/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230223.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, February 23, 2023, Vol. 24, No. 40 Headlines F R A N C E CASPER MIDCO: EUR155MM Loan Add-on No Impact on Moody's 'B3' CFR GROUPE RENAULT: S&P Affirms 'BB+/B' ICRs & Alters Outlook to Stable I R E L A N D AQUEDUCT EUROPEAN 7-2022: Fitch Gives 'B-sf' Rating on Cl. F Notes HARVEST CLO XXVI: Fitch Affirms 'Bsf' Rating on Class F Notes U N I T E D K I N G D O M BRITISH STEEL: To Shut Down Cokings Ovens, Cut Up to 260 Jobs FLAMINGO GROUP: Moody's Cuts CFR to B3, Under Review for Downgrade KAINED HOLDINGS: Goes Into Liquidation, Fails to Repay Debts MACKENZIES SMOKED: Goes Into Voluntary Liqiuidation, Owes GBP1MM+ METNOR CONSTRUCTION: Enters Administration, 80 Jobs Affected PAPERCHASE: 106 Stores to Close, Around 900 Jobs Affected PRESCA: To Shut Down Online Store, Holds Closing Down Sale PW PROMOTIONS: Put Into Liquidation, Owes GBP100,000 SMALL BUSINESS 2021-1: Moody's Ups Rating on Cl. D Notes From Ba2 THG PLC: S&P Lowers ICR to 'B-' on High Leverage; Outlook Stable - - - - - =========== F R A N C E =========== CASPER MIDCO: EUR155MM Loan Add-on No Impact on Moody's 'B3' CFR ---------------------------------------------------------------- Moody's Investors Service said that Casper MidCo SAS and Casper BidCo SAS's (both "B&B" or the company) ratings, including Casper MidCo SAS's B3 corporate family rating and the B3 backed senior secured bank credit facilities issued by Casper BidCo SAS are unchanged following the announcement of the company's proposed EUR155 million incremental backed senior secured term loan B4 (TL-B4). The outlook on all ratings is stable. The instrument rating is in line with B&B's unchanged B3 corporate family rating (CFR) and in line with the unchanged ratings of the existing EUR100 million backed senior secured term loan B4 (TL-B4) given its equal ranking with all other existing senior secured indebtedness of the issuer. The proceeds will be used to refinance the EUR155 million backed senior secured 2nd lien term loans issued by Casper BidCo SAS and currently rated Caa2. RATINGS RATIONALE On February 20, 2023, B&B announced that they will increase the backed senior secured term loan B4 (TL-B4) by EUR155 million to refinance the EUR155 million backed senior secured 2nd lien term loans issued by Casper BidCo SAS currently rated Caa2. The increased TL-B4 amount will be fungible with the existing TL-B4. The B3 ratings continue to reflect (1) the substantial improvement of the credit metrics thanks to a strong operating performance of the company throughout 2022 and a gradual deleveraging; (2) an expectation that the revenue generation will remain robust over the next 12 to 18 months thanks to the new openings while B&B will likely benefit from some trading down from mid-scale segments which should partially mitigate the implication of weaker consumer sentiment on travel activity; (3) an expectation that the operating margin will remain robust at around 20% despite inflationary pressure thanks to B&B's efficient cost model; and (4) an adequate liquidity with EUR211 million of cash as of year-end 2022, EUR120 million committed and undrawn backed senior secured RCF, no major refinancing until 2026 and the absence of dividend payout until the PEG loan is repaid (2026). The B3 rating on the increased TL-B4 also reflects its pari-passu rank with TL-B3 and the backed senior secured RCF which all share same security. The current B3 rating on those debt instruments also reflects the low level of loss absorption from the second lien term loan to be repaid. In the loss-given-default (LGD) assessment for B&B, Moody's ranks pari passu the EUR715 million existing backed senior secured TL-B3, the EUR100 million additional backed senior secured TL-B4 issued in 2021, the EUR155 million increase of backed senior secured TL-B4 fungible with the existing TL-B4 and the EUR120 million backed senior secured RCF, which share the same security and are guaranteed by certain subsidiaries of the group accounting for at least 80% of consolidated EBITDA. Moody's also consider at the same level the total EUR120 million additional financing received throughout the pandemic from operating entities. The TL-B3 and TL-B4 are covenant-light with a spring net leverage covenant set at 8.5x only applicable to the revolver if it is drawn over 40% (undrawn as of February 2023). Following the repayment of the EUR155 million of backed senior secured second lien term loans they will be no more loss absorption by junior tranche, however current debt instrument ratings aligned with the CFR already addresses the low level of loss absorption from the second lien term loans to be refinanced. B&B's liquidity is adequate and is supported by EUR211 million of cash and a committed undrawn backed senior secured revolving credit facility of EUR120 million as of December 2022. Moody's however expect the company to be free cash flow negative (on a Moody's adjusted basis) in 2023 on the back of its growth strategy. The stable rating outlook reflects Moody's expectations that the key credit metrics will remain commensurate with a B3 rating in the next 12-18 months because of its weaker, but still robust, operating performance and significant buffer built throughout 2022. The outlook does not reflect a spillover of geopolitical tensions on the European travel market. Based in Paris, France, B&B is a limited-service hotel chain with more than700 hotels in 13 European countries and Brazil. B&B focuses on the "econo-chic" concept – the more upscale part of the budget segment. The company follows an asset-light business strategy leasing all its hotels and third-party management (mandate managers) approach for most of its assets. In 2022 B&B generated EUR945 million in revenues, 50 % above 2019 revenues of EUR632 million. GROUPE RENAULT: S&P Affirms 'BB+/B' ICRs & Alters Outlook to Stable ------------------------------------------------------------------- S&P Global Ratings revised its outlook on French automaker Groupe Renault to stable from negative while affirming its 'BB+' long-term and 'B' short-term ratings. The stable outlook reflects S&P's expectation that Renault can withstand a mild recession in Europe while maintaining adjusted EBITDA margin above 6% and positive FOCF to sales. For the second year in a row, Renault posted solid operating performance in a market battered by supply shortages. As expected, the termination of Renault's Russian operations had a limited impact on the upward trajectory of its credit profile. S&P views the group's restructuring as completed, with Renault ready to face the challenge of establishing itself as a cost competitive leader of electric vehicles (EV) in Europe. In Europe, Renault competes with larger competitors like Volkswagen (VW), Stellantis, Hyundai, and, most likely, new Chinese entrants. S&P said, "Renault has beat its 2022 guidance and outperformed our base case. Following the publication of Renault's 2022 results, we have reviewed our base case for the group. We now expect Renault to post adjusted EBITDA margins in the 7.0%-8.0% range compared with 6.3% in 2021 and our previous projection of about 7% for 2022. We also estimate adjusted FOCF at about EUR1 billion, versus negative FOCF in 2021 and our previous expectation this year of EUR300 million-EUR500 million. Changes in the product and price mix were primary drivers of operating performance last year. The pricing environment will be less favorable in 2023-2024. We consider that Renault's large order backlog at year-end 2022 should offset declining demand amid a mild recession in Europe for most of this year, while its operations could be more exposed in 2024. There was a progressive increase of sales--in the C segment and higher--for the Renault brand to 39% of total sales in 2022 and we believe there is additional room for improvement." This should continue to support revenue in 2023, thanks to the contribution of Megane E-Tech and Austral for the whole year and the revision of the Clio model. Cost pressure from energy, logistics, wages, and selected raw materials (mainly EV related) could remain high and pressure margins in the mature and highly regulated European market over the next two years. It is unclear at this stage whether the deconsolidation of Renault's powertrain business into its joint venture with Geely, planned for midyear 2023, will have a material impact on the auto segment's operating margins, this year or next. Renault's EV strategy will need diligent execution to build a robust market position amid tough competition. EV sales in the market were fairly stable in 2022 versus previous years, according to the EV Volumes database. Bestsellers among the battery electric (BEV) and plug-in hybrid electric (PHEV) vehicles include SUV A Dacia Spring (the cheapest EV in Europe), Car B ZOE, Car C Megane E-Tech (competing with VW's ID.3), and Car A Twingo. There will be no major BEV or PHEV launches in 2023. On a global scale, Renault is behind VW, Stellantis, and Volvo Cars in the transition to electric mobility. Its acceleration will come with key model launches like that of R5 (replacing the ZOE), R4, and Scenic only in 2024 under Ampere, the group's forthcoming EV and software company. Ampere's capacity to establish a solid position in the competitive and highly regulated European EV market is key to its credit profile. S&P therefore factors in execution risks it associates with this strategic development, leading to a negative adjustment under its comparable ratings analysis. Revival of the Renault-Nissan Alliance provides opportunities outside Europe and greater financial flexibility for Renault. The alliance's agreement confirms that cooperation between the two automakers will remain confined to specific projects in Latin America, India, and Europe. S&P said, "In our view, this ends the uncertainty regarding the alliance in recent years and clarifies that the groups' strategies will be independent to a large extent. We already take this into account in our rating analysis. Under the proposed settlement, the alliance's cross shareholding will be limited to 15% and additional Nissan shares (28.4%) will be transferred to a French trust where the voting rights will be neutralized but the economic rights will remain in Renault's control. This is likely to result in stronger financial flexibility at Renault. Looking ahead, Renault's creditworthiness will depend heavily on the execution of its ambitious business plan, which involves, among other things, the IPO of Ampere. We understand Ampere is fully funded but that proceeds from a potential IPO would allow the company to accelerate its development. The opportunity to sell Nissan shares thus provides additional financial headroom to Renault's plan. At current equity prices, these shares represent EUR3.5 billion-EUR4.0 billion, or the equivalent of about one-third of the gross debt allocated to Renault's industrial operations. Considering the complexity of Renault's industrial plan and the emerging economic and market risks, we expect the group will aim to optimize capital allocation. We add a discounted value of Nissan shares transferred to the Trust to Renault's available cash." S&P said, "We have reassessed our view of the group's governance, which we now regard as neutral to the ratings. Over the last few years, Renault has faced a variety of headwinds on top of industrywide supply bottlenecks. These include challenges of reviving the Alliance, a complicated group overhaul in relatively tough market conditions, and the termination of its Russian operations. The latter resulted in a loss of approximately 500,000 vehicles and about EUR2.3 billion of value lost. Notwithstanding the difficult environment, the group delivered a profound industrial transformation and rapid deleveraging. We recognize this effort through our positive reassessment of management and governance." Outlook The stable outlook reflects S&P's belief that Renault may withstand a mild recession in Europe without a major deterioration of its credit metrics or liquidity, thanks to significant improvements in its management of pricing, model mix, and costs implemented over the last two years. Downside scenario S&P could lower the ratings if it observed a material weakening of Renault's competitive position in Europe, possibly combined with a more severe erosion of auto market conditions, resulting in adjusted EBITDA margins falling below 6% and negative adjusted FOCF. This scenario, although currently not likely in our view, could materialize as a result of increased competitive pressure in Europe from new entrants in the EV space, in combination with material missteps in the deployment of the B and C segment EV models that Renault expects to launch from 2024. Upside scenario S&P said, "Although not expected in the short term, we could raise the rating if Renault establishes a durable and competitive EV position against intense competition from incumbent and potentially new players in the highly regulated European market, supported by competitive model launches and the development of a reliable EV supply chain. We would also expect Renault to achieve adjusted EBITDA margins in the 8.0%-10.0% range and adjusted FOCF approaching 2% of automotive revenue, in addition to an adjusted net cash position." Environmental, Social, And Governance ESG credit indicators: To E-3, S-2, G-2; From E-3, S-2, G-3 Renault has material exposure to environmental factors due to its large share of volume sales in Europe. Outside the region, around 70% of the group's sales are subject to Corporate Average Fuel Economy-type regulations. Together with its Alliance partners, Nissan and Mitsubishi, Renault met the 2021 carbon dioxide (CO2) emissions target of around 109 grams per kilometer (as defined under the Worldwide Harmonised Light Vehicles Test Procedure) for its average car fleet in Europe. S&P said, "We do not expect the company to have particular difficulties complying with CO2 regulation over 2022-2025 because the share of EV in the group's sales is set to rapidly increase to more than 30% in 2025 (including BEVs, PHEVs, and fuel cell electric vehicles) from 10%-11% as of Dec. 31, 2022. The shift is likely to constrain profitability at least until the full EV line-up transitions to more cost-efficient EV platforms that are developed and shared within the Alliance. Renault acknowledges that its EVs generate operating margins below the group average. Ampere is targeting breakeven in 2025 and, in the long term, its operations should be consistent with the targeted 8% group operating margin. "Social factors do not play a major role in our credit assessment for Renault, but we monitor the risks of product liability issues linked to road and vehicle safety. "We believe governance at Renault has benefitted from the recent management change. In our view, management has succeeded in realigning all stakeholders' interests to the exclusive benefit of the company. The early delivery on an ambitious restructuring plan also derives in our view from the cohesion on an ambitious albeit compelling project. This leads us to think that governance no longer has a moderately negative impact on credit quality. Hence we revised the governance score to G-2 from G-3." ============= I R E L A N D ============= AQUEDUCT EUROPEAN 7-2022: Fitch Gives 'B-sf' Rating on Cl. F Notes ------------------------------------------------------------------ Fitch Ratings has assigned Aqueduct European CLO 7-2022 DAC final. Bavarian Sky S.A., Compartment German Auto Loans 12 class A notes an expected rating. Entity/Debt Rating ----------- ------ Aqueduct European CLO 7-2022 DAC A-Loan LT AAAsf New Rating A-Notes XS2448041108 LT AAAsf New Rating B-1 XS2448041876 LT AAsf New Rating B-2 XS2448042411 LT AAsf New Rating C XS2448042924 LT Asf New Rating D XS2448043658 LT BBB-sf New Rating E XS2448044201 LT BB-sf New Rating F XS2448044383 LT B-sf New Rating M-1 XS2448046594 LT NRsf New Rating M-2 XS2448047055 LT NRsf New Rating M-3 XS2448047568 LT NRsf New Rating TRANSACTION SUMMARY Aqueduct European CLO 7-2022 DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans, first-lien, last-out loans and high-yield bonds. Net proceeds from the issuance of the notes have been used to fund a portfolio with a target par of EUR300 million. The portfolio is actively managed by HPS Investment Partners CLO (UK) LLP. The transaction has a reinvestment period of about 4.5 years and an 8.5-year weighted average life (WAL). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch Ratings places the average credit quality of obligors at 'B'/'B-'. The Fitch weighted average rating factor (WARF) of the identified portfolio is 25.35. High Recovery Expectations (Positive): At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate (WARR) of the identified portfolio is 62.8%. Diversified Portfolio (Positive): The transaction includes two Fitch matrices: one effective at closing corresponding to a top-10 obligor concentration limit at 20% and a fixed-rate asset limit of 10%; and one that can be selected by the manager at any time from one year after closing as long as the collateral principal balance (including defaulted obligations at their Fitch-calculated collateral value) is at least at EUR299.5 million and subject to the same limits as the previous matrix. The transaction also includes various concentration limits, including a maximum exposure to the three largest Fitch-defined industries in the portfolio at 40.0%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Cash Flow Modelling (Positive): The WAL used for the transaction's matrices and stressed-case portfolio analysis is 12 months less than the WAL covenant. This accounts for the strict reinvestment conditions envisaged by the transaction after its reinvestment period. These include, among others, passing both the coverage tests and the Fitch 'CCC' limit post reinvestment as well a WAL covenant that progressively steps down over time, both before and after the end of the reinvestment period. Fitch believes these conditions would reduce the effective risk horizon of the portfolio during the stress period. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would have no impact on the class A notes but would lead to model-implied downgrades of no more than one notch for the rest. Downgrades, which are based on the identified portfolio, may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio than the stressed-case portfolio, the class E notes display a rating cushion of three notches, the class B, D and F notes of two notches, and the class C notes of one notch. Should the cushion between the identified portfolio and the stressed-case portfolio be eroded either due to manager trading or negative portfolio credit migration, a 25% increase of the mean RDR across all ratings and a 25% decrease of the RRR across all ratings of the stressed-case portfolio would lead to downgrades of up to four notches for the rated notes. Factors that could, individually or collectively, lead to positive rating action/upgrade: A 25% reduction of the RDR across all ratings and a 25% increase in the RRR across all ratings of the stressed-case portfolio would lead to model-implied upgrades of up to five notches for the rated notes, except for the 'AAAsf' rated notes. During the reinvestment period, upgrades, which are based on the stressed-case portfolio, may occur on better-than-expected portfolio credit quality and a shorter remaining WAL test, leading to the ability of the notes to withstand larger-than-expected losses for the remaining life of the transaction. After the end of the reinvestment period, upgrades, except for the 'AAAsf' notes, may occur in case of stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. DATA ADEQUACY The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. HARVEST CLO XXVI: Fitch Affirms 'Bsf' Rating on Class F Notes ------------------------------------------------------------- Fitch Ratings has upgraded Harvest CLO XXI DAC's class B-1-R, B-2-R, C-R and D-R notes, and affirmed the others. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO XXI DAC A-1-R XS2326512378 LT AAAsf Affirmed AAAsf A-2-R XS2326512964 LT AAAsf Affirmed AAAsf B-1-R XS2326513772 LT AA+sf Upgrade AAsf B-2-R XS2326514317 LT AA+sf Upgrade AAsf C-R XS2326515041 LT A+sf Upgrade Asf D-R XS2326519035 LT BBB+sf Upgrade BBBsf E XS1951930533 LT BBsf Affirmed BBsf F XS1951930616 LT Bsf Affirmed Bsf TRANSACTION SUMMARY Harvest CLO XXI DAC is a securitisation of mainly senior secured loans (at least 90%) with a component of senior unsecured, mezzanine and second-lien loans. The transaction is managed by Investcorp Credit Management and will exit its reinvestment period on 15 October 2023. KEY RATING DRIVERS Stable Asset Performance: The upgrade reflects the shortened weighted average life (WAL) covenant since the last rating action in February 2022 and the stable performance of the transaction. The transaction is passing all its collateral-quality, coverage and portfolio-profile tests. Exposure to assets with Fitch-derived ratings of 'CCC+' and below is 2.43%, as calculated by the trustee. Stable Outlook: The Stable Outlooks reflect the sizeable cushion based on the current portfolio at the current ratings but also its expectation that deleveraging will be constrained by the transaction's ability to still reinvest and by the limited maturity of assets in the next 20 months. It also reflects the limited imminent refinancing risk of the portfolio, with around 0.16% of the assets maturing in 2023 and around 6.7% of maturing in 2024. Reinvestment Period Near Close: Following the expiry of the reinvestment period, the manager can still reinvest unscheduled principal proceeds and sale proceeds from credit-improved and credit-risk obligations as long as the reinvestment criteria are satisfied. Fitch believes that the manager will be able to reinvest post reinvestment period and as such has analysed the transaction's matrices based on the top-10 obligor limit of 15% with a 10% fixed-rate asset limit since Fitch viewed these as the most rating relevant among the transaction's two matrices. Fitch has applied a haircut of 1.5% to the weighted average recovery rate (WARR) covenant in the matrices to reflect the old recovery rate definition in the transaction documents, which can result in an average of a 1.5% inflation of the WARR relative to Fitch's latest CLO criteria. High Recovery Expectations: Senior secured obligations comprise 97.35% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated WARR of the current portfolio as reported by the trustee was 63.2%, which is above the minimum covenanted WARR of 62.5%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top- 10 obligor concentration is 14.3% of the portfolio balance and no obligor represents more than 1.5% as reported by the trustee. Cash Flow Modelling: Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par- value and interest-coverage tests. Deviation from Model-implied Ratings: The class E and F notes' rating are lower than their model-implied ratings (MIR) by one notch. The deviation reflects current economic uncertainty, limited default- rate cushion at the MIRs based on the Fitch-stressed portfolio, and that the transaction is yet to deleverage. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings based on the current portfolio would result in downgrades of the class E notes by two notches and the class F notes by one notch, and no impact on the remainder. Downgrades may occur if the loss expectation of the current portfolio is larger than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. The class B-R and E notes display a rating cushion of one notch, the class D-R notes two notches, and the class F notes four notches, while the class A-R and C-R notes have no rating cushion. Should the cushion between the current portfolio and the Fitch-stressed portfolio be eroded either due to manager trading or negative portfolio credit migration, a 25% increase of the mean RDR across all ratings and a 25% decrease of the RRR across all ratings of the Fitch-stressed portfolio would lead to downgrades of up to four notches for the rated notes and to below 'B-sf' for the class F notes. Factors that could, individually or collectively, lead to positive rating action/upgrade: A 25% reduction of the mean RDR and a 25% increase in the RRR across all ratings of the Fitch-stressed portfolio would result in upgrades of up to four notches across the notes except for the class A-R and C-R notes for which there would be no impact. Upgrades may occur on better-than-expected portfolio credit quality and deal performance, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. 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. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. =========================== U N I T E D K I N G D O M =========================== BRITISH STEEL: To Shut Down Cokings Ovens, Cut Up to 260 Jobs ------------------------------------------------------------- BBC News reports that unions have warned on the future of UK steelmaking after British Steel announced it will shut its coking ovens in Scunthorpe and cut up to 260 jobs. The Chinese-owned firm blamed an "unprecedented" rise in energy costs and demands to be greener, BBC relates. According to BBC, the biggest steelworkers' union said the cuts could have a "catastrophic impact" on steel production in the UK. The government said the decision by British Steel was "very disappointing" while negotiations were ongoing with the sector over funding support, BBC notes. British Steel currently employs around 4,200 workers in the UK and is owned by Chinese company Jingye. Making steel requires a lot of energy, and with prices soaring in recent months, the costs of making the metal have also gone up. The company, as cited by BBC, said its energy bills and carbon-offsetting costs increased by £190m last year and "decisive action" was needed. It added that its coke ovens were "reaching the end of their operational life" and that closing them would "bring environmental benefits including reductions in emissions to air and water". According to BBC, Alun Davies, national officer of the Community Trade Union, which represents the majority of steelworkers, said the union would "not accept redundancies" and added "nothing is off the table when it comes to protecting our members' jobs". Mr. Davies claimed closing the ovens would see the company "depending on unreliable imported coke" wand would "risk our sovereign capability to produce steel in the UK", BBC discloses. The Unite union, which also represents steelworkers, accused Jingye of reneging on investment promises and said the UK government had "no serious plan for the industry", BBC relays. General secretary Sharon Graham added that she was yet to see "any financial justification for the closure of the coking ovens". But British Steel chief executive Xifeng Han said steelmaking in the UK was "uncompetitive" when compared to other international markets, BBC notes. According to BBC, Mr. Han said the plan was to "streamline" the business while keeping "the period of uncertainty for our colleagues as short as we can". He said the company was undergoing its biggest transformation in its 130-year history, "to make sure we can deliver the steel Britain requires". The government has been holding negotiations with British Steel's owners over a GBP300 million support package, along with others in the industry, BBC discloses. The government said it would continue to work with British Steel to find a "solution for the business and the wider sector, which plays a vital role in the UK economy", according to BBC. Jingye has invested GBP330 million in British Steel since it bought the business in 2020, BBC relays. Mr. Han, as cited by BBC, said the owners were "committed" to the company for the long term, but warned the transition to greener forms of energy to make steel was a "major challenge". FLAMINGO GROUP: Moody's Cuts CFR to B3, Under Review for Downgrade ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of Flamingo Group International Limited, including its corporate family rating to B3 from B2; its probability of default rating to B3-PD from B2-PD, and its backed senior secured bank credit facility rating to B3 from B2. Concurrently, Moody's has placed all ratings on review for downgrade. Moody's has also changed the company's outlook to ratings under review from stable. RATINGS RATIONALE The downgrade of Flamingo's ratings follows the company's announcement of accounting misstatements on the financial information that it has provided to its lenders relative to financial years of 2021 and 2022 due to the intentional actions of a company employee at one of the company's subsidiaries, as well as significantly weaker operating performance in 2022 relative to Moody's previous expectations and the company's deteriorating liquidity profile with its EUR30 million backed senior secured revolving credit facility (RCF) maturing in less than 12 months. Moody's considers that these factors may have a significant impact on the company's ability to refinance its RCF (February 2024) and EUR280 million backed senior secured term loan B (February 2025) maturities. Governance considerations were an important driver of the rating actions. The internal controls weaknesses, together with the relatively late timing in addressing liquidity and maturity risk, have weakened the credit quality of Flamingo. Following the announcement of the company's draft results for 2022, the rating agency estimates that Moody's-adjusted gross debt/EBITDA for Flamingo was 5.1x at the end of December 2022, well above the 4.0x threshold for the B2 rating. The increase in leverage stemmed primarily from the weaker performance at the Flamingo UK level due to lower volumes, unfavourable sales-mix changes and the impact of cost inflation. Moody's also estimates that free cash flow generation during 2022 remained negative because of the impact of lower EBITDA generation and higher capex levels. For 2023, Moody's expects that pressures on disposable income across Western Europe will result again in lower volumes given the discretionary nature of the product, while resistance from retailers will make it harder to pursue significant price increases. Although Flamingo plans to introduce margin-enhancing measures such as product engineering, the rating agency forecasts that the company's operating performance will continue to deteriorate in 2023 and maintain leverage above 5.0x. At the same time, Moody's also expects that the added effect of higher interest rates will lead to a meaningful drop in interest coverage (measured as Moody's-adjusted EBITA/Interest Expense) to around 1.5x. Flamingo's product concentration (flowers generate around 69% of revenue), its vulnerability to weather and crop disease risk, and concentrated third-party supplier base and customer base remain key constraints on its credit quality. The fact that a significant portion of the company's production facilities are located in Ethiopia (Government of Ethiopia, Caa2 negative) also exposes the company to a risk of supply chain disruption, although this is mitigated by the location of Flamingo farms within Ethiopia and the signing of the Tigray truce agreement in November 2022. Flamingo's B3 CFR also benefits from the company's strong market position, albeit in narrow product segments, supported by the company's cost advantage in sweetheart roses production, and a degree of vertical integration that combines Flamingo's own production with third-party sourcing enabling it to meet fluctuations in demand. The ratings review will focus on (1) trading performance and prospects for 2023, including actions the company can take to improve performance, (2) the operating performance in the early months of the year, when the company typically generates over 40% of EBITDA, and (3) Flamingo's ability to address its liquidity shortfalls over the next few months. LIQUIDITY Moody's considers Flamingo's liquidity to be weak. The rating agency also forecasts that, as a result of the expected weaker operational performance and increased interest costs, free cash flow generation will continue to be negative in 2023 and put pressure on the company's liquidity. The company had a cash balance of GBP34.8 million and EUR17 million availability under its EUR30 million RCF, however the RCF matures in February 2024. Moody's considers that the impact of repaying the outstanding amount under the RCF alongside the simultaneous loss of access to the undrawn portion would result in a very tight liquidity standpoint, especially in the context of Flamingo's business which requires meaningful intra-month working capital swings. Moody's expects the company to take actions to address nearer term liquidity pressures, although these may to an extent depend on operating performance and the satisfactory resolution of internal control issues. ESG CONSIDERATIONS Additional governance factors that Moody's considers in Flamingo's credit profile are its private ownership, board structure and recent weak trading performance. Key environmental risks for Flamingo include its exposure to physical climate risk due to its concentration of sourcing from Kenya (Government of Kenya, B2 negative) and Ethiopia and risks related to water management, waste and pollution. The company also relies on natural capital in relation to the production of key ingredients for its products. At the same time, Moody's also note that sustainable production is high on the company's agenda as illustrated by Flamingo's usage of biological pest control and water efficiency initiatives in Kenya. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Although unlikely given the recent events, the ratings could be upgraded if (i) Moody's adjusted EBITDA is maintained sustainably below 4.0x, (ii) EBITA margin improves and is maintained above 5%, (iii) improving EBITA/interest coverage, (iv) consistent generation of material positive free cash flow, (v) the company has an adequate liquidity profile, and (vi) the company does not make any large business acquisition or shareholder distributions. The ratings could be downgraded in case (i) the company is unable to address its liquidity challenges and upcoming maturities, or (ii) free cash flow is materially negative, or (iii) Flamingo's revenue and earnings deteriorate faster than expected, or (iv) EBITA/Interest coverage approaches 1.0x, or (v) Flamingo undertake large business acquisitions or shareholder distributions. LIST OF AFFECTED RATINGS Downgrades: Issuer: Flamingo Group International Limited Probability of Default Rating, Downgraded to B3-PD from B2-PD; Placed On Review for Downgrade LT Corporate Family Rating, Downgraded to B3 from B2; Placed On Review for Downgrade BACKED Senior Secured Bank Credit Facility, Downgraded to B3 from B2; Placed On Review for Downgrade Outlook Action: Issuer: Flamingo Group International Limited Outlook, Changed To Ratings Under Review From Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Consumer Packaged Goods published in June 2022. COMPANY PROFILE Flamingo Group International Limited is a business combination created in February 2018 between Flamingo Horticulture Ltd (Flamingo UK), a leading supplier of cut flowers and premium vegetables to the UK premium and value retailers, and Afriflora, the world leader in sweetheart roses (according to third-party due diligence) supplying to major European retailers such as Lidl, Aldi and Edeka. The company runs farming operations primarily in Kenya and Ethiopia. In 2021 the combined entity generated revenues of GBP699 million and reported EBITDA of GBP72 million. Flamingo is owned by private equity funds managed and advised by Sun Capital Partners, Inc. and its affiliates. KAINED HOLDINGS: Goes Into Liquidation, Fails to Repay Debts ------------------------------------------------------------ Holly Lennon at GlasgowLive reports that liquidators have been appointed to the owner of some of Glasgow's best-loved bars and restaurants, Kained Holdings. According to GlasgowLive, the hospitality group which owns Lebowskis, Porter & Rye, Oyster Bar, and The Finnieston has been court-ordered to be wound up as it is unable to pay its debts. Wylie & Bissett have been appointed as liquidators and it is understood jobs have been secured, GlasgowLive discloses. Kained Holdings was launched by three friends Graham Suttle, Scott Arnot, and Maurice Clark in 2011 and describes itself as a "celebrated" hospitality group. In the years since launching the group has been responsible for opening some of Finnieston's most popular bars and restaurants and hailed for breathing new life into the area. Mr. Suttle has previously been outspoken on the impact of the pandemic, Brexit, and the cost of living crisis on the trade, GlasgowLive recounts. In September last year, he said that massive staff, supplier, and product shortages created "new challenges" for the industry that was already having to adapt after forced closures, GlasgowLive relates. MACKENZIES SMOKED: Goes Into Voluntary Liqiuidation, Owes GBP1MM+ ----------------------------------------------------------------- Vicky Carr at The Stray Ferret reports that a food business based in Nidderdale has gone into voluntary liquidation owing more than GBP1 million. Mackenzies Smoked Products Ltd appointed Clark Business Recovery last week to oversee its liquidation, The Stray Ferret relates. Papers filed with Companies House reveal it owed GBP1,025,690.40 to 156 other companies, The Stray Ferret discloses. Among its debts is almost GBP45,000 to HMRC for VAT, PAYE and National Insurance contributions, The Stray Ferret notes. The sole director, Paul James Palmer, was appointed in October 2019, when he and wife Gabby took over the Blubberhouses company from Robert and Stella Crowson, who founded it in 1999, The Stray Ferret recounts. As well as a smokehouse, Mackenzies runs a farm shop and cafe, both of which remained open today, The Stray Ferret states. In documents filed as part of the liquidation process, Mr. Palmer reserves the right for MFS&C Limited to use the trading names of Mackenzies, Mackenzies Farm Shop, and Mackenzies Farm Shop and Cafe, The Stray Ferret discloses. METNOR CONSTRUCTION: Enters Administration, 80 Jobs Affected ------------------------------------------------------------ Business Sale reports that administrators are seeking to realise the assets of Newcastle-based construction firm Metnor Construction following the company’s collapse. Steve Ross and Allan Kelly of FRP Advisory were appointed as joint administrators to Metnor, a major North East construction business, on Feb. 21, Business Sale relates. The administration comes just months after the company, which is part of the wider Metnor Group, announced that it had increased its turnover to GBP63 million from GBP48 million during 2021, due to the completion of COVID-delayed projects and new contract wins, Business Sale notes. Despite this, Metnor Construction began to suffer significant financial challenges over recent months, resulting from contract losses, supply chain issues and rising prices for raw materials, Business Sale states. This forced the business to appoint administrators, with all 80 employees made redundant, Business Sale discloses. Metnor Construction was founded in 2002 and worked across wide range of projects throughout the UK, including contracts for care homes, hotels, retail, student accommodation and data centres. In its year end accounts for 2021, Metnor Construction reported a pre-tax profit of GBP942,000, following a GBP2.3 million pre-tax loss a year earlier, Business Sale relays. At the time, the firm’s fixed assets were valued at GBP393,000, current assets at GBP18.9 million and total assets at GBP4.8 million, Business Sale notes. PAPERCHASE: 106 Stores to Close, Around 900 Jobs Affected --------------------------------------------------------- Daily Mail City & Finance reports that around 900 workers will lose their jobs at Paperchase as all its stores are closed. The gift and stationery chain fell into administration last month, Daily Mail City & Finance recounts. The brand was then bought by Tesco. But the deal did not include its 106 stores or staff and administrators from Begbies Traynor went on the hunt for a buyer, Daily Mail City & Finance notes. But they said the sale of "all or part of the remaining Paperchase business" was now unlikely. The stores will stay open for a little longer while the remaining stock is shifted, Daily Mail City & Finance relates. But the stationer, set up in 1968 by two art students, will then shut down, making it the latest household name to disappear from Britain’s high streets, Daily Mail City & Finance relays. It was bought just six months ago by retail investor Steve Curtis, Daily Mail City & Finance notes. He was involved in Tie Rack and Jigsaw and wanted to see the retailer grow to 150 stores over the next few years. But the firm collapsed after years of feeble sales, Daily Mail City & Finance discloses. Its stores in transport hubs were hard hit, with the pandemic and then rail strikes driving commuters away, according to Daily Mail City & Finance. PRESCA: To Shut Down Online Store, Holds Closing Down Sale ---------------------------------------------------------- Tom Davidson at Cycling Weekly reports that green clothing brand Presca has become the latest in a string of British cycling kit companies to close down in the first months of this year. Founded in 2013 by endurance athletes Guy Whitby and Rob Webbon, the Bristol-based company established itself as one of the industry leaders in innovative, eco-friendly sportswear, but will now be shutting down its online store. As a result of the brand's folding, Presca is now holding a closing down sale on its website, with 75% off all items. The owners stressed that the sale is "not a marketing ploy or clever gig", but rather “a last chance to get our kit in your hands before it's gone forever”, Cycling Weekly relates. When it was first launched, Presca aspired to be the world’s first climate positive sportswear brand, prioritising sustainability in every aspect of the business. The brand used recycled fabrics, and manufactured its kit in the UK in a bid to cut down on the supply chain, Cycling Weekly discloses. The current closing down sale is only available to UK customers, Cycling Weekly notes. PW PROMOTIONS: Put Into Liquidation, Owes GBP100,000 ---------------------------------------------------- According to Mirror.co.uk's Zara Woodcock, Pete Wicks has reportedly shut down his PW Promotions business after leaving The Only Way Is Essex. The reality star, 35, confirmed in January that he will be stepping back from being a regular cast member on the ITVBe show, Mirror.co.uk recounts. After eight years on the popular series, he decided to quit and focus on his other work commitments. And now, several weeks after confirming the news, it was reported that he shut down his business which has more than GBP100,000 in debt, Mirror.co.uk relates. A statement of affairs filed at Companies House showed VAT owed at GBP7,477, corporation tax owed at GBP66,702 and GBP26,500 in funds owed to Lloyds Bank, Mirror.co.uk discloses. The debts owed total GBP100,681, as reported by The Sun, Mirror.co.uk notes. The liquidation of his company comes after he quit the reality show after eight years on it, Mirror.co.uk states. SMALL BUSINESS 2021-1: Moody's Ups Rating on Cl. D Notes From Ba2 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of 4 classes of notes in Small Business Origination Loan Trust 2021-1 DAC ("SBOLT 2021-1", or the "Issuer"). The rating action reflects the increase in the levels of credit enhancement for the affected notes. GBP138.518 million (Current outstanding balance of GBP49.25M) Class A Floating Rate Asset-Backed Notes due March 2030, Upgraded to Aaa (sf); previously on Sep 30, 2022 Upgraded to Aa1 (sf) GBP3.351 million (Current outstanding balance of GBP1.97M) Class B Floating Rate Asset-Backed Notes due March 2030, Upgraded to Aaa (sf); previously on Sep 30, 2022 Upgraded to A1 (sf) GBP24.576 million (Current outstanding balance of GBP14.46M) Class C Floating Rate Asset-Backed Notes due March 2030, Upgraded to A1 (sf); previously on Sep 30, 2022 Upgraded to Baa1 (sf) GBP20.666 million (Current outstanding balance of GBP12.16M) Class D Floating Rate Asset-Backed Notes due March 2030, Upgraded to Baa3 (sf); previously on Sep 30, 2022 Upgraded to Ba2 (sf) RATINGS RATIONALE The rating action is prompted by an increase in credit enhancement for the affected tranches. Key Collateral Assumptions SME: As part of the rating action, Moody's reassessed its default probability and recovery rate assumptions for the portfolio reflecting the collateral performance to date. The performance of the transaction has continued to be stable since September 2022. Total delinquencies (30+ days) are currently standing at 1.15% of current pool balance. Cumulative defaults currently stand at 5.53%. For SBOLT 2021-1, the current default probability is 10% of the current portfolio balance and the assumption for the fixed recovery rate is 20%. Moody's has maintained its portfolio credit enhancement of 47.0%, which, combined with the key collateral assumptions, corresponds to a CoV of 60.74%. Increase in Available Credit Enhancement In October 2022, the Net Principal Amount Outstanding of Notes (excluding Class X) dropped below 60% of Principal Amount at Closing Date. As a result, the sequential amortisation trigger was breached and the amortization was switched from pro-rata to sequential, which led to the increase in the credit enhancement available in this transaction. Since the last rating action in September 2022, the credit enhancement for Class A, Class B, Class C and Class D increased from 42.49%, 40.98%, 29.95% and 20.66% to 54.94%, 52.95%, 38.35% and 26.06% respectively. The principal methodology used in these ratings was "Moody's Global Approach to Rating SME Balance Sheet Securitizations" published in July 2022. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) performance of the underlying collateral that is better than Moody's expected, (2) an increase in available credit enhancement and (3) improvements in the credit quality of the transaction counterparties and (4) a decrease in sovereign risk. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. THG PLC: S&P Lowers ICR to 'B-' on High Leverage; Outlook Stable ---------------------------------------------------------------- S&P Global Ratings lowered its issuer and issue rating on direct-to-consumer brands group THG plc to 'B-' from 'B'. The addition of the new GBP156 million banking facility in the capital structure diluted its recovery expectation for the EUR600 million term loan B facility at the point of hypothetical default. While the recovery rating on the senior secured debt remains unchanged at '3', S&P changed its recovery estimate to 50% from 65%. The stable outlook reflects S&P's expectation of adjusted EBITDA margins improving on the back of cost-saving measures implemented in 2022, and the effects of lower whey protein prices on the nutrition segment's profitability, as well as THG's adequate liquidity over the next 12 months. THG's slowing revenue growth rate means the previously anticipated deleveraging is highly unlikely. The company reported overall revenue growth of 3% in 2022 compared to management's original guidance of 20%-25%. Its Beauty and Nutrition segments in its primary markets of the U.K., and the U.S. among others (over 50% of 2022 revenue) performed better at about 9.4%, but still fell short of the original guidance. The migration to online shopping, an expanding portfolio of products, and a growing and loyal customer base will support the business in the long term, but growth has slowed. The 2022 revenue underperformance reflected consumers reverting to in-store shopping, heightened macroeconomic pressures, capital hesitancy about digital transformation projects impacting Ingenuity client onboarding, and some one-off factors such as the discontinuance of some of its loss-making OnDemand categories and the U.K. postal workers strike in December. S&P said, "We expect the macroeconomic environment to remain tough in 2023 as central banks in THG's key geographies increase interest rates to curb inflationary pressures. Without revenue growth of 15%-20%, we do not think the group's earnings profile will benefit from the operating leverage that underpinned our previous forecast of a speedy recovery. We forecast leverage to remain above 7.5x (including leases), higher than our previous expectation of 5.0x for 2023." Cost-reduction measures and the lower level of exceptional costs will help margins. Divisional reorganization has helped THG remove duplicate costs, improve transparency, and achieve procurement and payroll efficiencies. The group recalibrated its cost base after years of heavy investment aimed at building up scale. The GBP100 million of costing savings implemented in 2022, includes a headcount reduction by about 2,000 and discontinuing the loss-making segments. The substantial drop in whey prices in 2023 will support margin recovery in the Nutrition segment because, last year, THG limited the pass-through of commodity cost increases to consumers, so as to retain customers. Similarly, exceptional costs (international delivery, reorganization, and integration costs, among others) will reduce to about EUR15 million from EUR60 million. The group also plans a further GBP30 million cost saving in 2023. S&P said, "In our view, these measures give it a meaningful buffer against macroeconomic headwinds. We forecast the company-adjusted 2023 EBITDA at GBP135 million (translating into S&P Global Ratings-adjusted EBITDA of GBP100 million) compared to company-adjusted 2022 EBITDA of GBP80 million." The new GBP156 million banking facility provides THG with a liquidity buffer. The group has enhanced its liquidity profile by accessing this facility in October 2022. The facility is provided by the group's existing lenders under UKEF's Export Development Guarantee (EDG) to help companies that export, or plan to export, from the U.K. and can be used for general working capital or capital expenditure purposes. The interest rate on the loan is SONIA + 3.50% and is repayable in three years. THG already had a meaningful cash balance of GBP265 million on June 30, 2022, and did not face any immediate liquidity needs. By drawing on this facility, the group has given itself financial leeway to manage temporary cash flow needs for the next three years without drawing on its revolving credit facility (RCF). The Ingenuity business will pivot toward high-value, high-margin customers. Like other e-commerce providers, THG has invested in expanding its fulfilment centers and its global reach during 2020 and 2021. However, the anticipated volumes and new customer onboardings did not materialize as small and midsize business clients have been hesitant to spend in an inflationary environment. THG has therefore redirected its strategic focus toward higher value and higher margin contracts, and away from lower value clients. The new CEO of the Ingenuity business, Vivek Ganotra, has previous experience at Salesforce and British American Tobacco joined in second-quarter 2022 and is driving this strategic focus. THG expects to add over GBP1 billion of incremental GMV to the Ingenuity platform during 2023. However, if it again falls short of its stated guidance this could call into question its ability to execute its strategy in a segment where it had the early mover advantage. The stable outlook reflects THG's cost-saving measures and the effects of lower whey protein prices on the nutrition segment's margins, as well as its adequate liquidity over the next 12 months. It also reflects our view that the group has some flexibility to show a good earnings profile in its profitable segments, and a track record of higher levels of GMV processed via its Ingenuity platform. S&P could lower the rating if THG's operating performance weakened more than we currently forecast, such that it no longer viewed the capital structure as sustainable. This could occur if: -- Its liquidity buffer weakened because of a delay in renewing its RCF, or it risked a covenant breach, or it used cash to buy back its term loan debt at below par; or -- S&P considers the group's profitability unlikely to improve materially despite cost reductions and if ongoing weak operating results heightened its refinancing risk; or -- S&P forecasts the group's FOCF after lease payments will stay materially negative over the medium term. Due to continuing negative cash flows, S&P considers rating upside in the next 12 months to be unlikely. It could consider a positive rating action if: -- THG were to substantially strengthen its balance sheet and liquidity by raising equity, and sustainably reduce leverage below 6.0x; or -- The group achieved a sufficient track record of organic revenue growth, despite weakening economic conditions, while improving its S&P Global Ratings-adjusted margins toward 9%; and -- It maintained adequate liquidity with a cash balance of about GBP400 million even after negative FOCF while extending the maturity of its RCF. ESG credit indicators: E-2, S-2, G-3 ********* 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 * * *