/raid1/www/Hosts/bankrupt/TCREUR_Public/221118.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
Friday, November 18, 2022, Vol. 23, No. 225
Headlines
D E N M A R K
WELLTEC INT'L: S&P Ups LT Issuer Rating to 'B' on Lower Leverage
I R E L A N D
HELIOS (EUROPEAN LOAN 37): DBRS Confirms B(high) Rating on E Notes
I T A L Y
BCC NPLS 2018-2: DBRS Cuts Class B Notes Rating to CCC(low)
EOLO SPA: Moody's Cuts CFR to B3 & EUR375MM Sr. Sec. Notes to Caa1
RED & BLACK: DBRS Confirms BB(high) Rating on Class D Notes
TELECOM ITALIA: Fitch Cuts LongTerm IDR to 'BB-', Outlook Negative
K A Z A K H S T A N
IPAK YULI: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
TRUSTBANK PJSB: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
N E T H E R L A N D S
JUBILEE PLACE 5: DBRS Finalizes BB(low) Rating on Class F Notes
R O M A N I A
COS TARGOVISTE: Returns to Profit Following Asset Sale
R U S S I A
TEMBR-BANK JSC: Bank of Russia Provides Update on Liquidation
S P A I N
CAIXABANK RMBS 3: DBRS Confirms CC Rating on Series B Notes
SANTANDER CONSUMER 2014-1: DBRS Confirms C Rating on Class E Notes
TELEFONICA EUROPE: Moody's Rates EUR750MM Green Hybrid Debt 'Ba2'
UNICAJA BANCO: Fitch Puts Final 'BB+' Rating to EUR500M SNP Notes
S W E D E N
INTRUM AB: Moody's Lowers CFR to Ba3 & Alters Outlook to Stable
U N I T E D K I N G D O M
CARGOLOGICAIR: Goes Into Administration
COVENTRY CITY FOOTBALL: Frasers Group Takes Over CBS Arena Lease
INTERNATIONAL PERSONAL: Fitch Rates New Sr. Unsec Notes 'BB-(EXP)'
NEWDAY FUNDING 2022-3: DBRS Finalizes B Rating on Class F Notes
NEWDAY FUNDING 2022-3: DBRS Gives Prov. B Rating to Class F Notes
NEWDAY FUNDING 2022-3: Fitch Assigns Final 'Bsf' Rating to F Notes
RIBBON FINANCE 2018: DBRS Hikes Rating on Class F Notes to BBsf
SAGE AR 2021: DBRS Confirms BB(high) Rating on Class E Notes
STANTON BIKES: Enters Administration, Buyer Sought for Business
TURBO FINANCE 9: Moody's Affirms Ba2 Rating on GBP14.6MM E Notes
X X X X X X X X
[*] BOOK REVIEW: Transnational Mergers and Acquisitions
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D E N M A R K
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WELLTEC INT'L: S&P Ups LT Issuer Rating to 'B' on Lower Leverage
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S&P Global Ratings raised its long-term issuer rating on Welltec
International ApS (Welltec) to 'B' from 'B-' and assigned our 'B'
issue rating to its senior secured bonds.
The stable outlook reflects the company's ability to build some
headroom under the rating in 2023. It also reflects S&P's somewhat
conservative view of medium-term performance, on the back of much
lower oil prices.
S&P said, "We expect Welltec's record high EBITDA in 2022 to spill
over into 2023, despite the weak economic forecast. We expect the
company to report full-year 2022 EBITDA of about $160 million,
while 2023 should be equally robust if oil prices remain at current
levels. The company reported EBITDA of $134 million in the nine
months ending Sept. 30, 2022, and we estimate it will finish the
year with EBITDA of about $160 million. The results primarily
reflect the very high oil prices that led to strong demand for the
company's services (including growth in offshore jobs--about 40% of
total jobs). In addition, the strong demand allowed the company to
be more selective with its offers, moving to more complex jobs. We
expect this trend to continue in 2023, since the underlying growth
drivers of energy security and catch-up effects after a few years
of underinvestment should support oil prices and hence demand. Over
the medium term, we expect Welltec to post average
through-the-cycle EBITDA of about $100 million, which would allow
it to maintain credit metrics commensurate with the current rating
(with S&P Global Ratings-adjusted debt to EBITDA of up to 5x).
"Welltec is prioritizing balance sheet strengthening and we expect
it to post adjusted debt to EBITDA of just 2.3x in 2022. The
company does not need to serve its $325 million bond until 2026,
and we expect it will have strong free cash flow of about $60
million in 2022 and $65 million-$75 million in 2023. We therefore
think the company will reduce its absolute debt. As of Sept. 30,
2022, the company held a cash position of about $70 million.
Given the volatile nature of the company's EBITDA level (ranging
from $42 million- to $96 million over the past five years) and
adjusted debt of about $350 million, we view adjusted debt to
EBITDA of up to 5x through the cycle as commensurate with the 'B'
rating. We continue to view favorably the company's ability to
maintain almost breakeven free cash flow, including during the
lower part of the cycle. A change in the quantum of the debt or
less volatile EBITDA over the cycle could play a key role in the
evolution of the company's credit metrics under different economic
scenarios, which could in turn affect the rating.
"The stable outlook reflects the company's ability to build some
headroom under the rating in 2023, since demand for the company's
services is likely to remain healthy. At the same time, we remain
somewhat conservative regarding the company's medium-term
performance, on the back of much lower oil prices.
"Under our base-case scenario, assuming a Brent oil price of $85
per barrel for 2023, we expect adjusted EBITDA of $120 million-$140
million in 2023 (compared to $140 million-$150 million in 2022),
positive free operating cash flow of up to $75 million, and
adjusted debt to EBITDA of about 2.0x-2.5x.
"Despite the favorable credit metrics, our rating continues to give
weight to our assumption of an average through-the-cycle EBITDA of
about $100 million, with adjusted debt to EBITDA of up to 5x.
"We foresee no changes in the ownership structure, which we view as
supportive.
"We view a downgrade as somewhat remote in the coming 12 months.
However, pressure could build on the rating over time if there were
a sudden change in market sentiment due to a harsher-than-expected
economic recession and very low oil prices, leading to EBITDA of
$100 million or below."
Other triggers for a downgrade could be large debt-funded
acquisitions or a dividend payment.
S&P said, "We see an upgrade as unlikely in the coming 12-24
months. At this stage, the company's absolute EBITDA remains a
constraint. In our view, the company's ability to build a track
record of less volatile EBITDA at about $150 million or above,
especially if achieved during the lower part of the cycle, could
support reassessment of the business risk profile and result in
credit metrics commensurate with a higher rating.
"Alternatively, we could raise the rating if the company eliminated
most of its absolute debt and made a commitment to maintain it at
the same level for an extended period."
ESG credit indicators: E-4, S-2, G-2
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I R E L A N D
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HELIOS (EUROPEAN LOAN 37): DBRS Confirms B(high) Rating on E Notes
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DBRS Ratings Limited (DBRS Morningstar) took the following rating
actions on the commercial mortgage-backed floating rate notes due
2030 (the notes) issued by Helios (European Loan Conduit No. 37)
DAC (the Issuer):
-- Class A notes confirmed at AAA (sf)
-- Class RFN notes confirmed at AAA (sf)
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at A (high) (sf)
-- Class C notes confirmed at BBB (sf)
-- Class D notes confirmed at BB (high) (sf)
-- Class E notes confirmed at B (high) (sf) and placed Under
Review with Negative Implications (UR-Neg.)
The trend on Class RFN remains Stable while the trends on all other
classes remain Negative.
The rating confirmations on the Class A to Class D notes were
driven by the transaction's improved performance over the past 12
months and the borrower's earlier partial prepayment of the loan at
the October 2021 Interest Payment Date (IPD), with subsequent
deleverage of the transaction.
Helios (European Loan Conduit No. 37) DAC is the securitisation of
a single loan. The GBP 350 million senior loan matures on 12
December 2024 and the final note maturity is on May 2, 2030. The
loan is secured by a portfolio of 49 limited-service hotels located
across the United Kingdom. With the exception of the Hampton by The
Hilton in Liverpool and the Park Inn hotel in York, the portfolio
entirely comprises Holiday Inn Express Hotels.
The ultimate beneficial owner of the portfolio is London & Regional
Group (L&R), which acquired the hotels from Lone Star Funds in
2016. The hotels are managed by Atlas Hotels Group, which was also
acquired as part of the transaction in 2016 and is now a wholly
owned operating company of L&R.
As of June 2022, the portfolio's net operating income (NOI) was GBP
41.4 million, up from GBP 33.2 million in March 2022 (the NOI was
GBP 27.8 million in December 2021 and GBP 16.7 million in September
2021). The operating performance has continued to improve as the
Coronavirus Disease (COVID-19) pandemic restrictions are lifted and
the debt yield of 13.20% (as of August 2022) was above the covenant
level of 10.00% and the cash trap level of 11.30%.
The latest valuation conducted by Cushman & Wakefield in January
2021 valued the portfolio at GBP 472.0 million, which results in a
loan-to-value (LTV) of 66.41%, as of August 2022. The LTV is
currently above the cash trap LTV covenant level of 64.9% but is
below the event of default covenant threshold of 72.4%. The
occupancy for the portfolio was 71.5% as of 30 June 2022.
DBRS Morningstar maintained its net cash flow (NCF) assumption at
GBP 33 million and the cap rate at 8.9%, which translates into a
DBRS Morningstar value of GBP 367.2 million, a 22% haircut to the
latest market value provided by Cushman & Wakefield, as of January
2021. DBRS Morningstar maintained its underwritten 73%
portfolio-wide occupancy rate.
On the October 2020 interest payment date (IPD), the debt yield
covenant was breached and as a consequence of it not being cured,
the loan was transferred into special servicing on 23 November
2020; however, on September 28, 2021, the special servicer and the
borrower agreed to the amended terms of the facility agreement. In
consideration of the waivers, the borrower partially prepaid the
loan by GBP 30 million and deposited in the debt service account a
sum of GBP 13,500,315 towards a debt service contribution fund,
which was applied on the January, April, July, and October 2022
IPDs. The loan remained in special servicing until April 2022 and
then returned to primary servicing as a corrected loan.
Following the application of the GBP 30 million prepayment under a
sequential payment waterfall, the Class A notes were partially
redeemed, thereby increasing the weighted-average margin of the
notes. DBRS Morningstar calculates the weighted-average margin
(WAM) of the notes to be 3.18%, which reduces the excess spread
between the note margin and the loan margin (3.25%) and together
with the presence of the senior ranking issuer costs have started
to eat into the interest amount payable in respect of the Class E
notes since February 2022 IPD. As of the 2 November 2022 IPD, the
deferred interest amount on Class E stood at GBP 798,800.11.
DBRS Morningstar has raised a query to the cash manager regarding
the classification of this interest shortfall due to the WAM
increasing as a result of the partial prepayment of the Class A
notes and therefore apparently triggering the available funds cap
(AFC) provisions of the Class E notes. This query has not been
answered by the cash manager yet and so it remains unclear to DBRS
Morningstar whether these funds should be deferred or not due under
the AFC provisions and, as a result of this uncertainty, DBRS
Morningstar has placed its rating on the Class E notes UR-Neg.
until this determination has been made.
All figures are in British pound sterling unless otherwise noted.
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I T A L Y
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BCC NPLS 2018-2: DBRS Cuts Class B Notes Rating to CCC(low)
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DBRS Ratings GmbH (DBRS Morningstar) downgraded its ratings on the
Class A Notes and Class B Notes issued by BCC NPLs 2018-2 S.r.l.
(the Issuer) to B (high) (sf) and CCC (low) (sf), respectively,
from BB (high) (sf) and CCC (sf), respectively. The trends on all
ratings remain Negative.
The transaction represents the issuance of Class A, Class B, and
Class J Notes (collectively, the notes). The rating on the Class A
Notes addresses the timely payment of interest and the ultimate
repayment of principal on or before the final maturity date in July
2042. The rating on the Class B Notes addresses the ultimate
payment of both interest and principal. DBRS Morningstar does not
rate the Class J Notes.
At issuance, the notes were backed by a EUR 2 billion portfolio by
gross book value consisting of a mixed pool of Italian
nonperforming residential mortgage loans, commercial mortgage
loans, and unsecured loans originated by 73 Italian banks.
doValue S.p.A. (the servicer) services the receivables, while Banca
Finanziaria Internazionale S.p.A., operates as the backup
servicer.
RATING RATIONALE
The rating downgrades follow an annual review of the transaction
and are based on the following analytical considerations:
-- Transaction performance: Assessment of portfolio recoveries as
of 30 September 2022, focusing on: (1) a comparison between actual
collections and the servicer's initial business plan (the business
plan); (2) the collection performance observed over the past
months; and (3) a comparison between the current performance and
DBRS Morningstar's expectations.
-- Portfolio characteristics: Loan pool composition as of
September 2022 and evolution of its core features since issuance.
-- Transaction liquidating structure: The order of priority
entails a fully sequential amortisation of the notes (i.e., the
Class B Notes will begin to amortise following the full repayment
of the Class A Notes and the Class J Notes will amortise following
the repayment of the Class B Notes).
-- Performance ratios and underperformance events: As per the July
2022 investor report, the most recent available, the cumulative
collection ratio is 80.96% and the net present value cumulative
profitability ratio is 107.50%. The 80% trigger has been not
breached for both the cumulative collection ratio and the net
present value cumulative profitability ratio.
-- Liquidity support: The transaction benefits from an amortising
cash reserve providing liquidity to the structure and covering
potential interest shortfalls on the Class A Notes. The cash
reserve target amount is equal to 3.0% of the Class A Notes'
principal outstanding balance and is currently fully funded.
According to the investor report, the outstanding principal amounts
of the Class A, Class B, and Class J Notes were equal to EUR 369.9
million, EUR 60.1 million, and EUR 20.0 million, respectively. The
balance of the Class A Notes has amortised by 22.6% since issuance.
The current aggregate transaction balance is EUR 450.1 million.
As of June 2022, the transaction was performing below the
servicer's initial business plan expectations. The actual
cumulative gross collections equalled EUR 223.2 million whereas the
servicer's business plan estimated cumulative gross collections of
EUR 271.5 million for the same period. Therefore, as of June 2022,
the transaction was underperforming by EUR 48.3 million (-17.8%).
Out of the EUR 54.4 million gross collections registered during the
last collection date, EUR 27.1 million (49.8%) derived from note
sales with a material discount to the servicer´s executed lifelong
expectations for the receivables. As of September 2022, the actual
cumulative gross collections increased to EUR 232.6 million
compared with June 2022, underperforming by EUR 67.6 million
(-22.5%) the business plan expectations up to September 2022. DBRS
Morningstar understands that the note sales at material discounts
to the servicer´s executed lifelong expectations is not yet
reflected in the net present value cumulative profitability ratio
that was last reported as of June 2022.
At issuance DBRS Morningstar estimated cumulative gross collections
as of June 2022 to be EUR 210.6 million at the BBB (low) (sf)
stressed scenario. Therefore, the transaction was performing
slightly above DBRS Morningstar's initial BBB (low) (sf) stressed
expectations for the same period.
In September 2022, the servicer delivered an updated portfolio
business plan (the updated business plan) as of December 2021. The
updated business plan, combined with the actual cumulative gross
collections of EUR 168.8 million as of 31 December 2021, results in
a total of EUR 759.4 million expected gross collections, which is
8.6% lower than the total gross collections of EUR 830.6 million
estimated in the initial business plan. Without including actual
collections, the servicer' expected future collections from January
2022 are now accounting for EUR 590.6 million (EUR 633.7 million in
the initial business plan). Hence, the servicer' expectation for
collection on the remaining portfolio was revised considerably
downwards and timing of collections is now expected later than
initially envisaged. The updated DBRS Morningstar B (high) (sf)
rating stress assumes a haircut of 13.0% to the servicer's updated
business plan, considering total future expected collections July
2022 onwards. In DBRS Morningstar's CCC (low) (sf) scenario, the
servicer's updated forecast was only adjusted in terms of actual
collections to date, and timing of future expected collections.
