/raid1/www/Hosts/bankrupt/TCREUR_Public/230314.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, March 14, 2023, Vol. 24, No. 53
Headlines
F R A N C E
ASSYSTEM TECHNOLOGIES: EUR494M Bank Debt Trades at 16% Discount
CONSTELLIUM SE: Moody's Ups CFR to B1 & Alters Outlook to Stable
G E O R G I A
SILKNET JSC: Fitch Puts 'B+' Rating on Under Criteria Observation
G E R M A N Y
TECHEM VERWALTUNGSGESELLSCHAFT 674MBH: Fitch Affirms LongTerm B IDR
WITTUR HOLDING: EUR565M Bank Debt Trades at 30% Discount
I R E L A N D
RRE 15: S&P Assigns Prelim. BB-(sf) Rating on Class D Notes
I T A L Y
CASTOR SPA: S&P Lowers LongTerm ICR to 'B-', Outlook Stable
NEXI SPA: S&P Upgrades ICR to 'BB+' on Nets and SIA Integration
L U X E M B O U R G
ARMORICA LUX: EUR335M Bank Debt Trades at 35% Discount
N E T H E R L A N D S
NOBEL BIDCO: EUR1.05B Bank Debt Trades at 15% Discount
S P A I N
BBVA CONSUMO 12: Moody's Assigns (P)B1 Rating to EUR150MM B Notes
TDA IBERCAJA 5: S&P Affirms 'D(sf)' Rating on Class E Notes
TDA IBERCAJA 7: S&P Affirms 'D(sf)' Rating on Class C Notes
S W E D E N
REN10 HOLDING: Fitch Gives B+ Final Rating on EUR200M Term Loan
U N I T E D K I N G D O M
DRB GROUP: Former Workers Owed Around GBP1.2 Million
ECO MODULAR: Enters Administration, Owes GBP5MM to Creditors
EG FINCO: EUR610M Bank Debt Trades at 16% Discount
ENQUEST PLC: Moody's Lowers CFR to B3 & Alters Outlook to Negative
GALERIA KARSTADT: Files for Insolvency Protection for Second Time
GROSVENOR SQUARE 2023-1: Fitch Gives 'B-(EXP)sf' Rating on F Notes
HIGHLANDER HOTEL: Lomond Hills Goes Into Liquidation
IVC ACQUISITION: Fitch Alters Outlook on B LongTerm IDR to Negative
MIDAS CONSTRUCTION: Owed More Than GBP87MM to Supply Chain
PAVILLION POINT 2021-1A: Fitch Affirms BB+sf Rating on Cl. F Notes
SILICON VALLEY BANK UK: HSBC to Inject GBP2BB Following Acquisition
THG OPERATIONS: EUR600M Bank Debt Trades at 17% Discount
VEDANTA RESOURCES: Moody's Cuts CFR to Caa1, Outlook Negative
ZEPHYR BIDCO: GBP180M Bank Debt Trades at 20% Discount
- - - - -
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F R A N C E
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ASSYSTEM TECHNOLOGIES: EUR494M Bank Debt Trades at 16% Discount
---------------------------------------------------------------
Participations in a syndicated loan under which Assystem
Technologies Services SASU is a borrower were trading in the
secondary market around 84.2 cents-on-the-dollar during the week
ended Friday, March 10, 2023, according to Bloomberg's Evaluated
Pricing service data.
The EUR494.4 million facility is a Term loan that is scheduled to
mature on September 28, 2024. The amount is fully drawn and
outstanding.
Assystem Technologies Services provides engineering services. The
Company offers industrial processes development, embedded systems,
software, aero structures, risk management, and supply chain
solutions, as well as project management support, commissioning of
production units, and consultancy services. The Company's country
of domicile is France.
CONSTELLIUM SE: Moody's Ups CFR to B1 & Alters Outlook to Stable
----------------------------------------------------------------
Moody's Investors Service has upgraded Constellium SE's long term
corporate family rating to B1 from B2; its probability of default
rating to B1-PD from B2-PD; and the rating of its senior unsecured
notes to B1 from B2. The rating agency also changed the outlook on
Constellium to stable from positive.
"The upgrade primarily reflects the continued track record of
Constellium delivering good operational performance ahead of
Moody's expectations in environment with significant cost inflation
in 2022, coupled with ongoing discipline in capital allocation.",
says Martin Fujerik, Moody's lead analyst for Constellium. "Even
though Moody's forecast some deterioration of Constellium's
earnings in 2023, Moody's expect that the company will remain
strongly positioned in the B1 rating category over the next 12-18
months", adds Mr. Fujerik.
RATINGS RATIONALE
The upgrade of Constellium's ratings primarily reflects the
company's good operational performance in 2022, ahead of Moody's
expectations. Constellium coped well with supply chain bottlenecks
and significant cost inflation in its operations during the year.
Supported by favourable product mix, efficiency measures and
pricing actions, it even managed to increase its average EBITDA per
ton shipped (as adjusted by the company), generating its record
adjusted EBITDA.
The increase in earnings, together with a further reduction of
Moody's-adjusted debt, lead to Moody's-adjusted credit metrics for
2022 exceeding the agency's expectations for a B2 rating, such as
debt/EBITDA of 4.3x (4.2x excluding metal price lag effects; down
from 5.1x in 2021); and (cash flow from operations -
dividends)/debt of 16%, as estimated by the agency. In addition,
Constellium generated meaningful Moody's-adjusted free cash flow
(FCF) of around EUR120 million despite growth investments, thus
building a further track record of maintaining its FCF positive
since 2019.
The upgrade also recognizes the company's ongoing focus on leverage
reduction from the high 2015-16 peak levels. It has refrained from
dividends and sizeable M&A activity, committing to further reducing
its reported net leverage into the range between 1.5x and 2.5x,
from 2.8x in 2022. This commitment implies prospects for a lower
leverage over the next two to three years. Constellium is now
strongly positioned in the B1 rating category and additional upward
pressure is likely over the next quarters with a further evidence
of a sustained leverage reduction, given that the company's
business profile already exhibits characteristics commensurate with
a rating in a Ba range.
The stable outlook reflects the rating agency's expectation that
despite the sluggish real GDP growth prospects in mature economies
and persistently high inflation of the company's costs,
particularly for energy and labour, Constellium will continue to
operate with Moody's-adjusted metrics comfortably in line with the
B1 rating over the next 12-18 moths.
The agency's base case assumes that in 2023 Constellium will be
able to generate EBITDA around the lower end of its public guidance
of EUR640 million to EUR670 million, down from EUR673 million in
2022. An increase in shipments to automotive and the most
profitable aerospace markets, which have not yet fully recovered
back to the pre-pandemic levels, will support earnings despite high
inflation. Moody's also forecasts that the company will be able to
maintain positive Moody's-adjusted FCF in a range between EUR70
million and EUR100 million, despite even higher level of growth
investments.
Constellium's liquidity is adequate, underpinned by its long-dated
maturity profile without meaningful debt maturities before 2026.
The B1 CFR assumes that the company will be able to successfully
prolong the maturity of its undrawn EUR100 million French inventory
facility due in April 2023.
ESG CONSIDERATIONS
Governance considerations are among the key drivers of this rating
action because the company's conservative capital allocation
focusing on ongoing reduction of leverage over the past few years
supported the upgrade. The company's exposure to social and
environmental risks is moderately negative.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Further upward pressure on the ratings would build, if
Constellium's (1) Moody's-adjusted debt/EBITDA reduced sustainably
below 4.0x; (2) Moody's-adjusted (CFO - dividends)/debt improved to
at least 20%; and (3) Moody's-adjusted FCF remained consistently
positive.
Negative rating pressure could develop, if Constellium's (1)
Moody's-adjusted debt/EBITDA consistently exceeded 5.0x; (2)
Moody's-adjusted (CFO - dividends)/debt fell sustainably below 15%;
(3) Moody's-adjusted FCF turned sustainably negative; or (4)
liquidity deteriorated.
LIST OF AFFECTED RATINGS:
Issuer: Constellium SE
Upgrades:
LT Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to B1
from B2
Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2
Outlook Actions:
Outlook, Changed To Stable From Positive
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Steel published
in November 2021.
COMPANY PROFILE
Headquartered in Paris, France, Constellium is a global leader in
the development, manufacture and sale of a broad range of highly
engineered specialty rolled and extruded aluminium products to the
packaging, aerospace, automotive, other transportation and
industrial end-markets. In 2022, the company shipped close to 1.6
million tons of products, generating revenue of around EUR8.1
billion.
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G E O R G I A
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SILKNET JSC: Fitch Puts 'B+' Rating on Under Criteria Observation
-----------------------------------------------------------------
Fitch Ratings has placed four corporate issuers on Under Criteria
Observation (UCO) following the conversion of its Exposure Draft
Country-Specific Treatment of Recovery Ratings Criteria to final
criteria on March 3, 2023.
As these criteria do not affect issuer ratings the UCO assignment
indicates that the existing instrument and/or Recovery Rating may
change as a direct result of the final criteria. It does not
indicate a change in the underlying credit profile, nor does it
affect existing Outlooks or Rating Watch statuses.
Fitch will review all the UCO assignments within six months of
March 3, 2023. Not all issuers with a UCO will have an instrument
and/or Recovery Rating change upon resolution of the UCO.
KEY RATING DRIVERS
New Inputs for Country Groupings: Fitch now uses an average of
three governance indicators from the World Bank's World Governance
Indicators and apply a 'qualitative overlay' adjustment, where
appropriate, to determine the country groupings. This replaces its
reliance on the discontinued Resolving Insolvency scores from the
World Bank. Consequently, the groupings of certain countries have
changed, which in turn, could affect the instrument and/or Recovery
Rating of issuers in those countries.
The four country groups in its criteria specify varying constraints
on Recovery Ratings and upward notching of instrument ratings from
the Issuer Default Ratings.
RATING SENSITIVITIES
The resolution of the UCO will depend on Fitch's assessment of the
appropriate notching and Recovery Rating outcome based on the new
criteria within six months of 3 March 2023.
Existing issuer rating sensitivities remain unchanged.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
ContourGlobal
Power Holdings
S.A.
senior
secured LT BB+ Under Criteria Observation RR2 BB+
super
senior LT BB+ Under Criteria Observation RR2 BB+
Silknet JSC LT IDR B+ Under Criteria Observation B+
senior
unsecured LT B+ Under Criteria Observation RR4 B+
Arada
Developments
LLC LT IDR B+ Under Criteria Observation B+
senior
unsecured LT BB- Under Criteria Observation BB-
Oztel Holdings
SPC Limited
senior
secured LT BB Under Criteria Observation BB
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G E R M A N Y
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TECHEM VERWALTUNGSGESELLSCHAFT 674MBH: Fitch Affirms LongTerm B IDR
-------------------------------------------------------------------
Fitch Ratings has affirmed Germany-based heat and water
sub-metering services operator Techem Verwaltungsgesellschaft 674
mbH's (Techem) Long-Term Issuer Default Rating (IDR) at 'B' with a
Stable Outlook. It has also affirmed the senior secured instruments
ratings issued by Techem Verwaltungsgesellschaft 675 mbH at 'B+'
and senior unsecured instrument rating issued by Techem at 'CCC+'
with Recovery Ratings of 'RR3' and 'RR6', respectively.
The rating affirmation reflects expected improvements in operating
performance, which will result in total debt/EBITDA being more
comfortably within its sensitivities for a 'B' rating. Fitch
forecasts revenue and EBITDA growth to be driven by capex, mainly
in energy contracting and new product development, and by moderate
M&A. This is part of Techem shareholders' strategy to expand the
company's submetering infrastructure in Germany and in the rest of
Europe.
Fitch expects Techem's free cash flow (FCF) to be under pressure
from increasing interest expenses, high capex and increasing
working capital outflows. However, Fitch expects Techem to be able
to absorb higher interest expenses with EBITDA growth translating
into moderately positive FCF through the cycle.
KEY RATING DRIVERS
Ambitious Capex Plan: Techem plans to increase capex both for its
energy metering and energy contracting businesses. Metering
requires a devices replacement cycle to start by 2024, while energy
contracting is asset-heavy. Fitch expects capex of around EUR190
million per year for 2023-2025 (financial year ending in
September), which given the expected interest cost increases will
affect the company's FCF generation. However, Fitch assumes capex
to be partially discretionary, which the company can scale back to
counteract expected increases in interest expenses.
