/raid1/www/Hosts/bankrupt/TCREUR_Public/220928.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 28, 2022, Vol. 23, No. 188
Headlines
C R O A T I A
DJURO DJAKOVIC: DD Acquisitions Pays Cash Portion of Capital Hike
I R E L A N D
AIB GROUP: Fitch Affirms 'BB+' Rating on Subordinated Debt
BANK OF IRELAND: Fitch Affirms 'BB-' Rating on Subordinated Debt
K A Z A K H S T A N
FORTEBANK JSC: Fitch Corrects Sept. 14 Ratings Release
P O R T U G A L
ARES LUSITANI: Fitch Affirms 'BB+sf' Rating on Class D Notes
LUSITANO MORTGAGES 5: Fitch Affirms CC Rating on Class D Debt
R O M A N I A
TAROM: Insolvency Request Among CNAB's Options
R U S S I A
UZBEK METALLURGICAL: Fitch Assigns 'BB-' IDR, Outlook Stable
T U R K E Y
MILLI REASURANS: A.M. Best Lowers Fin. Strength Rating to C(Weak)
U K R A I N E
VF JSC: Fitch Affirms LongTerm Foreign Currency IDR at CCC'
U N I T E D K I N G D O M
ARJOWIGGINS GROUP: Sacked Workers Set to Take Legal Action
GCG SHOTBLASTING: Enters Administration, Halts Trading
MRS SMITH'S: Goes Into Liquidation
RECYCLING TECHNOLOGIES: Goes Into Administration
UAVEND INVESTMENTS: Owes Around GBP10 Million to Creditors
WORCESTER WARRIORS: Put Into Administration After RFU Suspension
- - - - -
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C R O A T I A
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DJURO DJAKOVIC: DD Acquisitions Pays Cash Portion of Capital Hike
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Annie Tsoneva at SeeNews reports that Croatian holding group Djuro
Djakovic said on Sept. 27 it has received a bank confirmation for
the payment of the cash portion of its capital increase by Czech
investor DD Acquisitions.
Djuro Djakovic said in a filing to the Zagreb bourse the payment
was carried out in line with the decision to increase the company's
capital through cash and in-kind contributions, SeeNews relates.
It did not disclose the amount of the cash payment in the filing
but the Croatian company announced in July that the Czech investor
committed to increase Djuro Djakovic's capital by
HRK232 million (US$30 million/EUR31 million) via a cash
contribution of HRK100 million and an in-kind contribution of
HRK132 million, SeeNews notes. In exchange, DD Acquisitions will
become owner of 81.83% of the capital of the Croatian company,
SeeNews states.
The capital increase is part of Djuro Djakovic's extensive
restructuring programme, which the European Comission approved in
December 2021, SeeNews disclsoes. The restructuring programme
included a debt-to-equity swap and a state guarantee on potential
future commercial claims for a total amount of EUR57.4 million,
according to SeeNews.
Earlier, the European Commission said that DD Acquisition, will
participate in the capital increase process of Djuro Djakovic with
cash and in-kind contributions of some EUR64 million, SeeNews
recounts.
The company is debt-ridden and the restructuring procedure is
necessary to avoid bankruptcy and keep jobs, Vlatko Kesegic, a
broker with Fima Vrijednosnice, told SeeNews on Sept. 27.
Djuro Djakovic has a diversified industrial portfolio including
defence, transport, industry and energy. The core business of the
company is the manufacturing of freight wagons for special
purposes. Djuro Djakovic, which has more than 700 employees, is
located in the eastern part of continental Croatia, in an area with
high unemployment and low job creation.
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I R E L A N D
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AIB GROUP: Fitch Affirms 'BB+' Rating on Subordinated Debt
----------------------------------------------------------
Fitch Ratings has affirmed AIB Group plc's (AIBG) Long-Term Issuer
Default Rating (IDR) at 'BBB' and Viability Rating (VR) at 'bbb'.
Fitch has also affirmed the group's operating companies Allied
Irish Banks, plc's (AIB) and AIB Group (UK) p.l.c.'s (AIBUK)
Long-Term IDRs at 'BBB+'. The Outlooks on the Long-Term IDRs are
Stable.
Fitch has withdrawn AIBG and AIB's Support Ratings of '5' and
Support Rating Floors of 'No Floor' as they are no longer relevant
to the agency's coverage following the publication of its updated
Bank Rating Criteria in November 2021. AIBUK's Support Rating of
'2' has also been withdrawn. In line with the updated criteria,
Fitch has assigned Government Support Ratings (GSR) of 'no support'
(ns) to AIBG and AIB, and a Shareholder Support Rating (SSR) of
'bbb+' to AIBUK.
KEY RATING DRIVERS
Satisfactory Credit Profile: AIBG's ratings reflect its leading
domestic franchise in core lending and deposits in Ireland, which
underpins its stable funding and liquidity, adequate capital
buffers, and moderate risk profile. Profitability is variable and
concentrated on the small, open and cyclical Irish economy. Asset
quality has steadily improved and we expect further modest
improvement in the near term, but it remains a rating weakness.
Leading Franchise: AIBG has a dominant position in the Irish
banking sector with more than 30% market share of loans and
deposits. Its strong brand and deposit franchise underpin its low
cost of funding through the cycle. The bank is strengthening
business diversification by expanding wealth management and
insurance businesses through acquisitions or joint ventures, which
should help reduce the bank's reliance on net interest income.
Above-Average but Improving Impaired Loans: AIBG's gross Stage 3
ratio fell to 3.8% at end-1H22 (end-2021: 4.9%; end-1H22 peer
average: 3.1%), mostly due to the sale of a portfolio of legacy
non-performing exposures, which have now largely been resolved. We
expect further modest improvement in the ratio in the near-term to
be driven by higher loan growth, primarily due to acquisitions, and
curing (mostly Covid-19-affected loans), which we expect to offset
increased inflows of impaired loans from borrowers vulnerable to
the energy crisis.
Average Profitability: Fitch said, "We expect AIBG's profitability
to continue to benefit from high margins resulting from the group's
leading market position and pricing power in the highly
concentrated Irish banking sector, where pricing discipline is
strong. Acquisitions and new ventures undertaken since 2021 should
strengthen net interest and commission income and help diversify
revenue from 2023 but the denominator effect will drag on its
operating profit/risk-weighted assets ratio (RWA; end-1H22: 2.4%)
in the near term."
Satisfactory Capital Buffers: Fitch expects AIBG to maintain
satisfactory capital buffers above minimum regulatory requirements,
given its targeted minimum fully-loaded common equity Tier 1 (CET1)
ratio of 13.5% (end-1H22: 15.3%). Encumbrance by unreserved
impaired loans has improved following de-risking and stronger loan
loss allowances and fell to 9% by end-1H22 (end-2021: 10%).
Stable Funding and Liquidity: AIBG's funding profile is supported
by ample and stable retail deposits, which fund a significant
portion of assets, and by an established and sufficiently
diversified wholesale-funding franchise. Customer deposits have
been growing strongly in Ireland since 2020 and look set to
continue in the short term. Liquidity is sound, supported by a
large stock of liquid assets, including sizeable cash deposited at
the central bank, and access to central bank facilities.
Holdco VR Equalised with Opco: Fitch assesses the group on a
consolidated basis. AIBG acts as the holding company of the Allied
Irish Banks group. AIBG's VR is aligned with the VR of its largest
wholly-owned operating subsidiary, AIB, to reflect the absence of
material double leverage at the holding company, prudent liquidity
management, and the fungibility of capital and liquidity across the
group, subject to its operating companies fulfilling their
regulatory requirements.
Debt Buffers Drive IDR Uplift: AIB's Long-Term IDR is notched up
once from the bank's VR to reflect additional protection to
external senior creditors afforded by the internal minimum
requirements for own funds and eligible liabilities (MREL) debt
buffers. These buffers (about 12% of AIB's RWA at end-1H22) are
underpinned by the group's strategy to fulfil MREL exclusively with
senior non-preferred and more junior debt. Under the group's
single-point-of-entry resolution strategy, senior debt issued at
the holding level is down-streamed to AIB as senior non-preferred
debt and statutorily subordinated to external senior creditors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Pressure on Asset Quality, Capitalisation: Fitch believes a
downgrade of the VRs is unlikely in the near term given our view of
satisfactory financial buffers at the current rating. However, a
downgrade could be triggered by a more severe and prolonged
deterioration of the operating environment for banks in Ireland
than in our base case, which causes the group's impaired loan ratio
to increase and be sustained above 4%, and the group's CET1 ratio
to fall below 13%, following losses, or if RWAs increase without
prospects for sufficient internal capital generation.
