/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/221215.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, December 15, 2022, Vol. 23, No. 244 Headlines G R E E C E SANI/IKOS GROUP: Moody's Puts 'B3' CFR on Review for Downgrade I T A L Y FIBER BIDCO: Fitch Assigns 'B+' Final LongTerm IDR, Outlook Stable ZONCOLAN BIDCO: Fitch Cuts LT IDR to 'B-' Then Withdraws Rating L U X E M B O U R G TRAVELPORT FINANCE: XAI OFRAITT Marks 2026 Loan at 30% Off R U S S I A ASAKA JSC: S&P Assigns 'BB-/B' ICRs, Outlook Stable S W I T Z E R L A N D VAT GROUP: Moody's Affirms 'Ba2' CFR & Alters Outlook to Positive U N I T E D K I N G D O M ALLSEAS GLOBAL: High Court Appoints Administrator CLEVER CO: Owed GBP4.5MM to Creditors at Time of Administration DOUNE THE RABBIT: Enters Liquidation Due to Supply Chain Issues INTERNATIONAL PERSONAL: Fitch Gives 'BB-' Rating to Sr. Unsec Notes MARKET DINER: Put Up for Sale Following Liquidation MCLAREN GROUP: S&P Downgrades LT ICR to 'CCC', On Watch Negative SHAWBROOK MORTGAGE 2022-1: S&P Assigns CCC (sf) Rating to F Notes TRILEY MIDCO 2: Fitch Assigns 'B' Final IDR, Outlook Positive WATERFRONT HOTELS: Bliss Hotel Attracts Potential Buyers - - - - - =========== G R E E C E =========== SANI/IKOS GROUP: Moody's Puts 'B3' CFR on Review for Downgrade -------------------------------------------------------------- Moody's Investors Service has placed on review for downgrade the B3 corporate family rating, the B3-PD probability of default rating of Sani/Ikos Group S.C.A. (Sani/Ikos or the Company) and the Caa1 instrument ratings of the EUR300 million backed senior secured bond guaranteed by the Company and issued by Sani/Ikos Financial Holdings 1 S.a r.l. The outlook on both entities is changed to ratings under review from stable. "The review for downgrade reflects the increased leverage following the acquisition by GIC Private Limited (GIC) in October 2022 which offsets the strong operating performance of the company throughout 2022. It also reflects the uncertainty around the company's operating performance in the next 12 to 18 months driven by rising inflation and weaker consumer sentiment and the uncertainty around future leverage appetite while the significant growth strategy remains largely debt-funded" says Elise Savoye CFA, a Moody's Vice President - Senior Analyst and lead analyst for Sani/Ikos. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The review for downgrade of Sani/Ikos Group S.C.A.'s (Sani/Ikos or the Company) ratings reflects the company significant increase in leverage following the acquisition of the company by GIC which Moody's expect to hover around 10.5x as of year-end 2022, while the company expansion plan will remain largely funded via additional debt. The B3 rating was initially weakly positioned in the B3 rating category because Moody's expected leverage to gradually decrease thanks to additional earning potential from development and expansion. The cash distribution of EUR250 million and the additional funding raised on the back of the group assets suggests higher leverage appetite. The review also factors in a deteriorated operating environment even if the Company's strong historic performance in the luxury resort segment in Greece and Spain and its highly profitable operating business model (with high EBITA margins of 23.5% as of the last twelve months ending September 2022) proved resilient to the pandemic and the Russian-Ukrainian crisis. The review will focus on (1) the future leverage appetite following GIC acquisition to maintain leverage metrics in line with Moody's expectations for the B3 level; (2) the company's capacity to roll-out its growth strategy with significant accretive earnings and to deliver on-going strong operating margin; (3) review of liquidity and plans in place to finance its important capex and (4) potential support from main shareholders to support the company in case of need. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS Sani/Ikos' credit impact score (CIS-4, highly negative) mainly reflect its leverage appetite and concentrated ownership. The company has a high environmental risk exposure stemming from physical climate risk and moderately from carbon transition risk. Its moderate social risk exposure reflects customer relation risks related to managing customer data and reputation. FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS A resurgence of effective travel restrictions caused by the pandemic Debt/EBITDA remains well above 10x in 2022 and well above 8x in 2023 EBITA margin fails to recover above 20% An upgrade is unlikely given the ratings are on review for downgrade. STRUCTURAL CONSIDERATIONS The bonds are structurally subordinated to indebtedness of the subsidiaries, and subordinated to all debt secured by property and partially corporate guarantees. The Caa1 rating on review for downgrade of the secured bonds reflects the subordinated nature of the bonds. The company also uses preferred equity certificates that Moody's have given 100% equity credit for given their equity-like features, in line with Moody's Hybrid Equity Credit methodology. LIQUIDITY Sani/Ikos' liquidity is adequate following the debt issuance, but Moody's expect the company to continue to be free cash flow negative for 2023 and 2024. Following the acquisition by GIC, the company refinanced its credit facilities in Greece and as part of this refinancing exercise reduced its debt repayment needs for 2023 and 2024, so that debt repayment needs in each year remain manageable (below EUR40 million annually) until bond maturity in 2026. ESG CONSIDERATIONS Moody's take into account the impact of environmental, social and governance (ESG) factors when assessing companies' credit quality. The Company's main shareholder is GIC alongside the company's founders and management. With the ownership structure comes a higher tolerance for leverage. The Sani/Ikos GP is managing the Sani/Ikos Group S.C.A. and has full control over the affairs of the Company. LIST OF AFFECTED RATINGS On Review for Downgrade: Issuer: Sani/Ikos Financial Holdings 1 S.a r.l. BACKED Senior Secured Regular Bond/Debenture, Placed on Review for Downgrade, currently Caa1 Issuer: Sani/Ikos Group S.C.A. Probability of Default Rating, Placed on Review for Downgrade, currently B3-PD LT Corporate Family Rating, Placed on Review for Downgrade, currently B3 Outlook Actions: Issuer: Sani / Ikos Financial Holdings 1 S.a r.l. Outlook, Changed To Rating Under Review From Stable Issuer: Sani/Ikos Group S.C.A. Outlook, Changed To Rating Under Review From Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Sani/Ikos runs 2,750 rooms and suites in 10 luxury hotels in Greece and Spain under the Sani and Ikos brands. Sani resort is a fully-integrated resort in a single location while the Ikos concept of the group consist of luxury all-inclusive hotels in different locations. The Company currently works towards opening another 4 hotels in Greece, Spain and Portugal, adding further 1578 rooms over 2023 to 2025. The hotels operates through the an extended summer season. In 2021 the group generated EUR213 million in revenues on par with 2019 revenues. ========= I T A L Y ========= FIBER BIDCO: Fitch Assigns 'B+' Final LongTerm IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has assigned Italy-based leading premium paper packaging materials and label manufacturer Fiber Bidco S.p.A. (Fedrigoni) a final Long-Term Issuer Default Rating (IDR) of 'B+' with a Stable Outlook. Fitch has also assigned the group's around EUR735 million floating-rate notes and EUR365 million fixed-rate notes final instrument ratings of 'BB-' with Recovery Ratings of 'RR3'. The assignment of the final ratings follows the completion of co-investment in Fedrigoni by Bain Capital and BC Partners, alongside minority shareholders and management, and a review of the final documentation, which is materially in line with the draft terms. KEY RATING DRIVERS Solid Business Profile: Fedrigoni's business profile is mainly underpinned by its strong positions in growing premium niche markets. This is complemented by both sound end-market and customer diversification with significant exposure to fairly resilient end-markets in food and beverage, household goods, pharma and personal care. Other strengths are the breadth and quality of its product range, well-established relations with leading luxury brands, a high share of tailored-made products and efficient distribution network. Strong Market Position: Fedrigoni is one of the market leaders in growing premium niches. Within the self-adhesives segment, it is the third-largest manufacturer of pressure-sensitive labels globally, and in particular a leader in the wine end-market. In luxury packaging, Fedrigoni is the global market leader in rigid cartons and shopping bags with a growing foothold in the folding boxes segment. However, the group's key target markets are fragmented and competitive with moderate barriers to entry. Cost Pass-Through Ability: The group is not vertically integrated into pulp and it is therefore exposed to changes in both raw materials and commodity prices (such as pulp, film, adhesives and natural gas). Fitch expects the group's margin volatility to be mitigated by its ability to pass on cost inflation and hedging efforts. Fedrigoni's sound record of cost pass-through is supported by its strong customer relationships developed through the group's market position, high share of tailored-made products and leading delivery times. Highly Acquisitive Growth Strategy: Fitch expects the group to continue to pursue an M&A-driven growth strategy, which bears execution risks. For 2023-2025, Fitch expects the group to spend around EUR150 million annually on acquisitions. Execution risk is mitigated by the group's successful integration record and prudent policy to acquire high-quality companies with a strong return on capital and at sensible valuations. Its M&A pipeline, deal parameters and post-merger integration are important rating drivers. Sound Profitability: Fitch expects Fedrigoni will continue to generate positive free cash flow (FCF) through the cycle. Its moderate operating profitability is offset by strong cash conversion. Fitch assumes a cumulative around 2pp improvement in EBITDA margin in 2022-2025, mainly driven by a gradual shift in its business mix towards more profitable niches (eg. premium fillers, luxury packaging, wine labels) and cost savings from various operational initiatives in procurement and manufacturing. The ability to sustain margin improvement, despite inflation and potential energy challenges, will be key for Fedrigoni's financial profile. Rating Limited by Leverage: The rating is constrained to the high 'B' category by high leverage and expected modest deleveraging during the next four years. Fitch forecasts total debt to amount to around 5.2x EBITDA at end-2022. Fitch expects gradual deleveraging towards around 4.0x by end-2025, mainly on the back of improving operating profitability. DERIVATION SUMMARY Fedrigoni is a specialty paper and packaging producer, which is smaller in scale than Fitch-rated peers such as Stora Enso Oyj (BBB-/Stable) and Smurfit Kappa Group plc (BBB-/Stable). Fitch views Fedrigoni's business profile as modestly stronger than that of producer of recycled paperboard, Rimini Bidco S.p.A (Reno De Medici (RDM); B+/Stable), mainly due to stronger product and geographic diversification. Fitch views Fedrigoni's financial profile as weaker than RDM's due to its higher expected leverage and weaker coverage. Both companies have sound profitability with expected strong FCF generation and moderate operating profitability. Similarly to Titan Holdings II BV's (Eviosys; B/Positive) Fedrigoni's margins have historically lagged Fitch-rated peers'. However, Fitch expects Fedrigoni to catch up with healthy 14%-15% EBITDA margins from 2023-2025. KEY ASSUMPTIONS - Revenue of around EUR2.2 billion in 2022. Organic revenue to decline by mid-single digits in 2023 before rebounding by mid-single digits in 2024 and 2025 - Average annual M&A spend of around EUR150 million in 2023-2025 (no guidance from the group) - EBITDA margin of 13.3% in 2022, gradually increasing to 15.1% by 2025 - Capex at 3.5%-3.8% of revenue annually in 2022-2024 and 3% in 2025 - Proportionate consolidation of Tageos, reflecting Fedrigoni's long-term strategic interest in the company - No dividends KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that Fedrigoni would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated - A 10% administrative claim - For the purpose of recovery analysis, Fitch assumed that debt post-senior secured notes issuance comprises EUR1,100 million notes, an EUR150 million revolving credit facility (RCF; assumed fully drawn), EUR351 million non-recourse factoring (the highest drawn amount in LTM to 3Q22) and around EUR53 million other debt (including modest debt at Tageos assuming proportionate consolidation). - The GC EBITDA estimate of EUR220 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch bases the group's enterprise valuation (EV). The assumed level reflects intense market competition resulting in subdued operating profitability - An EV multiple of 5.5x EBITDA is applied to the GC EBITDA to calculate a post-re-organisation EV - The multiple reflects Fedrigroni's strong positions in growing premium niche markets, established customer relationships and well-developed own distribution network - The 5.5x EV multiple is in line with that of RDM, Titan Holding II B.V. and Ardagh Group S.A. - Its waterfall analysis generated a waterfall-generated recovery computation (WGRC) in the 'RR3' band, indicating a 'BB-' instrument rating. The WGRC output percentage on current metrics and assumptions is 60% RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - EBITDA leverage below 4.5x on a sustained basis - Funds from operations (FFO) gross leverage below 5.5x on a sustained basis - FCF margin above 3% on a sustained basis Factors that could, individually or collectively, lead to negative rating action/downgrade: - EBITDA leverage above 6.0x on a sustained basis - FFO gross leverage above 7.0x on a sustained basis - EBITDA coverage below 2.0x on a sustained basis - Neutral to negative FCF margin on a sustained basis - Problems with integration of acquisitions or increased debt funding LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: Fedrigoni's liquidity at the closing of the notes issuance mainly consisted of an EUR150 million undrawn 4.5-year RCF and Fitch has assumed around EUR45 million readily available cash (excluding EUR15 million Fitch-restricted cash for intra-year working capital swings). Fitch expects positive FCF generation over the next four years. The group has no significant short-term debt maturities (apart from an overdraft and non-recourse factoring) as the new debt structure will be dominated by the EUR1,100 million senior secured five-year notes. ESG CONSIDERATIONS Fedrigoni has an ESG Relevance Score of '4' [+] for Exposure to Social Impacts due to consumer preference shift to more sustainable packaging solutions such as paper packaging, which has a positive impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Fiber Bidco S.p.A. LT IDR B+ New Rating B+(EXP) senior secured LT BB- New Rating RR3 BB-(EXP) ZONCOLAN BIDCO: Fitch Cuts LT IDR to 'B-' Then Withdraws Rating --------------------------------------------------------------- Fitch Ratings has downgraded Zoncolan Bidco S.p.A. Long-Term Issuer Default Rating (IDR) to 'B-' from 'B' and simultaneously withdrawn the rating following its merger into Eolo S.p.A.. The Outlook was Stable at withdrawal. Fitch has also assigned Eolo a first-time Long-Term IDR of 'B-' with Stable Outlook. Fitch has also downgraded the senior secured notes (SSN) issued by Zoncolan to 'B' from B+'. Eolo, as a consequence of the intra-group merger, has assumed the responsibility for Zoncolan's liabilities. The downgrade reflects a weaker-than-initially expected trajectory for Eolo's revenue and profitability, a significant increase in leverage, and its expectations of persistently negative free cash flow (FCF) due to high capex requirements. The lower profitability follows slower customer additions, due to delays in the FWA broadband rollout, and higher network costs. The Stable Outlook reflects Fitch's expectations that Eolo is likely to be able to access financing to fund its capex plan. A failure to do so in the next six-12 months is likely to jeopardise its competitive position, with adverse impact on customer growth, profitability and underlying cash flow generation. Zoncolan's IDR withdrawal follows its merger into Eolo. Zoncolan was initially an entity incorporated by funds managed by Partners Group and entities controlled by founder and CEO Luca Spada to acquire the Italian fixed wireless access (FWA) broadband operator Eolo. KEY RATING DRIVERS Negative FCF: Fitch expects Eolo's FCF to remain negative until the financial year to March 2027. Fitch expects its Fitch-defined EBITDA margin, which treats lease as operating expense, to increase to about 40% by FYE27 from around 35% currently. However, high capex requirements, averaging around 50% of revenue over the next five years, will keep FCF negative. A low tax charge and mild-to-neutral cash inflows from working capital will feed into a high cash flow from operations (CFO) margin averaging around 25% for FY23-FY27. Fitch had previously expected FCF to break even in FY25 and an average CFO margin of over 30%. Increase in Leverage: Its downward revision