sovereign. However, Fitch currently views this as unlikely.
The VR could be downgraded if further asset-quality deterioration
results in further substantial losses eroding Xalq's capital ratios
below statutory minimums while not being timely and adequately
replenished by new equity injections.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of Xalq's IDRs would mirror the upgrade of the sovereign
IDR.
A VR upgrade could stem from material improvements in Uzbekistan's
operating environment coupled with material strengthening of Xalq's
risk profile and successful work-out of legacy problem loans so
that asset quality significantly improves. It would also require
substantial improvements in the bank's profitability.
VR ADJUSTMENTS
No adjustments are needed to the implied VR scores.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Xalq's IDRs are equalised to the sovereign IDR of the Republic of
Uzbekistan based on Fitch's view of a moderate likelihood of state
support.
ESG CONSIDERATIONS
Xalq has an ESG Relevance Score of '4' for Financial Transparency,
reflecting delays in IFRS accounts publications, which are prepared
only on annual basis. These factors have a negative impact on the
bank's credit profile and are relevant to the ratings in
conjunction with other factors. The bank also has ESG Relevance
Score of '3' for 'Human Rights, Community Relations, Access and
Affordability', given the bank's focus on social lending to
lower-income citizens to decrease poverty and promote
entrepreneurship.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, is a score of '3' - ESG issues are
credit neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Rating Prior
------ -----
Joint Stock Commercial
Xalq Bank of the
Republic of Uzbekistan
LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Viability ccc+ Downgrade b-
Support WD Withdrawn 3
Support Floor WD Withdrawn BB-
Gov't. Support bb- New Rating
===============
S L O V E N I A
===============
SLOVENIA: Insolvency Law Draft Amendment in Limbo, Says Atty.
-------------------------------------------------------------
Simon Tecco, Esq., of Wolf Theiss, in an article for Mondaq,
reports that Slovenia is set to implement the Directive (EU)
2019/1023 on Restructuring and Insolvency ("the Directive"), but it
is still not entirely clear exactly when and how its provisions
will be transposed into Slovenian law.
A draft amendment of the main Slovenian insolvency law, the
Financial Operations, Insolvency Proceedings, and Compulsory
Dissolution Act ("Insolvency Act") that (among several other
topics) provides for transposition has been in circulation among
various state authorities and the interested public for over a
year. This draft was prepared under the previous government;
however, it has not been finally confirmed by the executive, nor
has it been proposed to the National Assembly for adoption.
The necessity for insolvency law reform has been mentioned as
necessary by the newly elected Government; nevertheless, whether or
not it will adopt the draft in its current form remains to be
seen.
In the course of public consultations, there have been notable
criticisms to the proposed changes. The re-composition of the
Government and National Assembly may offer those voices an
opportunity to revisit these issues and pressure for different
solutions.
The new Government and National Assembly would have to move
quickly, if the deadline for transposition of the Directive is to
be respected. However, Slovenia has missed such deadlines in the
past, and it is conceivable that it may happen again, considering
the broad scope of other legislative reforms announced by the
Government.
Against this backdrop, it is impossible to accurately predict if,
when and in what form the current draft amendment of the Insolvency
Act will be adopted. Nevertheless, it remains possible that the
mechanism of implementation of the Directive provided under the
draft may survive any potential redrafts.
Contemplated Scope of implementation
The current Insolvency Act already provides for a preventive
restructuring mechanism for companies at risk of becoming insolvent
within one year. The preventive restructuring process was
introduced in late 2013 and provides for the restructuring of
financial receivables of small, medium and large companies.
The process is a mix of contractual and court restructuring. It is
formally initiated by the court and stops all enforcement of
financial receivables. The debtor proposes the initiation of the
process; however, creditors holding over 30% of all financial
receivables must consent to it, and creditors holding over 30% of
all financial receivables may validly oppose it.
The product of a successful preventive restructuring process is a
financial restructuring agreement. This agreement, however, needs
to be confirmed by the court in order to take effect. If creditors
holding over 75% of the financial receivables consent to the
financial restructuring agreement, it is confirmed. Thereafter, it
bindingly regulates all financial receivables of the company,
regardless of whether an individual financial creditor provided
their consent or not.
Under the available draft amendment of the Insolvency Act, the
above process would remain as is. However, a second, broader
process would be introduced that expands the scope of preventive
restructuring to companies of all sizes (with the exception of
banks and insurance companies) all types of receivables.
This so-called "court restructuring process due to threat of
insolvency" essentially mirrors the existing compulsory settlement
model, applicable in situations where the debtor has already become
insolvent. There are, however, three notable differences between
the compulsory settlement and the new court restructuring process:
-- there is no possibility of a debt-to-equity swap under the
court restructuring process;
-- unlike with compulsory settlements, creditors cannot initiate
the court restructuring process;
-- if the court restructuring process is unsuccessful, the court
does not automatically initiate bankruptcy proceedings (which is
the case in compulsory settlement proceedings).
When would a court restructuring process be initiated?
The draft amendment of the Insolvency Act provides that a court
restructuring process may be initiated, if the debtor is at risk of
becoming insolvent within a year. The aforementioned condition is
deemed as fulfilled if creditors holding over 30% of all
receivables against the debtor agree with the initiation of the
process.
The process may not be initiated if:
-- less than three years have passed since the debtor has
fulfilled its obligations under a confirmed compulsory settlement;
-- less than two years have passed since (i) the debtor withdrew
a proposal for compulsory settlement or (ii) such a proposal was
rejected by the court (and bankruptcy proceedings were not
initiated);
-- the debtor has not fulfilled their duties in respect to
submission of annual reports in accordance with the Slovenian
Companies Act;
-- the debtor submitted false, incorrect or incomplete data to
the tax authority, which resulted in a subsequent imposition of
additional tax obligations exceeding EUR 4,000;
-- the debtor was convicted of a criminal offence in relation to
employment relationships, assets, the economy or transactions.
The initiation of the process may be proposed by the debtor or by
the personally-liable shareholder(s) of the debtor.
What would be the effects of initiation?
Once the court restructuring process is initiated, all ongoing
enforcement and security proceedings against the debtor would be
stopped, and new proceedings would not be initiated for a period of
up to four months following initiation. It is possible to extend
this period for up to 12 months.
The management of the debtor would become supervised by the court
and a court-appointed administrator. Further, contracts essential
for the ongoing operation of the debtor could not be terminated
during this period.
Which documents would be required?
With its proposal for the initiation of the court restructuring
process, the debtor would have to provide the following documents:
i. a report on the financial situation and operation of the
debtor;
ii. an auditor's report on the above containing an opinion with
no reservations;
iii. a financial restructuring plan;
iv. a report from a certified business appraiser with a positive
opinion.
The financial restructuring plan could offer creditors a reduction
of their receivables and interest rates and/or an extension of the
term of repayment.
How is the restructuring voted on and what is the result?
The voting on the restructuring plan would be the same, as in the
compulsory settlement proceedings. Each individual receivable is
multiplied by a particular quotient, depending on the nature of the
receivable (secured, unsecured, conditional unsecured, etc.). The
restructuring is confirmed, if creditors holding an amount of at
least 60% of the multiplied total of the receivables against the
debtor vote in its favour.
The restructuring would be confirmed by the court and would
regulate all the receivables covered under the plan. The court
decision would also constitute a directly enforceable title for
such receivables in the event that the debtor fails to meet its
obligations under the confirmed restructuring.
Is there a simplified restructuring procedure?
The Insolvency Act provides for a relatively simplified procedure
for the restructuring of financial receivables with less procedural
burdens and formal requirements, as well as less court
interference.
In respect to the court restructuring process, the rules for a
simplified compulsory settlement for small businesses would also
apply to court restructurings of such enterprises (no auditor or
certified business appraiser's opinion would have to be obtained,
among other simplifications).
Takeaways
The Insolvency Act is already considered one of (if not the most)
complex and challenging pieces of legislation due to many
inconsistent and unclear rules. This is particularly the case with
respect to rules governing compulsory settlements, where courts and
legislators alike have struggled to strike an adequate balance
between ensuring the continued operation of the debtor and the
interests of creditors.
The draft amendment of the Insolvency Act contains very few
provisions specifically regulating the new court restructuring
process; instead, the process is governed almost exclusively by the
existing rules of compulsory settlement proceedings. This approach
may be problematic in several ways:
-- all the issues of compulsory settlement proceedings that have
not been properly addressed either in legislation or judicial
practice will be transferred to the pre-insolvency court
restructuring process;
-- the compulsory settlement proceeding is a "last chance"
proceeding – an alternative to bankruptcy and liquidation, once
the debtor is already insolvent. The direct application of its
rules to a pre-insolvency situation without clear guidance or
proper re-calibration opens an entirely new set of challenges and
uncertainties that will take a considerable amount of time to
uniformly resolve through the courts;
-- larger creditors holding decisive influence over the outcome
of any restructuring effort would appear to have very little
incentive to agree to such process or vote in favour of such
restructuring, as they are likely to find existing alternatives of
voluntary out-of-court contractual restructurings and compulsory
settlements much more attractive;
-- the process would be as cost-, effort- and time-intensive for
the debtor, as a compulsory settlement proceeding. However, a
court restructuring process does not contain the implied threat of
liquidation inherent to a compulsory settlement proceeding, which
serves as a motivator for creditors to agree to the proposed
settlement terms. Coupled with considerations under point iii.,
there may be comparatively few incentives for debtors to consider
the new court restructuring process as well.
To sum up, while the draft amendment of the Insolvency Act does
formally provide new restructuring tools in line with the
Directive, their practical value would appear to be severely
limited. These tools would appear most useful to companies that
have a dispersed debt structure and principally require the
restructuring of unsecured commercial claims.
=========
S P A I N
=========
EL CORTE INGLES: S&P Withdraws 'BB+' Issuer Credit Rating
---------------------------------------------------------
S&P Global Ratings withdrew its ratings on El Corte Ingles S.A.
(ECI) at the company's request. S&P's issuer credit rating on the
company was 'BB+' and the outlook was stable at the time of
withdrawal.
ECI recently repaid its publicly rated bonds and its capital
structure now only comprises bank debt (not rated by S&P Global
Ratings).
===========
S W E D E N
===========
SAS AB: Egan-Jones Retains C Senior Unsecured Ratings
-----------------------------------------------------
Egan-Jones Ratings Company, on July 25, 2022, retained its 'C'
foreign currency and local currency senior unsecured ratings on
debt issued by SAS AB. EJR also retained its 'D' rating on
commercial paper issued by the Company.
Headquartered in Stockholm, Sweden, SAS AB offers air
transportation services.
===========
T U R K E Y
===========
TAKASBANK: Fitch Cuts LongTerm IDRs to 'B', Outlook Negative
------------------------------------------------------------
Fitch Ratings has downgraded Istanbul Takas ve Saklama Bankasi
A.S.'s (Takasbank) Long-Term Foreign- and Local-Currency Issuer
Default Ratings (IDRs) to 'B' from 'B+' with Negative Rating
Outlooks.
The rating actions follow the downgrade of Turkiye's sovereign
rating on July 8, 2022 and the subsequent downgrade of Turkiye's
largest banks. The Negative Outlook mirrors that of the sovereign
rating.
KEY RATING DRIVERS
The downgrade of Takasbank's Long-Term IDRs to 'B' from 'B+' and
Government Support Rating (GSR) to 'b' from 'b+' reflects the
weaker ability of the Turkish sovereign to support Takasbank.
Takasbank's IDRs and GSR reflect our view of a limited probability
of support from the Turkish sovereign.
Takasbank's GSR is higher than most commercial systemically
important domestic banks. This is because, in our opinion,
Takasbank has exceptionally high systemic importance for the
Turkish financial sector. Contagion risk from Takasbank's default
would be considerable, given the bank's inter-connectedness with
the wider Turkish financial sector as Turkiye's only central
counterparty clearing house (CCP). We believe that the ability of
the Turkish sovereign to support Takasbank in case of need is
higher than for the development and systemically important domestic
banks as Takasbank has no corporate debt and has only minor direct
foreign-currency exposure.
The Viability Rating (VR) downgrade to 'b-' from 'b' reflects
Fitch's view that following the downgrade of the VRs of Takasbank's
major bank counterparties, its credit and counterparty risk
exposures have increased. While Fitch views Takasbank's credit and
market risks in its core clearing activities as well-managed and in
isolation supporting a VR above Turkiye's operating environment,
our overall assessment is weighed down by Takasbank's considerable
concentration risk in its sizeable treasury activities.
Bank counterparty risk is particularly pronounced in Takasbank's
non-clearing treasury activities, which account for around 40% of
revenue. The size of treasury placements is variable but typically
accounts for up to 10x Takasbank's equity base, increasing
Takasbank's sensitivity to worsening commercial banks' credit
quality. Turkiye's large banks (VRs, b-) are consistently the
largest counterparties in Takasbank's treasury activities.
Takasbank is Turkiye's only CCP and is majority-owned by Borsa
Istanbul, Turkiye's main stock exchange. Borsa Istanbul is in turn
majority-owned by the Turkiye Wealth Fund. It operates under a
limited banking licence, and is regulated by three Turkish
regulatory bodies: Central Bank of Turkiye, Banking Regulation and
Supervision Agency and the Capital Markets Board.
ESG Influence
Takasbank has an ESG relevance score of '4' for governance
structure, reflecting potential government influence over the
board's strategy and governance effectiveness.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade of Turkiye's sovereign rating would be mirrored in
Takasbank's IDRs;
- A deterioration in the credit profiles of Takasbank's main
commercial bank counterparties would put pressure on
Takasbank's VR;
- A material operational loss or a materially increased risk
appetite, for example, in the bank's treasury activities,
particularly to lower credit-quality counterparties, would
also put pressure on Takasbank's VR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action on Turkiye's sovereign rating would
be mirrored in Takasbank's IDRs;
- Improvement of the credit profiles of Takasbank's main
commercial bank counterparties or a material reduction in the
size or concentration of Takasbank's treasury activities
could, in conjunction with unchanged or improving financial
profile metrics, lead to an upgrade of Takasbank's VR.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Takasbank's ratings are driven by Turkiye's sovereign ratings.
ESG CONSIDERATIONS
Takasbank has an ESG Relevance Score of '4' for Governance
Structure due to potential government influence over the board's
strategy and governance, which has a negative impact on the credit
profile, and is relevant to the ratings in conjunction with other
factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Istanbul Takas ve
Saklama Bankasi A.S.
LT IDR B Downgrade B+
ST IDR B Affirmed B
LC LT IDR B Downgrade B+
LC ST IDR B Affirmed B
Viability b- Downgrade b
Government Support b Downgrade b+
TAM FINANS: Fitch Cuts LT Foreign Curr. IDR to B-, Outlook Neg.
---------------------------------------------------------------
Fitch Ratings has downgraded Tam Finans Faktoring A.S.'s (TFF)
Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B-' from
'B' with a Negative Outlook.
KEY RATING DRIVERS
The rating action follows the downgrade of Turkiye's Long-Term IDRs
on July 8, 2022. It reflects Fitch's expectation of growing
downside risks to TFF's growth prospects, asset quality and
profitability in 2022 in an increasingly deteriorating operating
environment. Fitch has revised TFF's Operating Environment score,
identified as a high importance factor, to 'b-' with a negative
trend.
TFF's ratings reflect the company's small franchise, a largely
secured funding profile and a business model focused on higher-risk
small businesses operating in a challenging operating environment.
The ratings also reflect the company's record of fairly limited
credit losses for the business model, a granular portfolio, low
market risk, a liquid balance sheet and diversified funding
sources.
TFF is an independent Turkish factoring company accounting for 3.2%
of sector assets at end-2021. The company has demonstrated its
ability to maintain adequate performance during Turkiye's 2018
economic crisis, the coronavirus pandemic and the economic
turbulence in 4Q21. TFF focuses on higher-risk underbanked
businesses with fairly short credit history and of small scale,
making them more vulnerable to macroeconomic volatility thereby
exposing TFF to heightened credit risks. The business model carries
high operating costs due to small ticket sizes and the
labour-intensive nature of sales that highlights the importance of
scale.
TFF's fairly small credit losses are supported by an IT-based
scorecard and monitoring tools, which automatically collect and
analyse large amount of data on borrowers and receivables
originators, allowing TFF to service a wider range of Turkish
factoring sector customers.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A further deteriorating operating environment that affects
Fitch's assessment of asset quality and earnings, which in
turn would lead to a lower tolerance for leverage.
- A material increase leverage from end-2021 levels that weakens
funding access and impairs liquidity.
- A sharp increase in impaired receivables or deterioration
of profitability that increases solvency risk.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Stabilisation of Turkiye's operating environment, coupled with
TFF's resilient performance, is likely to lead to a revision
of the Outlook to Stable.
