/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/221124.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, November 24, 2022, Vol. 23, No. 229 Headlines F R A N C E RENAULT SA: Moody's Affirms 'Ba2' CFR & Alters Outlook to Stable G E R M A N Y DOLPHIN TRUST: Korean Investors Should Get Back Money Lost TTD HOLDING III: Fitch Gives 'B+(EXP)' LongTerm IDR, Outlook Stable UNIPER SE: Bailout Costs to Double Due to Russian Gas Cuts I R E L A N D ADAGIO X: Moody's Assigns B3 Rating to EUR5.8MM Class F Notes TIKEHAU CLO VIII: Fitch Assigns 'B-(EXP)sf' Rating to Class F Notes K A Z A K H S T A N NOMAD INSURANCE: S&P Alters Outlook to Stable, Affirms 'BB' ICR N E T H E R L A N D S BRIGHT BIDCO: S&P Upgrades ICR to 'B-', Outlook Negative U N I T E D K I N G D O M AMT COFFEE: SSP Acquires Business Out of Administration BOPARAN HOLDINGS: Fitch Affirms LongTerm IDR at 'B-', Outlook Neg. HNVR MIDCO: Moody's Affirms 'Caa1' CFR & Alters Outlook to Stable MADE.COM: Unsecured Creditors to Get Less Than 2% of Amount Owed WILDFIRE MEDIA: Goes Into Administration [*] UK: Number of Insolvencies in Restaurant Sector Up 59% - - - - - =========== F R A N C E =========== RENAULT SA: Moody's Affirms 'Ba2' CFR & Alters Outlook to Stable ---------------------------------------------------------------- Moody's Investors Service has changed the outlook on Renault S.A.'s (Renault or the group) ratings to stable from negative. Concurrently, Moody's affirmed the corporate family rating of Ba2, the probability of default rating of Ba2-PD, the rating of the group's senior unsecured EMTN programme of (P)Ba2 and the ratings of the group's senior unsecured notes of Ba2. "The outlook change to stable reflects Renault's improved profitability in the first half of 2022, and the expectation of further improvements driven by the execution of the strategic plan Renaulution." said Matthias Heck, a Moody's Vice President -- Senior Credit Officer and Lead Analyst for Renault. "The affirmation of the Ba2 rating is based on the expectation Renault's credit metrics will improve to comfortable levels required for the current rating category in 2023, notwithstanding the increasingly challenging macroeconomic environment and the execution risks linked to the new strategic plan." added Mr. Heck. RATINGS RATIONALE At its capital market day on November 8, 2022, Renault provided an update of its strategic plan Renaulution, which was initially announced in January 2021. According to the plan, the company will change its organizational structure, and break up its automotive activities into a unit for electric vehicles and software ("Ampere"), a unit for cars and light commercial vehicles with internal combustion engines (ICEs) and hybrid engines ("Power"), and a unit for sports cars ("Alpine"). The new structure will be gradually implemented from 2023 on, and will improve funding options within the group, generally a credit positive, although benefits will be somewhat offset by a more complicated governance structure. In this respect, Renault will bring its ICE business into a 50/50 JV with Zhejiang Geely Holding Group Company Limited (Geely Holding) and Geely Automobile Holdings Limited (Geely Auto, Baa3 negative) and considers an IPO of Ampere whilst remaining a strong majority shareholder. As part of the capital markets day, Renault also increased the financial targets of the Renaulution plan. This includes a group operating margin of more than 8% in 2025, compared to initially more than 5%, and a free cash flow of more than EUR2 billion on average for the years 2023-25. The increased targets illustrate that Renault is making faster progress in the execution of the strategic plan than initially expected, driven by continued efficiency measures, positive pricing effects and the launch of new models. In the first half of 2022, Renault's automotive revenues were flat (+0.3% versus 1H 2021, excluding Russia), while the automotive margin increased to EUR420 million (2.1% margin) compared to a loss of EUR145 million in 1H 2021. The profit and margin improvements were driven by price and mix effects, that overcompensated cost increases, especially for raw materials. Concurrently, Renault increased its group operating margin target (including financial services) to "above 5%" for 2023, compared to previously "around 3%". In the third quarter of 2022, Renault's positive trend continued, with 21.7% automotive revenue growth (excluding Russia), despite 2.4% lower global unit sales. The revenue growth was driven by a combination of volume and price effects, which each contributed around half of the growth. On a Moody's adjusted basis, Renault's EBITA margins improved to 2.9% in the last twelve months to June 2022, from only 1.3% in 2021. Excluding the contribution from Nissan Motor Co., Ltd. (Baa3 stable, Nissan), Renault's margins increased to 1.5%, versus 0.4%. At the end of June 2022, Renault's debt/EBITDA (Moody's adjusted) declined to 4.2x, from 5.7x at the end of December 2021. On September 29, 2022, Moody's changed its outlook on the global automotive industry to negative from stable. It now expects global light vehicle sales to be about flat (-0.7%) versus 2021 and climb 5.7% in 2023. Nevertheless, 85.5 million units expected for 2023 will remain well below the pre-pandemic peak of 95 million units. The negative industry outlook reflects a weakening macroeconomic environment and weakening consumer demand, driven by high price inflation and higher interest rates. At the same time, stress on global supply chains will improve but stay elevated. Despite headwinds from this more challenging sector environment, Moody's expects that Renault will benefit from a volume recovery in its key markets, which previously underperformed, and should therefore be able to improve its metrics within the next 12-18 months compared to still low current levels. The stable rating outlook reflects the recent improvement of Renault's operating profit margins and the corresponding positive impact on its main credit metrics. Over the next 12-18 months, Moody's expects the positive trend to continue, as Renault benefits from price and margin effects and attempts to restore its competitive position. More specifically, Moody's expects Renault to improve its operating profit margins to around 2% (Moody's adjusted EBITA, excluding Nissan contribution; 3% including Nissan), generate positive free cash flows in the high three-digit million Euro amounts (Moody's adjusted, after restructuring) at least, and reduce Moody's adjusted Debt / EBITDA to around 4x by the end of 2022. For 2023, Moody's expects margins to improve further by around 100 to 150 basis points and the repayment of the final EUR1.0 billion state guaranteed loan, leading to a corresponding improvement in leverage to around 3.5x. With this, metrics should become more comfortably in line with expectations for the Ba2. RATINGS RATIONALE FOR AFFIRMING THE Ba2 Renault Ba2 CFR reflects its position as one of Europe's largest car manufacturers, with a solid competitive position in France and good geographical diversity; the recent new model launches, with an advanced positioning in the area of hybrid and battery electric models; the execution of the strategic plan called "Renaulution", which aims to improve profitability and cash generation with first signs of success; and its prudent financial policy, good liquidity and balanced debt maturity profile. The rating also reflects Renault's ownership of RCI Banque, whose dividend payments contribute to Renault's industrial cash flows and finally its ability to delever, and the 15% ownership of French government, which supported Renault with a EUR4 billion state guaranteed loan during the pandemic. Lastly, its long-established strategic alliance with Nissan Motor Co., Ltd. (Nissan) and Mitsubishi Motors Corporation (Mitsubishi) has substantial synergy potential although the companies had material challenges to realize this in the past. The rating also incorporates Renault's low profitability and its exposure to the cyclicality of the automotive industry; its high exposure to Europe (including France), which represented more than half of the group's unit sales in 2021 and where economic development has been more materially impacted by the conflict between Russia and the Ukraine; the still limited integration level of Renault's alliance with Nissan and Mitsubishi and its dependence on the contribution to its earnings and cash flow from Nissan's dividends, which has weakened considerably since 2019; and the ongoing high need for investment spending (capex and R&D) into alternative fuel and autonomous driving technology, which will constrain future free cash flow (FCF). LIQUIDITY Renault's liquidity profile is good. As of June 30, 2022, Renault's principal sources of liquidity consisted of cash and cash equivalents on the balance sheet, amounting to EUR12.4 billion; undrawn committed credit lines of EUR3.4 billion; current financial assets of EUR1.6 billion. Including funds from operations, which Moody's expects to exceed EUR4 billion over the next 12 months, liquidity sources amount to more than EUR21 billion. These provide good coverage for liquidity requirements of nearly EUR9 billion that could emerge during the next 12 months, including short-term debt maturities of around EUR4.2 billion (including EUR2.0 billion state-guaranteed credit loans, of which Renault will repay another EUR1.0 billion in 2H 2022, and the remainder in 2023), expected capital spending of around EUR2.5 billion, and day-to-day needs (around EUR1.5 billion). FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Renault's ratings could be downgraded in case of (1) an inability to restore Moody's-adjusted EBITA margin excluding the at-equity contribution of Nissan towards 2% by 2022; (2) Moody's-adjusted Debt/EBITDA to consistently exceed 4.0x and (3) FCF to remain materially negative for a prolonged period. Furthermore, a significant weakening of Renault's liquidity could also trigger a further rating downgrade. Moody's would consider upgrading the ratings in case of (1) Moody's-adjusted EBITA margin excluding the at-equity contribution of Nissan sustainably increasing towards the mid-single digits (in percentage terms); (2) Moody's-adjusted Debt/EBITDA were to decrease below 3.0x and (3) FCF generation were to become sustainably positive. LIST OF AFFECTED RATINGS Issuer: Renault S.A. Affirmations: LT Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba2 Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 Other Short Term, Affirmed (P)NP Commercial Paper, Affirmed NP Outlook Actions: Outlook, Changed To Stable From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Automobile Manufacturers published in May 2021. ============= G E R M A N Y ============= DOLPHIN TRUST: Korean Investors Should Get Back Money Lost ---------------------------------------------------------- Youkyung Lee at Bloomberg News reports that Korean consumers were misled by some of the nation's biggest financial firms and should get back the money they lost when a German property fund collapsed, South Korea's financial watchdog recommended on Nov. 22. According to Bloomberg, a panel at Financial Supervisory Service said the six firms -- Shinhan Securities Co., NH Investment & Securities Co., Hana Bank, Woori Bank, Hyundai Motor Securities Co. and SK Securities Co. -- should repay the KRW430 billion (US$317 million) clients lost. The watchdog said while the panel's decision is just a recommendation, brokerages have accepted proposals from the panel in the past, Bloomberg notes. The German Property Group, formerly known as Dolphin Trust, at the center of the scandal filed for bankruptcy in 2020, wiping out about US$1 billion of investor cash, Bloomberg recounts. While investors from the UK, Singapore and Ireland also lost money, South Korea is unique because the people affected mostly bought through regulated finance firms, giving them the chance to recoup some of their losses, Bloomberg states. The Financial Supervisory Service said it received 190 complaints against six firms that sold the fund and derivatives products in South Korea, Bloomberg relates. The products were pitched to retail investors, many of them retirees, as real estate projects that would transform historic sites and castles in Germany into apartments, Bloomberg discloses. TTD HOLDING III: Fitch Gives 'B+(EXP)' LongTerm IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has assigned TTD Holding III GmbH (TTD), the new ultimate parent of the TOI TOI & DIXI Group (the company), an expected Long-Term Issuer Default Rating of 'B+(EXP)' with a Stable Outlook. Fitch has also assigned TTD Holding IV GmbH's new EUR210 million 2026 senior secured add-on term loan facility (TLB3) an expected instrument rating of 'BB-(EXP)' with a Recovery Rating of 'RR3'. The new EUR210 million add-on facility will be used together with company cash to finance Apax's buy-out of a large proportion of the founding family's minority stake in the company. Fitch has also affirmed Freshworld Holding III GmbH's IDR at 'B+'/Stable, and Freshworld Holding IV GmbH's 'BB-' senior secured instrument rating for its EUR660 million 2026 senior secured term loan B (TLB2), and its EUR200 million TLB3. The Stable Outlook reflects its expectations of a soft, but resilient performance over the downturn, with consistently positive free cash flow (FCF). Fitch forecasts post transaction leverage in 2022 and 2023 to be high for the company's 'B+' rating, but Fitch expects EBITDA gross leverage reducing to sustainably below 5.5x during 2024. Freshworld Holding III and IV and its intermediate holding companies will be merged into TTD Holding IV , the surviving entity, which will be the ultimate borrower of the EUR660 million TLB2, and the EUR200 million and EUR210 million TLB3. Fitch expects to withdraw the ratings on Freshworld Holding III and Freshworld Holding IV post execution of the merger. KEY RATING DRIVERS Exhausted Rating Headroom: The debt-funded minority buy-out will increase TOI TOI & DIXI's pro forma leverage by about 1x compared with its previous forecast, to 5.5x EBITDA gross leverage and 6.0x FFO gross leverage by end-2022, which is at the maximum leverage threshold for the company's 'B+' rating. Weaker-than-expected performance could lead to a negative rating action. Softer End-Market Demand, Delayed Deleveraging: Owing to softer end-market demand and high inflation, Fitch expects TTD to experience weaker growth and margins in 2023, such that deleveraging is delayed to 2024. Fitch forecasts muted like-for-like (LFL) revenue growth in 2023 before rebounding to single-digit growth in 2024. Fitch also expects that it will be more difficult for the company to pass-on higher operating costs in a softer market, and forecast weaker EBITDA margins in both Germany (about 1pp decline in 2023) and about a 2pp decline in remaining geographies where the company has less efficient logistics and a lower market share. Lower FCF to Debt: Fitch expects cost inflation to increase material cost and capex such that capex will represent about 10% of sales. Fitch expects higher interest rates and capex to reduce the company's FCF margin to 4%-5% of revenue, compared with 10-12% in 2020-2021. Construction Sector Outlook: Its softer, but still resilient expectations around the German construction sector are in line with Fitch's September 2022 Global Economic Outlook and recent German construction sector outlook by Fitch Solutions (German Infrastructure Report Q1 2023). Fitch Solutions expects 0.8% real growth 2023 in the German construction sector, with a weakening residential and on-residential building sector, linked to weaker economic outlook, high inflation, rising interest rates and surging energy costs. Fitch expects opportunities in green infrastructure projects to increase. Fitch also expects geopolitical factors such as increased demand and training of military services to partly mitigate softer residential and new-build demand such that LFL sales remain neutral to positive across its forecasts. Successful Transformation Programme: The implementation of the transformation programme started at the beginning of 2020 and has resulted in a significant rise in TDD's revenue and EBITDA. This is most visible in Germany, the group's home and most important market (about 45% of group revenue), and where the programme was first implemented. Changes in the pricing strategy, higher take-up of extra services (eg higher demand for cabins equipped with a water sink, and shorter service intervals) and other operating measures have led to structurally higher revenue and EBITDA. The rollout of the transformation programme to other key geographies for the group, such as Benelux, Poland and Switzerland, started in the latter part of 2021, and adds organic growth potential, but the programme's effectiveness may be lessened by TTD's relative weaker position (compared with its German position) in those markets. Additional Sales and Cost Efficiencies: Fitch believes the group has measures to improve sales growth and cost efficiencies further. The events business has recovered in 2022, but should benefit further from an increased emphasis on hygiene globally (additional water sinks, shorter service intervals). FCF-funded bolt-on acquisitions remains a key cornerstone for growth, building on the group's scale and route efficiencies. Finally, the expansion of the transformation programme to areas such as administrative, procurement and fleet costs should support profitability over the next few years. Financial Policy Record: At the current 'B+' rating level and high leverage, additional debt-funded corporate activities, M&A or dividends, without corresponding EBITDA growth or sustained positive mid-single digit FCF are likely to lead to a negative rating action. Fitch does not include any additional dividends or acquisitions in its forecasts. Fitch thinks that further shareholder-friendly actions could be possible in the next few years - Fitch treats such a risk as event risk. Longstanding Brand and Value Proposition: The TOI TOI & DIXI brands have decades of recognition and solidify the company's leadership position in Germany and most other European markets. TTD's strength across the value chain also makes it the clear top choice for customers, as the waste management aspect is necessary, although not highly contested. Aside from premium toilet cabins, TTD also offers customisable sanitary containers and ancillary equipment for larger or longer-term projects, which cannot be provided by the regional companies that compete mainly for smaller projects. Defensive Route-Based Model: TTD's business model is concentrated highly on network density, scale and logistics, and protects its entrenched position. In Germany, its national market share is 15x higher than its closest competitor. With more stops per servicing route, TTD can drive down the cost per stop, leading to a margin advantage. In effect, this creates a barrier to entry, as it becomes difficult for a competitor without a comparable presence to operate alongside TTD in a given area. DERIVATION SUMMARY TTD has no direct Fitch-rated peers. However, rated diversified service businesses with strong competitive positions and high visibility over recurring revenue include GfK SE (BB-/Rating Watch Negative), Irel Bidco S.a.r.l. (IFCO; B+/Stable), Polygon Group AB (B/Negative), TeamSystem Holding S.p.A. (B/Stable) and Techem Verwaltungsgesellschaft 674 mbH (B/Stable). GfK's leading position in its chosen segments, clearer financial policy, lower leverage and margin upside from ongoing restructuring allows for a higher rating. IFCO is larger and more diversified than TTD, allowing it a looser EBITDA leverage upgrade sensitivity at 4.5x. Polygon and TTD have similar geographical diversification with resilient revenue, albeit towards construction end-markets, but Polygon has higher FFO leverage at 7x through end-2023. TTD has lower leverage and stronger geographical diversification than TeamSystem. Techem has a resilient utility-like business profile allowing for a looser 'B' rating leverage threshold compared with TTD, but the rating is constrained by high leverage. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Reported revenue growth of about 27% in 2022, reflecting strong performance ytd and the partial inclusion (five months of trading) from the YLDA/Sebach transaction in July 2022 and other bolt-on acquisitions; muted LFL revenue growth in 2023 and low single digit growth thereafter - Fitch-defined EBITDA margin of 28%-29% in 2022-2023, gradually improving thereafter, due lower inflationary pressures and continued roll-out and expansion of the transformation plan; - Capex at 10% of sales - No dividend payments assumed - Modest working capital outflow (about 1% of sales) reflecting business growth KEY RECOVERY ASSUMPTIONS The recovery analysis assumes that TTD would be considered a going concern in bankruptcy and that the company would be reorganised rather than liquidated. Fitch has assumed a 10% administrative claim. Post-restructuring going-concern EBITDA of EUR130 million, reflecting a more-severe-than-expected economic downturn and reduced pricing power, which would, in turn, hinder the implementation and retention of gains of the transformation programme. A distressed enterprise value multiple of 6.0x is used to calculate a post-reorganisation valuation, reflecting TTD's dominant and entrenched position in most large European markets, arising from its scale and density. Fitch deduct administrative claims, EUR24 million of local prior-ranking credit lines, and EUR1,225 million of senior secured claims (EUR1,070 million in term loans and EUR155 million pari passu RCF). Fitch assumes that local lines and the RCF are fully drawn at default. Based on current metrics and assumptions, the waterfall analysis generates a ranked recovery at 55% and hence in the Recovery Rating 'RR3' band, indicating a 'BB-' instrument rating for the senior secured TLBs. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Successful continued roll-out of the transformation programme and bolt-on acquisitions leading to increased scale with a sustained competitive position and density across Europe - FFO gross leverage sustained below 4.5x (EBITDA gross leverage below 4.0x), combined with a clear financial policy and leverage targets - FFO and EBITDA interest coverage above 4.0x Factors that could, individually or collectively, lead to negative rating action/downgrade: - A weaker-than-expected slowdown or downturn in TTD's end-markets or failure to sustain EBITDA margin levels in line with its expectations - FFO gross leverage sustained over 6.0x (or EBITDA gross leverage over 5.5x) due to debt-funded shareholder remuneration or acquisitions - FFO or EBITDA interest coverage below 3.0x - Sustained thin or neutral FCF margin LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Fitch views TTD's liquidity as satisfactory. Fitch estimates its end-2022 cash position pro-forma for the buy-out at about EUR50 million. TTD has a committed EUR155 million RCF, of which about EUR90 million remain undrawn as per September 2022. Manageable Refinancing Risk: TTD has a single-source funding, and no maturities until 2026. It is deleveraging towards 5.0x EBITDA in 2024. TTD's FCF is positive pro forma for higher interest rates. ISSUER PROFILE TOI TOI & DIXI Group offers sanitary/toilet cabins, containers and ancillary products and services to the construction and events industries. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- TTD Holding IV GmbH senior secured LT BB-(EXP)Expected Rating RR3 TTD Holding III GmbH LT IDR B+(EXP) Expected Rating Freshworld Holding III GmbH LT IDR B+ Affirmed B+ Freshworld Holding IV GmbH senior secured LT BB- Affirmed RR3 BB- UNIPER SE: Bailout Costs to Double Due to Russian Gas Cuts ---------------------------------------------------------- Patricia Nilsson at The Financial Times reports that the cost of bailing out German utility Uniper will be up to EUR25 billion more than previously forecast, the company said on Nov. 23, almost doubling the total to as much as EUR51 billion. Uniper, which was brought to the brink of collapse this year as gas prices surged in the wake of Russia's assault on Ukraine, said a previously planned capital raise of EUR8 billion would "not be sufficient" and that it planned to issue more shares to the German government to cover future losses, the FT relates. "The capital measures agreed with the German government will end months of uncertainty for our company and our customers," the FT quotes Klaus-Dieter Maubach, chief executive of Uniper, as saying. "Now it's clear how we can bear the enormous costs resulting from the Russian gas cuts, which are still being borne mainly by Uniper," he added. The move comes weeks after Uniper, once Europe's biggest importer of Russian gas, reported a EUR40 billion loss for the first nine months of the year, one of the biggest in corporate history, the FT notes. Uniper's huge losses stem from long-term supply contracts agreed with customers before Russia's invasion of Ukraine, which mean it cannot pass on higher costs, the FT discloses. The company has said it does not expect to stop haemorrhaging money until 2024, the FT states. The share issuance, which is subject to approval by the European Commission, is set to be voted on at an extraordinary general meeting on Dec. 19, when the company will also be fully nationalised, according to the FT. Fearing a collapse would ripple through the German economy, Berlin has already agreed to buy Uniper from Finnish energy group Fortum and extended a line of credit from state-owned KfW Bank totalling EUR18 billion, the FT notes. The lifeline for the country's biggest importer of natural gas, which could now cost up to EUR51 billion, will be Germany's biggest corporate bailout since the financial crisis in 2008, when the government provided EUR480 billion in support to the banking sector, the FT states. "Without this relief, our customers, including many municipal utilities, would inevitably have faced an even higher wave of costs," the FT quotes Mr. Maubach as saying. "The government support will allow Uniper to continue supplying gas to its customers at the terms contracted before the war." Shares in Uniper, which are down almost 85 per cent since the start of the year, fell more than 6% on Nov. 23, the FT discloses. ============= I R E L A N D ============= ADAGIO X: Moody's Assigns B3 Rating to EUR5.8MM Class F Notes ------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to the notes issued by Adagio X EUR CLO Designated Activity Company (the "Issuer"): EUR212,800,000 Class A Senior Secured Floating Rate Notes due 2036, Definitive Rating Assigned Aaa (sf) EUR11,200,000 Class B-1 Senior Secured Floating Rate Notes due 2036, Definitive Rating Assigned Aa2 (sf) EUR10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2036, Definitive Rating Assigned Aa2 (sf) EUR20,100,000 Class C Deferrable Mezzanine Floating Rate Notes due 2036, Definitive Rating Assigned A2 (sf) EUR16,500,000 Class D Deferrable Mezzanine Floating Rate Notes due 2036, Definitive Rating Assigned Baa3 (sf) EUR19,800,000 Class E Deferrable Junior Floating Rate Notes due 2036, Definitive Rating Assigned Ba3 (sf) EUR5,800,000 Class F Deferrable Junior Floating Rate Notes due 2036, Definitive Rating Assigned B3 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in Moody's methodology. The Issuer is a static cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated senior secured corporate loans. The portfolio is 100% ramped as of the closing date. AXA Investment Managers US Inc. ("AXA IM") may sell assets on behalf of the Issuer during the life of the transaction. Reinvestment is not permitted and all sales and unscheduled principal proceeds received, together with scheduled principal proceeds will be used to amortize the notes in sequential order. In addition to the seven classes of notes rated by Moody's, the Issuer will issue EUR14,460,000 of Class Z Deferrable Junior Floating Rate Notes and EUR14,200,000 of Subordinated Notes, both of which are not rated. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in December 2021. Moody's used the following base-case modeling assumptions: Performing par: EUR330,005,960 Diversity Score: 52 Weighted Average Rating Factor (WARF): 2925 Weighted Average Spread (WAS): 3.87% Weighted Average Coupon (WAC): 4.18% Weighted Average Recovery Rate (WARR): 44.89% Weighted Average Life (WAL): 5.04 years TIKEHAU CLO VIII: Fitch Assigns 'B-(EXP)sf' Rating to Class F Notes ------------------------------------------------------------------- Fitch Ratings has assigned Tikehau CLO VIII DAC expected ratings. The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. Entity/Debt Rating ----------- ------ Tikehau CLO VIII DAC A LT AAA(EXP)sf Expected Rating B-1 LT AA(EXP)sf Expected Rating B-2 LT AA(EXP)sf Expected Rating C LT A(EXP)sf Expected Rating D LT BBB-(EXP)sf Expected Rating E LT BB-(EXP)sf Expected Rating F LT B-(EXP)sf Expected Rating Sub Notes LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY Tikehau CLO VIII DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds are being used to fund a portfolio with a target par of EUR400 million. The portfolio is actively managed by Tikehau Capital Europe Limited. The collateralised loan obligation (CLO) has a four-year reinvestment period and an eight year weighted average life test (WAL). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch assesses the average credit quality of obligors at 'B'/'B-'. The Fitch weighted average rating factor (WARF) of the identified portfolio is 24.5. High Recovery Expectations (Positive): At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate (WARR) of the identified portfolio is 62.5%. Diversified Asset Portfolio (Positive): The transaction has one matrix effective at closing corresponding to the 10-largest obligors at 20% of the portfolio balance and a fixed-rate asset limits at 10% of the portfolio. It also has one forward matrix corresponding to the same top-10 obligor and fixed-rate asset limits that will be effective one-year post closing, provided that the aggregate collateral balance (defaults at Fitch-calculated collateral value) will at least be at the target par. The transaction also includes various other concentration limits, including the maximum exposure to the three-largest Fitch-defined industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Cash-flow Modelling (Positive): The WAL used for the transaction's Fitch-stressed portfolio analysis is 12 months less than the WAL covenant to account for the strict reinvestment conditions envisaged by the transaction after its reinvestment period. These include, among others, passing both the coverage tests and the Fitch 'CCC' bucket limitation test post reinvestment as well as WAL covenant that progressively steps down over time, before and after the end of the reinvestment period. Fitch believes these conditions would reduce the effective risk horizon of the portfolio during the stress period. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would have no impact on the class A to E notes and would lead to a downgrade below 'CCCsf' for the class F notes. Downgrades, which are based on the actual portfolio, may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio than the Fitch-stressed portfolio, the class B to E notes display a rating cushion of one to three notches. Should the cushion between the identified portfolio and the Fitch-stressed portfolio be eroded either due to manager trading or negative portfolio credit migration, a 25% increase of the mean RDR across all ratings and a 25% decrease of the RRR across all ratings of the stressed portfolio would lead to downgrades of up to four notches for the class A to D notes and to below 'CCCsf' for the class E and F notes. Factors that could, individually or collectively, lead to positive rating action/upgrade: A 25% reduction of the mean RDR across all ratings and a 25% increase in RRR across all ratings of the Fitch-stressed portfolio would lead to upgrades of up to three notches for the rated notes, except for the 'AAAsf' rated notes. During the reinvestment period, upgrades, which are based on the Fitch-stressed portfolio, may occur on better-than-expected portfolio credit quality and a shorter remaining WAL test, leading to the ability of the notes to withstand larger-than-expected losses for the remaining life of the transaction. After the end of the reinvestment period, upgrades, except for the 'AAAsf' notes, may occur on stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. DATA ADEQUACY The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. 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. =================== K A Z A K H S T A N =================== NOMAD INSURANCE: S&P Alters Outlook to Stable, Affirms 'BB' ICR --------------------------------------------------------------- S&P Global Ratings revised its outlook on Nomad Insurance to stable from negative. At the same time, S&P affirmed its 'BB' long-term issuer credit and financial strength ratings on the insurer. S&P also raised its Kazakhstan national scale rating on Nomad to 'kzAA-' from 'kzA+'. S&P's outlook revision and raising of the national scale ratings on Nomad Insurance follows a substantial improvement in the company's regulatory solvency well above the required minimum. Nomad Insurance declared a solvency deficit (according to the regulator's solvency calculations) in its financial statements for May 1, 2022. The reason for the solvency deficit was the insurer's exposure to distressed assets in Kazakhstani subsidiaries of Russian banks--represented by deposits and bonds--which accounted for about 30% of the company's total investment portfolio over the same date. Since then, Nomad Insurance submitted to the regulator a recovery plan to restore its solvency above the minimum requirement over the next six months. More recently, Nomad Insurance has taken further steps and resolved the solvency deficit. This assumes control of expenses; the early termination and reduction to a minimal level of the company's deposits in unrated banks, mostly Kazakhstan-based subsidiaries of Russian banks; and a ban on dividend payment until solvency recovers to more than 1.5x, among other factors. As of Oct. 1, 2022, solvency increased to 1.7x (the minimum requirement is 1.0x). Based on these developments, S&P thinks downside to Nomad Insurance's risk profile has reduced significantly, and we consider the likelihood of regulatory action or significant volatility in Nomad Insurance's capital and earnings as remote. S&P said, "Our ratings reflect Nomad Insurance's solid and long-standing market position with 7% market share based on gross premium written (GPW) in the Kazakhstan property/casualty (P/C) insurance sector in the first nine months of 2022. The company reported positive underwriting performance, with a net combined (loss and expense) ratio of 80% for the first nine months of 2022, which is stronger than both its five-year average and the market average. In addition, Nomad reported robust net profits of Kazakhstani tenge (KZT) 5.7 billion in the first nine months of 2022 relative to its five-year average, benefiting from robust underwriting performance and investment returns. In our base-case scenario, we think the company's premium will increase by about 15% over 2022-2023. We estimate the insurer will report a net P/C combined ratio below 85% in 2022-2023, which is better than the market average, on the back of good risk selection and further cost-optimization measures. In 2022-2023, we expect a return on equity of above 40% and annual net profit of at least about KZT6.8 billion-KZT7.3 billion. We also expect the company's capital adequacy will improve further in 2023. We anticipate the insurer will start paying dividends in 2023 of 65% of net profits. "The stable outlook reflects our expectation that Nomad will maintain its well-established market position in the Kazakhstan P/C insurance market in the next 12 months while maintaining solid profitability metrics compared with peers. At the same time, we think Nomad will at least sustain its current capital adequacy thanks to its retained earnings and moderate dividend policy. "We could lower the rating in the next 12 months if Nomad increases its exposure to lower-quality instruments ('B' rated investments). We could also downgrade Nomad if its capital position weakens due to worse-than-expected operating performance, investment losses, or considerably higher dividend payouts than we currently anticipate." S&P could raise the rating in the next 12 months if: -- Nomad substantially strengthens its capital adequacy to at least the 'A' capital level benchmark and sustains it at this level thereafter on the back of its profitable premium growth; or -- The company firmly improves the weighted average asset quality of its investment portfolio to the 'BBB' category. ESG credit indicators: E-2, S-2, G-3 ===================== N E T H E R L A N D S ===================== BRIGHT BIDCO: S&P Upgrades ICR to 'B-', Outlook Negative -------------------------------------------------------- S&P Global Ratings raised its long-term issue credit rating on lighting solutions manufacturer Bright Bidco B.V. (doing business as Lumileds) to 'B-' from 'D' and assigned its 'B' issue rating and '2' recovery rating to its $300 million term loan. The negative outlook reflects the uncertain recovery path of Lumileds' earnings in the next 12 months due to volatile end market demand and the risk of prolonged cost inflation and supply chain disruptions. S&P believes this could alter the company's cash flow generation and deleveraging trajectory. Lumileds has emerged from bankruptcy with a more sustainable capital structure, but its deleveraging path remains exposed to volatile earnings. The financial restructuring allowed a material reduction of Lumileds' reported debt position to about $330 million, from $1.7 billion at year-end 2021. S&P said, "We believe this will support its credit metrics amid a tough market environment. Although we anticipate adjusted debt to EBITDA will decrease to 7.0x-8.0x at year-end 2022 from 13.4x in 2021, the company's leverage remains constrained by weaker earnings, with S&P Global Ratings adjusted EBITDA set to decrease to EUR60 million-EUR70 million this year from EUR139 million in 2021. We attribute this decline to volume contraction across its segments, several supply chain disruptions, and sharp inflation not immediately passed through to customers. We anticipate some earnings recovery supporting improved leverage to 5x-6x next year, but believe that Lumileds' deleveraging trajectory will remain heavily dependent on volatile market conditions and on successful transition of its automotive business toward LED systems, both of which have resulted in sizable profitability swings over the last few years. Our pro forma adjusted debt figure of about $500 million at emergence includes $81 million of lease liabilities, $74 million of nonrecourse factoring, $20 million of asset-retirement obligations, and $12 million of pension liabilities. We do not net available cash in our adjusted debt calculation since Lumileds is now majority-owned by several private equity funds specialized in distressed credit situations, sparking some uncertainty on financial policy and investment horizon." S&P said, "We anticipate some recovery in Lumileds' revenue in 2023, but visibility remains limited. We anticipate revenue will contract by 12%-13% this year, primarily due to lockdowns in China and component shortages affecting the operations of some of Lumileds' key clients across its general illumination, automotive, and smartphone segments. The discontinuance of its automotive aftermarket business in Russia, the gradual phase out of conventional auto lamp products, and negative foreign exchange effects are also weakening revenue. Although we anticipate some of these headwinds will progressively ease next year, we view some downside risk in our 7%-9% revenue growth assumption since automotive (59% of 2021 sales) and smartphone (about 20%) production remains volatile, and weakening economic activity could further affect demand in some of the company's other end markets. "Lumileds' profitability improvements will hinge on stronger volumes and cost inflation management. In addition to weaker volumes affecting Lumileds' operating leverage--about 50% of its cost base is fixed--margins have been weakened by sharp inflation in raw material, energy, and labor costs. We estimate that the company's ability to raise prices with auto and smartphone clients (tier-1 suppliers and original equipment manufacturers) is limited and constrained by competitive pressures, with benefits on profitability from successful cost pass-through typically coming with a lag. We believe the company can achieve stronger cost pass-through on its aftermarket and general illumination segments fairly easily, although the price increases remain subject to negotiations with retail clients. Our base case for 2023 assumes a progressive recovery in adjusted EBITDA margin to 8%-9% in 2023 from 6%-7% this year thanks to higher factory loading, some price increases, a stabilization in raw material prices and further cost savings (primarily labor count reduction and footprint optimization). That said, prolonged labor cost inflation or supply chain bottlenecks disrupting operations remain key risks that could slow the recovery in Lumileds' profitability next year. We view the company as particularly exposed to lockdowns and component shortages because its core production is located in China (Jiaxing and Songzi facilities), Malaysia (Penang), and Singapore and requires several electronic components. "Lumileds' lower interest charges should buffer cash flows as its business remains capital intensive. We estimate that the new capital structure will reduce the company's annual cash interest expense (including on leases) to $40 million-$45 million per year compared with about $80 million previously. The new term loan's interest payment in kind (PIK) optionality until October 2024 provides another cash flow buffer should market conditions remain difficult for a prolonged period. We expect the company will use this flexibility in 2023, which together with improved earnings and lower working capital requirements could support modestly positive FOCF of $20 million-$30 million after a sizable cash burn in 2022. We estimate a FOCF deficit close to $100 million this year, driven by the sharp earnings contraction, working capital outflows of $50 million-$60 million, and increasing investments to support new technology and product launches. We anticipate Lumileds' reported capital expenditure (capex) will increase to $95 million-$105 million (8%-9% of sales) in 2022-2023 from $85 million 2021 (6.7%) as new auto LED product platforms ramp up and continuous investments are required to sustain its LED technological capabilities and competitive position. Our capex forecast includes about $30 million of capitalized development costs, on top of annual research and development expenses of about $140 million (about 10% of sales on average over 2018-2021) to support product innovation such as microLED solutions. We believe such capital and investment intensity will remain a cash flow constraint until operating margins improve more firmly. "Lumileds' LED solutions offer sound growth prospects across end markets while conventional auto lamps continue their progressive phase out. We believe that industry transition toward less energy-intensive lighting systems supports sound demand for LED solutions in the next few years across the company's end markets. Over the past few years, Lumileds succeeded in increasing its penetration in new general illumination applications, such as horticulture and ambient lighting for offices, shops, and residential spaces. We anticipate some product mix improvement from this positioning on the more premium high power and color segments (about 55% of Lumileds' general illumination sales). We view this market niche as less subject to pricing competition than the low