of revenue and EBITDA margin forecasts result in higher expected leverage. Additionally, Fitch expects the remaining portion of Eolo's revolving credit facility (RCF) to be drawn by FYE24. Its forecasts factor in an additional funding requirement of EUR100 million- EUR150 million for FY24-FY27, which Fitch conservatively expects to be covered by additional debt, as allowed by Eolo's bond indenture. Overall, both funds from operations (FFO) gross leverage and EBITDA gross leverage will be around 6.5x by FYE23, higher than its acceptable threshold for a 'B' rating. Slower Customer Growth: Eolo's subscriber base is growing slower than its initial expectations when Fitch published its rating in October 2021. It had around 601,000 subscribers at FYE22 versus the 637,000 Fitch had expected. This slower growth is mainly because Eolo's migration to a more advanced network infrastructure using 28GHz spectrum has not yet been completed. The company has given priority to the completion of this transition, with the aim to connect new subscribers directly on the new network technology. Fitch therefore expects a pick-up in subscriber growth in FY25. Its forecast subscriber growth for FY22-FY27 averages around 6% per annum. Limited Scale Affects Margins: Eolo's Fitch-defined EBITDA margin for FY22 is around 35%, down from its initial expectations of around 45%. The lower margin is due to higher costs for labour and marketing and to increased network expenses. Part of these costs are fixed in nature and key to supporting Eolo's growth plan. Fitch expects profitability to slowly increase, alongside customer and revenue growth. Fitch assumes Eolo's average revenue per user (ARPU) to remain around EUR28 per month, which is high for Italy. Should competitors introduce inflationary indexations to their contracts, Eolo may follow suit and Fitch does not expect the company to be a first mover in this regard. High Capex Requirements: Fitch expects Eolo's capex to remain high at over EUR360 million over the next three years. This includes an estimated spend to cover the extension of the right-of-use of frequencies. These investments involve customer premise equipment (CPE) and base transceiver stations (BTS). Investments will complete the coverage of Eolo's addressable market and also upgrade its network technology. While CPE expenditure is linked to customer growth, the pace of BTS capex is more discretionary. Fitch believes BTS capex is likely to keep pace with customer growth and technology upgrades to maintain the network's service quality. Risks to FWA Operating Environment: Fitch sees a strong case for FWA to be a key technology in Italy where FTTH (fibre-to-the-home) networks will not be deployed or where FTTC (fibre-to-the-cabinet) connection is sub-optimal. However, FWA may be challenged by alternative wireless technologies such as satellite broadband and the deployment of 5G mobile networks. Adverse geography and competitive demand for faster broadband connections may make Eolo's offer uneconomical or lead to higher prices for customers. Infrastructural Approach to Financial Policy: Fitch expects Eolo to focus on increasing FWA coverage and on accelerating its subscriber expansion. This will result in high capex to build its infrastructure and connect customers. However, this business plan may prevent deleveraging and FCF break-even over the medium term. In certain scenarios such as slow revenue growth Fitch may sees Eolo requiring extra funding to achieve its targets. Fitch expects Eolo's shareholders may intervene should the company struggle to meet its funding requirements through the debt capital markets. Deal with Open Fiber: Eolo recently closed an agreement with Open Fiber S.p.A., Eolo will provide its FWA technology to Open Fiber to support its coverage commitments in several locations. Eolo already sells Open Fiber's FTTH services in certain rural areas of the country. Additionally, Open Fiber supplies fibre connections to connect Eolo's BTS under development. Fitch believes this deal highlights Eolo's capabilities as an FWA provider in Italy and its strong position in the rural areas of the country. The agreement should have a small positive impact on working capital in FY24. DERIVATION SUMMARY Eolo holds a strong position in the FWA technology niche of the Italian broadband market. This enables the company to grow its customer and geographical coverage in suburban and rural areas of Italy, where the roll-out of fibre networks is slow and structurally sub-optimal. In this niche, Eolo mainly competes with Linkem, but with limited geographical overlap. Eolo's ratings are based on an expanding business model, high leverage, and large capex requirements driving negative FCF. Its operating and financial profiles are commensurate with a 'B-' rating. Eolo is highly comparable with the speculative-grade issuers covered by Fitch in the telecommunications sector, in particular those of smaller scale and covering niche market positions. Eolo's operating profile compares well with that of Tele Columbus AG (B-/Stable), which has similar leverage and EBITDA margins. Tele Columbus is also in the process of improving its network infrastructure, and recently announced an equity capital increase to fund this plan. DKT Holdings ApS (DKT; B-/ Negative) also has high leverage and capex requirements driving negative FCF. Fitch rates DKT under a consolidated profile with with Nuuday A/S. Nuuday is the leader in the end-user market for mobile and broadband services in Denmark. For its infrastructure it relies on its network partner TDC NET Holdings A/S. Fitch sees possible comparisons with infrastructural and utility-like businesses such as Techem Verwaltungsgesellschaft 674 mbH (Techem, B/Stable), which has similar EBITDA margins to Eolo, network expansion plans and a customer-driven capex model. Techem is bigger, however, faces lower competition pressures and operates in a more favourable regulatory environment, resulting in a higher debt capacity. KEY ASSUMPTIONS - Revenue growth of around 5.7% in FY23 and FY24, before increasing to 7% in FY25 - Gross subscribers growing at an average of about 4%-6% per year for FY23-FY26, with stable ARPU and decreasing churn - Broadly constant ARPU at around EUR28 per month - Limited cash tax payments due to large losses carried forward up to FY26 - Capex at 60% of revenue in FY23 and 55% in FY24, before decreasing to below 50% from FY25 Key Recovery Assumptions Its recovery analysis assumes that Eolo would be considered a going concern (GC) in bankruptcy, and that it would be reorganised rather than liquidated. This is based on the inherent value of its customer portfolio of broadband clients in suburban and rural areas in Italy. Fitch has assumed a 10% administrative claim. Fitch assesses GC EBITDA at around EUR80 million. Its distressed scenario assumes slower customer growth, stagnation in pricing and higher capex requirements to maintain the customer base. This will lead to shrinking margins and higher cash needs to fund capex, causing increases in leverage. At the GC EBITDA level, Fitch expects Eolo to be FCF-negative. However, the company may be able to achieve positive FCF after scaling back capex requirements, following a cut in unprofitable areas from its FWA coverage. A sale to another telecoms operator with greater scale may also be an option. Fitch uses a 5.0x multiple, at the mid-point of its distressed multiples range for high-yield and leveraged- finance credits. Its choice of multiple is justified by the potential attractiveness of the business for other Italian telecoms operators, balanced by the lack of FCF generation in the medium term. Eolo's EUR140 million RCF is assumed to be fully drawn on default. The RCF ranks super senior and ahead of SSNs. Its waterfall analysis generates a ranked recovery for the SSN noteholders in the 'RR3' category, leading to a 'B' instrument rating. This results in a waterfall- generated recovery computation output percentage of 56%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - A successful roll-out of the FWA network leading to broadband leadership in target niches with customer expansion and control on pricing - Evidence of improvements in cash flow generation leading to neutral FCF margins in 18 to 24 months - FFO gross leverage and gross debt/EBITDA sustainably below 5.0x - Increase in liquidity headroom through additional facilities or reimbursements under the RCF Factors that could, individually or collectively, lead to negative rating action/downgrade: - Disruptions to FWA expansion due to faster-than-expected and more efficient roll-out of fibre networks in rural and suburban areas in Italy, leading to a higher customer churn - FFO gross leverage higher than 7.0x, caused by a reduction in margins and by increases in gross debt - Evidence of deterioration in liquidity, in the absence of possible equity injections to fund the capex plan LIQUIDITY AND DEBT STRUCTURE Limited Liquidity: Eolo's cash position as of FY23 is expected at around EUR10 million with remaining undrawn RCF availability in excess of EUR30 million. Fitch expects the company to draw down the remaining available portion of the RCF in FY23 and FY24. Fitch expects additional cash requirements over the next 18 to 24 months for the capex plan, which Eolo should be able to meet through debt capital markets. Fitch would expect shareholder support or the company to scale back its capex plans in the event of difficulty in gaining acess to financial markets. 