/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230214.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, February 14, 2023, Vol. 24, No. 33 Headlines F R A N C E ELIOR GROUP: S&P Affirms 'B+' ICR on Announced Acquisition G E R M A N Y HSE FINANCE: Moody's Lowers CFR to B3 & Alters Outlook to Negative TELE COLUMBUS: EUR525M Bank Debt Trades at 16% Discount G R E E C E ELLAKTOR SA: S&P Affirms & Then Withdraws 'CCC+/C' ICRs I R E L A N D NASSAU EURO II: Moody's Assigns B3 Rating to EUR9MM Class F Notes K A Z A K H S T A N AB KAZAKHSTAN-ZIRAAT: Fitch Affirms B- LongTerm IDRs, Outlook Neg. L U X E M B O U R G IDEAL STANDARD: Fitch Lowers LongTerm Issuer Default Rating to CCC+ N E T H E R L A N D S LEALAND FINANCE: $500M Bank Debt Trades at 41% Discount MEDIAN BV: GBP250M Bank Debt Trades at 16% Discount S P A I N PROMOTORA DE INFORMACIONES: Moody's Affirms 'Caa1' CFR U N I T E D K I N G D O M ARCTIC CIRCLE: Enters Administration Due to Financial Woes BURLEIGHS GIN: Darren Gould Identified as Potential Buyer CLOCKFAIR LIMITED: Enters Administration, Assets Put Up for Sale COMET BIDCO: GBP315M Bank Debt Trades at 20% Discount CONSTELLATION AUTOMOTIVE: EUR400M Bank Debt Trades at 18% Discount FONTWELL SECURITIES 2016: Fitch Affirms B-sf Rating on Cl. S Notes MIDDLETONS MOBILITY: Burton Town Centre Shop Shut Down THG OPERATIONS: EUR600M Bank Debt Trades at 26% Discount TILE GIANT: Put Through Pre-pack Administration by M. Williams TOLENT: Goes Into Administration, 313 Jobs Affected TRINITY SQUARE 2021-1: Fitch Hikes Rating on Cl. F Notes to 'BB+sf' [*] Helena Potts Joins Paul Hastings' London Restructuring Practice - - - - - =========== F R A N C E =========== ELIOR GROUP: S&P Affirms 'B+' ICR on Announced Acquisition ---------------------------------------------------------- S&P Global Ratings affirmed its 'B+' long-term issuer credit rating on Elior Group S.A. and its 'B+' issue rating on the group's EUR550 million senior notes due 2026. The stable outlook factors in a gradual improvement in Elior's operating performance and successful integration of DMS, translating into leverage of 5.6x-5.8x and funds from operations (FFO) to debt of 12%-13% in fiscal 2023 (including the pro forma effect of DMS), despite free operating cash flow after lease payments remaining moderately negative. S&P said, "The affirmation reflects that the acquisition of Derichebourg S.A.'s multi-services (DMS) business, which we believe will proceed, will increase Elior's EBITDA base and support deleveraging. In December 2022, shareholder Derichebourg S.A. agreed to move its DMS division to Elior in exchange for new Elior Group shares. Following this transaction, Derichebourg's ownership will increase to about 48.4% from about 24.36% currently. We view the proposed acquisition as positive because it increases the group's EBITDA by about EUR50 million on a pro forma 12-month basis, excluding synergies of an estimated EUR30 million, and it will complement Elior's facility management's activities, extending its customer base and geographic footprint. We view positively the increased diversification of the group's services away from catering services, with multi-services activities representing about 30% of Elior's pro forma combined revenue base compared with less than 15% currently. Nevertheless, there are potential execution risks associated with integrating DMS operations and with the changes in management and governance announced as part of this transaction. This could create higher-than-expected costs and cash outflows, and could delay the group's operational efficiency improvement plans. The transaction is subject to customary conditions, including obtaining an exemption from French financial markets regulator AMF from making a compulsory public tender offer, approval from anti-trust authorities, and Elior shareholder approval at an extraordinary general meeting. It is expected to close in April-May 2023. "In our view, Elior's progress in renegotiating its contracts to pass through cost inflation, and the benefits from margin improvement initiatives, will support a gradual recovery in EBITDA margins despite persistent inflation. The group made significant progress in renegotiating contracts with its customers in the past 12 months, to mitigate inflation's effects, and it reported achieving an approximately EUR234 million price increases on a 12-month rolling basis, based on 73% of contracts renegotiated as of Dec. 31, 2022, compared with 90% the group had targeted for then. "We understand that implementing price increases is more difficult with certain groups of customers, in particular public customers in France. We also include costs associated with restructuring and reorganization measures, which continue to weigh on EBITDA margin improvement and cash flow. But our base-case scenario still forecasts a significant improvement in the group's operating margins in fiscal years 2023 and 2024, benefiting from continued positive organic growth and ongoing recovery from COVID-19, the already-achieved contract negotiations, and the exit of the loss-making Preferred Meals business. "Despite Derichebourg's expected increased ownership of Elior's share capital, we do not factor in any extraordinary shareholder support in our assessment of the group's creditworthiness If the proposed transaction proceeds, Derichebourg will reinforce its long-term investment in Elior. Daniel Derichebourg, current CEO of Derichebourg, is to become Elior's CEO and chairman while remaining chairman of Derichebourg. We factor in Derichebourg's increased influence as shareholder and commitment to help turnaround Elior's operations and create value and synergies by combining DMS with the group's facility management's segment. However, we understand that both groups will be managed and funded independently and maintain arm's length relationships. Therefore, we continue to assess Elior's creditworthiness stand-alone. Any change in our perception of the relationship between the companies, notably our view of Derichebourg's willingness to support Elior's capital structure or liquidity, may warrant a reassessment of the latter's status within the group. "Following the new covenant waiver obtained in December 2022, we expect Elior will maintain adequate liquidity and covenant headroom in the next 12 months. With the waiver, the covenant test based on Sept. 30, 2023, results will have a target leverage of 6.0x (versus 4.5x previously). The covenant then decreases to 4.5x in March 2024. This provides additional time for Elior to restore its profitability and credit metrics. However, this is the second time the past 12 months that the company had to adjust its covenant levels, reflecting difficulties anticipating and mitigating operational risks that have significantly affected its profitability and cash flows in the past two years. "The stable outlook factors in a gradual improvement in Elior's operating performance and successful integration of DMS, translating into leverage of 5.6x-5.8x and FFO to debt of 12%-13% in fiscal 2023 (including DMS' pro forma effect), despite free operating cash flow after lease payments remaining moderately negative." S&P could lower the rating in the coming 12 months if it no longer expected Elior to deleverage toward 5.5x and its FFO to debt to increase above 10%, pro forma the DMS contribution, or if the group faced heightened liquidity and covenant pressure despite the recent covenant waiver. This could happen if: -- The DMS acquisition failed to materialize, implying weaker credit metrics for Elior given the EBITDA contribution from the multi-services activities. -- S&P anticipated no significant improvement in the group's EBITDA margins toward pre-pandemic levels due to persistently high inflation or higher-than-expected restructuring and integration costs. -- S&P expected the group's adjusted FOCF to remain negative. S&P could upgrade Elior if sustained positive organic growth combined with EBITDA margin improvement beyond its expectations, on fruitful contract negotiations and restructuring measures, as well as the successful integration of DMS, resulted in S&P Global Ratings-adjusted debt to EBITDA improving to and staying below 4.5x and FFO to debt to above 16%. To E-2, S-3, G-3; from E-2, S-4, G-2 S&P said, "Governance factors are now a moderately negative consideration in our credit rating analysis of Elior, reflecting our view that management failed anticipating and mitigating operational risks that have significantly affected the group's profitability and cash flows in the past two years. This includes the inability to rapidly adjust the cost base to reduced volumes following more people working from home post-COVID-19, and delayed actions taken to mitigate high input cost inflation that have resulted in deteriorated EBITDA margins (1.3% in 2022 compared with 2.3% in 2021). "We now consider social factors only as a moderately negative consideration in our credit rating analysis of Elior. The group's revenue has strongly recovered to about 95% of pre-pandemic levels because the effects of pandemic-related restrictions are fading away and demand for catering services at business and corporate clients has returned. Nevertheless, our moderately negative assessment reflects our view that the sector remains sensitive to health and safety issues, and that any virus variant resulting in renewed social distancing measures or increased absenteeism at corporate restaurants or school canteens could have a significant impact on the group's operating performance and credit metrics." ============= G E R M A N Y ============= HSE FINANCE: Moody's Lowers CFR to B3 & Alters Outlook to Negative ------------------------------------------------------------------ Moody's Investors Service downgraded the corporate family rating of HSE Finance S.a r.l. to B3 from B2. Moody's also downgraded the probability of default rating to B3-PD from B2-PD and the instrument rating on the EUR630 million backed senior secured notes due 2026 to B3 from B2. The outlook has changed to negative from stable. RATINGS RATIONALE The rating action reflects HSE's weak operating performance since the beginning of 2022 on the back of weak consumer demand especially in DACH region (which is the company's main market with 86% of group net sales), excess inventory orders, high inflation, exceptionally high freight costs, covid-19 outbreak in warehouse and persistent global supply chain challenges which have led to significant decline in earnings. HSE had to implement unusually high discounts and sales incentives to clear the excess inventory and the aforementioned factors together have led to a 7% decline in revenue and 38% decline in management adjusted EBITDA for the 9 months ending September 2022 versus the same period in 2021. This has resulted in Moody's adjusted debt/EBITDA of 8.6x and free cash flow (FCF) to debt of 3% for the last twelve months (LTM) ending September 30, 2022. Moody's estimates that HSE's leverage for 2022 will be around 7.9x based on slightly improved trading performance and further stock clearance in Q4 2022. Moody's expects HSE's operations to improve slightly in the next 12-18 months from the lows of 2022, on the back of normalising inventory levels, reduced need for discounting, declining freight costs and slight improvement in consumer sentiment and inflation. Under Moody's base case for 2023 and 2024, which includes Russian operations that contribute 14% of net sales and 15% of EBITDA to the company's results and which the company intends to dispose, Moody's expects some decline in volumes which will be partially offset by price increases and product mix leading to revenue in the range of EUR785-810 million and Moody's adjusted EBITDA of EUR102-112 million. This will result in Moody's adjusted leverage of 6.6x in 2023 which will reduce towards 6x in 2024 while FCF/debt will remain modest at around 2-3%, which is still materially above the thresholds set for the rating. LIQUIDITY Moody's considers HSE's liquidity to be adequate and supported by EUR28 million of cash on balance sheet as of September 30, 2022, EUR35 million of undrawn revolving credit facility (RCF) and no meaningful debt amortization before 2026. The RCF is subject to a springing senior net leverage covenant, with sufficient capacity, tested quarterly if more than 40% of the facility is drawn. RATING OUTLOOK The negative outlook reflects (i) the risk that the underlying trajectory of the business could be going back to pre-covid levels with declining or low level of earnings growth and, (ii) the risk involved in stabilising operations and improving its cost structure in a difficult economic environment pressured by weaknesses in consumer demand and elevated inflation. It also reflects that HSE's credit metrics will remain stretched in 2023 and will meaningfully improve only in 2024. The negative outlook also incorporates Moody's expectations that HSE will continue to maintain an adequate liquidity profile. STRUCTURAL CONSIDERATIONS The B3 rating of the EUR630 million backed senior secured notes due 2026 reflects their presence as the largest debt instrument in the capital structure, ranking behind the EUR35 million super-senior RCF. The backed senior secured notes and the RCF benefit from a similar guarantor package, including upstream guarantees from guarantor subsidiaries. Both instruments are secured, on a first-priority basis, by share pledges in each of the guarantors, security assignments over intercompany receivables; security over material bank accounts; and security over certain material intellectual property rights. However, the backed senior secured notes are contractually subordinated to the RCF with respect to the collateral enforcement proceeds. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A stabilisation of the outlook will require HSE to improve its operating performance in the next 12-18 months from 2022 levels with an increase in revenue, EBITDA and margins, all on a sustainable basis. Positive pressure while unlikely at this stage could occur if the company's operating performance improves such that Moody's adjusted debt/EBITDA remains below 5x on a sustainable basis and its EBIT/interest expense ratio rises sustainably above 2x. An upgrade would also require HSE to generate positive FCF to debt in the mid-single digits and to maintain an adequate liquidity profile while also demonstrating less shareholder friendly financial policies than in the past. Conversely, negative pressure on the rating could materialise if earnings do not grow materially such that HSE's debt/EBITDA ratio does not come below 6.5x, deteriorating interest coverage or if the company's earnings decline further. Downward rating pressure could also arise if FCF weakens significantly or adequate liquidity is not maintained at all times. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Retail published in November 2021. COMPANY PROFILE Headquartered in Ismaning, Germany, HSE is a multichannel home shopping operator that offers a wide range of own, exclusive and third-party brand products on its TV platform, online, via smartphone and tablet applications, and through smart TV. For the nine months ending September 30, 2022, the DACH region -- Germany (D), Austria (A) and Switzerland (CH) -- accounted for approximately 86% of group net sales, with the remainder generated in Russia (14%). HSE generated revenue of EUR806 million and Moody's adjusted EBITDA of EUR80 million for the LTM ending September 30, 2022. HSE has been owned by private-equity company Providence Equity Partners since 2012. TELE COLUMBUS: EUR525M Bank Debt Trades at 16% Discount ------------------------------------------------------- Participations in a syndicated loan under which Tele Columbus AG is a borrower were trading in the secondary market around 83.6 cents-on-the-dollar during the week ended Friday, February 10, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR525.2 million facility is a Term loan that is scheduled to mature on October 15, 2024. About EUR462.5 million of the loan is withdrawn and outstanding. Tele Columbus AG provides cable services. The Company offers cable television programming, telephone, and internet connection services to homeowners and the housing industry. Tele Columbus operates throughout Germany. =========== G R E E C E =========== ELLAKTOR SA: S&P Affirms & Then Withdraws 'CCC+/C' ICRs ------------------------------------------------------- S&P Global Ratings affirmed its 'CCC+/C' long- and short-term issuer credit ratings on Ellaktor S.A. and removed them from CreditWatch developing, where they were placed on Aug. 9, 2022. S&P subsequently withdrew its issuer credit ratings on Ellaktor S.A. at the company's request. Prior to the withdrawal, the positive outlook reflected the potential for an upgrade in the next 12 months if S&P viewed Ellaktor's capital structure as sustainable after the expiration of its largest concession in 2024. On Dec. 14, 2022, Ellaktor S.A. announced that it completed the sale of 75% of its Renewable Energy Sources (RES) division to Motor Oil (Hellas) Corinth Refineries S.A. (Motor Oil), resulting in EUR671.5 million of cash proceeds, in line with our previous expectations. The proceeds have been used to repay the facility established as a bridge for the full redemption of its EUR670 million senior notes maturing in 2024, leading to a material reduction in Ellaktor's leverage over 2023-2024 and alleviating near-term liquidity pressures. Ellaktor's repayment of its EUR670 million senior notes maturing in 2024 as well as the issuance of a EUR275 million bond maturing in 2037 at Ellaktor Concessions S.A. alleviate near-term liquidity pressures. On Dec. 15, 2022, Ellaktor announced that it had fully repaid its EUR670 million senior unsecured notes maturing in 2024. Their redemption was funded by a committed facility provided by Eurobank and Alpha Bank, which was repaid with the EUR672 million of cash proceeds from Ellaktor's 75% sale of its RES business to Motor Oil, in line with S&P's expectations. This significantly reduces refinancing risk ahead of the expiration of Ellaktor's largest concession, Attiki Odos, in October 2024, which represented about 80% of the concession division's EBITDA in 2019. Earlier in 2022, Ellaktor's concession subsidiary, Aktor Concessions S.A., issued a EUR275 million bond maturing in 2037 (only EUR175 million drawn at Dec. 31, 2022), which was used to repay debt at Ellaktor S.A. and fund upcoming investments in the concession division. As a result of both events, the group's financial flexibility is expected to improve with the extension of its remaining debt maturities and securing of additional funds to invest in concessions. S&P's S&P Global Ratings-adjusted debt, pro-forma the RES sale, also includes EUR414.6 million of gross debt as of Sept. 30, 2022, at the Moreas toll road concession and approximately EUR75 million at other operating subsidiaries (excluding Aktor Concessions S.A.), with no material maturity in the next five years. Ellaktor is undergoing a transformation phase that accentuates cash flow concentration toward Attiki Odos, whose limited concession duration constrains the group's absolute scale and credit profile. After the RES sale, Ellaktor announced last month that it had entered exclusive negotiations with companies Wade Adams Hellas SMSA and Adamas Group Ltd. for the potential disposal of its construction subsidiary, Aktor S.A. The subsidiary had limited debt of about EUR21 million at Sept. 30, 2022. In S&P's view, the sale of the construction business could benefit the group's profitability and stability of cash flows over 2023-2024 due to the division's limited contribution to earnings--versus a 56% margin for concessions in the nine months to Sept. 30, 2022--and given its expectations that construction projects' profitability will become less predictable within the expected weaker macroeconomic environment. However, it would accentuate Ellaktor's cash flow concentration toward Attiki Odos, which matures in October 2024. The environmental services business' contribution has been limited so far, with about EUR17 million of reported EBITDA in 2021, and S&P factors a rather slow expansion of these operations. Leverage could remain high in the longer term, absent new opportunities to replenish cash flows. Following Attiki Odos' expiration, S&P assumes leverage could increase, given the relatively small remaining EBITDA base. Other road concessions, such as Olympia Odos, Aegean Motorway, and Gefyra, are not fully consolidated in the group's financial statements and at early stages. Although these concessions are cash flow generators capable of paying dividends and repaying their loans, their contribution to group income will not be comparable to Attiki Odos by the time of its termination. Therefore, the sustainability of Ellaktor's capital structure will depend on its ability to replenish cash flows, as well as capital allocation and financial policy plans under the new shareholders. Prior to the withdrawal, the positive outlook reflected the potential for an upgrade in the next 12 months if S&P viewed Ellaktor's capital structure as sustainable after the expiration of its largest concession in 2024. This could have stemmed from the group maintaining sufficient liquidity to cover interest, committed capital expenditure (capex) payments, and potential working capital volatility in the next 12 months, supported by materially lower debt levels and the recently placed EUR275 million bond at its concession subsidiary. Ellaktor would also have needed to secure additional opportunities in concessions, which could improve the overall business size, materializing in lower leverage and positive free cash flow from operations beyond 2024. S&P sees the increased weight of the construction business in the group's operations as a risk within the currently weaker macroeconomic environment, although the potential sale could present an additional source of funds toward development opportunities in the concession segment. ESG credit indicators: E-2, S-2, G-4 ============= I R E L A N D ============= NASSAU EURO II: Moody's Assigns B3 Rating to EUR9MM Class F Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following definitive ratings to notes issued by Nassau Euro CLO II DAC (the "Issuer"): EUR248,000,000 Class A Senior Secured Floating Rate Notes due 2036, Definitive Rating Assigned Aaa (sf) EUR33,800,000 Class B-1 Senior Secured Floating Rate Notes due 2036, Definitive Rating Assigned Aa2 (sf) EUR5,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2036, Definitive Rating Assigned Aa2 (sf) EUR17,500,000 Class C Senior Secured Deferrable Floating Rate Notes due 2036, Definitive Rating Assigned A2 (sf) EUR22,200,000 Class D Senior Secured Deferrable Floating Rate Notes due 2036, Definitive Rating Assigned Baa3 (sf) EUR22,600,000 Class E Senior Secured Deferrable Floating Rate Notes due 2036, Definitive Rating Assigned Ba3 (sf) EUR9,000,000 Class F Senior Secured Deferrable Floating Rate Notes due 2036, Definitive Rating Assigned B3 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in Moody's methodology. The Issuer is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured obligations and up to 10% of the portfolio may consist of senior unsecured obligations, second-lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be 80% ramped as of the closing date and to comprise of predominantly corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the six month ramp-up period in compliance with the portfolio guidelines. Nassau Corporate Credit (UK) LLP ("Nassau") will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's two-year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations or credit improved obligations. The Class F Notes are delayed draw tranche. On the closing date, the Issuer will subscribe to Class F Notes with a notional of EUR9,000,000 for a zero net cash flow. During the reinvestment period only, subordinated noteholders may direct the Issuer to sell the Class F Notes, such sale proceeds will be used to redeem subordinated noteholders. In addition to the seven classes of notes rated by Moody's, the Issuer has issued EUR55,625,000 of Subordinated Notes which are not rated. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology underlying the rating action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in December 2021. Moody's used the following base-case modeling assumptions: Par Amount: EUR400,000,000 Diversity Score: 50 Weighted Average Rating Factor (WARF): 2865 Weighted Average Spread (WAS): 3.90% Weighted Average Coupon (WAC): 4.25% Weighted Average Recovery Rate (WARR): 44.50% Weighted Average Life (WAL): 6.25 years Moody's has addressed the potential exposure to obligors domiciled in countries with local currency ceiling (LCC) of A1 or below. As per the portfolio constraints and eligibility criteria, exposures to countries with LCC of A1 to A3 cannot exceed 10% and obligors cannot be domiciled in countries with LCC below A3. =================== K A Z A K H S T A N =================== AB KAZAKHSTAN-ZIRAAT: Fitch Affirms B- LongTerm IDRs, Outlook Neg. ------------------------------------------------------------------ Fitch Ratings has affirmed AB Kazakhstan - Ziraat International Bank JSC's (KZI) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B-'. The Outlooks are Negative. KEY RATING DRIVERS Support-Driven Ratings: KZI's 'B-' Long-Term IDRs reflect Fitch's view of a limited probability of support from the bank's parent, Turkiye Cumhuriyeti Ziraat Bankasi Anonim Sirketi (ZB, B-/Negative). The Negative Outlook on KZI mirrors that on the parent bank's Foreign-Currency (FC) IDR. High Support Propensity: In Fitch's view, ZB has a high propensity to support KZI, given virtually full ownership, common branding, the high level of integration between the two banks, the low cost of potential support due to the subsidiary's small size and recent record of considerable equity support. However, ZB's ability to provide support to KZI is constrained by the parent's 'B-' Long-Term FC IDR. Ratings Equalised with Parent's: The equalisation of KZI's and ZB's ratings reflects the high integration between the subsidiary and the parent insofar the former operates similarly to a branch. As per its criteria, Fitch also equalises ratings of a deeply integrated subsidiary with a parent rated at the lower end of the rating scale. No Viability Rating Assigned: KZI is a small bank with total assets of USD0.4 billion at end-2022. Its client base on both sides of its balance sheet mostly comprises ZB's group clients and other Turkish businesses. Fitch has not assigned KZI a Viability Rating (VR), because KZI is heavily reliant on its parent for new business origination and risk management, and as ZB's representatives are involved in all major decision-making at the subsidiary level. Support Mitigates Weak Loan Quality: Stage 3 loans decreased to 6.3% of gross loans at end-2022, from 26.1% at end-2021. This is because equity support from ZB provided in 9M22 (27% of risk-weighted assets at end-3Q22) allowed for necessary provisioning and write-offs. As a result, coverage of impaired loans by total loan loss allowances improved to 147% at end-2022 (end-2021: 34%). At the same time, the bank's Stage 2 loans increased to a high 36% of gross loans at end-2022 (end-2021: 13%). Fitch expects KZI's loan quality to remain vulnerable in the medium term. Impairment Charges Cause Losses: In 2022, KZI reported a net loss amounting to KZT10.9 billion, driven by very high loan impairment charges at 26% of average gross loans. Meanwhile, KZI operates with a wide net interest margin (2022: 10.3%), supported by low cost of funding (2.8%), and reasonable operating efficiency, with a cost-to-income ratio of 25% in 2022. Following the clean-up of KZI's balance sheet in 2022, Fitch expects its credit losses to be smaller in the medium term, while the bank's operating profit is likely to recover. Strong Loss-Absorption Buffer: As a result of capital injections from ZB and significant write-offs of problem loans (26% of average gross loans), KZI's Fitch core capital (FCC) ratio materially improved to 45.4% at end-2022 (end-2021: 22.7%), while impaired and Stage 2 loans, net of provisions, fell to 47% of FCC at end-2022 (end-2021: 71%). The bank's regulatory common equity Tier 1 (CET1) ratio was also high 37% at end-2022. Fitch believes the bank has sufficient capital buffer to absorb rapid loan growth in 2023. Customer Funding; Healthy Liquidity: At end-2022, more than half of KZI's customer funding (93% of total liabilities) was represented by interest-free current accounts. The bank's deposit base is concentrated by names. After its recapitalisation in 2022, KZI's liquidity buffer covered a significant 68% of total customer funding at end-2022, while loans-to-deposits ratio was an adequate 78% (end-2021: 92%). RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: KZI's ratings would likely be downgraded if ZB's Foreign-Currency IDR is downgraded. KZI's IDRs could also be downgraded if the propensity of the parent to support its subsidiary considerably weakens. Factors that could, individually or collectively, lead to positive rating action/upgrade: Positive rating action on the parent's Foreign-Currency IDR could result in similar rating action on the subsidiary. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- AB Kazakhstan – Ziraat International Bank JSC LT IDR B- Affirmed B- ST IDR B Affirmed B LC LT IDR B- Affirmed B- Natl LT B+(kaz)Affirmed B+(kaz) Shareholder Support b- Affirmed b- =================== L U X E M B O U R G =================== IDEAL STANDARD: Fitch Lowers LongTerm Issuer Default Rating to CCC+ ------------------------------------------------------------------- Fitch Ratings has downgraded Ideal Standard International SA's (IS) Long-Term Issuer Default Rating (IDR) to 'CCC+' from 'B-'. The downgrade reflects a change in IS's financial profile with significant deviation from our previous expectations and credit metrics outside its negative sensitivities over the rating horizon. Fitch forecasts weak growth in revenue due to lower demand as new construction is expected to slow down. However, growth will be supported by recent price hikes. Profitability will be under pressure from the global inflationary environment. IS remains highly leveraged due to taking on additional debt to fund its negative free cash flow (FCF). Fitch expects debt to increase further in 2023, and coupled with pressure on EBITDA, leverage is set to increase further over 2023 and 2024. The 'CCC+' IDR is underpinned by a diversified business profile with presence in more than 20 countries and good market positions in certain construction segments, with relatively higher exposure to more stable renovation works. KEY RATING DRIVERS Eroded Margins: Fitch expects the company's EBITDA margins for 2022 to deteriorate to an just above 8% from a historically strong 11% in 2021, due to rapidly increasing costs of raw material inputs and energy. The latest price hikes were effective from 4Q22 and did not sufficiently support last year's margins but should provide support in 2023. Fitch forecasts a gradual increase in margins in 2023 and 2024 due to recent price increases and expectations of muted additional inflation over the rating horizon. However, Fitch expects volume declines as new construction activity, in particular residential projects, has slowed. IS will see lower volumes but its large share of non-residential projects to e.g. schools, hotels and hospitals will provide some support. Fitch forecasts low single-digit growth of revenues due to higher prices but declining volumes. End of Large Restructurings: Fitch believes comprehensive operational restructuring processes concluded in 2022 will provide additional cost savings in the medium term. This follows the sale of its manufacturing in Italy due to its uncompetitive cost structure, where facilities were relocated to other locations within the company. However, restructuring costs (which Fitch considers as non-recurring and excluded EBITDA and funds from operations; FFO) have weighed on FCF, leading to a negative FCF margin, with the exception of 2020. Modest Financial Flexibility: Restructurings and recent inflationary pressure have led to negative FCF that has put a strain on IS's liquidity and financial flexibility. In 2022, the company raised new funding from banks, primarily in Bulgaria, to cover imminent cash needs. Working capital facilities including factoring and other facilities have been significantly higher given high working capital levels. Most recently, a new EUR25 million shareholder loan was raised that requires no interest payments in 2023 and matures in December 2024. Given the short-term nature, Fitch considers this as debt that will need to be refinanced when it becomes due for payment. Consequently, liquidity and financial flexibility is strained and no longer commensurate with the 'B' rating category. Delayed Deleveraging After Refinancing: Fitch previously expected some deleveraging in 2022 following strong performance in 2021. The delay in passing on cost increases is likely to resultin EBITDA leverage expected staying higher at 7.3x in 2022 and gradually improving to below 6.0x by 2025. This is significantly different from Fitch's earlier expectations and more aligned with the 'CCC' category. Given that IS's senior secured notes and revolving credit facility (RCF) are expected to mature in 2026, any further delay in deleveraging may limit IS's refinancing ability, which could be negative for the ratings. Sound Market Position: IS's business profile is supported by its broad products offering across ceramics and accessories and fittings. Products are mainly sold under its strong brands. IS is the largest broad market brand, while Armitage Shanks has a strong no.1 position in the non-residential UK segment and Porcher is the leading brand in France. These three brands have continuously been renewed and developed. Overall the company enjoys good market positions, at number four across Europe and MENA. Fairly Competitive Industry: Barriers to entry are fairly low, but supported by the value of strong brands and its focus on product development, such as water-saving technologies for taps and recent touch-free combined water and soap tap. However, pricing pressures remain, given the maturity of IS's main European market. Its restructuring initiatives delivering a lower cost base has been necessary to defend profitability and is expected to ensure improving margins over the rating horizon. Preferred Equity Certificates and Shareholder Loans: Fitch continues to treat the preferred equity certificates and shareholder loans (excluding the loan in 2023) as equity. This is due to their contractual and structural subordination to senior debt and their longer maturities. Payment-in-kind interest and the absence of material events of default are also relevant. However, the size of these instruments (EUR3.4 billion in total as of end-September 2022), is material relative to IS's capital structure. Fitch believes that a financial policy leaning to equity remunerations would be negative for the ratings. These instruments reflect debt restructurings under previous ownership and were retained when Anchorage Capital and CVC Credit Partners took over IS in 2018. DERIVATION SUMMARY Fitch compares IS with Fitch-rated building-product peers like PCF Gmbh (Pfleiderer: B+/Negative) HESTIAFLOOR 2 (Gerflor; B/ Stable), Tarkett Participation (B+/Stable) and Victoria PLC (BB-/Stable). With revenues below EUR1 billion, IS is slightly smaller than Pfleiderer, Gerflor and Victoria but well diversified geographically compared with Pfleiderer, which has around 50% of its exposure to Germany. These companies serve a diverse range of markets, but their smaller scale (with sales typically below EUR1 billion) means they characteristically have a niche product range and more limited geographic