Interest Costs to Increase: Techem's senior secured debt matures in
July 2025, its revolving credit facility (RCF) in January 2025 and
unsecured notes in July 2026. Fitch assumes a refinancing to take
place in 2024 at materially higher rates. Fitch expects base rates
to peak in 2024, and to slowly reduce thereafter. Fitch also
expects higher interest margins at refinancing. Consequently,
headroom to its debt coverage sensitivities will tighten, before
easing on improvements in EBITDA by 2025.
High but Declining Leverage: Techem's leverage remains high at the
upper band of its rating sensitivity, but Fitch expects it to
gradually decline in FY24-FY25 on improving EBITDA generation. At
FYE22 adjusted total debt was 6.9x EBITDA, which Fitch expects to
marginally increase to 7.0x in FY23 due to temporary RCF drawdowns.
Growing EBITDA from FY24 onwards will help the company reduce gross
leverage below 7.0x, comfortably placing the company within its
sensitivities. Higher drawdowns under the RCF, including to finance
capex overruns, and shocks to operating margins may put the
company's leverage back under pressure.
EBITDA to Grow in FY23-FY25: Techem's sub-metering activity has
high barriers to entry. The German market is close to saturation
and the rest of Europe is slowly adopting billing services.
However, Techem's EBITDA is set to grow, due to product innovation
in Germany and slow but constant growth outside Germany. Fitch
expects margins to improve also on product expansion, acquisitions
and cost-efficiency initiatives. Despite some contingency costs,
Fitch projects Fitch-defined EBITDA CAGR of about 7% for FY22-FY25,
driven by price increases, increased impact of sales initiatives,
introduction of new high value-added services and materialisation
of cost-efficiency programmes.
Strong FY22 Performance: In FY22, Techem's revenue increased 10%,
driven by higher billing and rental revenue in Germany, organic
growth in international business as well as higher energy prices
pass-through in energy contracting. Fitch-defined EBITDA increased
7% year-on-year, with earnings outpacing cost increase. The company
has reduced the difference between reported and adjusted numbers,
as its cost-efficiency measures are realised. In 1QFY23 revenue
continued to grow in all segments, whereas the company-defined
EBITDA fell year-on-year due to the one-off effect of earlier
billing in Germany. A positive trend is already visible from
year-to-date January 2023 data.
Non-Recurring Costs: Fitch adjusts Techem's FY22 EBITDA for around
EUR17 million of one-off costs, lower than EUR29 million in FY21.
We recognise around EUR15 million as non-recurring under the
Energize-T and Operational Excellence cost-saving programmes, which
is EUR10 million lower than FY21's. Fitch expects this amount to be
around EUR17 million per year over FY23-FY25, gradually declining
year-on-year.
Infrastructure-Driven Value Proposition: Fitch expects Techem's
medium-term strategy to target a wider coverage of dwellings in
Germany and abroad. Together with technological upgrades to smart
readers and product expansions, this may lead to higher cost
efficiencies, potentially covering the full energy value chain for
homes. Fitch believes that Techem shareholders see value
enhancement in infrastructure development, over maximising cash
flow generation in the short term.
Favourable Operating Environment: The adoption of sub-metering is
supported by the EU Energy Efficiency Directive. The adoption by
member states within the EU is, however, slow and affects the
timing of revenue expansion for operators like Techem. Stricter
market regulations may require additional investments, including
potential technical enhancements to allow inter-operability.
Despite the risk of stricter regulation, Fitch views Techem's
operating environment as stable and supportive in the medium term.
DERIVATION SUMMARY
Techem's business profile is similar to infrastructural and
utility-like peers and stands in the 'BBB' category. It has proved
resilient through the pandemic and has shown stability in
performance through the cycle. It is constrained by high gross
leverage with moderate deleveraging prospects in the short term.
Compared with smaller sub-metering peers within its private rating
coverage, Techem has a stronger business profile but also higher
gross indebtedness.
Its focus on the expansion of its smart reader network lends itself
to comparison with pure telecommunication networks, such as Cellnex
Telecom S.A. and Infrastrutture Wireless Italiane S.p.A. (both
BBB-/Stable). These entities have comparable leverage and their
high capex is demand-driven as is most of Techem's. However, their
sector, scale and tenants' stability provide for a higher debt
capacity.
Techem is also comparable with highly leveraged business services
operators, such as Nexi S.p.A. (BB/Stable) and Hurricane Bidco
Limited (Paymentsense, B/Stable), which share a similar billing
model on a wide portfolio of customers in a favourable competitive
environment. Fitch believes Nexi's secular growth prospects are
stronger than Techem's. Nexi also has lower leverage and higher FCF
conversion.
KEY ASSUMPTIONS
- Revenue CAGR of 7.2% for FY22-FY25
- EBITDA margins, adjusted for non-recurring expenses, averaging
about 42% to FY25
- Capex on average at about 18% of revenue a year till FY25
- M&A averaging around EUR50 million a year up to FY25
- No dividend paid, in line with stated financial policy
- Refinancing of all debt in 2024, with the effective interest
rate increasing to over 7% post-refinancing
Key Recovery Assumptions
The recovery analysis assumes that Techem would be reorganised as a
going concern in bankruptcy rather than liquidated, based on its
strong cash flow generation through the cycle and asset-light
operations. Its installed base and contractual portfolio are key,
intangible assets of the business, which are likely to be operated
post-bankruptcy by competitors with higher cost efficiency.
Fitch has assumed a 10% administrative claim.
Fitch estimates a going-concern EBITDA of about EUR230 million,
unchanged from the previous review. Fitch assumes a distressed
multiple of 7x, considering the stable business profile of Techem
and comparing it with similarly cash-generative peers with
infrastructure and utility-like business models. Its debt waterfall
includes a fully drawn RCF of EUR275 million and updated term loan
B and senior secured note amounts, resulting in recoveries of 56%,
equivalent to 'RR3', and broadly unchanged from its previous
analysis. The senior unsecured notes have a 'RR6' with 0%
recovery.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Total debt with equity credit below 6.0x operating EBITDA
on a sustained basis
- Operating EBITDA/interest paid trending to or above 3.2x
- Ongoing commitment to current financial policy of zero
dividends or debt-funded M&A
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Total debt with equity credit above 7.0x operating EBITDA
with no sign of deleveraging
- Operating EBITDA/interest paid trending to or below 2.3x
on a sustained basis
- Departure from financial policy of debt reduction and zero
dividends or debt-funded M&A activity
- Reduced EBITDA leading to an inability to return FCF to a
positive territory on a sustained basis
- Evidence of further deterioration in refinancing
conditions or opportunities
LIQUIDITY AND DEBT STRUCTURE
Satisfactory Liquidity: Fitch estimates around EUR180 million of
minimum undrawn RCF commitments in FY23, before its refinancing in
FY24, indicating a satisfactory liquidity profile. Techem had a
cash balance of about EUR29 million at FYE22 and no material
upcoming debt maturities until 2025. Fitch restricts Techem's cash
by EUR20 million, the estimated minimum operating cash.
ISSUER PROFILE
Techem is a Germany-based heat and water sub-metering services
operator active in submetering installation and services in Europe.
The company also has a presence in energy contracting.
ESG CONSIDERATIONS
Techem has an ESG Relevance Score of '4' [+] for Energy Management
and an ESG Relevance Score of '4' for GHG Emissions & Air Quality
due to the company's role in realization of energy efficiency
initiative, which is one of the drivers of demand on its service in
its key markets of operations. This has a positive impact on the
credit profile, and is relevant to the rating[s] in conjunction
with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Techem
Verwaltungsgesellschaft
674 mbH LT IDR B Affirmed B
senior unsecured LT CCC+ Affirmed RR6 CCC+
Techem
Verwaltungsgesellschaft
675 mbH
senior secured LT B+ Affirmed RR3 B+
WITTUR HOLDING: EUR565M Bank Debt Trades at 30% Discount
--------------------------------------------------------
Participations in a syndicated loan under which Wittur Holding GmbH
is a borrower were trading in the secondary market around 70.3
cents-on-the-dollar during the week ended Friday, March 10, 2023,
according to Bloomberg's Evaluated Pricing service data.
The EUR565 million facility is a Term loan that is scheduled to
mature on September 23, 2026. The amount is fully drawn and
outstanding.
Wittur Holding GmbH is the operating entity of The Wittur Group.
The Company is a worldwide producer and supplier of elevator
components. Founded 1968 in Germany, the group is today present
with various subsidiaries in Europe, Asia and Latin America. The
Company's country of domicile is Germany.
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I R E L A N D
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RRE 15: S&P Assigns Prelim. BB-(sf) Rating on Class D Notes
-----------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to RRE
15 Loan Management DAC's class A-1 to D notes. At closing, the
issuer will also issue unrated subordinate, performance, and
preferred return notes.
This is a European cash flow CLO transaction, securitizing a
portfolio of primarily senior secured leveraged loans and bonds.
The transaction is managed by Redding Ridge Asset Management (UK)
LLP.
The preliminary ratings assigned to the notes reflect our
assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
-- Under the transaction documents, the rated notes will pay
quarterly interest unless there is a frequency switch event.
Following this, the notes will permanently switch to semiannual
payment.
-- The portfolio's reinvestment period will end approximately 4.6
years after closing, and the portfolio's maximum average maturity
date is 8.5 years after closing.
Portfolio Benchmarks
CURRENT
S&P Global Ratings weighted-average rating factor 2,949.46
Default rate dispersion 446.86
Weighted-average life (years) 4.58
Obligor diversity measure 86.18
Industry diversity measure 17.50
Regional diversity measure 1.20
Transaction Key Metrics
CURRENT
Total par amount (mil. EUR) 400
Defaulted assets (mil. EUR) 0
Number of performing obligors 99
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 3.03
'AAA' covenanted weighted-average recovery (%) 36.65
Covenanted weighted-average spread (%) 3.85
Reference weighted-average coupon (%) 4.50
S&P said, "The portfolio is well-diversified, primarily comprising
broadly syndicated speculative-grade senior secured term loans and
senior secured bonds. Therefore, we have conducted our credit and
cash flow analysis by applying our criteria for corporate cash flow
CDOs. As such, we have not applied any additional scenario and
sensitivity analysis when assigning preliminary ratings to any
classes of notes in this transaction.
"In our cash flow analysis, we used the EUR400 million target par
amount, the covenanted weighted-average spread (3.85%), and the
covenanted weighted-average recovery rates at all rating levels as
indicated by the collateral manager. We applied various cash flow
stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class A-2A, A-2B, B-2, and D notes could
withstand stresses commensurate with higher preliminary ratings
than those we have assigned. However, as the CLO will be in its
reinvestment phase starting from closing, during which the
transaction's credit risk profile could deteriorate, we have capped
our preliminary ratings assigned to these classes of notes.
"We expect the transaction's documented counterparty replacement
and remedy mechanisms to adequately mitigate its exposure to
counterparty risk under our current counterparty criteria.
"Following the application of our structured finance sovereign risk
criteria, we consider the transaction's exposure to country risk to
be limited at the assigned preliminary ratings, as the exposure to
individual sovereigns does not exceed the diversification
thresholds outlined in our criteria.
"We expect the transaction's legal structure to be bankruptcy
remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our assigned
preliminary ratings are commensurate with the available credit
enhancement for the class A-1, A-2A, A-2B, B-1, B-2 C, and D
notes.
"In addition to our standard analysis, we have also included the
sensitivity of the ratings on the class A-1 to D notes to four
hypothetical scenarios."
Environmental, social, and governance (ESG) factors
S&P said, "We regard the exposure to ESG credit factors in the
transaction as being broadly in line with our benchmark for the
sector. Primarily due to the diversity of the assets within CLOs,
the exposure to environmental credit factors is viewed as below
average, social credit factors are below average, and governance
credit factors are average. For this transaction, the documents
prohibit assets from being related to the following industries:
Thermal-coal-based power generation, mining or extraction; Arctic
oil or gas production, and unconventional oil or gas production
from shale, right reservoirs, or oil sands; production of civilian
weapons; development or nuclear weapon programs and production of
controversial weapons; private for profit prisons; tobacco or
tobacco products; opioids; adult entertainment; speculative
transactions of soft commodities; predatory lending practices;
non-sustainable palm oil productions; animal testing for
non-pharmaceutical products; endangered species; and banned
pesticides or chemicals.
