/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/221019.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, October 19, 2022, Vol. 23, No. 203 Headlines C R O A T I A AGROKOR: Extraordinary Administration Procedure Completed G E R M A N Y NIDDA BONDCO: Fitch Affirms 'B' LongTerm IDR, Outlook Negative G R E E C E GREECE: Fitch Affirms 'BB' Foreign Currency IDR, Outlook Positive GRIFONAS FINANCE 1: Fitch Affirms 'B-sf' Rating on Cl. C Notes H U N G A R Y NITROGENMUVEK ZRT: Fitch Retains 'B-' IDR on Watch Negative I T A L Y FIBER BIDCO: Fitch Assigns 'B+(EXP)' LongTerm IDR, Outlook Stable K A Z A K H S T A N FORTELEASING JSC: Fitch Assigns 'BB-' LongTerm IDRs, Outlook Stable L U X E M B O U R G SPORTRADAR MGMT: Fitch Hikes LongTerm IDR to 'BB-', Outlook Stable SUBCALIDORA 1: Fitch Assigns 'B' LongTerm IDR, Outlook Stable N E T H E R L A N D S ATHORA NETHERLANDS: Fitch Affirms 'BB+' Rating on Jr. Sub. Debt R O M A N I A NEMO EXPRESS: Files Request to Open Insolvency Proceedings S E R B I A SRPSKA FABRIKA: Public Auction Fails to Attract Buyers S P A I N RURAL HIPOTECARIO VIII: Fitch Affirms CCsf Rating on Class E Debt TELEFONICA EUROPE: Fitch Affirms 'BB+' Rating on Subordinated Debt S W I T Z E R L A N D PEACH PROPERTY: Fitch Lowers Senior Unsecured Debt Rating to 'BB' T U R K E Y PETKIM PETROKIMYA: Fitch Affirms Foreign Currency IDR at 'B' U N I T E D K I N G D O M DEBENHAMS PLC: O'Flynn Group Eyes Former Flagship Store in Cork EUROSAIL 2006-2BL: Fitch Affirms 'CCCsf' Rating on Class F1c Debt TOGETHER FINANCIAL: Fitch Affirms BB- LongTerm IDR, Outlook Stable UROPA SECURITIES 2007-01B: Fitch Affirms 'B' Rating on B2a Notes [*] UK: Quarter of Scottish Small Businesses Fear They May Close - - - - - ============= C R O A T I A ============= AGROKOR: Extraordinary Administration Procedure Completed --------------------------------------------------------- Annie Tsoneva at SeeNews reports that Fortenova, the successor to the collapsed Croatian food-to-retail concern Agrokor, said on Oct. 13 the extraordinary administration procedure in Agrokor has been completed and therefore Agrokor has been deleted from the country's court registry. "We can rightfully be proud to have completed one of the most important economic processes ever to have taken place in Croatia, with impact on the entire region," Fabris Perusko, Fortenova Group CEO, said in a press release. The Commercial Court of Zagreb registered the deletion of Agrokor from the court registry on Oct. 12, according to data from registry. The extraordinary administration procedure in Agrokor started in April 2017 and comprised 77 Agrokor subsidiaries. The company's total debt back then amounted to HRK56 billion (US$7.2 billion/EUR7.5 billion), with a debt-to-operating profit ratio of around 30 times and only six kuna on its accounts. During the extraordinary administration procedure, the Agrokor's debts to a total of 2,400 micro and small suppliers were settled in full, while other creditors' recoveries amounted to 60% on average, according to the press release. Although in bankruptcy, Agrokor continued its business during the extraordinary administration procedure with all operations and full employment preserved in the process. ============= G E R M A N Y ============= NIDDA BONDCO: Fitch Affirms 'B' LongTerm IDR, Outlook Negative -------------------------------------------------------------- Fitch Ratings has affirmed Nidda Bondco GmbH's (Nidda) Long-Term Issuer Default Rating (IDR) at 'B' with a Negative Outlook. The rating balances Nidda's high leverage with its robust business profile. The Negative Outlook reflects slow deleveraging prospects feeding into increased refinancing risk ahead of debt maturities in 2024-2025. The risk of a permanent increase in total debt/EBITDA remains if western sanctions or Russian counter-sanctions affect Nidda's operations in Russia. Fitch estimates the Russian operations account for around 15% of Nidda's total sales. Nidda has sizeable and well-diversified operations by product and region, which are reflected in its healthy operating and cash flow margins. Fitch believes that Nidda can weather a stagflation by passing on cost increases to customers and can maintain its EBITDA margin above 22%. KEY RATING DRIVERS Refinancing Risks Increases: Nidda's high leverage increases the risk of refinancing at more onerous terms. This concerns the entirety of Nidda's capital structure, including its revolving credit facility (RCF) due in 2023, its senior secured notes due in 2024, and the rest of its senior secured and senior debt due in 2025. Fitch expects Nidda to refinance most of its financial liabilities over the next 12 to 18 months. High Leverage Until 2024: Slowing economic growth and increased input costs may exhaust Nidda's leverage headroom. As a result, Fitch expects total debt/EBITDA to trend towards 7.5x in 2023, before easing back to 7.0x in 2024. Economic Slowdown Affects Growth: Fitch forecasts GDP in the eurozone and Germany to contract 0.1% and 0.5%, respectively, in 2023. Consumer spending is forecast to grow modestly in Germany and to contract in the eurozone in 2023. Fitch views the pharmaceutical industry as fairly resilient to consumer spending pressures, which should help support revenue in European markets. Fitch assumes Nidda's revenue growth to slow to low single digits in 2023, before returning to mid-single digits in 2024-2025. Mitigated Energy Inflation Impact: Nidda has geographically diversified production sites, with less than 10% of production in Germany and around 50% in Serbia. This significantly reduces its exposure to energy inflation in the eurozone for the next 12-18 months. Fitch forecasts Fitch-calculated EBITDA margin to soften only by 140bp in 2023, due to favourable gas price terms in Serbia. Aggressive Financial Policy: Nidda had until now prioritised debt-funded expansion over deleveraging. Despite Nidda's healthy cash flow deleveraging by way of debt prepayment is unlikely, in its view. Fitch expects Nidda to continue making opportunistic bolt-on acquisitions as the European pharmaceutical market offers viable targets. These provide opportunities for large pharma companies to consolidate and streamline their product portfolios. As a result, Nidda's financial risk may increase depending on the size, profitability and margin-dilutive nature of its targets. Self-Sufficient Russian Operations: Fitch does not expect Nidda's exposure to Russia to have a contagion effect on the rest of its operations. Its profitable operations in Russia solely serve the local market. The Russian business is funded by local-currency loans and has limited exposure to imported substances. However, shrinking disposable income of the Russian population, together with drug costs not being reimbursed by compulsory medical insurance, can undermine Nidda's earnings and cash flow generated in Russia. Russian counter-sanctions may also constrain the transferability of cash and profits outside Russia. Healthy Operations Outside Russia: The IDR remains firmly placed at 'B', supported by Nidda's healthy sizeable operations outside Russia with a well-diversified product portfolio and pan-European footprint. Although declining, Fitch-defined EBITDA margin is estimated above 22% in 2023, which is appropriate for the sector. Positive Market Fundamentals: Fitch expects the positive fundamentals for the European generics market to continue as governments and healthcare providers seek to optimise rising healthcare cost stemming from growing ageing populations, increasing prevalence of chronic diseases, and expensive new innovative treatments coming to market and affecting budgets. Fitch sees continued structural growth opportunities, given limited overall generic penetration in Europe versus the US and the increasing introduction of biosimilars. DERIVATION SUMMARY Fitch rates Nidda using its Global Rating Navigator Framework for Pharmaceutical Companies. Under this framework, Nidda's generic and consumer business benefits from diversification by product and geography, with a balanced exposure to mature, developed and emerging markets. Nidda's business risk profile is affected by the lack of a global footprint compared with industry champions such as Teva Pharmaceutical Industries Limited (BB-/Stable) and Viatris Inc (BBB/Stable), and diversified companies, such as Novartis AG (AA-/Stable) and Pfizer Inc. (A/Positive). High financial leverage is a key rating constraint, compared with international peers', and is reflected in the 'B' rating with a Negative Outlook. Nidda ranks ahead of other highly speculative peers such as Care Bidco (B/Stable), and Roar Bidco AB (B/Stable), in size and product diversity. Nidda's business is mainly concentrated in Europe, but it also has a growing presence in developed and emerging markets. This gives Nidda a 'BB' category risk profile. However, its high financial risk, with total debt/EBITDA projected to remain above 7.0x until 2024, is in line with a 'B-' rating in the sector, albeit offset by strong free cash flow (FCF) generation. The rating difference between Nidda and higher-rated peers CHEPLAPHARM Arzneimittel GmbH (B+/Stable) and Pharmanovia Bidco Limited (B+/Stable) reflects their less aggressive leverage and asset-light business models, despite smaller business scale and higher product concentration. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: - Revenue to reach EUR4 billion by 2026, including Russian operations, due to volume-driven growth of Nidda's legacy product portfolio, new product launches, the acquisition of intellectual property rights and business additions - Fitch-defined EBITDA margin averaging 24% over 2022-2025, underpinned by a normalisation in trading operations combined with further cost improvements and synergies realised from the latest acquisitions. Fitch includes EBITDA from Russia in its rating case given Nidda's demonstrated ability to upstream profits and cash from Russia - Working-capital investments of 1%-2% of revenue p.a. to 2025 - Capex at 2.5% of sales a year to 2024 - M&A estimated at EUR100 million per annum, to be primarily funded from internally generated funds and supported by its EUR400 million RCF, and valued at 10x EBITDA with a 20% EBITDA contribution - Nidda's upcoming debt maturities in 2024-2025 to be refinanced KEY RECOVERY ASSUMPTIONS Nidda would be considered a going-concern (GC) in bankruptcy and be reorganised rather than liquidated. Fitch estimates a post-restructuring EBITDA of around EUR600 million, which would allow Nidda to remain a GC after distress and assuming implementation of some corrective actions. Its estimate of GC EBITDA includes contribution from Russia. Fitch has lowered its distressed enterprise value (EV)/EBITDA multiple to 6.0x from 7.0x, as Fitch expects the distressed valuation of the group to be diluted by the Russian business. Fitch assumes Nidda's senior unsecured legacy debt (at the operating company level), which is structurally the most senior, to rank pari passu with its senior secured acquisition debt, including term loans and senior secured notes. This view is based on its principal waterfall analysis and assuming the EUR400 million RCF is fully drawn in a default. Senior notes at Nidda rank below senior secured acquisition debt. Its principal waterfall analysis, after deducting 10% for administrative claims, generates a ranked recovery for the senior secured debt of 56% in the 'RR3' category, leading to a 'B+' rating, one notch above the IDR. Recoveries envisaged for Nidda's senior unsecured notes remain at 0%, in the 'RR6' band, corresponding to a 'CCC+' instrument rating, two notches below the IDR. RATING SENSITIVITIES Factors that could, individually or collectively, lead to upgrade: - Sustained Fitch-defined EBITDA margin in excess of 25% and FCF margin consistently above 5% - Reduction in total debt/EBITDA to below 6.0x on a sustained basis - Maintenance of EBITDA/interest cover above 3.0x Factors that could, individually or collectively, lead to a revision of the Outlook to Stable: - Progress on refinancing upcoming major debt maturities at prevailing market rates - Restoration of total debt/EBITDA to below 7.5x by end-2023 - Stable EBITDA margins of above 18% and mid-single-digit FCF margins - EBITDA/interest cover of at least 2.5x Factors that could, individually or collectively, lead to downgrade: - Lack of progress towards refinancing, or refinancing at materially more onerous terms than envisaged - Escalation of western sanctions and Russian-counter sanctions, hampering transfer and convertibility of cash flows from its Russian operations - M&A shifting towards higher-risk or lower-quality assets or weak integration resulting in pressure on profitability and weak FCF margins - Persistent operating weakness, with EBITDA margins declining to below 18% - Diminished prospects of total debt/EBITDA declining to below 7.5x by end-2023 - EBITDA/interest cover below 2.0x on a sustained basis. LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Fitch projects Nidda to close 2022 with EUR231 million cash on its balance sheet, excluding around EUR150 million restricted cash. Fitch projects healthy FCF generation to 2025, which should be sufficient to fund its operations and potential M&A activity. Large Refinancing Ahead: Nidda's capital structure comprises EUR1.9 billon senior secured notes due in September 2024, EUR3 billion senior secured term loans due in June 2025, its undrawn EUR400 million secured RCF due in August 2023, EUR579 million senior unsecured notes due in September 2025, EUR46 million legacy Stada OpCo debt and a EUR371 million unsecured rouble-denominated local facility. Timely and cost-efficient refinancing of its senior secured loans and senior unsecured notes coming due in 2024-2025 will be critical to our rating assessment. ISSUER PROFILE Nidda is an SPV indirectly owning the Germany-based pharmaceutical company Stada, a manufacturer and distributor of generic and branded consumer healthcare products. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Nidda BondCo GmbH LT IDR B Affirmed B senior unsecured LT CCC+ Affirmed RR6 CCC+ Nidda Healthcare Holding GmbH senior secured LT B+ Affirmed RR3 B+ =========== G R E E C E =========== GREECE: Fitch Affirms 'BB' Foreign Currency IDR, Outlook Positive ----------------------------------------------------------------- Fitch Ratings has affirmed Greece's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Positive Outlook. KEY RATING DRIVERS Structural Indicators, Debt Levels: Greece has income per capita that far exceeds the 'BB' and 'BBB' medians. Governance scores and human development indicators are among the highest of sub-investment grade peers. These strengths are set against the legacies of the sovereign debt crisis, which include large stocks of public and external debt, and a still high, albeit rapidly declining, level of non-performing loans (NPLs). The Positive Outlook reflects an expected decline in public sector indebtedness, in the context of still low average borrowing costs, and a degree of expected resilience of the Greek economy, despite the worsening of the economic outlook for the eurozone in recent months. Public Debt Levels, Mitigants: Fitch's public finance projections point to a steady decline of the government debt/GDP ratio through 2024. Fitch expects the debt ratio to fall to 175.4% by end-2022, below its pre-pandemic level and down from 193.3% at end-2021. The debt ratio will then edge down to 174.4%, before reaching 170.4% at end-2024, as the primary budget balance returns to surplus. The debt ratio in 2024 is still forecast to be among the highest of Fitch-rated sovereigns, and more than 3x the 'BB' median. At the same time, there are mitigating factors that support debt sustainability. Greece's liquid asset buffer is substantial (forecast to be close to 17% of GDP at year-end). The concessional nature of the majority of Greek sovereign debt means that debt-servicing costs are low and amortisation schedules are manageable. Proposed statistical reclassifications by Eurostat would cause guarantees to the financial sector issued under the Hellenic Asset Protection Scheme (HAPS) to be included in the stock of general government debt. At present, this would raise the level of debt by EUR13.8 billion (8.8% of forecast 2022 GDP). Government bond yields have risen further over the last three months, with the 10-year yield just under 5.0% in late September. However, the interest-to-revenue ratio will rise only gradually to around 6% in 2024 ('BB' median projection: 