and mid power solutions market (45%), which comprises more commoditized applications such as residential housing lighting. In automotive, the adoption of LED systems remains underway, with about 55% of new vehicles produced this year to be equipped with such solutions. With $327 million of sales in 2021 the company's auto LED business has so far not fully offset declines in conventional lamps, which generated annual revenue well over $500 million prior to 2020. That said, we anticipate the growth momentum in LED sales will outpace the volume attrition in halogen and xenon lamps in the next few years, supporting the group's overall revenue growth." In 2021, Lumileds' auto LED revenue grew by 25%, while sales from conventional lamps decreased by 2%--with the overall decline being cushioned by still resilient aftermarket demand. The negative outlook reflects the uncertain recovery path of Lumileds' earnings in the next 12 months due to volatile end market demand and the risk of prolonged cost inflation and supply chain disruptions. S&P believes this could pose risks to the company's cash flow generation and deleveraging trajectory. S&P said, "We could lower our ratings on Lumileds if its operating performance further deteriorates, translating into materially negative FOCF and liquidity pressure. We believe such a scenario could stem from prolonged low end market demand, supply chain disruptions, and cost inflation. Although less likely at this stage, a material deterioration of the company's competitive position indicated by lower win rates or declining market shares could also pressure the company's credit metrics. "We could revise our outlook on Lumileds to stable if we believed it could restore healthy revenue growth and higher profitability in the next 12 months, allowing adjusted EBITDA to cover interest expense (including the PIK interest) by 2x. We believe this could stem from more favorable market conditions and successful cost management." Environmental, Social, And Governance ESG credit indicators: E-2, S-2, G-3 S&P said, "Governance factors are a moderately negative consideration in our credit rating analysis of Lumileds Our assessment of the company's financial risk profile as highly leveraged reflects corporate decision-making that prioritizes the interests of the controlling owners, in line with our view of the majority of rated entities owned by private-equity sponsors. Our assessment also reflects their generally finite holding periods and a focus on maximizing shareholder returns. Environmental factors are a neutral consideration. The company's automotive lighting solutions (LED as well as legacy halogen and xenon lights) are used in both internal combustion engine cars and electric vehicles. As a result, we view its product portfolio as unaffected by the ongoing powertrain transition. Lumileds' LED products are also used in nonautomotive applications such as construction, retail, smartphones, farming, and entertainment, where the increasing need for energy efficiencies support their demand. At the same time, the production of the lumen of lights requires significant electricity and gas consumption, resulting in Lumileds generating more scope 2 emissions as a percentage of its revenue than the average for auto suppliers." =========================== U N I T E D K I N G D O M =========================== AMT COFFEE: SSP Acquires Business Out of Administration ------------------------------------------------------- James McAllister at Big Hospitality reports that travel hub-focused coffee chain AMT Coffee has been acquired from administration by SSP, with 18 sites to close with immediate effect and around 100 employees made redundant. Administrators were appointed to AMT Coffee, which has sites across the UK and Ireland primarily in hospitals, train stations and airports, earlier on Nov. 18, with Nick Holloway and Will Wright from Interpath Advisory appointed as joint administrators, Big Hospitality relates. According to Big Hospitality, AMT's business and assets were subsequently sold to travel caterer SSP, which has retained 25 sites that will continue to trade under the AMT Coffee brand name. Around 200 employees will also transfer across to SSP. BOPARAN HOLDINGS: Fitch Affirms LongTerm IDR at 'B-', Outlook Neg. ------------------------------------------------------------------ Fitch Ratings has affirmed Boparan Holdings Limited's Long-Term Issuer Default Rating (IDR) at 'B-' with a Negative Outlook. Fitch has also downgraded Boparan Finance plc's GBP525 million senior secured notes due in 2025 to 'B-' with a Recovery Rating of 'RR4' from 'B' with a Recovery Rating of 'RR3'. The Negative Outlook reflects its expectations of delayed deleveraging and profitability recovery in FY23-FY24 (financial year ending July), after the company suffered a material decline in profitability in FY21. Boparan has demonstrated partial recovery in FY22, but Fitch believes execution risks remain high in light of continued costs pressure from energy, distribution and labour costs in 2023. Moreover, its leverage metrics remain high for the rating (considering Fitch's new adjustment for factoring). The Negative Outlook also reflects high refinancing risks and high reliance on capital market conditions at the time of refinancing even though there are no meaningful debt maturities until 2025. Therefore, greater visibility on EBITDA margin remaining above 4% on a sustained basis and stabilisation of free cash flow (FCF) generation could support a revision of the Outlook to Stable. KEY RATING DRIVERS Moderate Profitability Recovery: Fitch projects Boparan's EBITDA margin in its core poultry segment will recover towards above 4% in FY23 (FY22: 3%), mainly due to continued pass through of feed-and-production cost inflation to customers, as demonstrated in 2HFY22. Fitch still sees risks that profits remain under pressure from energy, distribution, packaging and labour cost inflation, which might not be fully covered by further price increases. Fitch assumes that profitability in the meals and bakery business will remain under pressure in FY23, resulting in a consolidated EBITDA margin (Fitch-adjusted) recovery toward 4.1% in FY23, not a material improvement from its previous rating case. Heightened Leverage: Its estimates of projected recovery in Boparan's profitability translate into an only moderate reduction in leverage metrics in FY23, with funds from operations (FFO) gross leverage reducing to 8.5x (FY22: 9.2x), still materially above its negative sensitivity of 7.0x for the rating. The leverage metrics are also affected by Fitch's debt adjustments for factoring used (FY22: GBP60 million), following the company's disclosure of this information. The adjustment's impact on FFO leverage of approximately 1x in FY22 has added to the anticipated delay in deleveraging in FY23. Fitch continues to believe Boparan has the ability to deleverage to below 7x from FY24 if there is a sustained EBITDA margin recovery toward 4.5%. However, this remains subject to the company's ability to withstand continued external pressures on profitability. Execution Risks Remain High: Boparan's operating margins remain vulnerable to external pressures. The group has achieved some cost savings in FY21-22, which should translate into a more resilient operating margin in its core poultry segment, helped by the increased number of contracts with automatic feed price ratchet mechanisms to pass through feed costs inflation to customers in the UK (now over 90% of contracts). Further margin growth is subject to the company's ability to manage energy and wages costs growth (not part of the ratchet mechanism) in FY23-24. These aspects constrain the rating at 'B-' and are reflected in the Negative Outlook. Negative FCF in Near Term: Fitch expects negative FCF of up to GBP26 million in FY23, due to still low operating profits, assumed accelerated capex after tightened spending in FY21-FY22 and high pension contribution costs. Fitch projects FCF will turn mildly positive from FY24, due to its expectations of enhanced profitability, pension outflow normalisation and capex moderating. Conversely, a structurally low profit margin, dilution in profitability recovery and persistently negative FCF could prevent deleveraging towards levels that are consistent with the 'B-' IDR. Leading UK Poultry Producer: Boparan has a leading position in the UK, covering nearly one-third of the country's poultry market. The market position is supported by Boparan's large-scale operations and established relationships with key customers, including grocery chains, the food-service channel and packaged-food producers. It also benefits from an integrated supply chain via its joint venture with PD Hook, the UK's largest supplier of broiler chicks, which adds to the stability of livestock supply and ensures sufficient processing