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 ----------- ------ -------- ----- Eolo SpA LT IDR B- New Rating Zoncolan Bidco S.p.A. LT IDR B- Downgrade B LT IDR WD Withdrawn B- senior secured LT B Downgrade RR3 B+ =================== L U X E M B O U R G =================== TRAVELPORT FINANCE: XAI OFRAITT Marks 2026 Loan at 30% Off ---------------------------------------------------------- XAI Octagon Floating Rate & Alternative Income Term Trust has marked its $581,389 loan extended to Travelport Finance Luxembourg Sarl to market at $404,356, or 70% of the outstanding amount, as of September 30, 2022, according to a disclosure contained in XAI OFRAITT's Form N-CSR for the fiscal year ended September 30, filed with the Securities and Exchange Commission on December 1. XAI OFRAITT extended a Secured Second Lien Loan to Travelport Finance Luxembourg Sarl. The loan currently has an interest rate of 8.67% (3M US L + 6.75%) and is scheduled to mature on May 29, 2026. XAI OFRAITT is a diversified, closed-end management investment company. The Trust seeks attractive total return with an emphasis on income generation across multiple stages of the credit cycle. Travelport Finance (Luxembourg) S.a.r.l. operates as a subsidiary of Travelport Holdings Ltd. =========== R U S S I A =========== ASAKA JSC: S&P Assigns 'BB-/B' ICRs, Outlook Stable --------------------------------------------------- S&P Global Ratings assigned its 'BB-/B' long- and short-term issuer credit ratings to Uzbekistan-based Joint Stock Commercial Bank Asaka (Asakabank). The outlook is stable. Asakabank is the third largest bank in Uzbekistan, owned by the government. The bank was established in 1995 by decision of the Cabinet of Ministers of the Republic of Uzbekistan and is the third largest in the country in terms of capital and assets. Asakabank was created to support and develop the auto industry in Uzbekistan and is majority-owned by the state via the Fund for Reconstruction and Development (88%) and the Ministry of Finance (10.7%). Asakabank is undergoing a transformation that envisages the commercialization of its business model and its eventual privatization. Currently, the European Bank for Reconstruction and Development (EBRD) is taking steps to become a shareholder of the bank with an initial 15% stake. Asakabank, being predominantly a corporate bank, is going to increase retail and small and midsize enterprise (SME) lending as part of the transformation. This should improve its profitability metrics and business franchise and reduce concentrations in the loan book over the medium-to-long term. S&P said, "We believe, the bank will continue benefiting from on-going government support, despite preparing for privatization. Even with more emphasis on the SME and retail segments by year-end 2023, we expect large corporate customers will remain core to its business model. Therefore, we expect the bank will remain important for the government, maintain close ties with it, and continue enjoying on-going government support for its business and capital profiles in the coming two-to-three years despite its planned privatization. "We anticipate that Asakabank's net interest margin will gradually improve to 3.5% in 2024 from 2.4% in 2021.Part of the deal with the EBRD includes commercialization of the bank's business model. Starting 2023, the bank will increase interest rates on its two largest loans to bring them closer to market rates. Historically these loans were orchestrated by the government at below-market rates. At the same time, we understand the loans will retain the state guarantee and related funding costs will not increase. Generally, the SME and retail segments are more profitable than the corporate segment. However, the expected share of these operations in the coming three years will be low, only moderately supporting margins. "The bank will likely maintain an adequate capital position because of the EBRD's fresh capital and moderation of lending growth. We forecast that Asakabank's risk-adjusted capital (RAC) ratio will increase to 8.4% by year-end 2024, compared with 6.8% at year-end 2021. The projected improvement comes via the EBRD's anticipated capital injection and planned moderation of loan portfolio growth in 2022-2024. We think that the bank's profitability will improve in 2023, with the return on average equity improving to about 6.6% in 2024, which is still below the system average, from 2.7% in 2021. "We view Asakabank's risk position as adequate despite a high share of foreign currency (FX) denominated loans and high concentration in the loan book.The bank's asset quality is slightly better than the systemwide average with cost of risk at about 1.5%-1.7% over 2018-2021 versus the 2% sector average in the same period. It is positioned in line with many regional and global peers, with the share of problem assets (stage 3 loans under International Financial Reporting Standards) at 6.5% on Dec. 31, 2021. Under national standards the nonperforming loans ratio was 4.7% of total loans, on par with 4.9% for the sector. The share of FX denominated loans in the portfolio is high at 70% versus the 50% sector average. That said, it is important to note the two largest FX denominated loans (which constitute 32% of the total loan book) are guaranteed by the state. Moreover, Asakabank compares well with other state-owned banks like Uzpromstroybank (70% of FX loans) and Turon Bank (60%). "In our view, Asakabank's funding profile and liquidity position are comparable with those of other large state-owned banks in the country. The bank relies heavily on funding from international financial institutions, with the share of these funds accounting for about 55% of its funding base. We view the funds from international financial institutions as generally stable, especially those from multilateral lending institutions, given their long tenors and project nature. However, these funds can be potentially more volatile than customer deposits if the bank breaches the covenants. Going forward, Asakabank plans to diversify its funding base by attracting more deposits. The bank's stable funding ratio has remained above 100% over the past five years with the loans-to-deposits ratio exceeding 300%, reflecting the systemwide reliance on funds from international financial institutions. Asakabank keeps an adequate liquidity buffer with broad liquid assets covering about 93% of total customer deposits or 16% of total assets at Dec. 31, 2021, which is comparable with those of domestic peers. "In our view, Asakabank is a government-related entity (GRE) with high systemic importance but this doesn't provide any uplift to our 'bb-' stand-alone credit profile (SACP) assessment. We consider Asakabank a GRE with a moderately high likelihood of receiving timely and sufficient government support. We believe Asakabank plays an important role for the government. This reflects our view that the bank will maintain significant volumes of government-related operations, including lending to large GREs and supporting the auto industry. We think that the link between the government and Asakabank is strong because the government directly controls more than 90% of the bank's capital. Although the bank is included in the list of GREs to be privatized, we do not think that the link with the government will weaken in the next two-to-three years because the government will retain control and privatization is likely to be gradual. Our assessment of Asakabank's SACP incorporates the government's ongoing support to the bank in terms of funding and guarantees on its loans. We do not include additional uplift for potential government support because the bank's SACP is already at the same level as the sovereign rating. "The stable outlook reflects our view that Asakabank's ongoing government support and adequate capital buffers will help it switch to a more commercial business model and support its credit profile in the coming 12 months. "We could take a negative rating action in the next 12 months if, contrary to our expectations, the bank's RAC ratio deteriorates and remains below 7%. We could also lower the rating or revise the outlook to negative on Asakabank in the next 12 months if we take a similar action on Uzbekistan." A positive rating action is unlikely over the next 12 months because it would require a similar rating action on the sovereign, together with further improvement of the bank's SACP. Environmental, Social, And Governance ESG credit indicators: E-2, S-2, G-4 S&P said, "We view ESG factors for Asakabank as broadly in line with its domestic peers in Uzbekistan. The bank's direct exposure to the oil and gas and metals and mining sectors is very modest. Governance factors are a negative consideration in our credit rating analysis of Asakabank. We consider governance and transparency in the Uzbekistani banking system to be weak in a global context." ===================== S W I T Z E R L A N D ===================== VAT GROUP: Moody's Affirms 'Ba2' CFR & Alters Outlook to Positive ----------------------------------------------------------------- Moody's Investors Service affirmed the Ba2 corporate family rating and the Ba2-PD probability of default rating of VAT Group AG's (VAT, or the company). Concurrently, Moody's changed the outlook to positive from stable. RATINGS RATIONALE The rating action balances (i) the improvement in VAT's key credit metrics, prompted by supportive trading conditions since 2020 with (ii) the uncertain magnitude and length of the cyclical semiconductor downturn expected during 2023, which Moody's projects will have some adverse impact on the company's financial metrics. In the rating agency's view, declining chip demand and ongoing chip inventory corrections in the semiconductor supply chain will likely lead to a contraction in VAT's revenue by about 20% in 2023 (compared to 2022 expected levels), followed by a recovery in 2024. Nevertheless, Moody's projects VAT to maintain strong financial metrics over the next 12-18 months, including Moody's-adjusted gross debt to EBITDA below 1.0x and EBITDA margins in the mid-30s, which positions VAT strongly to weather the inherent cyclicality in the key semiconductor end-market. The positive outlook indicates that VAT's CFR is strongly positioned within the Ba2 rating category, owing to the company's (i) continued capitalization on strong demand for vacuum valves and after-sale services, coupled with steady market share gains in both segments over the past few years, (ii) high profitability and sustained positive free cash flow (FCF) generation, supported by a flexible cost structure and low capital investment requirements, and (iii) track record of abiding by a conservative financial policy, despite high dividends paid out. At the same time, the Ba2 CFR remains constrained by VAT's small revenue base and substantial customer concentration, reflective of the company's rather small addressable market and exposure to significantly larger original equipment manufacturers (OEM) customers. The rating also reflects VAT's high exposure to volatile demand from the semiconductor industry, which is to some extent mitigated by the company's high-end product offering, high market share, established customer relationships and rising contribution from after-sale services and other industrial applications to the product mix. LIQUIDITY VAT's liquidity is good. Moody's assessment incorporates the expectation that VAT will (i) continue to generate positive FCF in 2023-24 after expansionary capital investments and substantial dividend payments, (ii) maintain adequate cash balances, and (iii) successfully address the comprehensive refinancing of its capital structure, considering that the outstanding CHF200 million bond and the US$300 million RCF both mature in 2023. RATING OUTLOOK The positive outlook reflects Moody's expectation that VAT will maintain its strong market position, flexible cost structure and financial discipline supporting the retention of a strong credit profile, particularly through near term industry downturns. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS At this stage, further positive rating pressure requires the company to demonstrate resilient topline and profitability at times of cyclical downturns. Positive rating pressure would also require: Revenue in excess of $1.0 billion on a sustained basis A higher proportion of net recurring service and aftermarket revenue to help offset demand volatility EBITDA margin (Moody's-adjusted) above 30% Moody's-adjusted debt/EBITDA below 1.5x and not significantly exceeding 2.5x through the cycle while liquidity remains good Conversely, negative rating pressure would arise in conjunction with: Evidence that the company is losing market share Moody's-adjusted EBITDA margin falls below the mid-20s in percentage terms on a sustained basis or A relaxation in VAT's cost discipline and capital investment, for example, if consistent and significantly negative FCF (after dividend payments) results in a deterioration in the company's liquidity or in Moody's-adjusted debt/EBITDA rising above 2.5x PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Semiconductors published in September 2021. PROFILE Headquartered in Haag, Switzerland, VAT Group AG (VAT) is a specialised manufacturer of vacuum valves, serving a range of customers in the semiconductor, flat-panel display (FPD), industrial vacuum and photovoltaic industries. Additionally, the company produces multivalve modules, and provides aftermarket sales and related services. VAT has three manufacturing facilities in Switzerland, Malaysia and Romania, and had 2,897 employees as of the end of June 2022. It generated CHF1,034 million of revenue and CHF360 million of Moody's-adjusted EBITDA in the 12 months that ended June 2022. =========================== U N I T E D K I N G D O M =========================== ALLSEAS GLOBAL: High Court Appoints Administrator ------------------------------------------------- Adam Corbett at TradeWinds reports that the High Court in London has appointed an administrator at Allseas Global Project Logistics, part of the Allseas Group freight and logistics company. Steven Parker and Joanne Rolls of Opus Restructuring were appointed in November, TradeWinds relays, citing a court notice. The company, based in Oldham, northwest England, launched a service between China and Europe at the height of the container shipping boom in mid-2021, through Allseas Shipping, TradeWinds discloses. CLEVER CO: Owed GBP4.5MM to Creditors at Time of Administration --------------------------------------------------------------- Jon Robinson at Liverpool Echo reports that over GBP4.5 million was owed by an inflatable hot tub firm when it entered administration, it has been revealed. Newly-filed documents have detailed that Clever-Company owed the money to its creditors when it collapsed at the end of October, Liverpool Echo discloses. Interpath Advisory has been overseeing the administration since, Liverpool Echo notes. The Halton-based firm supplied inflatable hot tubs and related accessories to retailers and directly to consumers. The company saw increased demand for its products during the pandemic -- but that demand had fallen in recent months, Liverpool Echo relates. According to Liverpool Echo, in a statement issued in October, Howard Smith and Richard Harrison from Interpath Advisory said the company saw "significant pressure on cash flow" as recent investment in its cost base coincided with that sales fall. Some 25 staff members were made redundant, with nine remaining to support the administration, Liverpool Echo notes. The new statement of affairs document shows that the likes of B&Q, Homebase and NatWest are among the firm's creditors, Liverpool Echo relays. Others include HMRC, O2 and Funding Circle, Liverpool Echo states. DOUNE THE RABBIT: Enters Liquidation Due to Supply Chain Issues --------------------------------------------------------------- Joe Gallop at Access All Areas reports that the company behind Scotland's largest outdoor camping music festival, Doune the Rabbit Hole (cap. 15,000), has entered liquidation two months after being accused of failing to pay artists. The company behind the festival, Doune The Rabbit Hole Festival Ltd, will relaunch under the new name of Festival Beverage and Property Services Ltd., Access All Areas relays, citing a Companies House filing. It has pledged to pay artists, crew and suppliers from the 2022 event, Access All Areas discloses. Organisers said supply chain issues impacted income levels, which did not allow it to cover the budget costs outlined for the 2022 event, Access All Areas notes. The festival returned to the Cardross Estate in July for the first time in two years to host acts such as Amy MacDonald and Belle & Sebastian, Access All Areas recounts. INTERNATIONAL PERSONAL: Fitch Gives 'BB-' Rating to Sr. Unsec Notes ------------------------------------------------------------------- Fitch Ratings has assigned International Personal Finance plc's (IPF; BB-/Stable) GBP50 million, 12% senior unsecured issue due 2027 a final 'BB-' rating. The issuance comprises around GBP37.6 million offered to existing 2023 noteholders (ISIN: XS1998163148) and around GBP12.4 million through a cash offer to new investors. The exchange new notes and the cash offer new notes will be consolidated and form a single series on 12 December 2022 with ISIN XS2551486058. The rating is in line with the expected rating published on 15 November 2022 (see 'Fitch Rates International Personal Finance's Proposed Senior Unsecured Notes 'BB-(EXP)' on). KEY RATING DRIVERS IPF's notes are rated in line with the its Long-Term Issuer Default Rating (IDR), reflecting Fitch's expectation of average recovery prospects, given that all of IPF's funding is unsecured. The notes will represent senior unsecured obligations of IPF, ranking pari passu with existing similar issuances. Fitch expects the leverage impact from the transaction to be minimal, as proceeds are largely being used to refinance the existing senior unsecured debt maturing in December 2023. 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 Prior ----------- ------ ----- International Personal Finance plc senior unsecured LT BB- New Rating BB-(EXP) MARKET DINER: Put Up for Sale Following Liquidation --------------------------------------------------- Jo Wadsworth at Brighton & Hove News reports that one of Brighton's night time institutions is up for sale after rising prices. The Market Diner in Circus Street has been serving up round-the-clock fry-ups, including its famous Gut Buster breakfast, to clubbers and shiftworkers for decades. But the pandemic hit the night-time economy particularly hard, and now the cost of living crisis has forced its current owner Khasan Karimov, who has been running the cafe since 2010, to sell up, Brighton & Hove News relates. Market Diner Brighton Limited went into voluntary liquidation in September, and the leasehold is now on the market for GBP180,000, Brighton & Hove News recounts. According to Brighton & Hove News, the listing says: "Any potential buyer can pick up this business which already has a healthy and consistent turnover as well as a huge potential for growth due to a building development that has just been finished, which will bring an enormous captive market to the business. "The whole area has been redeveloped and features a beautifully paved road. The business has now been fully fitted out with a new roof, front cladding, modern furniture, energy-saving lightbulbs, an illuminated sign, and a new extractor fan. "The premises benefit from great customer footfall, with over 450 students living across the road, and a further 600 residents having just moved in. "Inside the new development, there are also offices and a dance studio, which attract over 50,000 visitors each year. This will provide plenty of passing custom for the new owner." The listing on Rightmove does not mention the cafe's 24-hour licence to sell food, but instead concentrates on the new Circus Street development opposite, which already houses 450 students with 600 more regular residents due to move in, Brighton & Hove News notes. It says the business has a healthy turnover of GBP350,000, Brighton & Hove News states. MCLAREN GROUP: S&P Downgrades LT ICR to 'CCC', On Watch Negative ---------------------------------------------------------------- S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based luxury sports car manufacturer McLaren Group Ltd. (McLaren) to 'CCC' from 'CCC+'. At the same time, S&P lowered the issue rating on McLaren's senior secured notes to 'CCC', with a recovery rating of '3'. S&P also placed the 'CCC' issuer credit and issue ratings on CreditWatch with negative implications. S&P said, "The CreditWatch placement reflects that we could downgrade McLaren if cash balances further deteriorate, pressuring its already strained liquidity position, and if we did not view further shareholder support as imminent. "We revised down our forecast of McLaren's wholesale volumes for 2022 and 2023 after its third-quarter 2022 results and our expectations into next year. McLaren's wholesale volumes totaled 1,359 vehicles in the nine months to the end of September 2022, 13% below the same period in 2021. As a result, we reduced our expectation for wholesales in 2022 to close to 2,000 vehicles in 2022, from above 3,300, and closer to 3,000 vehicles in 2023, from more than 4,000 that we previously expected. We expect sales in fourth-quarter 2022 to be similar to the third quarter (545 vehicles). The reduction in expected volumes is significantly driven by the pause in Artura deliveries for the remainder of 2022. The Artura, a key model for underpinning McLaren's recovery with about 50% of the current order book made up by the new vehicle, has been delayed a number of times. It was initially expected to launch in 2021, but deliveries did not commence until August 2022, due to technical issues with manufacturing. McLaren is still facing some of these problems, as it identified technical upgrades required on the model, which resulted in further delayed wholesale shipments and customer deliveries. Another factor affecting wholesales is the significant supply side constraints McLaren is facing, mainly relating to semiconductor chips and batteries. The semiconductor supply shortage has been well documented and felt by many automotive original equipment manufacturers (OEMs). Although, McLaren has seen a recovery in this recently, and the majority of the required chips are now being sourced. Battery supply was impaired by a fire in a key supplier's factory in China, and prolonged lockdowns in the country also halted the speed of recovery. We do not expect supply chain bottlenecks to be fully resolved in the fourth quarter of 2022, and think they are likely to persist well into the first half of 2023. This means deliveries could be lower than we expect for full-year 2023." Liquidity will continue to be pressured by decreasing sales volumes and the high cash burn associated with manufacturing and delivering these vehicles. McLaren's cash balances fell to GBP47 million at the end of third-quarter 2022. This is despite two instances of shareholder support in recent months--GBP125 million from the group's majority shareholder, Mumtalakat, in July-August 2022, and a further GBP100 million from Mumtalakat in November through the sale of some of its heritage cars to support the group as it faces challenges in delivering the Artura and other key models. Even with these cash injections, McLaren's liquidity position remains significantly constrained. If the group's rate of cash burn continues at the same trajectory as it has in recent quarters, S&P expects McLaren's cash balances will likely fall to zero within the next six to 12 months, absent any further equity injections or liquidity support. Despite three large instances of shareholder support since 2020 and other one-off cash inflows by the end of September 2022, the substantial amounts required to produce and sell vehicles and the effect of the working capital position have rapidly reduced McLaren's cash balances in 2021 and 2022. The slowdown in wholesales will also strain the group's liquidity, as cash is not being received by McLaren as fast as it anticipated. S&P said, "We forecast free operating cash flow (FOCF) to be deeply negative, as a result of high expenditure and struggling volumes. McLaren's FOCF has historically been deeply negative at GBP491 million in 2020 and GBP261 million in 2021. Capital expenditure (capex) has been high, predominantly related to research and development (R&D) costs, which made up more than 90% of total capex in the past few years. We expect capex in 2022 to be about GBP170 million, with more than GBP160 million related to R&D. We note that total capex has been steadily reducing in 2021 and 2022 compared with past levels, as the new vehicle platform recently developed should underpin new model rollouts for the next five to 10 years. Working capital changes have also exhibited outflows in the last years, GBP209 million in 2020 and GBP57 million in 2021, contributing to the negative FOCF. Although, we expect working capital flows to be neutral in 2022 in our base case. In 2022, inventories have built up significantly due to unfinished Artura models, though this has been offset by higher customer deposits, particularly related to the Solus GT, which McLaren launched in August. Despite the neutral working capital forecast this year, we expect FOCF to be minus GBP250 million-minus GBP300 million in 2022 and about minus GBP100 million-minus GBP150 million in 2023. "We have also revised down our forecasts of revenues and EBITDA for 2022 and 2023. Driven by reduced wholesale volumes, we anticipate revenues to decline in 2022 from the already subdued 2021 sales, to about GBP570 million-GBP600 million, from GBP610 million. This is due to the decrease in volumes but offset by an increase in the average selling price of McLaren's vehicles to about GBP300,000, from about GBP270,000 in 2021. In 2023, an increase in volumes and a similar average selling price should see revenue rise near to GBP900 million, but any further delays in the delivery of the Artura models or prolonged supply chain related setbacks affecting the production of other key vehicles could see this reduce. We forecast reported EBITDA to be negative in 2022, at about minus GBP65 million-minus GBP85 million, due to foreign exchange losses on hedging and retranslations and increase costs due to delays on the Artura. After accounting for about GBP160 million of capitalized R&D costs in 2022, which we treat as an expense, we forecast S&P Global Ratings-adjusted EBITDA to be about negative GBP210 million. Similar high R&D costs in 2023 mean we anticipate adjusted EBITDA to remain negative in 2023 at about negative GBP50 million to negative GBP100 million. "The CreditWatch placement reflects that we could downgrade McLaren if cash balances further deteriorated, pressuring the already strained liquidity position, and if we did not view further shareholder support as imminent. "We plan to resolve the CreditWatch placement when we have information on the recapitalization process and timelines, which is expected to be in first-quarter 2023. We will also look for further information on the progress of the Artura deliveries and the impact of supply chain bottlenecks on McLaren's production." ESG credit indicators: E-3, S-2, G-3 SHAWBROOK MORTGAGE 2022-1: S&P Assigns CCC (sf) Rating to F Notes ----------------------------------------------------------------- S&P Global Ratings assigned credit ratings to Shawbrook Mortgage Funding 2022-1 PLC's class A and B-Dfrd to F-Dfrd notes. On closing, the issuer also issued unrated class X1-Dfrd and X2-Dfrd notes and residual certificates. This is an RMBS transaction that securitizes a portfolio of GBP574 million buy-to-let (BTL) mortgage loans secured on properties in the U.K. The loans in the pool were originated between 2016 and 2022 by Shawbrook Bank Ltd., a specialist lender, wholly owned by Shawbrook Group PLC. The collateral primarily comprises loans granted to experienced professional landlords, none of whom have an adverse credit history. The transaction benefits from liquidity support provided by a liquidity reserve and a general reserve, and principal can be used to pay senior fees and interest on the most senior notes. Credit enhancement for the rated notes consists of subordination and the general reserve from the closing date. The transaction incorporates a swap to hedge the mismatch between the notes, which pay a coupon based on compounded daily Sterling Overnight Index Average (SONIA), and the loans, which pay a fixed rate of interest until they revert to a floating rate. At closing, Shawbrook Mortgage Funding 2022-1 used the proceeds of the notes to purchase and accept the assignment of the seller's rights against the borrowers in the underlying portfolio and to fund the reserves. The noteholders benefit from the security granted in favor of the security trustee, Citicorp Trustee Co. Ltd. There are no rating constraints in the transaction under S&P's counterparty, operational risk, or structured finance sovereign risk criteria. S&P considers the issuer to be bankruptcy remote. Ratings CLASS RATING* CLASS SIZE (%) A AAA (sf) 86.50 B-Dfrd AA+ (sf) 3.00 C-Dfrd AA (sf) 2.50 D-Dfrd A+ (sf) 2.50 E-Dfrd BBB+ (sf) 2.00 F-Dfrd CCC (sf) 3.50 X1-Dfrd NR 0.02 X2-Dfrd NR 0.02 RC1 Certs NR N/A RC2 Certs NR N/A *S&P's ratings address timely receipt of interest and ultimate repayment of principal on the class A notes, and the ultimate payment of interest and principal on all the other rated notes. S&P's ratings also address timely receipt of interest on the class B–Dfrd to F-Dfrd notes when they become the most senior outstanding. NR--Not rated. N/A--Not applicable. TRILEY MIDCO 2: Fitch Assigns 'B' Final IDR, Outlook Positive ------------------------------------------------------------- Fitch Ratings has assigned Triley Midco 2 Limited (Clinigen) a final Issuer Default Rating (IDR) of 'B'. The Rating Outlook is Positive. Concurrently, Fitch has assigned Clinigen's first- and second-lien debt final senior secured ratings of 'B+' with a Recovery Rating of 'RR3' and 'CCC+' with 'RR6', respectively. The assignment of final ratings follows the completion of the debt placement earlier in the year with final terms being in line with its expectations. Clingen's rating reflects high initial leverage following its take-private transaction, moderate risk to profitability and execution risk in its anticipated strategic move towards a greater contribution of services. Rating strengths are Clinigen's established presence in specialist niche pharmaceutical service markets supporting clinical trials and managed medicine access for pharma companies. Fitch views these markets as defensive with growth structurally correlated to pharma innovation. The Positive Outlook reflects its view that Clinigen should benefit from strong organic and profitable growth prospects, and its high resilience to the economic cycle. This, in combination with a successful strategic realignment of the business under new ownership, should lead to leverage metrics trending below its sensitivities for a 'B+' IDR over the next two years despite some weaker-than-expected debt service cover ratios due to rising interest rates. KEY RATING DRIVERS Specialist Pharmaceutical Services: The ratings reflect Clinigen's strong positions in the niche pharmaceutical markets of formulation, medical access, and clinical trial support, offering a specialist service to pharmaceutical companies, which offers good revenue defensibility and visibility. Management will under new ownership prioritise developing the service business, which is supported by solid distribution capabilities, over its owned product portfolio. The service business is the key source of its assumptions of around 8% organic revenue CAGR over 2022-2025 in its rating case. High Financial Leverage: Fitch views Clinigen's initial leverage post LBO of 6.5x (total debt/ Fitch-calculated EBITDA) as high for the rating but its rating case assumes steady deleveraging as Fitch expects the company to focus on implementing its organic growth strategy. Its Positive Outlook therefore assumes leverage will trend towards its positive sensitivity at 5.5x over the next two years, which would be consistent with a higher rating. Recent Performance within Expectations: Clinigen´s FY22 (year-end June) performance was broadly in line with its expectations with low double-digit sales growth and an EBITDA margin of 22.5% (down 110bp from FY21). A slight underperformance in the sales of key drug Proleukin (due to shipment date timing) and some drug shortages in certain regions (eg. Japan) meant that Fitch-adjusted EBITDA of GBP115 million was slightly under its prior forecast of GBP119 million. However, that was compensated by strong free cash flow (FCF) generation leading to a significant cash buffer at FYE22 of around GBP95 million (excluding the GBP15 million temporary bridge loan from the sponsor). Profitable, Cash-Generating Business: Based on its organic growth assumptions, Fitch projects EBITDA margins to remain at 21%-23% through to FY25. Fitch expects the implementation of a more service-led strategy to dilute profitability but stronger organic growth prospects in the segment should improve visibility around Clinigen's earnings quality. Its profitability assumptions lead to improving cash conversion with its FCF margin trending towards 4% over the same period, which is moderately strong for the rating. Fitch expects FCF will remain resilient, albeit around GBP15 million lower than previously forecast per annum due to recent interest-rate increases. Moderate Execution Risks, Limited M&A: Fitch sees moderate execution risks in the gradual development of Clinigen's strategy under its new ownership, as the company is already present in many service categories. Its rating case sees Clinigen prioritising organic growth with only modest bolt-on M&A totaling GBP85 million to selectively complement its service offering. Fitch would treat higher M&A spend during this period as event risk. Favourable Trends Aid Business Model: As a partner in clinical trials, licensed, and unlicensed medicines, Clinigen's business model is aligned with trends in the global pharma industry, characterised by innovation and partnerships/outsourcing, in addition to favourable demographic and regulatory developments. All this supports its organic growth assumptions underpinning Clinigen's deleveraging capabilities, and hence its rating. DERIVATION SUMMARY Fitch rates Clinigen according to its global Generic Rating Navigator. Under this framework, Clinigen's business profile is supported by its strong market positions within niche segments, resilient end-market demand, continued outsourcing by big pharma, and moderate geographical and business diversification. The rating is, however, constrained to the 'B' rating category by its overall limited size versus broader healthcare issuers', and high financial leverage following its acquisition by Triton. Given few rated outsourced pharmaceutical service providers, Fitch has compared Clinigen against niche pharmaceutical product companies within the broader sector, such as Advanz Pharma Holdco Limited (B/Stable), Cheplapharm Arzneimittel (B+/Stable) and Pharmanovia Bidco Limited (B+/Stable). Cheplapharm, Pharmanovia and Advanz contrast with Clinigen in their more asset-light business model, given their focus on the lifecycle management of typically off-patented drugs in targeted therapeutic areas, with R&D, marketing, distribution and manufacturing functions mostly outsourced. This allows these entities profitability metrics that are among the strongest in the sector and higher FCF margins versus Clinigen, although the latter benefits from solid cash conversion despite its lower EBITDA margin. Clinigen benefits from a more integrated service-orientated business model with higher business diversification, which provides downside protection as well as cross-selling opportunities and higher organic growth prospects. Fitch views Clinigen as firmly placed against 'B' rated names, such as Advanz, which display solid business model and good profitability, but whose credit profile is held back by high leverage and propensity for M&A. Compared with 'B+' rated peers, such as Cheplapharm and Pharmanovia, Fitch judges overall business risk and financial leverage as similar to Clinigen's but recognise the significant difference in profitability and FCF generation metrics, which justifies the one-notch rating differential. KEY ASSUMPTIONS - Organic sales CAGR of 9% to FY25, supported by new contract wins, cross-selling opportunities and continued outsourcing of services from big pharma. Total sales CAGR of 11% includes some bolt-on M&A - EBITDA margin steady at around 21.5%-22.5% to FY25 - Working-capital cash outflow of around GBP35 million in FY23, followed by GBP10 million-GBP15 million per annum to FY25 to support sales growth - Capex at 3%-4.5% of sales to FY25 - Bolt-on acquisitions of around GBP25 million per annum in FY23-FY25 at a pre-synergy enterprise value (EV)/EBITDA purchase multiple of 10x - No shareholder distributions paid KEY RECOVERY RATING ASSUMPTIONS - Clinigen's recovery analysis is based on a going-concern (GC) approach, reflecting the company's asset-light business model supporting higher realisable values in a distressed scenario compared with balance-sheet liquidation - Distress could arise primarily from material revenue contraction following volume losses and price pressure given Clinigen's exposure to generic pharmaceutical competition, possibly also together with an inability to provide services or maintain service capabilities in its key regions - For the GC EV calculation, Fitch estimates an EBITDA of about GBP90 million. This post-restructuring GC EBITDA reflects organic earnings post-distress and implementation of possible corrective measures - Fitch has applied a 5.0x distressed EV/EBITDA multiple, in line with its close peer group's and to reflect the company's minimum valuation multiple - After deducting 10% for administrative claims, its principal waterfall analysis generated a ranked recovery in the 'RR3' band, resulting in a senior secured debt rating of 'B+' for the first-lien euro and sterling term loans B (TLBs), including a GBP75 million secured revolving credit facility (RCF), which Fitch assumes to be fully drawn prior to distress. The RCF ranks pari passu with the TLBs, with a waterfall-generated recovery computation (WGRC) output percentage of 59% based on current metrics and assumptions. For the second-lien TLB, Fitch estimates its recovery in the 'RR6' band with a WGRC of 0%, corresponding to a 'CCC+' rating. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Successful implementation of the organic growth strategy focused on growing the service business leading to steady growth in operating profitability - Continued strong cash generation with FCF margins sustained in the mid-single digits - Fitch-adjusted EBITDA leverage at or below 5.5x (FFO gross leverage sustained at or below 6.5x) - EBITDA interest coverage trending above 2.5x - Evidence of conservative financial policy, with no debt-funded M&A or shareholder distributions Factors that could, individually or collectively, lead to a downgrade: - Unsuccessful implementation of the organic growth strategy, with operational underperformance relative to the business plan, leading to sustained erosion in EBITDA and margins - Weakening cash generation, with FCF margins declining towards low single digits or zero - Fitch-adjusted EBITDA leverage sustained at above 7.0x (FFO gross leverage sustained at above 8.0x) - Evidence of aggressive financial policy, including debt-funded M&A or shareholder distributions - EBITDA interest coverage below 2.0x Factors that could, individually or collectively, lead to the Outlook being revised to Stable: - Delayed execution of the organic growth strategy, with operational underperformance relative to the business plan, leading to mild erosion in EBITDA and margins - Weakening cash generation, with FCF margins declining towards low single digits - Evidence of aggressive financial policy, including debt-funded M&A or shareholder distributions, leading to a lack of deleveraging with Fitch-adjusted EBITDA leverage above 6.0x on a sustained basis - EBITDA interest coverage trending towards 2.0x LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Fitch projects low-to-mid FCF margins over FY22-FY26, which should be sufficient to cover working-capital movements, internal capex requirements and small bolt-on M&As. Clinigen also has a fully undrawn GBP75 million RCF available to support liquidity. Fitch projects a stable cash balance at around GBP50 million-GBP60 million with limited debt refinancing requirements before 2029. It has no significant factoring facilities or other local debt. ISSUER PROFILE Clinigen is a UK- headquartered pharmaceutical services and products company focused on distributing unlicensed and trial drugs to markets where they are unavailable through local health systems. 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 ----------- ------ -------- ----- Triley Midco 2 Limited LT IDR B New Rating B(EXP) senior secured LT B+ New Rating RR3 B+(EXP) Senior Secured 2nd Lien LT CCC+ New Rating RR6 CCC+(EXP) WATERFRONT HOTELS: Bliss Hotel Attracts Potential Buyers -------------------------------------------------------- Jon Robinson at BusinessLive reports that potential buyers are circling a landmark four-star hotel in Southport which collapsed into administration earlier this year. Administrators from James Cowper Kreston have received "a number of expressions of interest" in taking over Bliss Hotel after the deadline for bids expired on Friday, Dec. 9, BusinessLive relates. Paul Davies and Sandra Mundy, who are the joint administrators of Waterfront Hotels (Southport) Limited and Waterfront Southport Properties, added they are pursuing the bids and will give further updates "in due course", BusinessLive notes. The announcement comes after BusinessLive reported how more than GBP18 million was owed to creditors when the hotel entered administration. Bliss Hotel remains open and none of the 90 members of staff have been made redundant, BusinessLive discloses. The hotel, which is located on Southport's waterfront next to the planned Marine Lakes Events Centre, was put on the market at the end of September, BusinessLive recounts. It includes 131 bedrooms and penthouses, a lounge bar, restaurant, roof garden, gym, conferencing and events space, as well as secure underground car parking for 120 cars, BusinessLive states. Waterfront Southport Properties Ltd owed GBP18.2 million to its creditors when it entered administration, BusinessLive relays, citing documents with Companies House. ********* 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. 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