"Accordingly, since the exclusion of assets from these industries
does not result in material differences between the transaction and
our ESG benchmark for the sector, no specific adjustments have been
made in our rating analysis to account for any ESG-related risks or
opportunities."
Environmental, social, and governance (ESG) corporate credit
indicators
The influence of ESG factors in our credit rating analysis of
European CLOs primarily depends on the influence of ESG factors in
our analysis of the underlying corporate obligors. To provide
additional disclosure and transparency of the influence of ESG
factors for the CLO asset portfolio in aggregate, we've calculated
the weighted-average and distributions of our ESG credit indicators
for the underlying obligors. We regard this transaction's exposure
as being broadly in line with our benchmark for the sector, with
the environmental and social credit indicators concentrated
primarily in category 2 (neutral) and the governance credit
indicators concentrated in category 3 (moderately negative).
Corporate ESG Credit Indicators
ENVIRONMENTAL SOCIAL GOVERNANCE
Weighted-average credit indicator* 2.06 2.18 2.96
E-1/S-1/G-1 distribution (%) 0.00 0.82 0.00
E-2/S-2/G-2 distribution (%) 79.78 70.92 8.50
E-3/S-3/G-3 distribution (%) 5.54 11.15 73.57
E-4/S-4/G-4 distribution (%) 0.00 2.43 1.75
E-5/S-5/G-5 distribution (%) 0.00 0.00 1.50
Unmatched obligor (%) 11.66 11.66 11.66
Unidentified asset (%) 3.02 3.02 3.02
*Only includes matched obligor
Ratings Assigned
CLASS PRELIM PRELIM SUB (%) INTEREST RATE§
RATING* AMOUNT
(MIL. EUR)
A-1 AAA (sf) 238.00 40.50 Three/six-month EURIBOR
plus 1.75%
A-2A AA (sf) 31.50 29.50 Three/six-month EURIBOR
plus 2.95%
A-2B AA (sf) 12.50 29.50 6.30%
B-1 A+ (sf) 26.00 23.00 Three/six-month EURIBOR
plus 3.50%
B-2 A (sf) 4.00 22.00 Three/six-month EURIBOR
plus 4.70%
C BBB (sf) 25.00 15.75 Three/six-month EURIBOR
plus 5.00%
D BB- (sf) 15.00 12.00 Three/six-month EURIBOR
plus 7.40%
Performance
notes NR 1.00 N/A N/A
Preferred
return notes NR 0.25 N/A N/A
Sub notes NR 39.43 N/A N/A
*The preliminary ratings assigned to the class A-1, A-2A, and A-2B
notes address timely interest and ultimate principal payments. The
preliminary ratings assigned to the class B-1, B-2, C, and D notes
address ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
NR--Not rated.
N/A--Not applicable.
EURIBOR--Euro Interbank Offered Rate.
=========
I T A L Y
=========
CASTOR SPA: S&P Lowers LongTerm ICR to 'B-', Outlook Stable
-----------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Italy-based financial services company Castor SpA (Cerved) to 'B-'
from 'B'.
S&P said, "At the same time, we lowered the issue rating on the
senior secured notes (including the EUR195 million fungible add-on)
to 'B-' from 'B', in line with the issuer credit rating. The
recovery rating is unchanged at '3', indicating meaningful recovery
prospects (50%-70%; rounded estimate: 55%) in the event of a
payment default.
"The stable outlook reflects our view that Cerved will generate
positive free operating cash flow (FOCF) of at least EUR20 million
and the S&P Global Ratings-adjusted EBITDA margin will gradually
increase toward 43% over the next 12 to 18 months, while leverage
will remain about 7.5x and FFO cash interest coverage about 1.6x.
"The downgrade reflects our view that Cerved's financial policy has
become more aggressive. ION has chosen to undertake a debt-funded
dividend, despite Cerved's limited rating headroom. The company has
underperformed against our base case because of
slower-than-expected recovery of its credit management business,
less demand for business information services, offset by growth in
risk analytics, and a delay in the realization of synergies as part
of ION's cost-optimization program impacted by the later than
expected final closing of ION's acquisition. Therefore, we view the
increase in debt -- at a time when the company has limited track
record of achieving its operational goals -- as reflective of an
appetite for a more aggressive financial policy and higher leverage
tolerance in the longer term.
"The dividend recapitalization increases our leverage expectation
to about 7.5x at end-2023, versus our previous forecast of 6.5x and
5.0x at the time of the original transaction. We estimate Cerved's
leverage at about 7.0x at end-2022, in line with our latest
forecast. The 2022 performance has seen slower revenue growth
because of lower demand for business information services due to
small-to-midsize enterprises (SMEs) offsetting growth linked to
risk analytics products. In addition, we estimate the S&P Global
Ratings-adjusted EBITDA margin to increase by about 100 basis
points (bps), close to 42%, on the back of a positive services mix
and some synergy realization under the ION cost program by
end-2022. In December 2022, we revised our forecast leverage
expectations toward 6.5x in 2023 (versus below 5.0x at the time of
the original transaction in February 2022), and we see leverage at
about 7.5x over the next two years because of the debt-funded
shareholder return. In addition, the increasing interest costs
further compress FFO cash interest coverage to 1.6x in 2023,
compared with about 2.0x previously, only converging toward 2.0x by
2025.
"We continue to view Cerved's liquidity as adequate despite higher
interest costs and lower FOCF generation. While higher interest
costs and transaction fees are reducing FOCF generation during
2023, we still expect at least EUR20 million, compared with over
EUR40 million previously, thanks to the resilient business
characteristics. We forecast a high EBITDA margin above 40% and
only moderate capital expenditure (capex) and minimal working
capital outflows. In addition, Cerved has EUR140 million of pro
forma cash on balance sheet, a fully undrawn revolving credit
facility (RCF; as of Dec. 31, 2022) and no near-term debt
maturities.
"The stable outlook reflects our view that Cerved will generate
positive FOCF of at least EUR20 million, and that its S&P Global
Ratings-adjusted EBITDA margin will gradually increase toward 43%
over the next 12 to 18 months, while leverage will remain about
7.5x and FFO cash interest coverage about 1.6x.
"We see downside as remote, given the company's sound liquidity and
cash flow. However, we could lower the ratings if Cerved records
persistent negative FOCF, such that we view the capital structure
as unsustainable.
"We could raise the ratings if Cerved is successful in executing
its business plan, resulting in increased sales and EBITDA growth,
as well as margin improvement from the realization of synergies, in
addition to establishing a track record of deleveraging, and our
expectation of less aggressive financial policy actions by ION."
ESG credit indicators: E-2, S-2, G-3
NEXI SPA: S&P Upgrades ICR to 'BB+' on Nets and SIA Integration
---------------------------------------------------------------
S&P Global Ratings raised its issue ratings and long-term issuer
credit ratings on Nexi SpA and Nets to 'BB+' from 'BB'.
The positive outlook reflects the likelihood that S&P could raise
the ratings if the group's financial leverage further improves.
On March 8, 2023, Nexi published its 2022 results, which
demonstrated delivery of the initial synergies that it had targeted
following its mergers with Nets and SIA.
S&P said, "We think that Nexi's integration with Nets and SIA is
proving successful. Nexi closed the mergers with Nets and SIA on
July 1, 2021, and Dec. 31, 2021, respectively. The upgrade reflects
our view that the integration is proceeding in line with Nexi's
plans, execution risks have diminished, and Nexi is realizing the
stronger business and geographical diversification and increased
scale that the transactions have provided. We think this will allow
the company to leverage its expanded European market position and
continue growing business volume and improving operating margins."
Nexi is delivering synergies according to schedule. Nexi
anticipated about EUR365 million of recurring cash synergies from
the Nets and SIA mergers by 2025, of which it expected to deliver
EUR105 million by year-end 2022 (about EUR60 million of EBITDA
synergies and the rest capital expenditure synergies). Year-end
results confirm that the target has been exceeded with the delivery
of EUR110 million cash synergies, which demonstrates that the
integration process is proceeding on schedule. S&P also thinks the
full achievement of the 2025 synergies could benefit Nexi's already
strong operating margin (S&P calculates that the S&P Global
Ratings-adjusted EBITDA margin was 44% in 2022).
Leverage remains on a positive trajectory, with improving
profitability and good cash-generation capacity. Nexi has grown
through mergers and acquisitions (M&A) and financed a meaningful
share of these transactions through debt issuance. S&P said,
"However, the company's cash conversion, coupled with the
increasing EBITDA and our expectation of significant cash
retention, supports our expectation that Nexi's financial profile
could further improve. Our view is also supported by the
management's public commitment to lower reported net leverage to
1.0x-1.5x on organic basis by 2025, compared with reported 3.3x as
of 2022. Under our base case, we expect S&P Global Ratings-adjusted
funds from operations (FFO) to debt will average 25.0%-30.0% in
2022-2024, and adjusted debt to EBITDA will average 3.0x-3.5x over
the same period. We therefore anticipate Nexi's creditworthiness
could further improve, should leverage continue reducing over
2023-2024."
S&P said, "Under our base case, bolt-on acquisitions will not
affect the ongoing deleveraging. Nexi's leverage metrics benefit
from its improving EBITDA and significant cash buffer, which stood
at EUR1.5 billion as of end-December 2022. Although the payment
industry is consolidating, any future bolt-on acquisitions should
not jeopardize the company's efforts to reduce its leverage. Net
outflows over 2023 for acquisitions already contracted will amount
to EUR460 million. They relate to the acquisition of Intesa
Sanpaolo's Croatian merchant book, signed in 2022 and completed in
the first quarter of 2023, and the recently signed partnership to
acquire 80% of Sabadell's newly formed company that manages the
merchant book (the latter transaction pending regulatory approval
but expected to close by end-2023). These transactions would not
affect our forecast metrics, because we incorporate up to EUR800
million net cash outflows for M&A in 2023. A larger,
transformational acquisition could potentially affect our forecast
leverage trajectory, depending on how it is funded."
Nexi has manageable near-term refinancing needs. The group has no
debt maturing in 2023, and EUR756 million in 2024, which is more
than adequately covered by existing cash buffers. Nexi has a track
record of proactively managing its debt maturities and demonstrated
capacity to access funding markets through a range of financial
conditions.
S&P said, "The positive outlook reflects the likelihood that we
could raise the ratings on Nexi over the next 12-18 months if we
see a meaningful and sustainable improvement in financial
leverage.
"We could revise the outlook back to stable if we thought Nexi's
financial metrics were unlikely to improve beyond the current
assessment. Specifically, we would conclude this if we expected
adjusted FFO to debt to remain in the 20%-30% range, and adjusted
debt to EBITDA to remain 3x-4x over the forecast horizon." This
could be the result of:
-- Debt- or cash-funded acquisitions that are larger than expected
and could significantly affect the group indebtedness with a
proportionally lower impact on profitability;
-- Unforeseen share buybacks or dividend distributions that are
material enough to have a major impact on the group's cash
balances; or
-- Weaker-than-expected profit margins because of increased
competition or extraordinary expenses affecting the adjusted
EBITDA.
S&P said, "An upgrade would hinge on our expectation that adjusted
FFO to debt would remain above 30% and adjusted debt to EBITDA
would remain below 3x on a recurrent and consistent basis.
"We upgraded Nexi's senior unsecured notes and Nets' senior
unsecured notes to 'BB+' from 'BB', in line with the issuer credit
ratings. The recovery rating on the notes is '3', indicating our
expectations of recovery prospects at 50%-90% (rounded estimate:
55%)."
-- Year of default: 2028
-- Jurisdiction: Italy
-- Stressed EBITDA: EUR629 million
-- Operational adjustment: 25%
-- EBITDA multiple: 6.5x
-- Gross enterprise value at default: EUR4.1 billion
-- Net value available to creditors: EUR3.9 billion
-- Recovery expectations: 50%-90% (rounded estimate: 55%)
===================
L U X E M B O U R G
===================
ARMORICA LUX: EUR335M Bank Debt Trades at 35% Discount
------------------------------------------------------
Participations in a syndicated loan under which Armorica Lux Sarl
is a borrower were trading in the secondary market around 64.8
cents-on-the-dollar during the week ended Friday, March 10, 2023,
according to Bloomberg's Evaluated Pricing service data.
The EUR335 million facility is a Term loan that is scheduled to
mature on July 28, 2028. The amount is fully drawn and
outstanding.
Armorica Lux Sarl is the parent company of idverde, a provider of
landscaping services in Europe, offering a broad range of services
for public or private clients across all segments. The Company's
country of domicile is Luxembourg.
=====================
N E T H E R L A N D S
=====================
NOBEL BIDCO: EUR1.05B Bank Debt Trades at 15% Discount
------------------------------------------------------
Participations in a syndicated loan under which Nobel Bidco BV is a
borrower were trading in the secondary market around 84.6
cents-on-the-dollar during the week ended Friday, March 10, 2023,
according to Bloomberg's Evaluated Pricing service data.
The EUR1.05 billionfacility is a Term loan that is scheduled to
mature on June 23, 2028. The amount is fully drawn and
outstanding.
Nobel Bidco BV is an electronic appliances wholesaler. The
Company's country of domicile is the Netherlands.
=========
S P A I N
=========
BBVA CONSUMO 12: Moody's Assigns (P)B1 Rating to EUR150MM B Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to the Notes to be issued by BBVA Consumo 12, FT ("the
Issuer"):
EUR2850M Series A Fixed Rate Asset Backed Notes due August 2036,
Assigned (P)Aa3 (sf)
EUR150M Series B Fixed Rate Asset Backed Notes due August 2036,
Assigned (P)B1 (sf)
RATINGS RATIONALE
The transaction is a static cash securitisation of Spanish
unsecured consumer loans originated by Banco Bilbao Vizcaya
Argentaria, S.A. (BBVA) (A3/A3(cr), A2 LT Bank Deposits). The
portfolio consists of consumer loans used for several purposes,
such car acquisition, property improvement and other undefined or
general purposes. BBVA also acts as servicer, collection account
bank and issuer account bank provider of the transaction.
The underlying assets consist of consumer loans with fixed rates
(100% of the pool) and a total outstanding balance of approximately
EUR3,305 million. As of November 1, 2022, the provisional portfolio
has 316,147 loans with a weighted average interest of 5.78%. The
portfolio is highly granular with the largest and 20 largest
borrowers representing 0.001% and 0.06% of the pool, respectively.
The portfolio also benefits from a good geographic diversification
and good weighted average seasoning of 16.2 months. No loans in
grace period due to moratoriums will be securitised at closing. The
final portfolio will be selected at random from the provisional
portfolio to match the final Notes issuance amount.
The transaction benefits from credit strengths such as a strong
artificial write-off, which traps the available excess spread to
cover any losses when the loan has been six months in arrears.
Interest and principal on Class B are fully subordinated to Class A
and the amortization of the Notes is fully sequential. No interest
rate risk as both interests on the asset and the Notes are fixed.
However, Moody's notes that there is a risk of yield compression as
96.0% of the loans in the pool has the option of an automatic
discount on the loan interest rate as a result of the future cross
selling of other products. Various mitigants have been put in place
in the transaction structure, such as performance-related triggers
to stop the amortisation of the reserve fund. Commingling risk is
mitigated by the transfer of collections to the issuer account bank
within two days and the high rating of BBVA (A3/A3(cr), A2 LT Bank
Deposits). If BBVA's long term deposit rating is downgraded below
Baa2, it will either transfer the issuer account to an eligible
entity or guarantee the obligations of BBVA.
Moody's analysis focused, amongst other factors, on (i) an
evaluation of the underlying portfolio of consumer loans and the
eligibility criteria; (ii) historical performance provided on
BBVA's total book and past consumer loan ABS transactions and
performance of previous BBVA Consumo deals; (iii) the credit
enhancement provided by subordination, excess spread and the
reserve fund; (iv) the liquidity support available in the
transaction by way of principal to pay interest; and (v) the
overall legal and structural integrity of the transaction.
MAIN MODEL ASSUMPTIONS
Moody's determined a portfolio lifetime expected mean default rate
of 4.5%, expected recoveries of 15.0% and a portfolio credit
enhancement ("PCE") of 17.0%. The expected defaults and recoveries
capture Moody's expectations of performance considering the current
economic outlook, while the PCE captures the loss Moody's expect
the portfolio to suffer in the event of a severe recession
scenario. Expected defaults and PCE are parameters used by Moody's
to calibrate its lognormal portfolio loss distribution curve and to
associate a probability with each potential future loss scenario in
its ABSROM cash flow model to rate consumer ABS transactions.
The portfolio expected mean default rate of 4.5% is in line with
recent Spanish consumer loan transaction average and is based on
Moody's assessment of the lifetime expectation for the pool taking
into account: (i) historic performance of the loan book of the
originator, (ii) good performance track record on most recent BBVA
Consumo deals with cumulative 3m+ arrears below 3.95%, (iii)
benchmark transactions, and (iv) other qualitative considerations.
Portfolio expected recoveries of 15% are in line with recent
Spanish consumer loan average and are based on Moody's assessment
of the lifetime expectation for the pool taking into account: (i)
historic performance of the loan book of the originator, (ii)
benchmark transactions, and (iii) other qualitative considerations
such as quality of data provided.
The PCE of 17.0% is in line with other Spanish consumer loan peers
and is based on Moody's assessment of the pool taking into account
the relative ranking to originator peers in the Spanish auto loan
market. The PCE of 17.0% results in an implied coefficient of
variation ("CoV") of 51.35%.
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in December
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 of the Notes would be (1) better than expected performance
of the underlying collateral; or (2) a lowering of Spain's
sovereign risk leading to the removal of the local currency ceiling
cap.
Factors or circumstances that could lead to a downgrade of the
ratings would be (1) worse than expected performance of the
underlying collateral; (2) deterioration in the credit quality of
BBVA; or (3) an increase in Spain's sovereign risk.
TDA IBERCAJA 5: S&P Affirms 'D(sf)' Rating on Class E Notes
-----------------------------------------------------------
S&P Global Ratings raised its credit ratings on TDA Ibercaja 5,
Fondo de Titulizacion de Activos's class B, C, and D notes to 'AAA
(sf)', 'AA (sf)', and 'A+ (sf)' from 'AA+ (sf)', 'AA- (sf)', and
'A- (sf)', respectively. At the same time, S&P affirmed its 'AAA
(sf)', and 'D (sf)' rating on the class A and E notes,
respectively.
The rating actions follow its full analysis of the most recent
information that it has received and the transaction's current
structural features.
S&P said, "Under our global RMBS criteria, our weighted-average
foreclosure frequency assumptions decreased because of the
transaction's reduced arrears and lower weighted-average effective
loan-to-value (LTV). In addition, our weighted-average loss
severity (WALS) assumptions also declined due to the lower
weighted-average current LTV in the pool."
Table 1
Credit Analysis Results
RATING WAFF (%) WALS (%) CREDIT COVERAGE (%)
AAA 12.47 12.21 1.52
AA 8.66 9.26 0.80
A 6.74 5.07 0.34
BBB 5.17 3.32 0.17
BB 3.51 2.34 0.08
B 2.34 2.00 0.05
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
Loan-level arrears stand at 1.2%. Overall delinquencies remain well
below our Spanish RMBS index.
Cumulative defaults, defined as loans in arrears for a period equal
to or greater than 18 months, represent 2.18% of the closing pool
balance. The first interest deferral trigger is for the class D
notes; it is not at risk of being breached because it is defined at
3.95%, and S&P does not expect that this level will be reached in
the near term.
The reserve fund is at its floor value (EUR6.00 million) and will
no longer amortize, providing further credit enhancement as the
notes continue to amortize.
S&P's operational, counterparty, rating above the sovereign, and
legal risk analyses remain unchanged, in line with its previous
review. Therefore, the ratings assigned are not capped by any of
these criteria.
The servicer, Ibercaja Banco S.A., has a standardized, integrated,
and centralized servicing platform. It is a servicer for many
Spanish RMBS transactions, and its transactions' historical
performance has outperformed S&P's Spanish RMBS index.
S&P said, "Our credit and cash flow results indicate that the
credit enhancement available for the class A2 notes is still
commensurate with our 'AAA (sf)' rating. We therefore affirmed our
'AAA (sf)' ratings on the class A2 notes.
"The class B, C, and D notes' credit enhancement has increased to
5.6%, 3.6%, and 2.6%, respectively, due to the amortization of the
notes. Considering this increase, and the good and stable asset
performance, we raised to 'AAA (sf)', 'AA (sf)', and 'A+ (sf)',
from 'AA+ (sf)', 'AA- (sf)', and 'A- (sf)', respectively, our
ratings on the class B, C, and D notes.
"Under our cash flow analysis, the class C and D notes could
withstand stresses at higher ratings than those currently assigned.
However, we have limited our upgrades based on their overall credit
enhancement and position in the waterfall, the current
macroeconomic environment, and continuation of pro rata payments
with a lack of credit enhancement build-up before the upcoming
interest payment dates.
"The class E notes is not collateralized and is paid after
amortization of the reserve fund. It is still uncertain whether
future interest payments will be missed. Given its current credit
enhancement and position in the waterfall, we affirmed our 'D (sf)'
rating on the class E notes.
"We expect Spanish consumer price inflation to reach 5.1% this year
and 2.3% in 2024. Although elevated inflation is overall credit
negative for all borrowers, some borrowers will face more
constraints than others. Risks may emerge, for example, if
inflation worsens more quickly or more severely than currently
expected. We consider the borrowers in the transaction to be prime,
meaning they are generally very resilient to inflationary
pressures."
TDA Ibercaja 5 is a Spanish RMBS transaction securitizing a pool of
prime residential mortgage loans. It closed in May 2007.
TDA IBERCAJA 7: S&P Affirms 'D(sf)' Rating on Class C Notes
-----------------------------------------------------------
S&P Global Ratings raised to 'A+ (sf)' from 'BBB (sf)' its credit
rating on TDA Ibercaja 7, Fondo de Titulizacion de Activos's class
B notes. At the same time, S&P affirmed its 'AAA (sf)' and 'D (sf)'
ratings on the class A and C notes, respectively.
The rating actions follow its full analysis of the most recent
information that it has received and the transaction's current
structural features.
S&P said, "Under our global RMBS criteria, our weighted-average
foreclosure frequency assumptions decreased because of the
transaction's reduction in arrears. In addition, our
weighted-average loss severity assumptions have also declined due
to the lower weighted-average current loan-to-value ratio in the
pool."
Table 1
Credit Analysis Results
RATING WAFF (%) WALS (%) CREDIT COVERAGE (%)
AAA 11.31 19.40 2.19
AA 7.81 15.31 1.20
A 6.04 9.22 0.56
BBB 4.61 6.49 0.30
BB 3.10 4.85 0.15
B 2.03 3.61 0.07
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
Loan-level arrears stand at 0.87%. Overall delinquencies remain
well below our Spanish RMBS index.
Cumulative defaults, defined as loans in arrears for a period equal
to or greater than 18 months, represent 1.87% of the closing pool
balance. The interest deferral trigger for the class B notes is not
at risk of being breached because it is defined at 10%, and S&P
does not expect that this level will be reached in the near term.
The available credit enhancement for all classes of notes has
remain unchanged since our previous review. This is because the
notes are amortizing on a pro rata basis, and the reserve fund is
also amortizing in line with the notes and is at its target
amount.
S&P's operational, rating above the sovereign, and legal risk
analyses remain unchanged since its previous review. Therefore, the
ratings assigned are not capped by any of these criteria.
The servicer, Ibercaja Banco S.A., has a standardized, integrated,
and centralized servicing platform. It is a servicer for many
Spanish RMBS transactions, and its transactions' historical
performance has outperformed our Spanish RMBS index.
S&P said, "Our credit and cash flow results indicate that the
credit enhancement available for the class A notes is still
commensurate with our 'AAA (sf)' rating. We therefore affirmed our
'AAA (sf)' rating on the class A notes.
"Considering the results of our credit and cash flow analysis, the
available credit enhancement, and the stable and good asset
performance, we raised to 'A+ (sf)' from 'BBB (sf)'our rating on
the class B notes."
The class C notes paid all unpaid interest due on the November 2019
interest payment date. Since then, interest on this tranche has
been paid timely, and it has started amortizing. However, this
tranche is not collateralized, and it is paid after amortization of
the reserve fund. It missed a significant amount of interest
payments in the past, and it is still not certain that future
interest payments will not be missed. Given its credit enhancement
and position in the waterfall, S&P affirmed its 'D (sf)' rating on
this class of notes.
S&P said, "We expect Spanish consumer price inflation to reach 5.1%
this year and 2.3% in 2024. Although elevated inflation is overall
credit negative for all borrowers, some borrowers will face more
constraints than others. Risks may emerge, for example, if
inflation worsens more quickly or more severely than currently
expected. We consider the borrowers in the transaction to be prime
borrowers, meaning they will generally have high resilience to
inflationary pressures."
TDA Ibercaja 7 is a Spanish RMBS transaction that securitizes a
pool of prime residential mortgage loans. It closed in December
2009.
===========
S W E D E N
===========
REN10 HOLDING: Fitch Gives B+ Final Rating on EUR200M Term Loan
---------------------------------------------------------------
Fitch Ratings has assigned Ren10 Holding AB's (Renta; B+/Stable)
EUR200 million senior secured term loan a final rating of 'B+'/RR4.
The final rating is in line with the expected rating assigned on 14
February 2023.
KEY RATING DRIVERS
Debt Aligned With IDR: The senior secured term loan's rating is
aligned with Renta's Long-Term Issuer Default Rating (IDR),
reflecting Fitch's view that the likelihood of default is
materially similar. The loan is guaranteed by group subsidiaries
that account for a substantial majority of Renta's consolidated
assets, net sales and EBITDA. The 'RR4' Recovery Rating reflects
average recovery expectations. The term loan's rating ranks pari
passu with Renta's existing senior secured notes and junior to
Renta's revolving credit facility (RCF).
Acceptable Leverage: Fitch expects the proceeds of the loan to be
used to repay amounts drawn under the company's RCF and for general
corporate purposes including financing new acquisitions. While the
issuance will therefore lead to an increase in gross leverage and
delay Renta's previously communicated deleveraging plan, its
post-transaction gross debt/EBITDA ratio should remain comfortably
below Fitch's previously stated downgrade trigger of 5x.
For further details see 'Fitch Assigns Ren10 Holding AB Final
Rating Of 'B+', Outlook Stable', dated 21 February 2022 and 'Fitch
Rates Ren10 Holding AB's Senior Secured Term Loan 'B+(EXP)'', dated
14 February 2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The senior secured debt ratings could be downgraded if Renta's
Long-Term IDR was downgraded, e.g., as a result of the following:
- A reduction in EBITDA that leads Fitch to expect a meaningful
delay to Renta's currently anticipated deleveraging; for example,
if gross debt-to-EBITDA rises above 5x
- Insufficient liquidity or access to funding to support the capex
required to maintain an attractive fleet
- Material erosion of earnings, due to fleet-valuation impairments
or losses on the disposal of used equipment
- An increase in debt senior to the rated instruments could lead
Fitch to notch the senior secured debt ratings down from the
Long-Term IDR, on the basis of weaker recovery prospects
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The senior secured debt rating is primarily sensitive to an upgrade
of Renta's IDR, which in turn is principally sensitive to the
following factors:
- Material strengthening of the company's franchise, if in
conjunction with scale benefits that feed into material
profitability
- Gross debt-to-EBITDA below 3.5x on a sustained basis without
deterioration in other financial metrics and in conjunction with a
materially enlarged franchise
- Should the company introduce a subordinated tranche below the
rated instruments, Fitch could notch the senior secured debt
ratings up from the Long-Term IDR, on the basis of stronger
recovery prospects
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
----------- ------ -------- -----
Ren10 Holding AB
senior secured LT B+ New Rating RR4 B+(EXP)
===========================
U N I T E D K I N G D O M
===========================
DRB GROUP: Former Workers Owed Around GBP1.2 Million
----------------------------------------------------
Owen Hughes at North Wales Live reports that former workers at a
North Wales engineering firm are owed around GBP1.2 million after
it collapsed last month.
DRB Group was originally founded in Chester by Dave Bennett in 1976
and moved to Deeside in 1984.
The firm employed more than 120 staff and provided engineering
services to some of the UK's leading manufacturing companies. Last
month, North Wales Live revealed it was bring placed into a
Creditors Voluntary Liquidation, with insolvency firm Leonard
Curtis appointed.
Now a statement of affairs has been published -- showing the money
the company owed to staff, HMRC and other creditors, North Wales
Live discloses.
When it comes to the firm's workers there are employee claims for
pay arrears, holiday pay, and compensation in lieu of notice and
redundancy. These claims total around GBP1.2 million, North Wales
Live notes.
According to North Wales Live, if those payments cannot be recouped
in the sale of the company's assets then part of those claims can
be made through the National Insurance Fund, which covers payments
such as redundancy, salary and holiday pay.
The company has an estimated book value of around GBP1.3 million
but it is not known yet if liquidators will realise that figure,
North Wales Live states.
Cynergy Business Finance Ltd and Close hold debentures and fixed
and floating charges over the company's assets. They are owed a
total of around GBP1.05 million, North Wales Live notes.
There is more than GBP850,000 owed to trade creditors and nearly
GBP900,000 to HMRC, according to North Wales Live. If the book
value is met there will be a deficiency of around GBP2 million but
this could be significantly higher if they fail to reach that book
value, North Wales Live discloses.
ECO MODULAR: Enters Administration, Owes GBP5MM to Creditors
------------------------------------------------------------
Thurrock Nub News reports that the government has stepped in to say
it will ensure the future of a controversial new school in Avely
after news that its builders have gone bust.
Hull-based Eco Modular Building Ltd, the major contractor for the
new Harrier Primary Academy, has announced its intention to appoint
administrators, Thurrock Nub News relates.
And it has pulled plant and machinery off the site on Love Lane,
Thurrock Nub News discloses.
Planning permission was controversially granted by Thurrock Council
last year for the school, which was widely opposed by local
residents and ward councillors, Thurrock Nub News notes.
According to Thurrock Nub News, Eco Modular Building Ltd is the
main contractor for the site build -- which has reached the stage
where footings appear to be in place for some building but there
are still a lot of groundworks to be completed.
Its latest accounts for the year to December 31, 2021 show a
turnover of GBP33.5 million generating a pre-tax profit of
GBP244,000, Thurrock Nub News states.
During the year, the firm employed 77 staff and owed GBP5 million
to trade creditors, Thurrock Nub News discloses. That debt now
appears to have crippled the company, Thurrock Nub News notes.
"The Department for Education is working to explore all viable
options for opening the school as soon as possible," Thurrock Nub
News quotes a statement issued on March 13 as saying.
"Formal communications will be provided by the Reach2 Academy Trust
to parents that applied for a school place and community members
who expressed an interest in the school."
EG FINCO: EUR610M Bank Debt Trades at 16% Discount
--------------------------------------------------
Participations in a syndicated loan under which EG Finco Ltd is a
borrower were trading in the secondary market around 83.8
cents-on-the-dollar during the week ended Friday, March 10, 2023,
according to Bloomberg's Evaluated Pricing service data.
The EUR610 million facility is a Term loan that is scheduled to
mature on April 30, 2027. The amount is fully drawn and
outstanding.
EG Finco Limited operates as a petrol station. The Company offers
fuel, lubricants, and liquefied natural gas. EG Finco serves
customers worldwide. The Company's country of domicile is the
United Kingdom.
ENQUEST PLC: Moody's Lowers CFR to B3 & Alters Outlook to Negative
------------------------------------------------------------------
Moody's Investors Service has downgraded EnQuest plc's corporate
family rating to B3 from B2 and the probability of default rating
to B3-PD from B2-PD. Concurrently, Moody's downgraded to Caa1 from
B3 the instrument rating assigned to EnQuest's $305 million backed
senior unsecured notes due November 2027. The outlook has changed
to negative from stable.
RATINGS RATIONALE
In Moody's view, EnQuest's credit profile has weakened in the
aftermath of (i) changes to the UK Energy Profits Levy (EPL)
introduced in November 2022[1], (ii) the related reduction of the
company's reserve-based lending (RBL) facility, and (iii) announced
deferral of capital expenditure[2] in response to those changes, as
well as a 25% reduction in capital and abandonment expenditure for
2022 relative to the guidance provided earlier in the year.
Accordingly, the B3 CFR reflects the company's tight liquidity
position, along with Moody's expectations of lower production
volumes, lower cash generation capacity and reduced ability to
significantly de-leverage at mid-cycle price conditions in the
longer-term.
High operational concentration in the UK exposes EnQuest to
increased taxation of domestic upstream activities; in Moody's
view, this constrains the company's liquidity, operational and
financial performance. The value of EnQuest's hydrocarbon reserves
has reduced in the wake of the EPL; accordingly, the company is
required to meet an accelerated amortisation schedule of its $500
million RBL facility $400 million of which were drawn at year-end
2022. EnQuest repaid $78 million of the RBL in January 2023.
Assuming a 40%-45% reduction in RBL commitments, Moody's calculates
that EnQuest needs to repay an additional $40 million of the RBL
drawings by the end of 2023. Besides the RBL amortisation, the
company still faces retail bond maturities of GBP111.3 million in
October 2023, therefore the quantum of upcoming mandatory debt
reduction remains substantial. In an effort to preserve liquidity,
EnQuest has announced a deferral of investment in Kraken, that
Moody's considers detrimental to the longer-term production profile
on account of steep natural decline rates of the company's mature
asset base. As a result, the rating agency now projects a
significant reduction in EnQuest's free cash flow generation (FCF,
as defined by Moody's) because of the combined effects of higher
taxation and production volumes constrained by sub-optimal levels
of future investments.
Moody's base case scenario, which currently assumes an average
Brent oil price of $70/barrel in 2023 and $65/barrel in 2024 for
the rated corporates in the Oil & Gas sector globally, incorporates
stable, but lower than previously expected production at around
42-43 thousand barrels of oil equivalent (boe) per day and higher
unit operating cost of $25-$27/boe in each of 2023 and 2024.
Accordingly, EnQuest should generate Moody's-adjusted EBITDA of
$550-600 million annually in 2023 and 2024. Projected operating
cash flows of approximately $350 million in 2023 and $250 million
in 2024 shall be sufficient to cover Moody's-adjusted capital
expenditure (including lease repayments) of around $250 million per
annum. While positive, FCF generation under Moody's base case is
expected to be materially lower than previously expected and the
company will need to rely on its cash balances to fund around $270
million equivalent of expected mandatory debt repayments and
contingent considerations in 2023. In its base case scenario,
absent any access to capital markets, Moody's projects a year-end
2023 cash position to fall to around $75 million, significantly
lower than historical levels of over $200 million. However, should
oil prices fare better than Moody's current base case scenario
assumptions (as seen year to date), then the company's year-end
2023 cash position would be higher.
LIQUIDITY
EnQuest's liquidity profile is tight. Moody's assessment reflects
the expectation of mildly positive FCF generation in a
$65-$70/barrel Brent oil price environment along with a
significantly reduced availability of external liquidity under the
company's RBL following the redetermination of the borrowing base.
The company has significant debt maturities over the coming months
including the retail bond maturities of GBP111.3 million in October
2023. Absent any access to capital markets, EnQuest will need to
rely on existing cash balance and FCF generation to meet its
substantial debt repayments which would exhaust its cash buffer
substantially.
OUTLOOK
The negative outlook reflects EnQuest's tight near-term liquidity
under Moody's base case. The outlook could be stabilised on the
back of an improved liquidity assessment under Moody's base case,
for instance through stronger than currently expected operating
performance and cost discipline, leading to higher internal cash
flow generation or through demonstrated access to capital markets
to support the management of mandatory debt repayments and a
year-end cash balance commensurate with the requirements of the
business.
ESG CONSIDERATIONS
EnQuest's ESG Credit Impact Score has been revised downwards to
CIS-4 from CIS-3 commensurate with this rating action. A CIS-4
score implies that the company's rating is lower than it would have
been if ESG risk exposures did not exist. This change in EnQuest's
CIS score is primarily driven by the heightened social risk
exposure, reflecting the substantial increase in taxation on the UK
O&G windfall profits.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the rating action, a rating upgrade over the short term is
unlikely. Over time, EnQuest's ratings could be upgraded if the
company:
-- Sustainably grows its production and reserves
-- Maintains RCF/Debt above 25%
-- Generates positive free cash flow and establishes a track
record of ensuring good liquidity through the cycle
Conversely, the ratings could be downgraded should EnQuest's:
-- Fail to improve liquidity and successfully address its 2023
debt maturities
-- Fail to maintain current production levels of around 45 kboepd
-- RCF/Debt drop to below 15%
-- EBITDA/Interest expense drop below 3.0x
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Independent
Exploration and Production published in December 2022.
GALERIA KARSTADT: Files for Insolvency Protection for Second Time
-----------------------------------------------------------------
The Associated Press reports that Germany's last major department
store chain announced on March 13 that it plans to close two-fifths
of its branches, months after it filed for insolvency protection
for the second time in less than three years.
According to the AP, the long-troubled Galeria Karstadt Kaufhof
plans to shut 52 of its current 129 stores in two phases, with the
first closing down at the end of June and the rest at the end of
January.
It said that about 4,000 employees at those stores will be
affected, and that another 300 jobs will go at its headquarters in
Essen and in other areas such as IT and facility management, the AP
relates.
The company said that, because of economic circumstances and "local
conditions," and after "intensive negotiations" with landlords and
city authorities, there was no positive outlook for the stores that
are to be axed, the AP notes.
The remaining 77 stores will be modernized over the next three
years with ranges that are more tailored to local needs, with
11,000 jobs being safeguarded, Galeria Karstadt Kaufhof said in a
statement, the AP relays.
The company, which resulted from the merger a few years ago of
rivals Karstadt and Kaufhof, sought protection from creditors in
late October, citing a steep rise in energy prices, high inflation
and weak consumer spending, the AP recounts.
GROSVENOR SQUARE 2023-1: Fitch Gives 'B-(EXP)sf' Rating on F Notes
------------------------------------------------------------------
Fitch Ratings has assigned Grosvenor Square RMBS 2023-1 plc's
(GSQ2023-1) notes expected ratings as detailed below.
Entity/Debt Rating
----------- ------
Grosvenor Square
RMBS 2023-1 PLC
Class A
XS2594134350 LT AAA(EXP)sf Expected Rating
Class B
XS2594135167 LT AA(EXP)sf Expected Rating
Class C
XS2594137619 LT A+(EXP)sf Expected Rating
Class D
XS2594138187 LT BBB+(EXP)sf Expected Rating
Class E
XS2594138344 LT BB(EXP)sf Expected Rating
Class F
XS2594138930 LT B-(EXP)sf Expected Rating
Class G
XS2594139151 LT CC(EXP)sf Expected Rating
Class Z
XS2594141488 LT NR(EXP)sf Expected Rating
XS1
XS2594139318 LT BB+(EXP)sf Expected Rating
XS2
XS2594140753 LT BB+(EXP)sf Expected Rating
TRANSACTION SUMMARY
GSQ2023-1 is a refinancing of previous securitisations under
Kensington Mortgage Company Limited's Finsbury Square and Gemgarto
RMBS shelf programmes. The loans constituting the pool are a mix of
seasoned owner occupied (OO) and buy-to-let (BTL) loans originated
by Kensington mortgages. The assets constituting the pool were
previously included in the following transactions: Gemgarto 2018-1,
Finsbury Square 2019-1, Finsbury Square 2019-2, Finsbury Square
2019-3 and Finsbury Square 2020-1. The transaction may purchase the
assets collateralising the Finsbury Square 2020-2 at the additional
purchase date.
KEY RATING DRIVERS
Seasoned Specialist Prime Originations: The pool consists of a mix
of seasoned OO and BTL loans, with about 91% of the pool being
originated between 2016 and 2020. This leads to a weighted average
(WA) sustainable loan-to-value ratio of 72.5%, a WA indexed current
loan to value (CLTV) of 56.7%, a WA debt-to-income ratio of 33% and
a Fitch-calculated WA interest coverage ratio of 102.4%. These are
in line with the refinanced transactions at their closing except
the WA indexed CLTV, which is significantly lower.
Kensington takes a manual approach to underwriting, focusing on
borrowers who do not necessarily qualify on the automated scorecard
models of high-street lenders. It therefore attracts a higher
proportion of first-time buyers (FTBs), self-employed borrowers and
borrowers with adverse credit histories than is typical for prime
UK OO lenders. Fitch has applied an originator adjustment of 1.20x
on its prime OO assumptions to account for this, and the
performance of Kensington's OO book data and refinanced
transactions. Fitch also made a 1.10x originator adjustment to the
BTL loans to account for the historical performance of Kensington's
BTL book data and previous transactions.
High and Increasing Arrears: The pool contains 9.5% of loans in
arrears, materially higher than in most securitised prime pools
including from specialised lenders. Also, increasing arrears have
been observed in the refinanced transactions rated by Fitch,
notably late stage arrears since April 2020 (5.8% of loans in
arrears by more than three months in the portfolio). This is linked
to a backlog in the UK court system that has slowed repossession
process and high prepayments as eligible borrowers switch products
at the end of their initial fixed-rate period, resulting in a
concentration of weaker borrowers in the portfolio.
Ratings lower than MIR: The ratings of the class B and E notes have
been constrained one notch below the model implied rating (MIR).
This reflects Fitch's view that that there is limited headroom at
the higher MIR level for these notes and the potential for further
deterioration in the performance of the collateral pool as cost of
living challenges across the UK persist and the substantial
increases in interest rates remain for longer than anticipated
stretching borrower affordability. It also factors the increasing
trend in arrears and possible increase in WA foreclosure frequency
(FF).
High Prepayments Expected: The transaction consists of a
substantial proportion of loans that are still on their fixed-rate
period but due to revert to floating in the coming three years. In
its surveillance of previous Kensington securitisations, Fitch has
observed significant increases in prepayments as loans revert to
floating.
The significant level of upcoming reversions in the pool and the
prevailing rising interest rate environment over the past 12 months
further increases the likelihood of high prepayments, which may
limit available excess spread in the transaction.
To address this risk, Fitch applied a criteria variation to its
high prepayment assumptions across all rating scenarios, consisting
in assuming 25% of annual prepayments for the first year and 40% of
annual prepayments for the second year after closing, before they
go down to Fitch's high prepayment assumptions for each rating
scenario.
Self-Employed Borrowers: Prime lenders assessing borrower
affordability typically require a minimum of two years of income
information and apply a two-year average or, if income is
declining, the lower income amount. Kensington's underwriting
practices permits underwriters' discretion in using the latest
year's income if it is increasing. Fitch therefore applied an
increase of 30% to the FF for self-employed borrowers with verified
income instead of the 20% increase typically applied under its UK
RMBS Rating Criteria to the OO sub-pool only. Self-employed
borrowers constitute 46.3% of the OO sub-pool and 31.2% of the
total pool.
Product Switches, Further Advances Not Retained: The transaction
does not permit product switches or further advances to be retained
in the collateral pool. This mitigates against the risk of credit
quality migration of the pool and compression of yield on the
assets. However, this may further exacerbate prepayments in the
pool as the originator is obliged to repurchase any loans subject
to further advances or product switches.
Representations and Warranties Tempered: The representations and
warranties (R&W) provider may have limited resources available to
indemnify the issuer or to repurchase loans in case of a breach of
the R&Ws. In addition, the R&W provider's liabilities are capped at
GBP15 million for a period of 12 months following the issue date.
Fitch considers these limitations a weakness but there are several
mitigating factors that make a breach remote. These include among
others, the loans' seasoning combined with the absence of warranty
breaches in previous transactions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The transaction's performance may be affected by adverse changes in
market conditions and the economic environment. Weakening economic
performance is strongly correlated to increasing levels of
delinquencies and defaults that could reduce credit enhancement
(CE) available to the notes.
Additionally, unanticipated declines in recoveries could result in
lower net proceeds, which may make certain notes susceptible to
negative rating actions, depending on the extent of the decline in
recoveries. Fitch tested a sensitivity of a 15% increase in the
WAFF and a 15% decrease in the WA recovery rate (RR), which would
result in downgrades of up to one category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE and, potentially,
upgrades. Fitch tested an additional rating sensitivity scenario by
applying a decrease in the WAFF of 15% and an increase in the WARR
of 15%. The impact on the mezzanine notes could be upgrades of up
to six notches.
CRITERIA VARIATION
The transaction features a significant proportion of fixed-rate
loans, which are scheduled to revert to floating over the next
three years. Fitch has noticed a strong correlation between
reversions and prepayments in Fitch's surveillance of previous KMC
securitisations. Given the historically high prepayments in
previous KMC securitisations and prevailing rising interest-rate
environment, Fitch believes prepayments in the GSQ2023-1 pool may
be higher than Fitch's high prepayment assumptions. To account for
this risk factor, which would limit available excess spread in the
transaction, Fitch has applied a criteria variation to its high CPR
assumptions to adequately account for this characteristic in its
analysis.
The criteria variation was applied to high prepayment scenarios at
all rating scenario levels and consisted of a 25% prepayment
assumption in year one and a 40% prepayment assumption in year two.
From year three onwards prepayment assumptions return to those
standardly applied in criteria.
The impact of the criteria variation is one notch for the class D
notes.
DATA ADEQUACY
Grosvenor Square RMBS 2023-1 PLC
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
Fitch reviewed the results of a third-party assessment conducted on
the asset portfolio information, and concluded that there were no
findings that affected the rating analysis.
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.
HIGHLANDER HOTEL: Lomond Hills Goes Into Liquidation
----------------------------------------------------
Fiona Dobie at The Scotsman reports that Fife's historic Lomond
Hills Hotel has gone into liquidation.
Ken Pattulo and Kenny Craig of Begbies Traynor were appointed as
joint liquidators of the Highlander Hotel Ltd -- which traded as
the Lomond Hills Hotel in Freuchie -- on March 6, 2023, The
Scotsman relates.
A downturn in trade and "very difficult trading conditions during
the challenging winter season" have been cited among the reasons
for the village hotel's liquidation, The Scotsman discloses. As a
result, the hotel has now ceased trading and all 17 staff have been
made redundant, The Scotsman notes.
Liquidators hope to be able to sell the property in due course and
to see it operating again with new owners in the future, The
Scotsman states.
The Lomond Hills Hotel, which sits at the foot of the Kingdom's
Lomond Hills, is an 18th century converted coaching inn which dates
back to 1733. With 24 bedrooms, as well as a restaurant, a public
bar and a leisure centre, it was once a popular wedding venue.
According to The Scotsman, like much of the hospitality sector the
business has been impacted by the cost of living crisis, seeing a
downturn in trade as people have cut their luxury spend. The drop
in occupancy, combined with the challenge of Covid-19 lockdowns in
recent years, led to cash flow issues, making it unviable for the
business to continue to trade, The Scotsman recounts.
IVC ACQUISITION: Fitch Alters Outlook on B LongTerm IDR to Negative
-------------------------------------------------------------------
Fitch Ratings has revised IVC Acquisition Pikco Limited's (IVCE)
Outlook to Negative from Stable while affirming its Long-Term
Issuer Default Rating (IDR) at 'B'. At the same time, Fitch has
affirmed IVC Acquisition Ltd's senior secured instrument rating at
'B+' with a Recovery Rating of 'RR3'.
The revision of the Outlook to Negative reflects its expectation
that IVCE's deleveraging is likely to be delayed until financial
year 2025 (ending September). This is driven by temporarily lower
profitability in a weakened economic environment, inflationary cost
pressures and slower free cash flow (FCF) generation amid higher
interest rates, which will burden IVCE's operating and credit
metrics in FY23. The Negative Outlook also factors in the
uncertainty around its medium-term business strategy and rising
execution risks to achieve integration following a record year of
acquisitions.
The affirmation of the IDR at 'B' remains supported by IVCE's
defensive business model given its leading position in core
markets, strong sector fundamentals offering organic growth, and
the company's record of robust underlying operating profitability,
which Fitch believes will be restored in FY24, after temporary
weakness in FY22-FY23.
KEY RATING DRIVERS
Weakened Consumer Environment: Fitch expects organic revenue growth
to remain around 6% in FY23 before improving to 7% in FY24. Fitch
believes that demand for non-essential veterinary services could
weaken in the inflationary environment, resulting in subdued
trading performance in the short term. Organic revenue growth in
FY22 slowed to 6.2%, on staff absence during Omicron, from an
exceptional 15% in FY21 when the company benefited from increased
pet ownership in the pandemic.
Margin Under Short-term Pressure: Fitch believes that IVCE is able
to mitigate cost inflation through price increases. However, Fitch
expects the EBITDA margin to remain subdued in FY23 at 14.6% as the
company continues to invest in staffing and digital infrastructure.
Such investments had a negative impact on the margin for FY22. From
FY24 onwards, Fitch expects the EBITDA margin to improve towards
16.5% as benefits from investments in infrastructure and synergies
on recent acquisitions are realised.
Delayed Deleveraging: Fitch expects financial leverage to remain
above its negative downgrade sensitivity of total debt/EBITDAR of
8x in the next 12 to 18 months. Fitch anticipates stronger organic
growth and EBITDA margin improvement from FY24, which is likely to
support deleveraging in FY25. Its base case assumes M&A activities
to slow in the short-to-medium term. However, larger debt-funded
M&A, particularly at high valuations, could delay deleveraging
beyond its FY23-FY26 rating horizon, potentially putting ratings
further under pressure.
Improving FCF Generation: Fitch projects FCF to return to neutral
to positive in the next 12 months, as IVCE scales back M&A and
focuses on working-capital management. Fitch believes that rising
interest rates will have a materially negative impact on FCF
generation. However, Fitch expects accelerating organic growth and
improving profitability, in combination with moderated capex, to
drive FCF margin higher toward 4% in FY25.
Heightened Execution Risks: Fitch anticipates increased execution
risks for IVCE following a record year of M&A in FY22. This
includes cash acquisitions worth GBP1.5 billion (on a consolidated
group basis) and a sizable merger with the Canadian vet leader
VetStrategy (VS) paid in shares in November 2021. The merger with
VS further diversified IVCE's shareholder structure, adding VS's
owner Berkshire Partners, in addition to the earlier introduction
of strategic investors Nestlé and Silver Lake. Fitch believes that
recent M&A have helped expand the company's geographical footprint
and leadership in countries with attractive growth and
consolidation opportunities. Nonetheless, Fitch views positively
management's decision to focus on organic performance in FY23.
VS Deconsolidated: Fitch de-consolidates VS´s financials from
IVCE´s, treating it as a ring-fenced subsidiary. Therefore,
Fitch's rating case does not include any earnings or cash
contributions, or debt from VS, as it remains separately funded on
a standalone basis, outside IVCE's restricted lender group. Fitch
believes that IVCE intends to refinance VS's debt at the
consolidated group level, but the future debt structure and the
broader medium-term business plan remain uncertain to Fitch.
Diversified Customer-Centric Operations: IVCE has leading positions
in its core markets and is establishing itself as a leading
international veterinary care business, with a strong medical and
customer focus. It plans to focus on growing economies of scale,
consolidating the fragmented animal healthcare market and creating
leading regional veterinary chains. These regional operations are
supported by common head-office functions realising scale
benefits.
DERIVATION SUMMARY
Fitch assesses IVCE under its Generic Navigator framework, taking
into consideration underlying animal care and consumer service
characteristics, which drive its business profile. IVCE's strategy
of consolidating a fragmented care market and generating benefits
from scale and standardised management structures is similar to
strategies of other Fitch-rated health care operations such as
laboratory services and dental/optical chains. The key difference
is that the animal care market is not as regulated as human health
care, which allows for greater operational flexibility, but also
introduces a higher discretionary characteristic to an otherwise
defensive spending profile.
Fitch expects IVCE's EBITDAR leverage to remain above 7.5x until
deleveraging materialises in FY25. Its financial profile is
underpinned by EBITDA margin improvement (pro-forma for
acquisitions) towards the mid-high teens in FY24 translating into
gradually improving FCF generation.
High-yield peers active in industry consolidation such as Finnish
private health operator Mehilainen Yhtym Oy (B/Stable), laboratory
testing company Inovie Group (B/Stable), and Laboratoire Eimer
Selas (B/Stable) exhibit a similar financial risk profile to
IVCE's. This reflects their 'buy-and-build' growth strategies,
albeit in more regulated healthcare sectors, which have also
benefitted from the pandemic, similarly to IVCE.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Organic revenue growth of 6% for FY23 and improving to 7% for
FY24-FY25
- Fitch EBITDA margin gradually improving to 16% in FY24 and 16.5%
in FY25, from 14.5% in FY23, reflecting synergy realisation
- Fitch-adjusted operating leases at 4.2% of revenue to FY25
- Working-capital cash inflow of GBP47 million for FY23, followed
by GBP5 million per year to FY25
- Capex at 5% of revenue in FY23, followed by 3.7% to FY25
- Contingency consideration payments around GBP45 million per year
to FY25
- Small bolt-on acquisitions of up to GBP60 million in FY23,
followed by GBP100 million per year to FY25 assumed to be
predominantly debt-funded
- No dividends or equity injections
KEY RECOVERY ASSUMPTIONS
Fitch would expects IVCE to be restructured in a default and to
continue operating as a going concern as Fitch believes that this
approach will maximise recoveries for financial creditors over a
liquidation of its assets.
In this distressed recovery analysis, Fitch estimates a distressed
enterprise value (EV) of GBP1.7 billion, based on a
post-restructuring EBITDA of GBP310 million, a 6x distressed
EV/EBITDA valuation and 10% administrative claim.
Fitch assumes the newly increased revolving credit facility (RCF)
of GBP617.5 million to be fully drawn and rank pari passu with the
term loan B facility, leading to a resulting recovery for the
increased amount of senior secured debt at 51%, corresponding to a
'RR3' Recovery Rating and the affirmation of the senior secured
instrument rating at 'B+'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to
downgrade:
- Aggressive debt-funded acquisitions at high multiples or weak
operating performance leading to weakened financial metrics
including:
- EBITDAR leverage above 7.5x (pro-forma for acquisitions) on a
sustained basis
- EBITDA margin falling below 12%
- Negative or neutral FCF on a sustained basis
- EBITDAR fixed charge coverage below 2.0x on a sustained basis
Factors that could, individually or collectively, lead to a
revision of Outlook to Stable:
- EBITDAR leverage trending to below 8.0x by FYE24, and below 7.5x
thereafter
- EBITDA margin improving towards 16% in FY24
- Improving prospects of FCF turning neutral to positive from FY24
Factors that could, individually or collectively, lead to upgrade:
- Successful integration of acquired operations in combination with
increasing scale and profitability, or material shareholder support
in the form of equity injection, leading to improved financial
metrics on a sustained basis, including:
- EBITDAR leverage below 6.0x
- EBITDA margin above 17%
- FCF margin in high single digits
-Satisfactory financial flexibility with EBITDAR fixed charge cover
above 3.0x
LIQUIDITY AND DEBT STRUCTURE
Limited Liquidity: Fitch views IVCE's liquidity as limited
following a record year of acquisitions and subdued operating
performance in a weakened economic environment. IVCE had GBP231
million of cash on its balance sheet at FYE22, a small portion of
which (GBP13 million) remained in VS outside the restricted group.
The upsized GBP617.5 million RCF was mostly drawn, with GBP59
million remaining available at FYE22. Fitch views that refinancing
risk has increased given the currently very high financial leverage
in a more challenging debt market. However, Fitch expects IVCE to
deleverage organically on expanding EBITDA and improve its FCF
generation before the maturity of the RCF in August 2025 and of the
term loan in February 2026.
ISSUER PROFILE
IVCE is the largest veterinary practice group in Europe, with a
presence in about 20 countries. IVCE offers conventional veterinary
consultations and procedures and operates a pet health club. In
addition, it offers online pharmacy and pet care retail services,
including pet food, care products, crematoria, and out-of-business
hours services.
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
----------- ------ -------- -----
IVC Acquisition Ltd
senior secured LT B+ Affirmed RR3 B+
IVC Acquisition
Pikco Limited LT IDR B Affirmed B
MIDAS CONSTRUCTION: Owed More Than GBP87MM to Supply Chain
----------------------------------------------------------
Grant Prior at Construction Enquirer reports that Midas
Construction went down owing more than GBP87 million to its supply
chain.
The scale of the collapsed contractor's trade debt was revealed in
the latest update from administrator Teneon filed at Companies
House, Construction Enquirer relates.
More than 700 suppliers and subcontractors have lodged claims since
Midas went into administration in February 2022 when 303 staff were
made redundant, Construction Enquirer discloses.
Nearly a year ago, Teneon estimated the supply chain debt at GBP50
million, according to Construction Enquirer.
That has since soared and Teneon added: "It is unlikely that
sufficient funds will be realised to enable a distribution to be
made to unsecured creditors."
PAVILLION POINT 2021-1A: Fitch Affirms BB+sf Rating on Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has affirmed Pavillion Point of Sale 2021-1A PLC, as
detailed below.
Entity/Debt Rating Prior
----------- ------ -----
PAVILLION POINT
OF SALE 2021-1
LIMITED
Class A
XS2339490943 LT AAAsf Affirmed AAAsf
Class B
XS2339491248 LT AA+sf Affirmed AA+sf
Class C
XS2339491594 LT A+sf Affirmed A+sf
Class D
XS2339491834 LT A-sf Affirmed A-sf
Class E
XS2339491917 LT BBBsf Affirmed BBBsf
Class F
XS2339492055 LT BB+sf Affirmed BB+sf
TRANSACTION SUMMARY
Pavillion is a securitisation of unsecured point-of-sale finance
consumer loans originated by Clydesdale Financial Services Limited
(CFS). CFS is also known under the trading name of Barclays Partner
Finance, a wholly-owned subsidiary of Barclays Principal
Investments Limited.
An amortising liquidity reserve was funded at closing by proceeds
from the class R notes, which is equal to 1.25% of the class A and
class B notes' balance. The assets are interest-free and were sold
to the issuer at retailer-specific discount rates. The issuer
entered into an interest-rate swap to mitigate the interest-rate
exposure arising between the floating rate of interest payable on
the notes and the fixed discount rate applied to the receivables.
KEY RATING DRIVERS
Performance in Line with Expectations: The 10-month revolving
period ended in December 2022 and the class A notes had amortised
GBP 36.3 million as of January 2023, building up further credit
enhancement. The transaction's performance has remained stable and
within Fitch's expectations.
Life Default Base Case Updated: The default base cases for each
retailer are unchanged from closing. However, Fitch has updated the
remaining life default base-case to 1.6% for the total portfolio,
which is based on the current portfolio composition. The default
base-case still factors in the generally short data histories for
retailers that are reflective of a mostly benign period. The
default base-case also considers origination and servicing
practices, its deteriorating macroeconomic expectations for the UK
as well as deteriorating asset outlook expectations.
Fitch has applied a 'AAAsf' default multiple of 7.25x for the total
pool as per the current portfolio composition, which is towards the
higher end of the range. The recovery base-case was set at 10%,
with a recovery haircut of 50% applied at 'AAAsf'. The prepayments
base-case has been increased to 10% from 5% based on transaction
data since closing.
Retailer Performance Differences: The portfolio consists of
interest-free point-of-sale loans, originated through: Apple,
British Gas, DFS, Next and Wren, which have shown distinct
historical default performance. There was not an adverse migration
of the portfolio during the revolving period.
Servicing Continuity Risk Mitigated: The servicer is unrated and
there is no back-up servicer or back-up servicer facilitator in
place. However, Fitch believes the liquidity coverage provided by
the liquidity reserve is sufficient to bridge payment disruptions
until a replacement servicer becomes operational. The market
standard nature of the product and borrower characteristics, and
the UK's deep consumer loan servicing market, would also ease any
transition to a capable replacement servicer, in Fitch's view.
Pavillion has an ESG Relevance Score of '4' for Transaction Parties
and Operational Risk due to an investigation by the FCA that looked
into its broker and affordability processes, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Rating sensitivity to increased default rates: Increase default
rate by 10% / 25% / 50%
Class A: 'AAAsf' / 'AAAsf' / 'AAsf'
Class B: 'AA+sf' / 'AAsf' / 'A+sf'
Class C: 'A+sf' / 'Asf' / 'A-sf'
Class D: 'A-sf' / 'BBB+sf' / 'BBBsf'
Class E: 'BBBsf' / 'BBB-sf' / 'BBsf'
Class F: 'BBsf' / 'BB-sf' / 'B+Sf'
Rating sensitivity to reduced recovery rates: Reduce recovery rate
by 10% / 25% / 50%
Class A: 'AAAsf' / 'AAAsf' / 'AAAsf'
Class B: 'AAAsf' / 'AAAsf' / 'AA+sf'
Class C: 'A+sf' / 'A+sf' / 'A+sf'
Class D: 'Asf' / 'Asf' / 'A-sf'
Class E: 'BBBsf' / 'BBBsf' / 'BBB-sf'
Class F: 'BB+sf' / 'BB+sf' / 'BB+sf'
Rating sensitivity to increased default rates and decreased
recovery rates: Increase default rates and decrease recovery rates
by 10% / 25% / 50% each
Class A: 'AAAsf' / 'AA+sf' / 'AAsf'
Class B: 'AA+sf' / 'AAsf' / 'A+sf'
Class C: 'A+sf' / 'Asf' / 'BBB+sf'
Class D: 'A-sf' / 'BBB+sf' / 'BBB-sf'
Class E: 'BBBsf' / 'BB+sf' / 'BB-sf'
Class F: 'BBsf' / 'BB-sf' / 'Bsf'
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Rating sensitivity to decreased default rates: Decreased default
rate by 10% / 25% / 50% each
The class A notes are at the highest rating on Fitch's scale and
cannot be upgraded.
Class B: 'AAAsf' / 'AAAsf'/'AAAsf'
Class C: 'AA-sf' / 'AAsf' /'AAAsf'
Class D: 'A+sf' / 'AA-sf'/'AA+sf'
Class E: 'BBB+sf' / 'Asf'/'AA-sf'
Class F: 'BBB-sf' / 'BBBsf'/'A+sf'
Rating sensitivity to increased recovery rates: Increased recovery
rates by 10% / 25%/50% each
The class A notes are at the highest rating on Fitch's scale and
cannot be upgraded.
Class B: 'AAAsf' / 'AAAsf'/ 'AAAsf'
Class C: 'A+sf' / 'A+sf' / 'AA-sf'
Class D: 'Asf' / 'Asf' / 'A+sf'
Class E: 'BBBsf' / 'BBB+sf' /'BBB+sf'
Class F: 'BB+sf' / 'BB+sf' / 'BB+sf'
Rating sensitivity to decreased default rates and increased
recovery rates: Decreased default rates and increased recovery
rates by 10% / 25%/ 50% each
The class A notes are at the highest rating on Fitch's scale and
cannot be upgraded.
Class B: 'AAAsf' / 'AAAsf'/ 'AAAsf'
Class C: 'AA-sf' / 'AA+sf'/ 'AAAsf'
Class D: 'A+sf' / 'AA-sf'/ 'AAAsf'
Class E: 'BBB+sf' / 'Asf'/ 'AAsf'
Class F: 'BBB-sf' / 'BBBsf'/ 'A+sf'
DATA ADEQUACY
Pavillion Point of Sale 2021-1A PLC
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Prior to the transaction closing, Fitch reviewed the results of a
third party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Pavillion has an ESG Relevance Score of '4' for Transaction Parties
& Operational Risk due to an investigation by the FCA that looked
into its broker and affordability processes, which has a negative
impact on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SILICON VALLEY BANK UK: HSBC to Inject GBP2BB Following Acquisition
-------------------------------------------------------------------
James Titcomb and Simon Foy at The Telegraph report that HSBC has
pledged to inject GBP2 billion into Silicon Valley Bank UK after it
snapped up the collapsed lender for GBP1, averting a crisis that
threatened chaos across Britain's tech sector.
According to The Telegraph, the FTSE 100 bank told investors on
March 13 that it would commit cash to ensure that business-as-usual
continued at the lender after it was seized by the Bank of England
over the weekend.
In a call, Noel Quinn, chief executive of HSBC, and Ian Stuart,
head of its UK arm, indicated that there would be no major changes
to how SVB UK was run following the acquisition The Telegraph
relates.
It came after Prime Minister Rishi Sunak cleared the way for HSBC
to strike a last-minute deal for the collapsed lender after handing
it an exemption from certain ring fencing rules, The Telegraph
notes.
The Treasury, as cited by The Telegraph, said it would waive
restrictions on the types of customers that could be taken on by
its UK retail bank under the so-called ring-fencing regime.
According to The Telegraph, Andrew Griffith, the City minister,
said in a letter to the chairman of the Treasury committee: "The
Government is using its powers under the Banking Act to provide
HSBC with an exemption to certain ring-fencing requirements."
The failure of the lender threatened thousands of British tech
companies and investors who rely on the start-up-focused SVB UK as
their bank of choice, The Telegraph states.
Mr. Hunt and Treasury officials had been holding crunch talks with
the industry over the weekend and seeking to find a buyer, with
HSBC, Barclays, Bank of London and Oaknorth among the potential
bidders, The Telegraph relays.
Sources suggested HSBC was seen as the most stable and secure
candidate, The Telegraph discloses.
Putting the bank into insolvency without a buyer meant start-ups
were threatened with having their deposits frozen, potentially
making them unable to pay staff or suppliers, The Telegraph
states.
SVB UK had loans of around GBP5.5 billion and deposits of around
GBP6.7 billion, and made an GBP88 million profit last year,
according to The Telegraph.
THG OPERATIONS: EUR600M Bank Debt Trades at 17% Discount
--------------------------------------------------------
Participations in a syndicated loan under which THG Operations
Holdings Ltd is a borrower were trading in the secondary market
around 83.3 cents-on-the-dollar during the week ended Friday, March
10, 2023, according to Bloomberg's Evaluated Pricing service data.
The EUR600 million facility is a Term loan that is scheduled to
mature on December 11, 2026. The amount is fully drawn and
outstanding.
THG Operations Holdings Limited is affiliated with THG PLC,
headquartered in Manchester, England, and has a diverse range of
e-commerce focused activities, and certain associated manufacturing
facilities. Its largest brands lookfantastic.com and myprotein.com
operate in the beauty and wellness retail segments, respectively.
The Company's country of domicile is the United Kingdom.
VEDANTA RESOURCES: Moody's Cuts CFR to Caa1, Outlook Negative
-------------------------------------------------------------
Moody's Investors Service has downgraded Vedanta Resources
Limited's (VRL) corporate family rating to Caa1 from B3.
Concurrently, Moody's has downgraded the ratings to Caa2 from Caa1
on the senior unsecured bonds issued by VRL and those issued by
VRL's wholly owned subsidiary, Vedanta Resources Finance II Plc,
and guaranteed by VRL.
The outlook on all ratings remains negative.
"The rating downgrades reflect the increasing refinancing risk
surrounding holding company (holdco) VRL's large debt maturities.
Ongoing delays in holdco VRL's refinancing efforts and its
continued reliance on dividend receipts are depleting liquidity at
its operating subsidiaries," says Kaustubh Chaubal, a Moody's
Senior Vice President.
RATINGS RATIONALE
Holdco VRL's cash needs for the fiscal year ending March 2024
(fiscal 2024) remain large and include: (1) cross-border bonds of
USD400 million and USD500 million that are due in April and May
2023, respectively, and a USD1.0 billion bond maturing in January
2024; (2) an estimated USD1.1 billion in term debt; (3) USD450
million of an intercompany loan; and (4) an estimated interest bill
of at least USD600 million.
"Moody's previously expected holdco VRL to find sufficient funds
through loans and dividends to address its debt maturities until
June 2023. However, VRL faces ongoing delays in obtaining funds
relative to Moody's earlier expectations amid a funding environment
that remains challenging with high interest rates, scarce market
liquidity and tight credit availability," adds Chaubal who is also
Moody's Lead Analyst for VRL. "These issues expose the company to
material refinancing risks and exacerbate the likelihood of a
payment default or a distressed exchange."
Moody's notes that holdco VRL has paid down around USD2.0 billion
of its debt during fiscal 2023. However, the agency considers that
maintaining liquidity and proactive liability management are more
pertinent in preserving VRL's credit quality, as opposed to debt
reduction, given its Moody's-adjusted consolidated gross
debt/EBITDA remains around 4.0x, comfortably below the previous
downgrade trigger of 5.5x.
A large part of the holdco's cash needs during fiscal 2023 were met
through dividend receipts and management fees from operating
subsidiaries, thus substantially diminishing cash reserves. While
ongoing operations and the subsidiaries' sustained cash flow will
help to build liquidity, VRL's subsidiaries will need to raise debt
if they have to pay large dividends to address the holdco's cash
needs. Moreover, their depleting liquidity and the potential for
contagion risk from the holdco's debt woes may impair the operating
subsidiaries' ability to raise funds.
OUTLOOK
The negative outlook reflects VRL's persistently weak liquidity
profile and Moody's concerns over the company's ability to address
its imminent cash needs.
LIQUIDITY
Holdco VRL's liquidity remains weak with management fees and
dividends from operating subsidiaries insufficient to meet its
looming debt maturities.
Liquidity at VRL's subsidiaries also remains weak. VRL's 69.7%
owned subsidiary, Vedanta Limited (VDL) reported consolidated cash
of INR234.7 billion ($2.8 billion) as of December 31, 2022. Of the
consolidated cash, 70% was held at VDL's 64.9%-owned subsidiary,
Hindustan Zinc Limited. The subsidiaries' consolidated cash and
expected cash flow from operations will be insufficient to meet
capital expenditure, their own debt-servicing requirements and the
large dividends to address the holdco's cash needs.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS
VRL's very highly negative exposure to environmental considerations
relates to carbon transition, water management and natural capital.
The company's very highly negative social risk exposure emanates
from health and safety risks with an incidence of fatalities over
the past few years. The company's highly unionized work force
presents the risk of human capital, although the company has not
had any labor strikes in recent years.
The company has a very highly negative governance exposure due to
VRL's concentrated ownership with sole shareholder, Volcan
Investments Ltd. This keeps governance risk elevated given the
company's past related party transactions to the detriment of
creditors. Governance risks also reflect the company's aggressive
liquidity risk management.
VRL's CIS-5 score reflects very high risks on ESG considerations.
Absent these risks, the company's large scale and efficient asset
base could support a higher rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's is unlikely to upgrade the ratings or revise the outlook to
stable prior to the company substantially improving its liquidity
profile.
Failure to make any progress on refinancing will result in further
rating downgrades.
The principal methodology used in these ratings was Mining
published in October 2021.
Vedanta Resources Limited (VRL), headquartered in London, is a
diversified resources company with interests mainly in India. Its
main operations are held by Vedanta Limited (VDL), a 69.7%-owned
subsidiary. Through VRL's various operating subsidiaries, the group
produces oil and gas, zinc, lead, silver, aluminum, iron ore, steel
and power.
Delisted from the London Stock Exchange in October 2018, VRL is now
wholly owned by Volcan Investments Ltd. Founder chairman of VRL,
Anil Agarwal, and his family, are the key shareholders of Volcan.
For the fiscal year ending March 31, 2022, VRL generated revenues
of USD17.6 billion and adjusted EBITDA of USD6.4 billion. For the
nine months ending March 31, 2023, VDL would have generated
consolidated revenue of INR1,081.8 billion (USD13.1 billion) and
consolidated EBITDA of INR258.8 billion (USD3.1 billion).
ZEPHYR BIDCO: GBP180M Bank Debt Trades at 20% Discount
------------------------------------------------------
Participations in a syndicated loan under which Zephyr Bidco Ltd is
a borrower were trading in the secondary market around 80.3
cents-on-the-dollar during the week ended Friday, March 10, 2023,
according to Bloomberg's Evaluated Pricing service data.
The GBP180 million facility is a Term loan that is scheduled to
mature on July 12, 2026. The amount is fully drawn and
outstanding.
Zephyr Bidco Limited provides Internet-based services. The
Company's country of domicile is the United Kingdom.
*********
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
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Information contained herein is obtained from sources believed to
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