capacity utilisation. Limited Diversification: The protein business accounts for nearly 80% of Boparan's revenue, with poultry the core animal protein processed, while ready chilled meals and bakery categories represent the remainder. Additionally, Boparan is exposed to key customer concentration risk, both in poultry and ready meals in the UK, particularly with sales to Marks and Spencer Group plc. Geographical diversification benefits from operations in the EU, as the company is the second-largest poultry producer in the Netherlands and among the top five in Poland, the largest poultry-producing country in the EU. Favourable Market Fundamentals: Boparan operates in food categories with sound fundamental growth prospects. Fitch assumes resilient low-to-mid single-digit growth in poultry consumption, which is the fastest-growing protein globally, due to its low cost versus other proteins, as well as consumer perception that it represents a healthier option than beef and pork. The company's large exposure to discount retailers should support resilience of its sales volumes during weakened economic environment, as expected during FY23. DERIVATION SUMMARY Boparan's credit profile is constrained by high leverage and a modest size, with EBITDA below USD200 million, the median for the 'B' rating category in Fitch's Rating Navigator for protein companies, as well as by its regional focus on the UK, with only moderate diversification in the EU. In addition, Boparan has lower profitability than the majority of peers, such as Minerva SA (BB/Stable) and Pilgrim's Pride Corporation (BBB-/Stable), which Fitch believes is due to limited vertical integration and some operating inefficiencies that Boparan is addressing. Fitch expects pricing pass-through and rollout in automatisation plan result in improved profitability, more in line with the median for 'B' category companies over the next three years. No Country Ceiling, parent-subsidiary linkage or operating environment aspects apply to Boparan's ratings. KEY ASSUMPTIONS Fitch's Key Assumptions Within its Rating Case for the Issuer: - Revenue growth of 4.7% in 2023 driven by the poultry segment, gradually slowing towards 1.6% increase in 2026 - EBITDA margin at 4.1% in FY23 gradually recovering to 4.8% in FY26 - Capex at GBP56 million in FY22 before moderating to around GBP50 million in FY24-FY26 - No M&A or dividend payments over FY22-FY24 - Cash pension contribution of GBP36 million in FY23, before normalising at around GBP25 million from FY24, reflected above FFO Key Recovery Rating Assumptions: The recovery analysis assumes that Boparan would be reorganised as a going concern (GC) in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. Boparan's GC EBITDA is based on FY22 EBITDA of GBP83 million, increased by 14% to reach GBP95 million to reflect its view of a sustainable, post-reorganisation EBITDA, upon which Fitch bases the enterprise valuation (EV). An EV/EBITDA multiple of 4.5x is used to calculate a post-reorganisation valuation and reflects a mid-cycle multiple consistent with other protein business peers, particularly in market share and brand. After deducting 10% for administrative claims, its principal waterfall analysis generated a ranked recovery in the 'RR4' band for the GBP525 million senior secured notes, ranking after a GBP80 million of committed revolving credit facility (RCF) in addition to the add-on GBP10 million term loan B ranking pari-passu, which Fitch assumes would be fully drawn in the event of distress. This indicates a 'B-'/'RR4' instrument rating for the senior secured debt with an output percentage based on current metrics and assumptions of 48%. The reduction of the recovery rate from its previous estimate of 'RR3'/56% is mainly driven by application of a new factoring adjustment of GBP60 million (the factoring utilisation as of end-FY22), discounted by 25% following disclosure of this information. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Positive momentum from the operational turnaround, resulting in sustained EBITDA margin improvement above 5% and positive FCF - FFO gross leverage below 6.0x or EBITDA leverage below 4.5x on a sustained basis - EBITDA interest coverage above 2.5x - Sufficient liquidity to cover all operational needs (working capital and capex) with limited intra-year drawings under the RCF Factors that could, individually or collectively, lead to revising the Outlook to Stable: - Visibility of EBITDA margin remaining sustainably above 4% over the next 12-18 months - Neutral to positive FCF generation supporting reduced risks of additional capital requirement and lower liquidity risks Factors that could, individually or collectively, lead to negative rating action/downgrade: - Continued operational under-performance leading to EBITDA margin below 3.5% with negative FCF eroding liquidity - FFO gross leverage remaining above 7x or EBITDA Leverage above 5.5x on a sustained basis - EBITDA interest coverage below 2.0x LIQUIDITY AND DEBT STRUCTURE Limited Liquidity: Fitch forecasts that by end-FY23 Boparan will have GBP16 million cash on its balance sheet, after adjusting for GBP15 million required for operating purposes. The liquidity is supported by GBP80 million availability under Boparan's RCF, but remains constrained by weak FCF generation over the rating horizon following material pension contribution outflows, some working capital cash absorption and increasing capex. ISSUER PROFILE Boparan is the UK leading poultry meat producer, providing around one-third of all poultry products eaten in the UK. In addition, the group is the second-largest poultry processor in the fragmented Continental European market, with facilities in Holland and Poland. Boparan also supplies ready meals and bakery products (buns and rolls) to major UK food retailers. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Boparan Holdings Limited LT IDR B- Affirmed B- Boparan Finance plc senior secured LT B- Downgrade RR4 B HNVR MIDCO: Moody's Affirms 'Caa1' CFR & Alters Outlook to Stable ----------------------------------------------------------------- Moody's Investors Service has affirmed HNVR Midco Limited's (Hotelbeds or the company) Caa1 corporate family rating and Caa1-PD probability of default rating. Concurrently, Moody's has also affirmed the Caa1 instrument ratings of the backed senior secured revolving credit facility (RCF) and backed senior secured term loans issued by HNVR Holdco Limited. The outlook for all ratings has been changed to stable from negative. "The change in outlook to stable, from negative, reflects Moody's expectation that Hotelbeds' operating performance and financial metrics will continue to improve following the significant downturn caused by the coronavirus pandemic" said Fabrizio Marchesi, a Moody's Vice President-Senior Analyst and lead analyst for the company. "The affirmation of Hotelbeds' Caa1 CFR reflects the fact that, irrespective of any forecast improvement, the company's leverage remains very high and limited free cash flow (FCF) generation is expected, while there is also significant execution risk related to improving financial metrics over the next 12-18 months, particularly given deteriorating macroeconomic conditions", added Mr. Marchesi. RATINGS RATIONALE Moody's expects that Hotelbeds' operating performance will continue gain ground over the next 12-18 months, leading to an improvement in its financial metrics. The company's top-line, as measured by total transaction value (TTV), should benefit from relatively easy year-over-year comparables during the first half of fiscal 2023. This is due to a combination of stronger transaction volumes and higher average daily rates (ADR) when compared to the first half of 2022, when operating performance was negatively impacted by the omicron variant. Moody's forecasts that TTV will rise towards EUR6.7 billion in fiscal 2023, up from EUR5.8 billion in 2022, with company-adjusted EBITDA rising towards EUR210 million in 2023 and EUR240 million in 2024, up from EUR155 million in 2022. However, the aforementioned forecast is subject to a significant degree of execution risk given the highly uncertain macroeconomic environment, which is characterised by an unprecedented number of challenges to consumer spending including a surge in energy prices, strong inflation, and significant increases in interest rates as well as potentially recession-driven unemployment. At the same time, despite any forecast improvement in financial conditions, Moody's considers that Hotelbeds' Moody's-adjusted leverage is likely to remain very high at between 8-9x over the next 12-18 months, with Moody's-adjusted FCF / debt remaining limited at around 0-1% over the same period. Hotelbeds' rating is also constrained by a highly competitive accommodation distribution market, with risks of disintermediation as hotels and intermediaries seek to reach customers directly, and large online travel agents (OTAs) have the scale to contract directly with hotels; as well as exposure to risks from exogenous shocks (for example, pandemics and terrorism), cybersecurity threats and system disruptions. At the same time, the credit rating is supported by the company's leading market position in a fragmented industry; as well as diversification of customers, hotel suppliers, and source and destination geographies, with the latter allowing the company to take advantage of changes in global demand patterns. The company is tightly controlled by Cinven, CPPIB, and EQT which control the board. As is often the case in highly levered, private equity sponsored deals, owners have a higher tolerance for leverage/risk and governance is comparatively less transparent. LIQUIDITY Moody's considers Hotelbeds' liquidity to be adequate. As of September 30, 2022, the company had EUR808 million of liquidity, consisting of EUR539 million of cash on balance and a fully undrawn EUR247.5 million backed senior secured revolving credit facility (RCF). Taken together, these will be adequate to cover expected intra-year working capital swings of c. EUR0.3-0.4 billion and ensure compliance with a EUR75 million minimum liquidity covenant. That said, the company's liquidity must also be viewed in the context of Moody's expectations of limited FCF generation over the next 12-18 months as well as the company's large negative working capital position. The unwind of this working capital position during 2020 was one of the causes of a EUR575 million cash-injection by Hotelbeds' owners during the pandemic. STRUCTURAL CONSIDERATIONS Hotelbeds' capital structure consists of a fully undrawn EUR247.5 million backed senior secured RCF maturing in September 2024, a EUR1,008 million backed senior secured term loan B maturing in September 2025, a EUR400 million backed senior secured term loan C maturing in 2027, and a EUR400 million backed senior secured term loan D maturing in 2027. The term loans and the RCF are rated in line with the CFR, reflecting the first-lien-only structure and pari passu ranking of the facilities. RATING OUTLOOK The stable outlook reflects Moody's expectations of a gradual improvement in Hotelbeds' operating performance and financial metrics such that Moody's-adjusted leverage improves from current levels towards 8-9x over the next 12-18 months. The outlook also reflects Moody's expectations that Hotelbeds will generate limited but positive Moody's-adjusted FCF which, together with a significant liquidity position, will ensure that the company is in a position to meet its financial obligations as they fall due until the company's backed senior secured term loan B matures in September 2025. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating pressure could develop over time if the company delivers revenue and EBITDA growth, such that Moody's-adjusted leverage were to be sustained well below 6.5x, and Moody's-adjusted FCF is sustained in the low-single digits. Liquidity would also have to be maintained at an adequate level. Conversely, negative rating pressure could occur in the event that Hotelbeds does not deliver growth in revenue and profitability, such that Moody's-adjusted leverage remains at elevated levels, calling into question the sustainability of the company's capital structure. Additionally, negative rating pressure could occur if it becomes clear that the company will not be in a position to refinance its debt facilities at least 12 months prior to their maturity or if Hotelbeds' liquidity position deteriorates. LIST OF AFFECTED RATINGS Assignment: Issuer: HNVR Holdco Limited BACKED Senior Secured Bank Credit Facility, Assigned Caa1 Affirmations: Issuer: HNVR Midco Limited Probability of Default Rating, Affirmed Caa1-PD LT Corporate Family Rating, Affirmed Caa1 Issuer: HNVR Holdco Limited BACKED Senior Secured Bank Credit Facility, Affirmed Caa1 Outlook Actions: Issuer: HNVR Midco Limited Outlook, Changed To Stable From Negative Issuer: HNVR Holdco Limited Outlook, Changed To Stable From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Hotelbeds is a leading B2B technology distribution partner (bedbank), offering hotel rooms to the travel industry from an inventory of approximately 180,000 hotels in 185 destinations. It also distributes tickets and activities on a B2B basis and operates a range of travel-related new ventures. In fiscal year 2022, which ended on September 30, 2022, the company generated gross operating profit of EUR394 million and company-adjusted EBITDA of EUR155 million. MADE.COM: Unsecured Creditors to Get Less Than 2% of Amount Owed ---------------------------------------------------------------- Sarah Butler at The Guardian reports that hundreds of furniture suppliers and other unsecured creditors to the failed retailer Made.com are expected to receive less than 2% of almost GBP187 million they were owed when the business collapsed earlier this month. According to The Guardian, creditors include an estimated 12,000 customers who had already paid for items, as well as Thurrock council, which is owed GBP658,000 and Islington council, which is owed GBP110,000, while several furniture suppliers are owed well over GBP100,000. They will get no more than 1.6% of the money due to them before expenses, The Guardian says, citing a report from administrators. Among Made.com's biggest unsecured creditors who will lose out are Facebook (owed GBP1.4 million), Google (owed about GBP1.7 million) and the operator of the group's Antwerp warehouse (GBP1.8 million), The Guardian notes. About 4,500 items already on their way to customers are expected to be delivered, The Guardian discloses. Administrators at PricewaterhouseCoopers (PwC) said that if an order had not arrived by Nov. 25, customers should know it would not be coming and they should submit a claim to them via email at uk_madedesign_creditors@pwc.com, The Guardian relates. However, Made.com's main lender, Silicon Valley Bank, is likely to recover nearly all the GBP3.8 million it is owed after the retailer Next bought the Made.com brand and database for GBP3.4 million, The Guardian states. Employees and HMRC, which is owed GBP3.57 million, will also be paid in full, The Guardian notes. According to The Guardian, administrators said GBP14.5 million of stock had not be sold and was held in warehouses in the UK and Antwerp, or in transit to the UK. Most of that will be sold through the auctioneers John Pye to raise cash for creditors. Made.com's Trouva site, which sells branded homewares, fashion and accessories, continues to trade and administrators are seeking a buyer, The Guardian states. A sale of the business, which Made bought just four months ago, is expected to be concluded by the end of 2022, according to The Guardian. WILDFIRE MEDIA: Goes Into Administration ---------------------------------------- Hannah Baker at BusinessLive reports that a Bristol publisher of business-to-business property and education magazines has fallen into administration. Wildfire Media has appointed business recovery firm Leonard Curtis as administrators, BusinessLive relays, citing public records site The Gazette. According to BusinessLive, Andrew Beckingham and Siann Huntley of Leonard Curtis's Bristol Queen's Square office are overseeing the administration. The directors of Wildfire Media are named as John Kingston and Robert Tomblin on Companies House. It is not yet clear why the business collapsed or how many jobs are at risk, BusinessLive notes. There are 26 people listed on Linkedin as connected to the company. Wildfire Media was based at the Paintworks trading estate on Bath Road and specialised in producing digital content and print publications, including University Business, Education Technology and Independent Education Today. [*] UK: Number of Insolvencies in Restaurant Sector Up 59% ---------------------------------------------------------- Emma Powell and Dominic Walsh at The Times report that the hospitality sector is buckling from a "toxic mix" of headwinds as higher labour and energy costs combined with a slowdown in consumer spending lead to a surge in insolvencies. According to The Times, pubs, restaurants and cafes are battling to hire and retain staff, particularly for skilled roles such as chefs, while bills for energy and food soar just as consumers tighten their belts in the face of double-digit inflation. The number of insolvencies in the restaurant industry has risen 59% over the past year, according to the corporate advisory specialist Mazars, with almost 1,600 companies falling into financial distress, The Times notes. In the past three months the number of restaurant companies becoming insolvent rose to 453, from 395 the previous quarter, The Times discloses. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *