/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230224.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 Friday, February 24, 2023, Vol. 24, No. 41 Headlines A R M E N I A YEREVAN CITY: Fitch Alters Outlook on B+ LongTerm IDRs to Positive I R E L A N D 4D PHARMA: Receivers Appointed Following Parent Administration N E T H E R L A N D S KOUTI BV: Fitch Assigns 'B+(EXP)' Rating on EUR350MM Term Loan S E R B I A SERBIA: Fitch Affirms 'BB+' Foreign Currency IDR, Outlook Stable S P A I N TECPETROL INTERNATIONAL: Fitch Affirms & Then Withdraws 'BB' IDRs T U R K E Y TAKASBANK: Fitch Affirms 'B' LongTerm IDRs, Outlook Negative TAM FINANS: Fitch Affirms 'BB' Foreign Curr. IDR, Outlook Negative U N I T E D K I N G D O M AARTEE BRIGHT: GFG Seeks to Overturn Administration Process CINEWORLD GROUP: Yet to Receive Any Offers to Buy Whole Company FERGUSON MARINE: Misses Accounts Filing Deadline LLANYRAVON COURT: Former Cwmbran Care Home Put Up for Sale NEW DAY FUNDING: Fitch Affirms B+sf Rating on VFN-F1V2 Cl. F Notes X X X X X X X X [*] BOOK REVIEW: Transnational Mergers and Acquisitions [*] EUROPE: Number of Business Bankruptcies Up 26.8% in 4Q 2022 - - - - - ============= A R M E N I A ============= YEREVAN CITY: Fitch Alters Outlook on B+ LongTerm IDRs to Positive ------------------------------------------------------------------ Fitch Ratings has revised the Outlook on the City of Yerevan's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to Positive from Stable and affirmed the IDRs at 'B+'. The revision of Outlook follows the recent similar action on Armenia's sovereign ratings (see 'Fitch Revises Armenia's Outlook to Positive; Affirms at 'B+' dated 10 February 2023). Fitch views the city's ratings as capped by the sovereign's. CRA3 DEVIATION Under applicable credit rating agency (CRA) regulations, the publication of local and regional government reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this schedule in order to comply with the CRAs' obligation to issue credit ratings based on all available and relevant information and disclose credit ratings in a timely manner. Fitch interprets these provisions as allowing us to publish a rating review in situations where there is a material change in the creditworthiness of the issuer that Fitch believes makes it inappropriate for us to wait until the next scheduled review date to update the rating or Outlook/Watch status. The next scheduled review date for Fitch's rating on Yerevan City is 09 June 2023, but Fitch believes that developments for the issuer warrant such a deviation from the calendar and its rationale for this is set out in the first part (High weight factors) of the Key Rating Drivers section below. KEY RATING DRIVERS The rating action reflects the following key rating drivers and their relative weights: HIGH Sovereign Cap Yerevan's IDRs are capped by those of Armenia as its assessment of the city's Standalone Credit Profile (SCP) is unchanged at 'bb-' since the last review on 16 December 2022 (see 'Fitch Affirms Armenian City of Yerevan at 'B+'; Outlook Stable'). LOW Risk Profile: Vulnerable Yerevan's 'Vulnerable' risk profile is driven by five 'Weaker' key risk factors (revenue robustness and adjustability, expenditure adjustability, liabilities and liquidity robustness and flexibility) and one 'Midrange' factor (expenditure sustainability) in a country rated in the 'B' category or below. The assessment reflects Fitch's view that there is a very high risk of the issuer's ability to cover debt service with the operating balance weakening unexpectedly over the scenario horizon (2022-2026) due to lower revenue, higher expenditure, or an unexpected rise in liabilities or debt-service requirements. Debt Sustainability: 'aaa category' In its rating case, Fitch assumes that Yerevan will continue to draw down its European Investment Bank loan to the limit of EUR7 million. However, the city's debt levels will remain moderate, with little impact on debt-sustainability metrics in 2022-2026. Fitch expects the city's debt payback ratio - the primary metric of debt-sustainability assessment for Type B local and regional governments (LRG) - will remain strong at under 5x, which corresponds to a 'aaa' assessment. The latter is also supported by prudent secondary metrics. DERIVATION SUMMARY Fitch classifies Yerevan as a type B LRG, which has to cover debt service from cash flow on an annual basis. Yerevan's 'bb-' SCP reflects a 'Vulnerable' risk profile and debt sustainability metrics assessed at 'aaa' under Fitch's rating case. The 'bb-' SCP also reflects peer comparison. The IDRs are not affected by any asymmetric risk or extraordinary support from the central government, but they are capped by Armenia's sovereign IDRs at 'B+'. KEY ASSUMPTIONS Qualitative Assumptions and Assessments: Risk Profile: 'Vulnerable, Unchanged with Low weight' Revenue Robustness: 'Weaker, Unchanged with Low weight' Revenue Adjustability: 'Weaker, Unchanged with Low weight' Expenditure Sustainability: 'Midrange, Unchanged with Low weight' Expenditure Adjustability: 'Weaker, Unchanged with Low weight' Liabilities and Liquidity Robustness: 'Weaker, Unchanged with Low weight' Liabilities and Liquidity Flexibility: 'Weaker, Unchanged with Low weight' Debt sustainability: 'aaa, Unchanged with Low weight' Support (Budget Loans): 'N/A, Unchanged with Low weight' Support (Ad Hoc): 'N/A, Unchanged with Low weight' Asymmetric Risk: 'N/A, Unchanged with Low weight' Sovereign Cap (LT IDR): 'B+, Improved with High weight' Sovereign Cap (LT LC IDR) 'B+, Improved with High weight' Sovereign Floor: 'N/A, Unchanged with Low weight' Quantitative assumptions - Issuer Specific Fitch's rating case is a "through-the-cycle" scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on 2017-2021 published figures and 2022-2026 projected ratios. The key assumptions for the scenario include: - On average 9.2% yoy increase in operating revenue, Unchanged with Low weight - On average 9.8% yoy increase in operating spending, Unchanged with Low weight - Net capital balance on average at a negative AMD11.3 billion, Unchanged with Low weight Figures as per Fitch's sovereign actual for 2021 and forecast for 2023, respectively (no weights and changes since the last review are included as none of these assumptions was material to the rating action): - GDP per capita (US dollar, market exchange rate): 4,669; 7,472 - Real GDP growth (%): 5.7; 6.1 - Consumer prices (annual average % change): 7.2; 6.5 - General government balance (% of GDP): -4.6; -2.5 - General government debt (% of GDP): 60.3; 47.3 - Current account balance plus net FDI (% of GDP): -1.2; -1.2 - Net external debt (% of GDP): 56.2; 38.1 - IMF Development Classification: EM - CDS Market-Implied Rating: N/A RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Yerevan's IDRs are currently constrained by the sovereign ratings. Therefore, positive rating action on the sovereign could lead to corresponding action on Yerevan's IDRs Factors that could, individually or collectively, lead to negative rating action/downgrade: - Negative rating action on Armenia would lead to corresponding action on Yerevan's ratings - A downward revision of the SCP below 'b+', which could be driven by a material deterioration of the city's debt sustainability leading to a payback ratio above 7x on a sustained basis under Fitch's rating case PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Yerevan's IDRs are capped by Armenia's sovereign IDRs. COMMITTEE MINUTE SUMMARY Committee date: February 16, 2023 There was an appropriate quorum at the committee and the members confirmed that they were free from recusal. It was agreed that the data was sufficiently robust relative to its materiality. During the committee no material issues were raised that were not in the original committee package. The main rating factors under the relevant criteria were discussed by the committee members. The rating decision as discussed in this rating action commentary reflects the committee discussion. 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 ----------- ------ ----- Yerevan City LT IDR B+ Affirmed B+ ST IDR B Affirmed B LC LT IDR B+ Affirmed B+ ============= I R E L A N D ============= 4D PHARMA: Receivers Appointed Following Parent Administration -------------------------------------------------------------- John Mulligan at Independent.ie reports that receivers have been appointed to an Irish arm UK firm 4D Pharma after the parent company went into administration last summer. According to Independent.ie, the assets of the formerly-AIM listed group are being sold off by the administrators after the company's secured creditor said it would no longer support an exit from administration or a proposed US$15 million (EUR14 million) equity raise. The pharmaceutical group developed live biotherapeutic products. Its listing on the Alternative Investment Market was cancelled last week. UK-based Interpath Advisory -- which also managed the UK administration -- has just appointed Ken Fennell and Andrew O'Leary as joint receivers over 4D Pharma (Cork), Independent.ie relates. It employs 10 people. Following the administration of its parent company, the directors undertook an exploration of a number of options to safeguard the future of the business in Ireland, according to Interpath, Independent.ie recounts. "Regrettably, no solution was forthcoming, and the directors took the difficult decision to invite the appointment of the joint receivers," it said. "Our immediate priority is to take steps to secure the company's assets, while seeking to gather further information about the company's financial position," Independent.ie quotes Mr. Fennell as saying. The most recent set of accounts for the Ireland-based unit show that it made a near EUR600,000 loss in 2020, which brought its accumulated losses to EUR4.3 million, Independent.ie discloses. It had tangible assets of just EUR40,000, Independent.ie notes. In October, Armistice Capital Master Fund acquired the secured debt under which the group was placed into administration. Armistice is the sole secured creditor of the company and the party with the primary economic interest in the administration, Independent.ie recounts. Armistice said last month it would no longer support the use of 4D Pharma's cash assets to work towards an exit from administration and that the equity raise would not be provided, Independent.ie relays. ===================== N E T H E R L A N D S ===================== KOUTI BV: Fitch Assigns 'B+(EXP)' Rating on EUR350MM Term Loan -------------------------------------------------------------- Fitch Ratings has assigned Kouti B.V.'s upcoming additional EUR350 million term loan B (TLB) an expected senior secured rating of 'B+(EXP)' with a Recovery Rating of 'RR3'. Kouti is direct subsidiary of Titan Holdings II B.V.'s (Eviosys). Fitch has also affirmed Eviosys' Long-Term Issuer Default Ratings (IDR) at 'B' with a Positive Outlook. Proceeds from the additional TLB are to be used for general corporate purposes, including payment of dividends for the shareholders of the group. Assignment of the final rating is contingent on the receipt of final documentation conforming materially to information already received and details regarding the amount, security package and tenor. KEY RATING DRIVERS Financial Policy Drives Deleveraging: Eviosys' plan to issue a new TLB of EUR350 million to finance a special dividend will increase the group's leverage metrics by about 0.9x versus its previous expectations for 2023-2026. Nevertheless, Eviosys's expected EBITDA leverage continues to be under its positive sensitivity of below 6.0x over the rating horizon and underpins the Positive Outlook. Any additional borrowings or shareholder-friendly cash deployment actions will reduce the group's deleveraging capacity, which would likely negatively affect the rating. Eviosys' owners have no plans for material M&As or ordinary dividend payments until its profitability targets are achieved, which is viewed positively by Fitch. Leverage Still Adequate: Fitch estimates improved revenue and EBITDA to have reduced EBITDA leverage to around 4.5x at end-2022 from about 7.5x at end-2021. The new TLB will not materially affect key ratios given expected solid operating performance in 2023. Fitch forecasts EBITDA leverage to increase to about 5.5x at end-2023 before it gradually declines to below 5.0x in 2025. Maintaining leverage metrics that are consistent with its ratings in 2023 will depend on Eviosys' ability to pass on cost inflation to its customers. Steady EBITDA Margin Improvement: Eviosys' 2022 margin was significantly ahead of expectations on strong price increases, despite softer volumes, and due to inventory-repricing effect. Fitch therefore estimates 2022 EBITDA to have been higher than its previous forecast, and for Eviosys to maintain a steady margin improvement from 2024. This should bring EBITDA margins more in line with peers' and result in a financial profile that is stronger than the current rating. The group's EBIT margin has historically been weaker than many peers', although Fitch expects steady improvement over 2022-2026. Temporary Free Cash Flow (FCF) Pressure: Fitch estimates marginal FCF generation in 2022, due to higher- than-expected Fitch-defined working capital (WC) outflow on increased use of factoring, the cessation of supply-chain financing facility usage, and larger capex than historically. Fitch forecasts a solid positive FCF margin of over 3.5% starting from 2023 despite ongoing higher capex at about 3% of revenue this year. This will be driven by strong pricing resulting in higher EBITDA margins, which Fitch expects to be largely maintained through cost optimisation and the absence of regular dividend payments. Capex has historically been around 1.5%-2% of revenue and Fitch expects this to return to around 2% over 2024-2026 to support growth. Strong Market Position: Eviosys is the largest metal food can producer in Europe with a market share of about 39%, supported by stable, non-cyclical end-markets. The group benefits from moderate to high barriers to entry that include a broad network of production facilities, and long-term relationships with key customers as well as suppliers of tinplate, the group's core raw material. Exposure to Europe Partly Mitigated: Eviosys' European exposure leaves the group vulnerable to energy rationing (gas usage is limited) although this is partly mitigated by packaging being an integral part of the food supply chain and by this risk peaking in 1Q and 4Q, which are the quieter manufacturing periods for Eviosys. Moreover, Eviosys has managed to hedge a material share of energy costs for 2023 and increased prices to additionally cover energy costs. Limited Diversification: Eviosys has limited geographical diversification as it is mainly concentrated in Europe. Its production facilities are located close to food producers'. About 85% of Eviosys' revenue is exposed to the production of metal food cans, which limits product diversification versus higher-rated peers'. This is mitigated by stable demand from food producers and supports Eviosys' solid position in the metal food can market. Stability from Contracted Positions: A significant part of sales, albeit lower than that of some Fitch-rated peers, is secured by long-term contracts with a cost pass-through mechanism, which enables the group to mitigate raw-material price volatility. Eviosys further benefits from an annual pricing arrangement with both customers and key raw material suppliers, thereby fixing a significant portion of both its revenue and cost base and limiting its volatility exposure. End-Markets Provide Resilience: Eviosys is exposed to a broad range of non-cyclical end-markets that are 95% covered under food, including fruit & vegetables, fish, pet food and infant formula. The high level of proven recyclability of metal can products places it favourably in comparison with some competing materials, particularly in light of increasing environmental regulations and customer concerns or requirements. DERIVATION SUMMARY Eviosys' business profile is weaker than that of higher-rated peers such as Smurfit Kappa Group plc (BBB-/Stable), Berry Global Group, Inc (BB+/Stable), Silgan Holdings Inc. (BB+/Stable) and CANPACK S.A. (BB-/Negative) due to a less diversified geographical presence and a more limited product range. This is mitigated by its leading market position in food metal packaging and expected sustainably strong FCF generation. Eviosys compares favourably with CANPACK and Ardagh Metal Packaging S.A. (AMP; B/Stable), which are focused on beverage metal packaging. Eviosys has similar scale to CANPACK but is much smaller than AMP. Similarly to these peers, Eviosys has limited product diversification. Eviosys' EBITDA margin historically was lower versus Fitch-rated peers', before rising in 2022 ahead of our expectations. Fitch expects its EBITDA margin to be healthy at over 15% during 2022-2026, which compares well with peers' reported 13%-20%. Fitch continues to forecast sustainably positive FCF margin of over 3.5% from 2023, which is comparable with that of Silgan Holdings Inc. (4.5%-6.6%) and Berry Global Group, Inc. (6.4%-8%). Eviosys' spin-off from Crown Holdings Inc lifted its Fitch-defined EBITDA leverage in 2021 to 7.5x. However, profitability improvement should allow the group to reduce EBITDA leverage to about 5.5x in 2023 despite the additional debt issue, followed by gradual improvement over the rating horizon. Its closest highly leveraged peer is Ardagh Group with leverage at over 9x in 2021, but its business profile is stronger than Eviosys' with greater diversification and a better contract structure with pass-through of most costs. Forecast strong cash flow generation should allow Eviosys to reduce EBITDA leverage to below 5.0x by end-2025, which supports our Positive Outlook. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue to have grown in high double digits in 2022, followed by high single digit in 2023 and low single digit during 2024-2026 - EBITDA margin of 17.1% in 2022, about 15% in 2023 before rising to 16.4% by 2026 - WC outflow of more than EUR200 million in 2022, and normalising from 2023 - Capex at about EUR75 million in 2022 and EUR90 million in 2023, and about EUR50 million p.a. during 2024-2026 - No regular dividend payments to 2026 - New TLB issue of up to EUR350 million with maturity due 2028 for dividend distribution - No M&A to 2026 - No additional dividend recapitalisation over the rating horizon Key Recovery Rating Assumptions: - The recovery analysis assumes that Eviosys would be deemed a going concern (GC) in bankruptcy and that it would be reorganised rather than liquidated - Its GC value available for creditor claims is estimated at about EUR1.5 billion, based on its revised GC EBITDA of EUR275 million. - GC EBITDA also assumes a loss of a major customer and a failure to broadly pass on raw-material cost inflation to customers. The assumption also reflects corrective measures taken in reorganisation to offset the adverse conditions that trigger its default - A 10% administrative claim - An enterprise value (EV) multiple of 5.5x EBITDA is applied to GC EBITDA to calculate a post-reorganisation EV. The multiple is based on Eviosys' strong market position in Europe with resilient performance during the pandemic, good customer diversification with a long record of cooperation, and expected strong FCF generation. At the same time, the EV multiple reflects the group's concentrated geographical diversification and limited range of products - Fitch deducts about EUR425 million from the EV, due to Eviosys' high usage of factoring facility adjusted for discount, in line with Fitch's criteria - Fitch estimates the total amount of senior debt claims at EUR2,125 million, which includes an EUR275million senior secured RCF, EUR1,175 million senior secured TLB, EUR350 million senior secured additional TLB and EUR375 million subordinated notes - The allocation of value in the liability waterfall results in recovery corresponding to 'RR3'/52% for the TLBs and a recovery corresponding to 'RR6'/0% for the subordinated notes RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - EBITDA gross leverage below 6.0x on a sustained basis supported by a consistent financial policy - EBITDA margin above 16% on a sustained basis - FCF margin sustained above 1% Factors that could, individually or collectively, lead to negative rating action/downgrade: - Operating EBITDA/interest paid below 2.5x - Neutral to negative FCF margin on sustained basis - EBITDA gross leverage not declining below 7.0x by end-2023 LIQUIDITY AND DEBT STRUCTURE Healthy Liquidity: At end-2022 Eviosys reported Fitch-defined readily available cash of EUR242million, which was adjusted for EUR15 million to cover intra-year WC needs. Following the carve-out from Crown in 2021 Eviosys has no material scheduled debt repayments until 2028. The new proposed debt will also mature in 2028. Fitch-adjusted short-term debt is represented mainly by a drawn factoring facility of about EUR493million. This debt self-liquidates with factored receivables. In addition, Eviosys has an undrawn RCF facility of EUR275 million due in 2028, which supports its liquidity position. Eviosys' improvement in EBITDA and FFO generation and the general absence of dividend payments will further sustain positive FCF generation and in turn the group's healthy liquidity. ISSUER PROFILE Eviosys is the largest metal food can producer in Europe with a market share of about 39% and 45 manufacturing facilities across 17 countries. Eviosys is the former European tinplate business of Crown Holdings Inc. 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 ----------- ------ -------- ----- Titan Holdings II B.V. LT IDR B Affirmed B Subordinated LT CCC+ Affirmed RR6 CCC+ Kouti B.V. senior secured LT B+(EXP)Expected Rating RR3 senior secured LT B+ Affirmed RR3 B+ =========== S E R B I A =========== SERBIA: Fitch Affirms 'BB+' Foreign Currency IDR, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Serbia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook. KEY RATING DRIVERS Rating Fundamentals: Serbia's rating is supported by its credible macroeconomic policy framework, prudent fiscal policy, and somewhat stronger governance, human development and GDP per capita compared with 'BB' medians. Set against these factors are Serbia's greater share of foreign-currency-denominated public debt and higher net external debt than peer group medians, as well as a high degree of banking sector euroisation. Exchange rate stability underpinned relative macroeconomic stability in 2022 despite the shock of the war in Ukraine, but geopolitical risks linger. Resilient External Position: FX reserves increased in 2022 to an all-time high of EUR19.5 billion at end-December, despite a sharp energy-driven deterioration in the current account balance, demonstrating resilience to the confidence shock from the war in Ukraine. The current account deficit widened to 7% of GDP in 2022 from 4.3% in 2021 almost entirely driven by a widening of the trade deficit caused by higher energy imports. This was fully financed by net FDI inflows and bolstered by funds from the UAE and a new IMF programme. Stable Balance of Payments Outlook: Fitch expects balance of payment trends to support continued exchange rate stability throughout the forecast period to end-2024. Fitch expects the current account to narrow to an average of 6% of GDP in 2023-2024 as energy import volumes fall, reflecting the stocks built during 2022, and prices ease, particularly in 2024. FDI flows will remain robust and support further export expansion, while IT services will benefit from the inflow of Russians enhancing an already buoyant domestic sector. A Eurobond issue in January raised USD1.75 billion, lifting reserves to EUR20.9 billion at the end of the month. A further modest nominal increase is expected, keeping reserves at around 4.7 months of current external payments, in line with the 'BB' median. Energy Costs Dent Fiscals: The general government deficit was 3.1% of GDP in 2022 compared with the target of 3.9% in the revised budget adopted in November and a 4.1% deficit in 2021. This was largely driven by the impact of inflation on tax revenue and contained current expenditure growth and came despite net lending of around 1.8% of GDP to cover losses in the energy sector. The 2023 budget anticipates smaller energy-related transfers, and Fitch assumes that retail price hikes for gas and electricity together with cautious revenue assumptions mean the deficit will fall to 2.7%. Declining Debt/GDP Trend: A further decline in commitments for the energy sector and a reviving economy will pull the deficit down to 1.4% of GDP. Continued primary surpluses will lower general government debt from to 55.7% of GDP in 2022 to 50.5% in 2024, below the forecast 'BB' median of 55.0%. Medium-term fiscal dynamics should be underpinned by a new fiscal rule. External Demand Hits Growth: Fitch projects real GDP growth of 1.8% in 2023, from 2.3% in 2022, reflecting the low carry over from 4Q22 and ongoing weakness in export markets, although FDI-supported real export growth will continue. Domestic demand will remain the main source of growth reflecting the strong labour market, and growth should be bolstered by the potential normalisation of the agricultural season and electricity production. Growth is forecast to revive to 3.8% in 2024 as monetary policy is eased, lower inflation reduces pressure on disposable incomes and external conditions improve. Inflation Close to Peak: Headline inflation looks set to peak in 1Q23 after reaching an 11-year high of 15.1% in December, and is high relative to rating peers ('BB' median 7.4%). Food and energy prices have accounted for the bulk of the rise in inflation over the past 18 months and a hike in household electricity and gas prices will push the headline rate up. Core inflation was well below headline inflation, at 10.1% in December, reflecting exchange rate stability and a 450bp tightening of the main monetary policy rate. Tighter monetary policy and base effects should pull headline inflation back into single digits by the end of the year. Private sector wages are running above inflation, but seemingly consistent with a rise in productivity. Financial and corporate sector inflation expectations appear anchored, at 4% and 5%, respectively, for the three years ahead. Possible EU Accession Momentum: Approval of a new French/German proposal to stabilise relations with Kosovo would give impetus to EU accession talks. It could also ease pressures caused by Serbia's neutral position on the war in Ukraine, although Serbia will remain reliant on Russian gas for at least another three years. Fitch considers that EU accession remains a key policy anchor for the government. Any agreement on Kosovo is necessary, but not sufficient, for progress given EU concerns about the rule of law. However, a more severe dislocation of the process could negatively impact foreign investment, although this is not our base case. Governance, as measured by the World Bank, is just below the 'BB' median. Resilient Banks: Banks have smoothly weathered the shock of the war. Capital adequacy has strengthened, to 19.5% at end-3Q22, and the non-performing loan ratio was at an historical low of 3% at end-2022 (with coverage of 58%). Retail depositors have rebuilt dinar savings after a drop in March, although the share of foreign-currency deposits, at 61% of the total, is well above the peer median of 19%. 84% of the sector (by assets) is foreign-owned, reducing contingent liability risk. ESG - Governance: Serbia has an ESG Relevance Score of '5' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Serbia has a medium WBGI ranking, at the 47th percentile, reflecting a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - External Finances: An increase in external vulnerabilities, for example, from intensified financing pressures or a worsening of imbalances, leading to a fall in FX reserves, or higher external debt and interest. - Macro: Severe shock to economic growth, for example from recession in the EU, markedly lower FDI, and/or energy shortages potentially resulting from an unexpected deterioration in relations with Russia or from the impact of tighter EU sanctions on Russian ownership of Serbia's energy sector. - Public Finances: A sustained increase in general government debt/GDP over the medium term, for example, due to a structural fiscal loosening and/or weaker GDP growth prospects, or a sharp rise in the debt and interest burdens due to currency depreciation. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Public Finances: A fiscal stance that puts general government debt/GDP on a firm downward path over the medium term - Macro: An improvement in medium-term growth prospects that increase the pace of convergence in GDP per capita with higher rated peers; for example, due to structural reforms that enhance economic governance. - External Finances: Reduction in external vulnerabilities; for example, from lower banking sector euroisation, and a fall in overall net external debt/GDP. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Serbia a score equivalent to a rating of 'BB+' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee did not adjust the output from the SRM to arrive at the final LT FC IDR. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. ESG CONSIDERATIONS Serbia has an ESG Relevance Score of '5' for Political Stability and Rights as WBGI have the highest weight in Fitch's SRM and are highly relevant to the rating and a key rating driver with a high weight. As Serbia has a percentile below 50 for the respective Governance Indicator, this has a negative impact on the credit profile. Serbia has an ESG Relevance Score of '5' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as WBGI have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Serbia has a percentile rank below 50 for the respective Governance Indicators, this has a negative impact on the credit profile. Serbia has an ESG Relevance Score of '4' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the WBGI are relevant to the rating and a rating driver. As Serbia has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile. Serbia has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Serbia, as for all sovereigns. As Serbia has a fairly recent restructuring of public debt in 2004, this has a negative impact on the credit profile. Except for the matters discussed above, the highest level of ESG credit relevance, if present, 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 to the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Serbia LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B LC LT IDR BB+ Affirmed BB+ LC ST IDR B Affirmed B Country Ceiling BBB- Affirmed BBB- senior unsecured LT BB+ Affirmed BB+ ========= S P A I N ========= TECPETROL INTERNATIONAL: Fitch Affirms & Then Withdraws 'BB' IDRs ----------------------------------------------------------------- Fitch Ratings has affirmed and simultaneously withdrawn Tecpetrol Internacional S.L.'s (Tecpint) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'BB'. The Rating Outlooks are Stable. Tecpint's ratings and Outlooks reflects its strong business position, production profile, large reserve base, low leverage, and strong and predictable cash flow profile supported by contracted volumes and prices in both Peru and Argentina. Although 90% of its EBITDA comes from operating environments rated 'B' or below, with Argentina contributing 80%, the company's ratings are not capped by a country ceiling. The applicable country ceiling for Tecpetrol is Peru, as Fitch estimates EBITDA covers consolidated interest expense by an average 4.8x. The company is expected to maintain a conservative leverage profile of less than 1.0x, on average each year over the rating horizon. Fitch has chosen to withdraw Tecpetrol's ratings for commercial reasons. KEY RATING DRIVERS Diversified Asset Base: Tecpint's diversified asset base is a credit positive. The company has oil and gas exploration and production operations in six countries across Latin America (Argentina, Peru, Ecuador, Mexico, Colombia and Bolivia) as well as gas transportation and distribution in Argentina and Mexico, and electricity generation in Mexico. The company's principal reserves are in Peru (19%), Bolivia (3%), Colombia (3%), Mexico (1%) Ecuador (5%) and Argentina (70%). Approximately 60% of E&P revenues come from sales of oil and gas and services from Argentina. Camisea Stake: Tecpint's 10% ownership stake in blocks 88 and 56 within the Camisea natural gas field in Peru contributed nearly 20% of its EBITDA in 2022. The stake provides stable and predictable cash flows. Fitch forecasts Camisea's contribution to Tecpint's EBITDA will alone be more than adequate to cover interest expense, on average 4.8x, in 2022. Camisea's reserve life is estimated to extend for more than 25 years, although the license agreements for Camisea's two blocks, 88 and 56, expire in 2040 and 2044, respectively. Strong Production Profile and Hydrocarbon Reserve Life: Tecpint's ratings reflect the company's medium production size, consistent with the low 'BBB' rating category, and relatively strong reserve life of approximately 11 years compared with peers. In 2022, Tecpint's total owned production is expected to average 190,000 boed (69 million boe in the year) of which 78% is gas, and the remainder is liquids. As of 2Q22, Tecpint had proved reserves of 753 million boe (80% gas and 20% liquids). Strong Financial Profile: Tecpint's contracted volumes coupled with low cost production profile support its predictable cash flow profile. Fitch expects EBITDA of $1.25 billion in 2022. EBITDA margin remains strong, estimated at 57% in 2022, down from 69% in 2021 reflecting higher operating costs. Fitch estimates EBITDA margin will be around 50% through the rating horizon. FCF for 2022 is estimated at USD273 million, and Fitch's base case reflects negative FCF. Total debt to 1P reserves is $1.1 per barrel of oil equivalent, among the lowest in the region. Contracted Gas Production in Argentina: Tecpint has minimal volume risk as a majority of its revenues are contracted under Plan Gas 5 (PG5). In 2022, Fitch assumes 12 million cubic meters per day sold at USD3.6 MMBTU through 2028, resulting in an average revenue of USD430 million per annum. Tecpint is exposed to payments from the Argentine federal government, which, despite a history of payment delays, has maintained payables to the company of under 30 days in the last two years. Given its strong liquidity and cash flow profile, Fitch does not expect a material impact on the company over the rating horizon, should the Argentine government significantly delay payments. DERIVATION SUMMARY Tecpint's production is expected to average 189,000 boed over the rating horizon and maintain a strong 1P reserve life of at least 10 years, which compares favorably with other 'BB' rated oil and gas producers. These peers include Pan American Energy (BB-/Stable) with 226,000 boed and 20 years reserve life, Murphy Oil Corporation (BB+/Stable) with 196,000 of boed and 11.7 years and YPF SA (CCC-) with 529,000 of boed and 6.7 years. Tecpint's Argentine peer Pan American Energy is capped by Argentina 's 'B-' Country Ceiling, but receives multiple-notch uplift, due to its strong liquidity profile and cash flows from Bolivia and its Mexican operations. Pan American Energy's Stable Outlook reflects the company's stable production track record, large reserve base, and low leverage. YPF's rating is equalized with the rating of Argentina, due to the government's 51% ownership and the company's strategic importance to the country. Tecpint's capital structure is strong. Fitch expects gross leverage (total debt to EBITDA) to be 0.6x in 2022, which is in line with Pan American Energy at 1.1x, Murphy Oil at 0.8x and YPF at 1.2x. On debt to 1P reserves, Fitch estimates Tecpint's 2022 debt to 1P reserves are USD1.1 boe, comparable with Pan American Energy at USD1.75 boe, and stronger than Murphy Oil (USD2.60 boe) and YPF (USD5.86 boe). KEY ASSUMPTIONS Fitch makes the following assumptions within the rating case of the Issuer: - Production in Ecuador, Mexico and Peru to remain flat through 2026, and slow decrease in Bolivia; - Production increase in Colombia to 10k boe/d by 2024; - Fortin de Piedra gas production average of 18 million cubic meters per day from 2022 through 2026; - Realized gas prices of $3.60 MMBTU in Argentina under Plan Gas 5 from 2022 through 2026 applied to an average of 14 million cubic meters per day; - Fitch's Brent oil price assumptions USD100 per bbl for 2022, USD85 per bbl for 2022and USD53/bbl for the long term; - EBITDA margins expected to remain at an average of 51% from 2022 through 2026; - Total capex of USD 4.2 billion between 2022-2026; - Dividends USD210 million paid in 2022 and $50 million in 2023; - Peruvian EBITDA from CAMISEA average 190 million from 2022 through 2025. RATING SENSITIVITIES Rating sensitivities do not apply because the ratings have been withdrawn. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Tecpint reported a cash position of USD784 million in 3Q22. Fitch estimates with cash on hand and cash flow at the end of FY 2022, and the company can comfortably repay minimal repayment of 2023 maturities of 270 million. In November 2022, the company successfully refinanced its USD500 million bond with USD300 million in syndicated loans. They paid off the remainder of the bond in cash. ISSUER PROFILE Tecpint is the ultimate parent of all Tecpetrol operating companies. Tecpint has E&P assets in Argentina, Peru, Ecuador, Mexico, Colombia, Bolivia. Its oil and gas production in 2022 was 189 kboe/d with proved reserves of 750 MM boe. 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 ----------- ------ ----- Tecpetrol Internacional S.L. LT IDR BB Affirmed BB LT IDR WD Withdrawn BB LC LT IDR BB Affirmed BB LC LT IDR WD Withdrawn BB =========== T U R K E Y =========== TAKASBANK: Fitch Affirms 'B' LongTerm IDRs, Outlook Negative ------------------------------------------------------------ Fitch Ratings has affirmed Istanbul Takas ve Saklama Bankasi A.S.'s (Takasbank) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B' and its Viability Rating (VR) at 'b-'. The Rating Outlooks are Negative. KEY RATING DRIVERS Government Support Drives IDRs: Takasbank's Long-Term IDRs and Government Support Rating (GSR) reflect its view of a limited probability of support from the Turkish sovereign. The Negative Outlook mirrors that of the sovereign. The affirmation of the National Long-Term Rating at 'AAA(tur)' with Stable Outlook reflects Fitch's view of Takasbank's unchanged creditworthiness relative to other domestic issuers'. Systemic Importance in Turkiye: Takasbank's GSR is higher than most commercial systemically important domestic banks'. This is because, in its opinion, Takasbank has exceptionally high systemic importance for the Turkish financial sector. Contagion risk from Takasbank's default would be considerable, given the bank's inter-connectedness with the wider Turkish financial sector as Turkiye's only central counterparty clearing house (CCP). Fitch believes that the ability of the Turkish sovereign to support Takasbank is higher than for the development and systemically important domestic banks as Takasbank has no corporate debt and has only minor direct foreign-currency exposure. Treasury Activities Weigh on VR: Takasbank's VR is constrained by its sizeable credit exposure to major bank counterparties. While Fitch views Takasbank's credit and market risks in its core clearing activities as well-managed and in isolation supporting a VR above its assessment of Turkiye's operating environment, its overall view is weighed down by Takasbank's considerable concentration risk in its sizeable treasury activities with the largest bank exposures accounting for up to 8x its equity base. This increases its sensitivity to a deterioration in commercial banks' credit quality. Turkiye's large banks (with VRs typically at 'b-') are consistently the largest counterparties in Takasbank's treasury activities. Dominant Local Franchise: Takasbank's VR is underpinned by the bank's dominant franchise as the country's only clearing house. In the context of the weak operating environment, it is further supported by sound counterparty-risk management, well-developed regulations, limited direct credit risk in its CCP activities (supported by sound risk controls and availability of adequate default-management resources), as well as a reasonable liquidity profile. Strong Core Profitability: Takasbank's substantial non-CCP treasury activities lead to materially larger net interest income as a share of revenue (51% in 9M22) than at conventional banks. Core business revenue comprising fee revenue from CCP operations and custody commissions was growing with 56% annualised growth in 9M22. The core business is strong, as net fee income comfortably covered operating expenses by 1.8x, and its non-interest expense/ gross revenue (cost-to- income) was low at 23% at end-9M22. Takasbank's return on average equity (ROAE) was solid at 41% in 9M22 and we expect profitability to remain strong in 2023 given continued growth in trading activity and negative real interest rates in Turkiye. Rapid Growth Pressures Capitalisation: Takasbank's capitalisation ratio weakened to 15.7% in 9M22 (2021: 19.7%), mainly on the back of rapid growth in risk-weighted assets. Fitch believes the bank's capital base is able to withstand defaults of all clearing counterparties, except for the two largest, even under significant stress. At the same time, defaults in Takasbank's highly concentrated treasury portfolio could have a more adverse impact on its capitalisation. Majority State-Owned: Takasbank is Turkiye's only CCP and is majority-owned by Borsa Istanbul, Turkiye's main stock exchange. Borsa Istanbul is in turn majority-owned by the Turkiye Wealth Fund (B/Negative). It operates under a limited banking licence, and is regulated by three Turkish regulatory bodies: Central Bank of Turkiye, Banking Regulation and Supervision Agency and the Capital Markets Board . RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: A downgrade of Turkiye's sovereign rating would be mirrored in Takasbank's IDRs. Deterioration in the sovereign's propensity to provide support due to an adverse change in Takasbank's systemic importance or reduced ownership (through privatisation) would be reflected in its GSR, IDRs and the National Rating. Deterioration in the credit profiles of Takasbank's main commercial bank counterparties would put pressure on Takasbank's VR. A material operational loss or a materially increased risk appetite, for example, in the bank's treasury activities, particularly to lower credit-quality counterparties, would also put pressure on Takasbank's VR. Factors that could, individually or collectively, lead to positive rating action/upgrade: A positive rating action on Turkiye's sovereign rating would be mirrored in Takasbank's IDRs. Improvement in the credit profiles of Takasbank's main bank counterparties and a material reduction in the size or concentration of Takasbank's treasury activities could, in conjunction with unchanged or improving financial-profile metrics, lead to an upgrade of Takasbank's VR. ESG CONSIDERATIONS Takasbank has an ESG Relevance Score of '4' for Governance Structure due to potential government influence over the board's strategy and governance, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of 3. This means that other ESG issues are credit-neutral or have only a minimal credit impact, either due to their nature or to the way in which they are being managed. Entity/Debt Rating Prior ----------- ------ ----- Istanbul Takas ve Saklama Bankasi A.S. LT IDR B Affirmed B ST IDR B Affirmed B LC LT IDR B Affirmed B LC ST IDR B Affirmed B Natl LT AAA(tur)Affirmed AAA(tur) Viability b- Affirmed b- Government Support b Affirmed b TAM FINANS: Fitch Affirms 'BB' Foreign Curr. IDR, Outlook Negative ------------------------------------------------------------------ Fitch Ratings has affirmed Tam Finans Faktoring A.S.'s (Tam Finans) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B-' with Negative Outlook. KEY RATING DRIVERS Standalone Ratings: Tam Finans's ratings are driven by its standalone financial strength and reflect the company's small franchise, a business model focused on higher-risk small businesses operating in a challenging operating environment and a growing regulatory burden on its operations. The ratings also reflect its consistently strong profitability, small credit losses despite the inherently high-risk business model, a granular portfolio, low market risk, a liquid balance sheet and diversified, albeit largely secured, funding sources. High Leverage a Rating Constraint: Tam Finans's gross debt/tangible equity was 9.2x at end-1H22 (end-2021: 9.3x), considerably higher than the sector average of 5.2x (end-2021: 4.7x). Capital is tightly managed as its shareholders (a private equity firm) are focused on maximising valuation multiples given their long-term intention to exit with best possible returns. Fitch believes that high leverage results in a weak buffer against potential losses. Fitch views Tam Finans's high leverage as a key rating constraint. Limited Market Risk; Funding Constraints: Tam Finans's funding and liquidity position are supported by its highly liquid balance sheet. Around 90% of assets are short-term factoring receivables with an average maturity of around 100 days. Exposure to market risk is low given the absence of foreign-exchange (FX) exposures and low sensitivity to interest-rate risk as maturities of assets and liabilities are broadly matched. The short-term nature of the balance sheet allows the company to reprice assets in line with changes in funding costs. However, the operating environment in Turkiye and recent regulatory changes weigh on its assessment of Tam Finans's funding and liquidity profile. Stable and Sound Profitability: Fitch assesses Tam Finans's profitability on a risk-adjusted basis with return on assets (ROA) being a better indicator than return on equity due to the company's high leverage. Despite its small size and high-risk customer base, Tam Finans's pre-tax income/average assets since 2018 (including 1H22) averaged 4.9%, slightly better than the sector average of 4.5%. Its business model is cost-intensive due to small ticket sizes and the labour-intensive nature of sales, which highlights the importance of gaining further scale. Cost/Income Higher than Sector's: Tam Finans's average cost/income since 2018 was 58%, considerably higher than the sector average of 33%. In Fitch's view, the earthquake disaster in Turkiye will negatively affect Tam Finans' earnings this year through larger credit losses, although the net impact will likely be moderate. Well-Managed Credit Risk: Tam Finans's impaired receivables/gross receivables was low at 1% at end-H122 (end-2021: 2%), well below the sector average of 2.2%. However, due to accelerated write-off policies at Tam Finans, Fitch considers its impairment charges/average gross receivables a better indicator for the overall cost of risk. Since 2018, this ratio averaged 2.3%, above the 1.7% sector average. Fitch assesses Tam Finans's larger credit losses in conjunction with its wider profit margins and believes that its asset quality is well-managed given its high-risk business model. Niche Segment: Tam Finans started its operations in 2012 to serve micro SMEs in Turkiye. Founding shareholders were Actera Group (a Turkiye-based private-equity fund) and EBRD (with a 9.5% minority share). The company has since 2015 grown to control as of end-9M22 a 3.7% market share in Turkiye's competitive factoring sector. It focuses on small-ticket financing to higher-risk under-banked businesses. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - Further deterioration in the domestic operating environment that affects its assessment of asset quality and earnings, which in turn would lead to a lower tolerance for leverage - A material and sustained increase in leverage above 10x, assuming a broadly unchanged operating environment, could lead to downgrade of the IDRs primarily due to weakened access to funding and liquidity - Sharp deterioration in asset quality or profitability that increases solvency risk - Deterioration of the above factors relative to domestic peers' could lead to a downgrade of the National Rating Factors that could, individually or collectively, lead to positive rating action/upgrade: - Stabilisation of Turkiye's operating environment, coupled with Tam Finans's resilient performance, could lead to a revision of the Outlook to Stable - Materially lower leverage and an improved franchise while maintaining other financial metrics at current levels could lead to an upgrade of the National Rating, indicating improved creditworthiness relative to other domestic peers' 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 ----------- ------ ----- Tam Finans Faktoring A.S. LT IDR B- Affirmed B- ST IDR B Affirmed B LC LT IDR B Affirmed B LC ST IDR B Affirmed B Natl LT A-(tur) Affirmed A-(tur) =========================== U N I T E D K I N G D O M =========================== AARTEE BRIGHT: GFG Seeks to Overturn Administration Process ----------------------------------------------------------- Anna Cooper at TheBusinessDesk.com reports that GFG Alliance (GFG) says it is "continuing to fight" for 250 steel jobs through its application to overturn the administration process of Aartee Bright Bar. Aartee Bright Bar was acquired by GFG as it purchased all shares in the Singapore-based Aartee Group Pte, TheBusinessDesk.com discloses. GFG Alliance is the family group of steel magnate Sanjeev Gupta, and it has acquired Aartee Group, which is a shareholder in two companies -- Aartee Bright Bar Ltd and Aartee Bright Bar Property Ltd -- which went into administration two weeks ago following a creditor dispute, TheBusinessDesk.com recounts. According to TheBusinessDesk.com, Jeffrey Kabel, chief transformation officer, said: "On Friday, February 24, GFG will take its fight to save Aartee Bright Bar to court with its application to reverse the administration and save 250 viable steel jobs across the UK. "GFG believes the administration is unjustified and unnecessary, and risks an ongoing insolvency process that will lead to significant job losses and a fire sale of the business' assets. "The alternative is clear -- maintain the business as a going concern and integrate it into LIBERTY Steel's UK operations securing workers livelihoods and protecting a vital part of the UK's steel supply chain and distribution network. "We strongly urge all stakeholders to get behind GFG's bid to save the business." Aartee is headquartered in Willenhall and has sites in Dudley, Rugby, Southampton and Newport. CINEWORLD GROUP: Yet to Receive Any Offers to Buy Whole Company --------------------------------------------------------------- Oliver Barnes at The Financial Times reports that Cineworld, the world's second-biggest cinema chain, is yet to receive any offers to buy the whole company out of bankruptcy following a deadline for interested parties to declare their intention to bid. According to the FT, Joshua Sussberg, a lawyer representing Cineworld, told a US bankruptcy court in Texas on Feb. 21 that the debt-saddled cinema operator had contacted a "broad universe" of about 40 potential suitors to discuss a sale since early January. But while Cineworld received "many offers" for its operations outside of the US and the UK, its two biggest markets, potential buyers only expressed "some strategic interest in the full business" and did not come forward with a firm offer, the FT notes. Last month, the cinema operator, which owns the Regal Cinemas chain in the US and the Picturehouse brand in the UK, initiated a sales process "focused on proposals for the group as a whole", stressing that it had no plans to sell "any of its assets on an individual basis", the FT relates. Cineworld, which entered into bankruptcy protection last September after crumbling under net debt and lease liabilities that had ballooned to US$8.8 billion, also operates more than 100 cinemas across eastern Europe under the Cinema City brand and 10 in Israel, the FT recounts. Mr. Sussberg added that Cineworld "did not receive any all-cash bids and no bid came anywhere near the $6 billion of secured indebtedness that exists on the company's balance sheet today". The final deadline for a bid is set for April 10, the FT discloses. With no signs of a buyer in sight, lawyers for Cineworld and its secured lenders are pushing ahead with plans for a debt-for-equity swap, which would give the creditors control of the business and probably wipe out the existing shareholders, accordng to the FT. A debt for equity transaction could be approved by the end of May, with a restructuring agreement in place by next week, the FT states. In October, Cineworld agreed a US$1 billion debt repayment with its first lien lenders, many of which were landlords, the FT recounts. Following the agreement, the highest priority lenders are now a group of institutional investors, including Invesco, Eaton Vance and Fidelity, known as the legacy lender group, the FT states. According to the FT, a person close to the group said it was "no surprise" that no bidders came forward looking to spend "billions in cash on a struggling company". They added that it was still possible some assets may be sold individually, despite Cineworld's ambitions to avoid this, the FT says. FERGUSON MARINE: Misses Accounts Filing Deadline ------------------------------------------------ BBC News reports that the troubled Ferguson Marine shipyard in Port Glasgow has been warned it may be forced to stop trading after missing a deadline for filing accounts. It is building two Cal-Mac ferries -- but their cost is now well over double the original contract price, and delivery is more than five years late. According to BBC, Companies House required the Scottish government-owned firm to submit its annual accounts by the end of December. Ferguson said it expected the accounts to be submitted by the end of March, BBC relates. Companies House issued a public notice warning that it could strike off the firm if it fails to file them, BBC discloses. Ferguson's chief executive David Tydeman said that auditors Grant Thornton were handling what he called "outstanding issues" with the Scottish government and the public spending watchdog Audit Scotland, BBC notes. The accounts require the approval of MSPs before being submitted to Companies House, BBC says. It is expected Ferguson will have to pledge to cover its losses over the delayed and over-budget construction of the two Cal-Mac ferries before auditors sign off the company as financially secure and a going concern, according to BBC. The shipyard collapsed into administration and was nationalised in 2019 amid an acrimonious dispute between former owner Jim McColl and the government's ferries agency CMAL, who both blamed each other for the problems, BBC recounts. In November, the Scottish government chose former Prestwick Airport chairman Andrew Millar to take over as chairman of Ferguson Marine. LLANYRAVON COURT: Former Cwmbran Care Home Put Up for Sale ---------------------------------------------------------- Business Sale reports that a former care home in Cwmbran, Monmouthshire has been put up for sale with an asking price of GBP750,000 after the company that operated it fell into administration. The former Llanyravon Court Nursing Home was owned by Llanyrafon Court Limited, which entered liquidation in January 2023, Business Sale relates. According to Business Sale, joint liquidators Chris Stevens and Steve Baluchi of FRP Advisory have now engaged Christie & Co to market the home for sale. The freehold interest of the property, which has remained empty since it closed for trading in November 2022, is being sold on a closed basis with vacant possession and all fixtures, fittings and goodwill included, Business Sale discloses. The nursing home was originally constructed in the late 1980s and an additional extension was added in 2008. The property traded as a three-storey nursing home, featuring 50 bedrooms, 41 of which included en-suite WC facilities, and also has a rear enclosed garden, Business Sale states. NEW DAY FUNDING: Fitch Affirms B+sf Rating on VFN-F1V2 Cl. F Notes ------------------------------------------------------------------ Fitch Ratings has affirmed NewDay Funding Master Issuer Plc's series VFN-F1 V2 notes and NewDay Partnership Funding's series VFN-P1 V2 notes following amendments. None of the trusts' other outstanding notes are affected by the amendments. Entity/Debt Rating Prior ----------- ------ ----- NewDay Partnership Funding VFN-P1 V2 Class A LT AAAsf Affirmed AAAsf VFN-P1 V2 Class B LT AAsf Affirmed AAsf VFN-P1 V2 Class C LT A-sf Affirmed A-sf VFN P1 V2 Class D LT BBB+sf Affirmed BBB+sf VFN-P1 V2 Class E LT BBB-sf Affirmed BBB-sf NewDay Funding Master Issuer Plc VFN-F1 V2 Class A LT A+sf Affirmed A+sf VFN-F1 V2 Class E LT BBsf Affirmed BBsf VFN-F1 V2 Class F LT B+sf Affirmed B+sf TRANSACTION SUMMARY NewDay Partnership Funding's notes are collateralised by a pool of UK credit card, store card and instalment loan receivables originated by NewDay Ltd. The receivables arise under a number of retail agreements. NewDay Funding's notes are collateralised by a pool of non-prime UK credit card receivables originated by NewDay Ltd. Series VFN-P1 V2 and VFN-F1-V2 provide funding flexibility, which is necessary for credit card trusts. KEY RATING DRIVERS Increased Margins: The margins for the class A notes of NewDay Funding's VFN-F1 V2 and the class A, B and C notes for NewDay Partnership Funding's VFN-P1 V2 have increased. However, there have been no changes to the advance rates. The ratings of all classes of notes in both VFN series are unchanged. Fitch looks through to the maximum commitment amounts. Asset Assumptions Unchanged: These rating actions only address the impact of the amendments to the structure, meaning that asset assumptions are unchanged. For NewDay Funding Master Issuer's VFN-F1 V2, Fitch maintains a steady-state charge-off rate of 18%, a steady-state monthly payment rate of 10% and a steady-state yield of 30% for the trust. For NewDay Partnership Funding VFN-P1 V2 Fitch maintains a steady-state charge off rate at 8%, steady-state monthly payment rate of 20% and steady-state yield of 22% for the trust. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: This section provides insight into the model-implied sensitivities the transactions face when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in upside and downside environments. The results below should only be considered as one potential outcome, as the transactions are exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. NewDay Funding VFN-F1 V2: Rating sensitivity to increased charge-off rate: Increase steady state by 25% / 50% / 75% VFN-F1 V2 A: 'A-sf' / 'BBB+sf' / 'BBBsf' VFN-F1 V2 E: 'B+sf' / 'Bsf' / N.A. VFN-F1 V2 F: N.A. / N.A. / N.A. Rating sensitivity to reduced monthly payment rate (MPR): Reduce steady state by 15% / 25% / 35% VFN-F1 V2 A: 'Asf' / 'A-sf' / 'BBB+sf' VFN-F1 V2 E: 'BB-sf' / 'B+sf' / 'B+sf' VFN-F1 V2 F: 'Bsf' / 'Bsf' / 'Bsf' Rating sensitivity to reduced purchase rate: Reduce steady state by 50% / 75% / 100% VFN-F1 V2 A: 'A+sf' / 'A+sf' / 'A+sf' VFN-F1 V2 E: 'BB-sf' / 'BB-sf' / 'B+sf' VFN-F1 V2 F: 'B+sf' / 'Bsf' / 'Bsf' Rating sensitivity to increased charge-off rate and reduced MPR: Increase steady-state charge-offs by 25% / 50% / 75% and reduce steady-state MPR by 15% / 25% / 35% VFN-F1 V2 A: 'BBB+sf' / 'BBB-sf' / 'BB-sf' VFN-F1 V2 E: 'Bsf' / N.A. / N.A. VFN-F1 V2 F: N.A. / N.A. / N.A. NewDay Partnership Funding VFN-P1 V2 Rating sensitivity to increased charge-off rate: Increase steady state by 25% / 50% / 75% VFN-P1 V2 A: 'AA+sf' / 'AA+sf' / 'AAsf' VFN-P1 V2 B: 'A+sf' / 'Asf' / 'A-sf' VFN-P1 V2 C: 'BBB+sf' / 'BBBsf' / 'BBB-sf' VFN-P1 V2 D: 'BBBsf' / 'BBB-sf' / 'BB+sf' VFN-P1 V2 E: 'BB+sf' / 'BBsf' / 'BBsf' Rating sensitivity to reduced monthly payment rate (MPR): Reduce steady state by 15% / 25% / 35% VFN-P1 V2 A: 'AA+sf' / 'AA+sf' / 'AAsf' VFN-P1 V2 B: 'A+sf' / 'Asf' / 'A-sf' VFN-P1 V2 C: 'BBB+sf' / 'BBBsf' / 'BBB-sf' VFN-P1 V2 D: 'BBBsf' / 'BBB-sf' / 'BB+sf' VFN-P1 V2 E: 'BBB-sf' / 'BB+sf' / 'BBsf' Rating sensitivity to reduced purchase rate: Reduce steady state by 50% / 75% / 100% VFN-P1 V2 A: 'AAAsf' / 'AAAsf' / 'AAAsf' VFN-P1 V2 B: 'AA-sf' / 'AA-sf' / 'A+sf' VFN-P1 V2 C: 'BBB+sf' / 'BBB+sf' / 'BBBsf' VFN-P1 V2 D: 'BBBsf' / 'BBBsf' / 'BBB-sf' VFN-P1 V2 E: 'BBB-sf' / 'BBB-sf' / 'BB+sf' Rating sensitivity to increased charge-off rate and reduced MPR: Increase steady-state charge-offs by 25% / 50% / 75% and reduce steady-state MPR by 15% / 25% / 35% VFN-P1 V2 A: 'AAsf' / 'A+sf' / 'A-sf' VFN-P1 V2 B: 'Asf' / 'BBB+sf' / 'BBB-sf' VFN-P1 V2 C: 'BBBsf' / 'BB+sf' / 'BB-sf' VFN-P1 V2 D: 'BBB-sf' / 'BBsf' / 'B+sf' VFN-P1 V2 E: 'BB+sf' / 'BB-sf' / 'Bsf' Factors that could, individually or collectively, lead to positive rating action/upgrade: NewDay Funding VFN-F1 V2: Rating sensitivity to reduced charge-off rate: Reduce steady state by 25% VFN-F1 V2 A: 'AAsf' VFN-F1 V2 E: 'BBB-sf' VFN-F1 V2 F: 'BBsf' NewDay Partnership Funding VFN-P1 V2 Rating sensitivity to reduced charge-off rate: Reduce steady state by 25% VFN-P1 V2 A: 'AAAsf' VFN-P1 V2 B: 'AA+sf' VFN-P1 V2 C: 'A+sf' VFN-P1 V2 D: 'Asf' VFN-P1 V2 E: 'BBB+sf' DATA ADEQUACY NewDay Funding Master Issuer Plc, NewDay Partnership Funding Fitch has not conducted any checks on 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. 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. =============== X X X X X X X X =============== [*] BOOK REVIEW: Transnational Mergers and Acquisitions ------------------------------------------------------- Author: Sarkis J. Khoury Publisher: Beard Books Softcover: 292 pages List Price: $34.95 Order your personal copy today at http://is.gd/hl7cni Transnational Mergers and Acquisitions in the United States will appeal to a wide range of readers. Dr. Khoury's analysis is valuable for managers involved in transnational acquisitions, whether they are acquiring companies or being acquired themselves. At the same time, he provides a comprehensive and large-scale look at the industrial sector of the U.S. economy that proves very useful for policy makers even today. With its nearly 100 tables of data and numerous examples, Khoury provides a wealth of information for business historians and researchers as well. Until the late 1960s, we Americans were confident (some might say smug) in our belief that U.S. direct investment abroad would continue to grow as it had in the 1950s and 1960s, and that we would dominate the other large world economies in foreign investment for some time to come. And then came the 1970s, U.S. investment abroad stood at $78 billion, in contrast to only $13 billion in foreign investment in the U.S. In 1978, however, only eight years later, foreign investment in the U.S. had skyrocketed to nearly #41 billion, about half of it in acquisition of U.S. firms. Foreign acquisitions of U.S. companies grew from 20 in 1970 to 188 in 1978. The tables had turned an Americans were worried. Acquisitions in the banking and insurance sectors were increasing sharply, which in particular alarmed many analysts. Thus, when it was first published in 1980, this book met a growing need for analytical and empirical data on this rapidly increasing flow of foreign investment money into the U.S., much of it in acquisitions. Khoury answers many of the questions arising from the situation as it stood in 1980, many of which are applicable today: What are the motives for transnational acquisitions? How do foreign firms plans, evaluate, and negotiate mergers in the U.S.? What are the effects of these acquisitions on competition, money and capital markets; relative technological position; balance of payments and economic policy in the U.S.? To begin to answer these questions, Khoury researched foreign investment in the U.S. from 1790 to 1979. His historical review includes foreign firms' industry preferences, choice of location in the U.S., and methods for penetrating the U.S. market. He notes the importance of foreign investment to growth in the U.S., particularly until the early 20th century, and that prior to the 1970s, foreign investment had grown steadily throughout U.S. history, with lapses during and after the world wars. Khoury found that rates of return to foreign companies were not excessive. He determined that the effect on the U.S. economy was generally positive and concluded that restricting the inflow of direct and indirect foreign investment would hinder U.S. economic growth both in the short term and long term. Further, he found no compelling reason to restrict the activities of multinational corporations in the U.S. from a policy perspective. Khoury's research broke new ground and provided input for economic policy at just the right time. Sarkis J. Khoury holds a Ph.D. in International Finance from Wharton. He teaches finance and international finance at the University of California, Riverside, and serves as the Executive Director of International Programs at the Anderson Graduate School of Business. [*] EUROPE: Number of Business Bankruptcies Up 26.8% in 4Q 2022 --------------------------------------------------------------- The European Union on Feb. 17 disclosed that the number of bankruptcy declarations among EU businesses increased substantially in the fourth quarter of 2022 (+26.8% compared with the previous quarter) and reached the highest levels since the start of the data collection in 2015. The number of bankruptcy declarations increased during all four quarters of 2022. When it comes to registrations of new businesses, these decreased slightly by 0.2% in the fourth quarter of 2022 compared with the previous quarter. Generally, in all four quarters of 2022, business registrations levels were higher than during the pre-COVID pandemic period 2015-2019. This information comes from data on business registrations and bankruptcies published by Eurostat on Feb. 17. Since February 2023, for countries that transmit monthly information on voluntary basis, the Eurostat database also includes monthly data on business registrations and bankruptcies. This article presents a handful of findings from the more detailed Statistics Explained article. Since February 2023, the article also includes data in absolute numbers on the annual number of bankruptcies in the countries. Declarations of bankruptcies increased the most in transport and storage activities in Q4 2022 Looking specifically at bankruptcies by activity, all sectors registered increases in the number of bankruptcies in the fourth quarter of 2022 compared with the previous quarter. Transportation and storage (+72.2%), accommodation and food services (+39.4%), and education, health and social activities (+29.5%) were the activities with the highest increases in the number of bankruptcies in the fourth quarter of 2022 compared with the previous quarter. Compared with the pre-pandemic fourth quarter of 2019, the number of declarations of bankruptcies in the fourth quarter of 2022 was higher in the majority of sectors of the economy. The largest increases in the number of bankruptcies, compared with the fourth quarter of 2019, were recorded in accommodation and food services (+97.7%) and transportation and storage (+85.7%). The number of declarations of bankruptcies in the fourth quarter of 2022 compared with the pre-pandemic fourth quarter of 2019 was lower in only three sectors of the economy: industry (-17.6%), construction (-9.2%) and information and communication (-4.0%). ********* 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 * * *