/raid1/www/Hosts/bankrupt/TCREUR_Public/221020.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, October 20, 2022, Vol. 23, No. 204
Headlines
A L B A N I A
ALBANIAN PROCREDIT: Fitch Affirms BB- LongTerm IDR, Outlook Stable
B O S N I A A N D H E R Z E G O V I N A
PROCREDIT SARAJEVO: Fitch Affirms 'B+' LongTerm IDR, Outlook Stable
G E R M A N Y
APOLLO 5 GMBH: Moody's Affirms B3 CFR & Alters Outlook to Negative
I R E L A N D
ADAGIO X: Moody's Assigns '(P)B3' Rating to EUR5.8MM Cl. F Notes
AURIUM CLO I: Moody's Lowers Rating on Class F-R Notes to 'B3'
AVOCA CLO XVIII: Moody's Ups Rating on EUR14.5MM Cl. F Notes to B1
SEGOVIA EUROPEAN 5-2018: Moody's Affirms 'B2' Rating on Cl. F Notes
K O S O V O
PROCREDIT BANK: Fitch Affirms LongTerm IDR at 'BB', Outlook Stable
L U X E M B O U R G
CERDIA HOLDING: Moody's Affirms B3 CFR & Alters Outlook to Negative
N E T H E R L A N D S
LUMILEDS HOLDING: $275MM DIP Loan from Deutsche Bank Has Final OK
LUMILEDS HOLDING: Bankruptcy Court Confirms Reorganization Plan
REPSOL INTERNATIONAL: Fitch Affirms 'BB+' Rating on Sub. Debt
S P A I N
IM CAJA LABORAL 1: Moody's Hikes Rating on Class D Notes From 'Ba1'
T U R K E Y
EMLAK KONUT: Fitch Affirms LongTerm IDRs at 'B', Outlook Negative
U N I T E D K I N G D O M
2ND HND: Goes Into Administration, 13 Jobs Affected
GREENSILL CAPITAL: Administrators Earn GBP34MM in Fees, Expenses
GREENSILL CAPITAL: Creditors Await Outcome of Insurance Test Case
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A L B A N I A
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ALBANIAN PROCREDIT: Fitch Affirms BB- LongTerm IDR, Outlook Stable
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Fitch Rating has affirmed Albanian ProCredit Bank Sh.a.'s (PCBA)
Long-Term Issuer Default Rating (IDR) at 'BB-' with a Stable
Outlook and its Viability Rating (VR) at 'b-'.
KEY RATING DRIVERS
PCBA's IDRs and Shareholder Support Rating (SSR) reflects Fitch's
view of potential support from its sole shareholder, ProCredit
Holding AG & Co. KGaA (PCH; BBB/Stable).
The bank's VR at 'b-' is one notch below its implied VR of 'b'.
This reflects the bank's limited franchise and small scale, which
weigh on the bank's capacity to generate solid and sustainable
earnings. Its standalone credit quality also balances its
below-average risk profile as underlined by its better-than-sector
asset quality, against risks stemming from its operations in the
Albanian developing economy.
Country Risks Constrain Support: Fitch believes that PCH would have
a high propensity to support PCBA, if needed, given its importance
to the group's long-standing and established presence in south
eastern Europe (SEE). Nonetheless, the extent to which potential
support can be factored into PCBA's ratings is constrained by
Albania's country risks, in particular transfer and convertibility.
Without these constraints, the bank's Long-Term IDR would have been
notched down once from the parent's 'BBB' Long-Term IDR.
Challenging Operating Environment: In its assessment of the
operating environment Fitch continues to factor in the small and
cash-based economy that is dependent on the cyclical tourism and
agricultural sectors, which result in narrower opportunities for
banks to grow and diversify exposures. Despite large reductions of
legacy problem loans, the sector's non-performing loan (NPL) ratio
is still one of the highest in the region and Fitch expects high
inflation and supply shock to add moderate pressure to
asset-quality in the banking sector.
Concentration Hampers Improvement Trend: In 1H22 the bank's
impaired loans ratio deteriorated to 4.3% (end-2021: 3.7%)
following a default of one of its larger exposures. Although the
bank's asset- quality ratios are better that the sector average,
existing concentrations exacerbated by the bank's small size pose
some event risks. Fitch expects its asset quality to deteriorate
further in the next 12-18 months, but cost of risk should still
benefit from some reversal of provisions on legacy exposures.
Return to Pre-Impairment Profits: PCBA's operating profit at 0.6%
of risk-weighted assets in 1H22 was supported by the reversal of
loss provisions, while its core profitability benefitted from
higher revenues from widening margins and larger volumes, and
improvements in cost efficiency, which led the bank's
cost-to-income ratio to fall below 100%. Over the rating horizon to
2023, Fitch expects profitability before loan impairment charges
(LICs) to remain positive.
Capitalisation Supported by Parent: Net income generation since
2021 has supported the bank's capitalisation, in addition to
continuous support from the parent in the form of capital and
subordinated debt. The bank's common equity Tier1 (CET1) ratio of
12% at end-1H22 provided an adequate 530bp buffer over local
capital requirements, but Fitch views capital buffers as only
moderate for the risks stemming from the operating environment. As
a mitigating factor, the bank may rely on ordinary capital support
from the parent.
Reasonable Funding Base: The funding mix is dominated by customer
deposits (73% of total funding at end-1H22) and supported by
funding from PCH, resulting in a reasonable loans-to-deposits ratio
of 118% at end-1H22. PCBA relies on retail deposits, which account
for 71% of customer funding. The liquidity buffer remains just
adequate, but could be supported by PCH in case of need.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The Long-Term IDR and SSR of PCBA would be downgraded on adverse
changes to Fitch's perception of country risks in Albania. The
ratings could also be downgraded on a substantial decrease in the
bank's strategic importance for PCH, which is primarily based on
the group's commitment to the country and the region.
PCBA's VR has significant headroom given its 'b-' VR is below its
implied VR of 'b'. Fitch would downgrade the VR if the bank's
capitalisation weakens materially due to continued losses without
prospects for improvement. In particular Fitch would downgrade the
bank's VR if the CET1 ratio falls sustainably below 10%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
PCBA's Long-Term IDR could be upgraded as a result of diminished
country risks, which Fitch views as unlikely in the medium term.
The bank's VR could be upgraded on material improvements in its
franchise and resilience in the business model. The latter may be
reflected in a solid and sustained record of profitable operations
over the medium term, combined with stable asset-quality ratios.
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
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ProCredit Bank Sh.a. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Viability b- Affirmed b-
Shareholder Support bb- Affirmed bb-
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B O S N I A A N D H E R Z E G O V I N A
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PROCREDIT SARAJEVO: Fitch Affirms 'B+' LongTerm IDR, Outlook Stable
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Fitch Ratings has affirmed ProCredit Bank d.d. Sarajevo (PCBBiH)
Long-Term Issuer Default Rating (IDR) at 'B+' with a Stable Outlook
and its Viability Rating (VR) at 'b-'.
KEY RATING DRIVERS
PCBBiH's IDRs and Shareholder Support Rating (SSR) reflect Fitch's
view of potential support from its sole shareholder, ProCredit
Holding AG & Co. KGaA (PCH; BBB/Stable).
PCBBiH's VR of 'b-' is constrained by its small scale. Despite
reasonable credit metrics, prudent risk management and resilient
asset quality, Fitch adjusts the bank's VR a notch lower than its
implied VR for its business profile. This is due to certain
franchise limitations and an only moderate record of profitable
operations in Bosnia and Herzegovina, which Fitch views as a fairly
high-risk environment for banks.
Country Risks Constrain Support: PCBBiH is strategically important
to PCH and remains an important part of the group's long-standing
and well-established presence in south-eastern Europe (SEE).
However, the extent to which potential support can be factored into
the bank's ratings is constrained by Fitch's view of Bosnia's and
Herzegovina's country risks, in particular transfer and
convertibility.
The one-notch uplift of PCBBiH's support-driven Local-Currency IDR
above its Foreign-Currency IDR reflects a lower probability of
regulatory restrictions being placed on servicing local-currency
obligations, also in case of systemic stress.
Challenging Operating Environment: PCBBiH's operations are
concentrated in the small high-risk Bosnian market, which is
characterised by low GDP per capita, a multi-layered institutional
and regulatory framework, a large informal economy and high
unemployment. Macroeconomic and external risks have increased for
the country given its dependence on Germany, Italy (both exposed to
a Russian gas halt) and on neighbours for exports and remittances.
All these factors heavily weight on investor sentiment and result
in less opportunities to grow and diversify risk exposures for
banks.
Resilient Asset Quality: PCBBiH's Stage 3 loans ratio declined to
2.4% at end-1H22 (according to local IFRS9 reporting) from 4.5% at
end-2018 as a result of effective restructurings and recoveries,
and, more recently, the flattering effect of solid loan growth. The
bank's ample cushion of loan loss allowances provides headroom to
absorb credit losses for a potential deterioration in asset quality
owing to increased global and local macro risks.
Nascent Profitability Recovery: The bank's operating
profit/risk-weighted assets (OpRWA) reached a reasonable 1.4% in
1H22 (2019: -0.3%), supported by healthy loan growth, higher
earnings and good cost control. Loan impairment charges are likely
to increase over the next 18 months, in its view, moderately
pressuring PCBBiH's results in the near term and offsetting
positive margin development in 2022.
Nonetheless, the positive outlook on the profitability score
reflects its view that the bank's OpRWA improvement came largely
from recurring items, boding well for continued healthy
performance.
Moderate Capital Buffers: Fitch said, "We view the bank's common
equity Tier 1 (CET1) ratio of 16.2% at end-1H22 as only moderate,
for the overall small nominal size of its capital base and its low
8.9% equity/assets ratio amid the risks of a weak domestic
operating environment. We expect PCBBiH to be less reliant on
continued ordinary capital support from its shareholder (last
injection took place in 2021) to sustain business growth given
improved recurring profit fundamentals."
Accelerated Deposit Base Growth: Due to solid deposit inflows, the
bank's loans/deposits ratio dropped to 100% at end-1H22. This
reflects the bank's consequent efforts to strengthen its franchise
and reduce reliance on funding from PCH. The funding mix remains
supplemented by long-term loans from international financial
institutions earmarked for SME development projects. Liquidity is
healthy, with sizeable cash placements mainly at the local central
bank.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The bank's IDRs and SSR are sensitive to adverse changes in Fitch's
perception of country risks, in particular an increase in transfer
and convertibility risks in Bosnia and Herzegovina. PCBBiH would
also be downgraded on a substantial reduction of the bank's
strategic importance for PCH, which is primarily based on the
group's commitment to the country and the region, or other evidence
of weaker support propensity.
PCBBiH's VR has significant headroom given its 'b-' VR is below its
implied VR of 'b'. Fitch would downgrade the VR if the bank's
capitalisation weakens materially due to sustained losses without
prospects for improvement.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
PCBBiH's Long-Term IDRs could be upgraded on diminished country
risks, which Fitch views as unlikely in the medium term.
The bank's VR could be upgraded on sustained record of a resilient
business model and performance, in particular profitability over
the medium term.
SUMMARY OF FINANCIAL ADJUSTMENTS
For periods to end-2019, Fitch adjusted the impaired loan ratio as
reported under local regulatory standards for PCBBiH to bring it in
line with the reporting standards of PCH and its other
subsidiaries. The main difference is treatment of written-off
loans, which under local standards were part of both gross loans
and impaired loans figures.
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
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ProCredit Bank
d.d. Sarajevo LT IDR B+ Affirmed B+
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Viability b- Affirmed b-
Shareholder Support b+ Affirmed b+
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G E R M A N Y
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APOLLO 5 GMBH: Moody's Affirms B3 CFR & Alters Outlook to Negative
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Moody's Investors Service has affirmed the B3 corporate family
rating and B3-PD probability of default rating of Apollo 5 GmbH
(Aenova or the company). At the same time, Moody's has affirmed the
B3 instrument ratings of the EUR565 million senior secured 1st lien
term loan B (TLB) and the EUR50 million senior secured revolving
credit facility (RCF), borrowed by Aenova Holding GmbH. The outlook
on all ratings has been changed to negative from stable.
RATINGS RATIONALE
The change in outlook to negative primarily reflects the quick
deterioration of key credit metrics, including EBITDA and
liquidity, and the agency's expectations that Aenova's
Moody's-adjusted free cash flow (FCF) will remain negative over the
next two years, because of higher interest expense and still high
capital expenditure requirements, even if the company delays some
of its projects. The agency also expects normalized levels of WC
requirements, following a build-up of inventories of raw materials
to counteract supply chain disruptions and increased raw material
costs. The company has consumed around EUR38 million of cash since
the beginning of the year and has drawn EUR10 million of its senior
secured RCF at the end of September 2022 to support liquidity.
The rating affirmation considers the company's still adequate
liquidity and improved financial performance since August 2022.
However, preserving the ratings at the B3 level will be a function
of 1) maintaining an adequate liquidity at all times, because the
agency believes an improvement in the cash generation is needed, to
preserve capacity to draw under its senior secured RCF as available
liquidity has diminished, and 2) confirmation that operational
issues have been resolved, leading to a sustained improvement in
key credit metrics, including its Moody's-adjusted gross leverage
falling below 6.5x, and returning to positive Moody's-adjusted FCF
generation.
The recent improved performance is driven by the series of
initiatives launched by Aenova to increase profitability and
pass-through costs, including price increases to customers, which
Aenova expects will mitigate the upsurge in raw material costs and
should improve gross margin recovery over the next few quarters.
Aenova is confident that it can continue to adjust pricing as
required to cover cost increases as switching costs are high in the
industry. The company has hedged some energy prices for 2023 and it
also expects energy price caps to support profitability recovery.
However, downside risks are relevant as besides the weaker
macroeconomic environment, Aenova faces some operational issues in
some manufacturing facilities. While the agency understands that
the material internal issues have been resolved, the company still
faces high absenteeism from COVID-19 cases in some its German
manufacturing facilities and some supply chain disruption, which
could continue to limit output in the short-term.
The agency expects that Aenova's Moody's-adjusted gross leverage
will close at around 8x in 2022 and that it will improve below 7x
in 2023. The agency continues to expect revenue growth in the
mid-single digit range over the next 12-18 months.
RATING OUTLOOK
The negative outlook reflects the deterioration of the operating
performance of the company over the last months which weakened key
credit metrics beyond the thresholds set for the rating, as well as
persistent risk of downward rating pressure if Aenova's operating
performance, EBITDA and cash generation do not recover over the
next 12 months.
LIQUIDITY PROFILE
Aenova's liquidity is adequate, supported by cash balances of EUR14
million as of September 30, 2022, and access to its EUR50 million
senior secured RCF, of which EUR10 million are drawn as of the same
date, as well as long-dated maturities, with the senior secured TLB
due in 2026. Because of the lower trading the company has delayed
some capital expenditure initiatives, Moody's assumes total capital
investments will represent around 6.5% of revenue and that working
capital requirements will normalize, over the next 12-18 months.
The senior secured RCF is due in September 2024 which will weaken
Moody's assessment of liquidity if not refinanced at the latest 12
months in advance of its maturity. Under the loan documentation,
the senior secured RCF lenders benefit from a springing senior
secured net leverage covenant set at 8.16x, tested only when the
senior secured RCF is drawn by more than 40%. Moody's expects
Aenova to maintain good capacity under this covenant, if tested.
STRUCTURAL CONSIDERATIONS
The B3-PD probability of default rating, in line with the CFR,
reflects Moody's assumption of a 50% family recovery rate, typical
for covenant-lite secured loan structures, including first-lien
bank debt facilities. The B3 ratings of the EUR565 million senior
secured TLB, and EUR50 million senior secured RCF reflect their
pari passu ranking and sharing of the same security package.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The outlook could be stabilized if the recent recovery in
operations, profitability and credit metrics is sustained,
indicating that cost pass through initiatives are successful and
that operational issues at various production sites have been fully
resolved. In order to stabilize the outlook, the recovery in
earnings should translate into an improvement in Aenova's
Moody's-adjusted gross leverage below 6.5x, and an improvement in
Moody's-adjusted FCF generation towards positive and continued
adequate liquidity.
Further downward rating pressure could develop in case improvements
in operating performance (including recovery in gross margins and
operational key performance indicators such as on-time delivery)
are not evident over the next couple of quarters, or cost pass
through measures are not sufficient to recover EBITDA generation,
leading to sustained weak credit metrics, including
Moody's-adjusted gross leverage remaining above 6.5x and negative
Moody's-adjusted FCF generation, or its liquidity weakens.
Given the negative outlook, an upgrade is currently unlikely in the
short term. Upward rating pressure could develop if the company
evidences a sustainable increase in profitability and margins; if
it achieves positive FCF (Moody's-adjusted) and its
Moody's-adjusted gross leverage falls below 5.5x on a sustained
basis.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
Headquartered in Starnberg, Germany, Aenova is a leading European
contract development and manufacturing organization (CDMO)
providing outsourcing services to the pharmaceutical and healthcare
industries. Aenova is the largest European CDMO for oral solids and
semisolids, the largest company in the niche segment of animal
health and the second largest globally in soft gels, which have
higher technological complexity than oral solids. Aenova operates
primarily through 15 production sites in Europe. For the 12 months
that ended September 2022, the company generated revenue of EUR723
million and company EBITDA (before non-recurring items) of EUR94
million. Since 2012, Aenova has been owned by private equity
company BC Partners.
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I R E L A N D
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ADAGIO X: Moody's Assigns '(P)B3' Rating to EUR5.8MM Cl. F Notes
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Moody's Investors Service announced that it has assigned the
following provisional ratings to the notes to be issued by Adagio X
EUR CLO Designated Activity Company (the "Issuer"):
EUR212,800,000 Class A Senior Secured Floating Rate Notes due
2036, Assigned (P)Aaa (sf)
EUR11,200,000 Class B-1 Senior Secured Floating Rate Notes due
2036, Assigned (P)Aa2 (sf)
EUR10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2036,
Assigned (P)Aa2 (sf)
EUR20,100,000 Class C Deferrable Mezzanine Floating Rate Notes due
2036, Assigned (P)A2 (sf)
EUR16,500,000 Class D Deferrable Mezzanine Floating Rate Notes due
2036, Assigned (P)Baa3 (sf)
EUR19,800,000 Class E Deferrable Junior Floating Rate Notes due
2036, Assigned (P)Ba3 (sf)
EUR5,800,000 Class F Deferrable Junior Floating Rate Notes due
2036, Assigned (P)B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the CLO's portfolio and structure as
described in Moody's methodology.
The Issuer is a static cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. Moody's expect the portfolio to be 100% ramped as
of the closing date.
AXA Investment Managers US Inc. ("AXA IM") may sell assets on
behalf of the Issuer during the life of the transaction.
Reinvestment is not permitted and all sales and unscheduled
principal proceeds received, together with scheduled principal
proceeds will be used to amortize the notes in sequential order.
In addition to the seven classes of notes rated by Moody's, the
Issuer will issue EUR [ ] of Class Z Deferrable Junior Floating
Rate Notes and EUR [ ] of Subordinated Notes, both of which are not
rated.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
Moody's used the following base-case modeling assumptions:
Performing par: EUR330 Million
Diversity Score: 50
Weighted Average Rating Factor (WARF): 2923
Weighted Average Spread (WAS): 3.87%
Weighted Average Coupon (WAC): 3.88%
Weighted Average Recovery Rate (WARR): 44.64%
Weighted Average Life (WAL): 4.98 years
AURIUM CLO I: Moody's Lowers Rating on Class F-R Notes to 'B3'
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Moody's Investors Service has downgraded the rating on the
following notes issued by Aurium CLO I Designated Activity
Company:
EUR12,000,000 Class F-R Senior Secured Deferrable Floating Rate
Notes due 2032, Downgraded to B3 (sf); previously on Oct 7, 2020
Confirmed at B2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR249,000,000 Class A-R Senior Secured Floating Rate Notes due
2032, Affirmed Aaa (sf); previously on Oct 7, 2020 Affirmed Aaa
(sf)
EUR41,000,000 Class B-R Senior Secured Floating Rate Notes due
2032, Affirmed Aa2 (sf); previously on Oct 7, 2020 Affirmed Aa2
(sf)
EUR24,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2032, Affirmed A2 (sf); previously on Oct 7, 2020
Affirmed A2 (sf)
EUR26,000,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2032, Affirmed Baa3 (sf); previously on Oct 7, 2020
Confirmed at Baa3 (sf)
EUR22,000,000 Class E-R Senior Secured Deferrable Floating Rate
Notes due 2032, Affirmed Ba2 (sf); previously on Oct 7, 2020
Confirmed at Ba2 (sf)
Aurium CLO I Designated Activity Company, issued in March 2015,
refinanced in April 2017 and reset in September 2019 is a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured European loans. The portfolio is
managed by Spire Management Limited. The transaction's reinvestment
period will end in March 2024.
RATINGS RATIONALE
The rating downgrade on the Class F-R notes is primarily a result
of the deterioration of the key credit metrics of the underlying
pool, such as the performing par balance and the weighted average
floating spread, since the payment date in March 2022. Other
contributing factor is the loss of the Euribor floor benefit
consequent to a change in Euro forward rates.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR397.19m
Defaulted Securities: EUR2.0m
Diversity Score: 56
Weighted Average Rating Factor (WARF): 2732
Weighted Average Life (WAL): 5.44 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.62%
Weighted Average Coupon (WAC): 4.22%
Weighted Average Recovery Rate (WARR): 44.62%
Par haircut in OC tests and interest diversion test: none
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank and swap provider,
using the methodology "Moody's Approach to Assessing Counterparty
Risks in Structured Finance" published in June 2022. Moody's
concluded the ratings of the notes are not constrained by these
risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which could
lengthen as a result of the manager's decision to reinvest in new
issue loans or other loans with longer maturities, or participate
in amend-to-extend offerings. The effect on the ratings of
extending the portfolio's weighted average life can be positive or
negative depending on the notes' seniority.
Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Recoveries higher
than Moody's expectations would have a positive impact on the
notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
AVOCA CLO XVIII: Moody's Ups Rating on EUR14.5MM Cl. F Notes to B1
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Moody's Investors Service has upgraded the ratings on the following
notes issued by Avoca CLO XVIII Designated Activity Company:
EUR45,000,000 Class B-1 Senior Secured Floating Rate Notes due
2031, Upgraded to Aaa (sf); previously on May 24, 2018 Definitive
Rating Assigned Aa2 (sf)
EUR25,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2031,
Upgraded to Aaa (sf); previously on May 24, 2018 Definitive Rating
Assigned Aa2 (sf)
EUR31,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2031, Upgraded to A1 (sf); previously on May 24, 2018 Definitive
Rating Assigned A2 (sf)
EUR25,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2031, Upgraded to Baa1 (sf); previously on May 24, 2018 Definitive
Rating Assigned Baa2 (sf)
EUR14,500,000 Class F Deferrable Junior Floating Rate Notes due
2031, Upgraded to B1 (sf); previously on May 24, 2018 Definitive
Rating Assigned B2 (sf)
Moody's has also affirmed the ratings on the following notes:
EUR295,000,000 Class A Senior Secured Floating Rate Notes due
2031, Affirmed Aaa (sf); previously on May 24, 2018 Definitive
Rating Assigned Aaa (sf)
EUR28,000,000 Class E Deferrable Junior Floating Rate Notes due
2031, Affirmed Ba2 (sf); previously on May 24, 2018 Definitive
Rating Assigned Ba2 (sf)
Avoca CLO XVIII Designated Activity Company, issued in May 2018, is
a collateralised loan obligation (CLO) backed by a portfolio of
predominantly European senior secured loan and senior secured
bonds. The portfolio is managed by KKR Credit Advisors (Ireland)
Unlimited Company ("KKR"). The transaction's reinvestment period
will end on October 17, 2022.
RATINGS RATIONALE
The rating upgrades on the Class B-1, B-2, C, D and F Notes are
primarily a result of the short time remaining before the end of
the reinvestment period.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements. In particular, Moody's assumed that
the deal will benefit from a shorter amortisation profile and
higher diversity score than it had assumed at the last review in
April 2022.
The affirmations on the ratings on the Class A and E Notes are
primarily a result of the expected losses on the notes remaining
consistent with their current rating levels, after taking into
account the CLO's latest portfolio, its relevant structural
features and its actual over-collateralisation ratios.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance : EUR 500.69m
Diversity Score: 66
Weighted Average Rating Factor (WARF): 2870
Weighted Average Life (WAL): 4.4 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.59%
Weighted Average Coupon (WAC): 4.79%
Weighted Average Recovery Rate (WARR): 45.27%
Par haircut in OC tests and interest diversion test: None
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
The rating action took into consideration the notes' exposure to
relevant counterparties using the methodology "Moody's Approach to
Assessing Counterparty Risks in Structured Finance" published in
June 2022. Moody's concluded the ratings of the notes are not
constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: Once reaching the end of the reinvestment
period in October 2022. The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales or be delayed by an increase
in loan amend-and-extend restructurings. Fast amortisation would
usually benefit the ratings of the notes beginning with the notes
having the highest prepayment priority.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
SEGOVIA EUROPEAN 5-2018: Moody's Affirms 'B2' Rating on Cl. F Notes
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Segovia European CLO 5-2018 Designated Activity
Company:
-- EUR16,500,000 Class B-1 Senior Secured Floating Rate Notes due
2031, Upgraded to Aaa (sf); previously on Aug 10, 2018
Definitive Rating Assigned Aa2 (sf)
-- EUR15,000,000 Class B-2 Senior Secured Fixed Rate Notes due
2031, Upgraded to Aaa (sf); previously on Aug 10, 2018
Definitive Rating Assigned Aa2 (sf)
-- EUR25,250,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2031, Upgraded to A1 (sf); previously on Aug 10,
2018 Definitive Rating Assigned A2 (sf)
-- EUR22,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2031, Upgraded to Baa2 (sf); previously on Aug 10,
2018 Definitive Rating Assigned Baa3 (sf)
Moody's has also affirmed the ratings on the following notes:
-- EUR206,500,000 Class A-1 Senior Secured Floating Rate Notes
due 2031, Affirmed Aaa (sf); previously on Aug 10, 2018
Definitive Rating Assigned Aaa (sf)
-- EUR9,500,000 Class A-2 Senior Secured Floating Rate Notes due
2031, Affirmed Aaa (sf); previously on Aug 10, 2018
Definitive Rating Assigned Aaa (sf)
-- EUR20,250,000 Class E Senior Secured Deferrable Floating
Rate Notes due 2031, Affirmed Ba2 (sf); previously on
Aug 10, 2018 Definitive Rating Assigned Ba2 (sf)
-- EUR10,500,000 Class F Senior Secured Deferrable Floating
Rate Notes due 2031, Affirmed B2 (sf); previously on Aug 10,
2018 Definitive Rating Assigned B2 (sf)
Segovia European CLO 5-2018 Designated Activity Company, issued in
August 2018, is a collateralised loan obligation (CLO) backed by a
portfolio of mostly high-yield senior secured European loans. The
portfolio is managed by Segovia Loan Advisors (UK) LLP. The
transaction's reinvestment period ended in August 2022.
RATINGS RATIONALE
The rating upgrades on the Class B-1, B-2, C and D Notes are
primarily a result of the transaction having reached the end of the
reinvestment period in August 2022.
The rating affirmations on the Class A-1, A-2, E and F Notes
reflect the expected losses of the notes continuing to remain
consistent with their current ratings after taking into account the
CLO's latest portfolio, its relevant structural features and its
actual over-collateralization levels.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements. In particular, Moody's assumed that
the deal will benefit from a shorter amortisation profile than it
had assumed at the last review April 2022.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR347.08m
Defaulted Securities: EUR3.4m
Diversity Score: 62
Weighted Average Rating Factor (WARF): 2997
Weighted Average Life (WAL): 4.52 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.70%
Weighted Average Coupon (WAC): 4.73%
Weighted Average Recovery Rate (WARR): 45.03%
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as account bank, using the
methodology "Moody's Approach to Assessing Counterparty Risks in
Structured Finance" published in June 2022. Moody's concluded the
ratings of the notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
===========
K O S O V O
===========
PROCREDIT BANK: Fitch Affirms LongTerm IDR at 'BB', Outlook Stable
------------------------------------------------------------------
Fitch Rating has affirmed ProCredit Bank Sh.a. (Kosovo)'s (PCBK)
Long-Term Issuer Default Rating (IDR) at 'BB' with a Stable Outlook
and its Viability Rating (VR) at 'b+'.
KEY RATING DRIVERS
PCBK's IDRs and Shareholder Support Rating (SSR) reflect Fitch's
view of potential support from its sole shareholder, ProCredit
Holding AG & Co. KGaA (PCH; BBB/Stable).
The bank's VR at 'b+' balances its view of a solid domestic
franchise, expertise in SME lending, below- average risk appetite
as reflected in better-than-sector asset quality, and solid
performance, against risks stemming from its operations in the
developing economy of Kosovo.
Country Risks Constrain Support: PCBK is strategically important to
PCH and remains an important part of the group's long-standing and
well-established presence in south eastern Europe (SEE).
Nonetheless, the extent to which potential support can be factored
into PCBK's ratings is constrained by Fitch's view of Kosovo's
country risks, in particular transfer and convertibility. Without
these constraints, the bank's Long-Term IDR would have been notched
down once from the parent's 'BBB' Long-Term IDR.
Challenging Operating Environment: Kosovo's business environment is
characterised by high risk due to an underdeveloped legal and
regulatory framework relative to other European emerging markets,
even though the banking system's financial metrics remain sound and
the sector has delivered solid growth. Fitch expects high inflation
and economic uncertainties to decrease loan demand, putting
moderate pressure on the banking sector's profitability and asset
quality at least in the short term.
Asset Quality at Moderate Risk: The bank's impaired loan ratio
improved to nearly 2% at end-1H22 from 3.4% at end-2020, which is
lower than the sector average. Fitch believes that asset-quality
risks have increased given heightened macroeconomic uncertainty,
but expect the core metric to deteriorate only moderately, with
impaired loans remaining below 3% of gross loans, given the bank's
generally prudent underwriting criteria. Furthermore, the bank's
ongoing write-offs and recovery activity will likely partially
compensate the inflow of impaired loans.
Improved Operating Profitability: Operating profitability improved
to 4% of risk-weighted assets (RWAs) in 1H22 from 3.2% in 2021,
largely driven by a reversal of loan impairment charges. Fitch
expects profitability to moderately weaken over 2022-2023, because
of increased operating costs and loan impairment charges due to
macro-economic risks, while interest margins are expected to remain
largely stable.
Reduced Capital Buffers: PCBK's common equity Tier 1 (CET1) ratio
weakened to 13.4% at end-1H22 from 17.6% at end-2020 following
EUR35 million dividend distribution from previous years' profits,
but also due to a 10% growth in RWAs since 2021. Fitch believes
this buffer provides an adequate cushion given the bank's
reasonable asset quality and access to capital from the parent, in
case of need.
Largely Retail Deposit Base: PCBK's funding mix is dominated by
typically more stable retail customer deposits and underpinned by
the bank's strong domestic franchise. The bank generally keeps it
loans-to-deposits ratio close to 80%, although at end-1H22 it
increased to 92% due to temporary deposit outflows reflecting
increased trade-capital flows. The bank's liquidity buffers
comprised cash, central- and-regional government securities and
central bank reserves, and resulted in a reasonable liquidity
coverage ratio (LCR) of 118% at end-1H22.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The Long-Term IDR and SSR of PCBK would be downgraded on adverse
changes to Fitch's perception of country risks in Kosovo. The
ratings may also be downgraded on a substantial decrease in the
bank's strategic importance for the group, which is primarily based
on the group's commitment to the country and the region.
The VR of PCBK may be downgraded on a marked weakening in
asset-quality metrics, in particular if its Stage 3 ratio increases
above 5%, accompanied by sustained weakening of core
profitability.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
PCBK's Long-Term IDR and SSR could be upgraded as a result of
diminished country risks, which Fitch views as unlikely in the
medium term.
Fitch does not foresee a VR upgrade in the medium term, given its
current high level relative to the operating environment. An
upgrade would probably require an improvement of the operating-
environment score, accompanied by an extended record of solid
asset-quality and profitability metrics, supported by larger
capital buffers.
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
----------- ------ -----
ProCredit Bank Sh.a. LT IDR BB Affirmed BB
ST IDR B Affirmed B
Viability b+ Affirmed b+
Shareholder Support bb Affirmed bb
===================
L U X E M B O U R G
===================
CERDIA HOLDING: Moody's Affirms B3 CFR & Alters Outlook to Negative
-------------------------------------------------------------------
Moody's Investors Service affirmed the B3 corporate family rating
and B3-PD probability of default rating of Cerdia Holding S.a r.l.
(Cerdia or the company), as well as the B3 rating of the $600
million backed senior secured notes (due in February 2027) issued
by its financing subsidiary Cerdia Finanz GmbH. Moody's also
changed the outlook on all ratings to negative from stable.
RATINGS RATIONALE
The negative outlook reflects Moody's expectation that declining
production volumes at its facility in Russia will result in
deteriorating credit metrics over the next 12 months. Cerdia faces
challenges sourcing raw materials due to sanctions on importing
flakes into Russia, which constrains its ability to run the Russian
facility at historical production levels. The negative outlook also
highlights increased risks of production limitations at Cerdia's
Freiburg Germany site as a result of sustained high energy costs or
potential energy and gas supply disruptions. Cerdia has a low
degree of operational flexibility due to the company's small number
of production facilities which are located in Germany, Russia,
Brazil and the US.
The rating agency estimates Cerdia's Moody's adjusted
debt-to-EBITDA ratio around 6.75x for the last twelve months
through June and expects leverage to rise in the second half of
2022 and into 2023. The aforementioned metric includes the rating
agency's standard adjustments and certain other non-recurring
items. Moody's expects Cerdia's earnings and cash flow to decline
due to lower filter tow volumes from Russia, but to be partially
mitigated by recent price increases. Based on lower production
volumes in Russia, Moody's expect Cerdia's gross debt-to-EBITDA to
exceed 7.0x (including revolver borrowings), above Moody's
expectations for the current B3 rating. The company is however
holding a sizeable cash balance estimated to be around $100
million, following the full drawn down of its EUR65 million
revolving credit facility in July. Significant disruptions to the
company's largest site in Freiberg, not incorporated into this
forecast, would have a highly negative impact on the company's
ability to produce filter tow and also poses downside risk.
The affirmation of the B3 CFR reflects Cerdia's established
position in the filter tow industry, which is protected by high
entry barriers; its vertically integrated business; the predictable
end user tobacco market over at least next several years, with good
revenue visibility based on multi-year customer contracts; and its
solid EBITDA margin in the low to mid 20% range (Moody's adjusted)
and low capex requirements, which results in capacity for solid
free cash flow. The company's aggressive financial policy which
leads to weak credit metrics, including high leverage and low
interest coverage, together with its small scale and very narrow
product portfolio focused on an end market that is in a structural
decline (tobacco), constrain the rating. The company has high
customer concentration, with its top six key accounts representing
around 60% of Cerdia's volumes, and high operational concentration,
given most filter tow is produced at the Freiburg site in Germany.
Additionally, the consolidated customer base and the ongoing
secular decline in volumes exposes the filter-tow market to future
price pressure.
LIQUIDITY
Cerdia's liquidity is adequate. As of the end of June 2022, the
company had around $51 million of cash on balance and access to an
undrawn EUR65 million RCF. In July, the company drew the full
amount of its revolver to secure its liquidity position and ensure
it can comply with its obligations in certain potential downside
scenarios. Moody's estimate that the company can maintain positive
Moody's adjusted free cash flow in 2023 but may experience a
decline in overall cash as a result of required bond amortization.
The bonds require the company to repay at least $15 million for
2022 and $20 million for 2023-2025 (each, to be paid within 125
days after the respective year end). Any further disruptions to the
company's existing operations or inability to effectively manage
working capital and input costs would place additional stress on
the company's liquidity position.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Although an upgrade is unlikely given the negative outlook and
exposure to a market in structural decline, positive rating
pressure could materialise if Cerdia: (i) meaningfully diversifies
its product offering; (ii) reduces leverage to well below 6.0x adj.
debt/EBITDA on a sustained basis; and (iii) maintains good
liquidity.
The following could lead to a downgrade of Cerdia's ratings: (i) a
weakening of the group's liquidity, as evidenced by negative free
cash flow, and a declining cash balance which would limit the
company's ability to make mandatory bond amortization and coupon
payments; (ii) disruptions in any of the company's production
facilities which would indicate a drop off in production volumes
(iii) leverage staying above 6.5x adj. debt / EBITDA over the next
12- 18 months; (iv) EBITDA margin declining below 20%.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
published in September 2021.
COMPANY PROFILE
Cerdia is a leading supplier of cellulose acetate filter tow, a
critical component used by tobacco companies for cigarette filters,
with expected net sales of $489.7 million in 2021. Acetate filter
tow represented more than 92% of 2021 revenues, with the rest split
between acetate flakes mainly used for textiles (2%) and sale from
other products and services (6%). Cerdia's four plants are located
in Germany, Russia, Brazil and the US. The company was spun-off
from Solvay SA (Baa2 stable), which sold it to private equity fund
Blackstone via an LBO deal 2017.
=====================
N E T H E R L A N D S
=====================
LUMILEDS HOLDING: $275MM DIP Loan from Deutsche Bank Has Final OK
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
authorized Bright Bidco B.V., an affiliate of Lumileds Holding B.V.
to, among other things, use cash collateral and obtain postpetition
financing, on a final basis.
Bright Bidco B.V., in its capacity as borrower, and each of the
other Debtors, with the exception of Luminescence Cooperatief U.A.
and Aegletes B.V., as guarantors, obtained postpetition financing,
on a joint and several basis, under a senior secured superpriority
term loan debtor-in-possession facility in an aggregate principal
amount of $275 million, consisting of:
(i) a first lien senior secured superpriority term loan
facility in the aggregate principal amount of up to $175 million,
which will, upon entry of the Proposed Interim Order, be available
to be drawn in up to two drawings, and
(ii) a delayed-draw term loan in a principal amount of up to
$100 million, with the funding of the DIP Loans to be coordinated
by Deutsche Bank Securities Inc., which will available to be drawn
in a single drawing upon entry of the Proposed Final Order;
provided, however, the Delayed Draw DIP Facility will only be
funded if (A) the Debtors do not obtain authority from the Court to
maintain a Receivables Factoring Facility or (B) Credit Agricole
fails to continue performing under the Receivables Factoring
Facility.
Deutsche Bank AG New York Branch serves as administrative agent,
collateral agent, and escrow agent under the DIP Agreement.
Under the agreement dated as of June 30, 2017, by and among Bright
Bidco B.V., certain of the Debtors, the lenders party thereto, and
Deutsche Bank, as administrative agent and collateral agent, the
Prepetition Lenders provided loans thereunder in a total aggregate
principal amount outstanding as of the Petition Date of not less
than $1.7 billion, including (a) $1.6 billion in principal amount
of Term Loans and (b) $87.5 million of Revolving Facility Loans. In
addition, there are not less than $12.1 million of letters of
credit that have been issued (but remain undrawn) under the
Prepetition Credit Agreement pursuant to a letter of credit
sub-facility.
As adequate protection, the Prepetition First Lien Secured Parties
are granted valid, enforceable, binding, non-avoidable, and fully
perfected first priority priming liens on and senior security
interests in substantially all of the property, assets, and other
interests in property and assets of the Debtor Loan Parties.
As further adequate protection, the Prepetition First Lien Secured
Parties are granted superpriority administrative expense claims
against each of the Debtors' estates to the Funding Coordinator,
the DIP Agent and the DIP Lenders with respect to the DIP
Obligations over any and all administrative expenses of any kind or
nature subject and subordinate only to the payment of the Carve Out
on the terms and conditions set forth in the Court's Order and the
DIP Loan Documents.
The Carve Out refers to certain statutory fees, including allowed
professional fees of the Debtors and any official committee of
unsecured creditors appointed in these Chapter 11 Cases pursuant to
section 1103 of the Bankruptcy Code.
The DIP Loan Agreement provides for certain milestones related to
the Chapter 11 Cases, including:
(a) Entry of Proposed Interim Order that is acceptable the DIP
Agent and to the DIP Lenders holding at least 50.1% of the
outstanding unused commitments and term loans under the DIP
Facility, within five days following the Petition Date;
(b) Entry of Proposed Final Order that is acceptable to the
DIP Agent the Requisite DIP Lenders within 30 days following the
Petition Date;
(c) Entry by the Bankruptcy Court of a combined order
confirming a plan of reorganization that is acceptable to the
Requisite DIP Lenders and approving the disclosure statement with
respect to the Acceptable Plan within 45 days following the
Petition Date; and
(d) Consummation of the Acceptable Plan within 65 days
following the Petition Date.
The Debtors' failure to comply with the milestones will constitute
an "Event of Default" in accordance with the terms of the DIP Loan
Agreement.
A copy of the order is available at https://bit.ly/3rZ5Y7W from
PacerMonitor.com.
About Lumileds Holding B.V.
Lumileds Holding B.V. is a global manufacturer of innovative
lighting solutions. In the 1960s, the Company expanded its
offerings to also include state-of-the-art LED devices alongside
the automotive lighting technologies that it had continued to
innovate. Today, the Company continues to develop and manufacture
high-tech lighting products for the automotive, mobile device,
consumer, general lighting, and industrial markets.
Lumileds Holding and several affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case
No. 22-11155) on August 29, 2022. In the petition signed by
Johannes Paulus Teuwen, chief financial officer, Lumileds Holding
disclosed up to $100 million in assets and up to $500 million in
liabilities.
Judge Lisa G. Beckerman oversees the case.
The Debtor tapped Latham & Watkins LLP as legal counsel, Paul,
Weiss, Rifkind, Wharton & Garrison LLP as special financing and
employee compensation counsel, AlixPartners, LLP as financial
advisor, and Evercore Inc. as investment banker, and Epiq Corporate
Restructuring, LLC as claims and noticing agent.
Davis Polk & Wardwell LLP serves as counsel to the DIP Lenders.
The Secured Lender Group retained Gibson Dunn & Crutcher LLP,
Loyens & Loeff N.V., Roland Berger LP, and PJT Partners LP, as
counsel or financial advisor.
LUMILEDS HOLDING: Bankruptcy Court Confirms Reorganization Plan
---------------------------------------------------------------
Lumileds Holding B.V., a global leader in innovative lighting
solutions, on Oct. 14 disclosed that the United States Bankruptcy
Court for the Southern District of New York has confirmed the
Company's Plan of Reorganization (the "Plan"). Lumileds plans to
emerge from the chapter 11 process ("Chapter 11") the week of
October 31 following the satisfaction of certain administrative
items before the Plan becomes effective.
Under the terms of the Plan, Lumileds will complete a comprehensive
restructuring transaction which will reduce the Company's funded
debt by approximately $1.4 billion, provide capital to accelerate
Lumileds' growth, and enable further investment in innovation that
will allow the Company to pursue additional strategic
opportunities.
Prior to commencing their Chapter 11, the Company announced the
execution of a Restructuring Support Agreement (the "RSA"), whereby
the Company obtained the necessary support from its lenders to
confirm the Plan. The Company's narrowly focused prepackaged
Chapter 11 filing was then commenced on August 29, 2022 and was
limited to involving only Lumileds U.S. and Dutch Lumileds.
Following the solicitation period, approximately 92% of Lumileds'
first lien lenders voted in favor of the Plan and over 99% of the
first lien lenders ultimately executed the RSA. Under the terms of
the Plan, the pre-petition first lien lenders provided the Company
with commitments for up to $275 million in new capital, first as
part of the DIP Facility which was then converted into a five-year
exit facility.
"Throughout this process we continue to maintain our sharp focus on
driving innovation and developing new products and solutions for
our customers, and we are excited by the opportunities ahead for
Lumileds," said Matt Roney, CEO of Lumileds. "With the confirmation
of our plan of reorganization, we will implement our financial
restructuring to deleverage our balance sheet, significantly
increase our liquidity and even better position ourselves for
long-term growth and innovation. We thank all our stakeholders for
their ongoing support and confidence in our market-leading position
in the specialty lighting industry, which has allowed us to reach
this significant milestone so quickly and on schedule."
For more information on Lumileds' restructuring, including access
to Court documents, please visit https://dm.epiq11.com/Lumileds or
contact Epiq Corporate Restructuring, LLC, the Company's noticing
and claims agent at +1 800-497-9116 (for toll-free domestic calls)
and +1 503-520-4495 (for tolled international calls) or email
Lumiledsinfo@epiqglobal.com.
Evercore is acting as investment banker for the Company, Latham &
Watkins is acting as restructuring counsel to Lumileds and
AlixPartners, LLP is acting as financial advisor. PJT Partners is
acting as financial advisor for an ad hoc group of Lumileds'
lenders, and Gibson, Dunn & Crutcher LLP is acting as the ad hoc
group's legal counsel.
About Lumileds Holding B.V.
Lumileds Holding B.V. is a global manufacturer of innovative
lighting solutions. In the 1960s, the Company expanded its
offerings to also include state-of-the-art LED devices alongside
the automotive lighting technologies that it had continued to
innovate. Today, the Company continues to develop and manufacture
high-tech lighting products for the automotive, mobile device,
consumer, general lighting, and industrial markets.
Lumileds Holding and several affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case
No. 22-11155) on Aug. 29, 2022. In the petition signed by Johannes
Paulus Teuwen, chief financial officer, Lumileds Holding disclosed
up to $100 million in assets and up to $500 million in
liabilities.
Judge Lisa G. Beckerman oversees the case.
The Debtor tapped Latham & Watkins LLP as legal counsel, Paul,
Weiss, Rifkind, Wharton & Garrison LLP as special financing and
employee compensation counsel, AlixPartners, LLP as financial
advisor, and Evercore Inc. as investment banker, and Epiq Corporate
Restructuring, LLC as claims and noticing agent.
Davis Polk & Wardwell LLP serves as counsel to the DIP Lenders.
The Secured Lender Group retained Gibson Dunn & Crutcher LLP,
Loyens & Loeff N.V., Roland Berger LP, and PJT Partners LP, as
counsel or financial advisor.
REPSOL INTERNATIONAL: Fitch Affirms 'BB+' Rating on Sub. Debt
-------------------------------------------------------------
Fitch Ratings has revised the Rating Outlook on Spanish oil and gas
company Repsol, S.A.'s Long-Term Issuer Default Rating (IDR) to
Positive from Stable and affirmed the Long-term IDR at 'BBB'.
The Positive Outlook reflects the progress in implementation of
Repsol's strategy and the company's strong financial profile and a
track record of commitment to a conservative financial policy.
Fitch believes that the recent partial disposals of the renewable
and upstream segments are long-term positives, as they provide the
financial flexibility to accelerate the transformation of the
business in light of the long-term energy mix changes. More
visibility on the business profile of the company and
sustainability of the prudent financial policy following the use of
proceeds from the disposals will be a key rating determinant to
resolve the Positive Outlook.
Repsol's ratings are supported by its large-scale upstream and
downstream segments and geographically diversified operations. They
also incorporate the company's proactive stance on energy
transition.
KEY RATING DRIVERS
Accelerated Transformation: Repsol has recently announced sales of
a 25% stake in the upstream business to the U.S. investor EIG
Partners for USD3.4 billion and disposal of a 25% stake in its
renewables business to Energy Infrastructure Partners and Credit
Agricole for EUR0.9 billion. The proceeds from the transactions
will be retained on the balance sheet to accelerate investments in
transformation of the business to meet the expected changes in the
long-term energy mix. Fitch forecasts Repsol's funds from
operations (FFO) net leverage to remain strong at around 1.1x over
2022-2025.
Deals a Long-Term Positive: Fitch views the recent transactions as
a long-term positive given the expected decline in oil and gas
sales in the long-term perspective. At the same time, the
transactions dilute Repsol's effective interests in specific
renewable and upstream projects. Fitch will take into account the
dividends paid to minorities in our FFO calculation. Fitch
understands that Repsol plans to maintain majority shares in both
businesses in the foreseeable future. Full assessments of the
transactions will also only be possible once proceeds are deployed
in new operations.
Strong Upstream Results: European natural gas prices remain
elevated due to tensions caused by the Russia Ukraine conflict and
the resulting tightness in Europe with repercussions to the global
LNG market. Oil prices were similarly high throughout 2022,
supported by OPEC+ actions despite growing risks from lower global
GDP growth. Fitch forecasts Repsol's upstream segment will record
strong results in 2022 and 2023 on the back of Fitch's oil and gas
price decks.
Uncertainties in Downstream: Refining margins have been very strong
since February 2022 on the back of lower Russian exports of fuels
to Europe, which will further reduce from February 2023 due to the
EU sanctions. Gasoline crack spreads have decreased recently, but
diesel cracks are still strong, which Fitch expects to continue.
Petrochemical margins were elevated throughout 2022, but higher
energy prices and recession fears result in an uncertain outlook
for margins in 2023. Fitch continues to model Repsol's downstream
segment in line with the agency's approach to cyclical industries
assuming a moderation of margins from 2023, in line with the
average for the last five year.
Solidarity Payment: The EU energy ministers have recently agreed to
a solidarity contribution, which will be levied on "surplus taxable
profits" of European oil and gas companies. Details on the
implementation of the tax are yet to be announced given national
governments can prepare country-specific measures within the broad
EU guidance. Fitch assumes the tax will be related to European
operations and estimates its impact will be limited to 0.2x on FFO
net leverage for Repsol with no rating implications.
Focus on Energy Transition: Repsol plans to increase capital
employed in low carbon businesses to 45% in 2030 from 2% in 2019.
Repsol's decarbonisation strategy is embedded in all its key
operating segments. In upstream, Repsol aims to focus on
low-capital-intensive projects with short pay-back periods and low
emission intensity. In the industrial segment, Repsol plans to
invest in waste and used cooking oil treatment plans, higher
biofuel production, chemicals circularity and biogas generation.
Repsol's commercial business will expand by offering multi-energy
solutions to customers and growing the charging network. Renewable
capacity is projected to reach 20GW in 2030, a target recently
increased from 15GW.
DERIVATION SUMMARY
Repsol compares well with EMEA peers such as OMV AG (A-/Stable) and
MOL Hungarian Oil and Gas Company plc (BBB-/Negative). Repsol
benefits from a larger scale and more diversified operations with
an upstream output of 572kboe/d (including 214kboe/d from JVs in
2021) and a refining capacity of 1,000 kbbl/d versus OMV's
486kboe/d and 357kbbl/d (excluding the stake in the Ruwais refinery
in the UAE), and MOL's 110kboe/d and 380kbbl/d, respectively.
Repsol's upstream business is significantly smaller than Eni's
(A-/Stable), which had a consolidated production of 1,332kboe/d in
2021.
KEY ASSUMPTIONS
- Fitch Brent oil price assumption of USD100/bbl in 2022, USD85/bbl
in 2023, USD65/bbl in 2024 and USD53/bbl thereafter;
- Fitch natural gas assumptions for Henry Hub of USD7/mcf in 2022,
USD5/mcf in 2023, USD4/mcf in 2024, USD3/mcf in 2025 and
USD2.75/mcf thereafter;
- Significant dividend going forward, along with buybacks from 2022
in line with management guidance;
- Capex in line with the 2021-2025 strategic plan.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Consistent application of the strategy coupled with investment of
the disposal proceeds in new low carbon businesses and commitment
to a conservative financial policy;
- Increase in the share of cash flows coming from low emission
operations;
- FFO net leverage below 2.2x or net debt to EBITDA below 2.0x on a
sustained basis.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The Rating Outlook is Positive, therefore, Fitch does not expect
a negative rating action at least in the short term. Aggressive
financial policy and/or investments in operations increasing the
business risk profile would lead to a revision of the Outlook to
Stable from Positive.
- Change in business strategy that would reduce cash flow
visibility and add to business risk may be negative for the
rating;
- Change in financial profile that would prioritise shareholder
returns coupled with FFO net leverage above 2.7x or net debt to
EBITDA above 2.5x on a sustained basis.
LIQUIDITY AND DEBT STRUCTURE
Good Liquidity: As of end-June 2022, Repsol reported cash and cash
equivalents of EUR4.3 billion (excluding the balance of a loan from
Repsol Sinopec Brasil), along with EUR1.9 billion of marketable
securities, which comfortably covers short-term maturities of
EUR3.7 billion. Repsol's liquidity position is further supported by
undrawn committed credit lines of EUR2.7 billion.
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
----------- ------ -----
Repsol Oil & Gas
Canada Inc. LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
Repsol Europe Finance
senior unsecured LT BBB Affirmed BBB
senior unsecured ST F2 Affirmed F2
Repsol, S.A. LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
senior unsecured LT BBB Affirmed BBB
Repsol International
Finance
senior unsecured LT BBB Affirmed BBB
subordinated LT BB+ Affirmed BB+
senior unsecured ST F2 Affirmed F2
=========
S P A I N
=========
IM CAJA LABORAL 1: Moody's Hikes Rating on Class D Notes From 'Ba1'
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of notes in IM
CAJA LABORAL 1, FTA. The rating action reflects the increased in
the levels of credit enhancement for the affected notes.
Moody's affirmed the ratings of the notes that had sufficient
credit enhancement to maintain their current ratings.
-- EUR856.3M Class A Notes, Affirmed Aa1 (sf); previously on
Nov 25, 2020 Affirmed Aa1 (sf)
-- EUR10.8M Class B Notes, Upgraded to Aa2 (sf); previously on
Nov 25, 2020 Affirmed Aa3 (sf)
-- EUR14.9M Class C Notes, Affirmed A2 (sf); previously on
Nov 25, 2020 Affirmed A2 (sf)
-- EUR18M Class D Notes, Upgraded to Baa3 (sf); previously on
Nov 25, 2020 Upgraded to Ba1 (sf)
The maximum achievable rating is Aa1 (sf) for structured finance
transactions in Spain, driven by the corresponding local currency
country ceiling of the country.
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement
for the affected tranches.
Increase in Available Credit Enhancement
A non-amortizing reserve fund led to the increase in the credit
enhancement available in this transaction.
For instance, the credit enhancement for the most senior tranche
affected by the rating action, Class B, increased to 12.3% from
10.7% since the last rating action on Nov. 25, 2020.
Additionally, Moody's assessed the exposure to Banco Santander S.A.
(Spain) acting as swap counterparty. Moody's analysis considered
the risks of additional losses on the notes if they were to become
unhedged following a swap counterparty default by using the CR
assessment as reference point for swap counterparties. Moody's
concluded that the ratings of the Class C notes are constrained by
the swap agreement entered between the issuer and the swap
counterparty.
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
July 2022.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement and (3) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
===========
T U R K E Y
===========
EMLAK KONUT: Fitch Affirms LongTerm IDRs at 'B', Outlook Negative
-----------------------------------------------------------------
Fitch Ratings has affirmed Turkish residential developer Emlak
Konut Gayrimenkul Yatirim Ortakligi AS's (Emlak Konut) Long-Term
Foreign-Currency (LT FC) and Local-Currency (LC) Issuer Default
Ratings (IDRs) at 'B' with a Negative Outlook. Fitch has also
affirmed Emlak Konut's National Rating at 'AA(tur)', and revised
its Outlook to Negative from Stable.
The affirmation reflects the solid business profile emanating from
the company's time-tested revenue sharing model (RSM), which
generates guaranteed revenue and upside gains, while passing nearly
all development risk to developers. The RSM was 85% of EBITDA in
2021. Emlak Konut holds a priority agreement with Turkiye's Housing
Development Administration (TOKI), under which the company can
voluntarily purchase land at independently appraised values without
a tendering process, which is a clear competitive advantage. Emlak
Konut has some exposure to volatile housing demand and price risk,
although the RSM mitigates much of this risk.
The rating continues to be constrained by Turkiye's Country Ceiling
of 'B' following the recent downgrade of its LT FC IDR to 'B' with
a Negative Outlook, reflecting weak policy credibility and
predictability, high inflation, low external liquidity relative to
high external financing requirements and dollarisation, as well as
geopolitical risks. Emlak Konut's LT LC IDR is influenced by the
group's high exposure to the Turkish economy and close linkage to
TOKI.
KEY RATING DRIVERS
Challenging Operating Environment: Following the sovereign
downgrade of Turkiye's LT FC IDR to 'B' with a Negative Outlook in
July 2022, Fitch forecasts spiraling inflation to average 71.4% in
2022, the highest of Fitch-rated sovereigns, while the country's
trajectory is highly uncertain due to increased risks of backward
indexation, rising expectations and additional Turkish lira
depreciation. In line with the Country Ceiling constraint, Emlak
Konut's rating was also downgraded twice in 2022, in February and
July, notwithstanding the company's stable business performance
during these turbulent times.
Mutually Beneficial TOKI Relationship: TOKI is Emlak Konut's
largest shareholder owning 49.4% of the company. Under an exclusive
priority agreement, the company can buy land from TOKI at
independently appraised values with no tendering process. This
ability to acquire large plots in good locations, mainly in and
around Istanbul, is a significant competitive advantage.
TOKI, which holds more than 200 million sqm of land, is mandated to
provide social housing across Turkey, but does not receive
government funding. Emlak Konut's dividends and land payments are a
key funding source for TOKI. These mutual benefits reduce the risk
of the exclusive relationship terminating. Were it to end, Emlak
Konut's business would be weakened, but it could operate under the
turnkey model, like other homebuilders.
Exposure to Contractor Performance Risk: The top 10 contractors
account for 82% of revenue from RSM projects. As such, contractor
failure is a risk, but is partly mitigated and tends to reduce as
projects progress towards completion. The bidding process comprises
two stages: in the first round, contractors must meet financial and
technical requirements and, if successful, must propose estimated
project values and revenue-sharing in the second. If all
requirements are met, the highest bidder wins.
The preferred bidder must provide a down payment of 10% of the
minimum revenue, as well as a guarantee of about 6% of the total
estimated project revenue. If Emlak Konut is concerned that a
contractor may be unable to complete a project, it can step in and
complete the project. No projects have failed to date with the
company only stepping in once.
Improving Leverage Metrics: Historically, Emlak Konut had a low
funds from operations (FFO) net leverage commensurate with a higher
rating. However, in 2019-2020, the company took advantage of the
favourable interest-rate environment to increase its debt. As the
business activity resumed in 2021 after the pandemic-affected 2020,
the solid cash flow generation reduced FFO net leverage to about
1.0x. Fitch expects leverage to remain low over the next two years
in the absence of major changes in the broad operating environment
ultimately affecting the demand of housing.
Large, Growing Land Bank: Emlak Konut's land bank exceeds 3.9
million sqm with a value of almost TRY9.7 billion. This land, which
most other contractors would not have access to and in most cases
could not afford, is critical to the RSM as the company can attract
financially strong contractors to tender bids. Emlak Konut retains
the option to buy land from TOKI, but is under no obligation and
can return unwanted land to TOKI for any reason at an updated
independent value.
Control Over Project Cashflows: Emlak Konut oversees the building
process and collects and distributes project cash flow, including
contractor revenue, which is shared at defined milestones. This
control provides flexibility to alter projects if demand dynamics
change. For example, in 2019, when sales slowed under high interest
rates, Emlak Konut delayed the latter stages of three projects.
Emlak Konut can cancel projects for any reason, including if bids
fall short.
DERIVATION SUMMARY
While Emlak Konut's turnkey model is similar to housebuilders, the
RSM, which generates most revenue and EBITDA, is unique. Under this
model, the company only contributes land to the project. The
company receives a minimum guaranteed revenue amount that will
cover the cost of the land, and will receive a share of any upside
gains, while passing nearly all development risks to private
contractors. In addition, the priority agreement with TOKI - unique
among Fitch-rated home builders - provides access to significant
and desirable parcels of land that other developers do not have.
The TOKI relationship also exposes Emlak Konut to potential
political or regulatory risks that do not affect peers. The
operating and regulation environments differ across EMEA, making a
direct comparison difficult, especially given Emlak Konut's
distinct business model.
Emlak Konut's standalone credit profile is comparable to other 'BB'
rated EMEA peers. Its size is similar to that of the UK based
Maison Bidco Limited (BB-/Stable) and the Spanish homebuilder Via
Celere Desarrollos Inmobiliarios, S.A.U. (BB-/Stable). However,
Emlak Konut operates in a much more volatile operating environment
than its EMEA rated peers and its ratings are constrained by
Turkiye's Country Ceiling. Turkiye has a significant housing
deficit and a growing population, but the economy remains highly
volatile.
KEY ASSUMPTIONS
- Sustainable EBITDA margin at about 20%
- FFO net leverage below 1.0x at end-2022, following
scheduled repayments and solid cash flow generation
- Stable dividend policy averaging 30% of net income
- Relationship with TOKI unchanged
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of the Country Ceiling, although unlikely given
the Negative Outlook
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Deterioration of the operating environment and a downgrade
of the Country Ceiling
The following factors could lead to a negative rating action (on a
standalone basis):
- Material changes in the relationship with TOKI, causing
deterioration in Emlak Konut's financial profile and
financial flexibility
- FFO gross and net leverage above 7.0x and 6.5x (net debt/EBITDA
above 6.0x), respectively
- Deterioration in the liquidity profile over a sustained period
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: As of June 2022, Emlak Konut is holding
TRY3.6 billion of unrestricted cash, which is adequate to cover the
scheduled debt repayments in the next 12 months. The debt maturity
profile remains short relative to peers, at three years on average,
due to limited long-term funding in the Turkish market, increasing
the company's liquidity risk. Emlak Konut is expected to use
readily available cash to expand its land bank and meet short-term
liquidity needs in 2022 and beyond.
ISSUER PROFILE
Emlak Konut is the largest real estate investment company in
Turkey. Although registered as a REIT, Emlak Konut operates largely
as a homebuilder, as it holds negligible rent-generating assets.
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
----------- ------ -----
Emlak Konut Gayrimenkul
Yatirim Ortakligi A.S. LT IDR B Affirmed B
LC LT IDR B Affirmed B
Natl LT AA(tur) Affirmed AA(tur)
===========================
U N I T E D K I N G D O M
===========================
2ND HND: Goes Into Administration, 13 Jobs Affected
---------------------------------------------------
Brian Donnelly at Herald Scotland reports that 2ND HND, a Scottish
company that refurbishes and sells pre-owned office furniture has
fallen into administration.
Shona Campbell of Henderson Loggie has been appointed joint
administrator with Lee Green and Andrew Kelsall of East Anglian
accountancy firm Larking Gowen, Herald Scotland relates.
Dundonald-based 2ND HND company has 19 employees of which 13 have
been made redundant and six have been retained to assist the
administrators, Herald Scotland discloses.
It has two warehouses in Scotland and one in Essex and an
e-commerce website which promotes high-end eco-friendly and
sustainable office furniture.
According to Herald Scotland, the company had reported a surge in
demand from businesses and consumers as a result of the pandemic as
businesses adapted to hybrid working practices and demand for
environmentally sustainable purchases grew, but trading has since
been affected by economic uncertainty.
The business also suffered from slow payment of debtors, Herald
Scotland notes.
GREENSILL CAPITAL: Administrators Earn GBP34MM in Fees, Expenses
----------------------------------------------------------------
City A.M. reports that the collapse of the disgraced supply chain
finance firm Greensill Capital has earned its administrators GBP34
million in fees and expenses, according to reports.
Insolvency firm Grant Thornton revealed in recent filings they had
pocketed GBP4.4 million of time costs between March and September
on Greensill Capital UK, taking the total costs for the 18 months
of the administration to about GBP23 million, City A.M. relays,
citing the Times.
A further GBP10 million of "other expenses" have been incurred,
making it one of the most expensive insolvency jobs in recent
years, City A.M. notes.
The supply chain finance firm, which lent cash to firms to pay
their invoices, collapsed in March 2021 and sent ripples across the
financial system, City A.M. recounts.
Swiss lender Credit Suisse was forced to freeze around US$10
billion of client funds that were linked to Greensill loans, while
Sanjeev Gupta's GFG Alliance is subject to a related investigation
by the Serious Fraud Office, City A.M. relates.
According to City A.M., a spokesman for Grant Thornton said its
fees "are wholly commensurate with an insolvency of this
complexity".
GREENSILL CAPITAL: Creditors Await Outcome of Insurance Test Case
-----------------------------------------------------------------
Roxanne Libatique at Insurance Business Australia reports that
Greensill creditors are still wondering if insurance contracts will
pay out after the after the global supply chain finance firm's
spectacular collapse in 2021.
Four years ago, Greg Brereton, an underwriter at Sydney insurance
firm Bond & Credit Co, and Lex Greensill, the supply chain finance
firm's founder, agreed on a GBP23 million insurance cover for loans
to a waste plant operator outside Hull, Insurance Business
Australia recounts.
According to Insurance Business Australia, the agreement, included
in court filings, reflected the crucial relationship between the
financier and the insurance executive, whose firm eventually
provided $10 billion of coverage against the risk of default on
Greensill's supply chain lending, with the financial risk held by
global insurance and reinsurance firms sitting behind BCC. Mr.
Brereton was eventually sacked, and an investigation was launched
into his dealings with the lender. Meanwhile, Greensill failed to
find insurance elsewhere and eventually collapsed, Insurance
Business Australia states.
Now, a Financial Times report revealed that Greensill creditors
struggling to recoup billions of dollars of client money are
eagerly awaiting proceedings in Australia's federal court, where a
series of insurance claims by Credit Suisse and other creditors
have been brought together in what is being regarded as a test case
for the billions of dollars of Greensill coverage, with pre-trial
hearings to commence in November 2022, Insurance Business Australia
discloses.
"To the extent that the insurance is found to be invalid, this will
inevitably lead to even further delay and uncertainty surrounding
repayments," said Natasha Harrison, managing partner of Pallas law
firm that represents some Credit Suisse investors, as reported by
Financial Times.
A Credit Suisse investor said he found a red flag related to the
strength of the insurance cover when the Swiss bank identified
three Greensill borrowers -- Sanjeev Gupta's GFG Alliance,
construction company Katerra, and mining group Bluestone -- where
it could struggle to recover funds, Insurance Business Australia
relays.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2022. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
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Information contained herein is obtained from sources believed to
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