Rising Holdco Double Leverage: AIBG's VR would also be downgraded
if the holding company's double leverage durably increases to above
120%, which we do not expect.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Business Profile, Earnings, Capital: An upgrade could result from a
stronger operating environment, signalled in an upward revision of
our operating environment assessment score, if accompanied by
better assessments of the group's business and financial profiles.
The former would require Irish banks to successfully weather the
near-term macroeconomic challenges caused by the war in Ukraine
with their financial profiles intact.
In the absence of a stronger operating environment, an upgrade
would require stronger profitability and capitalisation. This could
stem from increased revenue diversification that reduces earnings
variability, helping the group to generate an operating profit/RWAs
ratio of above 3%, and sustaining a CET1 ratio above 17%. However,
we believe the latter is unlikely to happen in view of the group's
current capital target under its medium-term plan.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Group Senior Debt Aligned with IDR: AIBG's Long-Term IDR and
long-term senior debt ratings are aligned with the group's VR.
AIBG's Short-Term IDR and short-term senior debt ratings are the
higher of two options corresponding to the group's Long-Term IDR
and long-term senior debt ratings of 'BBB'. AIB's Short-Term IDR
and short-term senior debt ratings are the lower of two options
corresponding to the bank's Long-Term IDR and long-term senior debt
ratings of 'BBB+'. This is based on our assessment of the group's
funding and liquidity, which at 'bbb+', warrants 'F2' short-term
ratings.
Opco DCR, Senior Debt Aligned with IDRs: AIB's DCR is aligned with
the bank's Long-Term IDR because under Irish legislation,
derivative counterparties have no preferential status over other
senior obligations in a resolution. The senior unsecured notes are
rated in line with the bank's IDR.
Junior Debt Notched Down from VR: AIBG's subordinated Tier 2 debt
rating is notched down twice from the VR. This reflects the notes'
poor recovery prospects arising from their subordinated status in a
resolution. Fitch does not notch for non-performance risk because
the terms of the notes does not provide for loss absorption on a
going-concern basis.
AIB's legacy subordinated notes are rated 'C' to reflect their
non-performance. The notes have sustained economic losses, the
issuer has not been paying the discretionary coupons for at least
10 years, and Fitch does not expect the notes to become performing
again before they mature.
No Sovereign Support Assumed: AIBG's and AIB's GSR of 'ns' reflect
Fitch's view that senior creditors cannot rely on extraordinary
support from the Irish authorities in the event that the group
becomes non-viable. In Fitch’s opinion, the EU's Bank Recovery
and Resolution Directive and Single Resolution Mechanism provide a
framework that is likely to require senior creditors to participate
in losses for resolving the bank.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Sensitive to VRs: AIB's and AIBG's IDRs, senior debt ratings and
DCR are sensitive to changes in the VRs, or if Fitch no longer
estimate that the resolution debt buffer provides AIB's senior
creditors and derivative counterparties with additional
protection.
The ratings of all subordinated instruments are primarily sensitive
to changes in the VRs, or to changes in their notching if Fitch
revises its assessment of loss severity or relative non-performance
risk
Short-Term IDR Sensitive to Funding and Liquidity: AIBG's
Short-Term IDR and short-term senior debt rating are also sensitive
to a negative reassessment of the group's funding and liquidity.
An upgrade of the GSRs would be contingent on a positive change in
the sovereign's propensity to support its banks. While not
impossible, this is highly unlikely, in Fitch's view.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
High Likelihood of Support: The IDRs of AIB's fully-owned UK
subsidiary, AIBUK, are equalised with AIB's. Our support assessment
and AIBUK's 'bbb+' SSR are primarily based on the high level of
integration of the UK subsidiary into the parent, high fungibility
of capital and funding, as well as a record of unquestioned support
from the parent. In addition, resolution funds raised by AIBG have
been down-streamed to AIBUK through AIB to meet resolution
requirements in the past, thereby protecting AIBUK's external
senior creditors in a resolution. Fitch expects intra-group
resources to be prepositioned at AIBUK to meet resolution
requirements, if required.
AIBUK represented around 13% of the group's gross loans at end-1H22
and is closely integrated within the group and relies on the
group's systems and processes. Therefore, Fitch does not assign
AIBUK a VR as Fitch believes it cannot be assessed meaningfully on
a standalone basis.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
Sensitive to AIB's Rating Changes: AIBUK's IDRs are sensitive to
the same factors as AIB's IDRs. Fitch said, “We could also
downgrade AIBUK's IDRs and SSR if the subsidiary's strategic
importance diminishes, resulting in weaker integration within the
group and a reduction in support propensity, in our view. For
example, this could be signalled by group resources no longer being
made available to fulfil the subsidiary's internal MREL and thus
reducing the protection of third-party senior creditors. However,
we believe this prospect is unlikely.”
VR ADJUSTMENTS
The Operating Environment score of 'bbb+' has been assigned below
the 'aa' category implied score due to the following adjustment
reasons: Size and Structure of Economy (negative), Reported and
Future Metrics (negative), Level and Growth of Credit (negative)
The Asset Quality score of 'bbb-' has been assigned above the 'bb'
implied score due to the following adjustment reason: Historical
and Future Metrics (positive)
The Earnings & Profitability score of 'bbb' has been assigned above
the 'bb' implied score due to the following adjustment reason:
Historical and Future Metrics (positive)
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
AIBUK's ratings are directly linked to AIB's.
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.
Debt Rating Prior
---- ------ -----
Allied Irish Banks, plc
LT IDR BBB+ Affirmed BBB+
ST IDR F2 Affirmed F2
Viability bbb Affirmed bbb
Support WD Withdrawn 5
Support Floor WD Withdrawn NF
DCR BBB+(dcr) Affirmed BBB+(dcr)
Gov't. Support ns New Rating
Subordinated LT C Affirmed C
senior unsecured LT BBB+ Affirmed BBB+
senior unsecured ST F2 Affirmed F2
AIB Group (UK) p.l.c.
LT IDR BBB+ Affirmed BBB+
ST IDR F2 Affirmed F2
Support WD Withdrawn 2
Shareholder
Support bbb+ New Rating
AIB Group plc
LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
Viability bbb Affirmed bbb
Support WD Withdrawn 5
Support Floor WD Withdrawn NF
Gov't. Support ns New Rating
senior unsecured LT BBB Affirmed BBB
Subordinated LT BB+ Affirmed BB+
senior unsecured ST F2 Affirmed F2
BANK OF IRELAND: Fitch Affirms 'BB-' Rating on Subordinated Debt
----------------------------------------------------------------
Fitch Ratings has affirmed Bank of Ireland Group plc's (BOIG)
Long-Term Issuer Default Ratings (IDRs) at 'BBB' and its main
operating subsidiary, Bank of Ireland's (BOI) Long-Term IDRs at
'BBB+'. The Outlooks are Stable. Their Viability Ratings (VRs) have
been affirmed at 'bbb'.
Fitch has withdrawn BOIG's and BOI's Support Ratings (SR) of '5'
and Support Rating Floors (SRF) of 'No Floor' as they are no longer
relevant to the agency's coverage following the publication of its
updated Bank Rating Criteria on November 12, 2021. In line with the
updated criteria, Fitch has assigned BOIG and BOI Government
Support Ratings (GSR) of 'no support (ns)'.
KEY RATING DRIVERS
Leading Domestic Bank; Diversified Business: BOIG's ratings are
driven by the group's reasonably diversified business model; a
leading retail and corporate-banking franchise primarily focused on
the small and concentrated Irish market; sound regulatory
capitalisation; and a stable funding and liquidity profile. The
ratings also consider the group's asset quality, which is weaker
than that of international peers, still influenced to some extent
by impaired loans underwritten before the global financial crisis.
Above-Average, but Stable, Impaired Loans: BOIG has been reducing
its stock of impaired loans (Stage 3) in recent years through
workouts and portfolio sales. Its impaired loans ratio stayed flat
at 5.3% at end-1H22 from end-2021, while the Stage 2 loans ratio
decreased to 13.4% from 15.8%, mainly due to declines in
pandemic-driven management adjustments. Fitch expects the impaired
loans ratio to decline in 2022 from impaired loans disposals and
then remain stable from new inflows, despite planned impaired loan
disposals and loan acquisitions.
Prospects of Increasing Earnings Diversification: BOIG's
profitability is supported by its reasonably diversified business
model and a leading market position in Ireland, which will benefit
from the acquisitions of Davy's stockbrokers and KBC Ireland's
performing loans and deposits. The acquisition of Davy's
stockbrokers will support diversification towards non-interest
revenue, which is already a strength relative to domestic peers,
due to BOIG's larger wealth management and insurance activities.
Adequate Capitalisation: The group's regulatory capital and
leverage ratios are sound. Its transitional common equity Tier 1
(CET1) ratio of 16.0% at end-1H22 (15.5% fully-loaded) was well
above the 2022 minimum regulatory requirements of 10.07% (excluding
Pillar 2 Guidance). BOIG's end-2021 leverage ratio of 6.6% was
comfortable. Capital encumbrance by unreserved impaired loans, at
28% of CET1 capital at end-2021, remains fairly high compared with
peers.
Stable Funding, Rating Strength: The group benefits from a strong
retail-banking franchise and access to a stable and granular
deposit base, particularly in its home market. Non-interest-bearing
current account balances make up a large proportion of total
customer deposits. In addition, the group has proven and
diversified access to the wholesale markets, which it regularly
taps principally for minimum requirement for own funds and eligible
liabilities (MREL) purposes, given abundant customer deposits.
Liquidity is sound and largely in the form of cash and cash
equivalents and high-quality liquid assets, supported by contingent
access to liquidity through various central bank facilities.
Holdco VR Equalised with Opco: Fitch assesses BOIG (the group's
holding company) on a consolidated basis. Its VR is aligned with
that of its main operating subsidiary, BOI, which is also based in
Ireland, to reflect the absence of material double leverage at the
holding company, prudent liquidity management with contingency
plans in place, and the fungibility of capital and liquidity across
the group, subject to its operating companies fulfilling their
regulatory requirements.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Deteriorating Operating Environment, Asset Quality: The ratings
would likely be downgraded if a deterioration of economic
performance and the operating environment for banks in Ireland and
the UK increases the group's impaired loans ratio towards 10%, and
BOIG is unable to reduce its stock of impaired loans fairly
quickly, or if capital encumbrance by impaired loans increases
significantly without prospects of recovering within a reasonable
timeframe. This is not Fitch's baseline scenario.
The ratings would also be downgraded if the group's fully loaded
CET1 ratio fell below 13%, following losses or risk-weighted assets
(RWA) increased without prospects of sufficient internal capital
generation.
BOIG's VR would also be downgraded if the holding company's double
leverage durably increases to above 120%, which we do not expect.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improved Asset Quality and Profitability: An upgrade would require
the group to generate operating profit/RWAs sustainably above 2%,
reduce impaired loans to about 3% of gross loans, and significantly
reduce capital encumbrance.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
BOIG's Long-Term IDR and long-term senior debt rating are in line
with the group's VR.
BOI's Long-Term IDR, DCR and long-term senior debt rating are one
notch above the bank's VR to reflect the protection of BOI's senior
third-party creditors by resolution funds ultimately raised by
BOIG, down-streamed to BOI and designed to protect the operating
company's external senior creditors in a group failure. The buffers
of junior and down-streamed holding-company senior debt are built
to comply with MREL.
BOIG's Short-Term IDR and short-term senior debt ratings are the
higher of two options corresponding to the group's 'BBB' Long-Term
IDR and long-term senior debt ratings. BOI's Short-Term IDR and
short-term senior debt ratings are the lower of two options
corresponding to the bank's Long-Term IDR and long-term senior debt
ratings of 'BBB+'. This is based on Fitch's assessment of the
group's funding and liquidity, which at 'bbb+' warrants 'F2'
short-term ratings.
BOI's DCR is aligned with the bank's Long-Term IDR because under
Irish legislation, derivative counterparties have no preferential
status over other senior obligations in a resolution.
Subordinated Debt: The rating of BOIG's and BOI's subordinated Tier
2 debt is notched down twice from the respective VRs. This reflects
the notes' poor recovery prospects arising from their subordinated
status in a resolution. Fitch does not notch for non-performance
risk because the terms of the notes do not provide for loss
absorption on a going-concern basis.
Additional Tier 1 Instruments: BOIG's additional Tier 1 notes are
rated four notches below the group's VR. This reflects poor
recovery prospects arising from their subordinated status (two
notches) as well as incremental non-performance risk relative to
the VR (two notches), given fully discretionary coupon payments and
mandatory coupon restriction features.
No Government Support Expected: BOIG's and BOI's GSRs of 'ns'
reflect Fitch's view that senior creditors cannot rely on
extraordinary support from the Irish authorities in the event that
the bank becomes non-viable. In our opinion, the EU's Bank Recovery
and Resolution Directive and the Single Resolution Mechanism
provide a framework that is likely to require senior creditors to
participate in losses for resolving the bank.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The IDRs, senior debt ratings and DCR of BOI and BOIG would be
upgraded if their respective VRs were upgraded and if the
resolution buffer continues to provide BOI's senior creditors and
derivative counterparties with additional protection.
BOI's and BOIG's IDRs, senior debt ratings and DCR could be
downgraded if the VRs were downgraded, or if we no longer estimate
that the resolution debt buffer provides BOI's senior creditors and
derivative counterparties with additional protection.
BOIG's Short-Term IDR and short-term senior debt rating are also
sensitive to a negative reassessment of the group's funding and
liquidity.
The ratings of all subordinated instruments are primarily sensitive
to a change in the VRs, or to changes in their notching should
Fitch change its assessment of loss severity or relative
non-performance risk.
Changes in Ability or Propensity to Support: An upgrade of the GSR
would be contingent on a positive change in the Irish authorities'
propensity to support its banks. While not impossible, this is
highly unlikely, in Fitch's view.
VR ADJUSTMENTS
The 'a-' operating environment score has been assigned below the
'aa' implied score due to the following adjustment reasons: Size
and Structure of Economy (negative) and Level and Growth of Credit
(negative), Reported and Future Metrics (negative). The operating
environment score is one notch higher than that applied to
overwhelmingly domestic banks to reflect BOIG's international
diversification in the UK.
The 'bbb' capitalisation & Leverage score has been assigned below
the 'a' implied score due to the following adjustment reason:
Reserve Coverage and Asset Valuation (negative).
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.
Debt Rating Prior
---- ------ -----
Bank of Ireland
Group plc LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
Viability bbb Affirmed bbb
Support WD Withdrawn 5
Support Floor WD Withdrawn NF
Gov't. Support ns New Rating
Subordinated LT BB+ Affirmed BB+
senior unsecured LT BBB Affirmed BBB
Subordinated LT BB- Affirmed BB-
Bank of Ireland
LT IDR BBB+ Affirmed BBB+
ST IDR F2 Affirmed F2
Viability bbb Affirmed bbb
Support WD Withdrawn 5
Support Floor WD Withdrawn NF
DCR BBB+(dcr) Affirmed BBB+(dcr)
Gov't. Support ns New Rating
Subordinated LT BB+ Affirmed BB+
senior unsecured LT BBB+ Affirmed BBB+
senior unsecured ST F2 Affirmed F2
===================
K A Z A K H S T A N
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FORTEBANK JSC: Fitch Corrects Sept. 14 Ratings Release
------------------------------------------------------
Fitch Ratings replaces a rating action commentary on ForteBank JSC
published on September 14, 2022 to correct the Long-Term
Local-Currency IDR and senior unsecured debt ratings in the rating
table.
The amended ratings release is as follows:
Fitch Ratings has upgraded ForteBank Joint Stock Company's (Forte)
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs)
to 'BB-' from 'B+'. The Outlooks are Stable. Fitch has also
upgraded the bank's Viability Rating (VR) to 'bb-' from 'b+'.
Fitch has withdrawn Forte's Support Rating of '5' and Support
Rating Floor of 'B-' as they are no longer relevant to the agency's
coverage following the publication of its updated Bank Rating
Criteria on November 12, 2021. In line with the updated Criteria,
Fitch has assigned Forte a Government Support Rating (GSR) of
'b-'.
KEY RATING DRIVERS
IDRs and VR Upgraded: Forte's IDRs are driven by the bank's
intrinsic credit strength, as reflected by the VR of 'bb-'. The
upgrade of the ratings reflects a material reduction in legacy
asset-quality risks in 2021-1H22, which has eased pressure on the
bank's capital. It also reflects Forte's extended record of robust
profitability through the cycle, which has boosted its
capitalisation, as well as the bank's strong funding and liquidity
profile.
External Shocks Manageable: Given Kazakhstan's strong trade and
financial links with Russia, the ongoing Russia-Ukraine conflict
and sanctions imposed on Russia by the US and EU have negatively
affected Kazakhstan's economy and financial sector.
Potential disruption in Kazakhstan's energy exports, a moderate 10%
devaluation of its local currency, higher inflation and steeper
interest rates pose downside risks to the banking sector's
prospects. Fitch has revised down Kazakhstan's GDP growth forecast
to 3.6% for 2022 from 4%. However, the banking sector is resilient
to external shocks, in Fitch's view, due to robust profitability
and high capital/liquidity buffers.
Legacy Problems Materially Reduced: Impaired loans (Stage 3 and
purchased or originated credit-impaired (POCI) loans under IFRS9)
halved over the last year to 13% of gross loans at end-2021. This
reduction was mainly driven by substantial write-offs and sales of
legacy impaired mortgage and home equity loans as well as migration
of some corporate exposures to Stage 2 from Stage 3. Rapid loan
growth in 1H22 helped to further decrease the impaired loans ratio
to 10% and Fitch expects it to remain around the same level in the
medium term.
Forte's overall asset quality is supported by a limited share of
net loans in total assets (just 39% of total assets at end-1H22).
Non-loan assets mainly comprised the security book (37% of total
assets, predominantly of investment-grade quality) and cash and
balances with the National Bank of Kazakhstan (NBK) and other banks
(another 17%).
Growth Resumed: After four years of low growth (4% on average),
Forte's loan book expanded 26% in 1H22 (not annualised). This
growth was mainly driven by refinancing of loans from Kazakh
subsidiaries of sanctioned Russian banks. Fitch expects this spike
in lending to be temporary and to moderate to 10%-15% within the
next year. Forte's loan book is balanced between corporate and
retail lending, with an increased focus on higher-margin unsecured
cash loans, which should support the bank's profitability in the
medium term, in Fitch's view.
Robust Performance: Forte has demonstrated strong performance over
the cycle, with operating profit averaging 5% of risk-weighted
assets (RWAs) in the last four years. The bank has maintained
stable net interest margin of around 5% in recent years which,
coupled with high operating efficiency (the cost-to-income ratio
was 36% in 1H22), resulted in robust pre-impairment profit equal to
13% of average gross loans in 1H22 (annualised), up from 9% in
2021. This was comfortably above the loan impairment charges (2% of
average loans in 1H22) providing the bank with strong loss
absorption capacity through profit and a high return on average
equity (33% in 1H22, annualised).
High Capital Ratios, Reduced Encumbrance: Due to strong profit
generation, Forte's Fitch Core Capital (FCC) stood at a high 24% of
RWAs at end-2021. It reduced to 18% by end-1H22 as high loan growth
inflated the bank's RWAs. Fitch forecasts the FCC ratio to return
to above 20% in 2023 on high profitability and the bank's decision
not to pay out dividends in 2022 as well as expected moderation of
loan growth in 2H22.
Given recent write-offs of impaired loans, pressure on capital from
legacy asset-quality problems has materially subsided, with net
high-risk assets reducing to 0.3x of FCC at end-1H22 from 0.7x at
end-2020.
Customer Funding; Ample Liquidity: Customer accounts are by far the
main source of funding, accounting for a high 78% of total
liabilities at end-1H22, complemented by state-related funding
(another 11%). Wholesale debt is low (6% of total liabilities) and
mainly comprises short-term repo obligations.
Forte benefits from a large cushion of highly-liquid assets (mainly
balances with the NBK and investment-grade securities), which made
up a high 50% of total assets and, net of planned repayments in the
next 12 months, covered almost 70% of customer deposits at
end-1H22.
Top-5 Bank, Privately-Owned: Forte is currently the fifth-largest
bank in Kazakhstan, accounting for 7% of sector assets and deposits
at end-1H22. The bank's franchise in lending is narrower (5% of the
system at end-1H22) than peers' although it services a number of
large export-oriented Kazakh corporates. It is owned by Bulat
Utemuratov, one of the richest businessmen in Kazakhstan, who also
has assets in natural resources, real estate, telecom, and media.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Forte's VR and IDRs could be downgraded on material weakening asset
quality or capitalisation. In particular, renewed asset-quality
pressure, leading the net high-risk assets to exceed 0.5x of FCC
could result in a downgrade.
In addition, downside rating pressure may result from a combination
of weaker profitability, faster loan growth and large dividend
distributions reducing the FCC ratio to 12%, which is a threshold
for the 'b' implied category capital score under our criteria.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of Forte's ratings would require further material
reduction in net problem assets relative to capital, coupled with
some moderation of loan growth, and an extended record of strong
profitability, and large capital/liquidity buffers.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Forte's senior unsecured debt ratings are in line with the bank's
Long-Term IDRs, reflecting average recovery prospects in case of
default.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Changes to Forte's IDRs will be reflected in its debt ratings.
VR ADJUSTMENTS
No adjustments are needed to the implied VR scores.
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.
Debt Rating
---- ------
ForteBank Joint
Stock Company
LT IDR BB- Upgrade
ST IDR B Affirmed
LC LT IDR BB- Upgrade
Natl LT A-(kaz) Upgrade
Viability bb- Upgrade
Support WD Withdrawn
Support Floor WD Withdrawn
Gov't. Support b- New Rating
senior unsecured LT BB- Upgrade
senior unsecured Natl LT A-(kaz) Upgrade
===============
P O R T U G A L
===============
ARES LUSITANI: Fitch Affirms 'BB+sf' Rating on Class D Notes
------------------------------------------------------------
Fitch Ratings has affirmed Ares Lusitani - STC, S.A./Pelican
Finance No.2 class A to D notes.
Debt Rating Prior
---- ------ -----
Ares Lusitani - STC, S.A. /
Pelican Finance No. 2
A PTLSNTOM0007 LT AA-sf Affirmed AA-sf
B PTLSNUOM0004 LT Asf Affirmed Asf
C PTLSNVOM0003 LT BBB+sf Affirmed BBB+sf
D PTLSNWOM0002 LT BB+sf Affirmed BB+sf
TRANSACTION SUMMARY
The transaction is a static securitisation of unsecured consumer
and auto loans originated in Portugal by Caixa Economica Montepio
Geral, Caixa economica bancaria, S.A. (BM; B-/Positive/B) and
Montepio Credito (MC, part of the BM group). This is the second
Fitch-rated securitisation of consumer and auto loans with BM and
MC as joint originators.
KEY RATING DRIVERS
Stable Performance Expectation: The rating actions reflect Fitch's
expectations of stable asset performance of the securitised
portfolio. This is driven by a low share of loans in arrears over
30 days (around 0.5% of the current portfolio balance as at the
latest reporting period), and a low share of cumulative defaults
(less than 0.3% of the initial portfolio balance).
Asset Assumptions Maintained: The securitised portfolio was
originated by MC (currently 59.9% of portfolio balance) and BM
(40.1%). MC's sub-pool only includes passenger car loans, and BM's
sub-pool is largely composed of unsecured consumer loans.
Fitch calibrated separate asset assumptions for each originator,
reflecting different performance expectations. Fitch has maintained
base-case remaining life default rates of 6% and 7%, respectively.
This results in a weighted average (WA) remaining life base-case
default rate of 6.4% for the portfolio, which combined with a 4.3x
'AA' default multiple results in a 'AA' default rate of 27.4% for
the portfolio. The lifetime base case, considering amortisation and
prior defaults, is 5.5%.
Base-case recovery rates are 55% for MC and 35% for BM, with a 50%
'AA' haircut for all asset sub-pools. This results in a WA recovery
rate of 23.4% for a 'AAsf' rating.
Pro Rata Amortisation: The class A to E notes will be repaid pro
rata unless a sequential amortisation event occurs, including
cumulative defaults on the portfolio in excess of certain
thresholds or a principal deficiency recorded on the class E
notes.
Under its base case, Fitch views the switch to sequential
amortisation as unlikely during the first few years after closing,
given portfolio performance expectations compared with defined
triggers. The tail risk posed by the pro-rata paydown is mitigated
by a mandatory switch to sequential amortisation when the portfolio
balance falls below 10% of its initial balance.
Servicing Disruption Risk Mitigated: Fitch said, "We view servicing
disruption risk as mitigated by liquidity provided in the form of a
cash reserve equal to 1% of the class A to D notes' outstanding
balance, which would cover senior costs and interest on these notes
for more than three months, a period we view as sufficient to
implement alternative arrangements and maintain payment continuity
on the notes. Moreover, the transaction benefits from a "warm"
back-up servicing agreement with HG PT S.A. available from the
closing date."
Interest-Rate Risk Broadly Mitigated: The transaction benefits from
an interest-rate cap agreement that hedges the interest-rate
mismatch arising from 60.7% of the portfolio balance paying a fixed
interest rate and the floating-rate notes. The interest-rate cap is
based on a predefined scheduled notional amount that covers the
fixed-rate share of the portfolio and has a strike rate of 3%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- For the class A notes, a downgrade of Portugal's Long-Term
Issuer Default Rating (IDR) that could lower the maximum
achievable rating for Portuguese structured-finance
transactions
- Long-term asset performance deterioration such as increased
delinquencies or reduced portfolio yield, which could be driven
by adverse changes in portfolio characteristics, macroeconomic
conditions, business practices or the legislative landscape
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- For the class A to D notes, credit enhancement ratios increase
as the transaction deleverages to fully compensate the credit
losses and cash flow stresses commensurate with higher rating
scenarios
- Upgrade to the Portuguese sovereign IDR could increase the
maximum achievable structured-finance ratings for the notes.
The class A notes can only be upgraded up to 'AAsf', six
notches above the Portuguese sovereign IDR
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
Prior to the transaction closing, Fitch reviewed the results of a
third-party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
Prior to the transaction closing, Fitch conducted a review of a
small targeted sample of the originator's origination files and
found the information contained in the reviewed files to be
adequately consistent with the originator's policies and practices
and the other information provided to the agency about the asset
portfolio.
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
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.
LUSITANO MORTGAGES 5: Fitch Affirms CC Rating on Class D Debt
-------------------------------------------------------------
Fitch Ratings has upgraded seven tranches of three Lusitano RMBS
transactions and affirmed the others. The Outlook on the class B
notes of Lusitano 6 is Positive.
Debt Rating Prior
---- ------ -----
Lusitano Mortgages No.5 plc
Class A XS0268642161 LT A+sf Upgrade Asf
Class B XS0268642831 LT BBB+sf Upgrade BBB-sf
Class C XS0268643649 LT B+sf Upgrade Bsf
Class D XS0268644886 LT CCsf Affirmed CCsf
Lusitano Mortgages No.6 Limited
Class A XS0312981649 LT AAsf Affirmed AAsf
Class B XS0312982290 LT AAsf Upgrade Asf
Class C XS0312982530 LT BB+sf Upgrade BB-sf
Class D XS0312982704 LT CCCsf Affirmed CCCsf
Class E XS0312983009 LT CCsf Affirmed CCsf
Lusitano Mortgages No.4 Plc
Class A XS0230694233 LT AA-sf Upgrade A+sf
Class B XS0230694589 LT A-sf Upgrade BBB+sf
Class C XS0230695552 LT BB+sf Affirmed BB+sf
Class D XS0230696360 LT CCCsf Affirmed CCCsf
TRANSACTION SUMMARY
The static Portuguese RMBS transactions comprise residential
mortgages originated and serviced by Novo Banco, S.A.
KEY RATING DRIVERS
Solid Credit Enhancement: The upgrades reflect Fitch's view that
the notes are sufficiently protected by credit enhancement (CE) to
absorb the projected losses commensurate with the current rating
scenarios. Structural CE is expected to increase in the short to
medium term for Lusitano 6, given the prevailing sequential
amortisation, while Fitch expects CE protection to remain stable
for Lusitano 4 and 5, considering the pro-rata amortisation of the
notes.
Performance Outlook: Over the past 12 months, the transactions'
asset performance has been stable, despite the conclusion of
pandemic-related payment holidays, which these transactions had a
higher than market average take up. Loans in arrears by more than
90 days remain broadly stable (ranging between 0.2% and 0.3% of the
current portfolio balance as of the latest reporting dates), and
the cumulative default rate ranges between 7.2% and 11.7% for the
transactions, which is higher than the market average but has
stabilised over the last four years.
Payment Interruption risk Mitigated: Fitch considers payment
interruption risk mitigated in the event of a servicer disruption.
Fitch deems the available liquidity mitigants as sufficient to
cover stressed senior fees, net swap payments and senior note
interest due amounts while an alternative servicer arrangement was
implemented. Other mitigants include the sweep of cash collections
from the servicer into the SPV account bank every two days, and
that principal collections on the portfolio can be used to cover
any interest shortfalls under certain circumstances.
The reserve fund balances were previously volatile but have since
recovered and been at target balance since September 2017 for
Lusitano 4 and January 2021 for Lusitano 5. The cash reserve is
below target (17.3%) for Lusitano 6, but it is the only transaction
that has a liquidity reserve.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
For Lusitano 6's class A and B notes, a downgrade of Portugal's
Long-Term Issuer Default Rating (IDR) that could decrease the
maximum achievable rating for Portuguese structured finance
transactions. This is because these notes are rated at the maximum
achievable rating, six notches above the sovereign IDR.
Long-term asset performance deterioration such as increased
delinquencies or larger defaults, which could be driven by changes
to macroeconomic conditions, interest-rate increases or borrower
behaviour.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Lusitano 6's class A and B notes are rated at the highest level on
Fitch's scale and cannot be upgraded. An upgrade of Portugal's
Long-Term Issuer Default Rating (IDR) could increase the maximum
achievable rating for Portuguese structured finance transactions,
which could lead to upgrades of these notes, provided that CE is
commensurate with higher rating stresses.
Increased CE as the transactions deleverage to fully compensate for
the credit losses and cash flow stresses that are commensurate with
higher rating scenarios.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Lusitano Mortgages No.4 Plc, Lusitano Mortgages No.5 plc, Lusitano
Mortgages No.6 Limited
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. 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 pools ahead of the transaction's Lusitano
Mortgages No.4 Plc, Lusitano Mortgages No.5 plc, Lusitano Mortgages
No.6 Limited initial closing. The subsequent performance of the
transactions 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
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.
=============
R O M A N I A
=============
TAROM: Insolvency Request Among CNAB's Options
----------------------------------------------
Andrei Chirileasa at Romania Insider reports that Bucharest
Airports Company (CNAB), the company operating Romania's largest
airport Henri Coanda, said it is considering the option of
suspending the provision of services to national flag carrier Tarom
and taking legal steps, including, if necessary, an insolvency
request.
Tarom claims there is no risk of disrupting the company's
operations at Henri Coanda Airport, Romania Insider relays, citing
News.ro.
CNAB's shareholder meeting on Oct. 10 will discuss the option of
suspending the provision of any services to Tarom until the volume
of claims drops below RON50 million (EUR10 million) or any other
threshold to be decided by the company's Managing Board, Profit.ro
reported, Romania Insider discloses.
The shareholders will also discuss the option to initiate legal
actions to recover the claims against Tarom, including, if
necessary, formulating a request to trigger the insolvency of the
national operator, Romania Insider notes.
Tarom reported its losses deepened to RON208.7 million in H1 this
year, from RON176.3 million in the same period of 2021, according
to Romania Insider.
===========
R U S S I A
===========
UZBEK METALLURGICAL: Fitch Assigns 'BB-' IDR, Outlook Stable
------------------------------------------------------------
Fitch Ratings has assigned JSC Uzbek Metallurgical Plant (UMK) a
Long-Term Issuer Default Rating (IDR) of 'BB-' with a Stable
Outlook.
The rating is equalised with that of its sole parent Uzbekistan
(BB-/Stable), due to strong ties between the company and the state,
as per Fitch's Government-Related Entities (GRE) Rating Criteria.
Fitch views UMK's Standalone Credit Profile (SCP) at 'b+', which
reflects its small scale of operations, low-cost operations due to
favourable scrap procurement, its solid position on the steel
market in Uzbekistan, and current focus on long steel products with
medium-term diversification into flat products and broader range of
end-markets.
UMK's expansion strategy is likely to result in negative free cash
flow (FCF) for the next three years, before it can deleverage and
return to a more conservative financial profile.
The SCP is constrained by the company's small scale, medium
execution risks linked to its ambitious expansion and capex plans,
exposure to the volatility of raw materials that must be imported,
concentration of operations in one country, and evolving corporate
governance.
KEY RATING DRIVERS
Very Strong Support: Fitch said, "We view the status, ownership and
control factor under our GRE Criteria as 'Strong' as the state is
UMK's sole shareholder but may sell around a quarter of the
company. We assess support track record as 'Very Strong' because
while less than 25% of UMK's debt is government- guaranteed, a
majority of local facilities are provided by state-owned banks, a
new facility is provided by state funds, and government support is
a prerequisite for its new project finance facility to be
finalised. Other forms of support include EUR140 million equity
injection from the state to support UMK's Casting and Rolling
Complex project and full rights to all Uzbek scrap."
'Moderate' Socio-Political Implications: UMK employs 12,000 people,
is the seventh-largest tax contributor to the country, and has the
fourth-highest net income earned and dividends paid to the state
budget. Fitch sees 'Moderate' socio-political implications from a
UMK default because over 90% of its products supports the country's
construction sector. UMK is responsible for 80% of all steel
products produced in Uzbekistan and more than a third of steel
products consumed within the country. Its default could hit
further development of the national steel industry and may hinder
the development of the construction and metals & mining sectors.
'Strong' Financial Implications: Fitch said, "We view financial
implications of a default as 'Strong' because we view the company's
debt as a proxy for the government's, but the size of UMK's debt is
substantially smaller than that of the government."
New Project to Diversify Output: The Casting and Rolling Complex
project is a transformative hot-rolled sheet project for the
company and the country's steel industry. The project will increase
UMK's steel-making capacity to 2.1 mtpa from 1 mtpa and double
total capacity for finishing lines to 2.2mtpa. This provides
diversity to its current output of longs and grinding balls.
Execution Risk: UMK has limited experience in delivering new
projects and is exposed to the risk of cost overruns and delays.
The project is estimated to cost around EUR672 million, of which
EUR220 million is provided by a new project financing facility, a
state-funded EUR110 million loan, EUR140 million equity injection,
EUR89 million from local banks, and the remainder from UMK's own
funds.
High Leverage: Fitch said, "Under our rating case, we estimate
UMK's EBITDA to reach UZS2.1 trillion-UZS2.4 trillion in 2023-2024
(USD170 million-USD180 million), and UZS3.3 trillion-UZS3.8
trillion (USD240 million-USD280 million) when the new project is
fully ramped up by 2026. At end-2021 the company had around UZS2
trillion (USD200 million) of total debt, or 1.0x EBITDA. We expect
debt to rise to 2.8x EBITDA in 2023 on large capex, before
moderating towards 1.7x as higher EBITDA from those assets feeds
through and capex normalises. No dividend is expected in 2022,
given construction costs and its target debt-to-EBITDA of 3x."
Steel Market Moving Beyond Peak: Global steel companies reported
exceptionally high steel margins in 2H21. However, the energy
crisis and waning global GDP growth are leading to market
moderation linked to some demand destruction and as steel companies
start to compete for volumes in many markets. Steel prices have
eased materially in July and August, but overall 2022 will still be
a solid year, given that sales to June plus order books at that
time provide for a robust earnings outlook for the year. Fitch
expects the global steel market to start normalising in 2023.
Exposure to Russian Raw Materials: UMK currently relies partially
on Russia for certain raw materials including hot briquetted iron
(HBI, used for crude steel production). Historically, this exposure
has amounted to less than 1/3 of raw material costs. With an
additional mini mill and the Casting and Rolling Complex project
coming onstream by 2024, the need to import more semi-finished
products will substantially increase. The HBI market is fairly
small and it may be difficult to substitute Russian suppliers.
Improving Corporate Governance: As part of its preparation for an
international IPO, UMK is developing its corporate governance
structures with a set of targets, including IFRS accounts
publication since 2017, increasing transparency and developing a
decarbonisation strategy. Additionally, the company is in the
process of developing a long-term financial model and ESG strategy,
and has optimised its ownership structure of dependent and
subsidiary companies.
DERIVATION SUMMARY
UMK's peers are Brazilian steel and iron ore producer Usinas
Siderurgicas de Minas Gerais SA (Usiminas) (BB/Stable), Interpipe
Holdings Plc (CCC-), and JSC Almalyk Mining and Metallurgical
Complex (BB-/Stable).
Usiminas is much larger in scale, has 150% self-sufficiency in iron
ore, greater operational diversification with two steel-producing
units and a range of steel-processing capabilities. The company
produces a large proportion of high value-added products and its
business is highly exposed to the local steel industry in Brazil.
Usiminas has used substantial cash flows generated from iron ore
during 2019-2022 and post-Covid-19 steel recovery to substantially
reduce gross debt with a forecast gross debt/EBITDA at or below
1.2x in 2022 and 2023.
UMK has 1 mt crude steel capacity with 1.1mt finishing capacity
that is capable of achieving EBITDA around USD150 million-USD200
million before its expansion project. Interpipe has similar scale,
but produces mostly high value-added products for international
markets, a broad range of pipe products and train wheel sets.
Interpipe's rating reflects operational challenges arising from its
asset concentration in Ukraine.
Almalyk focuses largely on copper and gold mining, exports the
majority of its products, and has roughly 10x the EBITDA of UMK.
Nevertheless, both companies maintain strong links to the Uzbek
government, currently depend mostly on single assets within
Uzbekistan, have ambitious growth plans to complete
transformational new projects, and stand to benefit from evolving
corporate governance.
KEY ASSUMPTIONS
- Volumes in line with management's guidance to double by 2026
when the expansion project is at full production
- Steel prices normalising by 2023
- Average EBITDA margin of 24%-25% over the next four years
- Capex of EUR672 million for the Casting and Rolling Complex by
2024
- Equity injection of EUR140 million from the state by 2024
- No dividend until 2024, followed by absolute payment in line
with management's guidance
- Effective tax rate on average at 18%, in line with management's
guidance
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action on the sovereign would be replicated
in UMK's rating
- Gross debt/EBITDA and funds from operations (FFO) gross
leverage below 2.0x on a sustained basis could be positive for
the SCP but not necessarily the IDR
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A negative sovereign rating action
- Material weakening of ties between the company and the state
- Gross debt/EBITDA and FFO gross leverage above 3.0x on a
sustained basis could be negative for the SCP but not
necessarily the IDR
- Unremedied liquidity issues could be negative for the rating
Uzbekistan
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
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
foreign direct investments, resulting in a significant decline
in foreign-exchange 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
LIQUIDITY AND DEBT STRUCTURE
Comfortable Liquidity: At end-2021 UMK's cash position amounted to
USZ2 trillion against gross debt of USZ2 trillion raised mostly
from state-owned banks. New debt will be composed of a new EUR220
million project finance facility and a EUR110 million loan from the
state. Given the funding already in place and upcoming capex for
the Casting and Rolling Complex, Fitch expects comfortable
liquidity and UMK to have well-covered cash needs with flexibility
to pay dividends opportunistically.
ISSUER PROFILE
UMK is a small producer of long steel products and grinding balls
in Uzbekistan.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
UMK's rating is equalised with the sovereign rating
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.
===========
T U R K E Y
===========
MILLI REASURANS: A.M. Best Lowers Fin. Strength Rating to C(Weak)
-----------------------------------------------------------------
AM Best has downgraded the Financial Strength Rating to C (Weak)
from B- (Fair) and the Long-Term Issuer Credit Rating to "ccc"
(Weak) from "bb-" (Fair) of Milli Reasurans Turk Anonim Sirketi
(Milli Re) (Turkey). The outlook of these Credit Ratings (ratings)
is negative.
The ratings reflect Milli Re's balance sheet strength, which AM
Best assesses as very weak, as well as its adequate operating
performance, neutral business profile and marginal enterprise risk
management (ERM).
The rating downgrades follow the publication of Milli Re's
financial statements for half-year 2022, and factor a significant
deterioration of the company's consolidated risk-adjusted
capitalization, as measured by Best's Capital Adequacy Ratio
(BCAR), which fell further into the very weak category. The balance
sheet strength assessment also considers Milli Re's standalone BCAR
scores, which have deteriorated to the very weak level at half-year
2022. A weakening of economic conditions in Turkey has resulted in
a material devaluation of the Turkish lira and extremely high
levels of inflation, which have increased Milli Re's asset and
underwriting risk significantly, whilst impacting negatively its
shareholders' equity position with the company reporting a loss at
half-year 2022 on a consolidated and standalone basis. Milli Re's
liquidity position on a standalone basis has been constrained by
the material erosion of its capital and surplus, evidenced by a
ratio of liquid assets to net technical provisions of 71% at
half-year 2022, down 33 percentage-points from year-end 2021.
The rating actions also reflect a revision in Milli Re's ERM
assessment to marginal from appropriate, due to the impact of
operating conditions in Turkey on the company's risk profile and
the rising difficulties that it faces in navigating an increasingly
challenging environment.
The negative outlooks reflect pressures on the company's rating
fundamentals stemming from its exposure to the deteriorating
macroeconomic conditions in Turkey.
=============
U K R A I N E
=============
VF JSC: Fitch Affirms LongTerm Foreign Currency IDR at CCC'
-----------------------------------------------------------
Fitch Ratings has affirmed Private Joint Stock Company VF Ukraine's
Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'CCC'.
The agency has also affirmed VF Ukraine's USD400 million
outstanding senior unsecured notes at 'CCC' with a Recovery Rating
of 'RR4'.
The ratings of VF Ukraine are constrained by its materially
disrupted business operation, martial law-imposed restrictions on
cross-border foreign-currency (FC) payments and substantial
foreign-exchange (FX) risk exposure.
The ratings are supported by sufficient liquidity in foreign
accounts to cover 12 months of debt service, and the strategic
importance of the company's infrastructure insofar that we expect
the National Bank of Ukraine (NBU) to continue to permit the
company to service debt and pay key capex and operating expenses in
FC.
Fitch does not assign Outlooks to ratings in the 'CCC' category.
KEY RATING DRIVERS
Materially Disrupted Operating Environment: The war in Ukraine has
led to net outward migration of 6.1 million people, and Fitch
projects inflation in Ukraine to accelerate to 30% at end-2022 from
22.2% in July, and to remain high in 2023 on average at 20%. Fitch
forecasts the economy to contract 33% this year, followed by a
shallow recovery of 4% in 2023.
Reduced User Base: VF Ukraine's customer base fell to 16.6 million
users in 1H22 from 18.9 million at end- 2021, due to migration
abroad or within the country (in military zones or occupied
territories) and network outage in occupied territories. We expect
a continued reduction in the user base towards 15 million users by
end-2023, which will partly be compensated by increased average
revenue per user (ARPU) and annual price increases.
Majority of Assets in Operation: As of end-August 2022 VF Ukraine
operated 87% of the infrastructure the company had controlled
before the war. In addition, VF Ukraine's users in controlled areas
still have access to other providers' networks via a national
roaming agreement in case the company's network service is
disrupted. All its assets in non-controlled territories (NCT) have
been written off, with net impairments of UAH806 million in 1H22.
Moratorium on Cross-Border Payments: The NBU moratorium on
cross-border FC payments, limiting VF Ukraine's ability to service
its FC obligations, including its USD400 million senior notes, is a
key rating constraint. Exceptions can be made to the moratorium,
and the company in August this year received special permission
from the NBU to pay their semi-annual coupon using domestically
held cash.
Fitch expects the company's network assets and the ability to
communicate freely across the country to be of strategic importance
to Ukraine. As such, the NBU should have an incentive to continue
to grant the company permission to service key FC obligations using
cash held in Ukraine.
Limited USD-denominated Cash Generation Abroad: Even without the
NBU special permission, VF Ukraine is still able to service debt
using USD25 million (equivalent to two semi-annual interest
payments) held in its international account (as per mid-September
2022). This cash is generated from roaming agreements with
international operators. Payments are typically made with up to a
15-month delay from actual revenue generation, and Fitch expects
additional but limited cash inflow into this account. Based on
current roaming revenue and expected reduction in 2H22 and 2023,
Fitch expects this cash inflow to reduce in the latter part of
2023.
Compensation from Roaming: Service revenue rose 2.9% yoy in 1H22,
versus 13.2% in 1H21. Revenue from mobile users declined 2.1%, but
was compensated by gains of 90% in roaming revenue and 54% in other
revenue (fixed business, Vega acquisition and revenue from
integration services). Users abroad have limited incentives to
continue with their local VF Ukraine subscription over a prolonged
period. Fitch estimates a 30% drop in roaming revenue in 2023, with
a total revenue decline of around 6.6% in 2022 and 5% in 2023.
Fitch forecasts an EBITDA margin of 47% in 2022 and 45% in 2023,
driven by reduced roaming, cost inflation and a weakening local
currency.
Sustained Underlying Cash Flow: Increased ARPU and roaming revenue
in 1H22 compensated for a reduced customer base. A temporary pause
in expansion capex (but sustained maintenance and repair capex) and
materially reduced dividend payments have preserved VF Ukraine's
cash flow and liquidity with a material local-currency cash
position of UAH4.7 million at end-1H22. Fitch forecasts strong
underlying cash preservation with local-currency cash and
equivalents of around UAH8.8 million at end-2023 on the back of
underlying profitability and capex capped at 20% of revenue.
Low Leverage, Material FX Risk: Fitch forecasts funds from
operations (FFO) gross leverage at 2.0x at end-2022, which is low
for the rating. VF Ukraine is however exposed to significant FX
risk as revenue is generated in Ukrainian hryvnia, while a large
share of its expenses are denominated in US dollars (70%-80% of
capex, 20%-30% of operating expenses, and 100% debt service). The
exchange rate is officially fixed as per the NBU moratorium in
February 2022 and was further devalued in July 2022.
Real exchange rates closer to debt maturity are difficult to
ascertain in the current uncertain geopolitical and economic
environment. We have used the official FX rate of 36.57 in 2022,
increasing it by 10% per year in our forecast, with leverage rising
towards 2.5x in 2024.
DERIVATION SUMMARY
The 'CCC' ratings for VF Ukraine reflect heightened operational and
financial risks, as discussed under Key Rating Drivers. The
uncertainty and dynamics of the war in Ukraine makes meaningful
differentiation between companies impossible at this stage. At
'CCC', VF Ukraine's ratings are above Ukraine's sovereign rating at
'CC' but below the Ukrainian Country Ceiling of 'B-'.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue to decline by mid-single digits in 2022-2023, followed
by low single-digit growth in 2024-2025
- Fitch-defined EBITDA margin at around 47% in 2022, gradually
declining to around 44% in 2025, partially reflecting
inflationary pressures on the company's performance
- Capex at 20% of revenue a year in 2022-2024
- No material dividend payments in 2022-2025
- No acquisitions and disposals
- UAH/USD at 36.57 in 2022 (official exchange rate set by the NBU
on July 21, 2022). Hryvnia depreciation against US dollar of
10% a year in 2023-2025
Key Recovery Assumptions
- The recovery analysis assumes that VF Ukraine would be
considered a going concern in bankruptcy and that it would be
reorganised rather than liquidated. We assume a 10%
administrative claim
- Fitch's view of a sustainable post-reorganisation going-concern
EBITDA is UAH4,000 million. This level reflects stress
assumptions of a decrease in the number of subscribers as a
result of the war, decrease in profitability due to
inflationary pressures and an inability of the company to pass
on costs to customers
- An enterprise value (EV) multiple of 2.5x is used to calculate
post-reorganisation valuation. This multiple reflects the
currently disrupted operating environment
- Senior unsecured notes of UAH14,628 million (equivalent of
USD400 million debt as at end-June 2022 at the FX rate of
UAH/USD of 36.57)
- The allocation of value in the liability waterfall with a
waterfall-generated recovery computation of 62% indicated an
'RR3' for the senior notes based on current metrics and
assumptions. The instrument rating is however capped at
'CCC'/'RR4'/50% in accordance with our country-specific
treatment of recovery ratings.
RATING SENSITIVITIES
VF Ukraine
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- De-escalation of Russia's military operations reducing
operating risks and relaxed FX and cross-border payment
controls with reduced liquidity and refinancing risk
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Increased signs of a probable default, for instance from
liquidity stress, inability to service debt or failing
operations and cash flows
- Less than 12-18 months of freely available funds for debt
service, either from a reduction in the FC cash balances in
international accounts or inability to use domestically held
cash balances for debt service
Ukraine
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The Long-Term Foreign-Currency 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 and taken to avoid a traditional payment
default
- The Long-Term Local-Currency 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
Poor Liquidity, Partly Funded: A special permission from the NBU is
required to make cross-border FC payments, significantly
restricting VF Ukraine's ability to service its debt, currently
unlawful under the country's marshal law. As per mid-September the
company had cash for around 12 months of debt service available in
international accounts, not requiring any permission from the NBU
for debt service.
Excessive Refinancing Risk: Refinancing will be highly dependent on
the future Ukrainian economic environment. Investors are currently
withdrawing from the country based on uncertain recoveries. The
company's senior unsecured notes mature in February 2025.
ISSUER PROFILE
VF Ukraine is the number #2 mobile operator in Ukraine holding
around 35% of the market by revenue and serving about 16 million
subscribers at June-2022.
ESG CONSIDERATIONS
VF Ukraine has an ESG Relevance score of '4' for governance
structure, reflecting the dominant majority shareholder's influence
over the company, in the absence of independent members on the
board and lack of transparency from its wider group. Although this
does not restrict the rating at the current level, it has a
negative impact on the credit profile, and is relevant to the
rating 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.
Debt Rating Recovery Prior
---- ------ -------- -----
VFU Funding Plc
senior unsecured LT CCC Affirmed RR4 CCC
Private Joint Stock
Company VF Ukraine
LT IDR CCC Affirmed CCC
===========================
U N I T E D K I N G D O M
===========================
ARJOWIGGINS GROUP: Sacked Workers Set to Take Legal Action
----------------------------------------------------------
BBC News reports that workers at an Aberdeen paper mill who
suddenly lost their jobs last week are set to take legal action.
Stoneywood paper mill -- which has operated for more than 250 years
-- went into administration on Sept. 22 with the loss of more than
300 jobs, BBC relates.
According to BBC, the Unite union said workers were not properly
consulted over the decision.
It organised a mass meeting with solicitors on Sept. 27 to also
cover areas such as redundancy pay outs and unpaid wages, BBC
discloses.
Staff said workers were told on Sept. 22 to attend a meeting an
hour later and were then informed administrators had been
appointed, BBC notes.
Scottish Enterprise has given the mill owners more than GBP12
million worth of support over the last three years, BBC relays.
In 2019, the business was sold to a new parent company, securing
the jobs at the mill, BBC recounts.
However, administrators have now been appointed at the Arjowiggins
Group mills at Stoneywood, as well as Chartham, Kent, with 368 of
the group's 463 UK-based employees made redundant immediately, BBC
discloses.
A total of 301 out of the 372 members of staff in Aberdeen were
made redundant, according to BBC.
Across the two sites 95 staff were retained to continue limited
activity while the administrators explore the possibility that the
mills and assets could be sold, BBC relates.
GCG SHOTBLASTING: Enters Administration, Halts Trading
------------------------------------------------------
Vidushi Tiwari at STV News reports that the majority of employees
at an Aberdeenshire shotblasting firm have lost their jobs after
the company collapsed into administration.
GCG Shotblasting has ceased trading with immediate effect and
appointed administrators, after operating for nearly 40 years, STV
News relates.
The majority of its 13 employees were made redundant immediately,
with the remainder kept on temporarily to help with "various
administrative matters", STV News notes.
The family business, founded in 1985, provided companies in the oil
and gas industry with "critical" coatings to protect and maintain
on-and-off-shore equipment.
However, despite expanding its trading activities in recent years,
the firm cited a reduction in onsite work due to Covid restrictions
and the cancellation of contracts stemming from the pandemic as
reasons for its financial difficulty, STV News discloses.
It comes less than a week after hundreds were made redundant as the
Aberdeen-based Stoneywood paper mill entered administration, STV
News states.
According to STV News, Blair Nimmo and Geoff Jacobs of Interpath
Advisory were appointed joint administrators for GCG Shotblasting
on Sept. 26.
Despite a recent uptick in activity levels and efforts made by the
directors to turn the business around, the flow of cash remained
challenging amid increasing levels of debt, STV News discloses.
"Having considered all available options and having sought to raise
additional funding or investment, which ultimately could not be
secured, the directors determined that entering administration was
necessary," STV News quotes the administrators as saying.
Mr. Jacobs, managing director at Interpath Advisory, said: "This is
a disappointing outcome for a long-established family-run
business.
"However, we will now take steps to support the workforce and look
to secure a sale of the assets comprising primarily, its property,
plant and machinery, well-known business name, order book, work in
progress and customer list. Interested parties should make contact
in early course."
MRS SMITH'S: Goes Into Liquidation
----------------------------------
Thomas Barrett at The Stray Ferret reports that Mrs Smith's Cafe in
Jennyfields, which has been closed since April, has gone into
liquidation.
The family-friendly community cafe was situated in a unit on
Jennyfields Shopping Centre next door to the Co-op. It offered
food and drink and had a play area for children.
However, a post on the cafe's Facebook page from April 26 said it
was closed "until further notice" and it's remained empty since,
The Stray Ferret relates.
It appears the cafe will not be reopening as Wigan-based Focus
Insolvency Group was appointed to liquidate the business, The Stray
Ferret discloses.
RECYCLING TECHNOLOGIES: Goes Into Administration
------------------------------------------------
Terry Murden at Daily Business reports that Recycling Technologies,
the company that received GBP2 million from Zero Waste Scotland to
chemically recycle crisp packets and black plastics into oil, has
gone into administration.
The company, which is based in Swindon in Wiltshire and has
additional facilities in Perthshire, had hoped to raise funding on
top of existing deals worth GBP65 million for the forward sale of
oil from its machine, Daily Business relates.
It generated upwards of GBP10 million via grants and investment
rounds, but the project was hit by a string of delays after
originally planning to have a machine operational in Scotland in
2018, Daily Business discloses.
Recycling Technologies was due to float on the stock market in
2021, but these plans were later ditched, Daily Business notes.
The company's director, Adrian Griffiths, then resigned in April
2022 for "personal reasons", Daily Business recounts.
Following an "unsuccessful" process to seek additional investment,
the company appointed Interpath Advisory as administrators, Daily
Business relates.
"Regrettably, the majority of the group's 73 employees have been
made redundant, with a small number retained to assist the joint
administrators with the closing down of its sites," Daily Business
quotes the administrators as saying.
Mr. Holloway, who is Interpath Advisory's managing director, said:
"Our immediate priority is to assist those members of staff who
have been made redundant, providing them with the support and
information they need to make claims to the redundancy payments
device.
"We will also be looking to realise the assets of the business and
its intellectual property and would encourage any interested
parties to contact us as soon as possible."
UAVEND INVESTMENTS: Owes Around GBP10 Million to Creditors
----------------------------------------------------------
Lori Little at Isle of Wight County Press reports that debts of
around GBP10 million have been left by the collapse of the business
behind Island Harbour.
And unsecured creditors are being warned they are unlikely to get
their money back, the County Press notes.
A new buyer is being sought for the site at Binfield, on the
outskirts of Newport, the County Press discloses.
Kevin Lucas, managing director of Lucas Ross, the firm handling the
administration, confirmed a ballpark figure of just under GBP10
million was about right, as documents on Companies House show, the
County Press relates.
He said it "would seem unlikely unsecured creditors would receive
any payment" but stressed it was early in the process.
He said Island Harbour was still operating and they were "trying to
keep disruption to a minimum, both for the harbour users and also
for the onward sale of the site."
According to the County Press, a buyer is being sought and offers
have been coming in, he said, citing "significant interest" in the
site, which is situated just outside Newport.
Mr. Lucas confirmed Uavend Investments LLP, the previous owner, was
now insolvent and the site would not be going back into the same
hands, the County Press discloses.
He said Island Harbour consisted of the marina site, berths, the
freehold to parts of the site, and phases in development, including
some apartments, the County Press relates.
The Breeze restaurant has been confirmed as a separate entity and
not part of the sale, the County Press notes.
The administrator is Stephen Lancaster, who works for Lucas Ross,
the County Press states.
WORCESTER WARRIORS: Put Into Administration After RFU Suspension
----------------------------------------------------------------
Gerard Meagher at The Guardian reports that Worcester Warriors have
been put into administration after being suspended by the Rugby
Football Union from all competitions, leaving the club condemned to
relegation and plunging the Premiership into turmoil.
On announcing the decision, the RFU chief executive, Bill Sweeney,
declared that the whole business model of rugby union in England
needs to be improved, The Guardian relates.
The Department for Digital, Culture, Media and Sport -- Worcester's
biggest creditor after they gave the club GBP14 million last year
to alleviate the effects of the Covid pandemic -- announced the
administration process had been triggered. The Warriors were duly
kicked out of the Premiership, and the women's team out of the
Premier 15s, after failing to meet the financial requirements laid
down by the RFU, The Guardian relates. Those included insurance
guarantees, an ability to meet the payroll and a "credible plan to
take the club forward".
Administration, according to RFU regulations, means relegation at
the end of the season, The Guardian notes. Worcester can appeal
against that fate on the grounds it was not their fault, citing the
"pandemic clause" in the RFU's regulations, The Guardian discloses.
It is unclear if they would be successful given what local MPs
have called the "appalling mismanagement" of the owners, Jason
Whittingham and Colin Goldring, The Guardian states.
It is understood Messrs. Whittingham and Goldring made a late
attempt to delay the deadline on Monday but the RFU meted out its
punishment regardless, The Guardian disclsoes.
"We appreciate this is incredibly difficult news for fans, staff
and players," The Guardian quotes Mr. Sweeney as saying.
"We hope a buyer can be secured to allow Worcester Warriors and the
University of Worcester Warriors to return to professional league
rugby. It is so important that we continue to work with
Premiership Rugby to improve the structure, governance and business
model of rugby union in England."
Worcester's best chance of survival and a return to the Premiership
this season is for the administrators to swiftly find investors who
can satisfy the financial requirements laid down by the RFU, The
Guardian states. Two interested parties are primed -- one includes
the club's former chief executive Jim O'Toole -- but the process
would take at least a couple of weeks meaning Worcester's
Premiership match against Harlequins on Oct. 8 is expected to be
called off, The Guardian discloses.
There are doubts over whether administrators will consider a sale
viable with upwards of GBP25 million of debt, including GBP6
million in unpaid tax owed to HMRC by early next month, as well as
accusations of asset-stripping, according to The Guardian.
Outstanding wages also have to be paid and the RFU will scrutinise
any sale in extreme detail given the determination to avoid a
similar mess, in turn elongating the process, The Guardian notes.
*********
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,
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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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