diversification with Europe as the core region. IS's EBITDA margin of around 9-10% is the weakest among rated building-product peers that generate margins of 12%-15%. FCF generation is also weaker due to significant restructuring-related costs, working capital lock up and capex. However, Fitch expects the FCF margin to improve to be in line with peers by 2023. Fitch's deleveraging forecast for IS of EBITDA gross leverage of above 7x by 2023 means it will have higher EBITDA leverage than PCF and Hestiafloor 2. KEY ASSUMPTIONS -- Revenue to increase 3% in 2022 (due to price hikes though the volumes have declined) and expected to grow in low single digits to 2025. -- EBITDA margin of 8.2% for 2022 and then increase gradually to 9.5% by 2025. -- Negative cash from operations in 2022 due to higher working capital lock up due to inflationary environment. -- Capex at 3.7% of sales in 2022 and then slightly decline to 3-3.5% in 2023-2025. -- Negative FCF margin in 2022 and FY23 and slightly positive in 2024 RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- EBITDA gross leverage below 6.0x -- EBITDA margin sustainably above 9% -- Neutral FCF margin -- Improved liquidity profile Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Deterioration in liquidity profile impacting its debt obligations -- Inability to refinance its long-term maturities -- Negative FCF margin on a sustained basis -- EBITDA gross leverage above 8.0x -- EBITDA margin below 7% LIQUIDITY AND DEBT STRUCTURE Limited Liquidity: IS had Fitch-adjusted cash (adjusted by 2% of revenue for working capital swings) of EUR22 million at September 2022 with a fully utilised EUR15 million RCF and EUR25 million Bulgarian credit facilities. Fitch expects its current maturity of EUR81 million will be largely rolled over and further supported by the recent shareholder loan. Fitch believes IS will generate negative FCF in 2022 and 2023 due to lower EBITDA, higher interest costs and increased working capital lock up. Manageable Debt Structure: IS's long-term debt consists of EUR325 million senior secured notes with maturity in 2026. The company uses factoring and non-recourse factoring lines along with lease-back arrangements, which can be rolled over as per the due dates. ISSUER PROFILE IS is a leading manufacturer of sanitaryware in Europe and MENA. Product offering includes ceramic, fittings, bathing & wellness as well as bathroom furniture and accessories for residential and non-residential end 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 ----------- ------ -------- ----- Ideal Standard International SA LT IDR CCC+ Downgrade B- senior secured LT CCC+ Downgrade RR4 B- ===================== N E T H E R L A N D S ===================== LEALAND FINANCE: $500M Bank Debt Trades at 41% Discount ------------------------------------------------------- Participations in a syndicated loan under which Lealand Finance Co BV is a borrower were trading in the secondary market around 59.5 cents-on-the-dollar during the week ended Friday, February 10, 2023, according to Bloomberg's Evaluated Pricing service data. The $500 million facility is a Term loan that is scheduled to mature on June 30, 2025. The amount is fully drawn and outstanding. Lealand Finance is an affiliate of CB&I Holdings B.V. and Chicago Bridge & Iron Company B.V. The Company's country of domicile is the Netherlands. MEDIAN BV: GBP250M Bank Debt Trades at 16% Discount --------------------------------------------------- Participations in a syndicated loan under which Median BV is a borrower were trading in the secondary market around 83.8 cents-on-the-dollar during the week ended Friday, February 10, 2023, according to Bloomberg's Evaluated Pricing service data. The GBP250 million facility is a Term loan that is scheduled to mature on May 16, 2027. The amount is fully drawn and outstanding. Median B.V. is the result of the September 2021 private equity-led merger of Median (Germany) and Priory (UK), two leading providers of medical rehabilitation and mental care services in their respective countries. The Company's country of domicile is the Netherlands. ========= S P A I N ========= PROMOTORA DE INFORMACIONES: Moody's Affirms 'Caa1' CFR ------------------------------------------------------ Moody's Investors Service has affirmed the Caa1 corporate family rating of Promotora de Informaciones, S.A. ("Prisa" or "the company"), a leading provider of cultural, educational, information and entertainment content to the Spanish and Portuguese-speaking markets. The outlook remains stable. "Prisa's operating performance in 2022 was solid, which combined with the recent issuance of the mandatory convertible bond, have led to an improvement in leverage," says Víctor Garcia Capdevila, a Moody's Vice President-Senior Analyst and lead analyst for Prisa. "However, the Caa1 rating reflects that Prisa's leverage remains very high, particularly in the current high interest rate environment, its coverage metrics remain weak and its free cash flow continues to be negative," adds Mr. García. RATINGS RATIONALE On February 1, 2023, Prisa completed the issuance of EUR130 million worth of subordinated bonds mandatorily convertible into ordinary shares. Proceeds from this convertible will be primarily used to partially pay off the junior tranche of the company's syndicated facility. The convertible has a maturity of 5 years and accrues a fixed cash coupon of 1% payable upon conversion. Moody's estimates that the convertible bond will reduce Prisa's annual interest payments by around EUR8 million and since it will be reported as equity, it will improve headroom under financial covenants, reducing leverage by around 0.9x. Moody's estimates that in 2022, Prisa will generate revenue of around EUR850 million, including positive foreign exchange effects, a 17% increase year-on-year, supported by a successful execution of the strategy. The rating agency expects Prisa's Moody's-adjusted EBITDA will increase by 28% to around EUR150 million while its Moody's-adjusted gross leverage will reduce to 7.6x in 2022 from 8.7x in 2021. Moody's base case scenario assumes that in 2023, Prisa will generate revenues of around EUR930 million driven by strong growth in the education segment (10%) and modest growth in the media segment (1%-2%). It also assumes a high single digit growth in EBITDA to around EUR160 million. However, there is downside risk to these forecasts given the weakened macroeconomic environment, which can negatively affect Prisa's advertising-related businesses, and the likely increases in wages owing to inflationary pressures in most of the markets where the company operates. While Moody's expects that the company's leverage will further reduce to around 6.5x in 2023, this level of leverage is still very high, particularly in the current high interest rate environment. Given the interest rate increase and the fact that Prisa's debt is floating, Moody's forecasts that Prisa's interest expense will increase to around EUR90 million in 2023 compared with EUR55 million in 2022, leading to a very weak (EBITDA-Capex)/Interest Expense ratio of below 1.0x in both 2023 and 2024, and a sustained negative free cash flow position. The Caa1 rating continues to reflect the company's improving operating and financial performance; market-leading positions in the education segment in Latin America, its leading market shares in the media segment (both press and radio), the resiliency of the education segment and the increasing contribution of the digital learning systems model in Latin America. The rating also factors in the company's sizeable exposure to emerging markets, resulting in significant foreign-exchange risks and a large currency mismatch between its cash flow and debt profile, large exposure to interest rate risks, uncertainty around advertising spending, which is cyclical and vulnerable to digital disruption; its history of debt restructurings; and limited capacity under its financial covenants. LIQUIDITY The company's liquidity is adequate. Moody's estimates that as of December 2022 the company had cash and cash equivalents of around EUR190 million. The EUR80 million revolving credit facility is fully drawn. The company does not have any debt maturities until June 2026, when the EUR160 million super senior term loan and the EUR80 million revolving credit facility mature. Moody's estimates that the company will generate negative free cash flow of around EUR20 million in 2022 and negative free cash flow of around EUR40 million in 2023. Moody's forecasts that as of December 2023, the capacity under the net debt covenant included in the Senior Facilities Agreement will be at around 40% but will reduce rapidly in 2024 to around 10% because of the gradual covenant step downs. Moody's estimates a very small headroom under the debt service covenant of around 4% in 2023 with only a minor improvement to around 10% in 2024. RATIONALE FOR STABLE OUTLOOK The stable outlook reflects the company's adequate liquidity profile, the expected progressive improvement in operating performance over the next two years and the good underlying value of the company's assets which would translate into a high recovery rate for creditors in a hypothetical default scenario. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING A rating upgrade would require sustainable growth in group-wide revenue and EBITDA, a turnaround in operating performance in the press and radio business segments, a reduction in Moody's-adjusted gross leverage towards 5.5x, an interest cover metric, measured as (EBITDA-Capex)/Interest Expense, trending towards 1.5x and an adequate liquidity profile. Downward rating pressure could develop should operating conditions deviate significantly from Moody's current expectations, liquidity deteriorates or the likelihood of a default over the next 12 – 18 months increases. LIST OF AFFECTED RATINGS Affirmation: Issuer: Promotora de Informaciones, S.A. LT Corporate Family Rating, Affirmed Caa1 Outlook Action: Issuer: Promotora de Informaciones, S.A. Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in this rating was Media published in June 2021. COMPANY PROFILE Promotora de Informaciones, S.A. (Prisa), headquartered in Madrid, is a leading provider of cultural, educational, informative and entertainment content to the Spanish and Portuguese-speaking markets. The company is present in 24 countries and offers its content through two business lines: Education and Media (Radio and Press). In the 12 months that ended September 2022, Prisa generated revenue of EUR843 million and reported EBITDA of EUR114 million. The company is listed on the Spanish Stock Exchange. =========================== U N I T E D K I N G D O M =========================== ARCTIC CIRCLE: Enters Administration Due to Financial Woes ---------------------------------------------------------- Cooling Post reports that economic headwinds coupled with an ongoing legal dispute have been blamed for the financial difficulties confronting pioneering refrigeration company Arctic Circle. The Hereford-based company, which was established in 1985, was placed into the hands of Birmingham-based business advisory firm FRP and joint administrators Raj Mittal and Arvindar Jit Singh last week, Cooling Post relates. According to Cooling Post, in a statement, the joint administrators blamed "economic headwinds" and an "ongoing legal dispute" as the reason for Arctic Circle being placed into administration. ACL operates from premises on the Rotherwas Industrial Estate and employs 74 staff. BURLEIGHS GIN: Darren Gould Identified as Potential Buyer --------------------------------------------------------- Ian Evans at TheBusinessDesk.com reports that a Leicestershire gin distiller and retailer that owed almost GBP1.6 million to creditors when it collapsed into administration could be on the verge of being rescued. According to TheBusinessDesk.com, administrators from Begbies Traynor have identified Darren Gould as the potential saviour of Burleighs Gin, which slipped into administration in December after temporarily closing its distillery and ceasing to take orders due to "unforeseen circumstances" just weeks beforehand. Mr. Gould, a former director of Burleighs' holding company Burleighs Holdings Limited, has established a new company, Burleighs Gin Distillers Limited, in a bid to rescue the embattled Loughborough firm, TheBusinessDesk.com discloses. Mr. Gould, who holds directorships with Exeter-based real estate and management consultancy company Lexer Investments and Safeguard Construction, resigned from Burleighs Holdings in November 2021, TheBusinessDesk.com recounts. Begbies were called in to look after the day-to-day running of Burleighs after the firm posted two notices of intention (NOIs) to appoint administrators in November, TheBusinessDesk.com relates. Documents subsequently released by the administrators showed that creditors could potentially miss out on the GBP1.58 million owed to them, TheBusinessDesk.com states. At the time, a source told TheBusinessDesk.com that business advisory firm Kirks had informed creditors Burleighs were "commencing liquidation proceedings." In a statement, the administrators said "significant delays" to the sale process had resulted in all of Burleighs' staff being made redundant at the beginning of January, but hopes of a rescue deal remain live, TheBusinessDesk.com notes. CLOCKFAIR LIMITED: Enters Administration, Assets Put Up for Sale ---------------------------------------------------------------- Anna Cooper at TheBusinessDesk.com reports that the owners of the Broadway Casino in Birmingham has entered into administration after struggling since the pandemic. Sutton Coldfield-based Clockfair Limited appointed Matthew Ingram and Elizabeth Welch as joint administrators from risk and financial advisory solutions firm Kroll at the beginning of February, TheBusinessDesk.com relates. The number of redundancies made has not yet been revealed by administrators, but in 2021, the average number of employees stood at 103, TheBusinessDesk.com notes. According to TheBusinessDesk.com, Kroll said in a statement that: "The casino was forced to close its doors during the Covid 19 Pandemic, in accordance with Government guidelines, which had an immediate impact on its finances. "Customer footfall at the casino did not return to pre-Covid Pandemic levels impacting on its working capital and ability to pay its debts." Administrators were initially bought in to identify a potential purchaser for the business and its assets through an accelerated merger and acquisition process, TheBusinessDesk.com recounts. Following an extensive marketing period, no offers were received to acquire the company on either an insolvent or solvent basis which resulted in the casino ceasing to trade at the end of December 2022, TheBusinessDesk.com relays. The administrators are currently selling the available assets of the company for the benefit of creditors, TheBusinessDesk.com states. COMET BIDCO: GBP315M Bank Debt Trades at 20% Discount ----------------------------------------------------- Participations in a syndicated loan under which Comet Bidco Ltd is a borrower were trading in the secondary market around 79.8 cents-on-the-dollar during the week ended Friday, February 10, 2023, according to Bloomberg's Evaluated Pricing service data. The GBP315 million facility is a Term loan that is scheduled to mature on October 6, 2024. The amount is fully drawn and outstanding. CometBidco Limited provides connectivity and business-critical insight across communities of buyers and sellers. The Company uses range of exhibitions, conferences, tradeshows, and websites to target new business, demonstrate their products, build relationship with their clients, and identify new opportunities for performance improvement. The Company's country of domicile is the United Kingdom. CONSTELLATION AUTOMOTIVE: EUR400M Bank Debt Trades at 18% Discount ------------------------------------------------------------------ Participations in a syndicated loan under which Constellation Automotive Ltd is a borrower were trading in the secondary market around 81.8 cents-on-the-dollar during the week ended Friday, February 10, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR400 million facility is a Term loan that is scheduled to mature on July 28, 2028. The amount is fully drawn and outstanding. Constellation Automotive Group Limited offers digital used car marketplace. The Company offers used passenger cars, utility vehicles, and trucks, as well as provides parts and accessories, repairs and maintenance, finance, and insurance services. The Company's country of domicile is the United Kingdom. FONTWELL SECURITIES 2016: Fitch Affirms B-sf Rating on Cl. S Notes ------------------------------------------------------------------ Fitch Ratings has upgraded five classes of Fontwell Securities 2016 Limited, and affirmed the others as detailed below. Entity/Debt Rating Prior ----------- ------ ----- Fontwell Securities 2016 Limited A LT AA-sf Affirmed AA-sf B LT AA-sf Affirmed AA-sf C LT AA-sf Affirmed AA-sf D LT AA-sf Affirmed AA-sf E LT AA-sf Affirmed AA-sf F LT AA-sf Affirmed AA-sf G LT AA-sf Affirmed AA-sf H LT AA-sf Affirmed AA-sf I LT AA-sf Affirmed AA-sf J LT AA-sf Affirmed AA-sf K LT AA-sf Upgrade A +sf L LT AA-sf Upgrade A+sf M LT BBB+sf Upgrade BBB-sf N LT BBB-sf Upgrade BB+sf O LT BBB-sf Upgrade BB+sf P LT B+sf Affirmed B+sf Q LT B+sf Affirmed B+sf R LT B+sf Affirmed B+sf S LT B-sf Affirmed B-sf TRANSACTION SUMMARY The transaction is a granular synthetic securitisation of partially-funded credit default swaps (CDS) referencing a static portfolio of secured loans granted to UK borrowers in the farming and agriculture sector. The loans were originated by AMC plc, a fully owned subsidiary of Lloyds Bank plc (A+/Stable/F1). The ratings address the likelihood of a claim being made by the protection buyer under the CDS by the end of the protection period in December 2024, in accordance with the documentation. KEY RATING DRIVERS Higher Credit Enhancement: The rating actions reflect the increased credit enhancement (CE) for most classes due to the transaction deleveraging, as well as good performance since the last review in early 2022. As of 12 January 2023, the class A tranche balance had further amortised to 32% of its original notional from 37% at the last review, leading to an increase in available CE except the class P to S notes. The affirmation the of class P to S tranches is supported by the reduced risk horizon, which leads to a lower default rate, offsetting a mild decrease in CE following an increase in events since the last review The class A to L tranches' ratings are currently constrained by the UK sovereign Long-Term Issuer Default Rating (IDR) of 'AA-'/Negative. This reflects that the farming and agriculture sector is still materially dependent on direct subsidies, albeit reducing, from the UK. MIR Deviation: The class S tranches are rated two notches below the model-implied rating (MIR). The MIR deviation reflects the tranche's limited CE and its subordinated status. The class S notes' balance reflects the adjustment of the initial loss for outstanding verified credit events at 35%, and the balance can write up or down depending on the ultimate verified loss, although so far there have been no losses to the loans in the originator's book. However, due to the limited CE for the class S, they are vulnerable to higher than expected defaults or lower than expected recoveries. Low Default Risk: The transaction has performed better than Fitch's expectations with credit events at around 1.4% of outstanding portfolio balance (up from 0.8% for the last review), but is still significantly lower than the annual average probability of default (based on 90 days past due) for this transaction, set at 2.0%. Limited Collateral Dilution Risk: The eligibility criteria and the originator's policies set the maximum loan-to-value (LTV) at 60%, calculated on a borrower basis. However, available mortgage collateral secures all AMC exposure including debt outside of the transaction. Any recoveries will be shared pro rata across a borrower's different AMC debts. The current LTV in the portfolio is around 25%, but any additional lending could reduce the collateral share for the securitised exposures. Fitch has stressed the LTV to 50% for loans with LTVs under 50%. The majority of available collateral is over agricultural land. In the recovery analysis, Fitch has applied its commercial property haircuts, which at the 'AA' level are 75% and would reverse most of the increase experienced over the last 10 years. Limited Obligor Concentration: The portfolio is diverse with a total of 5,663 loans. The largest obligor and top 10 contribute around 0.5% and 4.7% of the total reference portfolio balance, respectively. Single Industry Exposure: All the borrowers in the reference portfolio are exposed to the UK farming and agriculture sector. Accordingly, Fitch continues to apply a bespoke correlation of 10%. This reflects the low volatility of observed defaults in the originator's farming and agricultural loan book. It was calibrated at closing so that the portfolio default rate at 'B' stress can cover the maximum cumulative historical default of the originator's farming and agricultural loan book. Since the transaction has performed in line with expectations, the correlation of 10% is still applicable. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: An increase in the default rate at all rating levels by 25% of the current portfolio's mean default rate, and a decrease of the recovery rate by 25% would have no impact on the class A to L tranches and would lead to downgrades of no more than three notches for the remaining tranches, with a larger impact on the more junior tranches. If CE cannot fully compensate for the credit losses associated with the current ratings scenarios, the notes could be downgraded although this is not expected for senior and mezzanine tranches. A downgrade of the UK sovereign's Long-Term IDR could lower the maximum achievable structured finance rating for the transaction. Factors that could, individually or collectively, lead to positive rating action/upgrade: A decrease in the default rate at all rating levels by 25% of the portfolio's mean default rate, and an increase of the recovery rate by 25% based on the stressed LTV ratio of the loans would have no impact on the class A to L tranches and lead to upgrades of no more than five notches for the remaining tranches. If CE ratios increase as the transaction deleverages, fully compensating credit losses that are commensurate with higher rating scenarios, the senior and mezzanine tranches could be upgraded. The class A to L tranches' ratings are currently constrained at the UK's IDR. Fitch does not expect these tranches to be upgraded to above the UK's IDR. DATA ADEQUACY Fontwell Securities 2016 Limited Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. 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. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The class A to L notes' ratings are capped at the UK IDR 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. MIDDLETONS MOBILITY: Burton Town Centre Shop Shut Down ------------------------------------------------------ Helen Kreft at StaffordshireLive reports that a Burton town centre store specialising in mobility scooters is now empty after the chain collapsed into administration last month. Middletons Mobility, in Union Street, shut in January after the company which owns the national chain called in the administrators, StaffordshireLive recounts. According to StaffordshireLive, a notice on the business' website said: "It's sad to say goodbye. Middletons is now regrettably in administration and has ceased trading. All customers with outstanding unfulfilled orders will be contacted in the next seven to 10 days. "If you have any questions regarding an order, please contact customers@middletons.co.uk quoting your order number or postcode." Estate agent Rob Alston is now marketing the property to rent for GBP45,000 a year, StaffordshireLive discloses. According to mobility news service THIIS Magazine, a letter to staff last month explained that the business had experienced rises in costs, difficulty with its supply chain, and a fall in consumer confidence due to the current economic climate, relates. It added that Middletons was not able to adapt quickly enough to the challenging trading conditions or to meet the additional financial demands placed upon it, StaffordshireLive notes. THG OPERATIONS: EUR600M Bank Debt Trades at 26% Discount -------------------------------------------------------- Participations in a syndicated loan under which THG Operations Holdings Ltd is a borrower were trading in the secondary market around 74.3 cents-on-the-dollar during the week ended Friday, February 10, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR600 million facility is a Term loan that is scheduled to mature on December 11, 2026. The amount is fully drawn and outstanding. THG Operations Holdings Limited is affiliated with THG PLC, headquartered in Manchester, England, and has a diverse range of e-commerce focused activities, and certain associated manufacturing facilities. Its largest brands lookfantastic.com and myprotein.com operate in the beauty and wellness retail segments, respectively. The Company's country of domicile is the United Kingdom. TILE GIANT: Put Through Pre-pack Administration by M. Williams --------------------------------------------------------------- The Times reports that the former chief executive of Topp Tiles has put Tile Giant through a pre-pack administration after buying the business last month and discovering that the company's finances were worse than expected. According to The Times, Matt Williams has bought 56 of Tile Giant's stores and its brand through the fast-track insolvency that will preserve 255 jobs. Mr. Williams recently purchased Tile Giant for an undisclosed amount before finding it required more funding than had been expected, The Times recounts. Tile Giant's new management team were forced to appoint restructuring advisers at Interpath Advisory to put together a pre-pack administration as creditors started to make demands on the company's debts, The Times notes. Aurelius, the private equity firm, has taken on 13 of the company's stores as part of the deal to add to its Ceramic Tiles, The Times discloses. TOLENT: Goes Into Administration, 313 Jobs Affected --------------------------------------------------- Will Ing at Construction News reports that Tolent has entered into administration with 313 staff being made redundant. The Gateshead-based contractor is one of the largest in the North East, with a revenue of GBP200 million, and is the 67th largest in the UK, according to the CN100 2022 ranking of the UK's biggest contractors. On Feb. 13, the group appointed administrators to wind up the group, including five subsidiaries, following a year of financial difficulties, as