/raid1/www/Hosts/bankrupt/TCREUR_Public/220831.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, August 31, 2022, Vol. 23, No. 168
Headlines
A U S T R I A
WIEN ENERGIE: Faces Insolvency Due to Soaring Electricity Prices
M A L T A
MALTA MEDAIR: To Face Liquidation Along with Air Malta
N E T H E R L A N D S
KOOS HOLDING: S&P Withdraws 'B' Issuer Credit Rating
S L O V E N I A
ADRIA AIRWAYS: Receiver Files Lawsuit Against Former Managers
S W E D E N
SAS AB: Future Still Uncertain Amid Operational Challenges
U K R A I N E
[*] Fitch Affirms 'CCC-/CCC' IDRs on Seven Ukrainian Banks
U N I T E D K I N G D O M
CHESHIRE 2021-1: Fitch Hikes Rating on Class F Debt to BB+sf
CINEWORLD: Equity Holders May Get Nothing, Short Seller Warns
- - - - -
=============
A U S T R I A
=============
WIEN ENERGIE: Faces Insolvency Due to Soaring Electricity Prices
----------------------------------------------------------------
TVP World reports that Austria's largest energy supplier, Wien
Energie faces financial turmoil due to massive inflation in the
country.
According to TVP World, the company is due to repay between EUR1.7
and EUR1.8 billion and needs collateral.
Austrian media outlet Heute stated that Wien Energie's financial
situation has become tumultuous due to the immense inflation on the
electricity market, TVP World relates.
Between EUR1.7 and EUR1.8 billion had to be deposited by the City
of Vienna subsidiary at the beginning of the week -- and it could
no longer cope on its own, TVP World discloses.
Heute reported that since the electricity prices in the wholesale
sector (where Vienna has to buy energy) have soared, the securities
are no longer sufficient, TVP World notes. Now the federal
government has to help out, TVP World states. Around two million
customers are under contract with Wien Energie -- so Finance
Minister Magnus Brunner will probably have to set up a rescue
parachute scheme, according to TVP World.
Wien Energie stated on Aug. 28 that it was "not
insolvent/bankrupt", but due to the explosion in electricity prices
across Europe, the "necessary security payments had risen [to an]
unforeseen [amount]," TVP World relates. "Wien Energie & Wiener
Stadtwerke are solid, economically sound companies with top credit
ratings."
=========
M A L T A
=========
MALTA MEDAIR: To Face Liquidation Along with Air Malta
------------------------------------------------------
The Shift reports that Malta MedAir, a government phantom airline
company registered in 2018 used in an elaborate accounting exercise
to give a false impression that Air Malta was turning a profit, is
now expected to be liquidated together with Air Malta, according to
the government's secret plan to create a new national airline later
this year.
Sources close to the finance ministry told The Shift that as part
of the government's Plan B, drawn up in anticipation of a negative
decision from the European Commission on its request to inject more
state aid into the flailing airline, Finance Minister Clyde Caruana
has now also decided to axe Malta MedAir, and make all its
employees redundant, in order to start a new national airline
company from scratch.
According to the detailed plans, which have already been approved
by Prime Minister Robert Abela, and which are still being discussed
in Brussels, all the assets currently held by Malta MedAir --
particularly the Heathrow and Gatwick slots valued at some EUR50
million -- will be acquired by the new airline, The Shift
discloses.
Those assets will be used as collateral for the banks and other
financial institutions that will be called in to finance the new
government venture, The Shift notes.
The plan -- which will mean redundancy for all Air Malta employees
still on the airline's books by the time of its dissolution -- will
take into consideration some important Air Malta employees, mostly
those close to the ruling Labour Party, The Shift states. These
employees are expected to be recruited by the new national airline
company where they will assume its top managerial posts, although
on less lucrative contracts than those currently being paid by Air
Malta, according to The Shift.
However, government sources told The Shift that Caruana's
declarations are "very far from the truth" and are only intended to
give a false impression, mostly to employees, to keep their morale
high.
