/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230317.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, March 17, 2023, Vol. 24, No. 56 Headlines D E N M A R K SGLT HOLDING I: Fitch Affirms Then Withdraws 'B' LongTerm IDR F R A N C E BANIJAY GROUP: Fitch Hikes LongTerm IDR to 'B+', Outlook Stable VANTIVA SA: S&P Withdraws 'CCC+/C' Issuer Credit Ratings G E R M A N Y FLENDER INTERNATIONAL: Fitch Lowers LongTerm IDR to B, Outlook Neg I R E L A N D PERRIGO COMPANY: Moody's Cuts CFR to Ba2 & Unsecured Notes to Ba3 TRINITAS EURO IV: S&P Assigns Prelim B- (sf) Rating to Cl. F Notes L U X E M B O U R G ADB SAFEGATE: Barings Capital Marks $5.5M Loan at 24% Off KLEOPATRA HOLDINGS: S&P Downgrades ICR to 'B-', Outlook Stable N E T H E R L A N D S KETER GROUP: S&P Downgrades ICR to 'CCC', Put on Watch Developing KOUTI BV: Fitch Puts Final B+ Sr. Sec Rating on EUR400M Term Loan U N I T E D K I N G D O M HOLOXICA: Cashflow Challenges Prompt Liquidation METNOR GROUP: Goes Into Administration MOORE LARGE: Goes Into Administration WTL TRAVEL: Goes Into Liquidation, Owes Staff GBP127,000 XCAV8 SW: Goes Into Liquidation, Owes More than GBP1.6 Million X X X X X X X X [*] BOOK REVIEW: Bankruptcy and Secured Lending in Cyberspace - - - - - ============= D E N M A R K ============= SGLT HOLDING I: Fitch Affirms Then Withdraws 'B' LongTerm IDR -------------------------------------------------------------- Fitch Ratings has affirmed SGLT Holding I LP's (SGLT) Long-Term Issuer Default Rating (IDR) at 'B' with a Stable Outlook, and SGL International A/S's senior secured rating at 'B+' with a Recovery Rating of RR3'. The ratings have simultaneously been withdrawn. The ratings are withdrawn as they are no longer considered relevant to the agency's coverage. Fitch will no longer provide ratings or analytical coverage of SGLT. KEY RATING DRIVERS The withdrawal follows Skill BidCo ApS's (B(EXP)/Stable) announced acquisition of SGLT's operating assets and anticipated closing of the transaction. Existing bonds of SGL International A/S were partially converted into temporary bonds. New Skill BidCo bonds were also issued and successfully placed on 2 March 2023, the proceeds of which will be used to repay SGL International's remaining bondholders. The affirmation reflects the unchanged credit profile ahead of the transaction's closing. The challenging business environment is mitigated by the diversified portfolio of clients across industries and higher resilience of the niche segment SGLT operates in. For further details on Skill BidCo's rating, see: Fitch Assigns Skill Bidco 'B(EXP)' IDR, Outlook Stable; Senior Secured Notes 'B+(EXP)'/RR3 DERIVATION SUMMARY Fitch views the company's debt capacity and credit metrics as in line with 'B' rated peers'. The credit profile is supported by the diversification of its end-customer portfolio by industry. Fitch views SGLT's earnings as less volatile than that of sole carriers, such as shipping companies, but its small size constrains its debt capacity. Fitch views InPost S.A. (BB/Stable) as a broad industry peer. InPost is a niche leader with good revenue visibility and limited competition translating into high operating margins. It also has a more conservative financial structure, which explains the several rating-notch differential. KEY ASSUMPTIONS N/A RATING SENSITIVITIES N/A LIQUIDITY AND DEBT STRUCTURE N/A ISSUER PROFILE SGLT is an asset-light freight forwarder and logistics provider with a global footprint, and is particularly active in the Nordics and north America. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Although their ratings are not formally linked, Fitch uses similar data for SGLT as to that used in the expected rating of Skill BidCo. ESG CONSIDERATIONS Following the rating withdrawal Fitch will no longer provide ESG Relevance Scores for SGLT. 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 ----------- ------ -------- ----- SGLT Holding I LP LT IDR B Affirmed B LT IDR WD Withdrawn B SGL International A/S senior secured LT B+ Affirmed RR3 B+ senior secured LT WD Withdrawn B+ =========== F R A N C E =========== BANIJAY GROUP: Fitch Hikes LongTerm IDR to 'B+', Outlook Stable --------------------------------------------------------------- Fitch Ratings has upgraded Banijay Group SAS's (Banijay) Long-Term Issuer Default Rating (IDR) to 'B+' from 'B'. The Outlook is Stable. Fitch has also upgraded the company's senior secured loans and notes to 'BB-/RR3' from 'B+/RR3' and senior unsecured notes to 'B-/RR6' from 'CCC+/RR6'. The rating upgrade follows a change in its rating approach based on parent and subsidiary linkage (PSL) from a standalone assessment previously. As per the approach for stronger parent - FL Entertainment N.V (FLE) - and weaker subsidiary - Banijay - Fitch applies a bottom-up assessment with a single notch uplift from the latter's Standalone Credit Profile (SCP) of 'b'. The Stable Outlook reflects its view that Banijay's EBITDA leverage, interest cover and free cash flow (FCF) will remain consistent with a 'b' level in 2023-2024, adjusted for a higher interest rate environment and including higher dividend payout to its parent. KEY RATING DRIVERS PSL Approach: In applying Fitch's PSL Criteria Fitch assesses the legal and operational incentives for FLE to support Banijay as 'Low' with no operational overlap between the parent and subsidiary. There are no cross defaults or guarantees between FLE and Banijay. Fitch views strategic incentives to support as 'Medium', as Banijay represents around two thirds of FLE's consolidated EBITDA. This assessment leads to an overall bottom-up approach where Banijay's 'B+' IDR is lifted one notch above its 'b' SCP. Stronger Parent/Weaker Subsidiary: Fitch views the consolidated business profile of FLE as broadly corresponding to the low-to-mid 'bb' range. FLE's larger scale and business diversification is partly constrained by material regulatory oversight in the online gaming subsidiary Betclic. The consolidated profile, however, benefits from a stronger financial structure and financial flexibility, with an estimated Fitch-defined EBITDA net leverage around 4.0x in 2022, which Fitch forecasts to decline in 2023. Deleveraging is further supported by FLE's financial policy at below 3.0x group-defined net debt/EBITDA, guided at 3.0x-3.5x for end-2022. 'b' SCP: Banijay's 'b' SCP reflects a robust business model with increasing scale and diversification that is balanced by leverage (gross and net) and interest cover metrics in the 'b' category. Fitch forecasts that earnings and FCF will remain resilient through the economic cycle. In 2022 it saw some margin pressure from higher staff cost, but also a mix effect from more scripted content (around 24% of revenues in 2022, up from 20% in 2021), with structurally lower margins. Fitch expects some continued margin pressure into 2023 owing to inflation and higher staff cost. Fitch expects EBITDA gross and net leverage metrics to remain consistent with the 'b' level in 2023-2024. Banijay has hedged its floating-rate exposure and as such EBITDA interest cover should remain around 3.3x for 2023 with no relevant maturities prior to March 2025. Deleveraging Aims: Fitch expects FCF and interest cover to remain at 'b' also in a higher interest-rate environment, and despite a higher dividend payout from Banijay (around EUR60 million per year, increasing in line with earnings) to part-fund FLE's dividend policy. Banijay aims to deleverage further, to below 4x company-defined EBITDA leverage in two years, from 4.9x at end-2021, which if achieved, may create upward rating pressure over the next 18-24 months. Underlying Secular OTT Growth: Fitch expects Banijay to grow above the market with mid-single-digit revenue growth in 2023 (including 2022 M&A). It is well-positioned to grow with streamers and digital platforms at broadcasters in the over-the-top (OTT) niche, currently representing around 18% of its production and distribution revenues (from 13% in 2021). Its focus on strong local content should benefit from demand from streamers facing jurisdictional local content regulation in Europe. This is further supplemented by Banijay's cost-efficient non-scripted content in times of weaker consumer purchasing power and broadcasters' cost-cutting. Continued growth in the global TV market will be driven by OTT growth at streaming platforms, but also via digital platforms developed by traditional broadcasters. Fitch expects extraordinary content spend in 2020-2022, predominantly by streamers, to slow towards 2% annual growth in 2023, owing to fewer large budget productions and economic pressure on consumer spend and advertising. DERIVATION SUMMARY Banijay is the largest independent TV production firm globally. Its primary competitors are ITV Studios, Fremantle Media and All3Media. It has a greater proportion of non-scripted content than its peers, although the company has increased its scripted content towards 24% (public guidance under 25%). Fitch covers several UK and US peers in the diversified media industry such as TFCF Corporation (Twenty-first Century Fox, Inc., A-/Stable); owned by Disney) and NBC Universal Media LLC (A-/Stable; owned by Comcast). These are much larger and more diversified, occupy stronger competitive positions in the value chain and are less leveraged than Banijay. Compared with these investment-grade names, Banijay's profile is more consistent with a 'B' rating category. KEY ASSUMPTIONS Key Assumptions in its Rating Case for the Issuer: - Revenue growth of 6% in 2023, followed by around 2% in 2024 - Fitch-defined EBITDA margin of 13% in 2022 (14.1% in 2021), before falling towards 12.1% in 2023 (Fitch adjusts for leases and around EUR13 million of recurring outflows related to staff incentive programmes and restructuring costs) - Working-capital outflows below 1% of revenue in 2023-2024 - Capex at around EUR50 million in 2023 and EUR60 million in 2024 - Common dividends of around EUR60 million per year from 2023 - Due to lack of visibility no M&A is assumed KEY RECOVERY RATING ASSUMPTIONS - Fitch assumes Banijay would be reorganised as a going concern in distress or bankruptcy rather than liquidated - Post-restructuring EBITDA estimated at EUR325 million (including acquired EBITDA), reflecting weaker demand for non-scripted formats and increasing price pressure from both broadcasters and streaming platforms - A distressed enterprise value multiple of 5.5x to calculate a post-restructuring valuation - Fitch deduct 10% for administrative claims and allocate the residual value according to the liability waterfall. Fitch first deducts EUR145 million of factoring and EUR152 million of local facilities ranking prior to Banijay's senior secured debt. Fitch expects its EUR170 million revolving credit facility (RCF) to be fully drawn in a default, ranking pari-passu with its EUR457 million and USD423 million term loans, and EUR582 million and USD385 million senior secured notes. Thereafter Fitch deducts its lowest-ranking EUR400 million senior unsecured notes. - Based on current metrics and assumptions, the waterfall analysis generates a ranked recovery at 67% in the 'RR3' band for the senior secured loans and notes, and 0% in 'RR6' for the senior unsecured notes. These indicate a 'BB-' senior secured instrument rating for the senior secured term loans and notes, and a 'B-' unsecured instrument rating for the EUR400 million notes. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - EBITDA net leverage sustainably below 4.8x, together with visibility regarding the use of high cash balances (and less divergence between gross and net leverage metrics), will be a key consideration for an upgrade - Continued growth of EBITDA and FCF, with continued demand for non-scripted and scripted content without significant increase in competitive pressure - Stronger legal, strategic or operational incentives for consolidated FLE to support the credit profile of Banijay - EBITDA interest cover sustained above 3.3x Factors that could, individually or collectively, lead to negative rating action/downgrade: - Total EBITDA net leverage sustainably above 5.8x (and/or greater divergence between gross and net leverage metrics) - EBITDA interest coverage sustained below 2.8x - Deterioration of EBITDA because of failure to renew leading shows, increase in competition or inability to control costs - Weaker linkages between FLE and Banijay, with reduced incentives to support Banijay's SCP - An overall weaker consolidated credit profile of FLE, such that the parent's consolidated credit profile is no longer stronger than Banijay's SCP LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Fitch estimates a cash balance of around EUR400 million at end-2022. In addition, Banijay has access to a EUR170 million undrawn RCF. Fitch forecasts positive FCF post-dividends in 2023-2024, which combined with its cash position and undrawn RCF, provides satisfactory liquidity for working-capital requirements, earn-outs and growth M&A. Manageable Refinancing Risks: Banijay's senior secured loans and notes mature in March 2025, and the unsecured notes in March 2026. Fitch expects refinancing to be manageable, based on its current and expected leverage profile, FCF and interest cover remaining at a 'b' level, adjusted for a higher interest-rate environment. ISSUER PROFILE Banijay is the largest independent content producer and distributor globally; home to over 130 production companies across 21 territories, and a multi-genre catalogue boasting over 160,000 hours of original standout programming. 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 ----------- ------ -------- ----- Banijay Entertainment SAS senior secured LT BB- Upgrade RR3 B+ Banijay Group SAS LT IDR B+ Upgrade B senior unsecured LT B- Upgrade RR6 CCC+ Banijay Group US Holding, Inc. senior secured LT BB- Upgrade RR3 B+ VANTIVA SA: S&P Withdraws 'CCC+/C' Issuer Credit Ratings -------------------------------------------------------- S&P Global Ratings withdrew its 'CCC+' and 'C' long- and short-term issuer credit ratings on Vantiva S.A. (formerly Technicolor S.A.), at the company's request. The outlook was stable at the time of the withdrawal. ============= G E R M A N Y ============= FLENDER INTERNATIONAL: Fitch Lowers LongTerm IDR to B, Outlook Neg ------------------------------------------------------------------ Fitch Ratings has downgraded German gearboxes and generators manufacturer Flender International GmbH's Long-Term Issuer Default Rating (IDR) to 'B' from 'B+'. The Outlook is Negative. Fitch has also downgraded Flender's existing senior secured term loan's rating to 'B+'/RR3 from 'BB-'/RR3. The downgrade reflects the ongoing challenging wind market environment and expected pressure of EBIT and EBITDA profitability. Together with higher capex this will lead to negative free cash flow (FCF) accompanied with EBITDA leverage metrics above its negative sensitivity of 6.0x in the financial year ending September 2023 (FY23) and FY24. The IDR is supported by the group's solid market position, strong underlying demand in wind industry, which should enable recovery of profitability in the medium term, and Flender's good liquidity position. The Negative Outlook reflects the still vulnerable wind market environment and lag in profitability margins improvement amid high inflationary pressure that could further pressure Flender's cash flow generation and deleveraging capacity. KEY RATING DRIVERS FCF Under Pressure: Higher than expected capex in FY22 eroded the FCF margin, which turned negative to -1.8%. Flender is continuing its large investing programme, primarily focused on construction and localisation of plants in India and China. Flender's high capex aims to address the capacity needs for the strong demand in wind industry. Nevertheless, the current wind market environment is challenging, leading to a squeeze of profitability margins at wind original equipment manufacturers (OEM) and making the recovery of Flender's FCF generation uncertain. Fitch forecasts negative FCF margins in FY23 and FY24 before they return to a marginally positive level in FY25 and FY26. Operating Profitability Under Pressure: Fitch believes that ongoing supply chain issues and still high prices for raw materials through 2023 will put pressure on Flender's profitability. Flender's key customers, large wind turbine producers, have higher bargaining power and their profitability is currently under huge pressure. Coupled with Fitch's expectation of deteriorating business activity in 2023, this will erode Flender's order intake, primarily in the wind end-market, and put pressure on the EBITDA and EBIT margins. Fitch expects Flender's EBIT margin to decrease to about 6.2% in FY23, with a gradual increase to 8.2% in FY26. Forecast higher interest rates will also constrain the group's funds from operations margin, which Fitch forecasts to decrease to about 4.4% in FY23 from about 5.7% in FY22. Higher Leverage: Constrained profitability accompanied by the increased debt amount under Flender's term loan results in higher leverage than Fitch previously expected. Fitch forecasts a higher capex investment that will also put a pressure on leverage metrics. Fitch therefore expects EBITDA leverage to be above 6.0x, its previous negative sensitivity. Manageable Energy Risk: Flender has a wide global network of production facilities, making it less vulnerable to potential energy rationing than small industrial companies that operate in Western Europe or Germany only. The company has limited exposure to gas usage in production and has substantially hedged electricity costs for FY23. Solid Market Position: Flender has leading positions in its niche markets for gearboxes and generators. Technological capabilities and long-term cooperation with major wind OEMs provides the company with moderate barriers to entry. Gearboxes are a critical component of wind turbines, and reliability is very important given its impact on downtimes due to the difficulty of access and cost increases. Nevertheless, in-house OEM production and Chinese producers remain a major competitive threat for suppliers in the long term. Limited Business Profile: Flender has narrow product diversification as a gearbox and generator manufacturer. The group is primarily focused on the wind industry (about 59% of revenue in FY22). Due to the nature of the industry, the group has a concentrated customer base focusing on major wind OEMs, which is not necessarily a credit weakness. However, Fitch views Flender's business profile as limited compared with peers, as Flender is focused on only part of the manufacturing process. The business profile limitations are mitigated by good geographical diversification that compares well with higher rated peers. About 41% of revenue in FY22 was generated in EMEA, 42% in China and 14% in North and South America. Good Level of Service Revenue: Fitch views positively the presence of aftermarket and service revenue as a source of cash flow generation, as this typically provides industrial companies with more profitable and less cyclical earnings. About 25% of Flender's revenue in FY22 was attributed to service revenue. Supportive Long-Term Demand: Fitch expects underlying demand for wind turbines to grow over the long term, taking into account global goals for CO2 emissions reduction. The demand for renewables is further boosted, particularly in Europe, due to the current energy crisis and high gas prices. Fitch believes this should provide the group with sustainable order intake and revenue visibility over the long term. DERIVATION SUMMARY Flender compares well with other high-yield diversified industrials rated by Fitch. Similar to Ammega Group B.V. (B-/ Stable), INNIO Group Holding GmbH (B/Stable), TK Elevator Holdco GmbH (B/Negative) and ams-OSRAM AG (BB-/Positive), Flender has good global geographical diversification. Nevertheless, its business profile is limited due to a narrow product range, like INNIO, and due to its primary focus on one core end-market of wind power. Limited end-markets and product diversification is also typical for Siemens Gamesa Renewable Energy S.A. (NR) and Vestas (NR), one of Flender's key customers, which is a function of the industry. Flender's EBITDA margin is lower than those reported by Ammega, INNIO and ams-OSRAM, and is comparable with TK Elevator. Historically, Flender reported sustainably positive FCF generation, which is also typical for ams-OSRAM and INNIO. Flender's leverage profile with EBITDA leverage ratio of 5.9x as at end FY22 is stronger than that of TK Elevator (9.4x), although TK Elevator is almost 4x times bigger by revenue and has a larger share of service revenue, which provides more resilient cash flow generation. Flender's leverage is comparable with INNIO's (5.9x at end-2021) but is higher than ams-OSRAM's (3.5x at end-2021). KEY ASSUMPTIONS Key Recovery Rating Assumptions - The recovery analysis assumes that Flender would be deemed a going concern (GC) in bankruptcy and that it would be reorganised rather than liquidated - Its GC value available for creditor claims is estimated at about EUR1 billion, assuming GC EBITDA of EUR200 million. GC EBITDA incorporates a loss of a major customer, a deterioration in demand and reduced order intake. The assumption also reflects corrective measures taken in reorganisation to offset the adverse conditions that trigger default - A 10% administrative claim - An enterprise value (EV) multiple of 5.0x EBITDA is applied to the GC EBITDA to calculate a post-reorganisation EV. The multiple is based on Flender's strong market position globally, good geographical diversification, long-term cooperation with customers and good supplier diversification, expected sustainably positive FCF generation after completion of large capex programme in FY23 and FY24. At the same time, the EV multiple reflects the company's concentrated customer diversification and limited range of products. - Fitch deducts about EUR90 million from the EV, due to Flender's high usage of factoring facility in FY22, in line with Fitch's criteria - Fitch estimates the total amount of senior debt claims at EUR1.6 billion, which includes an EUR1.32 billion senior secured term loan B (TLB), EUR205 million senior secured revolving credit facility (RCF) and EUR33 million of ancillary facilities - The allocation of value in the liability waterfall results in recovery corresponding to 'RR3'/'52%' for the TLB RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: EBITDA leverage below 6.0x FCF margin sustainably above 1% Increased product and end-market diversification Increase of service revenues to above 25% of total revenues Factors that could, individually or collectively, lead to negative rating action/downgrade: EBITDA leverage above 7.5x Negative FCF margin on a sustained basis EBITDA interest coverage ratio below 2.0x Aggressive shareholder-friendly policies, or acquisitions leading to further increase in leverage LIQUIDITY AND DEBT STRUCTURE Good Liquidity Position: At end-September 2022, Flender reported Fitch-defined readily available cash of EUR112 million. This should be enough to cover expected negative FCF generation of about -EUR60 million. Flender has no material scheduled debt repayments until 2028. Short-term debt at end-FY22 comprised drawn ancillary facilities and factoring utilisation. An available undrawn RCF of EUR205 million supports Flender's liquidity position. Flender's sources of funding are concentrated and consist of a TLB of EUR1.32 billion due March 2028. ISSUER PROFILE Flender is a market leader in drive technology with a comprehensive product and service portfolio of gearboxes, couplings and generators for a broad range of industries, with a strong position in wind. It has a global sales network with a footprint in 35 countries, including 11 major production and assembly facilities, with a significant footprint in low-cost countries such as China and India. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Flender International GmbH LT IDR B Downgrade B+ senior secured LT B+ Downgrade RR3 BB- ============= I R E L A N D ============= PERRIGO COMPANY: Moody's Cuts CFR to Ba2 & Unsecured Notes to Ba3 ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Perrigo Company plc ("Perrigo"), including the Corporate Family Rating to Ba2 from Ba1, Probability of Default Rating to Ba2-PD from Ba1-PD, and senior unsecured notes ratings to Ba3 from Ba2. Moody's also downgraded the ratings of the senior secured revolver and term loans issued by Perrigo Investments LLC, a subsidiary of Perrigo Company plc, to Ba1 from Baa3. Perrigo's speculative grade liquidity rating was unchanged at SGL-3, and the rating outlook remains negative. The ratings downgrade reflects that Perrigo's deleveraging progress is slower than Moody's previous expectation and the company's low projected free cash flow for 2023. Slower-than-anticipated revenue growth and margin improvement led to considerably lower free cash flow in 2022 and debt-to-EBITDA leverage above 6.0x as of December 2022 (gross leverage pro forma for a full year of earnings from the HRA and Gateway acquisitions). Revenue and EBITDA were below Moody's and the company's expectations partly due to foreign currency headwind, higher input and freight costs, plant shutdown in the Vermont facility, as well as supply chain disruptions and labor shortage, which led to capacity constraints to meet consumer demand. Moody's now anticipates the company will not be able to reduce debt-to-EBITDA to below 4.5x until 2025, two years behind Moody's