well as significant losses on its GBP85.5 million Milburngate hotel project in Durham, Construction News relates. According to Construction News, James Lumb, managing director of Interpath Advisory and joint administrator for Tolent, said: "Tolent is one of the most well-known construction firms in the North East, having been involved in landmark projects including Riverside Sunderland, the Hadrian's Tower residential scheme and the Milburngate development in Durham. "However, like many businesses across the UK's building and construction sector, the group has been battling severe headwinds, including spiralling costs, labour shortages and also the loss of other companies within its supply chain, all of which unfortunately resulted in one of its major contracts becoming loss-making. "Following the tapering-off of the government's COVID-19 support schemes, and in the wake of recent economic volatility, access to finance has tightened for many companies across the sector. This means many building and construction firms are finding they have fewer options available to them to help deal with any liquidity crisis. "Additionally, after the annual Christmas shutdowns and a cold December, the months of January and February often bring with them a painful cash crunch. In a sector which typically operates on wafer-thin margins, this can often prove to be insurmountable and, unfortunately, so has been the case for Tolent." The group was founded in Gateshead in 1983 and has offices in Leeds, Stock-on-Tees and Shotton Colliery. It has worked across several construction sectors and has also provided civil engineering and property development work. In its latest financial accounts, which cover its 2021 financial year, Tolent made a GBP4 million loss from a revenue of GBP198 million, while in 2020 it made an GBP8 million loss from a GBP184 million turnover, Construction News discloses. In September 2021, Tolent replaced its chief executive following poor financial results, with Paul Webster taking over after 23 years working at the company, Construction News recounts. Earlier in 2021, the firm underwent a GBP12 million refinancing with lenders, Construction News notes. TRINITY SQUARE 2021-1: Fitch Hikes Rating on Cl. F Notes to 'BB+sf' ------------------------------------------------------------------- Fitch Ratings has upgraded Trinity Square 2021-1 PLC's (TSQ2021-1) class B, D, E and F notes and affirmed the rest. Entity/Debt Rating Prior ----------- ------ ----- Trinity Square 2021-1 Class A XS2318720864 LT AAAsf Affirmed AAAsf Class B XS2318721086 LT AAAsf Upgrade AA+sf Class C XS2318720948 LT A+sf Affirmed A+sf Class D XS2318721169 LT Asf Upgrade BBB+sf Class E XS2318721243 LT BBBsf Upgrade BB+sf Class F XS2318721326 LT BB+sf Upgrade BBsf Class G XS2318721599 LT BB-sf Affirmed BB-sf Class H XS2318723025 LT CCCsf Affirmed CCCsf TRANSACTION SUMMARY TSQ2021-1 is a securitisation of legacy owner-occupied (OO) and buy-to-let (BTL) mortgages originated by GE Money Home Lending Limited and GE Money Mortgages Limited. The transaction is a refinancing of the Trinity Square 2015-1 Plc and Trinity Square 2016-1 Plc issuance. KEY RATING DRIVERS Stable Performance: Early- and late-stage arrears have remained stable at less than 6% and 4%, respectively, over the last 12 months. Strong Credit Protection: The upgrade and affirmations reflect a bigger increase in credit enhancement than expected, resulting from sequential amortisation and mostly related to material prepayment rates to date. Additionally, the non-amortising general reserve funded at 1% of the collateralised notes balance at the closing date provides liquidity and credit support to the class A to G notes. Liquidity Access Constrains Mezzanine Notes: Interest payments for all notes except the class A are deferrable at all times. In its analysis, Fitch tested the class A and B notes' ratings on a timely basis and assessed the materiality of the interest deferability exposure for the class C, D and E notes. Fitch considers the available liquidity protection adequate for the ratings, albeit constraining the ratings of the class C to F notes to the 'Asf' rating category. Rating Lower than MIR: The rating of class E notes is one notch below their model-implied rating (MIR). This reflects Fitch's view of the note's expected interest deferral, higher prepayments and increased arrears that could result in lower MIR in future analyses. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: The transaction's performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce credit enhancement available to the notes given the borrowers in this pool are already stretched in affordability. In addition, unanticipated declines in recoveries could result in lower net proceeds, which may make certain notes' ratings susceptible to negative rating action depending on the extent of the decline in recoveries. Fitch conducts sensitivity analyses by stressing both a transaction's base-case foreclosure frequency (FF) and recovery rate (RR) assumptions. For example, a 15% weighted-average (WA) FF increase and a 15% WARR decrease imply a downgrade of the mezzanine notes of up to six notches. Factors that could, individually or collectively, lead to positive rating action/upgrade: Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing credit enhancement and, potentially, upgrades. Fitch tested an additional rating sensitivity scenario by applying a decrease in the WAFF of 15% and an increase in the WARR of 15%, implying upgrades of up to five notches for the subordinated notes. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch 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. Prior to the transaction closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS TSQ2021-1 has an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy & Data Security, due to the pool exhibiting an interest-only maturity concentration of legacy non-conforming OO loans of greater than 20%, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. TSQ2021-1 has an ESG Relevance Score of '4' for Human Rights, Community Relations, Access & Affordability, due to a significant proportion of the pool containing OO loans advanced with limited affordability checks, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. [*] Helena Potts Joins Paul Hastings' London Restructuring Practice ------------------------------------------------------------------- Further strengthening its market-leading financial restructuring practice, Paul Hastings LLP has added highly regarded lawyer Helena Potts as a partner in London. Recognized by Legal 500 UK and IFLR 1000, Potts focuses on high-value, complex, cross-border matters across the full range of stressed and distressed situations, from insolvent liquidations to consensual restructurings and new money opportunities, with broad experience across all types of capital structures. Her experience spans diverse industry sectors, including automotive, financial services, retail and leisure, manufacturing, and oil and gas. "Helena adds depth to the firm's London restructuring practice. We are very focused on growth in the restructuring market, and her arrival enables us to further capitalize on cross-border opportunities with our US team," said Mei Lian, London office co-chair and financial restructuring partner. "We're excited to have Helena join the team," said Kris Hansen, Financial Restructuring co-chair. "She will help us meet our and the firm's objectives of expanding global relationships and constantly improving the advice and service we provide to them." Potts joins from Shearman & Sterling and is the London office's third new partner in 2023, after leading infrastructure and energy lawyers Jessamy Gallagher and Stuart Rowson. Ten lateral partners joined the London office last year, including a Band 1 global finance team and leading high yield partner Patrick Bright. "I have been impressed by the targeted investment the firm has made in the London office and in its global restructuring practice," said Potts. "This is clearly a firm where top-flight talent is fostered and forged." The Paul Hastings financial restructuring practice has extensive experience representing sophisticated financial institutions in complex, high-profile restructurings, workouts and insolvency matters worldwide. Unique in the industry, the practice covers committee-side, debtor-side and bank-side work, as well as international bankruptcies, debtor-in-possession (DIP) financing and exit financing transactions. About Paul Hastings With widely recognized elite teams in finance, mergers & acquisitions, private equity, restructuring and special situations, litigation, employment and real estate, Paul Hastings -- http://www.paulhastings.com-- is a premier law firm providing superior intellectual capital and execution globally to the world's leading investment banks, asset managers and corporations. ********* 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. 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