The final maturity date of the transaction is in July 2042.
The Coronavirus Disease (COVID-19) and the resulting isolation
measures had caused an economic contraction, leading in some cases
to increases in unemployment rates and income reductions for many
borrowers. For this transaction, DBRS Morningstar incorporated its
expectation of a moderate medium-term decline in commercial real
estate prices for certain property types.
All figures are in euros unless otherwise noted.
EOLO SPA: Moody's Cuts CFR to B3 & EUR375MM Sr. Sec. Notes to Caa1
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Moody's Investors Service has downgraded to B3 from B2 the
corporate family rating and to B3-PD from B2-PD the probability of
default rating of EOLO S.p.A. ("EOLO" or "the company"), a Fixed
Wireless Access ("FWA") telecommunications service operator in
Italy. Concurrently, Moody's has downgraded to Caa1 from B3 the
rating on the EUR375 million senior secured notes due in 2028 and
issued by EOLO. The outlook remains stable.
"The downgrade to B3 reflects the increase in EOLO's leverage
resulting from lower subscriber growth and higher than expected
capex, leading to a longer period of negative free cash flow
generation," says Ernesto Bisagno, a Moody's Vice President-Senior
Credit Officer and lead analyst for EOLO.
RATINGS RATIONALE
EOLO's 2022 full year results (for the fiscal year ending March
2022) were behind Moody's expectations when Moody's assigned the
initial rating in October 2021. This deviation in performance was
caused by a combination of lower than expected customer growth,
modest ARPU deterioration, and higher capex leading to a sustained
negative free cash flow generation.
The lower than expected customer growth was due to a combination of
flattening in the broadband market after the exponential growth
during the pandemic, as well as increased competition from other
telecom companies, as EOLO has expanded into new areas. This,
combined with supply chain disruptions, has increased pressure on
capex, as the company decided to increase investments in network
capacity and speed up the pace of customer upgrades to the
100Mb/200Mb technology, which requires higher investments in
Customer Premises Equipment (CPE).
Moody's expects these trends to continue in 2023-2024, with
revenues growing at around 5% per year compared to the historical
growth in the double digit range. The rating agency forecasts that
EOLO's Moody's adjusted EBITDA will also grow more slowly and reach
EUR100 million by 2024 (EUR85 million in 2022), while Moody's
adjusted free cash flow after growth capex will remain negative at
around EUR65 million each year over 2023-2024.
Leverage (as adjusted by Moody's) will increase towards 6.5x over
2023-2024 from 5.8x in 2022. However, the leverage evolution will
depend on the speed of the company's growth plan and how it will
fund the incremental capex and potential negative free cash flow
generation.
Moody's also notes that the EBITDA calculation reflects the
capitalization of network and CPE related costs, which are
amortized over the useful life of the underlying assets. However,
historical operating margins are significantly lower, and over
2021-2022, the company reported a negative EBIT largely owing to
depreciation of CPE and amortization of intangible assets arisen in
the PPA process. While the company's EBIT to interest coverage
ratio is very weak as a result, its FFO to interest coverage ratio
is much stronger at around 7.0x.
EOLO's rating reflects (1) the supportive fundamentals of the
Italian FWA market, given the relatively low penetration of fibre
in rural areas and the difficult orography of the country; (2) the
company's strong market position and technological leadership in
this segment; (3) its well invested infrastructure; and (4) its
growing customer base and modest churn rate. The rating is
constrained by (1) the company's high Moody's adjusted leverage and
negative free cash flow generation after growth capex; (2) EOLO's
modest scale and niche business focus; (3) its exposure to
technology risk; (4) the more challenging competitive environment
as the company enters into new regions; and (5) its high operating
leverage owing to a high proportion of fixed costs.
LIQUIDITY
EOLO's liquidity is adequate, but it has weakened due to the higher
than expected capital investments. As of June 2022, the company had
cash of EUR13 million and maintained access to the EUR140 million
super senior revolving credit facility ("SSRCF") maturing in April
2028, with no financial covenants, of which EUR105 million were
available.
Because of the significant growth capex and the spectrum payment,
Moody's expects the company to generate negative FCF of EUR65
million each year over 2023-2024, which might require full
utilization of the SSRCF by end fiscal 2024 unless EOLO raises
additional sources of liquidity. Moody's expects the company to
pro-actively address the funding requirements to support the growth
plan, although the rating agency acknowledges that a large part of
the investments includes growth (success-based) capital spending
that could be curtailed if needed.
The company has a long dated debt maturity profile, with its senior
secured debt maturing in 2028.
STRUCTURAL CONSIDERATIONS
The Caa1 rating of the senior secured notes is one notch below the
CFR, reflecting its ranking behind the SSRCF, which has priority
over the proceeds in an enforcement scenario under the
Intercreditor Agreement.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectation that EOLO will
continue to grow its revenues and earnings overtime, mitigating the
intense competition through a solid customer service proposition
and ongoing technology upgrades. While leverage is expected to
remain flattish at around 6.0x-6.5x, the rating factors in the
flexibility that the company has to curtail growth capex in order
to accelerate the achievement of a positive free cash flow
generation.
The stable outlook assumes that the company will raise sufficient
funds to accommodate its growth plan.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure could develop if the company successfully
executes its growth plan, showing strong revenue growth as well as
a sustainable improvement in EBITDA margins that allows sustained
deleveraging. Quantitatively, that would require Moody's adjusted
debt/EBITDA to reduce towards 5.0x and Moody's adjusted free cash
flow (FCF) to at least break-even.
Downward pressure on the ratings could develop if operating
performance deteriorates, including sustained subscriber losses
leading to revenue and EBITDA declines, with Moody's adjusted
debt/EBITDA rising above 6.5x. In addition, downward rating
pressure could arise if EOLO's liquidity weakens because of
sustained negative free cash flow generation and the company is
unable to raise sufficient funds to fund its growth plan.
LIST OF AFFECTED RATINGS
Downgrades:
Issuer: EOLO S.p.A.
Probability of Default Rating, Downgraded to B3-PD from B2-PD
LT Corporate Family Rating, Downgraded to B3 from B2
Senior Secured Regular Bond/Debenture, Downgraded to Caa1 from B3
Outlook Action:
Issuer: EOLO S.p.A.
Outlook, Remains Stable
PRINCIPAL METHODLOGY
The principal methodology used in these ratings was
Telecommunications Service Providers published in September 2022.
COMPANY PROFILE
Headquartered in Busto Arsizio, Italy, EOLO is a national
telecommunications operator and market leader in the supply of
ultrabroadband FWA services to the residential, business and
wholesale sectors in Italy. EOLO offers FWA services in rural and
suburban areas in Italy for residential and wholesale customers
with speeds ranging from 30 Mbps in the basic package to 200Mbps in
the premium package.
As of June 30, 2022, the company had 610 thousand subscribers.
Reported revenue and company adjusted EBITDA for the fiscal year
ending March 2022 were EUR208 million (+8.6% vs 2021) and EUR112
million (+3.8% vs 2021), respectively.
RED & BLACK: DBRS Confirms BB(high) Rating on Class D Notes
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DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the
Class A, Class B, Class C, and Class D notes (the rated notes)
issued by Red & Black Auto Italy S.r.l. as follows:
-- Class A Notes at AA (high) (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at BBB (high) (sf)
-- Class D Notes at BB (high) (sf)
The rating on the Class A Notes addresses the timely payment of
interest and the ultimate payment of principal by the legal final
maturity date. The ratings on the Class B, Class C, and Class D
notes address the timely payment of interest when most senior
outstanding notes otherwise ultimate payment of interest and
ultimate payment of principal by the legal final maturity date.
The confirmations follow an annual review of the transaction and
are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults,
and losses, as of the September 2022 payment date;
-- Probability of default (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the rated notes to
cover the expected losses at their respective rating levels.
The transaction is a securitisation of a portfolio of auto loans to
individual borrowers in Italy, for the purchase of new and used
vehicles. The receivables are originated and serviced by Fiditalia
S.p.A., whose ultimate parent is Societe Generale, S.A. The
transaction is static and is not subject to residual value risk.
The receivables include insurance premia.
The transaction features a mixed pro rata/sequential amortisation
mechanism, whereby the rated notes initially amortise sequentially
until the Class A Notes' support ratio reaches a target level.
Thereafter, the rated notes will start to amortise pro rata.
However, certain events could cause this feature to stop
indefinitely, resulting in the rated notes amortising on a
sequential basis.
The transaction closed in November 2021 and its legal final
maturity date is at the December 2031 payment date.
PORTFOLIO PERFORMANCE
Delinquencies have been low since closing. As of the September 2022
payment date, two- to three-month arrears and 90+-day arrears were
at 0.1% and 0.2% of the outstanding portfolio balance,
respectively. As of the September 2022 payment date, the cumulative
gross default ratio and cumulative net default ratio were both at
0.1%.
PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining
pool of receivables and maintained its base case PD and LGD
assumptions at 2.2% and 75.0%, respectively.
CREDIT ENHANCEMENT
Credit enhancement (CE) to the rated notes consists of their
subordination (excluding the unrated Class J Notes) and the cash
reserve. As of the September 2022 payment date, CE to the rated
notes had slightly increased since closing as follows:
-- CE to the Class A Notes to 8.7% from 6.0%
-- CE to the Class B Notes to 6.5% from 4.5%
-- CE to the Class C Notes to 3.6% from 2.6%
The CE to the Class D Notes was stable at 0.5%.
As of the September 2022 payment date, amortisation on the rated
notes was sequential. The Class A Notes' support ratio stood at
8.2%, below the pro rata amortisation trigger level of 12.0%.
Interest deferral on Class B, Class C, and Class D Notes depends on
these classes of notes not being the most senior notes as well as
on the cumulative gross default ratio exceeding certain limits
(15.0%, 4.0%, 3.1%, respectively). As of the September 2022 payment
date, no interest was deferred on these notes as the cumulative
gross default ratio was 0.1% and the Class A Notes were
outstanding.
The transaction benefits from a cash reserve funded via the Class J
Notes issuance. The cash reserve is available to cover senior fees,
swap payments, and interest on the rated notes. It is amortising
and set at 0.5% of the outstanding balance of the rated notes and
floored at EUR 2.5 million. As of the September 2022 payment date,
it was at its target balance of approximatively EUR 3.5 million.
The Bank of New York Mellon SA/NV, Milan branch (BNYM Milan) acts
as the account bank for the transaction. Based on DBRS
Morningstar's private rating on BNYM Milan, the downgrade
provisions outlined in the transaction documents, and other
mitigating factors inherent in the transaction structure, DBRS
Morningstar considers the risk arising from the exposure to the
account bank to be consistent with the rating assigned to the Class
A Notes, as described in DBRS Morningstar's "Legal Criteria for
European Structured Finance Transactions" methodology.
DZ BANK AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) acts as
the swap counterparty for the transaction. DBRS Morningstar's
public Long Term Critical Obligations Rating on DZ Bank of AA is
above the first rating threshold as described in DBRS Morningstar's
"Derivative Criteria for European Structured Finance Transactions"
methodology.
DBRS Morningstar analysed the transaction structure in Intex
DealMaker.
All figures are in euros unless otherwise noted.
TELECOM ITALIA: Fitch Cuts LongTerm IDR to 'BB-', Outlook Negative
------------------------------------------------------------------
Fitch Ratings has downgraded Telecom Italia S.p.A's (TI) Long-Term
Issuer Default Rating (IDR) to 'BB-' from 'BB'. The Outlook on the
IDR is Negative. Fitch has also downgraded the senior unsecured
instrument rating to 'BB-' from 'BB', with a recovery rating of
'RR4'.
The rating downgrade reflects the absence of sufficient debt
reduction in 2022. Fitch expects TI's EBITDA net leverage to exceed
4.5x from 2023, which is a threshold to maintain a 'BB' rating. The
worsening macroeconomic environment adds execution risks on the
company's growth and deleveraging capacity.
The Negative Outlook reflects the lower liquidity and interest
coverage ratios, which are moving towards a 'B+' rating profile.
Significant investment outlay and sustained negative free cash flow
(FCF) at a time of strong market competition, increasing inflation
and high interest rates result in lower cash reserves and liquidity
metrics.
Fitch continues to base TI's rating on its current operating scope,
which includes its fixed network assets. There is still uncertainty
on the execution of TI's strategic options to optimise the value of
its businesses and strengthen its competitive position. Any impact
on TI's rating and credit profile would depend on the details of
any proposed transaction structure and the subsequent reallocation
of debt.
KEY RATING DRIVERS
Leverage Increasing, Negative FCF: Fitch's base-case forecasts
assume that TI's EBITDA net leverage will increase to about 4.7x at
end-2023 from 4.3x at end-2022 before declining to about 4.6x by
end-2024. Fitch also expects TI's FCF to remain negative for at
least three years - its definition of FCF does not include the
expected funds TI should receive from the PNRR (the EU-funded
recovery and resilience plan) of about EUR600m and EUR500m in 2024
and 2025, respectively. TI's financing of its negative FCF is
increasingly important given the backdrop of volatile financial
markets and high interest rates.
The increase in leverage is driven by a weak EBITDA profile, higher
interest and one-off payments, including EUR2.1 billion of spectrum
costs in 2022. Fitch expects Fitch-defined EBITDA to decrease to
EUR5 billion in 2022 from EUR5.3 billion in 2021. Continued losses
of high-margin wholesale revenue are likely to have a
disproportionate effect on the group EBITDA margin, increasing the
execution risk to TI's efforts to stabilise its EBITDA through
cost-cutting measures.
Large Debt Refinancing: The refinancing of TI's upcoming maturities
and maintenance of sufficient liquidity will become increasingly
important. TI has debt maturities of EUR3.4 billion and EUR4.5
billion in 2023 and 2024 respectively.
Fitch estimates that the company will have cash reserves of about
EUR4.7 billion and undrawn credit facilities of about EUR4 billion
at end-2022, which would allow it to cover its upcoming debt
maturities until June 2024, but at the expense of exhausting its
liquidity. Fitch expects TI's EBITDA interest coverage ratio to
fall below 3.0x in 2023 from 3.2x in 2022.
Cost Reductions Define Leverage Trajectory: The pace at which TI is
able to offset the competitive pressure on revenue and margin
through cost reduction is uncertain and dependent on strong
execution. Fitch expects improvements in leverage in 2024, driven
by lower content and operational costs, and CPI-linked revenue,
when the EBITDA margin will start to increase. Management now aims
to reduce the cost base in Italy of EUR4.8 billion by 20% in 2024,
up from a previously announced 15%.
TI realised 90% of its 2022 savings target of EUR300 million in
9M22, but not enough to increase EBITDA in 2022. While these
efficiencies will pass through to 2023 and should continue to
increase, Fitch expects them to be offset by stronger competitive
and inflationary pressures increasing in 2023. This will result in
the Fitch-defined EBITDA margin reducing to 31.8% in 2023 from
32.4% in 2022.
Worsening Macroeconomic Environment: In its September 2022 Global
Economic Outlook, Fitch lowered its growth forecasts for Italy in
2022. It now believes the economy will contract in 2023 as a result
of the energy shock. This will directly affect production and
consumer purchasing power. Italy is one of the most gas-reliant EU
states, with gas generating 50% of its electricity, compared with
20% in the EU as whole. CPI inflation is expected to be 8.5% in
2022, up from 4.2% in 2021, before reducing to 3.3% in 2023.
Fitch expects higher inflation and lower consumer purchasing power
will affect TI's EBITDA and its revenue. The company has hedged 75%
of their energy costs for 2023, but higher costs could still offset
some cost efficiencies realised from its transformational plan. For
example, tower-rental lease costs are CPI-linked, adding to TI's
lease expenses in 2023 and reducing its EBITDA margin. Lower
consumer purchasing power increases the execution risk of TI's
customer base stabilisation as it establishes its competitive
positioning as the "value over volume" brand operator.
Strong Market Position to Remain: Competitive pressures in the
mobile and fixed wholesale segments have continued as rivals Iliad
Italy builds scale and Open Fiber continues to expand its network.
Despite these pressures, TI's market position remains strong. While
TI will cede some market share in the next two to three years,
Fitch expects it to retain its leading position. TI is the market
leader in fixed broadband and mobile with shares of about 41% and
28.5%, respectively.
TI continues to lead in the B2B segment with above market growth in
its Enterprise business. Over the past year, competition in mobile
has started to slow as Iliad reaches scale, but competition in
fixed has increased, leading to TI's fixed broadband market share
(retail + wholesale) falling to 80.7% in 2Q22 from 83.4% in 2Q21.
Extraordinary Transactions Uncertainty: TI has outlined two
strategic options to reduce its debt. One option was to divest its
network assets or its enterprise division but the expected timing
of this remains uncertain. TI had said that it favoured a second
option, a merger between its network assets and Open Fiber, but
this has entailed lengthy negotiations given the multitude of
stakeholders. Even if the stakeholders reach an agreement, the
regulatory scrutiny for the merger would be significant, which
could delay the transaction further.
TI is subject to the Golden Power rule as a strategic asset and the
volatility in Italian politics and recent change in government has
led to further delays. For example, the terms of a memorandum of
understanding (MOU) signed between TI, Cassa depositi e prestiti
SpA (BBB/Stable), Open Fiber, Macquarie Fund and KKR in May have
been extended.
DERIVATION SUMMARY
TI's ratings are driven by its strong domestic position, with
leading market shares, underpinned by a leading network footprint
in Italy but high leverage. TI's reduced ownership in its local
access network, despite retaining control, slightly weakens its
operating profile compared with other western European incumbent
telecom operators that fully own their local access network.
TI's leverage thresholds are looser than similarly rated cable
peers, such as VMED O2 UK Limited and Telenet Group Holding N.V
(both 'BB-'/Stable), and on a par with those of higher-rated BT
Group plc (BBB/Stable). The latter fully owns its local access
networks but faces FCF volatility from pension deficits and the
competitive environment. Like TI, Royal KPN N.V.'s (BBB/Stable)
revenue mix has a domestic focus, but it has ownership of a
majority of its entire local access network. BT and Royal KPN's
higher ratings reflect their lower leverage.
Other higher-rated peers, such as Deutsche Telekom AG and Orange
S.A. (both 'BBB+'/Stable), have greater diversification, as well as
lower leverage and greater organic deleveraging capacity.
KEY ASSUMPTIONS
- Domestic revenue to decline by 5.7% and 3.0% in 2022 and 2023,
respectively, before stabilising, with group revenue broadly flat
in 2022-2024.
- Company-defined EBITDA margin (before special factors and leases)
of 38.8% in 2022, reducing to 38.6% in 2023, before increasing
slightly to 38.9% in 2024.
- Recurring cash tax payments of EUR90 million-EUR150 million a
year in 2022-2024.
- Broadly stable working-capital requirements over the next two
years, before increasing to EUR75 million in 2024.
- Capex (excluding spectrum) at 26% of revenue in 2022 and 2023,
and 23% in 2024.
- No dividends in 2022-2024, including savings shares.
- Net outflow of EUR500 million from a reduction in TI's holding of
INWIT and partial purchase of Oi assets in Brazil (the Oi asset
purchase is assumed to be consolidated for six months in 2022,
which is within Fitch's base-case assumptions).
- Inflow of PNRR funds of EUR600 million in 2024 and EUR500m in
2025, aiding net debt reduction.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Funds from operations (FFO) net leverage sustained below 5.0x
(equivalent to about 4.5x Fitch-defined EBITDA net leverage). Fitch
will also be guided by TI's FFO net leverage on a proportionate
basis for FiberCop.
- A sustained improvement in domestic operations and fixed and
mobile operations that stabilises EBITDA and improves organic
deleveraging capacity.
- FFO interest coverage sustainably over 3.5x (with EBITDA interest
coverage above 4.0x).
- The Outlook could be changed to Stable if TI improves its
liquidity profile with higher-than-expected EBITDA, stronger FCF
and successful debt refinancing.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- FFO net leverage sustained above 5.7x (equivalent to about 5.2x
Fitch-defined EBITDA net leverage). Fitch will also be guided by
TI's FFO net leverage on a proportionate basis for FiberCop.
- Tangible worsening of operating conditions or the regulatory
environment, leading to expectations of materially weaker FCF
generation.
- Sustained competitive pressure in the mobile, fixed and wholesale
segments, driving significant losses in service revenue market
share.
- Decreasing liquidity and signs of reduced access to financial
markets for refinancing.
- FFO interest coverage sustainably below 2.5x (with EBITDA
interest coverage decreasing below 3.0x).
LIQUIDITY AND DEBT STRUCTURE
Weakening Liquidity: TI's liquidity profile is defined by its EUR5
billion of cash and equivalents at end-3Q22 and EUR4 billion of
available undrawn credit facilities, with which the company can
cover its operating and financing obligations until June 2024. TI
has upcoming debt maturities of a combined EUR7.9 billion up to
2024. Coupled with negative FCF, this results in weak liquidity
metrics.
ISSUER PROFILE
TI is the incumbent telecom carrier in Italy, with leading market
positions in both fixed-line and mobile. The company owns 67% of
TIM Brazil, the third-largest mobile operator in Brazil.
SUMMARY OF FINANCIAL ADJUSTMENTS
One-off goodwill clean-up payments included as a non-recurring
payment EUR231 million made in 2021 was added back to cash flow
operations and expensed in non-recurring items.
ESG CONSIDERATIONS
TI has and ESG Relevance score of '4' for Governance Structure.
This reflects historic conflicts between TI's shareholders and
frequent changes to senior management. This 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.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Telecom Italia
Capital
senior
unsecured LT BB- Downgrade RR4 BB
Telecom Italia
S.p.A. LT IDR BB- Downgrade BB
senior
unsecured LT BB- Downgrade RR4 BB
Telecom Italia
Finance SA
senior
unsecured LT BB- Downgrade RR4 BB
===================
K A Z A K H S T A N
===================
IPAK YULI: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed Joint Stock Innovation Commercial Bank
Ipak Yuli's Long-Term Issuer Default Ratings (IDRs) at 'B' with
Stable Outlook and Viability Rating (VR) at 'b'.
KEY RATING DRIVERS
IDRs Driven by VR: Ipak Yuli's 'B' Long-Term IDRs are driven by its
intrinsic creditworthiness, as captured by its 'b' VR. The VR
reflects the bank's limited franchise, high dollarisation, moderate
capitalisation along with notable impaired loans. The VR also
reflects the bank's high profitability and diversified funding
base.
Positive GDP Trend; Sector Risks: The impact of the Russia-Ukraine
military conflict on Uzbekistan's economy has been limited to date
and Fitch forecasts Uzbekistan's GDP will grow by 5.1% in 2022 and
4.7% in 2023. However, Fitch considers Uzbekistan's operating
environment as volatile and vulnerable to external shocks related
to the conflict and the global economy. Potential risks also stem
from structural weaknesses of the banking sector, including high
dollarisation, continued asset quality deterioration and reliance
on external foreign-currency debt.
Small Bank, SME Lending Focus: Ipak Yuli is a small privately-owned
bank in the concentrated Uzbek banking system. The bank runs a
commercial business model and is focused on SME lending (72% of
gross loans at end-2Q22). Although Ipak Yuli's ownership structure
is quite complex and lacks transparency, the bank benefits from the
presence of international financial institutions (IFIs), which hold
around 35% of outstanding shares.
Rapid Growth, High Dollarisation: Ipak Yuli had high loan growth in
2019-2021 (32% annualised), outpacing both the sector average of
20% and the bank's internal capital generation amid continued
economic growth. In 9M22, the bank's loan book expanded by a
further 21% and Fitch expects Ipak Yuli to continue growing rapidly
its loan book (particularly exposures to SMEs and individuals) in
2023. Loan book dollarisation remained significant at 40% at
end-3Q22, although below the sector (50%).
Moderate Impaired Loans: Ipak Yuli's impaired loans (defined as
Stage 3 loans under IFRS) ratio remained stable at around 6% in
2020-1H22. Stage 2 loans were a high 21% of gross loans at
end-1H22. The coverage of impaired loans by total loan loss
allowances was 69% at end-2Q22, which is acceptable in its view,
but lower than the bank reported during the pandemic (end-2020:
83%). Loan book is diversified by names. Fitch expects the bank to
maintain its impaired loans ratio at the current level in the
medium term, while coverage by loan loss allowances will continue
exceeding 60%.
Healthy Profitability: Ipak Yuli's focus on the high-yielding SME
lending segment results in a wide net interest margin of 11% in
1H22. Combined with reasonable operating efficiency (1H22: 46%)
this led to a strong pre-impairment profit at 12% of average gross
loans. Despite an increase in the annualised cost of risk to 1.7%
in 1H22 from 0.4% in 2021, Ipak Yuli's annualised operating
profit/regulatory risk-weighted assets (RWA) ratio remained robust
at 4.7%.
Moderate Capitalisation: Fitch views capitalisation as moderate,
given the bank's rapid asset growth. The Fitch core capital
(FCC)/regulatory RWA ratio decreased to 13.5% at end-2Q22 from
14.4% at end-2021, mainly due to significant RWA growth accounting
for 23% in 1H22. Fitch views Ipak Yuli's regulatory capital buffer
(300bp over Tier 1 ratio and Total Capital ratio regulatory
minimums at end-3Q22) as modest considering the bank's ambitious
plans for RWA growth exceeding 20% in 2023.
Wholesale Funding, Adequate Liquidity Buffer: Ipak Yuli's wholesale
debt obligations (44% of total liabilities at end-2Q22) were
notably above those of its peers and mainly attracted from IFIs.
Customer deposits amounted for another 51%. The liquidity cushion
has been reasonable over the past three years and comprised 26% of
total assets at end-2Q22. Net of forthcoming wholesale debt
repayments, liquid assets covered about a third of customer
deposits at the same date.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The bank's IDRs and VR could be downgraded as a result of material
deterioration in asset quality leading to a substantial increase in
impairment charges and larger losses. Furthermore, the VR could be
downgraded if rapid loan growth results in weaker capitalization,
with the FCC ratio sustainably below 12% or regulatory capital
ratios approaching the regulatory requirements.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of the bank's IDRs and VR would require a substantial
improvement in Uzbekistan's operating environment, strengthening of
the bank's business model and asset quality while maintaining
strong capitalisation and profitability metrics.
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
----------- ------ -----
Joint Stock Innovation
Commercial Bank
Ipak Yuli LT IDR B Affirmed B
ST IDR B Affirmed B
LC LT IDR B Affirmed B
LC ST IDR B Affirmed B
Viability b Affirmed b
Government Support ns Affirmed ns
TRUSTBANK PJSB: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Private Joint Stock Bank Trustbank's
Long-Term Issuer Default Ratings (IDRs) at 'B' with Stable Outlook
and Viability Rating (VR) at 'b'.
KEY RATING DRIVERS
IDRs Driven by VR: Trustbank's IDRs are driven by its intrinsic
creditworthiness in view of a low probability of support from the
state, due to the bank's private ownership and low systemic
importance. The bank's 'b' VR is one notch below the 'b+' implied
VR due to a negative adjustment for business profile score,
assessed by Fitch at 'b', reflecting the bank's modest franchise in
concentrated banking sector and concentrated business model with
high reliance on funds from the related party. The VR is supported
by the bank's good profitability and a track record of strong
capitalisation.
Positive GDP Trend; Sector Risks: The impact of the Russia-Ukraine
military conflict on Uzbekistan's economy has been limited to date
and Fitch forecasts Uzbekistan's GDP will grow by 5.1% in 2022 and
by 4.7% in 2023. However, Fitch considers Uzbekistan's operating
environment as volatile and vulnerable to external shocks related
to the conflict and the global economy. Potential risks also stem
from structural weaknesses of the banking sector, including high
dollarisation, continued asset quality deterioration and reliance
on external foreign-currency debt.
Small Bank, Concentrated Funding: Trustbank is a small (market
share 1.5% at end-3Q22) privately-owned bank in Uzbekistan with a
focus on SME lending. Around half of the balance sheet is presented
by liquid assets, while the bank's funding is very concentrated,
with total liabilities presented mostly by customer accounts and
the largest depositor comprising about two-thirds.
Rapid Growth: Trustbank demonstrated high double-digit growth in
recent years, including 2021, when gross loan growth was 20%. In
6M22 growth of gross loans increased to 17% (not annualised),
meaning growth of gross loans during this period was comparable
with growth throughout 2021.
High Share of Non-Loan Assets: Net loans made up only 42% of total
assets at end-1H22, while other assets are mainly represented by
low-risk interbank placements and government bonds. The impaired
loans ratio (Stage 3) was low 3.4% at end-1H22, with Stage 2 loans
making another 13%. Fitch views Trustbank's loan quality as largely
untested due to a sizable 38% of loans in grace periods at end-1H22
and due to high lending growth, especially in the retail segment
(+71% in 1H22, not annualised).
Profitability a Rating Strength: Good profitability metrics are
supported by a positive carry from free related-party funding
complemented with Trustbank's focus on higher-yielding SME lending.
The return on average equity was high 45% in 1H22, despite the
noticeable cost of risk of 3%.
Sizeable Capital Cushion: Fitch views Trustbank's capitalisation as
strong, while good pre-impairment profitability allows the bank to
absorb higher credit costs without putting pressure on capital. The
Fitch Core Capital (FCC)/regulatory risk-weighted assets ratio was
17.7% at end-1H22. The regulatory Tier 1 and total capital ratios
were 12.5% and 16.7% at end-3Q22, respectively, above the
regulatory minimums (10% and 13%).
Related-Party Dominates Funding: Funding from related parties
accounted for 65% of total liabilities at end-1H22. Virtually all
of it was current accounts from Uzbek Commodity Exchange, which
keeps its liquidity at the bank. Trustbank manages liquidity risk
by keeping not less than 80% of this funding in cash instruments or
government bonds. Wholesale funding is insignificant and liquid
assets (net of 12 months' wholesale repayments) covered 63% of
customer accounts at end-1H22.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The bank's IDRs and VR could be downgraded as a result of material
deterioration in asset quality that would lead to higher impairment
charges. A hike in liquidity risk for example as a result of lower
coverage of current accounts would also weight on the VR.
Furthermore, the VR could be downgraded if rapid loan growth
translates into weaker capitalisation that threatens to breach
regulatory requirements with buffer above regulatory requirements
for Tier 1 Capital below 100bp.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of Trustbank's IDRs and VR would require a substantial
improvement in Uzbekistan's operating environment and a
diversifying and strengthening of the bank's business model with
less reliance on related party funding.
VR ADJUSTMENTS
The earnings and profitability rating score of 'b+' has been
assigned below the implied score of 'bb' due to following
adjustment reasons: Revenue Diversification (negative).
The viability rating score of 'b' has been assigned below the
implied score of ' b+' due to following adjustment reasons:
Business Profile (negative).
ESG CONSIDERATIONS
Private Joint Stock Bank Trustbank has an ESG Relevance Score of
'4' for Governance Structure due to high reliance on funds from the
related party , 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.
Entity/Debt Rating Prior
----------- ------ -----
Private Joint Stock
Bank Trustbank LT IDR B Affirmed B
ST IDR B Affirmed B
LC LT IDR B Affirmed B
LC ST IDR B Affirmed B
Viability b Affirmed b
Government Support ns Affirmed ns
=====================
N E T H E R L A N D S
=====================
JUBILEE PLACE 5: DBRS Finalizes BB(low) Rating on Class F Notes
---------------------------------------------------------------
DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional
ratings on the following classes of loan and notes issued by
Jubilee Place 5 B.V. (the Issuer):
-- Class A loan at AAA (sf)
-- Class B notes at AA (sf)
-- Class C notes at A (sf)
-- Class D notes at BBB (high) (sf)
-- Class E notes at BB (high) (sf)
-- Class F notes at BB (low) (sf)
DBRS Morningstar does not rate the Class G or Class R notes also
issued in this transaction.
The rating on the Class A loan addresses the timely payment of
interest and the ultimate repayment of principal by the legal final
maturity date in July 2059. The rating on the Class B notes
addresses the timely payment of interest when most senior and the
ultimate repayment of principal by the legal final maturity date.
The ratings on the Class C to Class F notes address the ultimate
payment of interest and principal by the legal final maturity
date.
Jubilee Place 5 B.V. is a bankruptcy-remote special-purpose vehicle
incorporated in the Netherlands. The Issuer used the proceeds from
the Class A loan and the issued notes to fund the purchase of Dutch
mortgage receivables originated by Dutch Mortgage Services B.V.,
DNL 1 B.V., and Community Hypotheken B.V (the originators), which
were acquired from Citibank, N.A., London Branch (the seller).
The originators are specialised residential buy-to-let (BTL) real
estate lenders operating in the Netherlands and started their
lending businesses in 2019. They operate under the mandate of
Citibank, which defines most of the underwriting criteria and
policies.
RATING RATIONALE
As of August 31, 2022, the portfolio consisted of 1,068 loans with
a total portfolio balance of approximately EUR 409.1 million. The
weighted-average (WA) seasoning of the portfolio is 0.2 years with
a WA remaining term of 34.2 years. The WA current loan-to-value
ratio, at 72.5%, is slightly above that of other Dutch BTL RMBS
transactions. The loan parts in the portfolio are either
interest-only loans (89.9%) or annuity mortgage loans (10.1%). A
significant portion of the loans were granted for the purpose of
equity release (50.1%). All of the loans in the portfolio are fixed
with a compulsory future switch to floating. The loan and notes pay
a floating rate. To address this interest rate mismatch, the
transaction is structured with a fixed-to-floating interest rate
swap where the Issuer pays a fixed rate and receives three-month
Euribor over a notional, which is a defined amortisation schedule.
There are no loans in arrears in the portfolio.
DBRS Morningstar calculated the credit enhancement for the Class A
loan at 15.75%, which is provided by the subordination of the Class
B to Class G notes. Credit enhancement for the Class B notes is
10.25% and is provided by the subordination of the Class C to Class
G notes. Credit enhancement for the Class C notes is 7.50% and is
provided by the subordination of the Class D to Class G notes.
Credit enhancement for the Class D notes is 5.90% and is provided
by the subordination of the Class E to Class G notes. Credit
enhancement for the Class E notes is 4.75% and is provided by the
subordination of the Classes F and G notes. Credit enhancement for
the Class F notes is 3.75% and is provided by the subordination of
the Class G notes.
The transaction benefits from an amortising liquidity reserve fund
(LRF) that can be used to cover shortfalls on senior expenses and
interest payments on the Class A loan. The LRF was partially funded
at closing at 0.75% of (100/95) of the initial balance of the Class
A loan and will build up until it reaches its target of 1.25%
(100/95) of the outstanding balance of the Class A loan. The LRF is
floored at 0.75% (100/95) of the initial balance of the Class A
loan. The LRF indirectly provides credit enhancement for the Class
A loan and all classes of notes, as released amounts are part of
the principal available funds.
Additionally, the loan and notes are provided with liquidity
support from principal receipts, which can be used to cover senior
expenses and interest shortfalls on the Class A loan or the
most-senior class of notes outstanding once the Class A loan has
been fully repaid.
The Issuer entered into a fixed-to-floating swap with Citibank
Europe plc (rated AA (low) with a Stable trend by DBRS Morningstar)
to mitigate the fixed interest rate risk from the mortgage loans
and the three-month Euribor payable on the loan and the notes. The
notional of the swap is a pre-defined amortisation schedule of the
assets. The Issuer pays a fixed swap rate and receives three-month
Euribor in return. The swap documents are in line with DBRS
Morningstar's "Derivative Criteria for European Structured Finance
Transactions" methodology.
The Issuer Account Bank is Citibank Europe plc, Netherlands Branch.
Based on DBRS Morningstar's private rating on the account bank, the
downgrade provisions outlined in the transaction documents, and
structural mitigants inherent in the transaction structure, DBRS
Morningstar considers the risk arising from the exposure to the
account bank to be consistent with the ratings assigned to the loan
and notes, as described in DBRS Morningstar's "Legal Criteria for
European Structured Finance Transactions" methodology.
DBRS Morningstar based its ratings primarily on the following
considerations:
-- The transaction capital structure, form, and sufficiency of
available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage loan portfolio and the
ability of the servicer to perform collection activities. DBRS
Morningstar calculated portfolio default rates (PDs), loss given
default (LGD), and expected loss (EL) outputs on the mortgage loan
portfolio.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay the loan and notes according to the terms of
the transaction documents. DBRS Morningstar analysed the
transaction cash flows using the PD and LGD outputs provided by
DBRS Morningstar's European RMBS Insight Model. DBRS Morningstar
analysed transaction cash flows using Intex DealMaker.
-- The structural mitigants in place to avoid potential payment
disruptions caused by operational risk, such as a downgrade and
replacement language in the transaction documents.
-- The transaction's ability to withstand stressed cash flow
assumptions and repay investors in accordance with the terms and
conditions of the loan and notes.
-- The consistency of the transaction's legal structure with DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology and the presence of legal opinions
addressing the assignment of the assets to the Issuer.
All figures are in euros unless otherwise noted.
=============
R O M A N I A
=============
COS TARGOVISTE: Returns to Profit Following Asset Sale
------------------------------------------------------
Bogdan Todasca at SeeNews reports that Romanian special steel plant
COS Targoviste said it has turned to a RON103.5 million (US$21.94
million/EUR21.03 million) net profit in the first nine months of
2022, from a net loss of RON22.4 million during the same period of
2021.
COS Targoviste's net result improved on the back of its insolvency
procedures and the consequent sale of its assets, the steel mill
announced in a financial report filed with the Bucharest Stock
Exchange on Nov. 15, SeeNews relates.
COS Targovite's sales amounted to RON20.2 million in the
January-September period, compared to RON13 million in the like
period of last year, SeeNews discloses.
Total revenues jumped to RON256.1 million during the first nine
months of 2022, from RON8.9 million in the same period of 2021,
SeeNews notes.
Total assets shrunk to RON70.9 million at the end of the first nine
months of 2022, from RON194.9 million at the end of 2021, according
to SeeNews.
Debt almost halved, reaching RON281.5 million at end-September,
compared to the RON508.3 million owed at the end of 2021, SeeNews
states.
Following its asset sales, COS Targoviste covered outstanding
wages, as well as debts to the state budget, while partially
settling current debts incurred during the insolvency procedure,
according to SeeNews.
In March 2022, Italian steel bars and special steels manufacturer
AFV Beltrame Group announced it acquired the functional production
assets of COS Targoviste, through its Romanian subsidiary, Donalam,
SeeNews recounts.
Following the acquisition, Beltrame added that it plans to invest
EUR200 million (US$208.62 million) to upgrade the Targoviste
special steel plant and build a photovoltaic park with an installed
capacity of 100-120 MW, SeeNews discloses.
===========
R U S S I A
===========
TEMBR-BANK JSC: Bank of Russia Provides Update on Liquidation
-------------------------------------------------------------
According to The Bank of Russia's Press Service, TEMBR-BANK (JSC)
(Registration No. 2764) (hereinafter, the Bank) was subject to
compulsory liquidation by the decision of the Court of Arbitration
of the City of Moscow, dated November 18, 2020. The State
Corporation Deposit Insurance Agency was appointed as the
liquidator.
In the course of liquidation procedures, the Bank's liquidator made
some findings implying that the activities of the Bank's former
executives and owners had signs of asset withdrawal by lending to
borrowers that had doubtful financial standing or were knowingly
unable to settle their obligations, as well as by terminating the
Bank's rights as a pledgee of liquid collateral.
By the decision of the Court of Arbitration of the City of Moscow,
dated May 16, 2022, the Bank was declared insolvent (bankrupt) and
subject to bankruptcy proceedings. The State Corporation Deposit
Insurance Agency was appointed as a receiver.
The Bank of Russia submitted information on the financial
operations of the Bank's officers to the Russian Prosecutor
General's Office and the Investigative Department of the Russian
Ministry of Internal Affairs for consideration and procedural
decision-making.
The reference to the Press Service is mandatory if you intend to
use this material.
=========
S P A I N
=========
CAIXABANK RMBS 3: DBRS Confirms CC Rating on Series B Notes
-----------------------------------------------------------
DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the
Series A and Series B Notes issued by Caixabank RMBS 3, FT (the
Issuer) at AA (low) (sf) and CC (sf), respectively.
The rating on the Series A Notes addresses the timely payment of
interest and the ultimate payment of principal on or before the
legal final maturity date in September 2062. The rating on the
Series B Notes addresses the ultimate payment of interest and
principal on or before the legal final maturity date.
The confirmations follow an annual review of the transaction and
are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and
losses, as of the September 2022 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the Series A Notes to
cover the expected losses assumed at the AA (low) (sf) rating level
and to the Series B Notes at CC (sf) once the Series A Notes are
fully amortised and the reserve fund starts providing credit
enhancement.
The transaction is a securitisation of Spanish residential mortgage
loans and drawdowns of mortgage lines of credit secured over
residential properties located in Spain and originated and serviced
by CaixaBank, S.A. (CaixaBank). The Issuer used the proceeds of the
Series A and Series B Notes to fund the purchase of the mortgage
portfolio. In addition, CaixaBank provided separate additional
subordinated loans to fund both the initial expenses and the
reserve fund.
PORTFOLIO PERFORMANCE
As of the September 2022 payment date, loans that were one to two
months and two to three months delinquent represented 0.1% and 0.0%
of the portfolio balance, respectively, while loans more than three
months delinquent represented 3.0%. Gross cumulative defaults
amounted to 1.2% of the original collateral balance, of which 40.6%
has been recovered so far.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis on the remaining
pool of receivables and updated its base case PD and LGD
assumptions to 5.4% and 32.2%, respectively.
CREDIT ENHANCEMENT
The subordination of the Series B Notes and the reserve fund
provides credit enhancement to the Series A Notes. As of the
September 2022 payment date, credit enhancement to the Series A
Notes was 20.15%, up from 18.4% at the last annual review.
The transaction benefits from a reserve fund, which was initially
funded to EUR 114.8 million at closing. The reserve provides
liquidity support and credit support to the Series A Notes. The
reserve fund started amortising two years after closing. The
reserve fund is currently at its target level of EUR 65.6 million.
Following the full repayment of the Series A Notes, the transaction
reserve fund will also provide liquidity and credit support to the
Series B Notes.
CaixaBank acts as the account bank for the transaction. Based on
the account bank reference rating of A (high) on CaixaBank (which
is one notch below the DBRS Morningstar Long Term Critical
Obligations Rating of AA (low)), the downgrade provisions outlined
in the transaction documents, and other mitigating factors inherent
in the transaction structure, DBRS Morningstar considers the risk
arising from the exposure to the account bank to be consistent with
the rating assigned to the Series A Notes, as described in DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
All figures are in euros unless otherwise noted.
SANTANDER CONSUMER 2014-1: DBRS Confirms C Rating on Class E Notes
------------------------------------------------------------------
DBRS Ratings GmbH (DBRS Morningstar) took the following rating
actions on the notes issued by FTA Santander Consumer Spain Auto
2014-1 (SCSA 2014-1) and FT Santander Consumer Spain Auto 2016-1
(SCSA 2016-1):
SCSA 2014-1:
-- Class A Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class B Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class C Notes confirmed at AA (high) (sf)
-- Class D Notes upgraded to AA (high) (sf) from AA (sf)
-- Class E Notes confirmed at C (sf)
SCSA 2016-1:
-- Series A notes upgraded to AAA (sf) from AA (high) (sf)
-- Series B notes upgraded to AAA (sf) from AA (high) (sf)
-- Series C notes confirmed at AA (high) (sf)
-- Series D notes upgraded to AA (high) (sf) from AA (low) (sf)
For SCSA 2014-1, the ratings on the Class A and Class B Notes
address the timely payment of interest and the ultimate payment of
principal on or before the legal final maturity date in June 2032.
The ratings on the Class C, Class D, and Class E Notes address the
ultimate payment of interest and principal on or before the legal
final maturity date.
For SCSA 2016-1, the ratings on the Series A and Series B notes
address the timely payment of interest and the ultimate payment of
principal on or before the legal final maturity date in April 2032.
The ratings on the Series C and Series D notes address the ultimate
payment of interest and principal on or before the legal final
maturity date.
The rating actions follow an annual review of the transactions and
are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults,
and losses as of the most recent payment dates;
-- Probability of default (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the rated notes to
cover the expected losses at their respective rating levels;
-- The rating of the Class E Notes issued by SCSA 2014-1 is based
on DBRS Morningstar's review of the following considerations:
(1) the Class E Notes are in the first-loss position and, as
such, are highly likely to default, and (2) given the
characteristics of the Class E Notes as defined in the
transaction documents, the default most likely would only be
recognised at the maturity or early termination of the
transaction.
SCSA 2014-1 and SCSA 2016-1 are securitisations of Spanish auto
loan receivables originated and serviced by Santander Consumer
E.F.C., S.A. (SC, the servicer, or the originator), a subsidiary of
Santander Consumer Finance, S.A. (SCF). SCSA 2014-1 closed in
November 2014 with an initial portfolio of EUR 760.0 million and
included a four-year revolving period, which ended in December
2018. SCSA 2016-1 closed in March 2016 with an initial portfolio of
EUR 765.0 million and included a 40-month revolving period, which
ended in July 2019.
PORTFOLIO PERFORMANCE
-- SCSA 2014-1: As of the September 2022 payment date, loans 30
to 60 days and 60 to 90 days in arrears represented 1.5% and
1.0% of the outstanding portfolio balance, while loans greater
than 90 days in arrears represented 2.5%. Gross cumulative
defaults amounted to 1.4% of the aggregate initial portfolio
balance, of which 37.5% has been recovered to date.
-- SCSA 2016-1: As of the October 2022 payment date, loans 30 to
60 days and 60 to 90 days in arrears represented 1.5% and 1.2%
of the outstanding portfolio balance, while loans greater than
90 days in arrears represented 2.9%. Gross cumulative defaults
amounted to 1.5% of the aggregate initial portfolio balance,
of which 31.9% has been recovered to date.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining
pool of receivables of each transaction and updated its base case
PD and LGD assumptions, based on updated historical performance
data received from the originator, as follows:
-- For SCSA 2014-1, the base case PD and LGD assumptions were
updated to 4.4% and 42.8%, respectively.
-- For SCSA 2016-1, the base case PD and LGD assumptions were
updated to 4.7% and 43.6%, respectively.
CREDIT ENHANCEMENT
The subordination of the respective junior obligations and cash
reserves provides credit enhancement to the rated notes. The
transactions continue to deleverage steadily, resulting in
increased credit enhancement available to the rated notes, which
prompted the rating upgrades.
As of the September 2022 payment date, credit enhancement to the
Class A, Class B, Class C, and Class D Notes in SCSA 2014-1
increased to 101.0%, 71.8%, 55.7%, and 40.4%, respectively, from
50.8%, 36.1%, 28.0%, and 20.3%, respectively, at the time of the
last annual review 12 months ago. The Class E Notes, which were
used to fund the cash reserve, do not benefit from any credit
enhancement.
As of the October 2022 payment date, credit enhancement to the
Series A, Series B, Series C, and Series D notes in SCSA 2016-1
increased to 99.1%, 75.8%, 43.7%, and 26.2%, respectively, from
51.7%, 39.6%, 22.8%, and 13.7%, respectively, at the time of the
last annual review 12 months ago.
SCSA 2014-1 benefits from an amortising reserve fund, funded to EUR
38.0 million at closing, available to cover senior fees, interest,
and principal payments on the Class A through Class D Notes. Once
four years have passed since the end of the revolving period, the
reserve will begin to amortise to a target of 10% of the
outstanding balance of the Class A through Class D Notes, subject
to a floor of EUR 19.0 million. As of the September 2022 payment
date, the reserve was at its target level of EUR 38.0 million.
SCSA 2016-1 benefits from a nonamortising reserve fund, funded to
EUR 15.3 million at closing, available to cover senior fees,
interest, and principal payments on the Series A through Series D
notes. As of the October 2022 payment date, the reserve was at its
target level of EUR 15.3 million.
To mitigate any disruptions in payments due to the replacement of
the servicer or the risk that the servicer fails to transfer the
collections, the transaction documents include the provision for
the funding of liquidity and commingling reserves. These were
unfunded at closing and will only be funded if the DBRS Morningstar
rating of SC's parent company, SCF, falls below specific
thresholds, or SCF's ownership share in SC decreases below a
certain threshold. These reserves continue to be unfunded, as none
of the rating triggers have been breached to date.
SCF acts as the account bank for the transactions. Based on the
DBRS Morningstar private rating of SCF, the downgrade provisions
outlined in the transaction documents, and other mitigating factors
inherent in the transaction structures, DBRS Morningstar considers
the risk arising from the exposure to the account bank to be
consistent with the ratings assigned to the notes, as described in
DBRS Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
All figures are in euros unless otherwise noted.
TELEFONICA EUROPE: Moody's Rates EUR750MM Green Hybrid Debt 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service has assigned a Ba2 rating to Telefonica
Europe B.V.'s EUR750 million backed issuance of undated, deeply
subordinated, guaranteed fixed rate reset securities (the "green
hybrid debt"), which are fully and unconditionally guaranteed by
Telefonica S.A. (Telefonica or the company) on a subordinated
basis. The outlook is stable.
"The Ba2 rating assigned to the green hybrid debt is two notches
below Telefonica's senior unsecured rating of Baa3 primarily
because the instrument is deeply subordinated to other debt in the
company's capital structure," says Carlos Winzer, a Moody's Senior
Vice President and lead analyst for Telefonica.
Telefonica plans to use the net proceeds from the offering
predominantly towards eligible green investments, mainly energy
efficiency in the network transformation from copper to fiber optic
and 5G deployment.
RATINGS RATIONALE
The Ba2 rating assigned to the hybrid debt is two notches below the
group's senior unsecured rating of Baa3.
The two-notch rating differential reflects the deeply subordinated
nature of the hybrid debt. The instrument: (1) is perpetual; (2)
senior only to common equity; (3) provides Telefonica with the
option to defer coupons on a cumulative basis; (4) steps up the
coupon by 25 basis points (bps) at least 10 years after the
issuance date and a further 75 bps occurring 20 years after the
first reset date; and (5) the issuer must come current on any
deferred interest if there are any payments on parity or junior
instruments. The issuer does not have any preferred shares
outstanding that would rank junior to the hybrid debt, and the
issuer's articles of association do not allow the issuance of such
shares by the issuer.
In Moody's view, the notes have equity-like features that allow
them to receive basket "C" treatment, i.e., 50% equity and 50% debt
for financial leverage purposes (please refer to Moody's Hybrid
Equity Credit methodology published in September 2018).
Telefonica's Baa3 rating reflects (1) the company's large scale;
(2) the diversification benefits associated with its strong
position in its key markets; (3) the company's strengthened
position as an integrated mobile fixed operator in the UK, after
the creation of the joint venture (JV) VMED O2 UK Holdings Limited
(VMED O2 UK, Ba3 stable); (4) the ample fibre roll-out of its
high-quality network in Spain; (5) management's track record, and
(6) the company's good liquidity risk management.
However, Telefonica's rating also reflects (1) fierce competition
in the low-end residential mobile market in Spain; (2) the negative
impact of high inflation, particularly, the surge in energy costs;
(3) the company's exposure to emerging market risk, including
significant foreign-currency volatility, and (4) the group's
increased complexity as the company fully consolidates some
subsidiaries that it does not fully own.
RATIONALE FOR STABLE OUTLOOK
The stable rating outlook reflects Telefonica's strong position in
its four core countries of operation — Spain, Brazil, Germany and
the UK — which will mitigate the pressure on the company's cash
flow arising from the weak revenue growth in Spain because of
increasing competition and high inflationary environment.
Although Telefonica's ratings carry a stable outlook, the ratings
are weakly positioned at the current level, as revenue growth and
cash flow may deteriorate beyond current expectations given the
challenging macroeconomic environment.
The stable rating outlook also reflects Moody's expectation that
Telefonica's management will maintain leverage reduction as a
priority.
Downward rating pressure will arise if the company's leverage
exceeds the current maximum leverage tolerance with no likely
improvement over the next two to three years.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
As the hybrid debt rating is positioned relative to another rating
of Telefonica, either: (1) a change in Telefonica's senior
unsecured rating; or (2) a re-evaluation of its relative notching
could affect the hybrid debt rating.
A rating downgrade could result if the company were to deviate from
its financial strengthening plan as a result of weaker cash flow,
or its operating performance in Spain and other key markets were to
deteriorate, with no likelihood of an improvement in the underlying
trends over a 12-months period. Credit metrics that could result in
a downgrade include adjusted retained cash flow/net adjusted debt
below 15% or Moody's-adjusted net leverage of 3.75x or above.
Conversely, Moody's could consider an upgrade of Telefonica's
rating to Baa2 if the company's credit metrics were to strengthen
significantly as a result of an improvement in its operating cash
flow and debt reduction. More specifically, the rating could be
upgraded if the company were to demonstrate its ability to achieve
sustainable improvement in its debt ratios, such as Moody's
adjusted retained cash flow/net debt above 22% and Moody's adjusted
net debt/EBITDA comfortably and sustainably below 3.0x.
LIST OF AFFECTED RATINGS
Assignment:
Issuer: Telefonica Europe B.V.
BACKED Preference Stock, Assigned Ba2
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was
Telecommunications Service Providers published in September 2022.
COMPANY PROFILE
Telefonica S.A. (Telefonica), domiciled in Madrid, Spain, is a
leading global integrated telecommunications provider, with
significant presence in Spain, Germany, the UK and Latin America.
In 2021, Telefonica generated revenue and EBITDA of EUR39.2 billion
and EUR12.7 billion, respectively.
UNICAJA BANCO: Fitch Puts Final 'BB+' Rating to EUR500M SNP Notes
-----------------------------------------------------------------
Fitch Ratings has assigned Unicaja Banco, S.A.'s EUR500 million
senior non-preferred (SNP) notes (ISIN: ES0380907065) a final 'BB+'
rating.
The rating is in line with the expected rating assigned on 8
November 2022 and follows the receipt of the final terms. The bonds
mature on 15 November 2027 with an optional redemption date on 15
November 2026 and carry an annual coupon of 7.25% until the
optional redemption date.
KEY RATING DRIVERS
Unicaja's SNP debt is rated one notch below its Long-Term Issuer
Default Rating (IDR; BBB-/Stable), reflecting its expectation that
Unicaja will use senior preferred debt to meet its resolution
buffer requirements, and that the combined buffer of additional
Tier 1, Tier 2 and SNP debt is unlikely to exceed 10% of the bank's
risk-weighted assets (RWA).
SNP obligations are senior to any subordinated claims and junior to
senior preferred liabilities.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The SNP rating would be downgraded if Unicaja's Long-Term IDR was
downgraded.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The SNP rating would be upgraded if Unicaja's Long-Term IDR was
upgraded.
The rating would also be upgraded if the bank is expected to meet
its resolution buffer requirements exclusively with SNP debt and
more junior instruments or if Fitch expects resolution buffers
represented by SNP and more junior instrument to sustainably exceed
10% of RWAs, both of which we currently view as unlikely.
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
----------- ------ -----
Unicaja Banco, S.A.
Senior non-preferred LT BB+ New Rating BB+(EXP)
===========
S W E D E N
===========
INTRUM AB: Moody's Lowers CFR to Ba3 & Alters Outlook to Stable
---------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of Intrum AB (publ) (Intrum) and Intrum's senior unsecured
debt ratings to Ba3 from previously Ba2. Concurrently, the outlook
has been changed to stable from negative.
RATINGS RATIONALE
The downgrade of Intrum's CFR to Ba3 is driven by Moody's concerns
over the company's financial policy with regards to its elevated
leverage that has now persisted since its debt-funded growth and
acquisition focused strategy prior to the pandemic. Intrum's gross
debt/EBITDA leverage has remained consistently in the range
4.5-5.0x since 2018, while its Interest coverage ratio measured as
EBITDA to Interest Expense declined from above 6x in 2018 to a
range of 5.3-5.5x. After the company revised its financial
objectives in November 2020, management communicated its commitment
to reduce leverage to 3.5x net debt/EBITDA as restated by Intrum's
interim CEO during the Q3 2022 results presentation. While Moody's
believes that the company will be able to somewhat reduce its
current gross leverage from 4.6x (as of Q3 2022) by year-end, the
agency expects that the deteriorating macro-economic environment in
Europe, increasing financing costs and high competition among the
debt purchasing companies will add pressure on profitability,
negatively impacting Intrum's ability to sustainably restore its
key credit metrics in the near term.
Intrum's credit profile continues to benefit from its diversified
business model, with the majority of external revenues coming from
third party debt collections and as a result of its leading
position in European debt purchasing and debt servicing. The
positioning of the CFR is supported by the company's adequate
liquidity without significant near-term maturities until 2024.
The downgrade of Intrum's senior unsecured notes to Ba3 reflects
the downgrade of Intrum's CFR and the priorities of claims and
asset coverage in the company's current liability structure. The
model outcome for the notes is Ba3.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectation that Intrum will
maintain its credit profile commensurate with that of a Ba3 CFR
during the 12-18 month outlook period.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
FACTORS THAT COULD LEAD TO AN UPGRADE
An upgrade of Intrum's CFR will depend on a sustainable improvement
in key credit metrics commensurate with a higher rating category
Ba2, particularly a reduction in leverage to below 4.0x and
strengthened interest coverage. Moody's could also consider
upgrading Intrum's CFR after the successful implementation of the
One Intrum transformation program and the visible improvement in
profitability following the efficiency gains achieved. The program
is expected to generate around SEK1billion of annual savings and
thus materially improve Intrum's profitability.
An upgrade of Intrum's CFR would likely result in an upgrade of its
debt ratings.
FACTORS THAT COULD LEAD TO A DOWNGRADE
Intrum's CFR could be further downgraded, if its leverage increases
substantially to above 5.0x and if other credit metrics
additionally weaken; its liquidity worsens significantly; and it
fails to appropriately handle the risks related to its
transformation program. A downgrade of Intrum's CFR would likely
result in a downgrade of its debt ratings of up to two notches.
Furthermore, Moody's could downgrade Intrum's senior unsecured
foreign-currency debt rating if its Revolving Credit Facility (RCF)
is significantly drawn upon, which is senior to the company's
senior unsecured liabilities.
LIST OF AFFECTED RATINGS
Issuer: Intrum AB (publ)
Downgrades:
Long-term Corporate Family Rating, downgraded to Ba3 from Ba2
Senior Unsecured Regular Bond/Debenture, downgraded to Ba3 from
Ba2
Outlook Action:
Outlook changed to Stable from Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
===========================
U N I T E D K I N G D O M
===========================
CARGOLOGICAIR: Goes Into Administration
---------------------------------------
Alex Lennane at The Loadstar reports that UK freighter operator
Cargologicair (CLA) has finally gone into administration -- but at
a cost to UK jobs and trade, it was claimed.
On Nov. 16, joint administrators David Buchler and Jo Milner, of
Buchler Phillips, were appointed and were scathing about the fate
of the airline, The Loadstar relates.
"The appointment of administrators at Cargologicair is a very
unfortunate, unintended consequence of sanctions generally applied
against British businesses perceived as Russian-controlled," The
Loadstar quotes Mr. Buchler as saying.
"This is a unique British business performing a valuable commercial
service to British customers trading overseas, employing British
people and paying British tax."
Cargologicair's accounts for 2020 state clearly that "the ultimate
controlling party is Mr. Alexey Isaykin".
Mr. Isaykin has a Cypriot passport, but was sanctioned by the UK in
June after, "under president Putin's instructions", he signed a
deal with the mayor of Moscow to carry 20,000 tonnes of freight on
Volga-Dnepr Airlines, The Loadstar discloses.
The UK government said at the time that Mr. Isaykin, who has had
his UK assets frozen and a UK travel ban, was "working as a
director (or equivalent) of a company carrying on business in a
sector of strategic significance (the transport sector) to the
government of Russia and, therefore, is or has been involved in
obtaining a benefit from or supporting the government of Russia",
The Loadstar notes.
But the administrators said: "[Cargologicair] has been unable to
trade effectively since its majority shareholder and former
director, a Cypriot national, was made the subject of UK government
sanctions against businesses deemed Russian-controlled following
the invasion of Ukraine in February.
"As a consequence, the company sought and was granted licences for
minimal continuance of operations from HM Treasury. However, it ran
into problems operating its bank accounts on a timely basis; the
company faced increasing difficulties with its bankers, despite
having considerable funds in its account which should have left the
company solvent."
One source close to the company said "every attempt by CLA
management to wind the company down and assist staff was stopped
because of the sanctions -- which was a ridiculous situation."
COVENTRY CITY FOOTBALL: Frasers Group Takes Over CBS Arena Lease
----------------------------------------------------------------
Leigh Journal reports that Mike Ashley's Frasers Group has taken
over the lease of Coventry City Football Club's home ground after
the stadium's operators were placed into administration.
According to Leigh Journal, the sportswear tycoon's retail group
secured the CBS Arena lease after the appointment of administrators
paved the way for the completion of its GBP17 million purchase of
the stadium operators' business and assets.
Earlier this month, Arena Coventry Limited (ACL), Arena Coventry
(2006) Limited (AC06) and IEC Experience Limited said they had
applied for administration but the CBS Arena would remain open,
Leigh Journal relates.
The approval of administrators by a specialist judge in London on
Nov. 17 was made despite a last-minute bid by lawyers representing
local businessman Doug King to delay court proceedings to allow for
consideration of his potential rival offer of GBP25 million, Leigh
Journal notes.
The court proceedings came the day after the Sky Blues' owners Sisu
Capital agreed to sell a majority 85% stake to Mr. King in a deal
which will leave the club debt free, Leigh Journal states.
The High Court was told that, on appointment, administrators sought
to "effect a pre-packaged sale of the companies' business and
assets to entities controlled by Frasers Group plc", with the deal
covered by an "exclusivity" agreement, Leigh Journal relays.
According to Leigh Journal, making the administration orders at
1:22 p.m., Insolvency and Companies Court judge Sebastian Prentis
said the Frasers Group deal was the only "viable prospect" to
prevent the group of companies "entering immediate insolvent
liquidation".
Judge Prentis explained to the court an on-hold deal between
Frasers Group and the CBS Arena operators, which included the
pre-payment of a GBP1.2 million exclusivity fee, had already been
signed and would be completed upon the companies entering
administration, Leigh Journal discloses.
Rajnesh Mittal and Andrew Sheridan of FRP Advisory Trading Limited
were appointed as joint administrators of the arena companies,
Leigh Journal recounts.
The group of companies operates from the Coventry Building Society
Arena, the freehold of which is owned by Coventry City Council, the
court was told.
ACL is a wholly owned subsidiary of Wasps Holdings Limited, which
went administration last month, leading to the English rugby club's
entire playing and coaching staff being made redundant.
AC06, a wholly owned subsidiary of ACL, holds a 250-year lease of
the arena, which it subleases to ACL, which in turn subleases part
of the stadium to Coventry City and other tenants and receives
revenue from naming rights.
IEC is the trading vehicle for conferences, events, retail, car
parking and the operation of the Hilton hotel on the site.
In written arguments, he said if the sale to Frasers Group could
not be completed on Nov. 17 then "there will be no available funds
to allow the companies to continue to operate or engage in a
further marketing process and, in consequence, it will be necessary
for the companies to enter immediate compulsory liquidation", Leigh
Journal relates.
He warned in court liquidation would be "terminal" for the
companies and said if administrators were not appointed then the
council might forfeit the stadium lease and employees would be made
redundant, Leigh Journal states.
The court heard that as of July 2021, ACL had net liabilities of
GBP27.174 million, AC06 had net liabilities of GBP30.557 million
and IEC had net liabilities of GBP5.54 million, Leigh Journal
notes.
As a result of the Nov. 17 ruling, some GBP13.5 million would be
paid to bondholders, amounting to 30 pence in the pound, as opposed
to "nothing" or a "much smaller return", the judge said, according
to Leigh Journal.
INTERNATIONAL PERSONAL: Fitch Rates New Sr. Unsec Notes 'BB-(EXP)'
------------------------------------------------------------------
Fitch Ratings has assigned International Personal Finance plc's
(IPF; BB-/Stable) proposed issue of 12% senior unsecured notes due
2027 an expected rating of 'BB-(EXP)'. IPF is also making an offer
to holders of its existing 7.75% notes due 2023 (ISIN:
XS1998163148) to exchange them for the new notes, and any notes
issued pursuant to the exchange offer will form a single series
with the new notes on settlement on 12 December 2022. The new notes
will be used for general corporate purposes, and will extend the
maturity profile of IPF's borrowings.
The final rating is subject to the receipt of final documentation
conforming to information already received.
KEY RATING DRIVERS
The expected rating is in line with IPF's Long-Term Issuer Default
Rating (IDR), reflecting Fitch's expectation of average recovery
prospects, given that all of IPF's funding is unsecured. The
facility will represent a senior unsecured obligation of IPF,
ranking pari passu with existing similar issuances.
Fitch expects the leverage impact from the transaction to be
minimal, as proceeds are expected to be used largely to refinance
the existing senior unsecured debt maturing in December 2023. The
issuance includes an exchange offer to existing 2023 noteholders as
well as cash offer to new investors.
IPF's IDR captures the company's low balance-sheet leverage and
structurally profitable business model, despite high impairment
charges, supported by a cash-generative short-term loan book. The
ratings remain constrained by IPF's higher-risk lending focus,
evolving digital business, and vulnerability to regulatory risks.
The concentration of IPF's funding also remains a weakness for its
credit profile.
Fitch affirmed IPF's ratings on 6 October 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IPF's senior unsecured debt rating will move in tandem with its
Long-Term IDR
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IPF's senior unsecured debt rating will move in tandem with its
Long-Term IDR
ESG CONSIDERATIONS
IPF has an ESG Relevance Score of '4' for Exposure to Social
Impacts stemming from its business model focused on high-cost
consumer lending, and therefore exposure to shifts of consumer or
social preferences, and to increasing regulatory scrutiny,
including tightening of interest-rate caps. This has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
IPF has an ESG Relevance Score of '4' for Customer Welfare - Fair
Messaging, Privacy & Data Security, driven by an increasing risk of
losses from litigations including early settlement rebates customer
claims. This 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.
Entity/Debt Rating
----------- ------
International Personal
Finance plc
senior unsecured LT BB-(EXP) Expected Rating
NEWDAY FUNDING 2022-3: DBRS Finalizes B Rating on Class F Notes
---------------------------------------------------------------
DBRS Ratings Limited (DBRS Morningstar) finalised its provisional
ratings on the notes issued by NewDay Funding Master Issuer plc
(the Issuer) as follows:
-- Series 2022-3, Class A Notes at A (sf)
-- Series 2022-3, Class D Notes at BBB (low) (sf)
-- Series 2022-3, Class E Notes at BB (low) (sf)
-- Series 2022-3, Class F Notes at B (sf)
DBRS Morningstar also confirmed its ratings on the following
outstanding notes as part of the annual review:
NewDay Funding Master Issuer plc, Series 2021-1:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (high) (sf)
NewDay Funding Master Issuer plc, Series 2021-2:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (high) (sf)
NewDay Funding Master Issuer plc, Series 2021-3:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (high) (sf)
NewDay Funding Master Issuer plc, Series 2022-1:
-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (high) (sf)
NewDay Funding Master Issuer plc, Series 2022-2:
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (sf)
NewDay Funding Loan Note Issuer, Series 2022-2:
-- Class A Loan Notes at AA (sf)
NewDay Funding Loan Note Issuer, VFN-F1-V1:
-- Class A Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (low) (sf)
NewDay Funding Loan Note Issuer, VFN-F1-V2:
-- Class A Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
-- Class F Notes at B (low) (sf)
The ratings address the timely payment of scheduled interest and
the ultimate repayment of principal by the relevant legal final
maturity dates.
DBRS Morningstar also discontinued its ratings on the notes issued
by NewDay Funding 2019-2 plc. The rating discontinuation reflects
the full repayment of the Class A, Class B, Class C, Class D, and
Class E Notes on the scheduled redemption date of 15 November 2022
and the cancellation of the Class F Notes on 8 November 2022.
NewDay Ltd (NewDay or the originator) retained the Class F Notes
and their cancellation occurred when NewDay Funding 2019-2 Class A
to Class E Notes were defeased. Prior to their repayment and
cancellation, the ratings and the outstanding principal balance of
the notes issued by NewDay Funding 2019-2 plc were as follows:
-- Class A Notes at AAA (sf), USD 205,000,000
-- Class B Notes at AA (sf), GBP 25,730,000
-- Class C Notes at A (low) (sf), GBP 37,760,000
-- Class D Notes at BBB (low) (sf), GBP 47,110,000
-- Class E Notes at BB (low) (sf), GBP 26,400,000
-- Class F Notes at B (high) (sf), GBP 14,030,000
The rating discontinuation of the notes issued by NewDay Funding
2019-2 plc will not result in a downgrade or withdrawal of the
ratings on the other outstanding series listed above.
All the notes above are backed by a portfolio of own-branded,
direct-to-consumer credit cards granted to individuals domiciled in
the UK by NewDay. The notes are issued out of NewDay Funding Master
Issuer plc or NewDay Funding Loan Note Issuer as part of the NewDay
Funding-related master issuance structure, under the same
requirements regarding servicing, amortisation events, priority of
distributions, and eligible investments.
The ratings are based on the following analytical considerations:
-- The transaction's capital structure, including the form and
sufficiency of available credit enhancement to support DBRS
Morningstar's expectation of charge-off, monthly principal
payment, and yield rates under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay the notes.
-- The originator's capabilities with respect to origination,
underwriting, and servicing.
-- An operational risk review of the originator, which DBRS
Morningstar deems to be an acceptable servicer.
-- The transaction parties' financial strength regarding their
respective roles.
-- The credit quality, the diversification of the collateral, and
the securitised portfolio's historical and projected
performance.
-- DBRS Morningstar's sovereign rating on the United Kingdom of
Great Britain and Northern Ireland at AA (high), Under Review
with Negative Implications.
-- The consistency of the transaction's legal structure with DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
TRANSACTION STRUCTURE
The 2022-3 transaction includes a scheduled revolving period.
During this period, additional receivables may be purchased and
transferred to the securitised pool, provided that the eligibility
criteria set out in the transaction documents are satisfied. The
revolving period may end earlier than scheduled if certain events
occur, such as the breach of performance triggers or servicer
termination. The servicer may extend the scheduled revolving period
by up to 12 months. If the notes are not fully redeemed at the end
of the respective scheduled revolving periods, the transaction
enters into a rapid amortisation.
The 2022-3 transaction includes a series-specific liquidity reserve
that the originator initially funds at 2.0% of the Class A and
Class D Notes' balances at closing and will be replenished to the
target amount of 3.2% of the Class A and Class D Notes' balances in
the transaction's interest waterfalls. The liquidity reserve is
available to cover the shortfalls in senior expenses and interest
due on the Class A and Class D Notes and would amortise to the
target amount, subject to a floor of GBP 250,000.
As the 2022-3 notes carry floating-rate coupons based on the rate
of daily compounded Sterling Overnight Index Average (Sonia), there
is an interest rate mismatch between the fixed-rate collateral and
the floating-rate notes. While the potential risk is to a certain
degree mitigated by excess spread and the originator's ability to
increase the credit card contractual rate, the Class A Notes
benefit from higher subordination and a liquidity reserve than
comparable notes classes of the NewDay Funding-related master
issuance program with a rating that is one notch higher at A (sf)
to compensate for the higher note margins and higher sensitivity to
further rapid interest rate hikes during the revolving period. This
approach is consistent with DBRS Morningstar's view to maintain the
rating stability of a master issuance structure.
COUNTERPARTIES
HSBC Bank plc (HSBC Bank) is the account bank for the 2022-3
transaction. Based on DBRS Morningstar's private rating on HSBC
Bank and the downgrade provisions outlined in the transaction
documents, DBRS Morningstar considers the risk arising from the
exposure to the account bank to be commensurate with the ratings
assigned.
PORTFOLIO ASSUMPTIONS
Recent total payment rates, including the interest collections in
the servicer report, continue to be higher than historical levels.
Nonetheless, it remains to be seen if these levels are sustainable
in the current challenging macroeconomic environment of persistent
inflationary pressures and interest rate increases. DBRS
Morningstar therefore elected to maintain the securitised
portfolio's expected monthly principal payment rate (MPPR) at 8%
after removing the interest collections.
The portfolio yield was largely stable over the reported period
until March 2020. The most recent performance in September 2022
showed a total yield of 31.7%, up from the record low of 25.0% in
May 2020 due to higher delinquencies and the forbearance measures
offered (such as payment holidays and payment freezes). After
considering the observed trend and the removal of spend-related
fees, DBRS Morningstar maintained the expected yield at 24.5%.
The reported historical annualised charge-off rates were high but
stable at around 16% until June 2020. The most recent performance
in September 2022 showed a charge-off rate of 11.7% after reaching
a record high of 17.1% in April 2020. Based on the analysis of
historical data and in consideration of the current challenging
environment, DBRS Morningstar continued to maintain the expected
charge-off rate at 18%.
DBRS Morningstar elected to stress the asset performance
deterioration over a longer period for the notes rated below
investment grade in accordance with its "Rating European Consumer
and Commercial Asset-Backed Securitisations" methodology.
NEWDAY FUNDING 2022-3: DBRS Gives Prov. B Rating to Class F Notes
-----------------------------------------------------------------
DBRS Ratings Limited (DBRS Morningstar) assigned provisional
ratings to the notes to be issued by NewDay Funding Master Issuer
plc (the Issuer) as follows:
-- Series 2022-3, Class A Notes at A (sf)
-- Series 2022-3, Class D Notes at BBB (low) (sf)
-- Series 2022-3, Class E Notes at BB (low) (sf)
-- Series 2022-3, Class F Notes at B (sf)
The provisional ratings are based on information provided to DBRS
Morningstar by the Issuer and its agents as of the date of this
press release. The ratings can be finalised upon review of final
information, data, legal opinions, and the governing transaction
documents. To the extent that the information or the documents
provided to DBRS Morningstar as of this date differ from the final
information, DBRS Morningstar may assign different final ratings to
the notes.
The ratings address the timely payment of scheduled interest and
the ultimate repayment of principal by the relevant legal final
maturity dates.
The notes are backed by a portfolio of own-branded,
direct-to-consumer credit cards granted to individuals domiciled in
the UK by NewDay Cards Ltd. (NewDay Cards or the originator).
The ratings are based on the following analytical considerations:
-- The transaction's capital structure, including the form and
sufficiency of available credit enhancement to support DBRS
Morningstar's revised expectation of charge-off, monthly principal
payment, and yield rates under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay the notes.
-- The originator's capabilities with respect to origination,
underwriting, and servicing.
-- An operational risk review of the originator, which DBRS
Morningstar deems to be an acceptable servicer.
-- The transaction parties' financial strength regarding their
respective roles.
-- The credit quality, the diversification of the collateral, and
the securitised portfolio's historical and projected performance.
-- DBRS Morningstar's sovereign rating on the United Kingdom of
Great Britain and Northern Ireland at AA (high), Under Review with
Negative Implications.
-- The expected consistency of the transaction's legal structure
with DBRS Morningstar's "Legal Criteria for European Structured
Finance Transactions" methodology.
TRANSACTION STRUCTURE
The notes will be issued out of NewDay Funding Master Issuer plc as
part of the NewDay Funding-related master issuance structure, where
all series of notes are supported by the same pool of receivables
and are generally issued under the same requirements regarding
servicing, amortisation events, priority of distributions, and
eligible investments.
The transaction includes a scheduled revolving period. During this
period, additional receivables may be purchased and transferred to
the securitised pool, provided that the eligibility criteria set
out in the transaction documents are satisfied. The revolving
period may end earlier than scheduled if certain events occur, such
as the breach of performance triggers or servicer termination. The
servicer may extend the scheduled revolving period by up to 12
months. If the notes are not fully redeemed at the end of the
respective scheduled revolving periods, the transaction enters into
a rapid amortisation.
The transaction includes a series-specific liquidity reserve that
the originator initially funds at [-]% of the Class A and Class D
Notes' balances at closing and will be replenished to the target
amount of [-] % of Class A and Class D Notes' balances in the
transaction's interest waterfalls. The liquidity reserve is
available to cover the shortfalls in senior expenses and interest
due on the Class A and Class D Notes and would amortise to the
target amount, subject to a floor of GBP 250,000.
As the notes carry floating-rate coupons based on the rate of daily
compounded Sterling Overnight Index Average (Sonia), there is an
interest rate mismatch between the fixed-rate collateral and the
floating-rate notes. While the potential risk is to a certain
degree mitigated by excess spread and the originator's ability to
increase the credit card contractual rate, the Class A Notes
benefit from higher subordination and a liquidity reserve than
comparable notes classes of the NewDay Funding-related master
issuance program with a one-notch higher rating at A (sf) to
compensate for the higher note margins and higher sensitivity to
further rapid interest rate hikes during the revolving period. This
approach is consistent with DBRS Morningstar's view to maintain the
rating stability of a master issuance structure.
COUNTERPARTIES
HSBC Bank plc (HSBC Bank) is the account bank for the transactions.
Based on DBRS Morningstar's private rating on HSBC Bank and the
downgrade provisions outlined in the transaction documents, DBRS
Morningstar considers the risk arising from the exposure to the
account bank to be commensurate with the ratings assigned.
PORTFOLIO ASSUMPTIONS
Recent total payment rates, including the interest collections in
the servicer report, continue to be higher than historical levels.
Nonetheless, it remains to be seen if these levels are sustainable
in the current challenging macroeconomic environment of persistent
inflationary pressures and interest rate increases. DBRS
Morningstar therefore elected to maintain the securitised
portfolio's expected monthly principal payment rate (MPPR) at 8%
after removing the interest collections.
The portfolio yield was largely stable over the reported period
until March 2020. The most recent performance in September 2022
showed a total yield of 31.7%, increased from the record low of
25.0% in May 2020 due to higher delinquencies and the forbearance
measures offered (such as payment holidays and payment freeze).
After consideration of the observed trend and the removal of
spend-related fees, DBRS Morningstar maintained the expected yield
at 24.5%.
The reported historical annualised charge-off rates were high but
stable at around 16% until June 2020. The most recent performance
in September 2022 showed a charge-off rate of 11.7% after reaching
a record high of 17.1% in April 2020. Based on the analysis of
historical data and in consideration of the current challenging
environment, DBRS Morningstar continued to maintain the expected
charge-off rate at 18%.
DBRS Morningstar elected to stress the asset performance
deterioration over a longer period for the notes rated below
investment grade in accordance with its "Rating European Consumer
and Commercial Asset-Backed Securitisations" methodology.
All figures are in British pound sterling unless otherwise noted.
NEWDAY FUNDING 2022-3: Fitch Assigns Final 'Bsf' Rating to F Notes
------------------------------------------------------------------
Fitch Ratings has assigned NewDay Funding Master Issuer Plc -
Series 2022-3 notes final ratings. The Outlooks are Stable.
Fitch has simultaneously taken rating actions on the notes from the
2019-2, 2021-1, 2021-2, 2021-3, 2022-1, 2022-2, VFN-F1 V1 and
VFN-F1 V2 series.
Drawings from the VFN-F1 and VFN-F2 series have been used to fully
defease series 2019-2. Funds were held on the series 2019-2
principal funding ledger of the receivables trustee investment
account until the series 2019-2 scheduled redemption date. This
means that series 2019-2 has been repaid and its liquidity reserve
released. The series 2019-2 class F notes and the originator OVFN,
which were retained by the originator, have been cancelled.
Consequently, the rating on the series 2019-2 class F notes has
been withdrawn.
Entity/Debt Rating Prior
----------- ------ -----
NewDay Funding Master
Issuer Plc
2019-2 Class A 65120KAA1 LT PIFsf Paid In Full AAAsf
2019-2 Class B XS2052209256 LT PIFsf Paid In Full AAsf
2019-2 Class C XS2052209413 LT PIFsf Paid In Full Asf
2019-2 Class D XS2052209769 LT PIFsf Paid In Full BBBsf
2019-2 Class E XS2052210189 LT PIFsf Paid In Full BBsf
2019-2 Class F XS2052210346 LT WDsf Withdrawn B+sf
2021-1 Class A1 XS2296139798 LT AAAsf Affirmed AAAsf
2021-1 Class A2 65120LAA9 LT AAAsf Affirmed AAAsf
2021-1 Class B XS2296139954 LT AAsf Affirmed AAsf
2021-1 Class C XS2296140028 LT Asf Affirmed Asf
2021-1 Class D XS2296140291 LT BBBsf Affirmed BBBsf
2021-1 Class E XS2296140374 LT BBsf Affirmed BBsf
2021-1 Class F XS2296140457 LT B+sf Affirmed B+sf
2021-2 Class A1 XS2358473374 LT AAAsf Affirmed AAAsf
2021-2 Class A2 65120LAB7 LT AAAsf Affirmed AAAsf
2021-2 Class B XS2358473887 LT AAsf Affirmed AAsf
2021-2 Class C XS2358474000 LT Asf Affirmed Asf
2021-2 Class D XS2358474182 LT BBBsf Affirmed BBBsf
2021-2 Class E XS2358474422 LT BBsf Affirmed BBsf
2021-2 Class F XS2358474778 LT B+sf Affirmed B+sf
2021-3 Class A1 XS2399701254 LT AAAsf Affirmed AAAsf
2021-3 Class A2 65120LAD3 LT AAAsf Affirmed AAAsf
2021-3 Class B XS2399700447 LT AAsf Affirmed AAsf
2021-3 Class C XS2399700793 LT Asf Affirmed Asf
2021-3 Class D XS2399791149 LT BBBsf Affirmed BBBsf
2021-3 Class E XS2399805972 LT BBsf Affirmed BBsf
2021-3 Class F XS2399973176 LT B+sf Affirmed B+sf
2022-1 Class A1 XS2452635118 LT AAAsf Affirmed AAAsf
2022-1 Class A2 65120LAK7 LT AAAsf Affirmed AAAsf
2022-1 Class B XS2452635464 LT AAsf Affirmed AAsf
2022-1 Class C XS2452635548 LT Asf Affirmed Asf
2022-1 Class D XS2452635977 LT BBBsf Affirmed BBBsf
2022-1 Class E XS2452636272 LT BBsf Affirmed BBsf
2022-1 Class F XS2452636512 LT B+sf Affirmed B+sf
2022-2 Class A Loan Note LT AAsf Affirmed AAsf
2022-2 Class C XS2498643589 LT Asf Affirmed Asf
2022-2 Class D XS2498643829 LT BBBsf Affirmed BBBsf
2022-2 Class E XS2498644124 LT BBsf Affirmed BBsf
2022-2 Class F XS2498644470 LT B+sf Affirmed B+sf
2022-3 Class A XS2554910591 LT Asf New Rating A(EXP)sf
2022-3 Class D XS2554989678 LT BBBsf New Rating BBB(EXP)sf
2022-3 Class E XS2554989918 LT BBsf New Rating BB(EXP)sf
2022-3 Class F XS2554991062 LT Bsf New Rating B(EXP)sf
VFN-F1 V1 Class A LT BBB-sf Affirmed BBB-sf
VFN-F1 V1 Class E LT BBsf Affirmed BBsf
VFN-F1 V1 Class F LT B+sf Affirmed B+sf
VFN-F1 V2 Class A LT BBBsf Affirmed BBBsf
VFN-F1 V2 Class E LT BBsf Affirmed BBsf
VFN-F1 V2 Class F LT Bsf Affirmed Bsf
TRANSACTION SUMMARY
The Series 2022-3 notes issued by NewDay Funding Master Issuer Plc
are collateralised by a pool of non-prime UK credit card
receivables. NewDay is one of the largest specialist credit card
companies in the UK, where it is also active in the retail credit
card market. However, the Merchant Offering retail card receivables
do not form part of this transaction.
The collateralised pool consists of an organic book originated by
NewDay Ltd, with continued originations of new accounts, and a
closed book consisting of two legacy pools acquired by the
originator in 2007 and 2010. The legacy pools now only account for
a small portion of the total pool. The securitised pool of assets
is beneficially held by NewDay Funding Receivables Trustee Ltd.
Fitch has withdrawn NewDay Funding's series 2019-2 class F notes'
rating, as the notes have been cancelled.
KEY RATING DRIVERS
Non-Prime Asset Pool: The portfolio consists of non-prime UK credit
card receivables. Fitch assumes a steady-state charge-off rate of
18%, with a stress on the low end of the spectrum (3.5x for
'AAAsf'), considering the high absolute level of the steady-state
assumption and low historical volatility of charge-offs.
As is typical in the non-prime credit card sector, the portfolio
had low payment rates and high yield. Fitch assumed a steady-state
monthly payment rate of 10% with a 45% stress at 'AAAsf', and a
steady-state yield of 30% with a 40% stress at 'AAAsf'. Fitch also
assumed a 0% purchase rate in the 'Asf' category and above,
considering that the seller is unrated and there is reduced
probability of a non-prime portfolio being taken over by a
third-party in a high-stress environment.
Good Performance, Deterioration Expected: Delinquency and
charge-off rates are below pre-pandemic levels and the monthly
payment rate has been strong. However, Fitch expects performance to
deteriorate as the global energy supply shock is increasing
inflationary pressures, affecting households' purchasing power,
especially those with less financial flexibility, a key demographic
for this portfolio.
Card usage may be the main way to bridge temporary household
finance pressure, which in Fitch's view could be a source of
performance stress. Fitch will monitor for significant shifts in
historical usage patterns, but although downside risks have
materially increased, the portfolio's current good performance
provides some headroom for deterioration before reaching the
long-term steady-state level. On balance, current assumptions
therefore remain adequate.
Variable Funding Notes Add Flexibility: The structure uses a
separate Originator VFN, purchased and held by NewDay Funding
Transferor Ltd (the transferor), in addition to series VFN-F1 and
VFN-F2 providing the funding flexibility that is typical and
necessary for credit card trusts. It provides credit enhancement
for the rated notes, adds protection against dilutions by way of a
separate functional transferor interest and meets the UK and US
risk-retention requirements.
Key Counterparties Unrated: The NewDay Group acts in several
capacities through its various entities, most prominently as
originator, servicer and cash manager. The degree of reliance is
mitigated by the transferability of operations, agreements with
established card service providers, a back-up cash management
agreement and a series-specific liquidity reserve.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Long-term asset performance deterioration, such as increased
charge-offs, reduced monthly payment rate (MPR) or reduced
portfolio yield, which could be driven by changes in portfolio
characteristics, macroeconomic conditions, business practices,
credit policy or legislative landscape, would contribute to
negative revisions of Fitch's asset assumptions that could
negatively affect the notes' ratings.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in upside and
downside environments. The results below should only be considered
as one potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
Rating sensitivity to increased charge-off rate:
Increase steady state by 25% / 50% / 75%
Series 2022-3 A: 'A-sf' / 'BBB+sf' / 'BBBsf'
Series 2022-3 D: 'BB+sf' / 'BBsf' / 'BB-sf'
Series 2022-3 E: 'B+sf' / 'Bsf' / N.A.
Series 2022-3 F: N.A. / N.A. / N.A.
Rating sensitivity to reduced MPR:
Reduce steady state by 15% / 25% / 35%
Series 2022-3 A: 'A-sf' / 'BBB+sf' / 'BBBsf'
Series 2022-3 D: 'BBB-sf' / 'BB+sf' / 'BBsf'
Series 2022-3 E: 'BB-sf' / 'B+sf' / 'B+sf'
Series 2022-3 F: 'Bsf' / N.A. / N.A.
Rating sensitivity to reduced purchase rate:
Reduce steady state by 50% / 75% / 100%
Series 2022-3 D: 'BBBsf' / 'BBB-sf' / 'BBB-sf'
Series 2022-3 E: 'BB-sf' / 'BB-sf' / 'BB-sf'
Series 2022-3 F: 'Bsf' / 'Bsf' / N.A.
No rating sensitivities are shown for the class A notes, as Fitch
is already assuming a 100% purchase rate stress in this rating
scenario.
Rating sensitivity to increased charge-off rate and reduced MPR:
Increase steady-state charge-offs by 25% / 50% / 75% and reduce
steady-state MPR by 15% / 25% / 35%
Series 2022-3 A: 'BBBsf' / 'BB+sf' / 'BB-sf'
Series 2022-3 D: 'BBsf' / 'B+sf' / 'Bsf'
Series 2022-3 E: 'B+sf' / N.A. / N.A.
Series 2022-3 F: N.A. / N.A. / N.A.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Long-term asset performance improvement, such as decreased
charge-offs, increased MPR or increased portfolio yield driven by a
sustainable positive change of the underlying asset quality would
contribute to positive revisions of Fitch's asset assumptions,
which could positively affect the notes' ratings.
Rating sensitivity to reduced charge-off rate:
Reduce steady state by 25%
Series 2022-3 A: 'AA-sf'
Series 2022-3 D: 'A-sf'
Series 2022-3 E: 'BBB-sf'
Series 2022-3 F: 'BB-sf'
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 was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte LLP. The third-party due diligence described
in Form 15E focused on observing and comparing specific loan-level
data contained in a sample of credit card receivables. Fitch
considered this information in its analysis, which did not have an
effect on Fitch's analysis or conclusions.
Prior to the transaction's closing, Fitch reviewed the results of a
third-party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
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.
RIBBON FINANCE 2018: DBRS Hikes Rating on Class F Notes to BBsf
---------------------------------------------------------------
DBRS Ratings Limited (DBRS Morningstar) took the following rating
actions on the commercial mortgage-backed floating rate notes due
April 2028 issued by Ribbon Finance 2018 Plc (the Issuer):
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at A (high) (sf)
-- Class C notes confirmed at A (low) (sf)
-- Class D notes confirmed at BBB (sf)
-- Class E notes confirmed BB (high) (sf)
-- Class F notes upgraded to BB (sf) from BB (low) (sf)
DBRS Morningstar also changed the trends on all ratings to Stable
from Negative.
The rating confirmations on the Class A to Class E notes and the
upgrade of the most junior Class F notes follow the senior loan's
improved performance, as well as a GBP 20 million voluntary
prepayment on the October 2022 Interest Payment Day (IPD), which
contributed to a substantial deleveraging of the Class F notes
thanks to the reverse principal allocation. The loan's improved
revenue performance and the recovery in the hospitality sector
following the lifting of the Coronavirus Disease (COVID-19)
pandemic-induced restrictions is also reflected in the trend change
to Stable from Negative.
Ribbon Finance 2018 Plc is the securitisation of a GBP 449.8
million (at inception) senior loan advanced to Ribbon Bidco Limited
(the borrower) to provide partial acquisition financing to the
Dayan family (the sponsor) to acquire Lapithus Hotels Management UK
and 20 hotel properties located across the United Kingdom. The
initial lender is Goldman Sachs Bank USA and the transaction was
arranged by Goldman Sachs International. Goldman Sachs Bank USA
also advanced a mezzanine loan of GBP 69.2 million to Ribbon Mezzco
Limited. The mezzanine loan was fully repaid on 27 July 2020. The
five-year-term loan does not have extension options and will mature
on 13 April 2023. As such, the borrower is currently working
towards the refinancing of the loan.
The senior loan is secured by a portfolio of 18 hotels (20 at
origination): 15 hotels are flagged by the Holiday Inn brand while
the remaining three operate under the Crowne Plaza brand. The
majority of the portfolio is located in Southern England, with a
part of the portfolio located in Cardiff, Glasgow, Edinburgh,
Manchester, and Birmingham. Five of the properties are in the
Greater London area. In general, the properties are located close
to key vehicular routes or interchanges and benefit from excellent
accessibility. Five of the hotels are located at or near airports.
The hotels in Cardiff, London (Regent's Park), and Milton Keynes
benefit from their central locations and are well placed to benefit
from the strong post-pandemic demand recovery.
Since the COVID-19-related restrictions disrupted hotel operations
and cash flows, the facility agent agreed to waive any loan event
of default in connection with the pandemic. The waiver expired on
the July 2022 IPD, and the loan is now fully compliant with all the
covenant requirements. As a result, GBP 20 million of funds, which
were placed in a blocked account to sufficiently cover debt service
costs as a condition of the waiver agreement, have been released to
the borrower and subsequently applied towards the voluntary
prepayment of the loan on the October 2022 IPD. The prepayment
receipts were applied to the notes in a reverse sequential order
and therefore resulted in the substantial deleveraging of the most
junior Class F notes.
As a result of the voluntary prepayment, scheduled amortisation,
and sale of one property (Best Western Ariel Heathrow), the loan
balance as of the October 2022 IPD has reduced to GBP 250.3
million, down GBP 33.5 million since the last annual surveillance.
In July 2022, Savills Advisory Services Limited (Savills) carried
out a new valuation and, in aggregate, appraised the portfolio's
market value at GBP 559.5 million, which represents an 8.3%
increase in value for the 18 properties compared with the May 2021
valuation. The reduced loan balance and the increased valuation
together translated to a loan-to-value reduction to 48.2% in
October 2022 from 54.2% a year ago.
Since May 2021, the hotels have been able to operate as ‘Business
as Usual' and have seen a strong recovery in revenue performance.
Helped by the strong demand, the average daily rate and occupancy
have seen a steady increase over the past year, with total revenue
reaching GBP 110.4 million in July 2022 compared with GBP 48.8
million in July 2021. The increased revenue led to a strong
improvement in debt yield (DY) over the past year. In July 2022, DY
increased to 11.9%, resulting in amortisation requirements halving
to GBP 1,124,500 per quarter. Overall, recovery in the loan's
revenue performance coupled with voluntary prepayments have
contributed to substantial improvement in the loan's key
performance indicators (LTV and DY). Based on the current loan
metrics, DBRS Morningstar expects the loan to be refinanced at
maturity amid higher interest rates.
Reflecting the property disposal, DBRS Morningstar reduced its net
cash flow (NCF) to GBP 30.6 million from GBP 31.5 million at last
annual surveillance. With the capitalisation rate remaining
unchanged from the previous review, the resulting DBRS Morningstar
value is EUR 368.2 million, representing a haircut of 34.2% to the
most recent appraised value. Deleveraging of the most junior notes
has resulted in the upgrade of the Class F notes to BB (sf) from BB
(low) (sf). The ratings on Class A to Class E notes have been
confirmed, and the trends on all ratings changed to Stable from
Negative, reflecting the loan's improved revenue performance and
the recovery in the hospitality market.
The loan has tightening LTV covenants for cash trap and event of
default. The LTV cash trap covenant is set at 71.50% for the first
two years, at 70.42% in year three, and at 69.33% for the last two
years of the loan. The LTV default covenants are set at 75.83% for
the first two years, at 74.75% in year three, and at 73.67% for
years four and five. The other two covenants, DY and interest
coverage ratio, are set at 10.10% and 1.95x for cash trap and 9.26%
and 1.78x for event of default.
During the loan term, the borrower is required to amortise the
senior loan by GBP 1,124,500 per IPD or GBP 4,498,000 per annum,
which is 1% of the senior loan amount at issuance. However, the
borrower is required to double the amortisation payment on each IPD
should the NOI debt yield DY for that period fall below 11.54%.
The senior loan carries a floating interest rate with a Sonia
benchmark plus a margin of 3.19% per annum. The senior loan is 100%
hedged with an interest rate cap provided by Goldman Sachs Bank
USA, with a strike rate of 2.0%.
The transaction benefits from a liquidity reserve facility that may
be used to cover shortfalls on the payment of interest due by the
Issuer to the holders of the Class A to Class F notes. No drawings
have been made under the liquidity reserve facility since issuance.
The liquidity facility amortises in line with the notes' balances
and amounted to GBP 15.5 million as of October 2022.
The legal final maturity of the notes is in April 2028, five years
after the loan maturity.
All figures are in British pound sterling unless otherwise noted.
SAGE AR 2021: DBRS Confirms BB(high) Rating on Class E Notes
------------------------------------------------------------
DBRS Ratings Limited (DBRS Morningstar) confirmed its ratings on
the following classes of notes issued by Sage AR Funding 2021 PLC
(the Issuer):
-- Class A notes at AAA (sf)
-- Class B notes at AA (low) (sf)
-- Class C notes at A (low) (sf)
-- Class D notes at BBB (sf)
-- Class E notes at BB (high) (sf)
The trend on all ratings remains Stable.
The rating confirmations follow the transaction's stable
performance over the past 12 months, with a slight increase of
rental income since origination on November 9, 2021. There are no
cash trap covenant breaches recorded to date.
The transaction is a securitisation of a GBP 274.9 million
floating-rate social housing-backed loan advanced by the Issuer to
a single borrower, Sage Borrower AR2 Limited. The borrower then
onlent the funds to its parent, Sage Rented Limited, a for-profit
registered provider of social housing, which used the funds to
acquire the properties and cover the associated costs. The loan is
backed by 1,712 residential units comprising mostly houses or flats
located across England.
Sage Housing Group (the sponsor or Sage) was established in May
2017 and is majority owned by Blackstone. Sage's core business is
the provision of new affordable homes rented at a discount to the
prevailing open market and let only to people on local authority
housing waiting lists. The transaction represents the sponsor's
second securitisation, following its issuance of Sage AR Funding
No. 1 Plc in October 2020.
The transaction comprises a five-year floating-rate loan, maturing
on November 16, 2026, with interest based on the Sterling Overnight
Index Average rate (Sonia), floored at 0%, plus a weighted-average
margin of the rated notes of 1.46% per annum (p.a.) for the initial
five years, stepping up to 2.12% thereafter if the loan is not
repaid. The first interest payment date was on 17 February 2022.
There is no scheduled amortisation; however, upon failing to repay
in the fifth year, the loan will be in cash sweep with a minimum of
1% scheduled amortisation p.a. of the loan balance. The loan is
currently hedged with an interest rate cap of 1.0% provided by
Merrill Lynch International. The hedge terminates on 17 November
2023.
Savills provided a market value subject to tenancy (MVSTT) of GBP
376.9 million and an existing use value social housing (EUVSH) of
GBP 302.8 million, as of October 14, 2021. The stock is a mixture
of houses (56%) and flats (44%) in new purpose-built schemes dating
from 2019. DBRS Morningstar determined the quality of the buildings
to be above average. The schemes are generally situated in good
residential locations with the majority located in the South East
(60.8%) and the East of England (11.1%). The portfolio's reported
loan-to-value (LTV) ratio has remained unchanged at 68.0% since
origination in November 2021.
Most of the rented units are on a "starter lease" and then
transferred to a periodic assured shorthold tenancy after an
initial probationary period of 12 months, which is extendable to 18
months. Tenants in social housing typically occupy the units for
more than five years beyond the probationary period. As of August
2022, the contracted annual rent (let units) for the portfolio
stood at GBP 14.7 million, and the net rental income at GBP 11.2
million. The leases are indexed to the consumer price index (CPI)
plus 1% from years one to six, and to the CPI alone after year
seven.
Sage's affordable rents business has an arrears level of 2.3% (in
respect of tenants in occupancy for over eight weeks) and 3.1% (in
respect of tenants who have been in occupancy for over 18 months).
However, Sage takes the approach that any amount that is overdue,
by even one day, is an arrears. Sage has an expected bad debt level
of 0.2%, as of the August 2022 interest payment date. Given the
newness of Sage's portfolio, there have been very few relets, so
the portfolio does not yet have a meaningful tenancy churn level.
The debt yield (DY) slightly increased to 4.4% in August 2022 from
4.3% at cut off in November 2021, due to a 2.8% increase in net
operating income to GBP 11.2 million from GBP 10.9 million at the
cut-off date. The occupancy has improved to 99.4% from 84.0% since
origination in November 2021. Since the properties are new-build,
Sage does not anticipate any capital expenditure until at least
year three since cut off.
At the cut-off date, DBRS Morningstar assumed an average annual
rent per unit of GBP 7,718, which equated to a total portfolio
gross rental income (GRI) of GBP 13.4 million. DBRS Morningstar
assumed a rental growth of 1.5% p.a. DBRS Morningstar has not
changed its assumptions of annual costs of approximately 23% of the
GRI across the portfolio (equating to deductions of GBP 3.0
million). Also, DBRS Morningstar made further deductions of 2% to
account for arrears and bad debt. DBRS Morningstar estimates net
cash flow (NCF) at GBP 10.2 million. The capitalisation rate
applied to the DBRS Morningstar NCF estimate is 4.22%, equating to
a value of GBP 242.6 million, which represents a haircut of 35.6%
towards Savills' MVSTT valuation. DBRS Morningstar calculated a LTV
of 105.7% for the rated loan and a DY of 3.99%.
Based on DBRS Morningstar's calculation, the current debt service
coverage ratio stands at 1.66 times (x). However, a sensitivity
analysis on interest stress scenarios reveals that further
increases in the three-month compounded Sonia rate would result in
a shortfall of debt service coverage. The current hedge terminates
in November 2023, offering protection to debt service coverage
until then. Meanwhile, DBRS Morningstar understands that a new
valuation will be mandated and is expected to be available early in
2023.
DBRS Morningstar considers that rising interest rates will
challenge the borrower's ability to pay the hedging costs. As
discussed in the commentary dated October 2022, “Short-Dated
Interest Rate Caps: an Emerging Feature in European CMBS”, DBRS
Morningstar notes that premiums for interest rate caps increased
five times between January 2022 and July 2022. Increased hedging
costs may result in a liquidity issue and heightened credit risks
along with the possibility of a loan event of default under the
terms of the facility agreement (if the loan is not rehedged at
hedge termination).
On the closing date, GBP 5.7 million of the proceeds from the
issuance of the Class A notes was used to fund the Issuer liquidity
reserve (ILR), which can be used to cover interest payment
shortfalls through the Class A to D notes. DBRS Morningstar
calculates that the ILR can cover interest payments on the covered
notes up to 12 months, based on the interest rate cap strike rate
of 1%, or five months, based on the Sonia cap of 4% (the interest
on the notes being capped at 4.0% plus their respective margins).
The initial loan maturity date is in November 2026 with 20 one-year
extension options available after that. Therefore, the final
maturity date is in November 2046, followed by a five-year tail
period. The legal final maturity date of the notes is in November
2051.
STANTON BIKES: Enters Administration, Buyer Sought for Business
---------------------------------------------------------------
Rebecca Morley at bikebiz reports that Derbyshire-based mountain
bike manufacturer and retailer Stanton Bikes has fallen into
administration.
According to bikebiz, PKF Smith Cooper was appointed as
administrators to the company on Nov. 11 and will now seek a buyer
for the business as a whole or its assets. Stanton Bikes, based
near Matlock, specialises in hand-built steel and titanium mountain
bikes.
The business will continue to trade under the supervision of joint
administrators Dean Nelson and Nick Lee, business recovery and
insolvency partners at PKF Smith Cooper, while a buyer is sought
for the company and its assets, bikebiz discloses.
"We will be providing creditors with relevant information regarding
the administration process to allow them to participate in
proceedings. We are currently dealing with all enquiries. We will
strive to achieve the best outcome for everyone involved at this
difficult time," bikebiz quotes joint administrator Dean Nelson as
saying.
TURBO FINANCE 9: Moody's Affirms Ba2 Rating on GBP14.6MM E Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three Notes
in Turbo Finance 9 plc. The rating action reflects better than
expected collateral performance and the increased 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.
GBP493.3M Class A Notes, Affirmed Aaa (sf); previously on May 18,
2022 Affirmed Aaa (sf)
GBP26.3M Class B Notes, Upgraded to Aaa (sf); previously on May
18, 2022 Upgraded to Aa1 (sf)
GBP29.2M Class C Notes, Upgraded to Aa3 (sf); previously on May
18, 2022 Upgraded to A1 (sf)
GBP11.7M Class D Notes, Upgraded to Baa1 (sf); previously on May
18, 2022 Upgraded to Baa2 (sf)
GBP14.6M Class E Notes, Affirmed Ba2 (sf); previously on May 18,
2022 Affirmed Ba2 (sf)
RATINGS RATIONALE
The rating action is prompted by decreased key collateral
assumptions, namely the portfolio default probability assumption,
due to better than expected collateral performance and an increase
in credit enhancement for the affected tranches.
Revision of Key Collateral Assumptions
As part of the rating action, Moody's reassessed its default
probability and recovery rate assumptions for the portfolio
reflecting the collateral performance to date.
The performance of the transaction has been better than expected
since the closing date and after the end of the revolving period.
Delinquencies with 60 days plus arrears currently stand at 0.40% of
current pool balance. Cumulative defaults currently stand at 0.60%
of original pool balance.
The current default probability assumption is 5% of the current
portfolio balance, which translates into a decrease of the default
probability assumption on original balance to 2.35% from 3.22%.
Moody's maintained the assumption for the fixed recovery rate at
40% and the portfolio credit enhancement at 16%.
Increase/Decrease in Available Credit Enhancement
Sequential amortization led to the increase in the credit
enhancement available in this transaction.
For instance, the credit enhancement for the Class B Notes, the
Class C Notes and the Class D Notes increased to 24.8%, 14.0% and
9.7% from 17.7%, 10.1% and 7.0% since the last rating action.
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
November 2022.
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, (3) improvements in the credit quality of the
transaction counterparties and (4) 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.
===============
X X X X X X X X
===============
[*] BOOK REVIEW: Transnational Mergers and Acquisitions
-------------------------------------------------------
Author: Sarkis J. Khoury
Publisher: Beard Books
Softcover: 292 pages
List Price: $34.95
Order your personal copy today at http://is.gd/hl7cni
Transnational Mergers and Acquisitions in the United States will
appeal to a wide range of readers. Dr. Khoury's analysis is
valuable for managers involved in transnational acquisitions,
whether they are acquiring companies or being acquired themselves.
At the same time, he provides a comprehensive and large-scale look
at the industrial sector of the U.S. economy that proves very
useful for policy makers even today. With its nearly 100 tables of
data and numerous examples, Khoury provides a wealth of information
for business historians and researchers as well.
Until the late 1960s, we Americans were confident (some might say
smug) in our belief that U.S. direct investment abroad would
continue to grow as it had in the 1950s and 1960s, and that we
would dominate the other large world economies in foreign
investment for some time to come. And then came the 1970s, U.S.
investment abroad stood at $78 billion, in contrast to only $13
billion in foreign investment in the U.S. In 1978, however, only
eight years later, foreign investment in the U.S. had skyrocketed
to nearly #41 billion, about half of it in acquisition of U.S.
firms. Foreign acquisitions of U.S. companies grew from 20 in 1970
to 188 in 1978. The tables had turned an Americans were worried.
Acquisitions in the banking and insurance sectors were increasing
sharply, which in particular alarmed many analysts.
Thus, when it was first published in 1980, this book met a growing
need for analytical and empirical data on this rapidly increasing
flow of foreign investment money into the U.S., much of it in
acquisitions. Khoury answers many of the questions arising from the
situation as it stood in 1980, many of which are applicable today:
What are the motives for transnational acquisitions? How do foreign
firms plans, evaluate, and negotiate mergers in the U.S.? What are
the effects of these acquisitions on competition, money and capital
markets; relative technological position; balance of payments and
economic policy in the U.S.?
To begin to answer these questions, Khoury researched foreign
investment in the U.S. from 1790 to 1979. His historical review
includes foreign firms' industry preferences, choice of location in
the U.S., and methods for penetrating the U.S. market. He notes the
importance of foreign investment to growth in the U.S.,
particularly until the early 20th century, and that prior to the
1970s, foreign investment had grown steadily throughout U.S.
history, with lapses during and after the world wars.
Khoury found that rates of return to foreign companies were not
excessive. He determined that the effect on the U.S. economy was
generally positive and concluded that restricting the inflow of
direct and indirect foreign investment would hinder U.S. economic
growth both in the short term and long term. Further, he found no
compelling reason to restrict the activities of multinational
corporations in the U.S. from a policy perspective. Khoury's
research broke new ground and provided input for economic policy at
just the right time.
Sarkis J. Khoury holds a Ph.D. in International Finance from
Wharton. He teaches finance and international finance at the
University of California, Riverside, and serves as the Executive
Director of International Programs at the Anderson Graduate School
of Business.
*********
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-
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Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
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Editors.
Copyright 2022. All rights reserved. ISSN 1529-2754.
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