/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230103.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 Tuesday, January 3, 2023, Vol. 24, No. 3 Headlines C Y P R U S UNITED CEMENT: S&P Assigns 'B+' Long-Term ICR, Outlook Positive G E R M A N Y SPEEDSTER BIDCO: EUR225M Bank Debt Trades at 16% Discount I R E L A N D OCP EURO 2022-6: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. E Notes L U X E M B O U R G FLY FUNDING: $385.4M Bank Debt Trades at 20% Discount SK NEPTUNE: $610M Bank Debt Trades at 26% Discount R U S S I A LINDE AG: Russian Court Freezes US$488 Million Worth of Assets S P A I N MADRID RMBS II: Fitch Puts 'B-sf' Class D Notes Rating UCO SAN PATRICK SL: EUR61M Bank Debt Trades at 57% Discount S W I T Z E R L A N D DDM HOLDING: Fitch Maintains 'B-' LongTerm IDR on Rating Watch Neg. U N I T E D K I N G D O M CITYMAPPER: Losses Widen to GBP7.4 Million HAREFIELD HALL: Faces Liquidation, Creditors' Meeting Set LEHMAN BROTHERS: Winding Up Process to Take Three More Years LETTING BASE: Director Gets 11-Year Disqualification Order WINE ENTERPRISE: Insolvent by at Least GBP7.8 Million - - - - - =========== C Y P R U S =========== UNITED CEMENT: S&P Assigns 'B+' Long-Term ICR, Outlook Positive --------------------------------------------------------------- S&P Global Ratings assigned its 'B+' long-term issuer credit rating to United Cement Group PLC (UCG), a privately held Cyprus-based cement producer operating primarily in Uzbekistan (90% of revenue) and Kyrgyzstan (10%). The positive outlook reflects S&P's expectation that it may raise the rating in the next 12 months if UCG delivers operational and financial results, in line with current expectations, maintaining FFO to debt above 45% while adhering to conservative financial and dividend policies. The 'B+' rating on UCG balances the company's leading positions in the expanding Uzbekistan cement market and moderate leverage with its relatively small size on a global scale and limited operational track record. UCG has 35% market share in Uzbekistan and moderate leverage, with FFO to debt at 50%-60% in 2022. At the same time, the rating is constrained by the company's small size compared to international peers, low geographical and product diversity, and untested financial policy after restructuring its debt and changing ownership in 2019. In addition, UCG has a track record of lengthy litigation with the state, which involved expropriation of its largest asset at the time, Bekabadcement. The company's size, diversity, and limited operational track record constrain our business risk assessment. Despite being a market leader in Uzbekistan, by global standards UCG is a relatively small company with just 8.4 MTPA of capacity, even after the incorporation of Kyzylkumcement, which it acquired in December 2021. S&P said, "In terms of EBITDA, UCG is by far the smallest cement producer that we rate with just $24.7 million (we expect this to increase toward $80 million in 2022) versus $113.2 at Cementos Pacasmayo SAA in Peru, $342.2 million at GCC SAB in Mexico, and $396.5 million at UNACEM Corp. in Peru. We expect UCG to approach Cementos Pacasmayo in EBITDA next year, but still be slightly smaller." UCG's high exposure to Uzbekistan, where it derives more than 90% of revenue with the remaining 10% from Kyrgyzstan, exposes the company to a developing high-risk country. Uzbekistan only started to open its economy in 2016 and is still developing the framework, meaning that rules can change quickly. UCG's focus on cement exposes it to construction cycles in the economy, while its focus on industrial clients, because it lacks a distribution network, prevents it from accessing the smaller but potentially marginal retail segment and developing brand awareness nationally, which peers in Latin American countries do. Furthermore, UCG has a very limited track record under the current asset structure. It only acquired its largest asset, Kyzylkumcement, from the state in December 2021 and started integrating it in 2022. The company also did not control second-largest asset Bekabadcement until 2019, when it won a legal case against the state, which nationalized a 70% stake in UCG in 2009. Therefore, until 2019 the group was several times smaller with only 2.4 MTPA of capacity available to it. S&P notes that this limits the visibility of UCG's performance under different market conditions and its operational stability. Additionally, there are certain limitations on gas availability in Uzbekistan, while future volumes and prices available to the industrial sector are unclear. Uzbekistan produces natural gas domestically but production is nearly balanced with consumption, which is expanding quite steadily. The government has initiated several industrial projects, including a large gas-to-liquids plant, which turns gas into liquid fuel (such as kerosene, diesel, naphtha, and petrol gas) and is operated by Uzbekneftegaz, and should lead to increased consumption of gas domestically. In the winter, UCG's Kuvasaicement and Kyzylkumcement plants have some limitations on access to gas, since it is being used for heating. This is somewhat restricting their output and leads to working capital buildup, because the company must accumulate clinker ahead of the winter months. Should demand for gas significantly outpace supply, these limitations might become more widespread over the next few years. Importantly, gas prices are regulated in Uzbekistan for all consumer types, including industrial. The government has been contemplating market liberalization for some time. It is unclear what types of consumers will be affected and by how much, but pressure on volumes could give the government an incentive to increase prices faster to constrain demand growth. That said, S&P understands price increases for the industrial sector are not expected over the next year and that Uzbekistan's government is currently negotiating additional gas supplies with neighboring gas-rich Turkmenistan and Russia, which could help address winter shortages. S&P notes that some of UCG's plants can switch to coal in case of gas shortages, but coal prices have been on the rise recently, so economically it may be less efficient. UCG's business is supported by its leading positions and growth prospects in Uzbekistan and its reasonable profitability. The company is a market leader in Uzbekistan, with a 35% share. Following the acquisition of Kyzylkumcement and a new kiln in 2022, its 9.5 MTPA total capacity now exceeds 50% of the country's consumption, at an estimated 18.5 MTPA in 2022. Although producing at 100% capacity is not possible given gas limitations and maintenance requirements, there is room for market share improvement, especially given the high quality of UCG's product and its reputation in the local market. Importantly, Uzbekistan's cement market will continue to expand as the country is catching up on infrastructure investment and industrialization, which only started a few years ago and requires large quantities of cement. S&P expects demand to expand 5%-6% annually in the next few years, which incorporates fast annual population growth of about 2%. This presents good opportunities for further growth of Uzbekistan's cement market and UCG's robust positioning in the market, which could support an improvement in our business risk assessment over time. UCG has moderate leverage, with FFO to debt of 50%-60% in 2022 and potentially improving toward 100% in 2023, but its financial policy is still to be tested. The company was nearly debt free until 2022, when it borrowed $127 million to finance the $176 million acquisition of Kyzylkumcement. The group's debt amortizes until 2025 and we understand it does not plan to have material debt on its balance sheet. UCG's capital expenditure (capex) plans are also quite modest with up to $30 million in 2022 and up to $15 million annually thereafter, focused primarily on operating efficiency rather than extensive growth. That said, the company's financial policy and management and shareholders' appetite to maintain moderate leverage are still to be tested. We note that UCG went through a debt restructuring in the past, with roughly $360 million written off its balance sheet in 2020 after it changed ownership. UCG also borrowed $200 million from Kazkommertsbank in 2008 to finance the acquisition of Bekabadcement and defaulted on the loan in 2009 after the construction and cement markets contracted sharply amid the global financial crisis and its cash flows dried up. The loan was finally restructured in 2020 when the new shareholder paid $36 million to purchase it from Kazakhstan's bad debt fund. UCG's track record of debt restructuring and litigation with the state, which included nationalization of its major asset, is a constraining factor for our assessment. The group restructured its debt in 2019, when it last changed ownership, writing off more than $300 million of debt owed to Kazakhstan's Bad Debt Fund. The new shareholder paid $36 million to purchase UCG's debt from the fund, which left the company essentially debt free. This is unusual for a restructuring, since normally companies are left with at least some debt on the balance sheet. The legal dispute involved key asset Bekabadcement, which had 70% of its shares seized by the state in 2010 under the previous ownership. It lasted for 10 years until 2020, when the plant was returned to the company under a new government in Uzbekistan and new shareholder at UCG. S&P said, "Although there is no evidence that the state might try to seize back control of the plant, we need a track record of new disputes around the asset. Furthermore, we need some track record of prudent financial policies under the new capital structure and shareholder." The positive outlook on UCG reflects S&P's expectation that the company will continue to deliver stable operating results, in line with its expectations, by gradually increasing its sales volumes after incorporation of Kyzylkumcement, while improving the operating efficiency of its assets. This should result in FFO to debt of up to 60% in 2022, improving toward 100% in 2023. We also expect the company to maintain a reasonable financial and dividend policies, along with adequate liquidity, which should provide a sufficient track record for the upgrade. S&P could upgrade UCG in the next 12 months due to a combination of the following: -- An operational track record indicating stable performance and the absence of setbacks after integrating Kyzylkumcement in 2022, as well as better visibility on group cash flow volatility. -- Clarity on the liberalization of the gas market and its impact on UCG, as well as indication that there is no deterioration in natural gas availability to UCG's plants. -- A track record of reasonable financial policies, including the absence of excess dividends, large debt-funded acquisitions, or material related-party transactions, resulting in a conservative capital structure with FFO to debt above 45%. -- S&P could revise the outlook to stable if the company experiences operational setbacks and/or pursues an aggressive financial policy, such as material debt-funded acquisitions, dividends, or related-party transactions, which would prevent it from improving its FFO to debt to above 60% in 2023. ESG credit indicators: E-3, S-3, G-4 S&P said, "Governance factors are a negative consideration in our analysis on UCG because it operates in Uzbekistan, a high-risk country where we see governance practices as evolving. The track record of legal disputes with the government and debt restructuring under previous ownership also weighs on our assessment because it has a limited history of operating under the new ownership. Environmental factors are a moderately negative consideration in our credit analysis of UCG because close to 100% of its revenue comes from cement sales. Cement production is among the highest carbon-dioxide (CO2)-emitting industries, and we expect greater investment requirements among cement players in the medium term to meet tighter CO2 emissions regulations. That said, environmental regulations are not pressuring Uzbekistan's cement producers at the moment, while UCG's focus on the domestic market limits exposure to stricter regulation elsewhere. Social factors are a moderately negative consideration in our credit analysis of UCG since we believe gas availability and prices are subject to social factors, given the country does not produce excess gas." ============= G E R M A N Y ============= SPEEDSTER BIDCO: EUR225M Bank Debt Trades at 16% Discount --------------------------------------------------------- Participations in a syndicated loan under which Speedster Bidco GmbH is a borrower were trading in the secondary market around 83.9 cents-on-the-dollar during the week ended Friday, December 30, 2022, according to Bloomberg's Evaluated Pricing service data. The EUR225 million facility is a Term loan. It is scheduled to mature on March 31, 2028. The amount is fully drawn and outstanding. Speedster Bidco GmbH is controlled by Hellman & Friedman, which had acquired AutoScout24 in 2020. Parent company, Munich, Germany-based AutoScout24 GmbH, operates a website for trading vehicles such as motorcycles, cars, trucks, and more. It also offers loans and vehicle licensing products. The Company's country of domicile is Germany. ============= I R E L A N D ============= OCP EURO 2022-6: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. E Notes ----------------------------------------------------------------- Fitch Ratings has assigned OCP Euro CLO 2022-6 DAC expected ratings. Entity/Debt Rating ----------- ------ OCP Euro CLO 2022-6 DAC A LT AAA(EXP)sf Expected Rating B 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 Subordinated Notes LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY OCP Euro CLO 2022-6 DAC (the issuer) is a cash flow collateralised loan obligation (CLO) that will be serviced by Onex Credit Partners Europe LLP. Net proceeds from the issuance of the notes will be used to purchase a pool of primarily secured senior loans and bonds, with a par of EUR350million. KEY RATING DRIVERS 'B' Portfolio Credit Quality (Neutral): Fitch places the average credit quality of obligors to be in the 'B' category. The Fitch weighted average rating factor (WARF) of the current portfolio is 24.20. High Recovery Expectations (Positive): Senior secured obligations make up close to 99.3% of the portfolio. 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 current portfolio is 62.07%. Diversified Portfolio Composition (Positive): The largest three industries comprise 28.73% of the portfolio balance, the top 10 obligors represent 12.07% of the portfolio balance and the largest obligor represents just over 1.72% of the portfolio. Nearly Static Portfolio (Positive): The manager can only reinvest the sale proceeds of a credit risk obligations during the non-call period (approximatively one year from closing). The reinvestments are limited to 5% of the target par amount and subject to the reinvestment criteria. Given the limited reinvestment possibility, Fitch's analysis is based on the current portfolio and stressed by applying a one-notch reduction to all obligors with a Negative Outlook (floored at 'CCC'), which is 11.07% of the indicative portfolio. After the adjustment on Negative Outlook, the WARF of the portfolio would be 25.65. Deviation from MIR (Neutral): The class B, C and D notes are rated one notch below their model-implied rating (MIR). The class E notes are rated two notches below their MIR. The deviation reflects the limited cushion on the Negative Outlook portfolio at the MIR and uncertain macro-economic conditions. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: An increase of the default rate (RDR) at all rating levels by 25% of the mean RDR and a decrease of the recovery rate (RRR) by 25% at all rating levels in the stressed portfolio would result in downgrades of up to three notches, depending on the notes. Downgrades may occur if the build-up of the notes' credit enhancement (CE) following amortisation does not compensate for a larger loss expectation than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Based on the actual portfolio, downgrades 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 WARF of the target portfolio compared with the Negative Outlook portfolio and the model deviations, the class B, C and D notes display a rating cushion of one notch, while the class E notes display a rating cushion of two notches. Factors that could, individually or collectively, lead to positive rating action/upgrade: A reduction of the RDR at all rating levels by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels in the stressed portfolio would result in upgrades of up to five notches, depending on the notes. Except for the tranches rated at the highest 'AAAsf' level on Fitch's scale, upgrades may occur in case of better-than-expected portfolio credit quality and deal performance, and continued amortisation that leads to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. DATA ADEQUACY OCP Euro CLO 2022-6 DAC The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations 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. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action 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. =================== L U X E M B O U R G =================== FLY FUNDING: $385.4M Bank Debt Trades at 20% Discount ----------------------------------------------------- Participations in a syndicated loan under which Fly Funding II Sarl is a borrower were trading in the secondary market around 80.2 cents-on-the-dollar during the week ended Friday, December 30, 2022, according to Bloomberg's Evaluated Pricing service data. The $385.4 million facility is a Term loan. It is scheduled to mature on August 9, 2025. About $323.6 million of the loan is withdrawn and outstanding. The Company's country of domicile is Luxembourg. SK NEPTUNE: $610M Bank Debt Trades at 26% Discount -------------------------------------------------- Participations in a syndicated loan under which SK Neptune Husky Group Sarl is a borrower were trading in the secondary market around 73.8 cents-on-the-dollar during the week ended Friday, December 30, 2022, according to Bloomberg's Evaluated Pricing service data. The $610 million facility is a Term loan. It is scheduled to mature on January 3, 2029. The amount is fully drawn and outstanding. SK Neptune Husky Group Sarl has its registered office in Luxembourg. =========== R U S S I A =========== LINDE AG: Russian Court Freezes US$488 Million Worth of Assets -------------------------------------------------------------- Reuters reports that a Russian court has ordered nearly US$500 million of assets belonging to German industrial gases company Linde, to be frozen at the request of a Russian joint venture building a gas complex at the Baltic Sea port of Ust-Luga, court filings showed on Jan. 2. According to Reuters, RusKhimAlyans, the joint venture which is 50% owned by Russia's Gazprom, asked the Court of Arbitration of St Petersburg and the Leningrad Region to freeze Linde assets worth RUR35 billion (US$488 million) as a preventative measure. In 2021, Linde and Renaissance Heavy Industries signed an engineering, procurement and construction (EPC) contract with Gazprom and its partners for the Ust-Luga gas complex. Linde notified the customer in May and June 2022 that it had suspended work under the contract due to European Union sanctions imposed after Russia's invasion of Ukraine, Reuters relates. RusKhimAlyans alleges, according to the document, that EU sanctions ban supplying equipment for the liquefied natural gas (LNG) plant but do not cover equipment required for the other part of the Ust-Luga complex -- a gas processing plant, Reuters notes. ========= S P A I N ========= MADRID RMBS II: Fitch Puts 'B-sf' Class D Notes Rating UCO ---------------------------------------------------------- Fitch Ratings has placed 50 Iberian RMBS ratings Under Criteria Observation (UCO) following criteria changes. Entity/Debt Rating Prior ----------- ------ ----- RMBS Green Belem No.1 Class B PTTGCYOM0009 LT AA-sf Under Criteria Observation AA-sf TDA 29, FTA Class B ES0377931029 LT A+sf Under Criteria Observation A+sf Class C ES0377931037 LT BB+sf Under Criteria Observation BB+sf FTA, UCI 14 Class A ES0338341003 LT A+sf Under Criteria Observation A+sf Class B ES0338341011 LT BBBsf Under Criteria Observation BBBsf FTA, UCI 15 Series A ES0380957003 LT A+sf Under Criteria Observation A+sf Series B ES0380957011 LT BB+sf Under Criteria Observation BB+sf IM Cajamar 6, FTA Class D ES0347559033 LT BBBsf Under Criteria Observation BBBsf BBVA RMBS 3, FTA A2 ES0314149016 LT BBBsf Under Criteria Observation BBBsf Madrid RMBS II, FTA Class B ES0359092030 LT Asf Under Criteria Observation Asf Class C ES0359092048 LT BBsf Under Criteria Observation BBsf Class D ES0359092055 LT B-sf Under Criteria Observation B-sf RMBS Belem No.2. Class A PTTGUGOM0025 LT AAsf Under Criteria Observation AAsf Class B PTTGUHOM0024 LT A-sf Under Criteria Observation A-sf TDA CAM 6, FTA Class B ES0377993037 LT BB+sf Under Criteria Observation BB+sf AyT Caja Granada Hipotecario 1, FTA Class B ES0312212014 LT BBBsf Under Criteria Observation BBBsf Lusitano Mortgages No.5 plc Class A XS0268642161 LT A+sf Under Criteria Observation A+sf Class B XS0268642831 LT BBB+sf Under Criteria Observation BBB+sf Class C XS0268643649 LT B+sf Under Criteria Observation B+sf FTA, UCI 17 Class A2 ES0337985016 LT BBB+sf Under Criteria Observation BBB+sf Class B ES0337985024 LT B-sf Under Criteria Observation B-sf Madrid RMBS III, FTA Class C ES0359093046 LT BB-sf Under Criteria Observation BB-sf Bancaja 9, FTA Series D ES0312888045 LT BB+sf Under Criteria Observation BB+sf BBVA RMBS 2, FTA Class B ES0314148042 LT A-sf Under Criteria Observation A-sf Class C ES0314148059 LT BBB-sf Under Criteria Observation BBB-sf FTA, UCI 16 A2 ES0338186010 LT Asf Under Criteria Observation Asf B ES0338186028 LT BB-sf Under Criteria Observation BB-sf FTA, Santander Hipotecario 3 Class A1 ES0338093000 LT BBBsf Under Criteria Observation BBBsf Class A2 ES0338093018 LT BBBsf Under Criteria Observation BBBsf Class A3 ES0338093026 LT BBBsf Under Criteria Observation BBBsf HipoTotta No. 4 Plc Class C XS0237370860 LT BB+sf Under Criteria Observation BB+sf Hipocat 8, FTA Class D ES0345784047 LT A-sf Under Criteria Observation A-sf TDA CAM 9, FTA Class C ES0377955044 LT CCsf Under Criteria Observation CCsf Lusitano Mortgages No.6 Limited Class B XS0312982290 LT AAsf Under Criteria Observation AAsf Class C XS0312982530 LT BB+sf Under Criteria Observation BB+sf Sagres, STC S.A. / Pelican Mortgages No.4 Plc Class B XS0365138295 LT AA-sf Under Criteria Observation AA-sf Class C XS0365138964 LT BBB+sf Under Criteria Observation BBB+sf Class D XS0365139004 LT B-sf Under Criteria Observation B-sf Class E XS0365139939 LT B-sf Under Criteria Observation B-sf Lusitano Mortgages No.4 Plc Class A XS0230694233 LT AA-sf Under Criteria Observation AA-sf Class B XS0230694589 LT A-sf Under Criteria Observation A-sf Class C XS0230695552 LT BB+sf Under Criteria Observation BB+sf Class D XS0230696360 LT CCCsf Under Criteria Observation CCCsf BBVA RMBS 1, FTA Class C ES0314147044 LT BBsf Under Criteria Observation BBsf IM Caja Laboral 2, FTA Class B ES0347552012 LT A+sf Under Criteria Observation A+sf Class C ES0347552020 LT BBsf Under Criteria Observation BBsf TDA CAM 7, FTA Class B ES0377994035 LT BBsf Under Criteria Observation BBsf Hipocat 11, FTA Class A2 ES0345672010 LT Asf Under Criteria Observation Asf Hipocat 9, FTA Class D ES0345721056 LT BB+sf Under Criteria Observation BB+sf TDA CAM 8, FTA Class C ES0377966025 LT BBsf Under Criteria Observation BBsf KEY RATING DRIVERS The ratings placed on UCO indicate the possibility of rating change as a result of the application of Fitch's updated European RMBS Rating Criteria. The updates include revised recovery rate assumptions for Portugal and Spain in the form of house price decline and foreclosure sale adjustment calibrations that reflect Fitch's updated views on the Portuguese and Spanish housing and mortgage markets (see "Fitch Ratings Updates European RMBS Rating Criteria, Consolidating Iberian Recovery Rate Assumptions Rating Criteria" dated 16 December 2022). Fitch will resolve the UCO status by 16 June 2023. CRITERIA VARIATIONS Where relevant, criteria variations as disclosed in the latest rating action commentaries on each transaction continue to apply. ESG CONSIDERATIONS ESG relevance scores as disclosed in the latest rating action commentaries on each transaction continue to apply. 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. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: The application of the updated assumptions could result in positive rating actions, as larger recovery rate expectations on defaulted loans would imply lower projected losses on the mortgage portfolios. DATA ADEQUACY Fitch has not conducted any checks on the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. SAN PATRICK SL: EUR61M Bank Debt Trades at 57% Discount ------------------------------------------------------- Participations in a syndicated loan under which SAN Patrick SL is a borrower were trading in the secondary market around 42.9 cents-on-the-dollar during the week ended Friday, December 30, 2022, according to Bloomberg's Evaluated Pricing service data. The EUR61 million facility is a Term loan. It is scheduled to mature on October 2, 2024. The amount is fully drawn and outstanding. SAN Patrick SL manufactures apparel. The Company offers wedding gowns, dresses, and accessories for women. SAN Patrick serves customers in Spain. ===================== S W I T Z E R L A N D ===================== DDM HOLDING: Fitch Maintains 'B-' LongTerm IDR on Rating Watch Neg. ------------------------------------------------------------------- Fitch Ratings has maintained DDM Holding AG's (DDM) and DDM Debt AB (publ)'s (DDM Debt) 'B-' Long-Term Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN). DDM Debt's EUR200 million senior bonds' (SE0015797683) long-term rating has also been maintained on RWN. KEY RATING DRIVERS The RWN primarily reflects Fitch's view that despite moderate improvements in 3Q22, DDM's liquidity position remains tight and its cash-generating capacity in the short term might be weaker than Fitch previously assumed due to material investments in illiquid, non-core assets. In particular, the announced investment in Nordiska Kreditmarknadsaktiebolaget (publ) (Nordiska), which is to acquire Swiss Bankers Prepaid Services AG (Swiss Bankers) in 1Q23, will lead to a significant liquidity outflow (CHF40 million) while not immediately generating recurring revenue. The acquisition also materially increases DDM's exposure to equity investments, which could lead to a less favourable capitalisation and leverage assessment and Fitch putting more emphasis on DDM's balance sheet capitalisation (gross debt/tangible equity). Apart from large investments outside its core debt purchasing business, the ratings also reflect DDM's weak profitability, elevated leverage and the absence of contingent liquidity following the expiry of its revolving credit facility (RCF) in 2022. Non-Core Investments: Since 2021, DDM has announced several investments, partly funded with proceeds from a bond issue in 2021. These include the planned acquisition of Swiss Bankers, which will be structured through acquiring a minority stake in a small Sweden-based bank Nordiska, but also the recent investments in related-party fintech company Omnione S.A (Omnio) and debt servicer AxFina Holding SA (AxFina). Fitch views investments in Nordiska/Swiss Bankers and Omnio as negative for DDM's credit profile because these companies have limited synergies with DDM's core debt purchasing business model and could undermine its cash-generating capacity. Although the acquisition of a 50.2% stake in AxFina was more complementary to DDM's business model, the transaction weighed on DDM's already weak liquidity and leverage metrics. Tight Liquidity: At end-3Q22, DDM had EUR58 million in unencumbered cash but Fitch expects this to be largely consumed by the Nordiska/Swiss Bankers transaction in 1Q23. DDM's funding profile is mainly long-term, primarily consisting of a EUR200 million bond maturing in 2026. The next coupon for the EUR200 million notes is due in April 2023 (EUR8.5 million). DDM did not have an RCF at end-3Q22, while its EBITDA/interest expense ratio was a modest 3.3x in the trailing 12-month (TTM) to end-3Q22. Elevated Leverage: DDM's gross debt/EBITDA ratio was a high 4.1x at end-3Q22 (end-2021: 5.3x). The improvement in 9M22 was driven by strong collections in 3Q22. Its net debt/EBITDA ratio was 3.0x at end-3Q22, but Fitch expects the cash buffer to be largely consumed by investment activity in 1Q23. DDM's gross debt/tangible equity ratio, which is Fitch's core benchmark metric for investment companies, deteriorated to 21x at end-3Q22, due to a decline in tangible equity caused by goodwill from the AxFina acquisition. Volatile Collections: Gross collections were EUR73 million in the TTM to end-3Q22, (2021: EUR61 million), supported by strong collections of EUR23 million in 3Q22 (2Q22: EUR16 million). This was driven by one transaction in Croatia, reflecting the concentrated nature of DDM's secured non-performing loans. Collections in the TTM to end-3Q2 were broadly stable compared with 2018-2019, while gross collections (EUR123 million) in 2020 were inflated by EUR60 million due to DDM's exit from Greece. Weak Profitability: DDM's TTM EBITDA was EUR51 million at end-3Q22, which was above EUR38 million in 2021 but weaker compared with previous years and expectations at the time of the bond issuance. As a result of lower revenue from invested assets, higher finance expenses due to an increase in outstanding debt, and loss on fair value investments, DDM reported a modest net loss in 2021 and 9M22. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - A materially weaker liquidity position following the closing of the Nordiska/Swiss Bankers acquisition combined with weak projected cash generation, which could jeopardise DDM's ability to service its debt obligations or execute its strategy. - Further marked deterioration in profitability and leverage, including from negative results on financial investments. - Signs that planned acquisitions are materially increasing DDM's exposure to operational or legal risks. Factors that could, individually or collectively, lead to positive rating action/upgrade: - The RWN on DDM's issuer and issue ratings reflects that upside for the ratings is limited. - An affirmation of the ratings would require stabilisation of DDM's liquidity position after the Swiss Bankers/Nordiska acquisition. - An upgrade in the medium term would require improvement in DDM's recurring profitability and leverage metrics, both in terms of cash-flow and balance-sheet leverage, including a gross debt/adjusted EBITDA ratio comfortably below 4.5x on a sustained basis. DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS The rating on DDM Debt's senior secured notes reflects Fitch's expectation of average recoveries, resulting in an equalisation of the bonds' rating with DDM's. DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES The secured notes' rating is principally sensitive to changes in DDM Debt's Long-Term IDR. Worsening recovery expectations, for instance as a result of a layer of more senior debt, could lead Fitch to notch the secured notes' rating down from DDM Debt's Long-Term IDR. ESG CONSIDERATIONS DDM has an ESG Relevance Score of '4' for governance structure, primarily reflecting the recent material increase in related-party transactions. DDM has an ESG Relevance Score of '4' for management strategy reflecting DDM's more opportunistic strategy when compared to other debt purchasing peers. DDM has an ESG Relevance Score of '4' for financial transparency, in view of the significance of internal modelling to portfolio valuations and associated metrics such as estimated remaining collections. This has a moderately negative influence on the rating, but is a feature of the debt purchasing sector as a whole, and not specific to DDM. 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 ----------- ------ -------- ----- DDM Holding AG LT IDR B- Rating Watch Maintained B- DDM Debt AB (publ) LT IDR B- Rating Watch Maintained B- senior secured LT B- Rating Watch Maintained RR4 B- =========================== U N I T E D K I N G D O M =========================== CITYMAPPER: Losses Widen to GBP7.4 Million ------------------------------------------ Matthew Field at The Telegraph reports that Citymapper's losses have widened to GBP7.4 million as the travel app struggles to turn its popularity into revenue growth. The London travel start-up, which developed a mapping and transport app used by millions, reported revenues of GBP5.1 million in the year ending in December 2021, down from GBP5.4 million the previous year, The Telegraph discloses. The company went further into the red during the year as losses increased to GBP7.4 million, up from GBP6.4 million, The Telegraph notes. Founded more than a decade ago, Citymapper has never made a profit and has run multiple experiments to turn its much-loved travel app into a money-making business, The Telegraph states. The business now makes money through referrals for taxis, e-bikes and scooters that users can pick and pay for through its app. It also has a subscription-based travel card in London, Citymapper Pass, that starts at GBP40 per week and provides unlimited travel in Zones 1 and 2 and GBP10 in credit to spend on ride-hailing services and e-bikes or "Boris bikes". According to The Telegraph, Companies House accounts for Citymapper showed it had raised GBP4.3 million in convertible loans to fund its business throughout 2022, The Telegraph discloses. It was most recently valued at GBP200 million on the back of a 2021 crowdfunding round where it raised GBP6 million from thousands of investors, The Telegraph notes. Backed by tens of millions of pounds in funding from investors Index Ventures and Balderton Capital, Citymapper was launched a decade ago by founder Azmat Yusuf after struggling with London's bus timetables. It has since expanded to cover London tubes, trains, taxis, bikes and scooters and launched in every major city in Europe. Its accounts state it now has a presence, using a mix of public and private data, in more than 500 cities. But the app, which has tens of millions of users, has had difficulty turning popularity into revenues, The Telegraph relays. Citymapper said revenues from its Citymapper Pass subscription service had "continued to be impacted by Covid-19" during 2021 with movement restrictions and working from home, according to The Telegraph. However, its app enjoyed all-time high engagement in the latter half of 2021, the company said, The Telegraph notes. HAREFIELD HALL: Faces Liquidation, Creditors' Meeting Set --------------------------------------------------------- John Plummer at The Stray Ferret Feed reports that a meeting of creditors of Harefield Hall Ltd is to take place next week as the business faces the prospect of being wound-up. Harefield Hall is a family-run guest house, restaurant and wedding venue popular with walkers and tourists. The building, set amongst 28 acres of woodland, once belonged to the Archbishop of York and is rumoured to have also belonged to Henry VIII. The Gazette, a journal of public record, last week posted a notice by Elaine Little, a director of the company, announcing the virtual meeting of creditors on Jan. 9, The Stray Ferret Feed relates. According to The Stray Ferret Feed, the notice said the meeting had been called under section 100 of the Insolvency Act 1986, which allows for the appointment of a liquidator. A meeting of shareholders prior to the creditors' meeting will consider passing a resolution for voluntary winding up of the company, The Stray Ferret Feed discloses. The notice added: "The resolutions to be taken at the creditors' meeting may include the appointment by creditors of a liquidator, a resolution specifying the terms on which the liquidator is to be remunerated, and the meeting may receive information about, or be called up to approve, the costs of preparing the statement of affairs and convening the meeting." LEHMAN BROTHERS: Winding Up Process to Take Three More Years ------------------------------------------------------------ Kalyeena Makortoff at The Guardian reports that administrators will spend at least three more years winding up the London-based arm of Lehman Brothers, swelling the almost GBP1.1 billion in fees that PwC has already raked in since the bank's calamitous collapse in 2008. According to The Guardian, PwC has secured court approval to extend the administration process for the investment bank's European hub to 2025, given the "complexity of unwinding the group's affairs" after one of the biggest corporate failures in history. Lehman Brothers was the fourth-largest investment bank in the US when it collapsed in one of the largest bankruptcies on record on September 15, 2008. Its downfall exacerbated the global financial crisis, which was prompted by risky lending, and resulted in governments around the world spending billions of pounds to bail out their lenders, The Guardian notes. The resulting credit crunch led to the worst global recession since before the second world war. The extension means the process of selling the investment bank's local assets, settling court cases and its taxes, and ensuring its suppliers and a complex web of creditors are paid what they are owed after its disastrous failure will end up taking at least 17 years in total, The Guardian notes. The extension will result in growing fees for PwC's team of administrators, who have recovered GBP43 billion in total for creditors of Lehman Brothers International Europe (LBIE), but have themselves charged GBP1.08 billion for their work over the past 14 years, The Guardian discloses. Overall, administrators have put in more than 3.1m hours of work to date, with average billing rising from GBP329 an hour in September 2008 to GBP620 this year, The Guardian relays. PwC, as cited by The Guardian, said the rise was heavily affected by inflation, as well as the mix of staff working on the wind up of LBIE, given the senior specialists required to deal with "the remaining thorny issues". The European arm of Lehman Brothers employed about 5,500 staff when the bank went bust, resulting in the fire sale of some of the bank's operations and sweeping job cuts that left about 500 of its own staff to assist PwC with the administration, The Guardian recounts. LETTING BASE: Director Gets 11-Year Disqualification Order ---------------------------------------------------------- The Insolvency Service on Dec. 23 disclosed that Laszlo Szabo, 49 of London, was the sole director of Letting Base Ltd, which was incorporated in 2009 and traded as a letting agency on Holloway Road until it went into liquidation in January 2022. In October 2020, Mr. Szabo applied for a Bounce Back Loan of GBP38,000 to support his business, which had formerly traded as Hungarian Lettings Ltd. The company received the loan money the following day. Bounce Back Loans were a government scheme to help keep businesses afloat during the Covid-19 pandemic, whereby companies could apply for loans of up to 25% of their 2019 turnover, up to a maximum of GBP50,000. Under the rules of the scheme, businesses could only take out one loan, although they were permitted to apply for a top-up if the original loan was less than the maximum to which they were entitled. Yet five days after applying for the first loan, Mr. Szabo applied for another Bounce Back Loan of GBP50,000 for Letting Base Ltd, this time from a different bank. And 10 days after this, he applied for a GBP12,000 top-up to the first Bounce Back Loan, taking the total borrowed through the scheme up to GBP100,000. The following day he returned to the second bank, seeking a further top-up of GBP50,000 to the second Bounce Back Loan. This time the application was rejected. Letting Base Ltd went into liquidation in 2022 owing more than GBP243,000, including the full GBP100,000 of the Bounce Back Loan money, triggering an investigation by the Insolvency Service. Investigators discovered that Szabo had made the four separate applications for Bounce Back Loans and top-ups, despite signing a declaration each time confirming it was his only application, and that Letting Base Ltd was entitled to the money he was applying for. On November 21, 2022, the Secretary of State for Business, Energy and Industrial Strategy accepted a disqualification undertaking from Laszlo Szabo after he did not dispute that he had misused the Bounce Back Loan scheme by claiming money to which his business was not entitled. His ban lasts for 11 years and began on 12 December 2022. The disqualification prevents him from directly or indirectly becoming involved in the promotion, formation or management of a company, without the permission of the court. Due to Laszlo Szabo's personal circumstances, it is unlikely that repayment of the Bounce Back Loans will be made. Nina Cassar, Deputy Head of Investigations at the Insolvency Service, said: "The Bounce Back Loan scheme was set up to support businesses in genuine need during the COVID-19 pandemic, and the terms of the scheme were widely publicised to make clear that directors were required to self-certify their eligibility for support. "Laszlo Szabo made false declarations to his company's banks, and then entered liquidation having made no repayments towards its Bounce Back Loans, which resulted in a loss of GBP100,000 of public funds. "His blatant and repeat abuse of taxpayer's money has resulted in a lengthy disqualification, which will serve to safeguard the economy from traders who exploit financial support packages designed to help UK businesses." WINE ENTERPRISE: Insolvent by at Least GBP7.8 Million ----------------------------------------------------- The Royal Gazette reports that a wine-based investment group, based in Bermuda and England, has been accused of impropriety by an investor and appeared to be insolvent by at least GBP7.8 million, it has been reported. But a spokesman for the group said that there was nothing untoward in the matter and the dispute will soon be resolved, The Royal Gazette relates. According to The Royal Gazette, the article was published in OffshoreAlert, which said that the group is controlled by Rodney Birrell, a Canadian living in Bermuda, and Briton Andrew della Casa of London. The group is said to include British fund manager Anpero Capital Limited and at least two Anpero-managed investment funds, The Wine Enterprise Investment Scheme Limited, in England, and The Wine Investment Fund Limited, in Bermuda, The Royal Gazette notes. The Registrar of Companies for England and Wales has filed a notice with Companies House that Anpero will be compulsorily struck off the register and dissolved by the end of January, The Royal Gazette discloses. According to The Royal Gazette, the article further states: "The Wine Enterprise Investment Scheme's Bermuda sister fund, The Wine Investment Fund, also appears to be insolvent, with one Bermuda investor complaining to the Bermuda Monetary Authority in a letter dated October 5, 2022, that the fund had failed to satisfy ‘numerous requests', starting on June 30, 2021, to redeem its investment balance of GBP164, 212." The article also said: "The fund was "in serious breach of various provisions" of Bermuda's Investment Funds Act, including requirements "for a fund operator and service provider to be fit and proper" and "for preparation of audited financial statements", the latter of which the investor has not received since investing in 2009, it was stated in the letter." According to OffshoreAlert, the BMA was asked to appoint someone to investigate the fund's activities, order it to satisfy redemptions, and, if it failed to do so, impose penalties against the fund, its manager, and principals, including revoking the fund's registration. Two months after the complaint, The Wine Investment Fund was still listed as an 'Authorised Standard Fund' on the BMA's website. The article states the Wine Investment Fund was incorporated in Bermuda in 2008 and, according to its register of directors and officers obtained by OffshoreAlert from its administrator, Krypton Fund Services, Birrell is currently its sole director. The fund's management shares and participating shares are all owned by Anpero Capital, according to its register of members. "Despite The Wine Investment Fund's apparent insolvency, it is currently claimed in the "Performance" section of its website at wineinvestmentfund.com that the Fund's Net Asset Value increased by 139.37 per cent since inception in March 2004 to August 2022, and potential investors are invited to "Apply for your investment pack". "When contacted by OffshoreAlert, della Casa stated that The Wine Investment Fund had been making payments, including interest, on the amount owed to the investor, adding that 'one final payment' was still outstanding." "Since a formal complaint by the company to the BMA has been made, however, it would not be appropriate to comment further until the matter has been formally resolved," he stated. "Once resolved we will be more than happy to answer all your questions in full and, to this end, I shall write to you again at such time. "In the meantime, I can confirm that no financial crime, serious or otherwise, is in progress." Anpero's accounts "were not filed in time due to an internal control issue and are due to be filed shortly", he claimed. Regarding the liquidation of The Wine Enterprise Investment Scheme, he claimed that "the company is an Enterprise Investment Scheme in the UK and that it is standard practice for such companies to be put into liquidation once the company's shares have been held for the qualifying period, The Royal Gazette relates. "This ensures that returns to investors are treated as capital gains (tax free under the scheme) and not as income (which would otherwise be taxed)." ********* 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 2023. 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 * * *