"The main reason the minister postponed the cut-off date for Air
Malta employees to be transferred onto the government's books,
which was postponed from August to December, is to provide for a
smoother transition into his already-devised secret plan," The
Shift quotes the sources as saying.
They also confirmed that a decision has not yet been taken on the
date of Air Malta's dissolution, although that will most likely
take place sometime this autumn, The Shift notes. The government
is planning to, politically, "blame" the European Commission for
the "forced" decision, The Shift says.
=====================
N E T H E R L A N D S
=====================
KOOS HOLDING: S&P Withdraws 'B' Issuer Credit Rating
----------------------------------------------------
S&P Global Ratings withdrew its ratings on Koos Holding Cooperatief
U.A. (Roompot) and its financing entity Rouge Beachhouse B.V. at
Roompot's request.
S&P's issuer credit rating on the company was 'B' and the rating on
the instruments, a EUR279.5 million term loan B (TLB) and EUR40
million revolving credit facility (RCF), was 'B+'. The outlook on
the issuer credit rating was stable at the time of withdrawal.
Roompot recently repaid its publicly rated TLB and undrawn RCF with
drawings under the committed facilities at the financing entity,
Sandy Midco, of its ultimate parent Sandy Holdco B.V.
===============
S L O V E N I A
===============
ADRIA AIRWAYS: Receiver Files Lawsuit Against Former Managers
-------------------------------------------------------------
EX-YU Aviation News reports that the receiver of the bankrupt
former Slovenian national carrier Adria Airways has filed a EUR78
million lawsuit against the former company's German managers and
owners for the damage they caused to its creditors by financially
draining the airline.
The suit has been filed against former CEOs Arno Schuster and
Holger Kowarsch, as well as other managers that led Adria after the
German fund 4K Invest bought the carrier in 2016, EX-YU Aviation
News relates.
Messrs. Schuster and Kowarsch were also partners at 4K Invest,
EX-YU Aviation News states.
When Adria declared bankruptcy in October 2019, it owed tens of
millions of euros to its suppliers, leasing companies, airports,
airlines, employees and other creditors, EX-YU Aviation News
discloses.
The lawyers hired by official receiver, Janez Pustaticnik, studied
the forensic audit of Adria and found that some managers had
violated insolvency legislation. While knowing Adria was
insolvent, they did not ask 4K Invest to supply it with fresh
capital as promised nor declared bankruptcy, EX-YU Aviation News
states. Instead, they addressed Adria's financial problems with
"problematic bookkeeping tricks", EX-YU Aviation News notes. For
this reason, they are liable to pay the difference between the
claims and the proceeds from the bankruptcy estate sold, EX-YU
Aviation News relays.
However, analysts believe that the former German management have
largely covered their tracks, making it unlikely that enough assets
would be found and seized to pay Adria's creditors, according to
EX-YU Aviation News.
===========
S W E D E N
===========
SAS AB: Future Still Uncertain Amid Operational Challenges
----------------------------------------------------------
Victoria Fetcher at Bloomberg News reports that SAS AB, which is
working its way through a Chapter 11 restructuring in the United
States, warned that much more needs to be done to persuade
stakeholders to invest in the ailing Scandinavian airline.
According to Bloomberg, the airline is also having to overcome the
effects of a pilots' strike and travel disruptions that have
hampered its important summer season, just as the price of kerosene
has skyrocketed and inflation is accelerating.
"Cost cutting across all SAS remains a focus to ensure our cost
competitiveness," Bloomberg quotes the Stockholm-based airline as
saying in a statement on Aug. 26 as it announced third-quarter
results. It has identified "the vast majority" of the SEK7.5
billion (US$707 million) in annual spending it needs to cut.
It reported total operating expenses of SEK24.4 billion for the
nine months to July, up SEK10.8 billion after adjusting for
currency effects, Bloomberg discloses.
The tri-national airline made significant progress on both its
staffing crisis and financial restructuring plans over the summer,
Bloomberg notes. Earlier this month, Apollo Global Management Inc.
agreed to provide the company with a loan known as Treasury
Financing of approximately US$700 million to help it through its
Chapter 11 bankruptcy proceedings, Bloomberg recounts.
According to Bloomberg, CEO Anko van der Werff said in an interview
that in addition to the loan deal with Apollo, SAS is nearing the
results in talks to renegotiate contracts to reduce leasing costs
and "right size" the fleet, "We are making progress on our ongoing
talks," he said. "I think they'll last a few more months."
In August, the company's pilots also agreed to a collective
bargaining agreement the airline and unions struck last month to
end a 15-day strike, Bloomberg recounts. The July strike hit SAS
at its busiest time of the year, when it was forced to cancel 3,700
flights, affecting 380,000 passengers and costing US$135 million,
Bloomberg states.
But even with those milestones achieved, the future of SAS still
hangs in the balance, Bloomberg says. It has to convince lenders
to convert about SEK20 billion of existing debt into equity. In
addition, it must raise at least SEK9.5 billion in new equity,
Bloomberg discloses.
The Swedish government has already said it will not inject new
capital into the airline, while Denmark has signaled it could
increase its stake, Bloomberg recounts. Other potential supporters
include investors who already have equity or debt interests in
other airlines such as Apollo, Bloomberg notes.
Enormous operational challenges remain for the airline, SAS warned,
citing "prevailing uncertainties around the world" as well as Asian
traffic impacted by Covid-19 restrictions and geopolitics,
Bloomberg relays.
Travel demand may also be hampered as accelerating inflation, from
soaring energy bills to more expensive groceries, weighs on
household budgets, Bloomberg states.
About Scandinavian Airlines
SAS SAB, Scandinavia's leading airline, with main hubs in
Copenhagen, Oslo and Stockholm, is flying to destinations in
Europe, USA and Asia. Spurred by a Scandinavian heritage and
sustainable values, SAS aims to be the global leader in sustainable
aviation. The airline will reduce total carbon emissions by 25
percent by 2025, by using more sustainable aviation fuel and our
modern fleet with fuel-efficient aircraft. In addition to flight
operations, SAS offers ground handling services, technical
maintenance and air cargo services. SAS is a founder member of the
Star Alliance, and together with its partner airlines offers a wide
network worldwide. On the Web: https://www.sasgroup.net
SAS AB and its affiliates, including Scandinavian Airlines Systems
Denmark-Norway-Sweden and Scandinavian Airlines of North America
Inc., sought protection under Chapter 11 of the U.S. Bankruptcy
Code (Bankr. S.D.N.Y. Case No. 22-10925) on July 5, 2022. In the
petition filed by Erno Hildén, as authorized representative,
the Debtor SAS AB estimated assets between $10 billion and $50
billion and liabilities between $1 billion and $10 billion.
Weil, Gotshal & Manges LLP is serving as global legal counsel and
Mannheimer Swartling Advokatbyra AB is serving as Swedish legal
counsel to SAS. Seabury Securities LLC and Skandinaviska Enskilda
Banken AB are serving as investment bankers, Seabury is also
serving as restructuring advisor. FTI Consulting is serving as
financial advisor. Kroll Restructuring Advisors is the claims
agent.
=============
U K R A I N E
=============
[*] Fitch Affirms 'CCC-/CCC' IDRs on Seven Ukrainian Banks
----------------------------------------------------------
Fitch Ratings, on Aug. 22, 2022, affirmed seven Ukrainian banks'
Long-Term Foreign-Currency (LTFC) and Local- Currency (LTLC) Issuer
Default Ratings (IDRs) at 'CCC-' and 'CCC', respectively. The LT
IDRs do not carry an Outlook at this rating level.
The seven banks are:
JSC State Savings Bank of Ukraine (Oschadbank);
JSC The State Export-Import Bank of Ukraine (Ukreximbank);
JSB Ukrgasbank;
Joint-Stock Company Commercial Bank PrivatBank (Privat);
Joint Stock Company First Ukrainian International Bank (FUIB);
JSC Alfa-Bank (ABU); and
ProCredit Bank (Ukraine) (PCBU).
Fitch has also downgraded Privat's Viability Rating (VR) to 'ccc-'
from 'ccc' and the six other banks' to 'cc' from 'ccc' to reflect
heightened sovereign and operating environment risks to the banks'
standalone credit profiles.
The rating actions follow the downgrade of Ukraine's sovereign
rating to 'RD' (Restricted Default) on August 12, 2022 following
the completion of a distressed debt exchange (DDE) on some of its
bonds, and subsequent upgrade to 'CC' on August 17, 2022 following
a review of its debt service payment prospects.
KEY RATING DRIVERS
LTFC IDRs
The affirmation of the banks' LTFC IDRs at 'CCC-' reflects Fitch's
view that the risk of default on the banks' senior foreign-currency
(FC) obligations remains high but, with the exception of Privat, is
moderately lower than the banks' risks of failure, as reflected in
their VRs. This reflects the banks' stressed but still generally
adequate FC liquidity relative to their needs, helped by various
regulatory capital and exchange controls in place since the
outbreak of the war to reduce the risks of deposit and capital
outflows and maintain stability and confidence in the banking
system.
While FC repayments remain subject to considerable uncertainty,
Fitch's base-case expectation is that banks will continue to
service their external obligations. The banking sector's external
debt accounted for a low 3% of the sector's total liabilities at
end-2021 and is largely concentrated in Oschadbank and Ukreximbank.
Their next Eurobond repayments are limited in size, and are due in
September 2022 (around USD70 million for Oschadbank) and in January
2023 (around USD25 million for Ukreximbank).
The LTFC IDRs of Oschadbank, Ukreximbank; Ukrgasbank and Privat are
driven by their Government Support Ratings (GSRs) of 'ccc-' and of
PCBU by its Shareholder Support Rating (SSR) of 'ccc-'. The GSRs
for ABU and FUIB are 'No Support' (ns).
LTLC IDRs
The affirmation of the banks' LTLC IDRs at 'CCC', one notch above
their LTFC IDRs, reflects limited regulatory restrictions and
constraints on local-currency (LC) operations. The banking sector's
LC liquidity management is currently supported by limits on cash
withdrawals and a guarantee of all retail deposits for the duration
of the war and three months thereafter. The National Bank of
Ukraine (NBU) is also offering LC liquidity support to banks. These
support measures have helped to maintain domestic confidence in the
banking system, with hryvnia retail deposits rising about 16% since
the start of the war.
The banks' LTFC and LTLC IDRs are one notch above Ukraine's LTFC
and LTLC IDRs of 'CC' and 'CCC-' respectively, reflecting our view
of a lower risk the authorities will impose restrictions on banks
servicing their FC and LC obligations than non-payment by the
sovereign. This approach is consistent with Fitch's criteria under
certain circumstances when bank and sovereign ratings are both at
very low levels.
VRs
The VRs reflect Fitch's view of the exceptionally high risks to
Ukrainian banks' standalone profiles caused by the war. This is
reflected in Fitch's assessment of the operating environment for
Ukrainian banks, which has been revised to 'cc' from 'ccc'. Fitch's
base case is that very high operating-environment risks will lead
to a surge in problem loans that will require extensive
provisioning, threatening the banks' solvency. Fitch believes the
risk of near-term capital shortfalls at the banks with VRs at 'cc'
is high, with banks likely to require forbearance from the NBU or
extraordinary capital support. As a result, at a 'cc' VR we believe
the failure of the banks is a probable scenario. Privat's higher VR
at 'ccc-' reflects our view of its significantly stronger
loss-absorption buffers than the other six banks'.
GSRs and SSR
The GSRs of state-owned Privat, Oschadbank, Ukreximbank and Ukrgas
at 'ccc-' reflects Fitch's view that the propensity of the
Ukrainian authorities to provide support to these four banks
remains high given their majority state ownership and systemic
importance. Fitch expects the sovereign to continue to support the
four banks despite its very weak financial ability, as underlined
by the GSR being above the sovereign IDR. This is consistent with
Fitch's criteria under certain circumstances when bank and
sovereign ratings are both at very low levels.
GSRs of ABU and FUIB of 'ns' reflect Fitch's opinion that support
from the Ukrainian authorities cannot be relied on.
PCBU's SSR at 'ccc-' reflects potential constraints on the bank's
ability to utilise potential support from its foreign parent,
ProCredit Holding AG & Co. KGaA (PCH, BBB/Stable), in particular to
service foreign currency obligations.
DEBT RATINGS
The 'CCC-' ratings of the senior unsecured debt of Oschadbank and
Ukreximbank, issued by UK-registered SSB No. 1 PLC and Biz Finance
PLC, respectively, are aligned with the banks' LTFC IDRs.
Ukreximbank's subordinated debt, issued by Biz Finance PLC, has
been downgraded to 'C' from 'CC'. The notes are notched from the
bank's 'cc' VR anchor. The Recovery Rating on the obligations has
been revised to 'RR6' from 'RR5', reflecting our view of likely
poor recoveries in a default.
ABU's senior unsecured debt ratings are aligned with its 'CCC' LTLC
IDR and 'A(ukr)' National Rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IDRs, VRs, and DEBT RATINGS
Fitch would downgrade the IDRs and debt ratings of the seven banks
if we perceive an increased likelihood the banks would default on,
or seek a restructure of, their respective senior or subordinated
obligations. The VRs would be downgraded in the event of prolonged
regulatory forbearance of an extraordinary nature, or a more severe
operating environment that heightens pressure on financial
factors.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IDRs, VRs, and DEBT RATINGS
Fitch believes positive rating action is unlikely in the near term.
However, the banks' IDRs and debt ratings could be upgraded on a
similar action on the sovereign IDRs. An upgrade of the VRs would
likely require a considerable improvement in the operating
environment and significantly smaller losses, leading to lower
solvency risks than in our base case.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
NATIONAL RATINGS
The National Ratings reflect the banks' unchanged creditworthiness
in LC relative to other Ukrainian issuers'.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
GSRs and SSR
The GSRs of the four state-owned banks are sensitive to our view of
the government's ability and propensity to support the banks. In
our opinion an upgrade of the GSRs on FUIB and ABU is highly
unlikely. PCBU's SSR is sensitive to our view of the bank's ability
to use potential support from its parent and our view of the
parent's willingness to support its Ukrainian subsidiary.
NATIONAL RATINGS
Changes in the banks' National Long-Term Ratings would likely arise
from a weakening/strengthening in their overall credit profiles
relative to other Ukrainian entities rated on the National Rating
scale.
VR ADJUSTMENTS
The operating environment scores of 'cc' are below the 'b' category
implied score due to the following adjustment reasons: sovereign
rating (negative).
The business profile scores of 'cc' are below the 'b' category
implied score due to the following adjustment reasons: business
model (negative).
The earnings and profitability scores of 'ccc' for Privat and 'cc'
for FUIB and Ukrexim are below the 'bb' implied score due to the
following adjustment reasons: historical and future metrics
(negative)
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
The ratings of Privat, Oschadbank, Ukreximbank and Ukrgasbank are
linked to Ukraine's sovereign ratings. The ratings of PCBU are
linked to those of its parent.
ESG CONSIDERATIONS
Oschadbank and Ukreximbank each has an ESG governance structure
score of '4', which reflects the high influence of the government
over both banks' business operations and strategy development. This
has a moderately negative impact on the credit profiles due to
governance risks and potential involvement in directed financing,
in Fitch's view, 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
------ -----
ProCredit Bank (Ukraine)
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
LC ST IDR C Affirmed C
Natl LT AA(ukr) Affirmed AA(ukr)
Viability cc Downgrade ccc
Shareholder
Support ccc- Affirmed ccc-
JSC State Savings Bank
of Ukraine (Oschadbank)
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr) Affirmed AA(ukr)
Viability cc Downgrade ccc
Gov't Support ccc- Affirmed ccc-
JSC Alfa-Bank
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT A(ukr) Affirmed A(ukr)
Viability cc Downgrade ccc
Gov't Support ns Affirmed ns
senior unsecured LT CCC Affirmed RR4 CCC
senior unsecured Natl LT A(ukr) Affirmed A(ukr)
Joint-Stock Company
Commercial Bank PrivatBank
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr) Affirmed AA(ukr)
Viability ccc- Downgrade ccc
Gov't Support ccc- Affirmed ccc-
SSB No.1 PLC
senior unsecured LT CCC- Affirmed RR4 CCC-
JOINT STOCK COMPANY FIRST
UKRAINIAN INTERNATIONAL BANK
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
LC ST IDR C Affirmed C
Natl LT AA-(ukr) Affirmed AA-(ukr)
Viability cc Downgrade ccc
Gov't Support ns Affirmed ns
JSB Ukrgasbank
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
LC ST IDR C Affirmed C
Natl LT AA(ukr) Affirmed AA(ukr)
Viability cc Downgrade ccc
Gov't Support ccc- Affirmed ccc-
Biz Finance PLC
Subordinate LT C Downgrade RR6 CC
senior unsecured LT CCC- Affirmed RR4 CCC-
JSC The State Export-Import
Bank of Ukraine (Ukreximbank)
LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr) Affirmed
AA(ukr)
Viability cc Downgrade ccc
Gov't Support ccc- Affirmed ccc-
===========================
U N I T E D K I N G D O M
===========================
CHESHIRE 2021-1: Fitch Hikes Rating on Class F Debt to BB+sf
------------------------------------------------------------
Fitch Ratings has upgraded Cheshire 2021-1 PLC's class C to F notes
and affirmed the class A and B notes. The Outlooks are Stable. The
class B to F notes have been removed from Under Criteria
Observation.
Cheshire 2021-1 PLC
A XS2386503721 LT AAAsf Affirmed AAAsf
B XS2386503994 LT AA-sf Affirmed AA-sf
C XS2386504026 LT A+sf Upgrade A-sf
D XS2386504299 LT A-sf Upgrade BBBsf
E XS2386504372 LT BBBsf Upgrade BBsf
F XS2386504455 LT BB+sf Upgrade Bsf
TRANSACTION SUMMARY
Cheshire 2021-1 PLC is a multi-originator securitisation of legacy
owner-occupied (OO) and buy-to-let (BTL) mortgages. The three
largest lenders are GMAC-RFC Limited, Future Mortgages Limited and
Mortgages 1 Limited. The transaction is a refinancing of the
Dukinfield II PLC issuance.
KEY RATING DRIVERS
Updated UK RMBS Criteria: Fitch updated its UK RMBS Rating Criteria
on May 23, 2022 (see Fitch Ratings Updates UK RMBS Rating
Criteria), including its sustainable house price, house price
indexation and gross disposable household income for each of the 12
UK regions. The changes represent an increase in the multiple for
all regions other than North East and Northern Ireland. The
sustainable house price is now higher in all regions except
Northern Ireland, which has a positive impact on recovery rates
(RR) and by extension Fitch's expected losses in UK RMBS
transactions.
In addition to updating its sustainable house price assumptions
Fitch also reduced the foreclosure frequency (FF) floors for loan
in arrears for rating categories other than 'AAAsf'. This reduction
aligned Fitch's expected case with observations from rated
transactions and has a positive impact on ratings at the lower end
of the rating scale. The updated criteria contributed to the rating
actions.
Ratings Lower than MIR: The class B, D, E and F notes' ratings are
one notch below their model-implied ratings (MIR). This reflects
Fitch's view that a modest increase in arrears could result in
lower MIR than the current ratings in future analyses.
Asset Analysis Assumptions: Certain loan-level attributes that
attract a FF adjustment (in relation to adverse credit history,
employment type and income verification) were not provided to
Fitch, but were reported in the Dukinfield II PLC prospectus. In
its initial analysis, Fitch used these reported proportions to
apply loan-level data adjustments to capture the relevant FF
adjustments. Fitch has maintained these assumptions in the analysis
for these rating actions.
Rental income data was not provided to Fitch. Fitch has assumed
that the rental income was sufficient to meet the minimum interest
coverage ratio defined in the underwriting policy at the time of
origination. This assumption is consistent with the approach
applied in Fitch's initial analysis.
In its initial analysis when setting the originator adjustment for
the portfolio, Fitch considered factors including the historical
performance and average annualised constant default rate since
Dukinfield II PLC closed. This resulted in an originator adjustment
of 1.0x for the OO sub-pool and 1.5x for the BTL sub-pool. Fitch
has maintained these assumptions in the analysis for these rating
actions.
Interest Deferral Caps Junior Notes: The interest payments for all
notes except the class A are deferrable at all times. In its
analysis Fitch tested the class A and B notes' ratings on a timely
basis and assessed the materiality of the interest deferability
exposure for the class C to F notes. Fitch considers the liquidity
protection in the structure adequate for the ratings. However, the
class C to F notes' ratings are constrained to the 'Asf' rating
category due to a lack of dedicated liquidity.
As per Fitch's criteria, the class F notes' rating is capped at
'BB+sf' as these notes defer interest in Fitch's modelling of its
expected case.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The transaction's performance may be affected by changes in market
conditions and economic environment. Weakening economic performance
is strongly correlated to increasing levels of delinquencies and
defaults that could reduce credit enhancement available to the
notes.
A 15% increase in the weighted average (WA) FF and a 15% decrease
in the WARR indicates model-implied downgrades of no more than two
notches.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing credit enhancement and
potentially upgrades.
Fitch tested an additional rating sensitivity scenario by applying
a decrease in the WAFF of 15% and an increase in the WARR of 15%.
The results indicate model-implied upgrades of up to four notches.
CINEWORLD: Equity Holders May Get Nothing, Short Seller Warns
-------------------------------------------------------------
Joe Easton, Tom Mackenzie and Francine Lacqua at Bloomberg News
report that Cineworld Group Plc equity holders are set to be left
with nothing, a short seller warned after the cinema operator said
last week that it was considering filing for US bankruptcy.
Argonaut Capital Partners LLP's Barry Norris told Bloomberg
Television that Cineworld's pursuit of acquisitions that were
funded by debt had left it with a "completely unsustainable"
capital structure.
According to Bloomberg, London-based Norris said Cineworld had a
chance to raise equity but didn't. "This is not a company you
should feel sorry for in any way," he said, adding that it was run
"on a wing and a prayer."
A spokesman for Cineworld declined to comment on Argonaut's
position or interview but requested that Bloomberg highlight the
firm's Aug. 22 statement, in which it said it would "maintain its
operations in the ordinary course until and following any filing
and ultimately to continue its business over the longer term with
no significant impact upon its employees", Bloomberg relates.
Argonaut has shorted Cineworld for four years, the Times of London
reported on Aug. 23, Bloomberg recounts.
The stock has lost more than 90% of its value in 2022, leaving the
firm with a market capitalisation of GBP37 million (US$44 million),
Bloomberg notes.
The cinema chain racked up large debts from acquisitions, and has
suffered from a weak box-office recovery following Covid-19
lockdowns that kept customers away from theaters, Bloomberg
discloses.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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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.
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