Entity/Debt Rating Prior
----------- ------ -----
Tam Finans Faktoring A.S. LT IDR B- Downgrade B
ST IDR B Affirmed B
LC LT IDR B Affirmed B
LC ST IDR B Affirmed B
TURKIYE IS BANKASI: Fitch Lowers LT Foreign Currency IDR to B-
--------------------------------------------------------------
Fitch Ratings has downgraded 25 Turkish banks' Long-Term
Foreign-Currency (LTFC) Issuer Default Ratings (IDRs) to 'B-' from
'B'. The agency has also downgraded the Long-Term Local Currency
(LTLC) IDRs of 25 banks and the Viability Ratings (VRs) of 18
banks. The Outlooks on the banks' Long-Term IDRs are Negative.
At the same time, the Government Support Ratings (GSRs) of two
banks have been downgraded by one notch and to 'ns' (no support)
for six other banks.
A list of the Affected Ratings is available at:
https://bit.ly/3BFgh6V
The rating actions follow the downgrade of Turkey's sovereign
rating on July 8, 2022. The downgrade reflected increased
macroeconomic and external risks amid policy uncertainty and
increasingly interventionist policies, as well as spiralling
inflation, Turkey's widening current account deficit, pressure on
sovereign foreign-exchange (FX) reserves position and high deposit
dollarisation.
Turkish banks' National Ratings (NRs) are unaffected by the rating
actions and may be reviewed once and if Fitch's NR equivalency
analysis results in different relative creditworthiness across
Turkish issuers.
The affected banks are Akbank T.A.S.(Akbank); Arap Turk Bankasi
A.S. (ATB); Anadolubank A.S. (Anadolubank); Denizbank A.S.
(Denizbank); Fibabanka Anonim Sirketi (Fiba); ING Bank A.S.
(INGBT); Kuveyt Turk Katilim Bankasi A.S (Kuveyt Turk); Odea Bank
A.S.(Odea); QNB Finansbank A.S. (QNBF); T.C. Ziraat Bankasi A.S.
(Ziraat); Turk Ekonomi Bankasi A.S. (TEB); Turkiye Finans Katilim
Bankasi A.S. (Turkiye Finans); Turkiye Garanti Bankasi A.S.
(Garanti BBVA); Turkiye Is Bankasi A.S. (Isbank); Turkiye Sinai
Kalkinma Bankasi A.S. (TSKB); Turkiye Vakiflar Bankasi T.A.O.
(Vakif); Vakif Katilim Bankasi (VKB); Yapi ve Kredi Bankasi A.S.
(YKB); Turkiye Ihracat Kredi Bankasi A.S. (Turk Eximbank); Turkiye
Kalkinma ve Yatirim Bankasi A.S. (TKYB); Turkiye Emlak Katilim
Bankasi A.S. (Emlak Katilim); Turkiye Halk Bankasi A.S. (Halk);
Alternatifbank A.S. (Alternatifbank); Burgan Bank A.S. (Burgan Bank
Turkey); and Turkland Bank A.S (T-Bank).
Fitch has assigned a Shareholder Support Rating (SSR) of 'b-' to
T-Bank. This follows the withdrawal of the bank's Support Rating as
it is no longer relevant to our coverage following the publication
of the updated Bank Rating Criteria on 12 November 2021.
KEY RATING DRIVERS
The bank downgrades are driven by a combination of three factors.
Firstly, the weaker operating environment has increased risks to
banks' standalone credit profiles, as reflected in the downgrade of
their VRs. Risks to banks' foreign-currency (FC) liquidity, asset
quality and capitalisation have risen, although most financial
metrics currently remain reasonable and profitability has
strengthened. Most banks' VRs have been downgraded to 'b-', with
five others (Akbank, Garanti BBVA, Isbank, YKB and ING) downgraded
to 'b'.
Secondly, external risks and policy uncertainty have increased the
potential for government intervention in the banking system, in our
view, and have led us to cap most banks' LTFC IDRs at 'B-', instead
of 'B' previously. This reflects our view that the risk of
intervention that would prevent banks from servicing their FC
obligations remains higher than that of a sovereign default.
Thirdly, Fitch no longer factors any government support into the
LTFC IDRs of the state-owned commercial banks or of TSKB, the
privately-owned development bank, due to high constraints on the
ability of the authorities to provide support in foreign currency.
These banks' GSRs have been lowered to 'ns', from 'b-', and are now
in line with the GSRs of domestic privately-owned banks. However,
Fitch continues to factor support into the LTFC IDRs of policy
banks TKYB (B) and Turk Eximbank (B-).
VRs (for Akbank; ATB; Anadolubank; Denizbank; Fiba; INGBT; Kuveyt
Turk; Odea; QNBF; Ziraat; TEB; Turkiye Finans; Garanti BBVA;
Isbank; TSKB; Vakif; VKB and YKB)
The downgrades of these banks' VRs reflect heightened risks to
their standalone credit profiles amid growing operating-environment
pressures. Fitch has downgraded the operating-environment score for
Turkish banks to 'b-'/negative, signalling a further increase in
risks to macroeconomic and financial stability at the lower
sovereign rating.
Turkish banks are subject to refinancing and FC liquidity risks,
given their reliance, to varying degrees, on external FC wholesale
funding, and high deposit dollarisation. Banks' capital ratios are
also eroded by lira depreciation due to the inflation of FC
risk-weighted assets (RWAs), although forbearance on RWAs currently
supports reported capital ratios. In addition, high sector FC
lending amid lira depreciation heightens risks to asset quality as
not all borrowers are fully hedged.
The VRs of Ziraat and Vakif, two large state-owned commercial
banks, are downgraded to 'b-' from 'b'. As the largest state-owned
banks in Turkey, we view their credit profiles and the strength of
their capital and FC liquidity buffers as commensurate with, but
not above, the risks of the Turkish operating environment,
notwithstanding their significant franchises (ranked first and
second by total assets, respectively). Ziraat's and Vakif's VRs are
below their 'b' implied VRs due to the operating-environment
constraint.
The VRs of Akbank, Garanti BBVA, Isbank, YKB - four
systemically-important privately-owned banks - are downgraded to
'b' from 'b+'. At the 'b' rating level, their VRs are one notch
above their 'B-' LTFC IDRs, reflecting that transfer,
convertibility and intervention risks are captured in banks' LTFC
IDRs but not in their VRs, under Fitch's Bank Rating Criteria. The
banks' 'b' VRs are one notch above the operating- environment
score, reflecting their solid FC liquidity, significant capital
buffers (Garanti BBVA and Akbank), generally resilient financial
metrics and reasonable domestic franchises (market shares by total
assets ranging from 8%-10% at end-2021).
INGBT's VR is also downgraded by one notch to 'b', in line with the
large privately-owned banks', despite its limited franchise,
reflecting its solid FC liquidity and capital buffers relative to
its risk profile and limited refinancing risk.
The VRs of Denizbank, QNBF and TEB, three mid-sized foreign owned
banks, are downgraded to 'b-' from 'b+'. The two-notch VR
downgrades reflect the two-notch downgrade of the sovereign rating
since the last full review of the banks, as their respective FC
liquidity and capital buffers are only commensurate with the risks
of the operating environment, in our view. Similarly, the VRs of
Turkiye Finans, Kuveyt Turk, two participation banks, and of ATB
Turk, a trade finance bank, are downgraded to 'b-' from 'b+'. QNB
Finansbank's, TEB's and VKB's VRs are below their 'b' implied VR
due to the operating- environment, capitalisation-and-leverage, and
risk-profile, constraints, respectively.
The VRs of ING, Denizbank, QNBF, TEB, ATB, Turkiye Finans and
Kuveyt Turk are all removed from RWN. The banks were placed on RWN
in February 2022 at the time of the sovereign downgrade to 'B+'
from 'BB-', signalling a heightened probability of downgrades given
the concentration of their operations in the volatile Turkish
operating environment and the ensuing heightened risks to
standalone credit profiles, since which time the sovereign has been
downgraded by a further notch to 'B'.
The VRs of Anadolubank, Fiba and Odea Bank, three small
privately-owned banks, and VKB, a state-owned participation bank,
are downgraded to 'b-' from 'b', reflecting Fitch's view that their
business profiles, capital buffers and funding profiles are
generally commensurate with the risks of the Turkish operating
environment given their small absolute size and limited franchises
and market shares, and in the case of VKB, also the bank's risk
appetite.