9.0%). The average maturity of Greek debt is among the longest of any sovereign, at around 19 years. Moreover the debt is mostly fixed rate, limiting the impact of market interest rate rises. Government Support, Deficit, Budget: The net cost to this year's budget of government support measures to alleviate the impact of energy prices is around EUR4.5 billion (around 2.2% of forecast GDP). The gross amount of support is around four times higher, but is offset by a clawback mechanism that levies utilities' supernormal revenues. Revenue buoyancy and the unwinding of pandemic support measures mean that the general government deficit this year will fall to 4.5% of GDP from 7.4% in 2021. The 2023 draft budget envisages discretionary measures with a cost estimated by the government at EUR3.2 billion (around 1.5% of forecast GDP). The weaker macroeconomic environment and the new deficit-increasing measures mean Fitch has revised up its deficit forecast for 2023 to 3.5% of GDP, from 2.4% in July. With the rebound in economic activity in 2024, the deficit will fall to 2.3%. Its public finance projections imply that the primary budget balance will be in deficit this year and next (-2.2% and -0.9% of GDP, respectively), and then return to a small surplus in 2024. The government's draft budget envisages a return to a primary surplus in 2023. Its more pessimistic macroeconomic outlook is the main driver of this difference. A key risk to public finances is that higher than expected energy prices will be followed by further subsidy increases, in particular in view of a parliamentary election due by July 2023. Macroeconomic Resilience, Slowdown Expected: The Greek economy expanded at a robust pace in the first half of the year, with real GDP increasing by 8.4% compared with the same period a year earlier. The macroeconomic outlook has worsened sharply in recent months, with the Russian invasion of Ukraine exacerbating the rise in energy prices and affecting confidence, and high inflation hitting real incomes and consumption dynamics. Fitch now assumes a full or near complete shut-off of Russian pipeline gas to Europe. Despite the slowdown in activity in the second half of this year, real GDP growth this year will be 5.5%. Economic activity will stagnate in the first half of next year, before picking up in the second half. The weak carryover effect implies a negative growth rate for GDP in 2023 (-0.2%). The recovery is expected to become more entrenched in 2024, with steady growth throughout the year, implying annual growth of 1.8%. Banking Sector Improvements, Risks: NPLs in the banking sector have continued to decline at a steady pace, with the overall NPL ratio reaching 10.0% in 2Q22, down from 20.4% a year earlier. The decline has been driven by securitisation transactions and sales by the four systemic Greek banks, incentivised by HAPS. Fitch expects the NPL ratio to decline to mid-single digits next year. Downside risks have increased as a result of the worsening economic and financial prospects, although government support to the most-affected borrowers, including through energy subsidies, should contain near-term asset quality pressures. Net credit flows to the private sector remain moderate, and negative to the household sector, despite strong residential real estate price dynamics in recent years. Reforms, European Funds, Growth: The Greek authorities have undertaken a series of structural reforms across various sectors of the economy in the past years, (for example, investment licensing, property taxation, insolvency framework, labour markets), and also in the context of the implementation of the National Recovery and Resilience Plan, which envisages a spending envelope of around EUR31 billion (around 15% of forecast 2022 GDP). It is too early to assess the impact of these reforms on medium-term economic growth, but in its view this underlines a record of constructive relationship with European institutions. On August 20, Greece exited the European Commission's enhanced surveillance framework. Inflationary Pressures, Current Account: Annual consumer price inflation on the harmonised HICP measure this year has risen from 5.5% in January to 11.6% in May, before edging down slightly. Fitch expects HICP inflation to average 9.8% this year (revised up from 7.3% in July), and expect some persistence in prices next year, when the annual average inflation rate is expected to be 4.5% (revised up from 1.8%). Base effects will bring about a sharp decline in the inflation rate in 2024. High imported energy prices will lead to a deterioration in the current account deficit this year despite the positive impact of the tourist season on the services balance. In January-July the current account deficit was EUR9.7 billion, compared with EUR6.8billion a year earlier. For the whole year Fitch still expects a deficit of 6.5% of GDP, higher than the 'BB' median estimate (4.0% deficit). The deficit will narrow to 3.5% of GDP by 2024. ESG - Governance: Greece has an ESG Relevance Score (RS) of '5[+]' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. Theses scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in its proprietary Sovereign Rating Model. Greece has a medium WBGI ranking at 64.8 reflecting a recent track record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - Public Finances: Failure to reduce government debt/GDP over the short term, due to higher than expected deficits or weak economic performance. - Macro: Renewed adverse shocks to the Greek economy affecting the economic recovery or Greece's medium-term growth potential. - Structural Features: Adverse developments in the banking sector increasing risks to the public finances and the real economy, via the crystallisation of contingent liabilities on the sovereign's balance sheet and/or an inability to undertake new lending to support economic growth. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Public Finances: Confidence in a firm downward path for the government debt/GDP ratio resulting from primary surpluses and robust nominal GDP growth. - Structural: Continued progress on asset quality improvement by systemically important banks, consistent with successful completion of securitisation transactions and lower impairment charges, and potentially leading to improved credit provision to the private sector. - Macro/Structural: Evidence of resilience of the economy to adverse shocks, for example the regional energy crisis, or an improvement in medium-term growth potential and performance. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Greece a score equivalent to a rating of 'BB+' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee adjusted the output from the adopted SRM score to arrive at the final LT FC IDR by applying its QO, relative to SRM data and output, as follows: - Structural: -1 notch, to reflect weaknesses in the banking sector, including a very high level of NPLs, which represent a contingent liability for the sovereign, and a constraint on credit provision to the private sector. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. ESG CONSIDERATIONS Greece has an ESG Relevance Score of '5[+]' for Political Stability and Rights as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Greece has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile. Greece has an ESG Relevance Score of '5[+]' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Greece has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile. Greece has an ESG Relevance Score of '4[+]'for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. As Greece has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile. Greece has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Greece, as for all sovereigns. As Greece has a fairly recent restructuring of public debt in 2012, this has a negative impact on the credit profile. Except for the matters discussed above, the highest level of ESG credit relevance, if present, 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 to the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Greece LT IDR BB Affirmed BB ST IDR B Affirmed B LC LT IDR BB Affirmed BB LC ST IDR B Affirmed B Country Ceiling BBB+ Affirmed BBB+ senior unsecured LT BB Affirmed BB senior unsecured ST B Affirmed B GRIFONAS FINANCE 1: Fitch Affirms 'B-sf' Rating on Cl. C Notes -------------------------------------------------------------- Fitch Ratings has affirmed Grifonas Finance No. 1 Plc. Entity/Debt Rating Prior ----------- ------ ----- Grifonas Finance No. 1 Plc Class A XS0262719320 LT BBB+sf Affirmed BBB+sf Class B XS0262719759 LT BBBsf Affirmed BBBsf Class C XS0262720252 LT B-sf Affirmed B-sf TRANSACTION SUMMARY The transaction comprises fully amortising residential mortgages originated and serviced by Consignment Deposit & Loans Fund (CDLF). KEY RATING DRIVERS Credit Enhancement Expected to Rise: The affirmation reflects its view that the notes are sufficiently protected by the credit enhancement (CE) and excess spread is enough to absorb projected portfolio losses. In the short-to-medium term credit enhancement for the class A notes is expected to increase due to sequential amortisation. On the other hand, credit enhancement for the class B and C notes relies more on the cash reserve held with Elavon Financial Services DAC (AA-/Stable). The class A notes' Positive Outlook reflect the Greek sovereign Outlook, while the Stable Outlook on the class B and C notes reflects stable asset performance. Fitch expects the stable trend to continue, notwithstanding macroeconomic uncertainty, given the portfolio's deleveraging. Credit Support and Liquidity Mechanism: The transaction continues to amortise sequentially as its non-amortising cash reserve is at target, resulting in increasing credit support. Grifonas also features a stand-by liquidity facility that provides adequate liquidity to support the timely payment of the notes' interest and senior expenses. The facility is non-amortising, due to breached triggers, which could become erosive in the tail of the transaction, given the associated commitment expenses expressed as an interest rate charged on the facility amount. Interest due on the class C notes is expected to be deferred over the next year when the 5% cumulative default trigger will be breached (the ratio is currently 4.9%). RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - Insufficient credit enhancement to fully compensate the credit losses and cash flow stresses associated with the current ratings scenarios - Default Rating (IDR) that could decrease the maximum achievable rating for Greek structured finance transactions. This is because these notes are currently rated at the maximum achievable rating, four notches above the sovereign IDR Factors that could, individually or collectively, lead to positive rating action/upgrade: - Continued stable asset performance and increasing credit enhancement could lead to further upgrades of the mezzanine tranche - Class A notes are rated at the highest level on Fitch's scale and therefore cannot be upgraded. An upgrade of Greece's Long-Term IDR that could increase the maximum achievable rating for Greek structured finance transactions provided that the available credit enhancement is able to sustain higher rating stresses. 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 initial 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 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. ============= H U N G A R Y ============= NITROGENMUVEK ZRT: Fitch Retains 'B-' IDR on Watch Negative ----------------------------------------------------------- Fitch Ratings has maintained Nitrogenmuvek Zrt's 'B-' Issuer Default Rating (IDR) on Rating Watch Negative (RWN) on the continued disruption of production caused by high gas prices. Fitch has also downgraded Nitrogenmuvek's senior unsecured rating to 'B-' with a Recovery Rating of 'RR4' from 'B'/'RR3' and maintained it on RWN. The RWN reflects the uncertainty of the company's operations in a "stop-start" manner since September 2021 due to the gas crisis in Europe. It also reflects the significant execution risk the company faces to sustainably operate its nitrogen fertiliser plant in Hungary due to the volatility of gas prices and uncertainty on fertiliser affordability for farmers. The stop-start strategy, as a short-term solution, has been supported by high fertiliser prices; however, the curtailment or shutdown of production for an extended period of time would reduce the currently high cash buffer and will challenge the company's ability to refinance before 1H25. Fitch estimates if the company's plant remains shut indefinitely and if the company sells its current inventory, it will have sufficient cash to last for just over 12 months. Nitrogenmuvek's ratings reflect its small scale with a single-site operation, low geographical and product diversification, high exposure to gas-price volatility and its position at the upper end of the global ammonia cost curve as well as ownership concentration. Its rating strengths include its satisfactory liquidity position, and its dominant market share in Hungary as the only manufacturer of nitrogen fertilisers with a focus on granulated calcium ammonium nitrate. KEY RATING DRIVERS Plant Shut Down: Cash flow uncertainty persists as Nitrogenmuvek's plant has been offline since the beginning of August 2022, after having been idled in March and May 2022. Nitrogenmuvek has generated a record EBITDA in 1H22, consolidating its cash buffer, but it is now burning cash to cover fixed costs and debt amortisation with the timeframe to restart the plant is uncertain, given the continued volatility of gas prices. Fitch believes that high gas prices in 2023 will continue to affect production, with production of ammonia in Europe currently unprofitable. Fitch estimates that over half of European ammonia production is currently curtailed or shut down. Strategy Successful So Far: Nitrogenmuvek's opportunistic production during periods of relatively stable gas prices has yielded significant results, with a record high EBITDA of HUF30 billion in 1H22. Fitch believes that products manufactured in July 2022 will generate significant margins at current calcium ammonium nitrate price, which will partially cover fixed costs cash burn until end-2022, as Fitch assumes that the plant will only operate for a month at a reduced rate in 4Q22. Future opportunities to produce with viable economics is too uncertain to assume that this strategy will continue to be successful. Reduced production in 2H22 would also affect 2023 performance due to seasonality. Growing Refinancing Risk: Fitch believes that high gas prices in Europe may challenge Nitrogenmuvek's ability to refinance its main debt due in 1H25. Fitch expects Nitrogenmuvek's production to be significantly curtailed throughout 2023, leading to only slightly positive EBITDA, assuming an average TTF gas price of USD55/thousand cubic feet (mcf). This drives funds from operations (FFO) leverage to a very high level in 2023, while a gas price moderation would support a recovery of profitability from 2024. However, Fitch anticipates that FFO leverage would be at 6.5x in 2024, while the EUR200 million bond is due in 2025. Manageable Fixed Costs: In a worst-case scenario where the plant is unable to restart due to prolonged high and volatile gas prices, Fitch estimates Nitrogenmuvek has sufficient liquidity to cover fixed costs and debt service for just over 12 months. This timeframe could be less if the fine payment imposed by the Hungarian Competition Authority is made during this period, though no payment is imminent. However, the business requires significant liquidity to restart production in a high gas price environment. Single Asset Risk: Production depends on Nitrogenmuvek's sole ammonia plant, which exposes the company to operational risk. Fitch sees this single asset structure as a significant constraint on the stability of cash flow, even though it has been more stable since the completion of the capex programme that ended in 2018, after a period of recurring unplanned outages. Price and Gas Cost Volatility: Nitrogenmuvek lacks the product and geographical diversification of its international peers, and is at the upper end of the global ammonia cost curve, which leaves it more exposed to nitrogen-price volatility than lower-cost producers. It is also exposed to volatility in natural gas prices (its main raw material), which it buys through spot or short-term contracts. Fertiliser price volatility continues to be driven by gas costs, weather patterns and uncertainties around global supply and trade patterns. Moreover, plant maintenance must be performed every three years for a period of 30-45 days, which can reduce production by about 10% and adds volatility to metrics over time. Weak Corporate Governance: Nitrogenmuvek's rating factors in ownership concentration. In April 2022, the Office of Economic Competition imposed a fine of about HUF8.5 billion due to allegations that Nitrogenmuvek infringed the provision of the Law of Competition. An appeal process is ongoing and payment of the remaining HUF7.1 billion is currently suspended, but Fitch assumes that it will be paid in the coming years. DERIVATION SUMMARY Nitrogenmuvek has a significantly smaller scale and weaker diversification than most Fitch-rated EMEA fertiliser producers. This is slightly mitigated by its status as the sole domestic producer and dominant share in landlocked Hungary, with high transportation costs for competing importers. However, its business model is jeopardised by high natural gas cost. Among its wider peer group, Roehm Holding GmbH (B-/Stable), a European producer of methyl methacrylate, is a much larger and diversified company with a strong cost position in Europe, but is also exposed to raw-material volatility and has higher leverage since its acquisition by a private equity sponsor. Root Bidco S.a.r.l. (B/Stable) has higher leverage than Nitrogenmuvek and a limited diversification, but it operates on a larger scale. Root Bidco's rating also reflects the stability of its business profile due to a focus on specialty-crop nutrition, crop protection and bio-control products as well as its positioning in higher-margin segments with favourable growth prospects. Lune Holdings S.a.r.l. (B/Stable) has a similar asset concentration and has yet to establish a record of stable production at a higher operating rate. However, it has reduced its supplier dependency with the construction of an ethylene terminal, and has direct access to the Mediterranean Sea to reach export markets outside of Europe. It also maintains conservative leverage with FFO gross leverage consistently below 4x through the cycle despite significant capex. KEY ASSUMPTIONS - Fertiliser prices in line with Fitch's global fertiliser price assumptions to 2025 - TTF gas prices of USD47/mcf in 2022, USD55/mcf in 2023 and USD30/mcf in 2024 - Fertiliser sales volumes of 0.6 million tonnes (mt) in 2022 and 2023, 0.9mt in 2024 and 1.1mt in 2025 - EBITDA margin of 17% in 2022 before becoming marginal in 2023, and averaging 8% in 2024-2025 - Maintenance capex of HUF2 billion per year and HUF5 billion in 2023 due to tri-annual maintenance - No dividends KEY RECOVERY ANALYSIS ASSUMPTIONS - The recovery analysis assumes that Nitrogenmuvek would be liquidated rather than treated as going-concern (GC), as the estimated value derived from the sale of the company's assets is higher than its estimated GC enterprise value post-restructuring - The liquidation estimate reflects Fitch's view of the value of inventory and other assets that can be realised in a reorganisation and distributed to creditors - Property, plant and equipment is discounted by 65%; the value of accounts receivables by 25% and the value of inventory by 50%, in line with peers' and industry trends and taking into account high operational risk - Its EUR200 million bond ranks pari passu with the company's bank debt - After a deduction of 10% for administrative claims, its waterfall analysis generated a waterfall-generated recovery computation (WGRC) in the 'RR4' band, indicating a 'B-' instrument rating. The WGRC output percentage on current metrics and assumptions was 45%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - The ratings are on RWN, and Fitch, therefore, does not expect a positive rating action at least in the short term. However, a return of market conditions supporting profitable sustained production, evidence of sufficient liquidity headroom over the next 12 months, FFO gross leverage below 7x and FFO net leverage below 6.5x on a sustained basis could lead to a removal of RWN and the affirmation of the rating. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A material deterioration in Nitrogenmuvek's liquidity profile due to continuously high gas prices among other things, and the company's inability to sell fertilisers at high prices leading to plant shutdown for a protracted period or unprofitable operations would be rating negative - Sustained FFO gross leverage above 7.0x and FFO net leverage above 6.5x, continuous deterioration in EBITDA margin to below 10% and sustainably negative FCF would be rating negative LIQUIDITY AND DEBT STRUCTURE Shutdown Burns Buffer: Nitrogenmuvek's strong cash buffer of HUF43 billion (excluding HUF7.1 billion related to the fine payment) at end-June 2022 enabled production during July 2022, and is sufficient to cover several quarters of fixed costs in addition to an annual debt service of about HUF10 billion. Inventories produced in July will provide additional liquidity. Fitch monitors on an ongoing basis the issuer's ability to cover an extended period of shut-down related cash outflows, as Nitrogenmuvek's plant is currently shut down and the timing and duration of a restart is highly uncertain. ISSUER PROFILE Nitrogenmuvek is a privately-owned producer of nitrogen fertilisers based in Hungary. In accordance with Fitch's policies, the issuer appealed and provided additional information to Fitch that resulted in a rating action that is different from the original rating committee outcome. SUMMARY OF FINANCIAL ADJUSTMENTS EBITDA and FFO were reduced by HUF181 million corresponding to depreciation of right-of-use asset and lease-related interest expense. Lease liabilities of HUF597 million were excluded from the financial debt. ESG CONSIDERATIONS Nitrogenmuvek 's ESG Relevance Score for Governance Structure of '4' reflects its concentrated ownership and ongoing litigations over alleged infringement of the provision of the Law of Competition, 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. Debt Rating Recovery Prior ---- ------ -------- ----- Nitrogenmuvek Zrt LT IDR B- Rating Watch B- Maintained senior unsecured LT B- Downgrade RR4 B ========= I T A L Y ========= FIBER BIDCO: Fitch Assigns 'B+(EXP)' LongTerm IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has assigned Italy-based leading premium paper packaging materials and label manufacturer Fiber Bidco S.p.A. (Fedrigoni) an expected Long-Term Issuer Default Rating (IDR) of 'B+(EXP)' with a Stable Outlook. Fitch has also assigned the group's proposed EUR875 million senior secured five-year notes expected instrument ratings of 'BB-(EXP)' with Recovery Ratings of 'RR3'. The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. The Long-Term IDR of Fedrigoni balances its forecast high leverage and modest deleveraging prospects with a solid business profile. The business profile is underpinned by strong positions in growing premium niche markets with sound end-market and customer diversification. Fitch forecasts that the group's exposure to raw-material price volatility will be mitigated by its ability to pass on costs to customers and hedging efforts. Fitch expects the group to continue to pursue a bolt-on M&A-driven growth strategy, which bears execution risk. However, this is mitigated by the group's successful integration record together with its prudent policy of acquiring companies with a clear strategic fit at sensible valuations. KEY RATING DRIVERS Solid Business Profile: Fedrigoni's business profile is mainly underpinned by its strong positions in growing premium niche markets. This is complemented by both sound end-market and customer diversification with significant exposure to fairly resilient end-markets in food and beverage, household goods, pharma and personal care. Other strengths are the breadth and quality of its product range, well-established relations with leading luxury brands, a high share of tailored-made products and efficient distribution network. Strong Market Position: Fedrigoni is one of the market leaders in growing premium niches. Within the self-adhesives segment, it is the third-largest manufacturer of pressure-sensitive labels globally, and in particular a leader in the wine end-market. In luxury packaging, Fedrigoni is the global market leader in rigid cartons and shopping bags with a growing foothold in the folding boxes segment. However, the group's key target markets are fragmented and competitive with moderate barriers to entry. Cost Pass-Through Ability: The group is not vertically integrated into pulp and it is therefore exposed to changes in both raw materials and commodity prices (such as pulp, film, adhesives and natural gas). Fitch expects the group's margin volatility to be mitigated by its ability to pass on cost inflation and hedging efforts. Fedrigoni's sound record of cost pass-through is supported by its strong customer relationships developed through the group's market position, high share of tailored-made products and leading delivery times. Highly Acquisitive Growth Strategy: Fitch expects the group to continue to pursue an M&A-driven growth strategy, which bears execution risks. For 2023-2025, Fitch expects the group to spend around EUR150 million annually on acquisitions. Execution risk is mitigated by the group's successful integration record and prudent policy to acquire high-quality companies with a strong return on capital and at sensible valuations. Its M&A pipeline, deal parameters and post-merger integration are important rating drivers. Sound Profitability: Fitch said, "We expect Fedrigoni will continue to generate positive free cash flow (FCF) through the cycle. Its moderate operating profitability is offset by strong cash conversion. We assume a cumulative 2pp improvement in EBITDA margin in 2022-2025, mainly driven by a gradual shift in its business mix towards more profitable niches (eg premium fillers, luxury packaging, wine labels) and cost savings from various operational initiatives in procurement and manufacturing. The ability to sustain margin improvement, despite inflation and potential energy challenges, will be key for Fedrigoni's financial profile." Rating Limited by Leverage: The rating is constrained to the high 'B' category because of high leverage and expected modest deleveraging during the next four years. Fitch forecasts total debt to amount to around 5.1x EBITDA at end-2022. Fitch expects gradual deleveraging towards around 4.1x by end-2025, mainly on the back of improving operating profitability. DERIVATION SUMMARY Fedrigoni is a specialty paper and packaging producer, which is smaller in scale than Fitch-rated peers such as Stora Enso Oyj (BBB-/Stable) and Smurfit Kappa Group plc (BBB-/Stable). Fitch views Fedrigoni's business profile as modestly stronger than that of producer of recycled paperboard, Rimini Bidco S.p.A (Reno De Medici (RDM); B+/Stable), mainly due to stronger product and geographic diversification. Fitch views Fedrigoni's financial profile as weaker than RDM's due to its higher expected leverage and weaker coverage. Both companies have sound profitability with expected strong FCF generation and moderate operating profitability. Similarly to Titan Holdings II BV (Eviosys; B/Positive) Fedrigoni's margins have historically lagged Fitch-rated peers'. However, we expect Fedrigoni to catch up with healthy 14%-15% EBITDA margins from 2023-2025. KEY ASSUMPTIONS - Revenue of around EUR2.2 billion in 2022. Organic revenue to decline by mid-single digits in 2023 before rebounding by mid-single digits in 2024 and 2025 - Average annual M&A spend of around EUR150 million in 2023-2025 (no guidance from the group) - EBITDA margin of 13.2% in 2022, gradually increasing to 15.1% by 2025 - Capex at 3.5%-3.8% of revenue annually in 2022-2024 and 3% in 2025 - Proportionate consolidation of Tageos, reflecting Fedrigoni's long-term strategic interest in the company - No dividends KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that Fedrigoni would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated - A 10% administrative claim - For the purpose of recovery analysis, Fitch assumed that debt post-senior secured notes issuance comprises EUR875 million notes, EUR150 million term loan A, an EUR150 million revolving credit facility (RCF; assumed fully drawn), EUR347 million non-recourse factoring (the highest drawn amount in LTM to 1H22) and around EUR53 million other debt (including modest debt at Tageos assuming proportionate consolidation). - The GC EBITDA estimate of EUR210 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch bases the group's enterprise valuation (EV) - The GC EBITDA assumption equals cash flow - assuming average EBITDA margins of around 11%, reflecting intense market competition - and LTM to 1H22 revenue of around EUR1.9 billion - An EV multiple of 5.5x EBITDA is applied to the GC EBITDA to calculate a post-re-organisation EV - The multiple reflects Fedrigroni's strong positions in growing premium niche markets, established customer relationships and well-developed own distribution network - The selected multiple of 5.5x is in line with that of RDM, Titan Holding II B.V. and Ardagh Group S.A. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Total debt/operating EBITDA below 4.5x on a sustained basis - Funds from operations (FFO) gross leverage below 5.5x on a sustained basis - FCF margin above 3% on a sustained basis Factors that could, individually or collectively, lead to negative rating action/downgrade: - Total debt/operating EBITDA above 6.0x on a sustained basis - FFO gross leverage above 7.0x on a sustained basis - Neutral to negative FCF margin on a sustained basis - Problems with integration of acquisitions or increased debt funding LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: Liquidity at the closing of the notes issuance is expected to mainly consist of an EUR150 million undrawn 4.5-year RCF. Fitch expects positive FCF generation over the next four years. There will be no significant short-term debt maturities (apart from an overdraft and non-recourse factoring) as the new debt structure will be dominated by the proposed EUR875 million senior secured five-year notes. ESG CONSIDERATIONS Fedrigroni has an ESG Relevance Score of '4' [+] for Exposure to Social Impacts due to consumer preference shift to more sustainable packaging solutions such as paper packaging, which has a positive impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery ----------- ------ -------- Fiber Bidco S.p.A. LT IDR B+(EXP) Expected Rating senior secured LT BB-(EXP) Expected Rating RR3 =================== K A Z A K H S T A N =================== FORTELEASING JSC: Fitch Assigns 'BB-' LongTerm IDRs, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has assigned JSC ForteLeasing (FL) Long-Term Foreign- (FC) and Local-Currency (LC) Issuer Default Ratings (IDRs) of 'BB-' and The Outlooks on both IDRs are Stable. Fitch has also assigned a Shareholder Support Rating (SSR) of 'bb-'. KEY RATING DRIVERS The ratings of FL are driven by support from its ultimate shareholder ForteBank Joint Stock Company (FB, BB-/Stable/bb-) - one of the largest privately-owned banks in Kazakhstan. Its 'A-(kaz)' National Rating reflects FL's creditworthiness relative to domestic peers'. Its view of support is based on FL's close integration in FB, strategic role for FB as the only leasing entity in the group, full ownership by the bank, common branding as well as significant reputational risk for the parent bank in case of the leasing subsidiary's default. Fitch's view of support is additionally underpinned by close supervision of FL by the parent bank's management, sizeable parental funding (49% of FL's borrowings at end-1H22), as well as FL's leading position among privately owned domestic leasing companies and record of acceptable performance. Fitch believes FL's small size relative to FB's (less than 1% of total assets) makes potential further support manageable for the shareholder. FL's Standalone Credit Profile (SCP) is, in Fitch's view, materially weaker than its support-driven IDRs. This is due to FL's very high reliance on FB for business origination, risk controls and funding, as well as its modest franchise in absolute size. FL has a small market share and almost no pricing power. Its business model focuses on leasing of trucks and specialised vehicles and benefits from close integration with the parent bank. FL's largely unseasoned portfolio is concentrated both by leasing asset type and single name. FL's asset quality has demonstrated resilience amid the pandemic, with problem receivables having decreased to around 5% of total receivables at end-1H22 from around 11% at end-2020. The problem receivables ratio was also flattered by rapid portfolio growth, averaging around 62% in the last four years (annualised 71% in 1H22). Fitch believes FL's asset quality could come under pressure from a volatile operating environment amplified by its seasoning lease portfolio. FL's profitability was supported by a healthy net interest margin of 12% in 1H22 (annualised) and operational efficiency helped by its strong ties with the parent. This resulted in a sound pre-tax return on average assets at 5% in 1H22 annualised (7% in 2021). FL's ability to pass on interest rate hikes to their customers and protect its currently healthy margins amid a monetary tightening cycle is yet to be tested. Fitch expects higher provisioning costs stemming from asset-quality pressures to weigh on the company's profitability in 2023. FL's gross debt/tangible equity increased to 1.3x at end-1H22 from 0.6x at end-2020 as leasing portfolio growth outpaced internal equity generation. Sound profitability and full profit retention should, in its view, support FL's capital and leverage position. However, high single-name concentration, with the 10- largest leasing exposures amounting to 85% of FL's capital could affect the quality of capital. FL is not subject to regulatory or covenanted capital requirements, which should support its growth plans. In Fitch's view, FB would provide capital support should it be required by FL. FL is mostly funded from the parent bank and state-owned fund DAMU (51% of total borrowings). State funding, while secured, is at favourable conditions with fairly low interest rates, which may not be sustainable as the key rate increases. In its view, FL's funding profile benefits from access to parent- bank funding, and Fitch believes the bank would provide liquidity support should it become necessary. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - A weakening of FB's propensity to support FL due to, for example, weaker integration, reduced ownership or potential deviation of FL from the group's objectives - A downgrade of FB's ratings will result in a corresponding downgrade of FL's ratings Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade of FB's IDR will result in a corresponding upgrade of FL's ratings ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating ----------- ------ JSC ForteLeasing LT IDR BB- New Rating ST IDR B New Rating LC LT IDR BB- New Rating LC ST IDR B New Rating Natl LT A-(kaz) New Rating Shareholder Support bb- New Rating =================== L U X E M B O U R G =================== SPORTRADAR MGMT: Fitch Hikes LongTerm IDR to 'BB-', Outlook Stable ------------------------------------------------------------------ Fitch Ratings has upgraded Sportradar Management Ltd's (SRAD) Long-Term Issuer Default Rating (IDR) to 'BB-' from 'B'. The Outlook is Stable. Fitch has also upgraded Sportradar Capital S.a r.l.'s senior secured term loan to 'BB+' from 'B+'. The Recovery Rating is 'RR2'. The upgrade follows SRAD's EUR200 million prepayment of its EUR420 million senior secured term loan B (TLB), which Fitch expects to significantly reduce gross leverage. Fitch expects strong organic revenue growth and increasing EBITDA margins for 2022 and 2023. This will lead to good cash flow generation and free cash flow (FCF) exceeding EUR50 million by 2023. The rating and Stable Outlook are also supported by SRAD's strong business profile as a leader in its core markets with high barriers to entry, contracted revenues and low churn rates. KEY RATING DRIVERS Debt Prepayment Lowers Leverage: In July 2022, SRAD made a EUR200 million prepayment on its EUR420 million senior secured TLB. Fitch now expects its gross debt to fall to 3.6x funds from operations (FFO) at end-2022 and below 3x in 2023, leaving ample leverage headroom at its rating. Fitch expects SRAD to show good deleveraging capacity given its organic EBITDA growth potential. SRAD has not committed to a public leverage target but has been in a net cash position since its IPO in 2021 and has not announced plans to make shareholder payments. With its large cash balance and rising interest rates, large debt-funded acquisitions seem unlikely in the short term. M&A Event Risk Remains: Small bolt-on acquisitions will remain a key part of SRAD's growth strategy. Recent acquisitions like Interact Sport or Vaix bring new capabilities that can be sold to the existing customer base and increase EBITDA growth potential. M&A funded through available cash typically improves FFO gross leverage over the long term. However, the acquisition of loss-making companies can erode its EBITDA margin in the first years of consolidation and constrain deleveraging. Limited Refinancing Risk: Refinancing risk is limited as SRAD's remaining debt matures in 2027 and the company was in a net cash position of EUR291 million in July 2022 following the prepayment. As its TLB is floating rate the prepayment will also help to limit the impact of future interest-rate increases. Strong Interim Revenue Growth: In 1H22 SRAD reported a 26.8% increase in total revenue including an 89.3% increase in the US. Growth in the rest of world (ROW) betting was driven largely by upselling customers onto higher-fee products like live odds and managed betting services (MBS). Growth in the US was driven by the acquisition of Synergy Sports and growth in media and betting revenues as more states legalised gambling. Fitch expects organic revenue growth to average around 11% between 2023 and 2025, reflecting continued customer upselling, increased legalisation in the US and market growth in countries like India and Brazil. Shrinking US Losses: SRAD's US EBITDA margin in 2Q22 improved to -19% from -27% a year before. Fitch now expects SRAD to turn profitable by 2024, a year earlier than initially expected. The high operating leverage caused by expensive sports rights should mean that as revenue growth continues the margin increases. Over 30 states have now legalised sports betting in some form and more look set to follow. SRAD's exclusive data rights portfolio, increased penetration of in-play betting and contracts with media and betting companies position it well to hold its leading position in a high-growth market. Margin Pressures in 2022: SRAD's adjusted EBITDA margins contracted significantly in 1H22 to 15.7% from 21.9% a year ago. This reflected cost inflation and the impact of the conflict in Ukraine, which led to an EBITDA loss of around EUR20 million. The two largest costs are sports rights and personnel and both will increase significantly in 2022. Fitch expects cost inflation to continue into 2023 with more rights coming due for auction and personnel cost increases. High operating leverage, an improving business mix and smaller US losses should see revenue growth outpace cost inflation and lead to increased margins from 2023. US Sports Rights Inflation: SRAD is growing well in a developing US market and key to its strategy is acquiring sports data rights. Data for the biggest sports in the US is sold largely on an exclusive basis with domestic sportsbooks required to use this data source. As the market grows and the value of this data increases, competition for these rights will intensify. SRAD may face higher prices per competition or risk losing key rights revenue if it does not bid higher than its competitors as happened with the NFL last year. SRAD's rights portfolio is well-diversified globally, which mitigates the EBITDA risk of losing individual rights like the NHL or UEFA leagues. DERIVATION SUMMARY SRAD's Fitch-defined EBITDA of below EUR100 million is smaller than that of its publicly rated data analytics business services peers such as Dun & Bradstreet Corporation (BB-/Positive) or GfK SE (BB-/RWN). It has strong geographic diversification and good contracted revenue visibility. SRAD has weaker product diversification than these companies with full exposure to the betting industry and exposure to sports rights renewal and inflation risk. SRAD is the leader in a rapidly growing market, with revenue growth exceeding its mature investment grade-rated peers'. At 3x FFO gross leverage, the financial profile will become more consistent with that of other data analytics and media companies in the 'BB' rating category, like Stan Holding SAS (BB/Negative) or GfK SE. SRAD is exposed to betting risk as part of its managed trading services (9% of 2019 revenues) where it typically takes a share of trading profits or losses. In its view, its business model compares favourably with traditional bookmakers'. It has no physical retail stores, is a clear leader in a market with only four main competitors, is not as directly exposed to betting volumes or regulatory pressures and is geographically diversified. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue growth of 23.6% in 2022 on continued organic growth across all segments with ROW betting and the US the biggest contributors. This is followed by an average organic revenue growth of 9% for the following three years - EBITDA margin to decline in 2022 as a result of increased headcount costs and the Ukraine conflict. Thereafter Fitch expects EBITDA margins to increase to just over 15% by 2024, reflecting high operating leverage - Total sports rights expense (including depreciation) at 28%-30% of revenue between 2022 and 2025 - Capex (excluding sports rights) at 1% of revenue to 2025 - Slightly negative working capital cash flows between 2022 and 2025 - No new M&A other than that announced - No dividends or other shareholder payments between 2022 and 2025 RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - FFO gross leverage below 3.5x on a sustained basis (equivalent to around 3.0x Fitch-defined total debt /EBITDA) with a public commitment to a stated leverage policy below this level - Increased clarity on SRAD's planned use of its cash, together with reduced uncertainty over M&A risk - Fitch-defined EBITDA margin trending towards 20% on a sustained basis with positive contribution from the US business Factors that could, individually or collectively, lead to negative rating action/downgrade: - FFO gross leverage sustainably above 4.5x (equivalent to around 4.0x Fitch-defined total debt / EBITDA) - Fitch-defined EBITDA margin expected to remain below 15% on a sustained basis - FCF margin falling below 5% - FFO interest coverage falling below 3x LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: At end-July 2022, SRAD had cash and cash equivalents of EUR529 million and an undrawn EUR110 million revolving credit facility. The company is in a net cash position and is expected to generate stable positive FCF over the next four years. Refinancing risk is limited and FFO interest coverage is expected to be sufficient over the next four years. ISSUER PROFILE SRAD is a leading service provider of end-to-end sports data analytics solutions to both betting and media industries, as well as to sport federations and authorities. The company covers the entire value chain of collecting, processing, marketing and monitoring of sports-related live data with multiple-use cases. ESG CONSIDERATIONS SRAD has an ESG Relevance Score of '4' for Exposure to Social Impacts due to increasing regulatory scrutiny on the sector, greater awareness around social implications of gaming addiction and an increasing focus on responsible gaming, in the UK and increasingly in other markets where the company is present. This factor has a negative impact on the credit profile, as already reflected in the rating, 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. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Sportradar Capital S.a.r.l senior secured LT BB+ Upgrade RR2 B+ Sportradar Management Ltd LT IDR BB- Upgrade B SUBCALIDORA 1: Fitch Assigns 'B' LongTerm IDR, Outlook Stable ------------------------------------------------------------- Fitch Ratings has assigned Subcalidora 1 S.a.r.l. (Mediapro) a Long-Term Issuer Default Rating (IDR) of 'B' with a Stable Outlook. Fitch has also assigned Subcalidora 2 S.a.r.l.'s EUR500 million term loan A (TLA) a senior secured rating of 'BB-' with a Recovery Rating of 'RR2'. The rating follows the successful refinancing of the company's outstanding debt on 28 July 2022 and, consequently, improvement in leverage, liquidity and refinancing risk. Mediapro has changed its group structure such that Subcalidora 1 S.a.r.l. is now the head of the restricted group. As a result, Fitch has upgraded Invictus Media S.A.U's IDR to 'B' from 'CCC+ and withdrawn it. The Outlook on the IDR was Stable at withdrawal. The senior secured and senior secured second lien instrument ratings at this company are also withdrawn following their early repayment. The ratings have been withdrawn following the refinancing of Mediapro's debt at Subcalidora 2 S.a.r.l. and repayment of the debt at Invictus Media S.A.U. KEY RATING DRIVERS Refinancing Improves Liquidity: Following the refinancing of Mediapro's debt, it has successfully extended its debt maturities and improved short-term liquidity. Fitch expects the company to maintain at least EUR100 million of available cash during the next four years after servicing its interest and amortisation payments on the new TLA facility. The new financing does not include a revolving credit facility (RCF). This means that if Mediapro significantly underperforms against its expectations of EBITDA, such as the loss of the La Liga International services contract, this could constrain future liquidity. Low Interest Coverage: The TLA is a floating-rate loan with a 7.5% margin over EURIBOR. Fitch expects interest payments increase to EUR45 million-EUR50 million per year after the refinancing, reflecting higher interest rates. Fitch expects EBITDA/interest to be lower than its negative sensitivity until 2024 and a negative rating action could occur if the metric does not show progress towards exceeding our threshold by end-2024. Fitch expects modest growth in EBITDA and increased interest costs to result in a free cash flow (FCF) margin of less than 1%, which is weaker than other 'B' rated media companies'. Modest Leverage: The injection of EUR620 million in 2022 by Southwind Group demonstrated shareholders' commitment in supporting Mediapro's business. The equity injection resolved working-capital issues and paid off outstanding debt. After the refinancing Fitch expects significantly lower leverage than in the previous three years. Fitch expects Fitch-defined funds from operations (FFO) gross leverage to fall to 4.9x by end-2022, from 11.3x by end-2021. Expected good deleveraging capacity means the company has ample leverage headroom at its current rating. EBITDA Decline Expected in 2022: Mediapro lost the rights to the Champions League and La Liga domestic bars and restaurants from 2021. It is also expected to report lower EBITDA from its international La Liga services contract after a change in the commission rate in 2022. The Qatar World Cup will reduce the number of matches played in Spain's La Liga in 2022 with five less games played compared with 2021. Fitch expects these changes to all contribute to a decline in Fitch-defined EBITDA to around EUR120 million in 2022, from EUR155 million in 2021. Fitch-defined EBITDA is after lease interest and right-of-use asset depreciation. Contract Renewal Risk Remains: Mediapro's longstanding relationship with La Liga supports the likely renewal of its international agency contract when it expires at the end of the 2023/24 season. This is also supported by the company already having sold rights beyond the expiry date of the current contract in the US and Mexico, among other countries. Failure to renew the contract would likely reduce EBITDA by around EUR50 million-EUR60 million per year. This could lead to increased leverage and constrain FCF generation. Exposure to contract renewal risk from such a large contract decreases its visibility of future earnings and implies higher business-model risk than that of peers with greater contract diversification. DERIVATION SUMMARY Fitch assesses Mediapro using its Ratings Navigator for Diversified Media Companies and by benchmarking it against selected Fitch-rated rights-management and content-producing peers, none of which Fitch views as a complete comparator given Mediapro's fully integrated business model. Mediapro's 'B' rating reflects its modest scale, low interest coverage and modest FCF margins relative to higher rated media peers'. Mediapro has a strong competitive position, and stronger regional, rather than global, sector presence but this is offset by high dependence on key accounts (in particular the International La Liga contract) and a lower FCF base than peers'. Fitch believes Mediapro has a weaker business profile than Banijay Group SAS's (B/Stable), driven by the former's high contract renewal risk. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue to decline 4%-7% in 2022 and 2023, reflecting the loss of domestic sports rights in Spain, disruption to 2022 match schedules during The World Cup and lower commissions received on the international La Liga contract. Thereafter Fitch expects low single-digit revenue growth to 2025 - Fitch-defined EBITDA margin to decline in 2022 to 10.6%, before increasing towards pre-pandemic levels by 2026 - Capex at around 5%-7% of revenue to 2025 - Working-capital outflows of around EUR5 million-EUR11 million per year for 2022-2025 - No shareholder payments to 2025 KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that Mediapro would be considered a going concern in bankruptcy and that the company would be reorganised rather than liquidated - A 10% administrative claim - Post-restructuring going-concern EBITDA estimated at EUR93 million, reflecting a loss of key contracts or material under-performance in EBITDA - An enterprise value (EV) multiple of 4.5x is used to calculate a post-reorganisation valuation - These assumptions result in a recovery rate of 75% for the senior secured instrument rating within the 'RR2' range, resulting in a two-notch uplift from the IDR RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Successful strategy implementation combined with increased diversification of the business model and a significantly lower proportion of EBITDA coming from the La Liga International contract - Growth in EBITDA to above EUR150 million with consistently positive FCF generation and mid-single- digit FCF margins, contributing to a reduction in FFO gross leverage to below 4.5x on a sustained basis (equivalent to around 4.0x Fitch-defined total debt/EBITDA) Factors that could, individually or collectively, lead to negative rating action/downgrade: - Non-renewal of the La Liga international contract or under-performance in other business areas, leading to negative FCF or FFO gross leverage increasing above 5.5x on a sustained basis (equivalent to around 5.0x Fitch-defined total debt/EBITDA) - FFO interest coverage remaining below 2.0x on a sustained basis (equivalent to around 2.5x Fitch-defined EBITDA /interest) - Readily available liquidity falling below EUR100 million during the year LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: Following the refinancing of its debt Mediapro does not face any short-term debt maturities. Its TLA is amortising with EUR5 million payable in year 1, EUR15 million in year 2, EUR25 million in years 3 & 4 and the outstanding EUR430 million in year 5. Fitch expects modest growth in EBITDA to be somewhat offset by increased interest costs, resulting in negative FCF in 2022 and 2023 before it turns positive in 2024 and 2025. At this level Fitch sees view Mediapro as having sufficient available liquidity to service its upcoming amortisation and interest payments over the next four years while maintaining an available cash balance of at least EUR100 million. ISSUER PROFILE Imagina is a Spanish-based vertically integrated global sports and media entertainment group operating across the entire value chain from rights management through content production using own audio-visual capabilities in production, broadcasting and transmission. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Subcalidora 1 S.a.r.l. LT IDR B New Rating Subcalidora 2 S.a.r.l. senior secured LT BB- New Rating RR2 Invictus Media S.A.U LT IDR B Upgrade CCC+ LT IDR WD Withdrawn B senior secured LT WD Withdrawn B Senior Secured 2nd Lien LT WD Withdrawn B- ===================== N E T H E R L A N D S ===================== ATHORA NETHERLANDS: Fitch Affirms 'BB+' Rating on Jr. Sub. Debt --------------------------------------------------------------- Fitch Ratings has affirmed Athora Life Re Ltd.'s, Athora Ireland plc's and SRLEV N.V.'s Insurer Financial Strength Ratings (IFS) at 'A' (Strong) and Athora Holding Ltd.'s (Athora, ultimate parent company of the Athora group) and Athora Netherlands N.V.'s Issuer Default Ratings (IDR) at 'A-'. The Outlooks are Stable. KEY RATING DRIVERS Very Strong Company Profile: Fitch regards Athora's business profile as 'Favourable' compared with Dutch life insurers'. With total assets of EUR81 billion at end-June 2022, Athora has a leading market position and franchise within the European life consolidator market, and its operating scale is favourable compared with other European life insurance groups'. In July 2022, Athora announced that it will acquire a closed book of life insurance contracts from AXA Germany, increasing the group's consolidated total assets by more than 25%. This will further improve its geographical diversification, which Fitch assesses as 'Favourable'. Strong Financial Performance: Fitch said, "We expect Athora's profitability to benefit from the implementation of the strategic asset allocation at SRLEV N.V., favouring higher yielding investments. We expect Athora to achieve a Fitch-calculated net income return on equity (ROE) of at least 8% in 2023." Athora's net income ROE increased to an annualised 52% in 1H22 from 3% in 2021. However, Fitch regards this rise as not sustainable as it was driven by an asset-liability accounting mismatch, with interest-rate movements affecting differently assets and liabilities in the group's accounts. Total comprehensive income, which includes realised and unrealised income, showed a loss of EUR0.6 billion in 1H22, as other comprehensive income suffered from the accounting mismatch. Very Strong Capitalisation and Leverage: Fitch expects Athora's group capitalisation to decline modestly as the group grows its business, but its Prism Factor-Based Capital Model (Prism FBM) score to be at least 'Very Strong' in the medium term. Athora's Prism FBM score was 'Extremely Strong' at end-June 2022. Fitch expects Athora's financial leverage ratio (FLR) to remain below 30% at end-2022; it was 29% at end-June 2022 and 24% at end-2021. The weakening in 1H22 was due to the decline in total equity. High Investment Risk: Fitch regards Athora's investment risk as high, but manageable. Most of Athora's investments are holdings of investment-grade corporate and sovereign bonds. Athora also invests in private credit assets, alternative investments and commercial mortgage loans. This results in an above-average portion of non-investment-grade bonds, most of which are unrated. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - A sustained ROE of more than 10% while maintaining at least a 'Very Strong' Prism FBM score and FLR below 30%, which Fitch regards as unlikely in the medium term. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A fall in the Prism FBM score to 'Strong' - A sustained increase in the FLR above 30% - A sustained ROE below 5% ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- SRLEV N.V. LT IDR A- Affirmed A- Ins Fin Str A Affirmed A subordinated LT BBB Affirmed BBB Athora Ireland plc Ins Fin Str A Affirmed A Athora Holding Ltd. LT IDR A- Affirmed A- Athora Life Re Ltd. Ins Fin Str A Affirmed A Athora Netherlands N.V. LT IDR A- Affirmed A- senior unsecured LT BBB+ Affirmed BBB+ subordinated LT BBB- Affirmed BBB- junior subordinated LT BB+ Affirmed BB+ ============= R O M A N I A ============= NEMO EXPRESS: Files Request to Open Insolvency Proceedings ---------------------------------------------------------- Bogdan Todasca at SeeNews reports that Romanian courier company Nemo Express Logistic said it has filed a request with the Ilfov county court to open insolvency proceedings. According to SeeNews, Nemo Express seeks to maintain operational control under the supervision of a designated insolvency practitioner, it said in a report filed with the Bucharest Stock Exchange (BVB) on Oct. 17. The company will also propose a restructuring plan in order to keep itself afloat and satisfy its creditors, SeeNews discloses. By Tuesday, Oct. 18, five creditors joined the company's petition for insolvency, including former Nemo Express shareholder Capital Fleet, home appliances retailer Premium Store, and construction equipment retailer Maxjonel, SeeNews relays, citing data posted on the justice ministry's online portal. =========== S E R B I A =========== SRPSKA FABRIKA: Public Auction Fails to Attract Buyers ------------------------------------------------------ Djordje Jajcanin at SeeNews reports that a public auction for insolvent Serbian glassmaker Srpska Fabrika Stakla (SFS) failed, the city authorities of Paracin, where the company is based, said. According to SeeNews, the only candidate buyer to meet the conditions for participation in the auction offered less than half the asking price of RSD10.1 billion (US$85 million/EUR86 million), the company's bankruptcy administrator Svetlana Simeunovic said, as quoted by the Paracin authorities. The bankruptcy administrator has referred the offer to the board of creditors, who will make a final decision on whether to accept it within 15 days of the submission of the request, SeeNews discloses. SFS was put up for sale on Sept. 7, SeeNews notes. SFS was taken over in 2012 by international group Glass Industry, affiliated with runaway Bulgarian businessman Tsvetan Vasilev, who sold it to Belgrade-based arms dealer CPR Impex in 2015, SeeNews states. SFS was declared bankrupt in 2017, SeeNews recounts. ========= S P A I N ========= RURAL HIPOTECARIO VIII: Fitch Affirms CCsf Rating on Class E Debt ----------------------------------------------------------------- Fitch Ratings has upgraded one tranche of Rural Hipotecario VIII, FTA and two tranches of Rural Hipotecario IX, FTA and affirmed the others. The Outlooks are Stable. Entity/Debt Rating Prior ----------- ------ ----- Rural Hipotecario VIII, FTA Class A2a ES0366367011 LT AAAsf Affirmed AAAsf Class A2b ES0366367029 LT AAAsf Affirmed AAAsf Class B ES0366367037 LT AAsf Affirmed AAsf Class C ES0366367045 LT A+sf Affirmed A+sf Class D ES0366367052 LT Asf Upgrade BBB+sf Class E ES0366367060 LT CCsf Affirmed CCsf Rural Hipotecario IX, FTA Class A2 ES0374274019 LT AAAsf Affirmed AAAsf Class A3 ES0374274027 LT AAAsf Affirmed AAAsf Class B ES0374274035 LT AAsf Upgrade A+sf Class C ES0374274043 LT Asf Affirmed Asf Class D ES0374274050 LT BBB+sf Upgrade BBBsf Class E (RF) ES0374274068 LT CCsf Affirmed CCsf TRANSACTION SUMMARY The static Spanish RMBS transactions comprise fully amortising residential mortgages originated and serviced by multiple rural savings banks in Spain with a back-up servicer arrangement with Banco Cooperativo Espanol S.A. (BBB/Stable/F2). KEY RATING DRIVERS Stable Asset Performance: The rating actions reflect the broadly stable asset performance outlook for both transactions, driven by the low share of loans in arrears over 90 days (less than 0.6% excluding defaults of portfolio balance as of the latest reporting date), high portfolio seasoning of more than 15 years and low current loan-to-value ratios (in range between 29% and 35%). However, downside performance risk has increased as the recent spike in inflation may put pressure on household financing, especially for more vulnerable borrowers like self-employed individuals. Robust CE: The rating actions reflect Fitch's view that the notes are sufficiently protected by credit enhancement (CE) to absorb the projected losses commensurate with higher and prevailing rating scenarios. Fitch expects CE ratios to gradually increase in the coming months considering the pro-rata note amortisation and the reserve funds being already at their absolute floor. Moreover, CE build up for the senior notes will accelerate when note amortisation switches to fully sequential, when the outstanding portfolio balance represents less than 10% of their original amount (currently 11.6% for Rural VIII and 17.4% for Rural IX). Rating Caps Due to Counterparty Risks: Both transactions' class D notes' ratings are capped at the transaction account bank (TAB) provider deposit rating (Societe Generale S.A., deposit rating 'A') as the cash reserves held at this entity represent the main source of structural CE for these notes. The rating cap reflects the excessive counterparty dependence on the TAB holding the cash reserves, in accordance with Fitch's Structured Finance and Covered Bonds Counterparty Rating Criteria. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: For the class A notes, a downgrade of Spain's Long-Term Issuer Default Rating (IDR) that could lower the maximum achievable rating for Spanish structured finance transactions. This is because the class A notes are rated at the 'AAAsf' maximum achievable rating in Spain, 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: The class A notes are rated at the highest level on Fitch's scale and cannot be upgraded. For Rural VIII's class D notes, an upgrade of the TAB's deposit rating could lead to an upgrade of the notes' rating. For mezzanine and junior notes, increased CE as the transactions deleverage to fully compensate the credit losses and cash flow stresses that are commensurate with higher rating scenarios. DATA ADEQUACY Rural Hipotecario IX, FTA, Rural Hipotecario VIII, FTA Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool[s] and the transaction[s]. 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[s] ahead of the transaction's [Rural Hipotecario IX, FTA, Rural Hipotecario VIII, FTA] initial closing. The subsequent performance of the transaction[s] 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. TELEFONICA EUROPE: Fitch Affirms 'BB+' Rating on Subordinated Debt ------------------------------------------------------------------ Fitch Ratings has affirmed Telefonica SA's (TEF) Long-Term Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook. TEF's rating reflects its broad geographic spread of leading telecommunications businesses, solid cash flow, advanced infrastructure investment and improving financial performance. A prudent financial policy, including a sizeable reduction in gross debt and the effective adoption of capital-light structures in its Latin American (Hispam) operations, have been hampered by negative currency impacts, in particular a weak Brazilian real (BRL). Management actions to reshape portfolio operations, effective currency strategies and cuts in shareholder distributions, have been supportive of the rating and helped build leverage headroom to its rating downgrade thresholds. Positive operating trends and stronger Latin American currencies are forecast to increase headroom further. Its rating case forecasts net debt/EBITDA of 2.9x in 2022 and 2.7x by 2024, compared with upgrade / downgrade thresholds of 2.7x and 3.2x, respectively. Macro-economic uncertainty and its associated operational impacts and the sustainability of foreign-exchange (FX) rates are downside risks. KEY RATING DRIVERS Improved Rating Headroom: TEF's funds from operations (FFO) net leverage of 3.4x at end-2021, versus its previous rating-case forecast of 3.6x, reflected better-than-forecast cash flow generation and debt reduction and, to a lesser extent, positive FX movement. Its current rating case forecasts 3.3x for 2022, on continuing cash flow improvement and the positive effects of stronger FX rates in Latin America, notably the Brazilian real. This should lead to better leverage headroom. Ability to sustain its operational performance in the face of weakening global economic conditions and better visibility over FX rates may be positive for its credit profile. Businesses Performing Well: TEF's key consolidated markets of Spain, Germany and Brazil delivered stable to strong organic performance in 1H22. Hispam (excluding Brazil) which management continue to deem as less strategic, has been through a turnaround and is also performing well. Organic revenue growth of 4.2% included strong performance in Germany (+5.5%) and Brazil (+7.8%), with full-year guidance upgraded modestly for both revenue and EBITDA. Market Consolidation: Spain's telecom market is highly competitive with four fully convergent operators (i.e. offering fixed-mobile converged services) and a well-developed alternative service provider market in both fixed and mobile. A deflationary price environment should ease over the medium term as the proposed merger of MasMovil (Lorca; B+/Stable) and Orange Spain would create a stronger market number two with an estimated 37% of revenues behind TEF's 44%. However, ahead of the merger's expected close in 2023 Fitch expects pressure to remain as operators jostle for market share. Consolidation in Brazil Also Positive: A four-to-three operator consolidation of the Brazilian mobile market, which completed in 1H22 is positive for both the market and TEF. Brazil is a high-growth and high-margin business for TEF, roughly equal in size to Spain and therefore one of its two largest markets. TEF's Vivo brand is the market leader and reported revenue growth of close to 27% (in euro terms) in 1H22, benefiting significantly from positive FX movements and 7.8% organic growth. Sizeable VMO2 Dividend: The creation of the VMED O2 UK Limited (VMO2; BB-/Stable) joint venture (combining the Virgin Media cable network and TEF's UK mobile business) in 2021 was the UK's second largest convergent network operator with the scale and cash flow to compete more effectively with BT Group plc's (BBB/Stable) incumbent business. A JV dividend of GBP1.6 billion to be paid in 2022 was partly a recapitalisation given a leverage target at the upper end of a 4x to 5x range. Although it is not a level Fitch expects to be repeated consistently, the dividend demonstrates the significant cash flow potential of the JV. UK Fibre JV: VMO2's recent fibre JV announcement will ease the capex budget at the UK operator and over the medium term support free cash flow (FCF) and therefore dividend potential at VMO2. The fibre JV is a greenfield project targeting 5 million-7 million new fibre homes. With VMO2 as anchor tenant the JV is also expected to provide fibre wholesale access to service provider customers and therefore offer the potential to compete with BT's Openreach network. In the near term it should capitalise on convergence and revenue synergies, while sharing risk in a larger fibre roll-out. Positive Currency Effects: Currency depreciation has been weighing heavily on leverage for a number of years despite TEF's sizeable debt paydown, most notably the fall in the value of the Brazilian real and the translation effect this has had on reported cash flows. The real and Latin American currencies, however, have generally strengthened in 2022 and its base case forecast of BRL5.2/EUR compares with 6.4 in its previous rating case. This has the potential to reduce leverage by 0.2x in 2022. Longer-Term EM Currency Effects: Over the longer term Fitch typically expects emerging-market (EM) currencies to follow a negative trend. Management aim to continue growing revenue faster than inflation in its Latin American markets to counter these currency effects. Treasury management, including increasing local currency debt (at both the opco and holdco levels), has also been used effectively to mute the impact of currency depreciation. Bringing financial leverage at the local level more closely in line with the group metric is an effective way of balancing these risks. DERIVATION SUMMARY TEF is rated broadly in line with other geographically diversified European telecom operators, such as Orange, Deutsche Telekom and Vodafone. Its higher exposure to EM with sub-investment-grade sovereign ratings and associated currency risk results in a moderately tighter leverage sensitivity per rating band compared with that of peers. TEF and its peer group combine strong positions in fixed or mobile markets with substantial and diverse cashflow operations. Operators with a single-market focus, such as Royal KPN N.V. and BT Group plc, both rated 'BBB'/Stable, have tighter leverage thresholds for their respective ratings. KEY ASSUMPTIONS - Revenue to decline about 1% in 2022 (reflecting negative impact from the deconsolidation of UK operations since mid-2021 and positive impact from the EUR/BRL exchange rate), and growing at low single digits for 2023-2025 - Fitch-defined EBITDA margin at 26%-27% in 2022-2025 - Cash capex (including spectrum payments) averaging at about 15% of revenue in 2022-2025 - Annual pre-retirement obligations included in FFO of about EUR900 million in 2022, and of about EUR800 million in 2023-2025 - Annual cash dividends of about EUR1.1 billion in 2022 and EUR1.8 billion in 2023-2025 - M&A at around EUR0.6 billion in 2022 - EUR/BRL exchange rate of 5.2 in 2022-2025 RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - FFO net leverage falling sustainably below 3.1x (equivalent to net debt/EBITDA below 2.7x) - Improved competitive position in TEF's domestic and key international markets combined with strong growth in pre-dividend FCF - Cash flow from operations (CFO) less capex/gross debt expected to be consistently above 15% (excluding one-off spectrum costs) Factors that could, individually or collectively, lead to negative rating action/downgrade: - FFO net leverage trending above 3.6x on a sustained basis (equivalent to net debt/EBITDA above 3.2x) - Pressure on FCF driven by EBITDA erosion, FX and capital repatriation constraints, higher capex and shareholder distribution, or significant underperformance in core domestic and international markets LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: TEF benefits from strong liquidity with a cash balance of EUR6.4 billion (excluding financial assets), committed undrawn liquidity facilities totalling EUR11.6 billion reported at end-June 2022 and expected FCF generation averaging EUR0.9 billion in 2023-2025. This compares favourably with an evenly split debt maturity profile. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Telefonica SA LT IDR BBB Affirmed BBB ST IDR F2 Affirmed F2 Telefonica Emisiones S.A.U. senior unsecured LT BBB Affirmed BBB senior unsecured LT BBB Affirmed BBB Telefonica Europe BV senior unsecured LT BBB Affirmed BBB subordinated LT BB+ Affirmed BB+ ===================== S W I T Z E R L A N D ===================== PEACH PROPERTY: Fitch Lowers Senior Unsecured Debt Rating to 'BB' ----------------------------------------------------------------- Fitch Ratings has downgraded Peach Property Group AG's (Peach) senior unsecured debt rating to 'BB'/RR4 from 'BB+', while affirming its Long-Term Issuer Default Rating (IDR) at 'BB' with a Stable Outlook. The downgrade of the senior unsecured debt aligns it with Peach's IDR, reflecting additional investment properties being pledged as collateral for newly signed secured financings in July and August 2022. This leaves a smaller pool of unencumbered assets (CHF0.5 billion) for its unsecured creditors. Fitch therefore no longer expects above-average recoveries in line with its Criteria for the EMEA Real Estate Sector Uplift. Fitch estimates the unencumbered asset cover at around 1x (1H21: 1.5x) pro-forma for the new financings. The affirmation of the IDR reflects the stability of Peach's rental income stemming from its CHF2.6 billion German regional residential-for-rent portfolio, the benefits of its now larger scale and diversification, and reduced refinancing risk for its upcoming 2023 bond maturity. Fitch forecasts Peach's net debt/EBITDA to reduce to 20x in 2023 and to 19x in 2024 as its Swiss development project completes, and its interest cover to improve to 1.9x at end-2024 from 1.5x at end-2022. KEY RATING DRIVERS Reduced Refinancing Risk: Management has actively managed Peach's upcoming February 2023 bond maturity via bond buybacks (in total around EUR70 million), which has reduced outstanding debt amount to EUR181 million. In August, Peach signed a new EUR100 million secured bank loan and in April a EUR100 million unsecured revolving credit facility (RCF), with four- and five-year maturities, respectively, including extension options. Together with CHF42 million cash on balance sheet (less approx. EUR20 million in bond buybacks in July 2022) at end-1H22, these facilities cover Peach's February 2023 bond maturity. Unencumbered Asset Cover Declines: The additional secured debt has reduced refinancing risk in this period of more expensive bond-market funding, but also led to more investment properties being pledged as collateral for the group's secured debt. This has reduced the pool of unencumbered investment properties available for its unsecured creditors. Fitch estimates that unencumbered investment property/unsecured debt has declined to around 1x pro forma for the refinancing completed in August 2022. Sector Uplift Removed: Fitch no longer applies the EMEA Real Estate Sector Uplift for to Peach, with the alignment of Peach's senior unsecured debt rating to its IDR, reflecting average, rather than above-average, recovery expectations for senior unsecured debt. Fitch expects at least a 1.5x unencumbered asset cover to apply the sector uplift for property companies in the 'BB' rating category. Peach still fulfils the other criteria (liquid property markets, regular valuations etc.) for the sector uplift. Portfolio Scale Achieved: Peach's CHF2.6 billion German residential-for-rent property portfolio has achieved scale and benefits from diversification through its 27,400 units spread across good locations in German B-cities. Peach's rental income is supported by affordable regulated German rents, which have been stable over time. German below-market rents provide reversionary potential and Peach estimates that its in-place rents were on average 18% below market at end-1H22. High Vacancy Rates: Vacancies suggest opportunities for landlords to re-set an apartment's rent closer to market rent, particularly if it has been renovated. Peach's European Public Real Estate Association (EPRA) vacancy rate at 8.5% at end-1H22 was higher than the 2%-4% industry norms for residential. Peach's strategy includes acquiring portfolios with pockets of vacancies and gradually reducing their high vacancies after renovating the buildings. This higher vacancy represents potential rental uplift after capex. Until then, Peach incurs the cost of acquisition and vacancies. During 2022, Peach has continued with its renovation programme and reduced its EPRA vacancy to 8.5% at end-1H22 (end-1H21: 9.1%). Healthy Rental Growth: Peach achieved healthy like-for-like rental growth of 3.8% in 2021 and 3.4% in 1H22, by the unwinding of some of its reversionary potential, higher market rents and vacancy reduction. Historically, German residential rents have followed the consumer price index, which should support rental growth in the new inflationary environment. Peach's utility costs are mostly passed on to tenants via service charges. Peach benefits from gas price hedging until 2024 for a large part of its tenants to reduce the cost increase for its tenants, and has increased the monthly pre-payments it charges for the remaining tenants to flatten increase. Government subsidies to households to cover utility bills are expected to reduce pressure on tenants further. North-Rhine-Westphalia-Focused Portfolio: Peach's off-market acquired portfolios have core metrics broadly comparable with German peers', but with pockets of high vacancies. The completed acquisitions were selected to complement Peach's existing footprint (including 2021's Eagle portfolio). Its Peach Point network of customer service centres and digital platform leads to better communication with local tenants and cost savings, compared with peers covering a Germany-wide portfolio. Peach's small market share does not work against it, as no participants command a regional market share that can influence evidence for local rent setting. Improving Cash Flow Leverage: Fitch forecasts Peach's financial profile will improve, with net debt/EBITDA falling to 20x in 2023, and improving to 19x in 2024 and 18x in 2025. The improvement will be driven by rental growth from its renovations and leasing activity, and from indexation and the gradual completion and disposal of its Swiss development property. Fitch forecasts interest cover to improve to 1.7x in 2023 and to 1.9x in 2024, driven by higher profitability despite rising interest rates. DERIVATION SUMMARY Fitch compares Peach with German residential peers, and Fitch-rated residential peers D.V.I. Deutsche Vermogens- und Immobilienverwaltungs GmbH (BBB-/Stable), Heimstaden Bostad AB (BBB/Negative), Akelius Residential Property AB (BBB/Stable) and Grainger Plc (BBB-/Stable). Peach's portfolio is broadly comparable with larger German peers', as measured by market value per square metre (sq m), in-place-rent per sq m, gross yield for the location and quality. Peach's portfolio focuses more on B-cities, and has markedly higher vacancy rates (1H22: 8.5% on an EPRA basis), which stems from some portfolios being acquired with properties awaiting renovation and re-letting. Over time, this provides an opportunity for increased rents. The vacancy is similar to Akelius's higher, renovation-driven, vacancy rate, which Fitch expects to improve as its renovation projects are completed. Peach's forecast end-2023 net debt/EBITDA of around 20x is high, consistent with its historical high loans-to-values, although lower than 22x-23x for Akelius (not including its large disposal), Heimstaden Bostad and Grainger. These three peers' portfolios have lower average income-yielding assets, reflecting their location in more attractive prime cities. Relative to office and retail property company metrics, residential net debt/EBITDA will be higher because of the asset class's tighter income yield and lower risk profile. Given the current and prospective conducive supply and demand dynamics, German residential has a more stable income profile. Peach's overall secondary quality of the portfolio (given vacancies, and average rents), exposure to secured funding, and current high leverage frame its IDR within the 'BB' rating category. Fitch expects this profile to improve as the company acquires similar portfolios and accesses additional unsecured debt, and improves its portfolio quality by completing renovations. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - For net debt/EBITDA calculation in forecast years, Fitch has annualised rents of signed and planned acquisitions, disposals and developments rather than include part-year contributions - Moderate 2%-4% like-for-like rental growth driven by annual uplifts, indexation and re-letting upon tenants vacating apartments, in addition to vacancy reduction due to renovation activity - A total of around CHF140 million of renovation and development capex during 2022-2025 - Completion and disposal of relevant parts of Peach's Swiss ongoing development projects - Rising interest costs on euro-denominated debt due to policy-rate changes and higher cost of debt generally RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Net debt/EBITDA below 17x - EBITDA net interest coverage above 1.75x - Vacancies below 7% - Liquidity score above 1.0x, and maturities refinanced well in advance and supported by undrawn committed credit facilities - For the senior unsecured debt rating: the unencumbered assets/unsecured debt improving to above 1.5x and a commitment to a lower proportion of secured debt Factors that could, individually or collectively, lead to negative rating action/downgrade: - Net debt/EBITDA above 19x - EBITDA net interest coverage below 1.5x - Costs for holding vacancies increasing to 5% of rent roll LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: At end-1H22, Peach had CHF42 million (about EUR42 million) of readily available cash. In July 2022, Peach reduced the upcoming 2023 bond to EUR181 million via another EUR20 million bond buybacks, signed a EUR100 million new secured loan in August and a EUR100 million unsecured RCF in April. Together these facilities and the remaining cash (after bond buybacks) cover the EUR181 million bond maturing in February 2023. The bond is the only debt maturity in the next 12 months besides its secured debt amortisation. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Peach Property Group AG LT IDR BB Affirmed BB senior unsecured LT BB Downgrade RR4 BB+ Peach Property Finance GmbH senior unsecured LT BB Downgrade RR4 BB+ =========== T U R K E Y =========== PETKIM PETROKIMYA: Fitch Affirms Foreign Currency IDR at 'B' ------------------------------------------------------------ Fitch Ratings has affirmed Petkim Petrokimya Holdings A.S.'s (Petkim) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B'. The Outlook remains Negative. Fitch has also affirmed the senior unsecured rating at 'B' with a Recovery Rating of 'RR4'. The Negative Outlook reflects Petkim's liquidity constraints and expected deterioration in credit metrics due to shrinking petrochemical margins, weakening demand and rising costs. Fitch forecasts funds from operations (FFO) net leverage to rise above 4x over 2022-2024. The Negative Outlook also mirrors that on Turkiye (B/Negative) due to the company's sizeable exposure to the Turkish economy. All operating assets are located in Turkiye and around 50% of revenue is derived from the domestic market. Petkim's rating takes into account its small scale, a single-site petrochemical complex and its exposure to cyclical commodity polymers, which results in inherent earnings volatility. Positively its business profile benefits from a well-invested asset base, a strong market position in the domestic petrochemical market and some resilience to foreign-exchange volatility. KEY RATING DRIVERS Margins Under Pressure: Petrochemical margins realised by Petkim fell by over a third in H122 from end-2021 and reported EBITDA margin declined to 10% in 1Q22 from 26% in 2Q21. Fitch expects softening demand and rising energy prices to increase challenges for European petrochemicals producers in 2H22 and into 2023. Fitch expects EBITDA margin to fall to around 9% in 2022 and to around 6% in 2023, partially due to weaker contribution from Petkim's trading activities. Economic recovery should restore EBITDA margin to around 11% in 2024-2025. Rising Leverage: Fitch said, "We forecast FFO net leverage to increase to materially above our negative rating sensitivity of 4.0x over 2022-2024, with a peak of above 8x in 2023 from 1.9x in 2021. The increase is driven by lower than previously forecast earnings, a higher debt load and higher working-capital (WC) volatility. Further, we no longer assume payment in 2022 of the last USD240 million instalment for Petkim's 18% stake purchase in STAR Refinery. We continue to include this liability in Fitch-adjusted debt calculation." Limited Liquidity: As at end-June 2022, Petkim had TRY17.2 billion of short-term debt versus cash and deposits of TRY7.4 billion. The main component of current liabilities is a USD500 million (TRY8.5 billion) Eurobond due in January 2023, which due to current market conditions has not been refinanced to date. Petkim remains highly reliant on domestic banks to roll over its short-term debt and support from its ultimate majority parent State Oil Company of the Azerbaijan Republic (SOCAR, BB+/Stable) to secure sufficient funds for bond repayment cannot be ruled out. STAR Adds to Cost Savings: STAR Refinery, which was launched in late 2018 by SOCAR next to Petkim's plants in Turkiye, now operates at its 11mt full capacity p.a. and supplies around 80%-90% of Petkim's naphtha feedstock. As a result, Petkim generates around USD30 million-USD40 million logistic cost savings annually. Exposure to a concentrated supply source is mitigated by the location of Petkim in close proximity to alternative supply sources from the Black Sea region and Russia. Small-Scale Commodity Producer: Petkim is a Turkish commodity chemical producer, making plastics and intermediates from naphtha. Its small scale and single-site operations with limited integration are key factors driving the company's business profile. Petkim's profitability recovered in 2021 when naphtha-ethylene spreads continued to widen and supported an increase in petrochemicals prices. However, as the market rebalances on improved supply, Fitch expects petrochemicals prices to fall to pre-pandemic levels in 2H22 and to weaken further in 2023. Turkish Lira Impact Manageable: Petkim has almost 90% of its plant production costs, or 80%-85% of total cash costs, denominated in US dollars as its major feedstock, naphtha, is purchased at US dollar prices. Simultaneously, the majority of sales is directly denominated in US dollar and euros, or indirectly driven by lira price indexation to global US dollar benchmarks. This supports Petkim's EBITDA during periods of lira devaluation, thus largely offsetting its inflated hard-currency debt. FX volatility could also have indirect implications by weakening domestic demand, although Petkim can choose to re-route its products to export markets. Rating on Standalone Basis: SOCAR's IDR is equalised with that of Azerbaijan (BB+/Stable). Under Fitch's Parent and Subsidiary Linkage Rating methodology, Fitch has not given an uplift to Petkim's rating from SOCAR's ownership. This is because Fitch assesses overall incentives to support as 'Low'. DERIVATION SUMMARY Petkim is a small commodity producer that is comparable to Turkiye-based Sasa Polyester Sanayi Anonim Sirketi (B/Negative). Petkim has lower leverage and higher margins but lower domestic market share and growth prospects. Sasa Polyester is a manufacturer of polyester stable fibres and yarns and in contrast to Petkim has an ambitious expansion programme, which entails execution risk. Other Fitch-rated, commodity-focused EMEA chemical companies include Roehm Holding GmbH (B-/Stable) and Ineos Group Holdings S.A. (BB+/Stable). Roehm has a leading position in the methacrylates business in Europe with better geographical diversification, but is more leveraged than Petkim. Ineos has a much stronger business profile with better product and geographical diversification and a larger scale. The US-based Westlake Corporation (BBB/Positive) have competitively priced petrochemical feedstock, placing it in a more advantageous position than less-integrated producers, such as Petkim. KEY ASSUMPTIONS - Naphtha price follows the crude oil price of USD100/bbl in 2022, USD85/bbl in 2023, USD65/bbl in 2024 and USD53/bbl in 2025 - Year-end USD/TRY rates of 20 in 2022, 24.9 in 2023, 27.7 in 2024-2025 - Working-capital inflow of around TRY0.3 billion in 2022, followed by net working-capital outflow of TRY1 billion in 2023-2025 - Capex at around 6% of sales in 2023 and 5% in 2024-2025 and 8% in 2026 - No dividends paid to Petkim's shareholders nor received from STAR Refinery in 2022-2025 Recovery Analysis Assumptions The recovery analysis assumes that Petkim would be considered a going-concern (GC) in bankruptcy and that the company would be reorganised rather than liquidated. GC EBITDA is estimated at USD220 million. It reflects Petkim's moderate recovery from a downcycle with benefits from synergies with the STAR Refinery. An enterprise value (EV) multiple of 4x was applied to the GC EBITDA, reflecting Petkim's single-site business with exposure to emerging markets and a volatile commodity sector. After deducting 10% for administrative claims and taking into account Fitch's Country-Specific Treatment of Recovery Ratings Rating Criteria, its waterfall analysis generated a waterfall-generated recovery computation (WGRC) in the 'RR4' band, indicating a 'B' instrument rating. The WGRC output percentage on current metrics and assumptions is 50%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - As the rating is on Negative Outlook, a positive rating action is unlikely at least in the short term. Fitch would revises the Outlook to Stable if the company successfully carries out its refinancing and its liquidity profile improves, reduces its FFO net leverage to below 4.0x and net debt to EBITDA below 3.5x and Turkiye's sovereign rating Outlook is revised to Stable - Consistent implementation of conservative financial policy leading to FFO net leverage consistently below 3.0x and net debt/EBITDA sustainably below 2.5x coupled with an upward revision of Turkiye's Country Ceiling would lead to a positive rating action - EBITDA interest cover sustainably above 4.0x - Sound liquidity on a sustained basis Factors that could, individually or collectively, lead to negative rating action/downgrade: - A downward revision of Turkiye's Country Ceiling - Inability to refinance upcoming maturities or deteriorating liquidity profile - Aggressive financial policies and/or a prolonged downturn in petrochemical market leading to sustained erosion in margins, FFO net leverage sustainably above 4.0x and net debt to EBITDA sustainably above 3.5x - EBITDA interest cover sustainably below 2.5x LIQUIDITY AND DEBT STRUCTURE Limited Liquidity: Petkim's liquidity was weak at end-June 2022, with cash and deposits of TRY7.4 billion versus short-term debt of TRY17.2 billion. Current debt consists primarily of USD500 million (TRY8.5 billion) bond due in January 2023 and TRY6.6 billion of liabilities resulting from letters of credit and murabaha loan for naphta procurement that we treat as debt. Due to volatile market conditions and heightened risk of bond refinancing, Fitch expects Petkim to raise additional funds from the local banks, potentially with support from SOCAR by end-2022. Following bond repayment Fitch expects Petkim to increase its reliance on short-term funding from domestic banks. While this is not uncommon among Turkish corporates it exposes the company to systemic liquidity risk. ISSUER PROFILE Petkim is a small Turkish petrochemical producer with 3.6 million tonnes annual gross production capacity including commodity chemicals. It operates 15 main and six auxiliary processing units, all located in Turkiye. SUMMARY OF FINANCIAL ADJUSTMENTS In 2021 Fitch treated TRY71 million (TRY38.4 million of depreciation and amortisation on rights-of-use of assets, and TRY33 million of lease interests) as operating expenses. In 2021 TRY3.1 billion (equivalent USD240 million) residual commitment to pay for the 18% stake in STAR Refinery was treated as off-balance-sheet debt. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Petkim Petrokimya Holdings A.S. LT IDR B Affirmed B senior unsecured LT B Affirmed RR4 B =========================== U N I T E D K I N G D O M =========================== DEBENHAMS PLC: O'Flynn Group Eyes Former Flagship Store in Cork --------------------------------------------------------------- Catherine Shanahan at the Iris Examiner reports that the head of one of the country's largest property development companies has confirmed that they have checked out Debenhams former flagship store in Cork city, which is currently on the market for EUR20 million. Michael O'Flynn, CEO of the O'Flynn Group, told the Irish Examiner that "We have looked at it", but he would not be drawn on whether they are still in the running for the landmark St Patrick's Street property. Separately, more than five contenders are vying for the 151,000 sq ft Debenham premises, with the latest reports suggesting that Dublin-based investment firm Ballybunion Capital, founded by Cahir entrepreneur/asset manager/ solicitor, Patrick O'Sullivan, is among those in the running, the Iris Examiner discloses. Ballybunion Capital was acquired by the UK-based JTC Group last year, who opened new offices on Dublin's Mespil Road. Paddy McKillen/Tony Leonard-controlled Clarendon Properties, who own Merchants Quay shopping centre, which adjoins Debenhams, have ruled themselves out saying they are "not involved", the Iris Examiner notes. Other possible bidders with a track record of development in Cork City include John Cleary Developments (JCD), who redeveloped the former Capitol cinema and O'Callaghan Properties (OCP), who developed Merchant's Quay, the Iris Examiner relays. In addition to developers, others thought to have shown interest in acquiring the building include the Fraser Group, who already own the across-the-street former Eason premises at 113-115 St Patrick's Street, and Irish Life, who own several properties on the main street, according to the Iris Examiner. Debenhams, once home to Roches Stores, was put on the market in August, along with the former Debenhams store on Dublin's Henry Street, with the latter c210,000 sq ft premises for sale for EUR55 million, the Iris Examiner recounts. Receivers Grant Thornton were appointed by Bank of Ireland to oversee the sale of both Cork and Dublin stores and they appointed Cushman & Wakefield to bring the property to market, the Iris Examiner states. EUROSAIL 2006-2BL: Fitch Affirms 'CCCsf' Rating on Class F1c Debt ----------------------------------------------------------------- Fitch Ratings has upgraded Eurosail 2006-2BL Plc's (ES06-2) Class D1a, D1c and E1c notes and upgraded the Eurosail 2006-4NP Plc's (ES06-4) class D1a and D1c notes. All other notes have been affirmed with Stable Outlooks. The class D and E notes of both transactions as well as the class F notes of ES06-2 have been removed from Under Criteria Observation (UCO). Debt Rating Prior ---- ------ ----- Eurosail 2006-2BL PLC Class A2c XS0266235612 LT AAAsf Affirmed AAAsf Class B1a XS0266238715 LT AAAsf Affirmed AAAsf Class B1b XS0266244440 LT AAAsf Affirmed AAAsf Class C1a XS0266246817 LT AAAsf Affirmed AAAsf Class C1c XS0266250413 LT AAAsf Affirmed AAAsf Class D1a XS0266252625 LT AA+sf Upgrade AA-sf Class D1c XS0266256709 LT AA+sf Upgrade AA-sf Class E1c XS0266258317 LT BBBsf Upgrade BB-sf Class F1c XS0266260560 LT CCCsf Affirmed CCCsf Eurosail 2006-4NP Plc Class B1a XS0274201507 LT AAAsf Affirmed AAAsf Class C1a XS0274203891 LT AAAsf Affirmed AAAsf Class C1c XS0274213692 LT AAAsf Affirmed AAAsf Class D1a XS0274204196 LT AA-sf Upgrade A-sf Class D1c XS0274214310 LT AA-sf Upgrade A-sf Class E1c 027421601 LT CCCsf Affirmed CCCsf Class M1a XS0275920071 LT AAAsf Affirmed AAAsf Class M1c XS0275921715 LT AAAsf Affirmed AAAsf TRANSACTION SUMMARY The transactions comprise non-conforming UK mortgage loans originated by Southern Pacific Mortgage Limited and Preferred Mortgages Limited, formerly wholly-owned subsidiaries of Lehman Brothers. KEY RATING DRIVERS Under Criteria Observation In the update of its UK RMBS Rating Criteria on 23 May 2022, Fitch updated its sustainable house price for each of the 12 UK regions. The changes increased the multiple for all regions other than the North East of England and Northern Ireland, updated house price indexation and updated gross disposable household income. The sustainable house price is now higher in all regions except Northern Ireland. This has a positive impact on recovery rates 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 the assumptions with observed performance in the expected case 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 UCO. Ratings Lower than Model-Implied The ratings of ES 06-2 class D1 and E1 notes have been constrained one notch below the model-implied rating (MIR). This reflects Fitch's view that a modest increase in arrears could result in lower model-implied ratings than the current ratings in future analyses. For ES06-4 the ratings of the D1 notes have been constrained two notches below the MIR due to the sensitivity of the MIR to increases in arrears and the increasing draws on the reserve fund which are an early indicator of stress within the transaction. Credit Enhancement Accumulation Credit Enhancement (CE) has increased in both transactions as they continue to amortise sequentially due to late stage arrears trigger breaches which are unlikely to cure, preventing the notes from amortising pro rata. The CE available for the senior notes has increased to 98.3% for ES06-2 and 75.2% for ES06-4, compared with 88.1% and 65.8% at the last review in October 2021. The continued build-up in CE across both transactions supports the upgrade of class D and E notes of ES 06-2 and the Class D notes of ES06-4, even in light of potential performance deterioration due to the cost of living crisis and the rising interest rate environment. Performance Adjustment Factor (PAF) The combination of the UK Criteria changes and the change in arrears reporting for the transactions coupled with a stable Constant Default Rate (CDR) resulted in higher PAFs being derived for each transaction, leading to volatility in the weighted average (WA) FFs derived for the OO and buy-to-let (BTL) sub- pools for both transactions. For this review the PAFs for both transactions was capped at the previous review's levels so that the 'Bsf' WAFF more accurately reflected Fitch's default expectations for the pool at that rating level. For ES 06-2 this resulted in applied PAFs of 104% and 185% for the OO and BTL sub-pools, while for ES 06-4 the BTL PAF was capped at 161% in line with previous review. Change in Arrears Reporting Methodology and Uncertain Asset Performance The servicer has updated its 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 payment due, the servicer now refers to the number of full monthly payments missed. This resulted in a reduction in the reported number of months in arrears for some borrowers. As at end-September 2022, total arrears reported for both transactions stood at 20.3% and 14.7% for ES06-2 and ES06-4 respectively. This represented a decline in total reported arrears from December 2021 of 3.2pp and 3.0pp for ES06-2 and ES06-4 respectively. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: The performances of the transactions may be affected by adverse changes in market conditions and the economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults and could reduce the CE available to the notes. Fitch conducted sensitivity analyses by stressing each transaction's base case FF and recovery rate (RR) assumptions, and by examining the rating implications on all classes of issued notes. A 15% increase in WAFF and a 15% decrease in WARR could lead to downgrades of up to eight notches for the mezzanine and junior tranches across both transactions. 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 and potential upgrades. Fitch tested an additional rating sensitivity scenario by applying a decrease in the WAFF of 15% and an increase in the WARR of 15%. The results indicate upgrades of up to seven notches for the mezzanine and junior tranches across both transactions. DATA ADEQUACY Eurosail 2006-2BL PLC, Eurosail 2006-4NP Plc 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 Eurosail 2006-2BL PLC, Eurosail 2006-4NP Plc initial closing. The subsequent performances 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 Eurosail 2006-2BL PLC and Eurosail 2006-4NP PLC have an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy & Data Security. This is due to the pools having 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. Eurosail 2006-2BL PLC and Eurosail 2006-4NP PLC have an ESG Relevance Score of '4' for Human Rights, Community Relations, Access & Affordability. This is due to a significant portion of the pools 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. 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. TOGETHER FINANCIAL: Fitch Affirms BB- LongTerm IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed Together Financial Services Limited's (Together) Long-Term Issuer Default Rating (IDR) at 'BB-' with Stable Outlook. Fitch has also affirmed the senior secured notes issued by subsidiary Jerrold FinCo Plc (FinCo) and guaranteed by Together at 'BB-', and the GBP380 million senior PIK toggle notes, maturing 2027 and issued by Together's indirect holding company Bracken Midco1 PLC (Midco1), at 'B' with a Recovery Rating of 'RR6'. KEY RATING DRIVERS TOGETHER - IDRS AND SENIOR DEBT Together's IDR is underpinned by its long-established franchise in providing secured specialised lending solutions to the UK (AA-/Negative) residential and commercial market; sound underwriting and risk controls; generally healthy profitability; adequate liquidity headroom; and an increasingly diversified, albeit largely secured, funding profile. These factors mitigate the inherent risk involved in lending to a niche sector of non-standard UK borrowers and the associated funding needs. Fitch expects Together to be able to withstand expected UK macroeconomic challenges over the near-to-medium term and to maintain financial metrics commensurate with its rating. Together is a privately-owned UK non-bank lender with a good franchise in its market segment, having been in operation for 50 years as a provider of secured lending products to predominantly non-standard borrowers. Its business origination benefits from strong relationships with intermediaries in addition to its significant direct distribution channels: brokers, auction houses and professional service firms. The business is split between the regulated personal finance division and the unregulated commercial finance division. Products offered range from first- and second-charge mortgages, buy-to-let mortgages, bridging loans, commercial term loans to development finance. In the context of the overall UK mortgage market, Together's franchise is modest but its position in specialist lending is well-established. Loans are secured on UK properties with fairly conservative loan-to-value (LTV) ratios with a weighted average origination LTV of 61% for financial year ended June 2022 (FYE21: 60%), which mitigates the higher-risk lending profile than mainstream UK mortgage lenders. Underwriting is of a more bespoke nature than mainstream mortgage providers, but Together has been increasing the level of automation to optimise the process. Together's non-performing loan ratio (defined as IFRS 9 stage 3 loans/gross loans) improved to 7.7% at FYE22 (FYE21: 11.8%), helped by significant loan book growth in FY22. Fitch expects that pressure on the non-performing loan (NPL) ratio could emerge alongside rising inflation and interest rates in the UK and declining customer affordability. Together's weighted average LTV ratio of 52% at FYE22 indicates significant headroom to absorb potential collateral valuation declines. Fitch expects this would help to contain credit losses in a material economic downturn. Profitability is robust with pre-tax income/average assets of 3.1% in FY22 (FY21: 3.4%). However, Together's net interest margin has been contracting over recent years due to industry competition putting pressure on nominal rates. More recently, the time lag in passing on rising funding costs to its borrowers has affected its profitability in the near term. Profitability also remains sensitive to inherent fluctuations in expected credit loss model assumptions, and in a worsening macroeconomic environment Fitch may sees impairment charges weighing on Together's profitability. Leverage, defined as gross debt/tangible equity, tends to fluctuate with lending activity and has increased (FYE22: 4.9x; FYE21: 4.1x) as FY22 loan origination outpaced capital generation. When calculating Together's leverage, Fitch adds Midco1's debt to that on Together's own balance sheet, regarding it as effectively a contingent obligation of Together. Midco1 has no separate financial resources of its own with which to service its debt, and failure to do so would have considerable negative implications for Together's own creditworthiness. Profits are largely re-invested in the business and this somewhat mitigates the dependence on debt funding. Together's funding profile is wholesale, via public and private securitisations, senior secured bonds issued by the financing arm Jerrold FinCo Plc, PIK notes issued by Bracken Midco 1 PLC as well as an undrawn revolving credit facility (RCF) of GBP138 million. Together has diversified its funding profile over recent years, but the wholesale nature can leave it exposed to refinancing and liquidity risks in highly volatile markets. In particular, the private securitisations contain a number of performance covenants and the senior secured bonds and RCF have maximum gearing ratios attached to them. In a worsening credit environment, these facility restrictions could limit funding availability. Positively, Together's total accessible liquidity, which includes liquidity that can be accessed from the private securitisations in exchange for eligible assets as well as RCF drawings, was around GBP407 million at FYE22 (FYE21: GBP453 million). The debt profile is fairly long-dated and Together has a proven ability to access wholesale-funding markets, which mitigates some refinancing risk. MIDCO1 -SENIOR PIK TOGGLE NOTES Midco1's debt rating is notched down from Together's IDR as Fitch takes Midco1's debt into account when assessing Together's leverage, and Midco1 is totally reliant on Together to service its obligations. The two-notch differential between Together's IDR and the rating of the senior PIK toggle notes reflects Fitch's expectation of poor recoveries in the event of Midco1 defaulting. While sensitive to a number of assumptions, this scenario would only likely occur when Together is also in a much weakened financial condition, as otherwise its upstreaming of dividends for Midco1 debt service would have been maintained. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: TOGETHER - IDRS AND SENIOR DEBT - Material asset-quality weakness or liquidity pressures. This could arise from a significant decline in redemptions and repayments or material depletion of Together's immediately accessible liquidity buffer, for example resulting from constrained funding access. A need by Together to inject cash or eligible assets into the securitisation vehicles to cure covenant breaches driven by asset-quality deterioration could also weaken its corporate liquidity - Consolidated leverage increasing to above 6x on a sustained basis MIDCO1 - SENIOR PIK TOGGLE NOTES The senior PIK toggle notes' rating is sensitive to adverse changes in Together's IDR, from which it is notched, as well as to Fitch's assumptions regarding recoveries in a default. The notes would be sensitive to wider notching if they are further structurally subordinated by the introduction of more senior notes at Midco1 with similar recovery assumptions. Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade would be supported by evidence that Together's franchise and business model remain robust amid the challenging UK operating environment, in addition to improving financial profile metrics, notably asset quality and an absence of a material increase in leverage. MIDCO1 - SENIOR PIK TOGGLE NOTES The senior PIK toggle notes' rating is sensitive to favourable changes in Together's IDR, from which it is notched, as well as to Fitch's assumptions regarding recoveries in a default. Lower asset encumbrance by senior secured creditors could lead to higher recovery assumptions and therefore narrower notching from Together's IDR. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Jerrold Finco Plc senior secured LT BB- Affirmed BB- Together Financial Services Limited LT IDR BB- Affirmed BB- ST IDR B Affirmed B Bracken Midco1 Plc subordinated LT B Affirmed RR6 B UROPA SECURITIES 2007-01B: Fitch Affirms 'B' Rating on B2a Notes ---------------------------------------------------------------- Fitch Ratings has upgraded Uropa Securities plc Series 2007-01B (U2007) class M1a, M1b, M2a, B1a and B1b (and associated swap obligations) notes. All other classes have been affirmed. All non-'AAAsf' rated tranches have been removed from Under Criteria Observation (UCO). The Outlooks on all notes are Stable. Debt Rating Prior ---- ------ ----- Uropa Securities plc Series 2007-01B Class A3a XS0311807753 LT AAAsf Affirmed AAAsf Class A3b XS0311808561 LT AAAsf Affirmed AAAsf Class A4a XS0311809452 LT AAAsf Affirmed AAAsf Class A4b XS0311809882 LT AAAsf Affirmed AAAsf Class B1a XS0311815855 LT BBB+sf Upgrade BBsf Class B1b XS0311816150 LT BBB+sf Upgrade BBsf Class B1b cross currency swap LT BBB+sf Upgrade BBsf Class B2a XS0311816408 LT Bsf Affirmed Bsf Class M1a XS0311810385 LT AAAsf Upgrade AA+sf Class M1b XS0311811193 LT AAAsf Upgrade AA+sf Class M2a XS0311813058 LT AA-sf Upgrade A-sf TRANSACTION SUMMARY The transaction securitises non-conforming mortgages purchased by ABN AMRO Bank N.V. KEY RATING DRIVERS Removed from UCO: The removal of the UCO follows the application of Fitch's updated UK RMBS Rating Criteria, published on 23 May 2022, including its latest sustainable house prices for each of the 12 UK regions. The changes include increased income multiples for all regions other than North East and Northern Ireland, as well as updated house price indexation and gross disposable household income. Fitch's 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 its expected-case assumptions with observed performance and incorporate a margin of safety at the 'Bsf' level. The updated criteria contributed to today's rating actions. Pro Rata Amortisation, Early Stage Arrears Increasing: The transaction closed in 2007 and is well-seasoned. Amortisation was sequential until January 2019 when the class A2b was fully repaid, resulting in credit enhancement (CE) build-up. Since then it has been pro rata except for the July 2020, October 2021 and April 2022 interest payment dates as the reserve fund was drawn due to insufficient excess spread. The non-amortising reserve fund is now at target and amortisation is pro rata, resulting in limited additional CE build-up. Loans that are three month or more in arrears remained stable in June 2022, in line with one year ago. However, one month plus in arrears increased to 14.8% from 13.1%. Lower Than MIR: Asset performance in non-conforming pools may be subject to performance deterioration as a result of rising inflation and interest rates. An increase in arrears could result in a reduction of the model-implied rating (MIR) in future analysis. Classes B1 and B2 notes ratings' are constrained to one notch below the respective MIR to account for the risk. Also, class M2 MIR is sensitive to a prolonged pro rata amortisation that would limit CE build-up. Its rating was constrained to three notches below the MIR. Strong Liquidity and Losses Support: The transaction benefits from sizeable liquidity and losses support. It has an undrawn liquidity facility (LF) and a fully funded general reserve fund (GRF). The LF and LRF can no longer amortise due to irreversible breaches in the cumulative loss performance triggers. High Fixed Fees: The fixed fees paid out have materially increased since 2021. Fitch deems this increase to be temporary and expect amounts payable to return towards amounts paid pre-2021. However, if these higher fee amounts persist and are not temporary, Fitch may increase is fixed fee assumption, which could lead to downgrades of the junior notes. Performance Volatility Risk from Interest-Only (IO) Loans: 85.2% of the collateral are loans advanced on an IO basis, a substantial portion of which are made to owner-occupied (OO) borrowers. This high proportion of IO loans may lead to performance volatility as the repayment date is reached and borrowers are required to redeem the principal balance. The potential for performance volatility is increased due to the concentration of loan maturity dates and the reducing number of assets. To account for this risk Fitch has floored the performance adjustment factor for the OO sub-pool at 100% in its analysis. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: The transaction's performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce the CE available to the notes. 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 recovery rate (RR) assumptions, and examining the rating implications on all classes of issued notes. Under this scenario, Fitch assumed a 15% increase in the weighted average (WA) FF and a 15% decrease in the WARR. The results indicate up to a three-notch downgrade for the mezzanine tranches. 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 scenario by applying a decrease in the FF of 15% and an increase in the RR of 15%. The results indicate an upgrade of up to two categories for the mezzanine notes. DATA ADEQUACY Uropa Securities plc Series 2007-01B 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 initial 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 Uropa Securities plc Series 2007-01B has an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy & Data Security. This is due to pool with limited affordability checks and self-certified income, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Uropa Securities plc Series 2007-01B has an ESG Relevance Score of '4' for Human Rights, Community Relations, Access & Affordability. This is due to a material concentration of interest only loans, 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. [*] UK: Quarter of Scottish Small Businesses Fear They May Close ---------------------------------------------------------------- Scott Reid at The Scotsman reports that a quarter of small business decision makers in Scotland fear their business may close, while a third say the main priority in the next six months is survival, according to new research. The study, which was conducted online by YouGov and commissioned by Facebook owner Meta, polled decision makers within Scottish companies employing fewer than 50 people, The Scotsman discloses. According to The Scotsman, a third (33%) of those polled worry their business won't be able to keep up with their outgoings during the year ahead while about one in five (18%) admit to using less energy to save on bills. More than a third (37%) say reducing costs would be crucial to their business' future success, The Scotsman notes. "Small businesses are the lifeblood of the UK economy and right now they face the challenge of a lifetime just to keep the lights on. We know there's no one fix to the challenges faced, however we believe through helping both online and offline we can provide support to local businesses in need," The Scotsman quotes Steve Hatch, vice-president northern Europe, Meta, as saying. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *