/raid1/www/Hosts/bankrupt/TCREUR_Public/220907.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, September 7, 2022, Vol. 23, No. 173
Headlines
G E R M A N Y
RED & BLACK: S&P Assigns Prelim BB (sf) Rating to Class D Notes
TK ELEVATOR: S&P Outlook Revised to Negative, Affirms 'B' ICR
G R E E C E
SANI/IKOS GROUP: Fitch Affirms 'B-' IDR & Alters Outlook to Neg.
I R E L A N D
BNPP IP 2015-1: Fitch Hikes Class F-R Debt Rating to BBsf
CONTEGO CLO III: Moody's Affirms B2 Rating on EUR8.25MM F Notes
HARVEST CLO IX: Moody's Cuts Rating on EUR15.2MM F-R Notes to B3
MADISON PARK XI: Fitch Hikes Rating on Class F Notes to B+sf
MADISON PARK XX: Fitch Assigns Final B-sf Rating to Class F Notes
SEGOVIA EUROPEAN 5-2018: Fitch Affirms B+sf Rating on Class F Notes
L A T V I A
AKROPOLIS GROUP: Fitch Affirms 'BB+' Longterm IDR, Outlook Stable
N E T H E R L A N D S
LUMILEDS HOLDING: Case Summary & 30 Largest Unsecured Creditors
LUMILEDS HOLDING: Gibson Dunn Represents Term Lender Group
LUMILEDS HOLDING: Seeks $275MM DIP Loan from Deutsche Bank
LUMILEDS HOLDING: Unsecureds Will Get 100% of Claims in Plan
LUMILEDS HOLDING: Wins Approval of First Day Motions
R O M A N I A
ROMCAB: To File Debt Rescheduling Request
U K R A I N E
UKRANIAN RAILWAYS: Fitch Hikes Foreign Currency IDR to 'CC'
UKRENERGO: Fitch Hikes State-Guaranteed Notes Unsec. Rating to 'CC'
[*] Fitch Ups 8 Ukrainian LRGs IDR to CC on Sovereign Rating Action
U N I T E D K I N G D O M
BLEIKER'S SMOKEHOUSE: Salmo Buys Business Out of Administration
EUROSAIL-UK 2007-2: Fitch Affirms CCCsf Rating on Class E1c Notes
JUPITER MARKETING: Goes Into Administration
REGIS MUTUAL: Three Mutuals Choose New Manager After Collapse
TRITON UK MIDCO: Fitch Withdraws 'B-' LongTerm IDR
XPO: Lack of Funding Prompts Administration
X X X X X X X X
UZBEKHYDROENERGO: Fitch Affirms BB- LongTerm IDR, Outlook Stable
- - - - -
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G E R M A N Y
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RED & BLACK: S&P Assigns Prelim BB (sf) Rating to Class D Notes
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S&P Global Ratings assigned its preliminary credit ratings to Red &
Black Auto Germany 9 UG (haftungsbeschrankt)'s (Red & Black Auto
9's) asset-backed floating-rate class A, B, C, and D notes. At
closing, Red & Black Auto 9 will also issue unrated class E notes.
This will be Bank Deutsches Kraftfahrzeuggewerbe GmbH's (BDK's)
ninth German publicly placed ABS transaction. The underlying
collateral comprises German loan receivables for new, used, and
newly used cars. BDK originated and granted the loans to its
private customers. Of the pool, 70.23% of the current principal
balance on contracts amortize with a final balloon payment.
The transaction will amortize from closing and has separate
interest and principal waterfalls. The interest waterfall features
a principal deficiency ledger mechanism, by which the issuer can
use excess spread to cure principal losses.
A combination of excess spread, subordination, and the cash reserve
will provide credit enhancement. The liquidity reserve is used to
pay any senior expenses, swap payments, and interest shortfalls.
Any excess of the reserve over the required amount will flow
through the interest waterfall and will be available to cure any
principal deficiency ledger (PDL).
Societe Generale S.A. will fund a reserve to mitigate setoff risk
and commingling risk, if its long-term issuer credit rating is
lowered below 'BBB', or if BDK becomes insolvent. In S&P's view,
the reserve fully mitigates the seller risks.
The assets will pay a monthly fixed interest rate, and the notes
pay one-month Euro Interbank Offered Rate (EURIBOR) plus a margin
subject to a floor of zero. Consequently, the rated notes benefit
from an interest rate swap until the legal final maturity date.
S&P said, "Our preliminary ratings address timely payment of
interest and ultimate payment of principal on the class A, B, C,
and D notes.
"Our structured finance sovereign risk criteria and our operational
risk criteria do not constrain our preliminary ratings in this
transaction. Counterparty risk is adequately mitigated in line with
our counterparty criteria."
Preliminary Ratings
CLASS PRELIM. RATING* AMOUNT (MIL. EUR)
A AAA (sf) 567.300
B AA- (sf) 7.500
C A- (sf) 9.600
D BB (sf) 12.600
E NR 3.000
Subordinated loan NR 13.731
NR--Not rated.
TK ELEVATOR: S&P Outlook Revised to Negative, Affirms 'B' ICR
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S&P Global Ratings revised its outlook on Germany-based TK Elevator
Topco, the holding company of TK Elevator Group (TK Elevator) to
negative from stable and affirmed its 'B' rating on the company,
its 'B+' issue rating on the senior secured debt, and our 'CCC+'
issue rating on the senior unsecured debt. The recovery ratings on
the senior secured and unsecured debt remain at '2' and '6',
respectively.
The negative outlook reflects the likely downgrade if the group's
is unable to improve its operating performance with EBITDA margin
increasing toward 14% and debt to EBITDA remaining above 8x by
Sept. 30, 2023.
Although price increases and signs of margin recovery will bolster
fiscal 2023 performance, continuously high raw materials prices and
a stretched supply chain will dampen TK Elevator's prospects for
the next 12-18 months, putting pressure on our 'B' rating. S&P
said, "While the group's operating performance in fiscal 2021 was
broadly as we expected, with an S&P Global Ratings-adjusted EBITDA
margin of 12.9%, continuously high raw materials prices,
pandemic-related lockdowns in China, and a stretched supply chain
have dampened prospects for higher margins in fiscal 2022. We note
ongoing efficiency measures under the group's transformation
program, including a new shared solutions center in Hungary;
improved new installation processes in North America, major
European countries, and China; the digitalization of the spare
parts supply chain; and improved procurement processes. However, we
expect margins will decline to about 12% in fiscal 2022, which is
significantly below our previous forecast of 13.6%-14.0%. This
mainly reflects the group's delay in making price adjustments in
response to significant raw materials and logistics price
increases. That said, we think some components are partly hedged,
thanks to the delayed pass-through clauses in supplier contracts.
We also understand that the group has been able to pass on the
majority of its increasing input prices related to new large-scale,
long-term projects and the cost increases in its service operations
because of contractual indexation. Therefore, the main drivers of
negative margin developments are non-indexed short- and medium-term
projects. This is why we expect profitability to pick up (though
still lag previous expectations) in fiscal 2023 when price
increases fully materialize, with margins rising toward 14.0%. In
addition, fiscal 2023 margins will also be supported by ongoing
service growth driven by high new installation conversion, improved
retention, and recaptures. However, if the inflationary environment
persists (although we note that spot metal prices have dropped in
recent weeks) or if demand from end markets softens due to a
weakening macroeconomic environment, there is a risk that the group
will not perform according to our base case and meet the
requirements of a 'B' rating in fiscal 2023."
S&P said, "Over the next 12-18, months we expect that TK Elevator's
business will continue to expand, reflecting a robust order intake
and a growing service business, supporting the current rating
level.TK Elevator's order intake was about EUR6.8 billion in the
first nine months (Oct. 1, 2021-June 30, 2022) of its 2022 fiscal
year, equating to an increase of 12% year on year, a new high
compared to previous periods. We saw particularly strong growth in
the Americas, modernization, and high demand for the company's
Access Solutions, mostly supported by catch-up effects at airports,
as well as strong growth in demand for elevator services across all
regions, which more than compensated for lower orders of new
installations in China. This translated into a record order backlog
of EUR6.5 billion as of June 30, 2022. Accordingly, we anticipate
an acceleration in sales growth with revenue increasing by
5.5%–6.5% to more that EUR8.4 billion in fiscal 2022 and by
4.0%–5.0% to more than EUR8.7 billion in fiscal 2023. Besides the
strong order intake, revenue growth is supported by price increases
amid inflation. Although direct natural gas price exposure for the
group is marginal, we also note that a slowdown could result from a
weakening macroeconomic environment, particularly in light of
potential gas rationing in several European countries. That said,
TKE's business in Europe is service-driven, new installations
account for less than 25% of its sales, and Germany accounts for
less than 3% of TKE's global elevator and escalator new
installation units. In addition, even though TK Elevator is
especially strong in China's infrastructure sector (market share of
about 20%), which was less affected by pandemic-induced lockdowns,
we recognize the risk that additional lockdowns in China could
place the new installation business under additional short-term
pressure.
"Rating pressure could arise if deleveraging does not materialize,
as reflected in the negative outlook. Based on the
weaker-than-expected operating performance, we expect leverage
(excluding PIK notes) to remain above 8.0x in fiscal 2022 at about
9.5x, before moving to below 8.0x in fiscal 2023. We recognize that
deleveraging is affected by industrywide challenges related to
inflationary pressures, particularly higher raw material prices and
freight costs. However, the current rating level assumes ongoing
deleveraging with continuously improving EBITDA generation. This
includes achieving a funds from operations (FFO) cash interest
ratio of about 2x over the next 12-18 months. We also note that
foreign exchange (FX) effects, namely euros to U.S. dollars, will
have a negative impact on leverage of about 0.4x because a
significant portion of TK Elevator's debt is denominated in U.S.
dollars. The dollar has recently appreciated significantly against
the euro, which we do not expect will be fully offset by natural
hedging in fiscal 2022, given the sharpness of the euro's decline.
When currency fluctuations moderate, the leverage effect should
vanish because the company will benefit from higher U.S. dollar
profits, which will balance the FX effect on its debt.
"In the next 12-18 months, we anticipate that the group's FOCF will
be significantly lower than anticipated, albeit still positive. We
expect positive FOCF of about EUR50 million in fiscal 2022 and
about EUR200 million in fiscal 2023. This is significantly lower
than we assumed previously (more than EUR200 million in fiscal 2022
and more than EUR300 million in fiscal 2023) and mainly driven by
margin pressure and a stretched supply chain, as well as one-time
social security expenses. Reflecting the steep increase in interest
rates, FOCF generation will also be pressured by higher interest
rate payments, but we understand that most floating rate debt
instruments are hedged and the interest risk is limited to EUR100
million per year. We expect the group will use generated funds to
pay amortizing debt and leases (about EUR100 million per year) and
for some smaller bolt-on acquisitions. We expect the group will
reduce the use of its revolving credit facility (RCF), which will
improve its liquidity and support deleveraging. Its liquidity
profile is also supported by low working capital swings and a
long-dated debt maturity profile with sufficient covenant
headroom.
"A sharp rise in interest rates will drag on the construction
sector, likely softening demand from 2024. We see increasing
interest rates as a potential risk for TK Elevator's longer-term
growth prospects because they could weigh on construction sector
dynamics, undermining the group's new installation business (40% of
total revenue). However, because TK Elevator is exposed to
late-cycle business, we do not anticipate any significant near-term
impact--as seen in the strong order intake across all business
lines--and we also see urbanization and increased elevator
utilization in multi-party buildings as a growth driver for the
group's new installation business. Furthermore, we note that the
group's high conversion rate of about 75% and growth of service
activities of 4%-5% support its business expansion.
"The negative outlook reflects our view that TK Elevator's
deleveraging may not proceed as expected. Such a scenario could
occur if an inflationary environment and a stretched supply chain
persist, or if a weaker macroeconomic environment and rising
interest rates lead to lower demand in end markets, particularly in
China.
"We could lower the rating if the group does not increase its
revenue or absolute EBITDA as expected, resulting in debt to EBITDA
(excluding PIK notes) of more than 8x or an FFO cash interest ratio
of less than around 2x by Sept. 30, 2023. These scenarios could
materialize following a contraction of EBITDA amid the tough
industry and weakening macroeconomic conditions."
S&P could also lower the rating if:
-- The EBITDA margin does not improve toward 14%;
-- It cannot generate sustainable positive FOCF of more than
EUR200 million;
-- Liquidity deteriorates ; or
-- The group undertakes significant debt-financed acquisitions.
S&P said, "We could revise the outlook to stable if TK Elevator's
operating performance significantly recovers over the next 12-18
months, such that EBITDA margins are comfortably above 14%,
enabling the company to continue its deleveraging path with debt to
EBITDA (excluding PIK notes) of below 8.0x and a FFO cash interest
coverage of about 2.0x. Significantly positive, sustainable FOCF
generation would be required for a stable outlook."
ESG credit indicators: E-2, S-2, G-3
S&Ps aid, "Governance factors are a moderately negative
consideration in our credit rating analysis of TK Elevator. Our
assessment of the group's financial risk profile as highly
leveraged reflects corporate decision-making that prioritizes the
interests of the controlling owners, as is the case for most rated
entities owned by private-equity sponsors. Our assessment also
reflects their generally finite holding periods and a focus on
maximizing shareholder returns. Environmental and social factors
are an overall neutral consideration in our credit rating analysis
to date. As a result of the more stringent CO2 emissions
regulation, steel prices could increase, which could increase costs
and pressure margins if the group is not being able to pass those
costs on to its clients in full."
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G R E E C E
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SANI/IKOS GROUP: Fitch Affirms 'B-' IDR & Alters Outlook to Neg.
----------------------------------------------------------------
Fitch Ratings has revised Sani/Ikos Group S.C.A.'s (Sani Ikos)
Outlook to Negative from Stable, while affirming the hotel
operator's Long-Term Issuer Default Rating (IDR) at 'B-' and its
2026 senior secured notes at long-term 'B-' with a Recovery Rating
of 'RR4'.
The 'B-' IDR of Sani Ikos reflects its niche positioning in the
lodging business, as well as its materially smaller scale relative
to rated peers'. It has a weaker financial profile than peers',
with free cash flow (FCF) consistently under pressure from an
increasingly intensive, but partly discretionary, capex programme
over 2022-2026. However, Fitch sees scope for the company to delay
new projects in the event of a material slowdown of internal cash
flow generation. Also, out of the EUR850 million growth capex,
EUR300 million is related to a budget for acquisitions, which may
or may not materialise.
Business-profile strengths include lower-than-peer demand
sensitivity to consumer income trends and a record of above-average
recovery post-pandemic for the luxury all-inclusive hotel segment.
The rating for Sani Ikos's senior secured notes assumes average
recovery expectations on default, largely underpinned by the
intrinsic value of its asset base. However as the asset base is
largely pledged to structurally senior secured debt at operating
company (OpCo), which represents a material share of debt in Sani
Ikos's capital structure, Sani Ikos's own senior creditors'
recoveries are constrained to the 'RR4' category.
KEY RATING DRIVERS
Revised Capex Affects Deleveraging: Sani Ikos has four hotels in
the development pipeline for 2022-2026 (two each in Iberia and
Greece), which it plans to maintain 100% ownership (75% for Porto
Petro), like the rest of its current portfolio. The overall
pipeline assumes a 65% increase in rooms to a total of around 4,500
by 2025. Its expansionary capex programme was revised to around
EUR860 million in 2022-2025 or 50%-70% of revenue (from EUR480
million in our previous case), with the majority to be funded by
debt. Although around EUR300 million potential investments are
discretionary and linked to non-committed acquisitions, should this
plan go ahead, it could lead to high leverage metrics beyond our
negative sensitivity of 7.5x over the forecast horizon.
Niche Positioning, Small Scale: Sani Ikos operates 10 upscale
resorts, including five luxury all-inclusive hotels, which remain a
niche segment in Europe. Its business scale remains modest versus
NH Hotels' (NHH) or Radisson's, and is more comparable in EBITDA
with smaller operators like Alpha Group's (A&O). However, high
hotel density (300 rooms or more with high break-even occupancy)
and above-average revenue per available room (RevPAR) make Sani
Ikos more operationally efficient than peers. Niche positioning
within its segment and limited competition or price sensitivity
support organic average daily rate (ADR) growth.
High Customer Concentration by Region: Despite heavy reliance on
just three regions (UK, Germany, Russia), in 2022 Sani Ikos managed
to efficiently replace the loss of the Russian inbound market with
British and German tourists. Also, its experience in Greece allows
for more efficient operations that are important for maintaining
high customer satisfaction and loyalty, leading to superior ADR and
above-average share of returning customers. Limited diversification
by travel type also remains a conscious management choice, with no
business travelers or events held in its facilities.
Execution Risks from International Expansion: Until Ikos Andalusia
was opened in 2021, Sani Ikos had operated exclusively in Greece.
Even with other projects in Iberia in the pipeline, 75% of rooms
will still be located in Greece, potentially increasing Sani Ikos's
exposure to a reintroduction of local travel restrictions. An
increasing shift to international operations under the Ikos brand
at the same time entails some execution risks. Despite successful
ramp-up in Spain, its limited international operational record
makes it difficult to assess the sustainability of its occupancy
and ADR, as well as to forecast evolution of other projects' KPIs
outside Greece.
Seasonal Operations, High Profitability: Sani Ikos's resorts
generally operate six to seven months a year, with occupancies
close to 95% during the season (annualifdszfzsed occupancy at
around 50%-60%). This high density allows for material optimisation
of costs, which are not easily scalable but highly variable
off-season, resulting in higher profitability than that of close
peers like Mandarin Oriental and comparable with that of the
strongest peers in the sector such as Whitbread plc. We expect Sani
Ikos's EBITDA margins to return to pre-pandemic levels of around
33% in 2022 (2021: 30%), as seasonal occupancies return to
historically high levels, further optimised through direct sales
and lower use of discounts this year.
FCF Hit by Capex: Strong EBITDA has historically converted into
strong funds from operations (FFO) margins of 16%-22%. FCF has
nevertheless remained volatile due to high capex intensity linked
to expansion projects. Fitch forecasts that the revised capex
programme will lead to sharply negative FCF margins of 35%-60% to
2025, although new projects remain flexible until construction
starts. Flexibility in managing its capex pipeline and ability to
fund an increasing portion of expansion capex with internally
generated cash flows will be important for its rating trajectory.
Fully-Owned Assets: Sani Ikos manages directly and mostly fully
owns its hotel portfolio developed so far, which allows full
control over asset development and day-to-day operations. According
to management, this approach helps ensure consistently high levels
of service and efficiency. Fitch expects that its fairly new
real-estate portfolio should allow Sani Ikos to keep maintenance
capex at around 3% of revenue (plus 2%-3% maintenance costs above
EBITDA in 2022 and beyond, which is already incorporated into
operating costs), which we view as low relative to sector peers'.
Debt Structure Affects Bond Recoveries: All of Sani Ikos's owned
operating real estate (except Ikos Andalusia) is currently
mortgaged at OpCo level. In a liquidation, this adversely affects
the waterfall-generated recovery computation (WGRC) for noteholders
at Sani Ikos's level, whose claims Fitch deems as being
structurally subordinated to those of secured OpCo creditors, given
their lack of direct recourse to OpCo assets. At the same time,
solid total gross asset value (GAV) of operating assets of EUR1.7
billion as of end-2021 leads to average WGRC even under
conservative liquidation assumptions.
DERIVATION SUMMARY
Sani Ikos is a Greek luxury resorts' operator with limited scale
compared with leisure peers such as Meliá or Hyatt.
Diversification is also constrained by its seasonal focus on
holiday destinations and certain reliance on British and German
guests, against global peers like Accor SA (BB+/Stable). The large
capacity of Sani Ikos's resorts, premium RevPAR during high season
and a freehold property structure allow for excellent pre-pandemic
EBITDA margins of around 40%, higher than that of luxury operators
such as Mandarin Oriental or Linblad.
Similarly to cruise operators like TUI Cruises GmbH (B-/Positive),
optimised capacity utilisation (occupancies close to 90% in summer
2022) and exclusive offerings underpin strong demand with high
levels of loyalty and advanced bookings, resulting in good cash
flow predictability.
The asset-backed nature of the business (GAV of EUR2,000 million by
end-21) leads to high leverage (FFO lease-adjusted leverage of 8.5x
pre-pandemic), which is above that of other asset-heavy operators
like Host Hotels & Resorts (BBB-/Stable), Whitbread plc
(BBB-/Stable) or NH Hotel (NHH; B/Stable), but does not undermine
deleveraging capacity.
After a pandemic-disrupted 2020 and 2021, liquidity is now less of
a risk, but Sani Ikos's decision to continue expanding its asset
portfolio results in significant capex and provides limited
financial flexibility as, except Ikos Andalusia, its assets are
currently encumbered.
Compared with mid-price range operators, Sani Ikos is
well-positioned to benefit from strong pent-up demand in 2022 and
EBITDA gains since luxury operators and holiday destinations are
among the segments recovering at an accelerated pace
post-pandemic.
KEY ASSUMPTIONS
- ADR to increase 15% and average occupancies of around 90% in
2022, followed by normalisation of rates to 2025
- Margins in 2023 under pressure from inflation before returning
to average historical levels from 2024
- Revised capex and expansion investment in line with the
company's maximum budget of around EUR900 million for 2022-2025
- Additional net debt proceeds of EUR550 million to fund new
expansion plans
Key Recovery Rating Assumptions:
- A bespoke recovery analysis for Sani Ikos creditors reflects a
'traded asset valuation', which is more akin to a liquidation
process, backed by a substantial asset base, even though Sani
Ikos creditors have no direct recourse to ring-fenced assets.
Senior noteholders could seize ownership of its main operating
entities by exercising share pledges, and attempt to sell the
SPVs that hold the assets (net of asset level debt that would
need to be redeemed upon change of control)
- A 10% administrative claim
- Although OpCo creditors in a liquidation scenario could seize
their respective assets and obtain full recovery before the
remainder of the proceeds is distributed among noteholders,
Fitch assumes assets could be traded either individually or in
aggregate
- Real estate value, externally estimated at EUR1.7 billion as at
end-4Q21 (excluding land under development), has a haircut of
55%
- OpCo creditors have first claim on asset sale proceeds
- The WGRC of 46% for senior secured noteholders (previously 50%)
assumes average recovery prospects upon default and hence no
notching from the IDR for the issued bond, resulting in a 'B-'
debt rating
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Visibility of FFO-adjusted gross leverage trending below 6.5x
or total adjusted debt/EBITDAR below 6.2x
- Stable cash flow generation with FCF margin improving towards
negative single digits under current capex assumptions
- FFO fixed charge cover sustainably above 2.0x
Factors that could, individually or collectively, lead to Outlook
revision to Stable:
- Ability to manage inflationary pressure leading to a faster-
than-forecast EBITDA margin recovery by 2023
- Slowdown of expansionary capex or organic deleveraging
providing visibility of FFO-adjusted gross leverage below 7.5x
or total adjusted debt/EBITDAR below 7.2x
- FFO fixed charge cover sustainably above 1.5x
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Material delay in business recovery due to under-performance or
external restrictions, resulting in inability to recover EBITDA
margin to at least 30% in 2022
- FFO adjusted gross leverage forecast to remain above 7.5x or
total adjusted debt/EBITDAR above 7.2x
- FFO fixed charge cover below 1.5x
- Liquidity deterioration on negative FFO generation, with
minimal headroom in available liquidity to cover business
requirements, interest and committed capex over the next 24
months
LIQUIDITY AND DEBT STRUCTURE
Satisfactory Liquidity: Cash position at end-June 2022 was EUR154
million (before Fitch-defined restricted cash), reinforced by the
positive cash flow from operations during 2021 and beginning of
2022. Most bank debt is at OpCo level, secured by the different
assets in Greece and Iberia, with partial amortisations. Its next
sizeable maturity will be in 2023 (EUR58 million). Liquidity is now
less of a risk, but the planned continued expansion of the asset
portfolio, which involves significant capex, will require
additional funding.
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
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.
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I R E L A N D
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BNPP IP 2015-1: Fitch Hikes Class F-R Debt Rating to BBsf
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Fitch Ratings has upgraded BNPP IP Euro CLO 2015-1 DAC 's class F-R
notes and affirmed the others.
BNPP IP Euro CLO 2015-1 DAC
A-R XS1802328267 LT AAAsf Affirmed AAAsf
B-1-RR XS1802328424 LT AA+sf Affirmed AA+sf
B-2-RR XS1802328770 LT AA+sf Affirmed AA+sf
C-RR XS1802329075 LT A+sf Affirmed A+sf
D-RR XS1802330677 LT BBB+sf Affirmed BBB+sf
E-R XS1802331139 LT BB+sf Affirmed BB+sf
F-R XS1802332533 LT BBsf Upgrade B+sf
TRANSACTION SUMMARY
BNPP IP Euro CLO 2015-1 DAC is a cash-flow collateralised loan
obligation (CLO) backed by a portfolio of mainly European leveraged
loans and bonds. The portfolio is managed by BNP Paribas Asset
Management France and the transaction exited its reinvestment
period in July 2022.
KEY RATING DRIVERS
Reinvestment Period Over: The transaction exited its reinvestment
period in July 2022 and the manager is unlikely to reinvest
unscheduled principal proceeds and sale proceeds from credit-risk
and credit-improved obligations due to the breach of the weighted
average life (WAL) test. The transaction's decreasing WAL covenant
makes it less likely this will be achieved.
Since the manager is unlikely to reinvest, Fitch has assessed the
transaction based on the current portfolio, and has notched down
the Fitch-derived ratings (FDR) for all assets in the current
portfolio with a Negative Outlook by one notch.
Limited Deleveraging Expectations: The Stable Outlooks on all notes
reflect Fitch's expectation that deleveraging of the notes will be
limited in the next 12-18 months, given the small portion of assets
maturing by 2023 and limited prepayment expectations in the current
uncertain macroeconomic environment.
Stable Asset Performance: The transaction's metrics indicate stable
asset performance. The transaction is almost at par and is passing
all coverage tests. Similar to the last review, it has continued to
fail the WAL test (4.57 versus 4.25). All other tests are passing.
Exposure to assets with a FDR of 'CCC+' and below is 4.50%, as
calculated by the trustee. These are no defaulted assets in the
portfolio.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors at 'B'/'B-'. The Fitch-calculated weighted average
rating factor of the current portfolio was 25.61 and of the
Negative Outlook portfolio 26.70.
High Recovery Expectations: The portfolio comprises senior secured
obligations. Fitch views the recovery prospects for these assets as
more favourable than for second-lien, unsecured and mezzanine
assets. The Fitch-calculated weighted average recovery rate of the
current portfolio was 63.53%.
Diversified Portfolio: While the portfolio has amortised and is
becoming more concentrated, it is still sufficiently diversified
across obligors, countries and industries. The top 10 obligor
concentration is 13.99%, and no obligor represents more than 1.96%
of the portfolio balance.
Cash Flow Modelling: The transaction was run using the current
portfolio with assets on Negative Outlook notched down by one notch
from the FDR.
Deviation from Model-implied Rating: Fitch deviated from the
model-implied ratings (MIR) by one notch for the class B notes due
to lack of deleveraging and uncertain macroeconomic environment and
for the D, E, and F notes because they only had modest default rate
cushions at their MIRs.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
An increase of the default rate (RDR) at all rating levels by 25%
of the mean RDR and a decrease of the recovery rate (RRR) by 25% at
all rating levels of the current portfolio would have no rating
impact on the class A and B notes, one notch lower on the class C
and D notes and two and four notches on the class E and F notes,
respectively. While not Fitch's base case, downgrades may occur if
build-up of the notes' credit enhancement following amortisation
does not compensate for a larger loss expectation than initially
assumed due to unexpectedly high levels of defaults and portfolio
deterioration.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
A reduction of the RDR at all rating levels by 25% of the mean RDR
and an increase in the RRR by 25% at all rating levels of the
portfolio stressed with Negative Outlook notching would result in
upgrades of up to three notches depending on the notes, except for
the class A notes, which are already at the highest rating on
Fitch's scale and cannot be upgraded. Upgrades may also occur if
the portfolio's quality remains stable and the notes continue to
amortise, leading to higher credit enhancement across the
structure.
CONTEGO CLO III: Moody's Affirms B2 Rating on EUR8.25MM F Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Contego CLO III DAC:
EUR7,000,000 Class B-1-R Senior Secured Fixed Rate Notes due 2030,
Upgraded to Aa1 (sf); previously on Apr 16, 2018 Definitive Rating
Assigned Aa2 (sf)
EUR28,160,000 Class B-2-R Senior Secured Floating Rate Notes due
2030, Upgraded to Aa1 (sf); previously on Apr 16, 2018 Definitive
Rating Assigned Aa2 (sf)
EUR18,240,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2030, Upgraded to A1 (sf); previously on Apr 16, 2018
Definitive Rating Assigned A2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR181,500,000 Class A-R Senior Secured Floating Rate Notes due
2030, Affirmed Aaa (sf); previously on Apr 16, 2018 Definitive
Rating Assigned Aaa (sf)
EUR15,900,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed Baa2 (sf); previously on Apr 16, 2018
Definitive Rating Assigned Baa2 (sf)
EUR19,950,000 Class E-R Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed Ba2 (sf); previously on Apr 16, 2018
Definitive Rating Assigned Ba2 (sf)
EUR8,250,000 Class F Senior Secured Deferrable Floating Rate Notes
due 2030, Affirmed B2 (sf); previously on Apr 16, 2018 Definitive
Rating Assigned B2 (sf)
Contego CLO III DAC, issued in April 2016 and refinanced in April
2018, is a collateralised loan obligation (CLO) backed by a
portfolio of mostly high-yield senior secured European loans. The
portfolio is managed by Five Arrows Managers LLP. The transaction's
reinvestment period ended in July 2022.
RATINGS RATIONALE
The rating upgrades on the Class B-1-R, B-2-R and C-R Notes are
primarily a result of the transaction having reached the end of the
reinvestment period in July 2022.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR297.02m
Defaulted Securities: None
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2930
Weighted Average Life (WAL): 4.47 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.74%
Weighted Average Coupon (WAC): 3.73%
Weighted Average Recovery Rate (WARR): 44.35%
Par haircut in OC tests and interest diversion test: None
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Moody's notes that the July 2022 trustee report was published at
the time it was completing its analysis of the May 2022 data. Key
portfolio metrics such as WARF, diversity score, weighted average
spread and life, and OC ratios exhibit little or no change between
these dates.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank and swap providers,
using the methodology "Moody's Approach to Assessing Counterparty
Risks in Structured Finance" published in June 2022. Moody's
concluded the ratings of the notes are not constrained by these
risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales the collateral manager or be
delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
HARVEST CLO IX: Moody's Cuts Rating on EUR15.2MM F-R Notes to B3
----------------------------------------------------------------
Moody's Investors Service has taken a variety of rating actions on
the following notes issued by Harvest CLO IX Designated Activity
Company:
EUR27,500,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2030, Upgraded to Baa1 (sf); previously on Dec 17, 2021
Affirmed Baa2 (sf)
EUR15,200,000 Class F-R Senior Secured Deferrable Floating Rate
Notes due 2030, Downgraded to B3 (sf); previously on Dec 17, 2021
Affirmed B2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR294,500,000 (current outstanding amount EUR 292,597,188) Class
A-R-R Senior Secured Floating Rate Notes due 2030, Affirmed Aaa
(sf); previously on Dec 17, 2021 Affirmed Aaa (sf)
EUR50,000,000 Class B-1-R Senior Secured Floating Rate Notes due
2030, Affirmed Aa1 (sf); previously on Dec 17, 2021 Upgraded to Aa1
(sf)
EUR25,000,000 Class B-2-R-R Senior Secured Fixed Rate Notes due
2030, Affirmed Aa1 (sf); previously on Dec 17, 2021 Upgraded to Aa1
(sf)
EUR26,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed A1 (sf); previously on Dec 17, 2021
Upgraded to A1 (sf)
EUR34,300,000 Class E-R Senior Secured Deferrable Floating Rate
Notes due 2030, Affirmed Ba2 (sf); previously on Dec 17, 2021
Affirmed Ba2 (sf)
Harvest CLO IX Designated Activity Company, issued in July 2014,
reset for the first time in August 2017 and lately refinanced again
in June 2021, is a collateralised loan obligation (CLO) backed by a
portfolio of mostly high-yield senior secured European loans. The
portfolio is managed by Investcorp Credit Management EU Limited.
The transaction's reinvestment period ended in August 2021.
RATINGS RATIONALE
The rating upgrade on the Class D-R notes is a result of the
benefit of a shorter amortisation profile.
The rating downgrade on the Class F-R notes results mainly from the
additional default reported since the last rating action in
December 2021, and the decreased Euribor floor benefit consequent
to a change in Euro forward rates.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR493.8m
Defaulted Securities: EUR3.4m
Diversity Score: 59
Weighted Average Rating Factor (WARF): 2,924
Weighted Average Life (WAL): 4.33 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.62%
Weighted Average Coupon (WAC): 3.83%
Weighted Average Recovery Rate (WARR): 44.74%
Par haircut in OC tests and interest diversion test: none
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank and swap provider,
using the methodology "Moody's Approach to Assessing Counterparty
Risks in Structured Finance" published in June 2022. Moody's
concluded the ratings of the notes are not constrained by these
risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Recoveries
higher than Moody's expectations would have a positive impact on
the notes' ratings.
MADISON PARK XI: Fitch Hikes Rating on Class F Notes to B+sf
------------------------------------------------------------
Fitch Ratings has upgraded Madison Park Euro Funding XI DAC's class
F notes and revised the Outlooks on the class B to E notes to
Stable from Positive.
Rating Prior
------ -----
Madison Park Euro Funding XI DAC
A-1 XS1833623306 LT AAAsf Affirmed AAAsf
A-2 XS1833623561 LT AAAsf Affirmed AAAsf
B-1 XS1833624379 LT AA+sf Affirmed AA+sf
B-2 XS1833624965 LT AA+sf Affirmed AA+sf
C XS1833625426 LT A+sf Affirmed A+sf
D XS1833626150 LT BBB+sf Affirmed BBB+sf
E XS1833626747 LT BB+sf Affirmed BB+sf
F XS1833627471 LT B+sf Upgrade B-sf
TRANSACTION SUMMARY
Madison Park Euro Funding XI is a cash flow CLO mostly comprising
senior secured obligations. The portfolio is managed by Credit
Suisse Asset Management and its reinvestment period ended on 15
August 2022.
KEY RATING DRIVERS
Transaction Outside Reinvestment Period: Despite the transaction
having exited its reinvestment period the manager can reinvest
unscheduled principal proceeds and sale proceeds from credit-risk
obligations.
Given the manager's flexibility to reinvest, Fitch's analysis is
based on a stressed portfolio where the weighted average rating
factor (WARF), weighted average recovery rate (WARR), weighted
average spread (WAS), weighted average life (WAL) and fixed-rate
exposure have been tested to their current limits.
Further, Fitch applied haircut of 1.5% to the stressed WARR
covenant to reflect the old recovery rate definition in the
transaction documents, which can result in on average a 1.5%
inflation of the WARR relative to Fitch's latest CLO Criteria. The
shorter WAL covenant of 4.51 years incorporated in Fitch- stressed
portfolio analysis than in previous reviews, together with the
average stable performance of the transaction to date, led to the
upgrade of the class F notes and affirmation of all other notes.
Limited Deleveraging Expectation: The Stable Outlooks, including
today's Outlook revision to the junior notes, reflect Fitch's
expectation that deleveraging of the notes would be constrained in
the next 12-18 months by a small portion of assets maturing by 2023
and limited prepayment prospects in the current uncertain
macroeconomic environment.
The Stable Outlooks on all notes also reflect Fitch's expectation
of sufficient credit protection to withstand potential
deterioration in the credit quality of the portfolio in scenarios
that are commensurate with their current ratings.
Resilient Asset Performance: The transaction's metrics indicate
resilient asset performance. The Despite the transaction being 0.7%
below par it is passing all collateral-quality, coverage and
portfolio-profile tests. Exposure to assets with a Fitch-derived
rating (FDR) of 'CCC+' and below as calculated by the trustee is
0.48%.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors at 'B'/'B-'. The Fitch-calculated WARF of the current
portfolio reported by the trustee was 33.87 as of 12 July 2022
compared with the covenanted maximum 35.
High Recovery Expectations: Senior secured obligations comprise
98.05% of the portfolio. Fitch views the recovery prospects for
these assets as more favourable than for second-lien, unsecured and
mezzanine assets. The Fitch-calculated WARR of the current
portfolio as reported by the trustee is 66.1% versus a covenanted
minimum of 61.2%.
Diversified Portfolio: The portfolios are well-diversified across
obligors, countries and industries. The top-10 obligor
concentration calculated by Fitch is 11.54%, and no obligor
represents more than 1.43% of the portfolio balance as calculated
by Fitch.
Cash Flow Modelling: Fitch used a customised proprietary cash flow
model to replicate the principal and interest waterfalls and the
various structural features of the transaction, and to assess their
effectiveness, including the structural protection provided by
excess spread diverted through the par- value and interest-coverage
tests.
Deviation from Model-implied Ratings: The class B-1, B-2 and D
notes' of 'AA+sf', 'AA+sf' and 'BBB+sf', respectively are a notch
lower than their model-implied ratings to reflect limited cushion
on the Fitch-stressed portfolio at their MIRs.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
An increase of the default rate (RDR) at all rating levels by 25%
of the mean RDR and a decrease of the recovery rate (RRR) by 25% at
all rating levels of the current portfolio will result in
downgrades of no more than two notches, depending on the notes.
While not Fitch's base case, downgrades may occur if build-up of
the notes' credit enhancement following amortisation does not
compensate for a larger loss expectation than initially assumed due
to unexpectedly high levels of defaults and portfolio
deterioration.
Due to the better metrics of the current portfolio than that of the
Fitch-stressed portfolio and the rating deviation from MIRs, the
class B notes and E notes have a rating cushion of one notch, class
D and F notes a rating cushion of three notches, while the other
classes of notes have no rating cushion.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
A reduction of the RDR at all rating levels by 25% of the mean RDR
and an increase in the RRR by 25% at all rating levels of the
Fitch-stressed portfolio would result in upgrades of up to four
notches for the rated notes except for the 'AAAsf' notes.
Further upgrades, except for the AAAsf notes, may occur on stable
portfolio credit quality and deleveraging, leading to higher credit
enhancement and excess spread available to cover losses in the
remaining portfolio.
MADISON PARK XX: Fitch Assigns Final B-sf Rating to Class F Notes
-----------------------------------------------------------------
Fitch Ratings has assigned Madison Park Euro Funding XX Designated
Activity Company's notes final ratings.
RATING ACTIONS
Rating Prior
------ -----
Madison Park Euro
Funding XX DAC
A -Loan LT AAAsf New Rating AAA(EXP)sf
A-1 XS2507606718 LT AAAsf New Rating AAA(EXP)sf
A-2 XS2511500956 LT AAAsf New Rating AAA(EXP)sf
B-1 XS2507606809 LT AAsf New Rating AA(EXP)sf
B-2 XS2507606981 LT AAsf New Rating AA(EXP)sf
C XS2507607013 LT Asf New Rating A(EXP)sf
D XS2507607104 LT BBB-sf New Rating BBB-(EXP)sf
E XS2507607286 LT BB-sf New Rating BB-(EXP)sf
F XS2507607369 LT B-sf New Rating B-(EXP)sf
M- Subordinated Notes
XS2507606635 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Madison Park Euro Funding XX DAC is a securitisation of mainly
senior secured loans and secured senior bonds with a component of
senior unsecured, mezzanine, and second-lien loans. Note proceeds
have been used to fund a portfolio with a target par of EUR400
million. The portfolio is actively managed by Credit Suisse Asset
Management Limited. The collateralised loan obligation (CLO) has an
approximately 3.6-year reinvestment period and an approximately
7.5-year weighted average life (WAL).
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors to be in the 'B' category. The
Fitch weighted average rating factor (WARF) of the identified
portfolio is 23.83.
High Recovery Expectations (Positive): At least 92.5% of the
portfolio will comprise senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate (WARR) of the identified portfolio is
60.50%.
Diversified Portfolio (Positive): The transaction includes four
Fitch matrices, two of which were effective at closing. These
correspond to a top 10 obligor concentration limit at 20%, two
fixed-rate asset limits of 5.0% and 12.5%, respectively, and a
7.5-year WAL. The other two can be selected by the manager at any
time from one year after closing as long as the portfolio balance
(including defaulted obligations at their Fitch collateral value)
is equal to target par and corresponds to a top 10 obligor
concentration limit at 20%, two fixed-rate asset limits of 5.0% and
12.5%, and a 6.5-year WAL. The transaction also includes various
concentration limits, including the maximum exposure to the three
largest (Fitch-defined) industries in the portfolio at 42.5%. These
covenants ensure the asset portfolio will not be exposed to
excessive concentration.
Portfolio Management (Neutral): The transaction has an
approximately 3.6-year reinvestment period and includes
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed-case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines. The
transaction can extend the WAL test by one year to seven years at
the interest payment date after the expiry of the non-call period
in February 2024 if the aggregate collateral balance (defaulted
obligations at Fitch collateral value) is at least at the target
par and all the tests are passing. The reinvestment after the
step-up of the WAL life will continue to be based on the forward
matrices.
Cash Flow Modelling (Positive): The WAL used for the transaction's
matrix and stress portfolio analysis is 12 months less than the WAL
covenant. This reduction to the risk horizon accounts for the
strict reinvestment conditions envisaged by the transaction after
its reinvestment period. These include, among others, passing both
the coverage tests and the Fitch 'CCC' bucket limitation test after
reinvestment as well a WAL covenant that progressively steps down
over time, both before and after the end of the reinvestment
period. Fitch believes these conditions would reduce the effective
risk horizon of the portfolio during the stress period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no impact on the class A and B
notes and would lead to a downgrade of one to two notches for the
class C to F notes.
Based on the actual portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio, the
class B, D and E notes display a rating cushion of two notches
while the class C and F notes display one notch and no rating
cushion, respectively. Should the cushion between the identified
portfolio and the stress portfolio be eroded either due to manager
trading or negative portfolio credit migration, a 25% increase of
the mean RDR across all ratings and a 25% decrease of the RRR
across all ratings of the stressed portfolio would lead to
downgrades of up to four notches for the rated notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
A 25% reduction of the mean RDR across all ratings and a 25%
increase in the RRR ) across all ratings of Fitch's stress
portfolio would lead to an upgrade of up to two notches for the
rated notes, except for the 'AAAsf' rated notes, which are at the
highest level on Fitch's scale and cannot be upgraded.
During the reinvestment period, based on Fitch's stress portfolio,
upgrades may occur on better-than-expected portfolio credit quality
and a shorter remaining WAL test, leading the notes to be able to
withstand larger than expected losses for the transaction's
remaining life. After the end of the reinvestment period, upgrades
may occur in case of stable portfolio credit quality and
deleveraging, leading to higher credit enhancement and excess
spread available to cover for losses on the remaining portfolio.
SEGOVIA EUROPEAN 5-2018: Fitch Affirms B+sf Rating on Class F Notes
-------------------------------------------------------------------
Fitch Ratings has revised Segovia European CLO 5-2018 DAC's Outlook
to Stable from Positive, while affirming its notes.
Segovia European CLO 5-2018 DAC
A-1 XS1840846437 LT AAAsf Affirmed AAAsf
A-2 XS1840846783 LT AAAsf Affirmed AAAsf
B-1 XS1840846940 LT AA+sf Affirmed AA+sf
B-2 XS1840847161 LT AA+sf Affirmed AA+sf
C XS1840847328 LT A+sf Affirmed A+sf
D XS1840847674 LT BBB+sf Affirmed BBB+sf
E XS1840848565 LT BB+sf Affirmed BB+sf
F XS1840847914 LT B+sf Affirmed B+sf
TRANSACTION SUMMARY
Segovia European CLO 5-2018 DAC is a cash flow CLO comprising
mostly senior secured obligations. The transaction is actively
managed by Segovia Loan Advisors (UK) LLP and exited its
reinvestment period in August 2022.
KEY RATING DRIVERS
Transaction Outside Reinvestment Period: The transaction is
currently marginally failing its Fitch 'CCC' test but the manager
may reinvest if this is cured. The trade date principal cash
balance was in deficit by EUR4.5 million as of the 6 July investor
report and no repayments have yet been made on the rated notes.
Given the manager's ability to cure the 'CCC' test failure and
hence to reinvest, Fitch's analysis is based on stressing the
portfolio to its collateral-quality test at their covenanted
limits. The tests are Fitch-calculated weighted average rating
factor (WARF), Fitch-calculated weighted average recovery rate
(WARR), weighted average spread, weighted average life, and the
fixed-asset limit. These covenanted limits are more stringent than
stressing the portfolio by downgrading a notch the assets that are
currently on Negative Outlook. The stressed WARR covenant is
haircut by 1.5%, to reflect the old recovery rate definition in the
transaction documents, which can result in on average a 1.5%
inflation of the WARR relative to Fitch's latest CLO Criteria.
Limited Deleveraging Prospects: The revision of the Outlook to
Stable reflects Fitch's expectation that deleveraging of the notes
is not expected since the deal may still reinvest. Even if the deal
is constrained from reinvesting deleveraging would remain limited
in the next 12-18 months, given the small portion of assets
maturing by 2023 and limited prepayment prospects in the current
uncertain macroeconomic environment.
Resilient Asset Performance: The transaction's metrics indicate
resilient asset performance. Despite the transaction currently
below par by 1%, it is passing all coverage and collateral-quality
tests. Exposure to assets with a Fitch-derived rating (FDR) of
'CCC+' and below is 7.57%, excluding non-rated assets, as
calculated by Fitch, leading to marginal failure of the 'CCC'
test.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors at 'B'/'B-'. The Fitch-calculated weighted WARF of the
current portfolio is 25.75 (or 34.8 as reported by the trustee
against a covenanted maximum of 37).
High Recovery Expectations: Senior secured obligations comprise
99.63% of the portfolio. Fitch views the recovery prospects for
these assets as more favourable than for second-lien, unsecured and
mezzanine assets. The Fitch-calculated WARR of the current
portfolio as reported by the trustee was at 65.8% as of 6 July 2022
compared with a covenanted minimum of 63.1%.
Diversified Portfolio: The portfolio is well-diversified across
obligors, countries and industries. The top- 10 obligor
concentration is 13.11%, and no obligor represents more than 1.55%
of the portfolio balance.
Cash Flow Modelling: Fitch used a customised proprietary cash flow
model to replicate the principal and interest waterfalls and the
various structural features of the transaction, and to assess their
effectiveness, including the structural protection provided by
excess spread diverted through the par- value and interest-coverage
tests.
Deviation from Model-implied Ratings: The class B notes' 'AA+sf'
and the class F notes' 'B+sf' ratings are lower by a notch than
their model-implied ratings (MIRs). This reflects limited cushion
on the stressed portfolio at their MIRs, a lack of credit
enhancement build-up since the end of the reinvestment period and
the absence of deleveraging thus far.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
An increase of the default rate (RDR) at all rating levels by 25%
of the mean RDR and a decrease of the recovery rate (RRR) by 25% at
all rating levels would result in downgrades of no more than two
notches depending on the notes. While not Fitch's base case,
downgrades may occur if build-up of the notes' credit enhancement
following amortisation does not compensate for a larger loss
expectation than initially assumed, due to unexpectedly high levels
of defaults and portfolio deterioration.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
A reduction of the RDR at all rating levels by 25% of the mean RDR
and an increase in the RRR by 25% at all rating levels would result
in upgrades of up to three notches depending on the notes, except
for the class A and B notes, which are already at the highest
rating on Fitch's scale and cannot be upgraded. Upgrades may also
occur, except for the 'AAAsf' notes, if the portfolio's quality
remains stable and the notes continue to amortise, leading to
higher credit enhancement across the structure.
===========
L A T V I A
===========
AKROPOLIS GROUP: Fitch Affirms 'BB+' Longterm IDR, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has affirmed Baltics-focused retail property company
Akropolis Group, UAB's Long-Term Issuer Default Rating (IDR) at
'BB+' with a Stable Outlook. Fitch has also affirmed Akropolis's
senior unsecured rating at 'BB+'.
Akropolis's ratings are constrained by its concentration on a
limited number (five) of retail assets, restricting asset and
geographical diversification. The largest asset comprises more than
30% of the group's portfolio. This asset concentration is expected
to improve once its Vilnius mixed-use development project is
completed in 2025 as scheduled.
The ratings also reflect low cash-flow leverage and a high interest
coverage ratio resulting from a high income-yielding profile of
Baltic-located assets with moderate Fitch-calculated loan-to-value
(LTV) of below 40%. Akropolis's shopping centres are anchored by
grocers, predominantly of Maxima Group, a Baltic leading grocery
chain owned by Akropolis's parent company UAB Vilniaus prekyba (VP
Group). Other tenants include a range of fashion and entertainment
retail offers.
KEY RATING DRIVERS
Concentrated Portfolio: Akropolis has one of the most concentrated
property portfolios among EMEA Fitch-rated peers. Its EUR1 billion
portfolio comprises five regional shopping centres with average
size of 64,000 sqm of retail gross lettable area (GLA), located in
Lithuania (60% by market value, (MV)) and Latvia (40%). The three
largest assets are located in the capital cities of both countries,
Vilnius (32% of portfolio MV) and Riga (40%). The remaining two are
in Klaipeda (20%) and Siaulai (8%), which are the third- and
fourth-most populous cities in Lithuania. Akropolis's
conveniently-located shopping centres dominate their respective
catchment areas, providing a wide retail offering.
Riga Acquisition: In November 2021, Akropolis acquired Afla, a
71,000 sqm shopping centre, by GLA the biggest retail scheme in
Riga. The asset, renamed Akropole Alfa, benefits from the high
recognition of the group's brand, was valued EUR198 million at
end-2021. The acquisition consolidated Akropolis's position in
Riga's market where it now owns the two biggest shopping centres.
Akropole Alfa is the only asset not anchored by Maxima. This
acquisition helps to reduce the group's tenant concentration, which
however remains high (top 10 tenant groups generate 41% of rent and
related income including 16% by VP Group-owned tenants) compared
with other Fitch-rated CEE peers whose top 10 tenant concentration
is around 20%.
Rental Income Growth: Akropolis's average rent per sqm in 1H22
increased around 20% compared with 2021 on a like-for-like basis,
after expiration of rent discounts granted to tenants due to the
pandemic (EUR8.5 million in 2021) and reflecting the effect of
inflation-linked rent indexation (2021 CPI: 4.6% and 3.2% for
Lithuania and Latvia, respectively). Other portfolio metrics
remained stable with occupancy of 98% and a weighted average lease
length of around 4.5 years.
Inflation-Driven Rents Increases: A substantial part (around 90% of
rental income) of Akropolis's tenancy contracts have an annual
inflation-linked rent indexation (often with a 1%-3% floor). Fitch
expects inflation in Lithuania and Latvia to average 15.9% and
16.8%, respectively, in 2022. Despite the assets' moderate
occupancy costs (including an affordable rent/sales of 10%-12% in
2021) raising rents in line with inflation, combined with an
increase in utility expenses, may be unsustainable, especially if
inflation erodes households' disposable income, weakening
consumption and tenants' sales.
Fitch expects that to maintain an affordable rent profile for its
assets and high occupancy levels Akropolis, like other landlords,
may choose to forfeit part of inflation-linked rent increases.
Vingnis First Rental in 2025: Akropolis's mixed-use development
Vingis is at the consultation phase with Vilnius's local
authorities. After receiving the building permit, construction
works are expected to start in 2023 with the first rental income
receipt in 2025. Capex totals around EUR300 million, but at this
stage it remains largely uncommitted.
Moderate Leverage: Akropolis's 2021 net debt/EBITDA of 7.1x was hit
by the acquisition of Alfa shopping centre in November and some
rent concessions provided to tenants. Using annualised rents from
this acquisition, 2021 leverage would be around 5.5x. In 2022, cash
flow leverage is expected to decrease to below 5x, helped by rent
indexation. Fitch forecasts this metric to rise in 2024 to 5.4x
before the Vingis development project is completed and starts
yielding rent. Interest cover remains over 5x, due to strong cash
flows and low fixed interest rates on the group's bond, which
constitutes around 70% of total debt.
Governance Structure Limitations: As part of the VP Group,
Akropolis has benefitted from cooperation with VP Group-owned
retailers in creating comprehensive and coordinated retail
offerings in its shopping centres. However, concentrated ownership
by this privately-held group means financial disclosure and
corporate governance are not comparable to listed companies'.
Indirect 87% ownership by dominant shareholder Nerijus Numa,
together with the lack of independent directors on Akropolis's
board, means that the arm's length nature of related-party
transactions (with Maxima Group and sister tenants) does not have
independent oversight that is comparable to listed peers.
PSL Assessment: Fitch rates Akropolis on a consolidated plus one
notch approach under its Parent and Subsidiary Linkage (PSL)
Criteria. Fitch views Akropolis' legal ringfencing as 'porous'
based on self-imposed restrictions included in its bond documents
that limit potential value transfers to the VP Group. The
restrictions include a maximum 60% total indebtedness/total assets
ratio (quasi-LTV) and less onerous limits on transactions with
affiliates and dividends. The criteria's access and control factors
are assessed as 'open' due to full ownership by the VP Group and
despite Akropolis being separately funded with its own treasury
functions and independent cash management.
DERIVATION SUMMARY
Akropolis' EUR1 billion portfolio, comprising five shopping centres
located in Lithuania (A/Stable) and Latvia (A-/Stable), is smaller
and materially more concentrated than the EUR5.6 billion CEE retail
portfolio owned by NEPI Rockcastle S.A. (BBB/Positive).
Office-focused Globalworth Real Estate Limited (BBB-/Stable) has a
portfolio of EUR2.8 billion, which is similar in size to the EUR2.1
billion office (65% of MV) and retail (35%) portfolio of Globe
Trade Centre S.A. (GTC; BBB-/Stable).
Akropolis' country risk exposure is the lowest among all
Fitch-rated CEE peers'. NEPI has the highest diversification with a
presence in nine CEE countries but the average country risk is
lower and similar to that exhibited by Globalworth, whose office
assets are almost equally split between Poland (A-/Stable) and
Romania (BBB-/Negative), and to GTC's. GTC's assets are located in
Poland with the reminder in five countries rated in the 'BBB'
category or below.
Akropolis has the most conservative financial profile with forecast
net debt/EBITDA at 4.9x for 2022, before a planned construction
project increases its leverage over time. This is partly because
Akropolis's assets yield high income with a net initial yield
estimated at around 7% and a low LTV below 40%. This net
debt/EBITDA is most comparable to NEPI's around 6x. NEPI's
financial profile is stronger than Globalworth's and GTC's.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Like-for-like rent increases of 10% in 2023, reflecting partial
forfeiture of inflation-linked rent indexation. Rent increases
of 4% and 3%, respectively, in 2024 and 2025
- Vacancy rate to increase to 4% in 2025
- Around EUR275 million of capex (mainly related to Vingis's
development) until 2025
- No dividends paid for the next four years
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Expansion of portfolio in less correlated markets while
maintaining portfolio quality
- Unencumbered assets/unsecured debt cover above 2.0x
- Net debt/EBITDA below 8.5x
- Consistent interest-rate hedging policy
- Improved corporate governance
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Net debt/EBITDA above 9.0x and LTV trending above 55%
- Unencumbered assets/unsecured debt cover below 1.75x
- Failure to complete the Vingis development as per schedule or
material cost overruns on the project
- Liquidity score below 1.0x
- Transactions with related-parties that are detrimental to
Akropolis's interests
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Akropolis held EUR59 million of readily available
cash (excluding EUR23 million pledged to a bank financing as
collateral) at end-2021, which is sufficient to cover around an
EUR7 million loan amortisation in 2022. Akropolis does not use
committed revolving credit facilities as a contingent source of
liquidity.
Four out of Akropolis's five assets are unencumbered. This results
in an unencumbered assets/unsecured debt of 2.2x.
Akropolis is not a REIT so it is not constrained by dividend
distribution requirements. Fitch interprets its internal dividend
policy to mean that no dividends will be paid when material outlays
related to the development programme or acquisitions are expected
or would cause the company's reported LTV to be above 45%. No
dividends are expected to be paid until 2025, which will allow
Akropolis to retain free cash flow to finance the development of
Vingis shopping centre.
ESG CONSIDERATIONS
Akropolis has an ESG Relevance Score of '4' for governance
structure, reflecting the lack of corporate governance that would
both mitigate key person risk from the dominant shareholder Nerijus
Numa and ensure independent oversight of related-party
transactions. This has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.
Unless stated otherwise above 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 company.
=====================
N E T H E R L A N D S
=====================
LUMILEDS HOLDING: Case Summary & 30 Largest Unsecured Creditors
---------------------------------------------------------------
Lead Debtor: Lumileds Holding B.V.
Evert van de Beekstraat 1
The Base, Tower B5 Unit 107
Schiphol, The Netherlands 1118 CL
Business Description: Lumileds is a global manufacturer of
innovative lighting solutions. In the
1960s, the Company expanded its offerings to
also include state-of-the-art LED devices
alongside the automotive lighting
technologies that it had continued to
innovate. Today, the Company continues to
develop and manufacture high-tech lighting
products for the automotive, mobile device,
consumer, general lighting, and industrial
markets.
Chapter 11 Petition Date: August 29, 2022
Court: United States Bankruptcy Court
Southern District of New York
Ten affiliates that concurrently filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code:
Debtor Case No.
------ --------
Lumileds Holding B.V. (Lead Case) 22-11155
Lumileds Subholding B.V. 22-11154
Lumileds International B.V. 22-11156
Aurora Borealis B.V. 22-11157
Lumileds Netherlands B.V. 22-11158
Bright Bidco B.V. 22-11159
Aegletes B.V. 22-11160
Lumileds LLC 22-11161
Lumileds USA (Holding) Corp. 22-11162
Luminescence Cooperatief U.A. 22-11163
Judge: Hon. Lisa G. Beckerman
Debtors' Counsel: George A. Davis, Esq.
George Klidonas, Esq.
Anupama Yerramalli, Esq.
Liza L. Burton, Esq.
Misha E. Ross, Esq.
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY 10020
Tel: (212) 906-1200
Fax: (212) 751-4864
Emails: george.davis@lw.com
george.klidonas@lw.com
anu.yerramalli@lw.com
liza.burton@lw.com
misha.ross@lw.com
Debtors'
Special
Financing &
Employee
Compensation
Counsel: PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Debtors'
Financial
Advisor: ALIXPARTNERS, LLP
Debtors'
Investment
Banker: EVERCORE INC.
Debtors'
Claims &
Noticing
Agent: EPIQ CORPORATE RESTRUCTURING, LLC
Estimated Assets: $50 million to $100 million
Estimated Liabilities: $100 million to $500 million
The petitions were signed by Johannes Paulus Teuwen as chief
financial officer.
A full-text copy of the Lead Debtor's petition is available for
free at PacerMonitor.com at:
@
www.pacermonitor.com/view/AUXA2JQ/Lumileds_Holding_BV__nysbke-22-11155__0001.0.pdf?mcid=tGE4TAMA
Consolidated List of Debtors' 30 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
1. UWV Tax $2,272,184
LA Guardiaweg 94-114
Amsterdam 1043 DL
Netherlands
Contact: Nathalie Van
Berkel, Board of Dirs
Tel: +31888982001
2. LBA RVI- Company I, LP Trade Payable $1,772,664
3347 Michelson Drive, Suite 200
Irvine, CA 92612
Contact: Brad Neglia
Principal
Tel: 949833-0400
3. Atos Nederland B.V. Trade Payable $901,971
Burg Runderslaan 30
Amstelveen 1185 MC
Netherlands
Contact: Nourdine Bihmane
Group CEO
Tel: +31088265555
4. Versum Materials Trade Payable $658,115
7350 Tilghman Street
Number 104
Allentown, PA 18106-9000
Contact: Natalie Chidester-
Inside Sales Rep.
Tel: 1 800 837 2724;
2675204817
Email: natalie.chidester@emdgroup.com
5. Jiangxi Jingneng Trade Payable $597,737
Semiconductor Co., Ltd.
No. 699 Aixi North Road
Nanchang China
Contact: Gaoping
Tel: 0791-8815617-5072
Email: gaoping@latticepower.com
6. Microsoft Corporation Trade Payable $536,548
One Microsoft Way
Redmond, WA 98052-6399
Contact: Satya Nadella, CEO
Tel: 425882-8080
Fax: 425706-7929
Email: daarthur@microsoft.com
7. Pacific Gas Electric Utility $498,749
300 Lakeside Drive
Oakland, CA 94612
Contact: Patricia K. Poppe, CEO
Tel: 800-743-5000
Email: customerserviceonline@pge.com
8. BT Americas Inc. Trade Payable $467,615
8951 Cypress Waters
Blvd Suite 200
Dallas, TSX 75019
Contact: Lorraine Badyna
Tel: 215-917-1479
Email: lorraine.badyna@bt.com
9. DXC Technology Services LLC Trade Payable $395,219
1775 Tysons Blvd.
McLean VA 22102
Contact: Alyssa Adams Clavin
Tel: 602-920-1551
Email: juan.mata@dxc.com
10. Vallen Distribution Inc. Trade Payable $360,609
1460 Tobias Gadson Blvd.
Charleston, SC 29407
Contact: Flores Nora-Vallen
Buyer
Tel: 408-964-2630;
843746-1260
Fax: 843746-1289
Email: sanjosesite@vallen.com
11. IPAN GMBH Trade Payable $299,845
n/k/a Clarivate
3133 W Frye Rd, Ste 401
Chandler, AZ 85226
Contact: Jerre Stead, CEO
Tel: (267) 876-577;
4806605100
Email: patents.ipan@cpaglobal.com
12. Siemens Industry Software Inc. Trade Payable $299,662
5800 Granite Parkway Suite 600
Plano, TX 75024-6612
Contact: Steve Shaffer
Tel: 704-227-6755
Fax: 678-297-8316
Email: naara.nuno@siemens.com
13. Shining Blick Enterprises Co. Trade Payable $298,915
10FL-2 No. 197, Sec. 4 Chung
Hsiao
Taipei 106
Taiwan
Contact: Jessamine Lin
Tel: 88622731-2862
Fax: 88622721-1593
Email: blick@blick.com.tw
14. Workday Limited Trade Payable $290,417
152-155 Kings Building
Church St.
Dublin D7
Ireland
Contact: Aneel Bhusri, Co-CEO
Tel: +4402071506200
Fax: +4402071550401
15. Eurofins EAG Materials Trade Payable $263,811
Science, LLC
810 Kifer Rd
Sunnyvale, CA 94086-5203
Contact: Annalou Orante
Tel: 1 408-530-3500
Email: po@eag.com
16. Prematech Advanced Ceramics Trade Payable $230,000
160 Goddard Memorial Drive
Worcester, MA 01603-1260
Contact: Ellen Cosltello-
Account Rep
Tel: 508791-9549
Fax: 508793-9814
Email: souellette@prematechac.com
17. Freiberger Compound Trade Payable $229,500
Materials GMBH
AM Junger-Lowe-Schacht 5
Freiberg 09599
Germany
Contact: Anke Wodtke
Tel: 49 3731 280 712
Fax: 49 373128 0106
Email: awodtke@fcm-germany.com
18. Aixtron Inc. Trade Payable $209,581
15 Wyatt Drive Suite
Santa Clara, CA 95054
Contact: Patricia Taha-
Sales Rep
Tel: 49(02407) 9030-844
Fax: 49240790-3040
Email: aixtroninc.parts@aixtron.com
19. Secure Works, Inc. Trade Payable $209,102
Suite 500 One Concourse Pkwy
Atlanta, GA 30328
Contact: Dean Dyer
Tel: 4152791600
Email: ddyer@secureworks.com
20. Shin-Etsu Chemical Co. Ltd. Trade Payable $193,112
2-6-1, Ohtemachi
Chiyoda-Ku 100-0004
Japan
Contact: E. Matsunaga-
Sales Rep.
Tel: 813-5962-9781
Fax: 813-6812-2414
Email: asano@smisj.com
21. NTT Data, Inc. Trade Payable $191,436
100 City Square
Boston, MA 02129
Contact: Anand Agarwal
Tel: 4084551172
Email: sudheer.Cheedella@nttdata.com
22. Iljin Display Co., Ltd. Trade Payable $186,054
157 Daegeum-Ro, Daeso, Myeon
Eumgsung-Gun, Chung-Buk
2769
Korea
Contact: Eddie Cho
Tel: 43879-4747
Fax: 43879-4877
Email: yonghyun.cho@iljun.co.kr.
23. Linkedin Trade Payable $180,352
2029 Stierlin Court
Mountain View, CA 94043
Contact: Lucas Van Ommen
Tel: +353(86) 064-8796
PPO-
Email: noreply@linkedin.com
24. Adecco Technical Trade Payable $176,249
5700 Granite Pkwy
Plano, TX 75024-662
Contact: Morgan Isch,
Business Mgr
Tel: 8665280707;
6318447800
Fax: 631844-7614
Email: arleen.gallagher@adeccona.com
25. Nouryon Functional Trade Payable $170,345
Chemicals LLC
525 West Van Buren
Chicago, IL 60607-3845
Contact: Todd Dann-Account Manager
Tel: +1(978) 317-3280
Email: todd.dan@nouryon.com
26. National Pronto Association Trade Payable $166,495
2601 Herltage Avenue
Grapevine, TX 76051
Contact: Robert Roos, President
Tel: 800477-6686
Email: roobert.roos@theprontonenetwork.com
27. Chongqing Silian Trade Payable $157,500
Optoelectronics
99 Tongxi Road, Caijiagang Town
Chongqing 400707
China
Contact: Amy
Tel: 86-18696606161
Fax: 86236826-9597
Email: zhangjuan@silianopto.com
28. Insight Direct USA, Inc. Trade Payable $153,470
6820 South Harl Avenue
Tempe, AZ 85283-4318
Contact: Gino Bujawe
Tel: 800-700-1000
Email: lumileds@insight.com
29. Service By Medallion Trade Payable $145,798
455 National Avenue
Mountain View, CA 94043
Contact: Elias Nacif
Tel: 650-625-1010 X12
Fax: 650-625-1043
Email: dgodinez@servicebymedallion.com
30. Roundstone Solutions Inc. Trade Payable $137,174
1485 Bayshore Boulevard, 181
San Francisco, CA 94124
Contact: Tim Joyce, CEO
Tel: 625217-1177
Email: sales@roundsstonesolutions.com
LUMILEDS HOLDING: Gibson Dunn Represents Term Lender Group
----------------------------------------------------------
Pursuant to Rule 2019 of the Federal Rules of Bankruptcy
Procedure,
the law firm of Gibson, Dunn & Crutcher LLP submitted a verified
statement that it is representing the Ad Hoc Term Loan Lender
Group
in the Chapter 11 cases of Lumileds Holding B.V., et al.
In or around October 2019, the Ad Hoc Term Loan Lender Group was
formed and retained attorneys currently affiliated with Gibson,
Dunn & Crutcher LLP to represent them as counsel in connection
with
a potential restructuring of the outstanding debt obligations of
the above-captioned debtors and certain of their subsidiaries and
affiliates.
As of Aug. 26, 2022, members of the Ad Hoc Term Loan Lender Group
and their disclosable economic interests are:
Anchorage Collateral Management, L.L.C.
Anchorage Capital Group, L.L.C.
Anchorage Strategies Advisor, L.L.C.
610 Broadway, 6th Floor
New York, NY 10012
* Term Loans: $335,634,362.00
* Revolving Facility Loans: $14,652,000.00
($16,700,000 committed)
Avenue Capital Management II, L.P. and
Avenue Europe International Management, L.P.
11 West 42nd Street, 9th Floor
New York, NY 10036
* Term Loans: $59,446,601.77
Blackstone Liquid Credit Strategies LLC
345 Park Ave, 31st Floor
New York, NY 10154
* Term Loans: $1,747,796.08
Brigade Capital Management, LP
399 Park Avenue
New York, NY 10022
* Term Loans: $21,925,002.11
Cerberus Capital Management LP
875 Third Avenue, 10th Floor
New York, NY 10022
* Term Loans: $74,282,439.31
CIFC Asset Management LLC
875 Third Avenue, 24th Floor
New York, NY 10022
* Term Loans: $11,449,549.24
Credit Suisse Loan Funding LLC
Credit Suisse Securities (USA) LLC
11 Madison Avenue, 4th Floor
New York, NY 10010
* Term Loans: $5,057,622.62
* Revolving Facility Loans: ($7,900,000.00 committed)
Deutsche Bank Securities Inc.
One Columbus Circle, 7th Floor
New York, NY 10019
* Term Loans: $30,064,119.14
Eaton Vance Management
Two International Place, 9th Floor
Boston, MA 02110
* Term Loans: $63,904,349.84
MJX Asset Management
12 East 49th Street, 38th Floor
New York, NY 10017
* Term Loans: $26,476,570.13
Nut Tree Capital Management, LP
55 Hudson Yards, 22nd Floor
New York, NY 10001
* Term Loans: $192,321,635.65
Nuveen Asset Management, LLC and
Teachers Advisors, LLC
8625 Andrew Carnegie Blvd.
Charlotte, NC 28262
* Term Loans: $146,644,342.16
Pictet Asset Management Limited
Moor House, 120 London Wall
London, EC2Y 5ET
United Kingdom
* Term Loans: $31,838,501.00
Sound Point Capital Management, L.P.
375 Park Avenue, 33rd Floor
New York, NY 10152
* Term Loans: $50,070,141.29
Vibrant Capital Partners, Inc.
350 Madison Avenue
New York, NY 10017
* Term Loans: $26,847,757.65
Voya Alternative Asset Management LLC
7337 East Doubletree Ranch Road Suite 100
Scottsdale, AZ 85258
* Term Loans: $24,465,940.00
Counsel to the Ad Hoc Term Loan Lender Group can be reached at:
GIBSON, DUNN & CRUTCHER LLP
Scott J. Greenberg, Esq.
Michael J. Cohen, Esq.
Keith R. Martorana, Esq.
200 Park Avenue
New York, NY 10166
Tel: (212) 351-4000
Fax: (212) 351-4035
E-mail: sgreenberg@gibsondunn.com
mcohen@gibsondunn.com
kmartorana@gibsondunn.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at @ * /3wWmfNP
About Lumileds Holding B.V.
Lumileds Holding B.V. is a global manufacturer of innovative
lighting solutions. In the 1960s, the Company expanded its
offerings to also include state-of-the-art LED devices alongside
the automotive lighting technologies that it had continued to
innovate. Today, the Company continues to develop and manufacture
high-tech lighting products for the automotive, mobile device,
consumer, general lighting, and industrial markets.
Lumileds Holding and several affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case
No. 22-11155) on August 29, 2022. In the petition signed by
Johannes Paulus Teuwen, chief financial officer, Lumileds Holding
disclosed up to $100 million in assets and up to $500 million in
liabilities.
Judge Lisa G. Beckerman oversees the case.
The Debtor tapped Latham & Watkins LLP as legal counsel, Paul,
Weiss, Rifkind, Wharton & Garrison LLP as special financing and
employee compensation counsel, AlixPartners, LLP as financial
advisor, and Evercore Inc. as investment banker, and Epiq
Corporate
Restructuring, LLC as claims and noticing agent.
Davis Polk & Wardwell LLP serves as counsel to the DIP Lenders.
The Secured Lender Group retained Gibson Dunn & Crutcher LLP,
Loyens & Loeff N.V., Roland Berger LP, and PJT Partners LP, as
counsel or financial advisor.
LUMILEDS HOLDING: Seeks $275MM DIP Loan from Deutsche Bank
----------------------------------------------------------
Bright Bidco B.V., an affiliate of Lumileds Holding B.V., asks the
U.S. Bankruptcy Court for the Southern District of New York for
authority to, among other things, use cash collateral and obtain
postpetition financing.
Bright Bidco B.V., in its capacity as borrower, and each of the
other Debtors, with the exception of Luminescence Cooperatief U.A.
and Aegletes B.V., as guarantors, seek to obtain postpetition
financing, on a joint and several basis, under a senior secured
superpriority term loan debtor-in-possession facility in an
aggregate principal amount of $275 million, consisting of:
(i) a first lien senior secured superpriority term loan
facility in the aggregate principal amount of up to $175 million,
which will, upon entry of the Proposed Interim Order, be available
to be drawn in up to two drawings, and
(ii) a delayed-draw term loan in a principal amount of up to
$100 million,
with the funding of the DIP Loans to be coordinated by Deutsche
Bank Securities Inc., which will available to be drawn in a single
drawing upon entry of the Proposed Final Order; provided, however,
that the Delayed Draw DIP Facility will only be funded if (A) the
Debtors do not obtain authority from the Court to maintain a
Receivables Factoring Facility or (B) Credit Agricole fails to
continue performing under the Receivables Factoring Facility.
Deutsche Bank AG New York Branch serves as administrative agent,
collateral agent, and escrow agent under the DIP Agreement.
The Debtors have been significantly impacted by various recent
geopolitical and macroeconomic events, including the recent
COVID-19 pandemic and the subsequent and interrelated global
decline in vehicle production, semiconductor shortages and other
supply chain issues, and lockdowns in China, as well as Russia's
invasion of Ukraine, and rising inflation and interest rates, raw
material prices, and other costs, which have exacerbated pricing
pressure in certain divisions. As these headwinds persisted, it
became clear that the Debtors' capital structure was unsustainable
and that the Company needed to move with urgency to gather support
from its secured lenders for a restructuring plan that would
secure
necessary liquidity to preserve the Company’s businesses in the
short term and reduce its indebtedness to maximize value in the
long term.
As of the Petition Date, the Debtors' capital structure consists
of
outstanding funded-debt obligations in the aggregate principal
amount of approximately $1.7 billion.
In late April 2022, the Company launched a process to explore
strategic alternatives. The Company, with the assistance of its
advisors and at the direction of the Restructuring Committee, has
aggressively pursued various initiatives and engaged in extensive
arm's-length negotiations with an ad hoc group of secured lenders.
These negotiations culminated in a comprehensive restructuring,
the
terms of which are memorialized in the Restructuring Support
Agreement, which, in addition to providing for the reduction of
the
Debtors' funded debt by $1.3 billion, also secures the
postpetition
financing.
Prior to the Petition Date, the Debtors entered into the
Restructuring Support Agreement with their key stakeholders,
including holders of approximately 67% of the outstanding
obligations under the Prepetition First Lien Credit Agreement, and
their sponsors AP Bright Holdings (Lux) S.a.r.l.,
Metaaldraadlampenfabriek "Volt" B.V., and Alnitak (MEP) B.V., and
launched solicitation of a prepackaged plan of reorganization. The
Debtors have commenced these chapter 11 cases to effectuate the
transactions contemplated in the Restructuring Support Agreement
and the Plan to restructure their funded debt, while ensuring that
the financial restructuring will have a minimal impact on the
Debtors' operations, their key business partners, and their
customers.
As adequate protection, the Prepetition First Lien Secured Parties
will be granted valid, enforceable, binding, non-avoidable, and
fully perfected first priority priming liens on and senior
security
interests in substantially all of the property, assets, and other
interests in property and assets of the Debtor Loan Parties. As
further adequate protection, the Prepetition First Lien Secured
Parties will be granted superpriority administrative expense
claims against each of the Debtors' estates to the Funding
Coordinator, the DIP Agent and the DIP Lenders with respect to the
DIP Obligations over any and all administrative expenses of any
kind or nature subject and subordinate only to the payment of the
Carve Out on the terms and conditions set forth herein and in the
DIP Loan Documents.
The Carve Out means certain statutory fees allowed professional
fees of the Debtors, and say official committee of unsecured
creditors appointed in these Chapter 11 Cases pursuant to section
1103 of the Bankruptcy Code.
The DIP Loan Agreement includes certain milestones related to the
Chapter 11 Cases, including:
(a) Entry of Proposed Interim Order that is acceptable the
DIP
Agent and to the DIP Lenders holding at least 50.1% of the
outstanding unused commitments and term loans under the DIP
Facility, within five days following the Petition Date;
(b) Entry of Proposed Final Order that is acceptable to the
DIP Agent the Requisite DIP Lenders within 30 days following the
Petition Date;
(c) Entry by the Bankruptcy Court of a combined order
confirming a plan of reorganization that is acceptable to the
Requisite DIP Lenders and approving the disclosure statement with
respect to
the Acceptable Plan within 45 days following the Petition Date;
and
(d) Consummation of the Acceptable Plan within 65 days
following the Petition Date.
A copy of the motion is available at @ * /3RkeMzI from
PacerMonitor.com.
About Lumileds Holding B.V.
Lumileds Holding B.V. is a global manufacturer of innovative
lighting solutions. In the 1960s, the Company expanded its
offerings to also include state-of-the-art LED devices alongside
the automotive lighting technologies that it had continued to
innovate. Today, the Company continues to develop and manufacture
high-tech lighting products for the automotive, mobile device,
consumer, general lighting, and industrial markets.
Lumileds Holding and several affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case
No. 22-11155) on August 29, 2022. In the petition signed by
Johannes Paulus Teuwen, chief financial officer, Lumileds Holding
disclosed up to $100 million in assets and up to $500 million in
liabilities.
Judge Lisa G. Beckerman oversees the case.
The Debtor tapped Latham & Watkins LLP as legal counsel, Paul,
Weiss, Rifkind, Wharton & Garrison LLP as special financing and
employee compensation counsel, AlixPartners, LLP as financial
advisor, and Evercore Inc. as investment banker, and Epiq
Corporate
Restructuring, LLC as claims and noticing agent.
Davis Polk & Wardwell LLP serves as counsel to the DIP Lenders.
The Secured Lender Group retained Gibson Dunn & Crutcher LLP,
Loyens & Loeff N.V., Roland Berger LP, and PJT Partners LP, as
counsel or financial advisor.
LUMILEDS HOLDING: Unsecureds Will Get 100% of Claims in Plan
------------------------------------------------------------
Lumileds Holding B.V., and its Debtor Affiliates filed with the
U.S. Bankruptcy Court for the Southern District of New York a
Disclosure Statement describing Joint Prepackaged Plan of
Reorganization dated August 29, 2022.
Lumileds is a long-established manufacturer of innovative lighting
solutions that is headquartered in Schiphol, The Netherlands.
Lumileds operates on a global scale, with seven world-class
manufacturing plants in the United States, Asia, and Europe, and
sales offices and operations throughout the world.
The Plan that the Debtors have proposed pursuant to the
Restructuring Support Agreement will restructure the Debtors'
balance sheet and, together with their consistent operational
strength, position the Debtors and the entire Lumileds enterprise
for success going forward. The Plan is predicated upon a total
enterprise value of $700 million and a postpetition capital
structure that includes the Exit First Lien Term Loan Facility of
$400 million, consisting of (i) Exit First Lien Converted Term
Loans of up to $275 million and (ii) the Exit First Lien Takeback
Term Loans of $125 million, provided by the DIP Lenders and the
First Lien Lenders, respectively, and secured by a pari passu lien
on all currently pledged assets under the Prepetition First Lien
Facility, plus the first-tier foreign subsidiaries of Holdings
and,
subject to exceptions to be agreed upon, any other direct or
indirect subsidiaries of Lumileds International B.V.
The proposed restructuring reduces total funded debt by
approximately $1.7 billion to approximately $400 million. That is
a
reduction of approximately $1.3 billion of debt. The resulting
total leverage at emergence is anticipated to be less than 25% of
the Debtors' prepetition leverage, based on 2021 EBITDA.
Importantly, the proposed restructuring effects minimal changes to
the non-financing obligations of the Debtors and the Company.
The Restructuring Support Agreement contemplates that all
creditors
will be treated fairly in accordance with their respective Claims
and legal entitlements. The Plan contemplates that (i) all Holders
of Claims against the Debtors (including General Unsecured
Claims),
other than the Claims of First Lien Lenders, will be paid in full
in the ordinary course, have their Claims Reinstated, or otherwise
be rendered Unimpaired, and (ii) all Intercompany Claims and
Intercompany Interests will be Reinstated, set off, settled,
distributed, contributed, merged, canceled, or released, in each
case in the Debtors' discretion with the reasonable consent of the
Required Consenting First Lien Lenders.
Existing Interests in Luminescence Cooperatief U.A. will be
canceled and released, and Existing Co-Investment Interests in
Aegletes B.V. will be canceled and released (or otherwise
excluded,
in accordance with Dutch Law) with no distribution to be made on
account thereof (except that, to the extent required under Dutch
Law, a nominal amount will be paid to the Existing Co-Investment
Interests in Aegletes B.V. in connection with such cancellation).
The terms of the DIP Facilities are the result of arm's-length,
good-faith negotiations conducted by the Debtors and their
Advisors
with the DIP Lenders. These discussions spanned several weeks and
lasted until shortly before the date hereof. Ultimately, the
Debtors, in consultation with their Advisors, determined that the
DIP Facility represents the best post-petition DIP financing
option
available to the Debtors. In addition to demonstrating the
confidence of the First Lien Lenders in the Debtors' restructuring
strategy, the DIP Facility is essential to the Debtors'
maintenance
of the support of key constituencies, including their workforce,
vendors, and customers, and avoidance of severe interruption of
their businesses or other involuntary and adverse modification of
operations.
The Debtors estimate that they have approximately $13 million in
General Unsecured Claims outstanding as of the date hereof. The
Plan provides for payment in full in Cash in the ordinary course
of
business for all such Claims.
Class 4 consists of the General Unsecured Claims. Subject to
Article V.C of the Plan, and except to the extent that a Holder of
a General Unsecured Claim agrees to less favorable treatment, in
full and final satisfaction, settlement, release, and discharge
and
in exchange for each Allowed General Unsecured Claim, each Holder
of an Allowed General Unsecured Claim against a Debtor shall
receive payment in full in Cash on the date due in the ordinary
course of business in accordance with the terms and conditions of
the particular transaction giving rise to such Allowed General
Unsecured Claim. This Class will receive a distribution of 100% of
their allowed claims. Class 4 is Unimpaired.
Class 7 consists of the Existing Interests in Luminescence
Cooperatief U.A. On the Plan Effective Date, all Existing
Interests
in Luminescence Cooperatief U.A. will be cancelled and
extinguished
(in accordance with the Transaction Steps Plan, which will
incorporate the requirements of applicable Law) and will be of no
further force or effect. No distribution will be made on account
of
Existing Interests in Luminescence Cooperatief U.A.
Class 8 consists of the Existing Co-Investment Interests in
Aegletes B.V. On the Plan Effective Date, all Existing Co
Investment Interests in Aegletes B.V. will be cancelled and
extinguished (in accordance with the Transaction Steps Plan, which
will incorporate the requirements of applicable Law) and will be
of
no further force or effect. No distribution (except a nominal
amount to be paid in connection with the cancellation, as and to
the extent required by Dutch Law) will be made on account of
Existing Co-Investment Interests in Aegletes B.V.
The Debtors shall fund distributions under the Plan with Cash on
hand and the proceeds of the Exit Facilities and by the issuance
of
the New Common Equity Interests. The Debtors and the Reorganized
Debtors, as applicable, may also make such payments using Cash
received from their subsidiaries through their respective
consolidated cash management systems and the incurrence of
intercompany transactions, but in all cases subject to the terms
and conditions of the Definitive Documents.
A full-text copy of the Disclosure Statement dated August 29,
2022,
is available at @ * /3CMo1Vj from PacerMonitor.com at no
charge.
Proposed Counsel to the Debtors:
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY 10020
Telephone: (212) 906-1200
Facsimile: (212) 751-4864
George A. Davis
George Klidonas
Anupama Yerramalli
Liza L. Burton
Misha E. Ross
About Lumileds Holding B.V.
Lumileds Holding B.V. is a global manufacturer of innovative
lighting solutions. In the 1960s, the Company expanded its
offerings to also include state-of-the-art LED devices alongside
the automotive lighting technologies that it had continued to
innovate. Today, the Company continues to develop and
manufacture high-tech lighting products for the automotive, mobile
device, consumer, general lighting, and industrial markets.
Lumileds Holding and several affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case
No. 22-11155) on August 29, 2022. In the petition signed by
Johannes Paulus Teuwen, chief financial officer, Lumileds Holding
disclosed up to $100 million in assets and up to $500 million in
liabilities.
Judge Lisa G. Beckerman oversees the case.
The Debtor tapped Latham & Watkins LLP as legal counsel, Paul,
Weiss, Rifkind, Wharton & Garrison LLP as special financing and
employee compensation counsel, AlixPartners, LLP as financial
advisor, and Evercore Inc. as investment banker, and Epiq
Corporate
Restructuring, LLC as claims and noticing agent.
Davis Polk & Wardwell LLP serves as counsel to the DIP Lenders.
The
Secured Lender Group retained Gibson Dunn & Crutcher LLP, Loyens &
Loeff N.V., Roland Berger LP, and PJT Partners LP, as counsel or
financial advisor.
LUMILEDS HOLDING: Wins Approval of First Day Motions
----------------------------------------------------
Lumileds Holding B.V., a global leader in innovative lighting
solutions, announced Aug. 30, 2022, that it has received interim
approval from the U.S. Bankruptcy Court for the Southern District
of New York for all the first day motions related to its
prepackaged Chapter 11 filed on August 29, 2022. The approved
motions will immediately solidify the Company’s liquidity
position and maintain normal course operations throughout the
financial restructuring.
As part of these motions, the Court granted Lumileds access to up
to $275 million in debtor-in-possession ("DIP") financing that,
together with the Company’s available cash reserves and cash
provided by operations, will provide sufficient liquidity for
Lumileds to continue meeting its ongoing obligations in the
ordinary course. Lumileds will continue to seamlessly deliver
products and services to customers. Lumileds' vendors and
suppliers will not be impaired and will be paid for all valid
amounts owed as they come due. Employees will also continue to
receive their usual wages and benefits without interruption.
"The approval of our first day motions is an important milestone
in
our recapitalization and financial restructuring efforts, which
will allow us to operate in the normal course as we de-leverage
our
balance sheet and further position Lumileds to capture
opportunities in the market and accelerate our growth," said Matt
Roney, CEO of Lumileds. "We remain focused on driving innovation
and delivering never before possible solutions for lighting,
safety, and well-being. I want to reiterate my thanks to our
customers, vendors, suppliers, employees, and lenders for their
continued support as we move through this process on an expedited
timeline."
As previously announced, Lumileds has received support from the
requisite lenders on the terms of a comprehensive financial
restructuring that would significantly de-leverage and strengthen
its balance sheet by over $1.3 billion, accelerate Lumileds’
growth, and enable further investment in innovation to pursue
additional strategic opportunities. The narrowly focused
prepackaged Chapter 11 filing is limited to Lumileds’ U.S. and
Dutch entities and the Company expects to emerge from the Chapter
11 process within approximately sixty days.
About Lumileds Holding
Lumileds Holding B.V. is a global leader in OEM and aftermarket
automotive lighting and accessories, camera flash for mobile
devices, MicroLED, and light sources for general illumination,
horticulture, and human-centric lighting. Its approximately 7,000
employees operate in over 30 countries and partner with our
customers to deliver never before possible solutions for lighting,
safety, and well-being. On the Web: @ lumileds.com.
Lumileds Holding B.V. and its affiliates, including Lumileds LLC,
sought protection under Chapter 11 of the U.S. Bankruptcy Code
(Bankr. S.D.N.Y. Lead Case No. 22-11155) on Aug. 29, 2022. In the
petition filed by Johannes Paulus Teuwen, as chief financial
officer, the Debtor reports estimated assets and liabilities
between $100 million and $500 million each.
Evercore is acting as investment banker for the Company; Paul,
Weiss, Rifkind, Wharton & Garrison, LLP, and Latham & Watkins LLP
are acting as corporate and restructuring counsel to Lumileds, and
AlixPartners, LLP, as financial advisor. Epiq Corporate
Restructuring, LLC, is the claims agent.
PJT Partners is acting as financial advisor for an ad hoc group of
Lumileds' lenders, and Gibson, Dunn & Crutcher LLP is acting as
the
group's legal counsel.
* * *
Lumileds, an Apollo Global Management LLC-owned lighting
components
firm, filed for Chapter 11 protection after reaching terms of a
restructuring plan to help reduce debt by $1.3 billion, as it
grapples with supply chain constraints exacerbated by the war in
Ukraine. It said it expected to emerge from proceedings within 60
days.
=============
R O M A N I A
=============
ROMCAB: To File Debt Rescheduling Request
-----------------------------------------
Razvan Timpescu at SeeNews reports that Romanian cables and
electric conductors manufacturer Romcab said on Sept. 6 it will
file a debt rescheduling request after the country's tax agency
ANAF requested its bankruptcy in court.
The company needs to recover a total RON18.8 million (US$3.87
million/EUR3.89 million) from ANAF, plus an additional RON1.35
million in penalties, it said in a report filed with the Bucharest
Stock Exchange (BVB), SeeNews relates.
On Sept. 5, the company announced in a bourse filing that ANAF's
Mures county branch has requested its bankruptcy in court, SeeNews
discloses.
According to SeeNews, in the first half of 2022, the company's
losses amounted to RON86.22 million, compared to a profit of
RON13.38 million in the same period of the previous year. Romcab's
debt stood at RON1.47 billion at the end of June 2022.
Romcab is Romania's largest producer of cables and conductors and
has been operating since 1950. The company has been insolvent
since 2017 and is currently in judicial reorganisation, SeeNews
notes.
=============
U K R A I N E
=============
UKRANIAN RAILWAYS: Fitch Hikes Foreign Currency IDR to 'CC'
-----------------------------------------------------------
Fitch Ratings has upgraded JSC Ukrainian Railways' (UR) Long-Term
Foreign-Currency (LTFC) Issuer Default Rating (IDR) to 'CC' from
'C'. Ratings at this level typically do not carry Outlooks due to
their high volatility.
KEY RATING DRIVERS
The rating actions follow Fitch's upgrade of Ukraine's sovereign
ratings on August 17, 2022. This rating action has a direct impact
on UR's IDRs as it is deemed a government-related entity (GRE) of
Ukraine based on Fitch's GRE Rating Criteria.
Fitch's assessment of UR's strength of linkage with the Ukrainian
government remains unchanged by the sovereign rating upgrade. The
company's strategic importance to the state has increased since the
Russian-Ukrainian war started in February 2022. The government's
incentive to support UR remains high, with the state providing it
with non-returnable cash subsidies (UAH10 billion) to support the
company's main operating expenditure needs. However, more than
before the war, UR's financial resources and cash flows are
dependent on the financial performance of the Ukrainian state.
UR's Standalone Credit Profile (SCP) at 'ccc' remains unaffected by
the rating action.
ESG - Governance Structure: It reflects the close links of UR to
the Ukrainian government and the latter's launch of its consent
solicitation to defer external debt payment. The weakened
sovereign's finances may weigh on UR's debt policy and willingness
and ability to service and repay debt, especially its US-dollar
loan participation notes, which make up for a large portion of UR's
debt stock.
DERIVATION SUMMARY
Fitch classifies UR as an entity linked to Ukraine sovereign under
its GRE Rating Criteria and assesses the GRE support score at 27.5
(out of a maximum 60), reflecting a combination of 'Very Strong'
status, ownership and control, 'Moderate' support track record and
socio-political implications of default, and 'Strong' financial
implications of default.
Fitch assesses UR's SCP at 'ccc' under Fitch's Public Sector,
Revenue-Supported Entities Rating Criteria, which factors in the
company's 'Weaker' revenue defensibility 'Midrange' operating risk
and 'Weaker' financial profile.
Based on this assessment Fitch applies a top-down approach under
its GRE Rating Criteria, which in combination with the UR's 'ccc'
SCP leads to rating equalisation with the Ukraine sovereign. The
difference in LTFC and LTLC IDRs acknowledge the difference between
Ukraine government's ability, and possibly willingness, to support
its GREs' LC rather than its FC obligations.
DEBT RATING DERIVATION
The ratings of senior debt instruments are aligned with UR's LTFC
IDR, including the senior unsecured debt of the UK-based financial
special financial vehicle (SPV) Rail Capital Markets plc. Payments
under the US-dollar loan participation notes (LPN) totaling
USD894.9 million are backed by the payments by UR under the
underlying loan from SPV. This underpins our view that the SPVs'
debt is direct, unconditional senior unsecured obligations of the
GRE, ranking pari passu with all of its other present and future
unsecured and unsubordinated obligations. The notes constituted 75%
of UR's debt stock at end-2021.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of Ukraine's sovereign rating, provided there is no
significant deterioration in the company's SCP below 'cc' and in
the support scoring under our GRE Criteria
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade of Ukraine's sovereign rating
- Heightened default probability or default-like processes in
place, including any proposals that entail a material reduction of
LPN terms, or a failure to make a payment on the notes in line with
the original terms and within the applicable grace period
ISSUER PROFILE
UR, the national integrated railway company, is the largest
employer in the country and plays a vital role in Ukrainian's
economy and labour market. Since the outbreak of the war, it is
also the major means of humanitarian transportation for civilians
and the main transportation option for goods export as sea
transport routes are still not fully viable.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
UR's ratings are linked to Ukraine's IDRs.
ESG CONSIDERATIONS
UR has an ESG Relevance Score of '5' for governance structure due
to reflect the close links between the issuer and the Ukrainian
government and the latter's launch of consent solicitation to defer
external debt payments, which has a negative impact on the credit
profile, and is highly relevant to the rating. This resulted in its
downgrade on July 29, 2022.
UR has an ESG Relevance Score of '4' for employee wellbeing due to
employees' heightened safety risks in the performance of railway
services, especially in areas of protracted war operations, as well
as increased spending for personal protection equipment, which has
a negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
UR has an ESG Relevance Score of '4' for customer welfare - fair
messaging, privacy & data security due to increasing data
protection needs related to its strategies, investments and
policies, including critical logistic and infrastructure data, IT
infrastructure and financial information, which result from
intensified cyberattacks in the Russian-Ukrainian war. This has a
negative impact on the credit profile, and is relevant to the
rating[s] 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.
UKRENERGO: Fitch Hikes State-Guaranteed Notes Unsec. Rating to 'CC'
-------------------------------------------------------------------
Fitch Ratings has upgraded Private Joint Stock Company National
Power Company Ukrenergo's (Ukrenergo) state- guaranteed notes'
senior unsecured rating to 'CC' from 'C' following the
restructuring of its USD825 million bonds. The notes' Recovery
Rating remains unchanged at 'RR4'. The upgrade follows the
restructuring of Ukraine's debt. Fitch has also assigned Ukrenergo
a 'CC' Long-Term Issuer Default Rating (IDR).
The ratings reflect the strong links of Ukrenergo with Ukraine
under Fitch's Government-Related Entities (GRE) Criteria, with
Ukraine being also the guarantor of almost all of Ukrenergo's debt.
The notes are unconditionally and irrevocably guaranteed by the
state, represented by the Minister of Finance acting on the
instructions of the cabinet ministers of Ukraine. The guarantee
provided to the notes constitute direct, unconditional and
unsecured obligations of Ukraine and rank pari-passu with all its
other unsecured debt.
KEY RATING DRIVERS
Completion of Change in Terms: On August 9, 2022, Ukrenergo's
bondholders consented to a change of terms regarding Ukrenergo's
USD825 million 6.875% notes originally due on November 9, 2026. We
view the change as a distressed debt exchange (DDE). New maturity
for the bond is now November 9, 2028 and the coupon payments
falling due from November 9, 2022 to November 9, 2024 will be
deferred to 2024. The bonds account for around half of Ukrenego's
gross debt.
Stressed Standalone Liquidity: The change of terms has improved
Ukrenergo's liquidity, which however remains tight given remaining
debt service and stressed operating cash flows. The company is
actively working on repurposing its available credit lines
initially for investment to general use and to improve collection
of receivables. Additionally, the government may allow restricted
cash use for debt service. However, we view tight liquidity
constraining Ukrenergo's ratings and its Standalone Credit Profile
(SCP) at CC and 'cc', respectively.
Strong Links with Ukraine: Fitch views the status, ownership and
control links between Ukrenergo and Ukraine as 'Strong'. Ukrenergo
is solely owned by the state and is strategically important to
Ukraine in ensuring national energy security. Ukrenergo is critical
for the integration of Ukraine's power system into the European
Network of Transmission System Operators for Electricity and,
consequently, Ukraine's strategic objective of integration into the
European Union. The support track record is 'Very Strong',
underpinned by state guarantees covering almost 100% of Ukrenergo's
debt. We deem the socio-political and financial implications of
Ukrenergo default for Ukraine as 'Strong'.
Operating Activity Distorted: Ukrenergo's operations have been
severely hit by Russia's invasion of Ukraine. We expect electricity
consumption in the next two years to remain significantly lower
(30%) than in pre-war times, limiting Ukrenergo's revenue from
transmission and dispatch. Fitch expects lower collection of trade
receivables in 2022-2023, and also accumulation of trade payables,
as the company prioritises crucial spending items over others.
Restoration of Critical Infrastructure: The requirement to keep the
electricity network operational is absorbing Ukrenergo's available
resources and weighing on its liquidity. Ukrenergo is responsible
for maintaining and rebuilding the country's power network at this
time of war. Fitch expects development capex to be reduced due to
postponed projects.
Grid Remains in Service: Ukrenergo's core infrastructure remains
operational, despite having sustained some damage and in part being
on the territory seized by Russia, and with sufficient ongoing
maintenance work.
DERIVATION SUMMARY
Ukrenergo's 'CC' IDR and senior unsecured rating reflect strong
links with Ukraine under our GRE Criteria and stressed standalone
liquidity from operational disruptions, an uncertain macro
environment and financial risks.
KEY ASSUMPTIONS
- Operations and available assets maintained at current levels
into 2023
- Electricity consumption to remain significantly lower than in
pre-war times to 2024
- Collection of receivables at up to 10% below the company's
assumptions for 2022-2023
- Accumulation of payables in view of lower collection of
receivables and limited available liquidity
- Capex aimed mainly at maintenance in 2022-2023 with development
projects postponed until 2024-2026
Assumptions For Recovery Analysis
The recovery analysis assumes that Ukrenergo would be considered a
going-concern (GC) in bankruptcy and that it would be reorganised
rather than liquidated. The GC EBITDA estimate reflects Fitch's
view of a sustainable, post-reorganisation EBITDA level upon which
we base the enterprise valuation (EV).
Fitch used a distressed enterprise value (EV)/EBITDA multiple of
4.0x to calculate post-reorganisation valuation. It captures
higher-than-average business risks in Ukraine and reflects
Ukrenergo's weaker business profile than peers'.
Guaranteed bank loans and unsecured debt rank equally with each
other. After the deduction of 10% for administrative claims, our
waterfall analysis generated a waterfall-generated recovery
computation (WGRC) in the 'RR4' band, indicating a 'CC' rating for
Ukrenergo's notes. The WGRC output percentage on current metrics
and assumptions is 33%.
RATING SENSITIVITIES
Ukrenergo
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Positive rating action on Ukraine
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The rating would be downgraded on signs that a renewed default-
like process has begun, for example, a formal launch of another
debt exchange proposal involving a material reduction in terms
to avoid a traditional payment default
- Negative rating action on Ukraine
The following rating sensitivities are for Ukraine (August 17,
2022):
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The LTFC IDR would be downgraded on signs that a renewed
default-like process has begun, for example, a formal launch of
a debt exchange proposal involving a material reduction in
terms to avoid a traditional payment default
- The LTLC IDR would be downgraded to 'CC' on increased signs of
a probable default, for example from severe liquidity stress
and reduced capacity of the government to access financing, or
to 'C' on announcing restructuring plans that materially reduce
the terms of local-currency debt to avoid a traditional payment
default
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Structural: De-escalation of conflict with Russia that markedly
reduces vulnerabilities to Ukraine's external finances, fiscal
position and macro-financial stability, reducing the
probability of commercial debt restructuring
LIQUIDITY AND DEBT STRUCTURE
Weak Liquidity: Unrestricted cash position by July 2022 was not
sufficient to cover payments due until the end of the year. The
consent solicitation has eased the liquidity strain, but short-term
liquidity remains insufficient for continued debt service.
ISSUER PROFILE
Ukrenergo is the 100% state-owned (through Ministry of Energy)
national electricity transmission system owner and operator in
Ukraine.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Ukrenergo's ratings are linked to Ukraine's IDRs.
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.
Rating Prior
------ -----
Private Joint Stock Company
National Power Company
Ukrenergo
LT IDR CC New Rating
senior unsecured LT CC Upgrade RR4 C
[*] Fitch Ups 8 Ukrainian LRGs IDR to CC on Sovereign Rating Action
-------------------------------------------------------------------
Fitch Ratings, on Aug. 26, 2022, upgraded eight Ukrainian local and
regional governments' (LRGs) Long-Term Foreign-Currency (LTFC)
Issuer Default Rating (IDR) to 'CC' from 'C'. Ratings at this level
typically do not carry Outlooks due to their high volatility.
Under applicable credit rating agency (CRA) regulations, the
publication of the local and regional government reviews is subject
to restrictions and must take place according to a published
schedule, except where it is necessary for CRAs to deviate from the
schedule in order to comply with the CRAs' obligation to issue
credit ratings based on all available and relevant information and
disclose credit ratings in a timely manner.
Fitch interprets this provision as allowing us to publish a rating
review in situations where there is a material change in the
creditworthiness of the issuer that we believe makes it
inappropriate for us to wait until the next scheduled review date
to update the rating or Outlook/Watch status. The next schedule
review date for Fitch's rating on Kharkov, Odesa, Kyiv, Lviv,
Dnipro is 28 October 2022 and for Mykolaiv, Zaporizhzhia, Kryvyi
Rih is 4 November 2022, but Fitch believes the developments for the
issuer warrant such a deviation from the calendar and our rationale
for this is set out in the first part (High weight factors) of the
Key Rating Drivers section below
KEY RATING DRIVERS
The upgrade of the IDRs of the cities follows the upgrade of the
Ukrainian sovereign on August 17, 2022, as the cities' ratings are
capped by the sovereign ratings.
The Risk Profiles remain 'Vulnerable' as they are not affected by
the rating action and all the cities have the Key Risk Factors
assessed at 'Weaker', the weakest assessment allowed under Fitch's
International Local and Regional Governments Rating Criteria. No
changes have been applied to the Debt Sustainability score of any
issuer, which remains 'b' for Dnipro, Kharkov, Kyiv, Lviv,
Mykolaiv, Odesa, Kryvyi Rih and Zaporizhzhia. The derivation of the
Standalone Credit Profiles is unaffected by the rating action.
Fitch will closely monitor the evolution of the situation
throughout the Russian-Ukrainian war and will take the appropriate
course of action in case of need.
ESG - Political Stability and Rights: The invasion by Russia and
ongoing full-scale war has severely compromised the cities'
political stability and the security outlook. The war is resulting
in the death of city inhabitants and extensive property damage,
with the aim of changing the cities' government and/or occupying
its territory.
ESG - Creditor Rights: The protracted war has weakened the cities'
ability and willingness to service and repay debt. The cities'
liquidity is deteriorating and the Ukrainian sovereign's
willingness to allow the use of foreign-currency reserves for debt
service in foreign currency is diminishing, while costs of
preserving the urban and communal functions for the cities are on
the rise.
DEBT RATING DERIVATION
The ratings on the senior debt instruments of City of Kyiv's
special financial vehicle (SPV) company PRB Kyiv Finance Plc have
been upgraded to 'CC' from 'C' as they are aligned with the city's
Long-Term IDRs. This is because we view the SPVs' debt as direct,
unconditional senior unsecured obligations of the City of Kyiv,
ranking pari passu with all of its other present and future
unsecured and unsubordinated obligations.
KEY ASSUMPTIONS
Qualitative assumptions and assessments and their respective change
since the last review on 29 April 2022 for Dnipro, Kharkov, Kyiv,
Lviv, Odesa and 13 May 2022 for Kryvyi Rih, Mykolaiv and
Zaporizhzhia and weight in the rating decision:
Risk Profile: 'Vulnerable'/unchanged with low weight
Revenue Robustness: 'Weaker'/unchanged with low weight
Revenue Adjustability: 'Weaker'/unchanged with low weight
Expenditure Sustainability: 'Weaker'/unchanged low weight
Expenditure Adjustability: 'Weaker'/unchanged with low weight
Liabilities and Liquidity Robustness: 'Weaker'/unchanged with low
weight
Liabilities and Liquidity Flexibility: 'Weaker'/unchanged with low
weight
Debt sustainability: 'b' category /unchanged with low weight
Budget Loans or Ad-Hoc Support: N/A, unchanged with low weight
Asymmetric Risk: N/A, unchanged with low weight
Sovereign Cap: Yes, 'CC' (for Foreign Currency), heightened with
high weight
Rating Floor: N/A, unchanged with low weight
Quantitative assumptions - issuer-specific: unchanged with low
weight
Fitch's rating case scenario is a "through-the-cycle" scenario,
which incorporates a combination of revenue, cost and financial
risk stresses. It is based on the 2016-2020 figures and 2021-2025
projected ratios.
Quantitative assumptions - sovereign-related (note that no weights
and changes since the last review are included as none of these
assumptions were material to the rating action):
Figures as per Fitch's sovereign data for 2021 and forecast for
2024, respectively:
- GDP per capita (US dollar, market exchange rate):4,790; 4,070
- Real GDP growth (%): 3.4; 9.0
- Consumer prices (annual average % change): 9.4; 15.0
- General government balance (% of GDP): -3.9; -16.1
- General government debt (% of GDP): 43.3; 106.5
- Current account balance plus net FDI (% of GDP): 2.1; 0.5
- Net external debt (% of GDP): -11.9; 49.1
- IMF Development Classification: EM (emerging market)
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of Ukraine's IDRs would lead to an upgrade of the
cities' IDRs provided that the cities' Debt Sustainability remains
in the 'b' category
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade of Ukraine's IDRs would lead to a downgrade of the
cities' IDRs
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The cities' ratings are capped by the sovereign's ratings.
ESG CONSIDERATIONS
The ESG Relevance Scores for political stability and rights for all
eight cities are '5' to reflect the invasion by Russia and ongoing
full-scale war, which has severely compromised the cities'
political stability and the security outlook. This has a negative
impact on the credit profiles and is highly relevant to the
ratings. The war is resulting in the death of city inhabitants and
extensive property damage, with the aim of changing the city's
government and/or occupying its territory.
The ESG Relevance Scores for creditor rights for all eight cities
are '5' to reflect the weakened ability and willingness of the
cities to service and repay debt. This has a negative impact on the
credit profiles and is highly relevant to the ratings. The
protracted war is resulting in depletion of liquidity and
diminishing Ukrainian sovereign's willingness to allow the use of
foreign currency reserves for debt service in foreign currency,
while costs of preserving the urban and communal functions for the
cities are on the rise.
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 Action
Rating Prior
------ -----
City of Lviv LT IDR CC Upgrade C
Dnipro City LT IDR CC Upgrade C
Zaporizhzhia City LT IDR CC Upgrade C
Kyiv, City of LT IDR CC Upgrade C
Kharkov, City of LT IDR CC Upgrade C
Kryvyi Rih City LT IDR CC Upgrade C
Mykolaiv, City of LT IDR CC Upgrade C
Odesa, City of LT IDR CC Upgrade C
PRB Kyiv Finance Plc
senior unsecured LT CC Upgrade C
===========================
U N I T E D K I N G D O M
===========================
BLEIKER'S SMOKEHOUSE: Salmo Buys Business Out of Administration
---------------------------------------------------------------
Stephen Farrell at Insider Media reports that a seafood firm is set
to make a significant investment in North Yorkshire following its
acquisition of a smoked salmon business out of administration.
The Salmo Group, which has a portfolio of seafood brands including
Seriously Fish and New York Smokehouse, has bought the previous
Bleiker's Smokehouse business out of administration, Insider Media
relates.
Following the deal, for an undisclosed sum, Yorkshireman David
Smith will take the helm of the Northallerton-based business as
managing director, Insider Media discloses.
According to Insider Media, Mr. Smith said: "I'm delighted to be
returning to Yorkshire, which has always been my home. After many
years building quality seafood supply businesses from the US. I'm
looking forward to investing in the Northallerton business, growing
the team and the brands and ensuring we give supermarkets,
independent retailers and restaurants across the UK, the very best
quality smoked fish products.
"We have already employed some members of staff from the previous
team who bring exceptional experience and expertise and as we build
the new business, we'll continue to grow the team and recruit more
staff from the local area."
Bleiker's Smokehouse went into administration in April after the
loss of a major supermarket contract and a continuing investigation
into country-of-origin claims on some of the former business'
products, Insider Media recounts.
EUROSAIL-UK 2007-2: Fitch Affirms CCCsf Rating on Class E1c Notes
-----------------------------------------------------------------
Fitch Ratings has upgraded Eurosail-UK 2007-2 NP plc's class D
notes and affirmed the rest. The class D and E notes have been
removed from under criteria observation (UCO) as detailed below.
RATING ACTIONS
Rating Prior
------ -----
Eurosail-UK 2007-2 NP Plc
Class A3a XS0291422623 LT AAAsf Affirmed AAAsf
Class A3c XS0291423605 LT AAAsf Affirmed AAAsf
Class B1a XS0291433158 LT AAAsf Affirmed AAAsf
Class B1c XS0291434123 LT AAAsf Affirmed AAAsf
Class C1a XS0291436250 LT AAAsf Affirmed AAAsf
Class D1a XS0291441417 LT A-sf Upgrade BBBsf
Class D1c XS0291442498 LT A-sf Upgrade BBBsf
Class E1c XS0291443892 LT CCCsf Affirmed CCCsf
Class M1a XS0291424165 LT AAAsf Affirmed AAAsf
Class M1c XS0291426889 LT AAAsf Affirmed AAAsf
TRANSACTION SUMMARY
The transaction comprises non-conforming UK mortgage loans
originated by Southern Pacific Mortgage Limited and Preferred
Mortgages Limited, formerly wholly owned subsidiaries of Lehman
Brothers Limited and serviced by Kensington Mortgages Limited.
KEY RATING DRIVERS
Removed from UCO: In its latest UK RMBS Rating Criteria on May 23,
2022, Fitch updated its sustainable house prices for each of the 12
UK regions. The changes include increased multiples for all regions
other than the North East and Northern Ireland, as well as updated
house price indexation and gross disposable household income. The
sustainable house prices are now higher in all regions except
Northern Ireland. This has a positive impact on recovery rates (RR)
and, consequently, Fitch's expected loss in UK RMBS transactions.
Fitch also reduced its foreclosure frequency (FF) assumptions for
loans in arrears based on a review of historical data from its
rated UK RMBS portfolio. The changes better align Fitch's
expected-case assumptions with observed performance and incorporate
a margin of safety at the 'Bsf' level.
The updated criteria contributed to the rating actions and the
removal of the ratings from under criteria observation.
Uncertain Asset Performance: Fitch expects asset performance in
non-conforming pools to weaken as a result of rising inflation and
interest rates. A modest increase in arrears could result in lower
model-implied ratings (MIR) in future model updates. The rating on
the class D notes is reduced by one notch below the MIR to account
for this risk.
Change in Arrears Reporting Methodology: The servicer has updated
their arrears calculation methodology effective as of 1Q22. Rather
than determining the number of months in arrears by dividing a
borrower's arrears balance by the due payment, the servicer now
refers to the number of full monthly payments missed. This resulted
in a reduction of the reported number of months in arrears for some
borrowers. As at June 2022 one month plus arrears stood at 14.0%,
down from 18.5% in December 2021. Fitch has constrained the rating
of the class D notes by a further one notch below the MIR (in
addition to the notch for uncertain asset performance) to reflect
the impact of the change in the arrears calculation rather than an
improvement in asset performance.
Performance Adjustment Factor (PAF): The combination of the UK RMBS
Rating Criteria changes and the change in arrears reporting for the
transaction, coupled with a stable constant default rate (CDR),
resulted in a higher derived PAF for the transaction. This led to
volatility in the weighted average (WA) FF for the buy-to-let
portion of the pool. For this analysis the PAF for the transaction
was capped at the previous review's level so that the 'Bsf' WAFF
more accurately reflected Fitch's default expectations for the pool
at that rating level.
Payment Interruption Risk Mitigated: The transaction features a
non-amortising liquidity facility provided by Danske Bank AS and
sized at GBP32.2 million. All notes have access to the liquidity
facility, and are, except the class A and M notes, subject to a 50%
principal deficiency ledger lock-out trigger. In Fitch's expected
case the lock-out trigger is not breached and the liquidity
facility is sufficient to mitigate payment interruption risk for
all notes.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The transactions' performance may be affected by adverse changes in
market conditions and economic environment. Weakening economic
performance is strongly correlated with increasing levels of
delinquencies and defaults that could reduce credit enhancement
(CE) available to the notes.
Additionally, unanticipated declines in recoveries could also
result in lower net proceeds, which may make certain notes
susceptible to negative rating action, depending on the extent of
the decline in recoveries. Fitch conducts sensitivity analyses by
stressing both a transaction's base-case FF and RR assumptions, and
examining the rating implications on all classes of issued notes.
Fitch tested a 15% increase in the WAFF and a 15% decrease in the
WARR, which may result in downgrades of up to four 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 CE levels and, potentially,
upgrades. Fitch tested an additional rating sensitivity by applying
a decrease in the WAFF of 15% and an increase in the WARR of 15%,
which may result in upgrades of up to 11 notches.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Fitch did not undertake a review of the information provided about
the underlying asset pool ahead of the transaction's closing. The
subsequent performance of the transaction over the years is
consistent with the agency's expectations given the operating
environment and Fitch is therefore satisfied that the asset pool
information relied upon for its initial rating analysis was
adequately reliable.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Eurosail UK 2007-2 has an ESG Relevance Score of '4' for human
rights, community relations, access & affordability due to a
significant proportion of the pool containing owner-occupied loans
advanced with limited affordability checks, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
Eurosail UK 2007-2 has an ESG Relevance Score of '4' for customer
welfare - fair messaging, privacy & data security due to the pool
exhibiting an interest-only maturity concentration of legacy
non-conforming owner-occupied loans of greater than 20%, 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.
JUPITER MARKETING: Goes Into Administration
-------------------------------------------
Sam Metcalf at TheBusinessDesk.com reports that a Shropshire
grower, importer and wholesaler of fruit has called in
administrators, with the majority of the firm's 85 staff being made
redundant.
Tim Bateson and Chris Pole from Interpath Advisory were appointed
joint administrators to Jupiter Marketing on Sept. 5,
TheBusinessDesk.com relates.
Based near Newport in Shropshire and with subsidiary operations in
Chile, Europe and South Africa, the company supplied a number of UK
supermarkets.
Following a recent refinance, the company has faced a "challenging
commercial period" with cost inflation in all its operating
regions, as well as "dramatic" rises in shipping costs and
localised supply chain challenges, TheBusinessDesk.com discloses.
As a result, the directors of the UK entity took the decision to
file for administration, TheBusinessDesk.com notes.
A small number of people have been retained to assist the
administrators, TheBusinessDesk.com states.
REGIS MUTUAL: Three Mutuals Choose New Manager After Collapse
-------------------------------------------------------------
Terry Gangcuangco at Insurance Business reports that three
discretionary mutuals have chosen Thomas Miller Group as their new
manager, replacing Regis Mutual Management (RMM) after the latter
went into administration in June.
According to Insurance Business, described as a "natural fit" with
Thomas Miller, the mutuals are Fire & Rescue Indemnity Company
Limited (FRIC), Livery Companies' Mutual (LCM), and Activities
Industry Mutual (AIM).
"The three mutuals opted to choose Thomas Miller rather than
transferring to a new manager in a 'pre pack' following RMM's move
into administration; they are a natural fit with Thomas Miller's PI
(professional indemnity) division," Insurance Business quotes
Thomas Miller as saying.
TRITON UK MIDCO: Fitch Withdraws 'B-' LongTerm IDR
--------------------------------------------------
Fitch Ratings has withdrawn the 'B-' Long-Term Issuer Default
Rating with Negative Rating Outlook for both Triton UK Midco
Limited and Synamedia Americas Holdings Inc. In addition, Synamedia
Americas Holdings Inc.'s 'BB-'/'RR1' senior secured first lien
rating and the 'B-'/'RR4' senior secured second lien rating have
also been withdrawn. Fitch has withdrawn the ratings due to lack of
information.
Fitch has withdrawn the ratings as Triton UK Midco Limited and
Synamedia Americas Holdings Inc. has chosen to stop participating
in the Rating process. Therefore, Fitch will no longer have
sufficient information to maintain the ratings. Accordingly, Fitch
will no longer provide ratings for Triton UK Midco Limited and
Synamedia Americas Holdings Inc.
ISSUER PROFILE
Triton UK Midco Limited and Synamedia Americas Holdings Inc.
(collectively referred to as Synamedia) is the leading global video
technology provider to satellite, cable, telecom and over the top
video distribution operators.
XPO: Lack of Funding Prompts Administration
-------------------------------------------
Finextra reports that XPO, a startup that raised about US$1 million
to help creators and influencers get their invoices quickly paid,
has gone into administration.
According to Finextra, Companies House records show the
London-headquartered company appointed an administrator, Alan
Clark, last month.
It raised US$1 million in seed funding from Blue Wire Capital,
Finextra relays, citing CrunchBase.
However, the company's co-founder Lotanna Ezeike tells Finextra
that it went into administration after running out of funding and
was unable to raise another round.
The firm's first product was designed to help users get paid within
24 hours, removing the burden of having to chase invoices, Finextra
discloses.
===============
X X X X X X X X
===============
UZBEKHYDROENERGO: Fitch Affirms BB- LongTerm IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Uzbekistan-based hydro power generation
monopoly Uzbekhydroenergo JSC's (UGE) Long-Term Issuer Default
Rating (IDR) at 'BB-' with a Stable Outlook.
The affirmation reflects the state's guarantee for 100% of UGE's
debt and our expectations that the majority of new loans to be
attracted for funding the expansionary and modernisation projects
will continue being backed by state guarantees. We equalise UGE's
rating with that of sovereign, as the guarantee acts as an
overriding single factor under Fitch's Government-Related Entities
Rating Criteria (GRE). State-guaranteed debt falling below 75% of
UGE's total debt would lead to a rating differential with the
sovereign rating of one notch.
Without the overriding factor, Fitch would rate UGE using a
top-down minus one notch approach from Uzbekistan's rating
(BB-/Stable) under the GRE criteria. This reflects our assessment
of links with the state and the company's 'b' Standalone Credit
Profile (SCP).
KEY RATING DRIVERS
State-Guarantees Drive Rating Equalisation: UGE plans to continue
financing its intensive capex of around USD1.5 billion (UZS17
trillion) over 2020-2026 with loans from international financial
institutions and development banks in China and Russia. The
government will continue to provide guarantees for UGE's hydro
power plants (HPPs) construction and modernisation, including the
largest Pskemskaya HPP with installed capacity of 400MW, to be
commissioned in 2026. Overall, we expect the share of
state-guaranteed debt to remain above 75% over 2022-2025,
justifying the rating equalisation.
Strong Links with State: UGE is 100% state-owned via Ministry of
Finance of Uzbekistan, with no short-term plans for company
privatisation. We assess status ownership and control as 'Strong',
largely due to the government's full ownership and broad control of
the company's operations, as well as UGE's inclusion in the list of
strategically important enterprises. We assess the support track
record as 'Very Strong', due to the 100% debt guarantee from the
state, generally favourable tariff framework, tax exemption until
2022 and relaxed dividend requirements.
'Moderate' Incentive to Support: We view the socio-political impact
of a UGE default as 'Moderate', as UGE's market share in Uzbekistan
is limited to 10%, services may be substituted with only temporary
disruption, and its development projects can be delayed. The
financial implications of a default are also 'Moderate' because it
should not have a material impact on the availability and cost of
funding for the government and other state-owned companies, given
the company's limited scale.
'b' SCP: UGE's business profile benefits from a monopoly position
in hydro electricity generation in Uzbekistan with priority in the
merit order over thermal generators and low off-take risk. However,
it is constrained by the company's limited revenue visibility, with
tariffs established one year ahead, weaker asset quality compared
with most peers, limited although increasing scale of operations
and limitations of the operating environment in Uzbekistan. UGE's
financial profile takes into account expected weakening of credit
metrics, large FX mismatch between revenue and debt and deeply
negative free cash flow.
Capex-Driven Leverage Increase: We expect UGE's large investment
programme, which assumes the increase in installed capacity to
2.4GW by 2025 and further to over 3GW by 2030 from 2GW at end-2021,
to be largely debt-funded. This will lead to a weakening of the
company's funds from operations (FFO) gross leverage to slightly
below 5x in 2025 after a temporary improvement in 2022 due to
strong hydrology and postponement of some capex projects to later
years.
Evolving Regulation: All UGE's volumes are purchased by the
guaranteed buyer of electricity in Uzbekistan, resulting in low
offtake risk. Tariffs are set on an annual basis and may be
restricted for social reasons. From 2022, UGE's tariff increased by
almost half due to its re-linkage to electricity price for
industrial customers instead of the household price previously. We
forecast UGE's tariff to grow in double digits in 2023. The
government plans to liberalise the market, but this is not part of
our rating case.
Volatile Hydrology: The company's HPPs are highly dependent on
weather conditions, which contributes to cash flow volatility.
UGE's generation volumes varied between 5-6.5 TWh over 2018-2021.
We forecast generation volumes to rise by around 20% yoy in 2022 on
improved water conditions compared with 2021.
DERIVATION SUMMARY
UGE has a slightly weaker business profile than Turkish renewable
energy producers Zorlu Yenilenebilir Enerji Anonim Sirketi
(B-/Stable) and Aydem Yenilenebilir Enerji Anonim Sirketi
(B/Negative). All three companies benefit from high EBITDA
profitability, but Turkish peers have better asset quality and
higher revenue visibility as they sell electricity under the
support mechanism, which provides fixed US dollar-denominated
feed-in tariffs for 10 years. The local operating environment is a
weakness for all three companies. ENERGO-PRO a.s. (BB-/Stable), a
utility operating in Bulgaria, Georgia and Turkey, benefits from a
stronger operating and regulatory environment than UGE, and from
integration into networks.
UGE's 'b' SCP considers expected weakening of credit metrics, large
FX mismatch between revenue and debt and deeply negative free cash
flow. Its financial profile is weaker than that of ENERGO-PRO, but
comparable with Aydem and Zorlu.
UGE is rated at the same level as JSC Uzbekneftegaz (UNG;
BB-/Stable, SCP 'b+'), a fully state-owned integrated natural gas
and liquid hydrocarbons producer. We expect UNG's share of
state-guaranteed debt to fall after the placement of Eurobonds, but
UNG has a higher 'Incentives to support' score than UGE, due to its
higher socio-political importance and much larger scale of
operations.
KEY ASSUMPTIONS
- Domestic GDP growth of 3.1% in 2022 and on average 4.5% per
year over 2023-2025
- Average USD/UZS exchange rate at 12,600 over 2022-2025
- Average electricity production volumes at around 5.8 TWh per
year over 2022-2025
- Double-digit tariff growth in 2023 and slightly below inflation
thereafter
- Capex on average USD170 million annually over 2022-2025, which
is below management's expectations
- Cost of new debt of 7.0%-7.5% in 2022-2025
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A sovereign upgrade.
- A more transparent and predictable operating and regulatory
framework (including implementation of multi-year tariffs)
together with a stronger financial profile (e.g. FFO gross
leverage sustained below 4.0x (3.9x in 2021) and FFO interest
cover above 4.5x) could be positive for the SCP.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A sovereign downgrade.
- Share of guaranteed debt falling below 75% of total debt would
lead to a single-notch differential with the sovereign rating,
assuming unchanged links and unchanged SCP.
- Operational under-performance, ambitious capex programme or
dividends resulting in deterioration in the financial profile
(e.g. FFO gross leverage exceeding 5x and FFO interest coverage
below 3.5x on a sustained basis) could be negative for the SCP.
The following rating sensitivities are for Uzbekistan (1 April
2022):
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
External Finances: Rapid weakening of external finances, for
example through a sustained widening of the current account deficit
derived from a permanent decline in remittances or increase in
trade deficit, combined with persistently low net FDI, resulting in
a significant decline in FX reserves or rapid increase in external
liabilities.
Public Finances: A marked worsening in the government debt-to-GDP
ratio or the erosion of the sovereign fiscal buffers, for example
due to an extended period of low growth or crystallisation of
contingent liabilities, that could result in the removal of the +1
notch for this factor.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Macro: Significant narrowing of Uzbekistan's GDP per capita gap vs.
peers, for example underpinned by the implementation of structural
reforms, and without creating macro-economic imbalances.
Structural: Significant improvement of governance standards
including rule of law, voice and accountability, regulatory quality
and control of corruption.
External and Public Finances: Significant strengthening of the
sovereign's fiscal and external balance sheets, for example,
through sustained high commodity export prices and windfall
revenues.
LIQUIDITY AND DEBT STRUCTURE
External Financing Key: At end-2021, UGE had cash and equivalents
of UZS54 billion (USD5 million) and available credit facilities of
USD50 million against short-term debt of UZS386 billion (USD36
million). Cash balances are mostly held in local currency with
domestic banks.
UGE's debt is represented by low-interest government-guaranteed
bank loans in US dollars and euros from national and foreign banks.
Maturities over 2022-2025 are minor. Fitch expects UGE to continue
generating negative free cash flow over 2022-2025, which the
company plans to finance with new bank borrowings. UGE has secured
financing for all of its largest capex projects.
High FX Exposure Risk: UGE is subject to foreign-currency risk as
almost 100% of its debt is foreign-currency-denominated while most
of revenue is in local currency. The company does not hedge its FX
risks. UGE plans to continue funding future capex from
foreign-currency debt.
ISSUER PROFILE
Uzbekhydroenergo JSC is a 100% state-owned company with a monopoly
position in hydro power generation in Uzbekistan. The company has
2GW installed capacity and takes around 10% market share of total
electricity production in the country.
*********
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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Information contained herein is obtained from sources believed to
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