Similarly, the VR of TSKB, the privately-owned development bank, is
downgraded to 'b-' from 'b', reflecting Fitch's view that the
bank's credit profile, and capital and FC liquidity buffers, are
only commensurate with the risks of the Turkish operating
environment given its policy role (providing investment loans and
funding projects in areas of strategic importance to the
authorities, although the bank has been diversifying its
operations) and exceptionally high balance-sheet dollarisation.
Anadolubank's VR is below the 'b' implied VR due to the business
profile constraint.
LONG-TERM IDRs, GSRs AND SENIOR DEBT RATINGS OF STATE-OWNED
COMMERCIAL BANKS AND DEVELOPMENT BANKS (for Ziraat; Vakif; VKB;
TSKB; Turk Eximbank; TKYB; Emlak Katilim and Halk)
TKYB's LTFC IDR is downgraded to 'B', and its GSR to 'b', in line
with the sovereign rating, reflecting its small size relative to
sovereign resources, a still largely treasury-guaranteed funding
base and the medium-term tenor of its non-guaranteed funding (as a
result of which its potential need for support in the near term is
likely to be limited), notwithstanding Turkey's weak financial
flexibility in FC. The Negative Outlook mirrors that on the
sovereign.
Turk Eximbank's LTFC IDR is downgraded to 'B-' from 'B', reflecting
the downgrade of its GSR, and remains one notch below Turkey's LTFC
IDR. This rating is supported by the bank's strategic policy role
as the country's export credit agency, but constrained by its
considerably larger balance sheet and volumes of external market
funding than TKYB. The Negative Outlook mirrors that on the
sovereign.
The GSRs of Ziraat, Vakif, Halk, Emlak Katilim, TSKB and VKB have
been downgraded to 'ns' from 'b-' reflecting the sovereign's weak
financial flexibility to provide support in FC, given its weak
external finances and sovereign foreign-exchange (FX) reserves.
This is despite us believing the government has a high propensity
to provide support, given their ownership (except for TSKB, which
is privately-owned), policy roles (TSKB), systemic importance
(Ziraat, Vakif, Halk), state-related or state-guaranteed funding,
the strategic importance of participation banking to the
authorities (Emlak Katilim, VKB) and the record of capital
support.
As a result of the downgrade of the banks' GSR to 'ns', the LTFC
IDRs of Emlak Katilim and Halk (which are unaffected by the
sovereign rating action) are now driven solely by their 'b-' VRs
and Halk's GSR is removed from RWN. The VR-driven LTFC IDRs of
Ziraat, Vakif and TSKB are also downgraded to 'B-' from 'B'. At
this rating level the Negative Outlooks on the banks' LTFC IDRs
reflect both that on the sovereign and heightened
operating-environment risks.
The LTLC IDRs of all state-owned commercial and development banks,
and of TSKB, the privately-owned development bank, continue to be
driven by state support and are downgraded to 'B' from 'B+' in line
with the sovereign rating action. Their LTLC IDRs remain above
their respective LTFC IDRs in all cases except for TKYB, reflecting
our view of a higher sovereign ability to provide support, and a
lower risk of government intervention, in LC. Halk's LTLC IDR
remains on RWN, reflecting potential uncertainty about the
authorities' ability and propensity to provide sufficient and
timely support in LC in case a material fine or other punitive
measures result from the US legal proceedings against the bank.
The rating actions on banks' senior unsecured debt ratings, where
relevant, mirror those on their respective Long-Term IDRs.
LONG-TERM IDRs AND SENIOR DEBT RATINGS OF PRIVATELY-OWNED TURKISH
BANKS (for Akbank; Isbank; YKB; ATB; Anadolubank; Fiba and Odea)
The LTFC IDRs of the seven privately-owned Turkish banks have been
downgraded to 'B-' from 'B', reflecting increased government
intervention risk at the lower sovereign rating. The Negative
Outlooks mirror those on the sovereign and, in the case of ATB,
Anadolubank and Odea, also reflect heightened operating-environment
risks given the banks' LTFC IDRs are at the same level as their
'b-' VRs.
All banks' LTLC IDRs are driven by, and mirror the rating actions
on, their VRs. Consequently, the LTLC IDRs of Anadolu and Odea, and
of ATB, are downgraded to 'B-' from 'B' and 'B+', respectively. The
LTLC IDRs of Akbank, Isbank, YKB and Fiba are downgraded to 'B'
from 'B+', one notch above their respective LTFC IDRs, reflecting
our view of lower government intervention risk in LC. In the case
of Fiba, the one notch uplift is driven by the bank's qualifying
junior debt (QJD) buffer, which we believe will be maintained above
10% of risk-weighted assets (RWA) in the short term.
The Negative Outlooks on all seven banks' LTLC IDRs reflects risks
to the banks' standalone credit profiles amid heightened
operating-environment pressures. It also considers the sovereign
outlook in the case of Akbank, Isbank and YKB, given that the banks
have VRs of 'b', in line with the sovereign's LTLC IDR, and we do
not rate any banks above Turkey's sovereign rating. In the case of
Fiba, the Negative Outlook on its LTLC IDR additionally considers
potential deterioration in the bank's QJD buffer below 10%, if it
executes a call option on its subordinated debt in November 2022 or
its subordinated debt is only partially rolled over, for example.
The rating actions on the banks' senior unsecured debt ratings,
where relevant, mirror those on their respective IDRs.
IDRs, SSRs AND SENIOR DEBT RATINGS OF FOREIGN-OWNED BANKS (for
Garanti BBVA; INGBT; QNBF; TEB; Denizbank; Alternatifbank; Burgan
Bank Turkey; Kuveyt Turk; Turkiye Finans and T-Bank)
The LTFC IDRs of Garanti BBVA and INGBT are downgraded to 'B-' from
'B', one notch below the banks' 'b' VRs - in line with their
Shareholder Support Ratings (SSRs), reflecting our view of
increased government intervention risk at the lower sovereign
rating, and which caps most Turkish banks' LTFC IDRs at one notch
below the sovereign rating. In addition, the LTFC IDRs of the eight
remaining foreign-owned banks are downgraded to 'B-' from 'B' in
line with their SSRs, and at this rating level are underpinned by
support from higher-rated foreign parents and their VRs.
Fitch's view of support for the banks, as reflected in their SSRs,
is based on their strategic importance to their respective parents,
ownership, integration and roles within their wider groups. All 10
foreign-owned banks' SSRs are downgraded to 'b-' from 'b', due to
Fitch's assessment that weaknesses in Turkey's external finances,
amid high sector deposit dollarisation and high short-term maturing
FC debt in volatile market conditions, make some form of
intervention in the banking system that would impede banks' ability
to service their FC obligations more likely than a sovereign
default.
The banks' LTLC IDRs are driven by their SSRs and - with the
exception of T-Bank (affirmed at 'B') - have been downgraded to 'B'
from 'B+'. At this level, their LTLC IDRs remain one notch above
their respective LTFC IDRs, reflecting our view of a lower
likelihood of government intervention in LC.
The Outlooks on the foreign-owned banks' Long-Term IDRs mirror
those on the sovereign. Where banks' LTFC IDRs are also underpinned
by their VRs, the Negative Outlook also reflects heightened
operating- environment pressures.
Senior debt ratings, where assigned, are aligned with the banks'
IDRs, reflecting average recovery prospects in case of default.
SUBORDINATED DEBT RATINGS
The subordinated notes' ratings of Garanti BBVA and Kuveyt Turk
(issued through its SPV KT21 T2 Sukuk), have been downgraded to
'CCC+' from 'B-' following the downgrade of their LTFC IDR anchor
ratings. The notching for the subordinated notes includes one notch
for loss severity and zero notches for non-performance risk
(relative to their anchor ratings). The one notch, rather than two,
for loss severity reflects our view that shareholder support (as
reflected in the banks' LTFC IDRs) could help mitigate losses and
incorporates the cap on the banks' LTFC IDRs at 'B-' by our view of
government intervention risks.
The subordinated notes' ratings of Akbank, Isbank and YKB have been
downgraded to 'CCC+' from 'B-' following the downgrade to 'B-' of
the banks' LTFC IDR anchor ratings. The anchor ratings are the
banks' 'B-' LTFC IDRs, rather than their VRs, which we deem the
most appropriate measure of non-performance risk given government
intervention risk. The debt ratings have been notched down once,
rather than twice, from the anchor ratings to reflect reduced loss
severity given that the main risk on these instruments in our view
is to timely payment rather than recoveries.
The subordinated notes' ratings of Vakif and Odea are notched down
twice from their VR anchor ratings reflecting our expectations of
poor recoveries in case of default and have been downgraded to
'CCC'.
Fiba's subordinated notes' ratings have been downgraded to 'CCC+',
one notch below the bank's VR anchor rating, reflecting the bank's
large buffer of QJD, which reduces loss severity.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
VRs
The VRs of Akbank, Garanti BBVA, Isbank, YKB and INGBT are
primarily sensitive to a sovereign downgrade. Fitch would also
downgrade the banks' VRs by one notch to the level of their LTFC
IDRs if there was material erosion in their capital and FC
liquidity buffers.
The 'b-' VRs of Ziraat, Vakif, VKB, Fiba, Anadolu, Odea, TSKB, TEB,
QNBF, Denizbank, ATB, Kuveyt Turk, Turkiye Finans are also
potentially sensitive to a sovereign downgrade. Their VRs could
also be downgraded due to further marked deterioration in the
operating environment, in case of a material erosion in their FC
liquidity buffers, for example due to a prolonged funding-market
closure or deposit instability, or in their capital buffers, if not
offset by shareholder support.
LONG-TERM IDRs, GSRs AND SENIOR DEBT RATINGS OF STATE-OWNED
COMMERCIAL AND PARTICIPATION BANKS, AND DEVELOPMENT BANKS
The LTFC IDRs of Ziraat, Vakif, VKB and TSKB are sensitive to a
change in their VRs, Fitch's view of government intervention risk
in the banking sector and, potentially, also a sovereign
downgrade.
The LTLC IDRs of Ziraat, Vakif, VKB, TSKB, Turk Eximbank, TKYB,
Emlak Katilim and Halk are sensitive to a change in the ability or
propensity of the authorities to provide support in LC and to our
view of government intervention risk in LC.
The RWN on Halk's LTLC IDR could be resolved once there is more
clarity on the outcome of the US investigations and is sensitive to
the authorities' ability and propensity to provide sufficient and
timely support in LC in case a material fine or other punitive
measures result from the US case against the bank.
TKYB's GSR is directly sensitive to a downgrade of Turkey's LTFC
IDR. Its LTFC IDR could also be downgraded if the bank's proportion
of non-guaranteed funding increases materially, particularly if
Fitch believes this to be indicative of a weakening in TKYB's
policy role, or if its balance sheet size sharply increases
relative to sovereign resources.
A sovereign downgrade would likely trigger a similar rating action
on Turk Eximbank, particularly if it reflects a further weakening
in the sovereign's ability to provide support in FC. A material
weakening in Turk Eximbank's policy role could also result in a
downgrade of its LTFC IDR.
Banks' senior unsecured debt ratings are primarily sensitive to
changes in their IDRs.
LONG-TERM IDRS AND SENIOR DEBT RATINGS OF PRIVATELY-OWNED TURKISH
BANKS
The LTFC and LTLC IDRs of the privately-owned Turkish banks
(Akbank, Isbank, YKB, ATB, Anadolubank, Fiba, Odea) are sensitive
to a sovereign downgrade and any increase in Fitch's view of
government intervention risk in the banking sector. As the banks'
ratings are driven by their VR, they are also sensitive to any
weakening in their VRs.
Fiba's LTLC IDR is sensitive to a downgrade by one notch to its VR
if we expect the QJD buffer to fall and remain below 10% of RWAs.
The banks' senior unsecured debt ratings, where relevant, are
primarily sensitive to changes in their respective IDRs.
LONG-TERM IDRs, SSRs AND SENIOR DEBT RATINGS OF FOREIGN-OWNED
BANKS
A downgrade of Turkey's sovereign rating or an increase in our view
of government intervention risk would lead to a downgrade of the
foreign-owned banks' SSRs, leading to negative rating action on
their Long-Term IDRs (Garanti BBVA, INGBT, QNBF, TEB, Deniz,
Alternatifbank, Burgan Bank Turkey, Kuveyt Turk, Turkiye Finans,
T-Bank).
All banks' SSRs are also sensitive to Fitch's view of their
shareholders' ability and propensity to provide support.
The banks' senior unsecured debt ratings, where assigned, are
primarily sensitive to changes in their respective IDRs.
SUBORDINATED DEBT RATINGS
Banks' subordinated debt ratings (Garanti BBVA, Kuveyt Turk, Fiba,
Akbank, Isbank, Vakif, YKB, Odea) are primarily sensitive to a
change in their respective anchor ratings. They are also sensitive
to a revision in Fitch's assessment of potential loss severity in
case of non-performance.
Fiba's subordinated debt rating is sensitive to a change in its VR
anchor rating and the size of its QJD buffer. A fall in this buffer
to below 10% of RWAs could result in a widening of the notching for
loss severity to two notches from the VR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Rating upgrades are unlikely given the heightened operating
environment risks and market volatility, the Negative Outlook on
Turkey's sovereign rating and our view of increasing government
intervention risk.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
BANK SUBSIDIARIES (for Ziraat Katilim Bankasi A.S. (Ziraat Katilim)
and Akbank AG)
The ratings of Ziraat Katilim and Akbank AG are downgraded in line
with their parents', and their SSRs are downgraded to 'b-' from
'b'. The banks' ratings are equalised with those of Ziraat and
Akbank, respectively, reflecting their strategic importance and
roles as core subsidiaries. The Outlooks on the banks' Long-Term
IDRs mirror those on their parents.
Akbank AG's long-term deposit rating has also been downgraded to
'B-' from 'B' as its debt buffers do not afford any significant
incremental probability of default benefit over and above the
support benefit factored into the bank's IDRs.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
BANK SUBSIDIARIES
The ratings of Ziraat Katilim and Akbank AG are sensitive to
changes in their respective parent ratings or parents' propensity
to provide support.
VR ADJUSTMENTS
The operating-environment score of 'b-' for Turkish banks is below
the 'bb' category implied score due to the following adjustment
reasons: macroeconomic volatility (negative), which reflects
heightened market volatility, high dollarszation and high risk of
FX movements in Turkey, and sovereign rating (negative).
The business profile scores of 'b' for Akbank, Denizbank, Ziraat,
Garanti BBVA, Isbank, Vakif and YKB is below the implied 'bb'
category implied scores, due to the following adjustment reason:
business model (negative). This reflects the banks' business model
concentration on the high-risk Turkish market.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
Criteria Variation
The analysis above includes one variation from Fitch's Bank Rating
Criteria:
Fitch's view of potential intervention risk in the banking system
means Fitch views default risk of Turkish banks as higher than that
of the Turkey sovereign. As a result, we have capped the LTFC IDRs
of Turkish commercial banks at 'B-', one notch below Turkey's
sovereign rating. As such, Fitch has varied its criteria to permit
a VR one notch above a bank's LTFC IDR where the latter is not
directly capped by Turkey's Country Ceiling ('B'), but rather our
view of broader intervention risk.
SUMMARY OF FINANCIAL ADJUSTMENTS
An adjustment has been made in Fitch's financial spreadsheets of
Akbank, Anadolubank, Denizbank, Fiba, Garanti BBVA, QNBF, TSKB and
Isbank that has had an impact on their core and complementary
metrics in prior periods. Fitch has taken a loan that was
classified as a financial asset measured at fair value through
profit and loss in the banks' financial statements and reclassified
it under gross loans as Fitch believes it the most appropriate
reflection of this exposure.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
All banks included in this review have ratings linked to the
Turkish sovereign rating, given the ratings either rely on or are
sensitive to Fitch's assessment of sovereign support or country
risks. Turkish foreign-owned banks have ratings linked to their
respective parent banks' ratings.
Ziraat Katilim's ratings are driven by support from Ziraat.
Akbank AG's ratings are driven by support from Akbank.
ESG CONSIDERATIONS
The state-owned commercial banks - Ziraat, Vakif, Emlak Katilim,
VKB and Ziraat Katilim Bankasi - each has ESG Relevance Scores of
'4' for governance structure and management strategy (in contrast
to a typical Relevance Score of '3' for comparable banks) due to
potential government influence over their boards' effectiveness and
management strategy in the challenging Turkish operating
environment. This has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.
Halk has an ESG Relevance Score of '5' for governance structure,
reflecting the high legal risk of a large fine, which drives the
RWN on the bank. It also considers potential government influence
over the board's effectiveness in the challenging Turkish operating
environment. This has a negative impact on the credit profile, and
is highly relevant to the ratings in conjunction with other
factors.
Halk has an ESG Relevance Score of '4' for management strategy (in
contrast to a typical Relevance Score of '3' for comparable banks),
due to potential government influence over its management strategy
in the challenging Turkish operating environment. This has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
In addition, the Islamic banks' (Emlak Katilim, VKB, Kuveyt Turk,
Turkiye Finans, Ziraat Katilim Bankasi) ESG Relevance Score of '4'
for governance structure reflects their Islamic banking nature (in
contrast to a typical ESG Relevance Score of '3' for comparable
conventional banks). These banks' operations and activities need to
comply with sharia principles and rules, which entails additional
costs, processes, disclosures, regulations, reporting and sharia
audit. This has a negative impact on their credit profiles and is
relevant to the ratings in conjunction with other factors.
The Islamic banks also have an ESG Relevance Score of '3' for
exposure to social impacts (in contrast to a typical ESG Relevance
Score of '2' for comparable conventional banks), which reflects
Islamic banks' certain sharia limitations being embedded in their
operations and obligations, although this only has a minimal credit
impact on Islamic banks.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'/ ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
VOLKSWAGEN DOGUS: Fitch Lowers LongTerm IDRs to B, Outlook Neg.
---------------------------------------------------------------
Fitch Ratings has downgraded Turkiye-based Volkswagen Dogus
Finansman A.S.'s (VDF) Foreign-Currency and Local-Currency
Long-Term Issuer Default Ratings (IDRs) to 'B' from 'B+' and
Shareholder Support Rating (SSR) to 'b' from 'b+'. The Outlook on
the Long-Term IDRs is Negative.
The downgrade follows the downgrade of Turkiye's sovereign ratings
to 'B'/Negative from 'B+'/Negative on July 8, 2022.
KEY RATING DRIVERS
IDRS, SSR AND NATIONAL RATINGS
VDF's ratings are driven by support from its controlling
shareholders - Volkswagen Financial Services AG (VWFS) and
ultimately Volkswagen AG (VW; A-/Stable). Fitch views VDF as
strategically important for the VW group, given its role in
facilitating car sales in Turkiye.
VDF's Long-Term IDRs and Shareholders Support Rating (SSR) are
capped by Turkiye's 'B' Country Ceiling. The Country Ceiling
captures transfer and convertibility risks and limits the extent to
which support from VWFS or VW can be factored into VDF's Long-Term
Foreign-Currency IDR.
After a recent change, VDF is fully owned by VDF Servis ve Ticaret
(VDF Servis), which, in turn, is 51% owned by VW (via VWFS) and 49%
by Dogus Holding. Dogus Group is a large Turkish conglomerate and
the sole importer of VW vehicles in Turkiye.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- VDF's Long-Term IDRs and SSR would likely be downgraded in case
of a further downgrade of Turkiye's sovereign Country Ceiling.
- Diminished support from VW, for example, as a result of dilution
of ownership in the companies, a loss of operational control or
diminishing of importance of the Turkish market could also trigger
a downgrade of the IDR and SSR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The Outlook on VDF's Long-Term IDRs would be revised to Stable
if the Outlook on the Turkish sovereign IDR was revised to Stable.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
VDF's ratings are linked to VWFS' ratings and are constrained by
Turkiye's sovereign ratings.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Volkswagen Dogus Finansman A.S.
LT IDR B Downgrade B+
ST IDR B Affirmed B
Shareholder Support b Downgrade b+
YAPI KREDI YATIRIM: Fitch Cuts LT Foreign Currency IDR to 'B-'
--------------------------------------------------------------
Fitch Ratings has downgraded the Long-Term Foreign-Currency Issuer
Default Ratings (LTFC IDRs) of subsidiaries of Turkish banks to
'B-' from 'B'. The Rating Outlooks are Negative. Fitch has also
downgraded their Long-Term Local-Currency (LTLC) IDRs to
'B'/Outlook Negative from 'B+'/Outlook Negative. The issuers'
National Ratings remain unaffected by the rating action.
A list of the Affected Ratings is available at:
https://bit.ly/3PN9fl0
The rating actions follow the downgrade of Turkish banks, which in
its turn follows the downgrade of Turkiye's sovereign rating on
July 8, 2022. The latter reflects increased macroeconomic and
external risks amid policy uncertainty and increasingly
interventionist policies, spiraling inflation, a widening current
account deficit, Turkiye's pressured sovereign FX reserves position
and high deposit dollarisation.
With the exception of foreign-owned TEB Finansman A.S., the
issuers' Long-Term IDRs are equalised with those of their
respective parent, reflecting Fitch's view that they are core and
highly integrated subsidiaries. The Negative Outlooks on the LT
IDRs mirror those on the respective parents (see insert Banks RAC).
Fitch is not able to assess the issuers' stand-alone credit profile
as all companies are highly integrated into their respective parent
and their franchise position relies heavily on their parents'.
Fitch has also downgraded the Shareholder Support Ratings (SSR) of
all 12 issuers to 'b-' from 'b', mirroring the downgrade on the
LTFC IDR, reflecting that the SSRs are capped by the respective
parents' creditworthiness and hence limited probability of
support.
KEY RATING DRIVERS
LT IDRs:
Ak Finansal Kiralama A.S.
Alternatif Finansal Kiralama AS
Deniz Finansal Kiralama A.S.
Garanti Faktoring A.S.
Garanti Finansal Kiralama A.S.
Is Finansal Kiralama A.S.
QNB Finans Finansal Kiralama A.S.
QNB Finans Faktoring A.S.
Yapi Kredi Faktoring A.S.
Yapi Kredi Finansal Kiralama A.O.
Yapi Kredi Yatirim Menkul Degerler A.S.
The ratings of the NBFI subsidiaries of Turkish banks reflect their
close integration with their parents, reputational risks of their
defaults for the broader groups, and ultimate full or majority
ownership. The subsidiaries offer core products and services
(leasing, factoring and investment services) in the domestic
Turkish market.
The Negative Outlooks mirror those on the respective parent banks.
These in turn reflect operating environment pressures and the
implications of the macroeconomic volatility on the credit profiles
of their banking groups.
All of the companies in this review share the same branding as
their parents, are highly integrated within their banking groups in
terms of risk and IT systems, and draw most of their senior
management and underwriting practices from parent banks.
The subsidiaries benefit from the well-established franchises of
their parent groups and mostly share the same customer base, with a
high share of referrals from their respective groups. In addition,
the cost of support would be low as the subsidiaries are small
relative to their parents, with total assets not exceeding 5% of
group assets (mostly 2%-3%) at end-2021.
These factors lead Fitch to believe that the propensity of the
parent banks to support their subsidiaries remains very high.
TEB Finansman A.S.
TEB Finansman's ratings are driven by potential support from BNP
Paribas S.A. (BNPP; A+/Stable). In Fitch's view, BNPP's propensity
to support TEB Finansman is closely aligned with that of support
for its sister bank in Turkiye, Turk Ekonomi Bankasi (TEB) A.S.
(B-/Negative). This is based on common brand association between
the two and significant reputational damage in the event of a
subsidiary default, notwithstanding differences in their respective
legal structure. The Outlooks on TEB Finansman's Long-Term IDRs are
aligned with that on TEB Bank, and mirrors that on the Turkish
sovereign.
SSRs AND NATIONAL RATINGS
The companies' 'b-' SSRs are capped by the respective parents'
creditworthiness and hence limited probability of support.
National Ratings reflect creditworthiness in local currency
relative to other local issuers, which was not affected by the
recent downgrade of the sovereign or by the increasing challenges
in operating environment.
RATING SENSITIVITIES
The subsidiaries' ratings are sensitive to changes in the parents'
ratings and Fitch's view of the ability and willingness of the
parents to provide support in case of need.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The Negative Outlooks on the Long-Term IDRs of the companies in
this review mirror those on the parents and are therefore sensitive
to a further marked deterioration in the operating environment or a
sovereign downgrade if resulting in a downgrade of their parents'
Long-Term IDR.
The ratings could be notched down from their respective parents
if:
- There are signs that support of subsidiaries becomes less
probable because the parents' own solvency is compromised;
- The subsidiaries become materially larger relative to the
respective banks' ability to provide support;
- The subsidiaries' strategic importance is materially reduced,
for example, through a substantial reduction in business referrals,
levels of operational and management integration, a reduced level
of ownership or a prolonged period of underperformance.
The Long-Term IDRs are sensitive to further negative sovereign
rating action, particularly if triggered by increased balance of
payments pressures, including sustained reduction in international
reserves and continuation of a policy mix that fails to reduce
macroeconomic and financial stability risks.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
A revision of the parent banks' Outlook on their Long-Term IDRs
would likely be mirrored on their respective subsidiaries. This
would likely be the result of improvements in Turkiye's operating
environment.
An Upgrade of the issuers' Long-Term IDR is unlikely in the short
term, given the Negative Outlook.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
=============
U K R A I N E
=============
CITY OF KYIV: S&P Affirms 'CCC+' Long-Term ICR, Outlook Negative
----------------------------------------------------------------
On Aug. 2, 2022, S&P Global Ratings affirmed its long-term foreign
and local currency issuer credit ratings on the Ukrainian capital
city of Kyiv at 'CCC+'. The outlook remains negative.
As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009
"EU CRA Regulation"), the ratings on the city of Kyiv are subject
to certain publication restrictions set out in Art 8a of the EU CRA
Regulation, including publication in accordance with a
pre-established calendar. Under the EU CRA Regulation, deviations
from the announced calendar are allowed only in limited
circumstances and must be accompanied by a detailed explanation of
the reasons for the deviation. In this case, the deviation was
caused by the sovereign rating action on Ukraine. The next
scheduled publication on Kyiv is on Oct. 28, 2022.
Outlook
The negative outlook reflects S&P's view that in the next six-to-12
months the city of Kyiv might face greater difficulties in meeting
its debt repayments than it currently envisages.
Downside scenario
S&P said, "We could lower the ratings in the next six-to-12 months
if we observed a higher probability of Kyiv not meeting its
obligations, for example if capital controls are tightened. We
could also lower the ratings if Kyiv's liquidity position were to
deteriorate significantly or there were indications that the city
might de-prioritize debt service in favor of meeting spending
needs."
Upside scenario
S&P said, "We could consider revising the outlook to stable or
raising the rating on Kyiv if we took a similarly positive action
on the sovereign, and saw this as a sign of decreasing risks
related to Kyiv's ability to service its debts. In this scenario,
we would likely see a reduced risk of T&C restrictions hampering
Kyiv's timely debt servicing."
Rationale
S&P said, "The ratings affirmation, despite the sovereign
downgrade, reflects our opinion that Kyiv remains able and willing
to continue honoring its debt-service obligations in both foreign
currency and local currency. A 'CCC+' rating means the issuer is
currently vulnerable and is dependent upon favorable business,
financial, and economic conditions to meet its financial
commitments. We believe that in the current circumstances of the
military conflict between Russia and Ukraine and the subsequent
sharp economic contraction, the city's financial indicators might
deteriorate dramatically and sharply, which can complicate the
fulfillment its obligations in the future. The city of Kyiv has
only one foreign-currency denominated issue outstanding maturing in
December 2022. With special permission from the National Bank of
Ukraine, Kyiv made another payment on this bond on June 15, 2022,
of about US$30 million. There is one instalment left from this
issuance: US$30 million due in December 2022. Our base-case assumes
the city will likely meet this payment given its currently high
cash reserves (about Ukrainian hryvnia [UAH] 13 billion, equivalent
to US$350 million as of mid-July) and management's commitment to
fulfil its debt obligations."
Regarding local currency debt, the city has a credit line from the
State Savings Bank of Ukraine (Oschadbank) of UAH1.2 billion,
maturing in 2023-2026, and three local currency bonds outstanding
totaling UAH1.1 billion, maturing in 2024-2026.
S&P Global Ratings acknowledges a high degree of uncertainty about
the extent, outcome, and consequences of the military conflict
between Russia and Ukraine. Irrespective of the duration of
military hostilities, sanctions and related political risks are
likely to remain in place for some time. Potential effects could
include dislocated commodities markets--notably for oil and
gas--supply chain disruptions, inflationary pressures, weaker
growth, and capital market volatility. As the situation evolves,
S&P will update its assumptions and estimates accordingly. See our
macroeconomic and credit updates here: Russia-Ukraine Macro,
Market, & Credit Risks. Note that the timing of publication for
rating decisions on European issuers is subject to European
regulatory requirements.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
KYIV (CITY OF)
Issuer Credit Rating CCC+/Negative/--
NAFTOGAZ UKRAINY: Attempts to Negotiate Deal After Missing Payment
------------------------------------------------------------------
Daryna Krasnolutska at Bloomberg News reports that Ukraine's
state-run energy company NJSC Naftogaz Ukrainy said it is still
trying to negotiate a deal with holders of around US$1.4 billion of
its bonds after the government forced it to miss a deadline on
Tuesday, July 26.
According to Bloomberg, the company said in an emailed statement it
will "urgently" present a new plan for bondholders. Naftogaz on
July 26 said it's on track to default as a grace period to redeem
US$335 million of bonds expired, Bloomberg notes.
The company has been swept up in Ukraine's decision to freeze
payments on about US$23 billion of its own foreign debt for two
years while the sovereign deals with the fallout from Russia's
invasion, Bloomberg discloses.
Bondholders have already rejected one debt-freeze proposal on the
grounds that the company has the money to pay, Bloomberg recounts.
Naftogaz Chief Executive Officer Yuriy Vitrenko has said that the
company had planned to continue servicing its bonds before it was
ordered by the government earlier this month to freeze debt
payments and increase its stock of natural gas for the winter
season, Bloomberg relates.
Without the consent of bondholders for a moratorium, or permission
from the government for Naftogaz to make the payment, the missed
transfer could trigger a cross default event on its remaining
notes, Bloomberg notes.
The statement said Naftogaz's new proposal will attempt to offer
similar terms for delaying payment as the government and other
state-owned companies, according to Bloomberg.
===========================
U N I T E D K I N G D O M
===========================
COUNTY WINDOWS: Enters Liquidation, Customers Affected
------------------------------------------------------
Toby Oliver at Hampshire Chronicle reports that it has now been
confirmed that a long-standing Winchester windows business has gone
into liquidation.
In an email to a customer, seen by the Chronicle, a former employee
confirmed that County Windows is no more.
In the email, it said: "We have gone into liquidation on July 28.
There is no County Windows."
County Windows, in Easton Lane, Winnall, was established in 1952
and specialised in conservatories, doors and windows.
Former customers have been reacting to the news, with some being
left with incomplete jobs, the Chronicle relates.
LIAM RUSSELL: Goes Into Liquidation Following Staff Embezzlement
----------------------------------------------------------------
Will Ing at Architect's Journal reports that Liam Russell
Architects has entered liquidation after a former member of staff
allegedly stole hundreds of thousands of pounds from the company.
The Brighton and London-based company has collapsed owing around
GBP500,000, with founding director
Liam Russell telling the AJ that an employee had secretly spent
most of the company's cash reserves as well as using its overdraft
facilities, Architect's Journal relates.
The practice will continue operating under a separate legal entity,
LRA Retinue, with 11 staff. However, 14 staff members were made
redundant at the end of June, Architect's Journal discloses.
The practice was founded in 2007 and has worked on residential
projects, including housing extensions, a collection of new
eco-homes and the retrofitting of 183 homes into a 25-storey office
block in Croydon.
Architect's Journal understands that Sussex Police and the Serious
Fraud Office are investigating the former staff member, who is
thought to have stolen GBP250,000 from the company, including
GBP65,000 spent on personal items on Amazon.
According to Architect's Journal, a statement by the liquidators
said Liam Russell Architects entered liquidation on July 8, adding:
"On that day, an offer was received from LRA Retinue Limited, an
associated company, for the chattel assets and assistance in
collecting the debtor ledger and the work in progress.
"This deal was recommended for acceptance by the liquidators'
agents and was finalised on July 11, 2022. Throughout this process,
the liquidators have acted in the best interest of the business's
creditors."
NOT FOR PROFIT: Goes Into Liquidation, 700 Plan Holders Affected
----------------------------------------------------------------
Lucy Alderson at The Sun reports that Not For Profit (NFP) Funeral
Plans had gone into liquidation.
The firm had 700 plan holders on its books at the time it went
under, The Sun discloses.
According to The Sun, Kelly Semke, director of Quantuma, the firm
appointed as administrator for NFP Funeral Plan, said: "We
understand that the closure of NFP Funeral Plans may be worrying
news for plan holders and their friends and family.
"However, I'd like to reassure them that we are working tirelessly
to establish what solutions can be offered.
"We will be contacting plan holders individually with regard to
next steps."
The Financial Conduct Authority (FCA) has been so concerned about
the funeral plan industry that it has now brought in new
regulations to protect consumers, The Sun relates.
Under the new rules, customers with pre-paid funeral plans will be
able to get compensation if their provider goes bust, and firms
will be banned from cold calling, The Sun states.
Firms will also only be able to sell the plans if they are
authorised by the FCA to do so, The Sun notes. It has shared a
list of 26 firms which have passed its checks -- but 13 others have
been banned, according to The Sun.
STOLT-NIELSEN LTD: Egan-Jones Retains CCC+ Sr. Unsecured Ratings
----------------------------------------------------------------
Egan-Jones Ratings Company, on July 28, 2022, retained its 'CCC+'
foreign currency and local currency senior unsecured ratings on
debt issued by Stolt-Nielsen Limited. EJR also retained its 'C'
rating on commercial paper issued by the Company.
Headquartered in London, United Kingdom, Stolt-Nielsen Limited
provides transportation and storage for liquids, notably specialty
and bulk liquid chemicals.
STRATTON 2022-1: S&P Assigns Prelim CCC (sf) Rating on Two Notes
----------------------------------------------------------------
S&P Global Ratings has assigned preliminary ratings to Stratton
Hawksmoor 2022-1 PLC's class A1, A2, and X1 notes, and class B-Dfrd
to G-Dfrd interest deferrable notes.
Stratton Hawksmoor 2022-1 is a static RMBS transaction that
securitizes a portfolio of GBP2,102.3 million nonconforming
owner-occupied and buy-to-let (BTL) mortgage loans secured on
properties located in the U.K. The loans in the pool were
previously securitized in Hawksmoor Mortgage Funding 2019-1 PLC
(Hawksmoor), Stratton Mortgage Funding 2019-1 PLC (Stratton),
Clavis Securities PLC 2006-1, and Clavis Securities PLC 2007-1.
At closing, the issuer will use the issuance proceeds to purchase
the full beneficial interest in the mortgage loans from the seller.
The issuer will grant security over all its assets in favor of the
security trustee.
S&P considers the collateral to be nonconforming, based on the
overall historical performance of the loans securitized in the
pool.
Credit enhancement for the rated notes will comprise subordination
from the closing date and overcollateralization, which will result
from the release of the general reserve excess amount to the
revenue priority of payments.
The class A notes will benefit from liquidity support from both a
liquidity and general reserve fund, and will be able to use
principal to pay interests unconditionally. The class B-Dfrd notes
will benefit from liquidity support provided by both the liquidity
and general reserve fund, and the ability to use principal subject
to their principal deficiency ledger (PDL) not exceeding 25% of
their outstanding balance or being the most senior note
outstanding. Finally, the class C-Dfrd to F-Dfrd notes will benefit
from liquidity support from the general reserve fund only, provided
that the respective tranche's PDL does not exceed 0% of each
tranche's outstanding balance or being the most senior note
outstanding, and the ability to use principal to cover interest
shortfalls only when the tranches are the most senior outstanding.
There are no rating constraints in the transaction under S&P's
counterparty, operational risk, or structured finance sovereign
risk criteria. It considers the issuer to be bankruptcy remote.
Preliminary Ratings
CLASS PRELIMINARY RATING* CLASS SIZE (%)§
A1 AAA (sf) 81.50
A2 AAA (sf) 3.00
B-Dfrd AA (sf) 4.00
C-Dfrd A (sf) 3.50
D-Dfrd BBB (sf) 2.00
E-Dfrd BBB- (sf) 0.75
F-Dfrd B- (sf) 1.25
G-Dfrd CCC (sf) 4.00
X1 CCC(sf) 1.50
X2 NR 0.50
RC1 certificates NR N/A
RC2 certificates NR N/A
*S&P's preliminary ratings address timely receipt of interest and
ultimate repayment of principal on the class A1, class A2, and
class X1 notes, and the ultimate payment of interest and principal
on the class B-Dfrd to G-Dfrd notes, which must pay timely interest
once they become the most senior notes outstanding.
NR--Not rated.
N/A--Not applicable.
UK: Company Insolvencies Rise in Second Quarter of 2022
-------------------------------------------------------
Business Sale reports that company insolvencies soared in the
second quarter of the year as UK businesses were hit by high costs,
supply chain and staff issues and the end of government COVID-19
support packages.
In new figures from the UK's Insolvency Service, company
insolvencies were up 81% from Q2 2021 to 5,629, the highest figure
for close to 13 years, Business Sale discloses.
This huge rise was driven by a massive increase in creditors'
voluntary liquidations (CVLs), Business Sale states. There were
4,908 CVLs during the quarter, the highest quarterly figure since
records began in 1960, accounting for around 87% of all
insolvencies, Business Sale notes.
Compulsory liquidations increased to 368 (although this remained
below pre-pandemic levels), 320 firms entered administration, 32
entered company voluntary arrangements (CVAs) and one receivership
appointment.
According to Business Sale, John Cullen, Business Recovery Partner
at Menzies, commented: "This is indication of the severe cashflow
pressures that many businesses are facing, which are exacerbated by
soaring energy and fuel costs. Inflation is testing the viability
of businesses across industry sectors and with interest rates
expected to rise again this week, the cost of borrowing is also set
to rise."
"At the same time as facing significant cost increases, many
businesses are being hampered by supply and staff shortages, which
are limiting revenues at a critical time, just as demand levels are
recovering or back to pre-pandemic levels."
The dramatic rise of CVLs has been described by Samantha Keen of
EY-Parthenon as the "first tranche" in a long-expected wave of
insolvencies, Business Sale relays. A surge in company collapses
had been widely forecast to occur following the withdrawal of
government COVID-19 support schemes, but the issue has now been
further escalated by supply chain issues and soaring inflation,
according to Business Sale.
R3 President Christina Fitzgerald, as cited by Business Sale, said:
"The increase this year -- and the surge in CVLs in the final
quarter of 2021 -- suggests that many directors are opting to close
their businesses as they lack confidence in their trading prospects
in the current climate. And while insolvencies still haven't
reached pre-pandemic levels, this is unlikely to remain the case
for long."
Given the worsening situation many businesses find themselves in,
many are forecasting that the recent surge in insolvencies is set
to continue and, most likely, intensify over the coming months as
costs rise, markets adjust to ongoing volatility and consumer
confidence deteriorates amid the cost-of-living crisis, Business
Sale discloses.
According to Business Sale, EY-Parthenon's Samantha Keen said: "We
expect further insolvencies in the year ahead among larger
businesses who are struggling to adapt to challenging trading
conditions, tighter capital, and increased market volatility.
"The impact from the slowdown in consumer spending is likely to be
felt in the autumn, just as many retail and hospitality businesses
gear up for the all-important 'golden quarter'. These businesses,
which are highly sensitive to fluctuations in consumer demand, will
be most vulnerable."
VALARIS PLC: Reactivates 4 Floaters a Year After Chapter 11 Exit
----------------------------------------------------------------
Offshore Magazine reports that Valaris has successfully reactivated
four deepwater floaters just over a year after emerging from
Chapter 11.
The reactivations started in fourth-quarter 2021 and included
semisubmersible VALARIS DPS-1 for Woodside Energy in Australia and
drillships VALARIS DS-4 for Petrobras in Brazil, VALARIS DS-9 for
Exxon Mobil in Angola and VALARIS DS-16 for Occidental in the US
Gulf of Mexico.
Deepak Bisht, Valaris senior director of technical support, said,
"The VALARIS DPS-1, DS-4, DS-9 and DS-16 have all commenced
operations for their respective customers. The leadership,
collaboration and commitment displayed by Valaris personnel at all
levels was exemplary and allowed us to move forward safely and
efficiently. This has set the bar high for the organization as we
venture into more rig reactivations."
About Valaris PLC
Valaris plc (NYSE: VAL) provides offshore-drilling services. It is
an English limited company with its corporate headquarters located
at 110 Cannon St., London. On the Web: http://www.valaris.com/
On Aug. 19, 2020, Valaris and its affiliates sought Chapter 11
protection (Bankr. S.D. Tex. Lead Case No. 20-34114). The Debtors
had total assets of $13,038,900,000 and total liabilities of
$7,853,500,000 as of June 30, 2020.
The Debtors tapped Kirkland & Ellis LLP and Slaughter and May as
their bankruptcy counsel, Lazard as investment banker, and Alvarez
& Marsal North America LLC as their restructuring advisor. Stretto
is the claims agent, maintaining the page
http://cases.stretto.com/Valaris
Kramer Levin Naftalis & Frankel LLP and Akin Gump Strauss Hauer &
Feld LLP serve as legal advisors to the consenting noteholders
while Houlihan Lokey Inc. serves as their financial advisor.
*********
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
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re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
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contact Peter Chapman at 215-945-7000.
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