previous expectations. Lower than anticipated earnings, an increase in capital spending in part due to upgrades to the Gateway facility acquired in November 2022, higher interest costs and the company's sizable dividend will likely lead to limited free cash flow in 2023. Moody's took the following action on Perrigo Company plc and related subsidiaries: Downgrades: Issuer: Perrigo Company plc Corporate Family Rating, Downgraded to Ba2 from Ba1 Probability of Default Rating, Downgraded to Ba2-PD from Ba1-PD Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 (LGD5) from Ba2 (LGD5) Issuer: Perrigo Finance Unlimited Company Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 (LGD5) from Ba2 (LGD5) Issuer: Perrigo Investments LLC Backed Senior Secured Bank Credit Facilities (Revolver, Term Loan A, Term Loan B and Delayed Draw Term Loan), Downgraded to Ba1 (LGD2) from Baa3 (LGD2) Outlook Actions: Issuer: Perrigo Company plc Outlook, Remains Negative Issuer: Perrigo Finance Unlimited Company Outlook, Remains Negative Issuer: Perrigo Investments LLC Outlook, Remains Negative RATINGS RATIONALE Perrigo's Ba2 CFR is supported by its leading positions in the relatively stable over-the-counter (OTC) market in the US and Europe. Perrigo has meaningful scale in its key product categories, as well as good product and customer diversity, enhanced by the HRA and Gateway acquisitions in 2022. Earnings growth is anticipated to outpace revenue growth for the next few years, driven by cost savings and portfolio mix shifts towards higher margin products. As the company's portfolio shifted more to branded products from store brands, Moody's expects the company will improve its EBITDA margin but face increased competition at the same time. The rating is constrained by its elevated gross leverage above 6.0x debt-to-EBITDA as of December 2022 pro forma for the HRA and Gateway acquisitions. Moody's forecasts low single-digit percentage annual revenue growth and mid-to-high single digit percentage annual EBITDA growth through 2025. Moody's projection does not include revenue and earnings from Opill, which is currently under US Food and Drug Administration (FDA) review. If approved by the FDA, Opill will be the first OTC daily birth control pill available in the U.S., which will provide additional revenue and earnings to Perrigo and accelerate the company's deleveraging efforts. The rating reflects Moody's projection that Perrigo will reduce debt-to-EBITDA to below 5.0x in 2024 and below 4.5x in 2025 supported by earnings growth and the expectation that Perrigo will repay $700 million of senior unsecured notes at or prior to the December 2024 maturity. EBITA growth is supported by Perrigo's good growth prospects on both pricing and volume growth, revenue from new and refreshed products, as well as opportunities to improve the EBITDA margin by significantly reducing the complexity of its supply chain and realizing acquisitions synergies. Free cash flow will likely be weak in 2023 but improve to more than $100 million in 2024 and 2025 with the cash used to repay debt and help reduce the high leverage resulting from the combination of divestitures and the May 2022 HRA acquisition. The SGL-3 speculative grade liquidity rating reflects that the company's $600 million cash on hand as of December 31, 2022 and full availability on the $1 billion revolver will provide adequate coverage of cash needs including repayment of the $700 million notes that mature in December 2024. Weak free cash flow projected for 2023 also contributes to liquidity only being adequate. Perrigo may need to utilize the revolver to help fund the note maturity if free cash flow does not improve or the company does not execute asset sales. ENVIRONMENTAL SOCIAL AND GOVERNANCE CONSIDERATIONS Perrigo's E-3 score, representing moderately negative risk, recognizes the company's manufacturing concentration in Western Michigan, which creates a level of physical climate risk, as well as the potential for increased waste and pollution risk. The company is taking steps to manage its environmental risks including the goal to use 100% renewable electricity by 2026. Perrigo has reduced carbon emissions by over 23% since 2015, exceeding its 15% reduction goal, 65-70% of packaging is recyclable, its How2Recycle labels expanded to 12 brands, it is committed to using PCR content and removing all PVC, and is committed to source 100% certified sustainable palm oil. Perrigo's S-3 score, representing moderately negative risk, recognizes that while it maintains a strong position in store brand over-the-counter (OTC) medicines and nutritional products, there is significant competition, requiring Perrigo to constantly innovate and preserve its brand equity with retailers and consumers. Long-term demand fundamentals are favorable with cost-conscious consumers increasingly switching to lower cost value brands. FDA-approved, store-brand OTC products are therapeutically equivalent alternatives to branded products such as Advil, Mucinex, and Zyrtec. In addition, as a by-product of its product categories, Perrigo faces regulatory and litigation risks that can have a negative effect on customer relations. Perrigo's G-3 score, representing moderately negative risk, considers the company's high financial leverage as a result of divestitures and the May 2022 HRA acquisition and a high dividend payout relative to current operating cash flow. Perrigo is targeting a net debt to EBITDA leverage ratio below 3.0x (based on the company's calculation) by 2025 from 5.5x as of December 31, 2022. Moody's expects the company to pause further acquisitions and focus on deleveraging through 2025. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The negative outlook reflects the company's weak projected free cash flow in 2023 and execution risk for Perrigo to reduce debt-to-EBITDA to below 5.0x in the next 12 to 18 months. Ratings could be upgraded if Perrigo generates good operating performance including consistent organic revenue growth, EBITDA margin improvement, and solid and consistent free cash flow. Perrigo would also need to sustain debt-to-EBITDA below 4.0x and maintain good liquidity. Ratings could be downgraded if substantive deleveraging does not occur over the next 12-18 months because of factors such as revenue weakness, higher costs or additional acquisitions, any of which lead to debt-to-EBITDA sustained above 5.0x. A deterioration in liquidity could also lead to a downgrade The principal methodology used in these ratings was Consumer Packaged Goods published in June 2022. Perrigo Company plc, with registered offices in Dublin, Ireland and principal executive offices in Allegan, Michigan, develops, manufactures, and distributes over-the-counter drugs, infant formulas, and nutritional products. The company reported revenue of approximately $4.5 billion in fiscal 2022 and estimated that 2022 revenue was approximately $4.75 billion pro forma a full year of sales from the HRA and Gateway acquisitions completed during the year. TRINITAS EURO IV: S&P Assigns Prelim B- (sf) Rating to Cl. F Notes ------------------------------------------------------------------ S&P Global Ratings assigned preliminary credit ratings to Trinitas Euro CLO IV DAC's class A to F European cash flow CLO notes. At closing, the issuer will issue unrated subordinated notes. The preliminary ratings reflect S&P's 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. Portfolio Benchmarks CURRENT S&P weighted-average rating factor 2,674.50 Default rate dispersion 554.76 Weighted-average life (years) 4.70 Obligor diversity measure 121.93 Industry diversity measure 21.72 Regional diversity measure 1.25 Transaction Key Metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 0.57 Covenanted 'AAA' weighted-average recovery (%) 37.73 Covenanted weighted-average spread (%) 3.85 Covenanted weighted-average coupon (%) 3.75 Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will switch to semiannual payments. Asset Priming Obligations And Uptier Priming Debt Under the transaction documents, the issuer can purchase asset priming (drop down) obligations and/or uptier priming debt to address the risk, where a distressed obligor could either move collateral outside the existing creditors' covenant group or incur new money debt senior to the existing creditors. In this transaction, current pay obligations are limited to 5% of the collateral principal amount. Corporate rescue loans and uptier priming debt are limited to 5%. Rationale S&P said, "We understand that at closing the portfolio will be 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. "In our cash flow analysis, we used the EUR400 million target par amount, the covenanted weighted-average spread (3.85%), the reference weighted-average coupon (3.75%), and the actual weighted-average recovery rates calculated in line with our CLO criteria for all classes of ratings. 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." Until the end of the reinvestment period on Nov. 15, 2027, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and it compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. S&P said, "Under our structured finance sovereign risk criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned preliminary ratings. "At closing, we expect that the transaction's documented counterparty replacement and remedy mechanisms will adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "We expect the transaction's legal structure and framework to be bankruptcy remote, in line with our legal criteria. "The CLO is managed by Trinitas Capital Management LLC. Under our "Global Framework For Assessing Operational Risk In Structured Finance Transactions," published on Oct. 9, 2014, the maximum potential rating on the liabilities is 'AAA'. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our preliminary ratings are commensurate with the available credit enhancement for the class A to F notes. Our credit and cash flow analysis indicates that the available credit enhancement for class B to F notes could withstand stresses commensurate with the same or higher 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 the notes. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance (ESG) 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: weapons of mass destruction, illegal drugs or narcotics, opioids, pornographic or prostitution, child or forced labor, payday lending, electrical utility limitations, oil and gas limitations, oil life cycle, tobacco, adversely affect animal welfare, genetic engineering or modification, beaching or breaking of ships, illegal logging operations, civilian firearms limitations, hazardous chemicals limitations, oil extraction limitations, private prisons limitations, unbonded asbestos fibers limitations, of soft commodities limitations, and trading coal limitations. 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." ESG corporate credit indicators S&P said, "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* 2.07 2.09 2.90 E-1/S-1/G-1 distribution (%) 0.86 0.86 0.00 E-2/S-2/G-2 distribution (%) 75.98 75.71 15.67 E-3/S-3/G-3 distribution (%) 5.85 5.26 62.45 E-4/S-4/G-4 distribution (%) 0.57 1.43 3.14 E-5/S-5/G-5 distribution (%) 0.00 0.00 2.00 Unmatched obligor (%) 11.98 11.98 11.98 *Only includes matched obligor Ratings List CLASS PRELIM. PRELIM. INTEREST RATE CREDIT RATING AMOUNT ENHANCEMENT (MIL. EUR) (%) A AAA (sf) 213.50 3mE +1.75% 39.00 B-1 AA (sf) 26.80 3mE +3.00% 28.49 B-2 AA (sf) 10.00 6.40% 28.49 C A (sf) 19.30 3mE +4.25% 22.97 D BBB- (sf) 21.90 3mE +6.00% 16.71 E BB- (sf) 14.90 3mE +7.11% 12.46 F B- (sf) 10.50 3mE +9.73% 9.46 Subordinated NR 30.00 N/A N/A NR--Not rated. N/A--Not applicable. 3mE--Three-month Euro Interbank Offered Rate. =================== L U X E M B O U R G =================== ADB SAFEGATE: Barings Capital Marks $5.5M Loan at 24% Off --------------------------------------------------------- Barings Capital Investment Corporation has marked its $5,500,000 loan extended to ADB Safegate to market at $4,180,000 or 76% of the outstanding amount, as of December 31, 2022, according to a disclosure contained in Barings Capital's Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 23, 2023. Barings Capital is a participant in a Second Lien Senior Secured Term Loan to ADB Safegate. The loan accrues interest at a rate of 14% (LIBOR+9.25%) per annum. The loan matures in October 2027. Barings Capital was formed on February 20, 2020 as a Maryland limited liability company and converted to a Maryland corporation on April 28, 2020. On July 13, 2020, Barings Capital commenced operations and made its first portfolio company investment. The Company is an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended. In addition, the Company has elected to be treated and intends to qualify annually as a regulated investment company(RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended. ADB Safegate provides airfield lighting solutions and services. The Company offers in-pavement and elevated lighting, guidance sign, mounting systems, light-emitting diode lighting, controlling, monitoring, and power equipment, as well as cables, connectors, tools, heliports, and accessories. The Company's country of domicile is Luxembourg. KLEOPATRA HOLDINGS: S&P Downgrades ICR to 'B-', Outlook Stable -------------------------------------------------------------- S&P Global Ratings lowered its long-term issuer credit ratings on Kleopatra Holdings 2 S.C.A. (KH2) and its subsidiaries to 'B-' from 'B' and its issue ratings on the senior secured and senior unsecured facilities to 'B-' and 'CCC', respectively. The stable outlook reflects S&P's forecast that in the next 12 months KH2 will maintain adequate liquidity and continue to improve S&P Global Ratings-adjusted leverage, but only generate minimal FOCF. Although the company improved its operating performance in 2022, its S&P Global Ratings-adjusted EBITDA fell short of S&P's expectations. Last year, the group faced input cost increases, supply chain disruptions, and softer demand in its food segment. KH2 successfully passed the rise in raw- and non-raw-material inflation to customers and generated S&P Global Ratings-adjusted EBITDA of about EUR233 million. Although this is an improvement from about EUR210 million in 2021, it is well below S&P's previous expectations (EUR250 million-EUR270 million). S&P Global Ratings-adjusted debt to EBITDA was 10.0x at year-end 2022, compared with 11.0x at year-end 2021. S&P said, "We anticipate positive but minimal S&P Global Ratings-adjusted FOCF for 2023.Our forecasts include S&P Global Ratings-adjusted EBITDA of EUR245 million, cash interest and tax outflows of about EUR175 million, and capital expenditure (capex) of about EUR85 million. We expect this will result in S&P Global Ratings-adjusted FOCF of about EUR25 million, assuming some working capital inflows amid our forecast of declining resin prices. Although we anticipate S&P Global Ratings-adjusted FOCF will turn positive in 2023, after being negative in 2021 and 2022, we view the group's cash generation as negligible compared to its adjusted debt of about EUR2.3 billion. "We expect liquidity to remain adequate in the next 12 months. Given our S&P Global Ratings-adjusted FOCF expectations of about EUR25 million for 2023, we expect KH2 to fund some of its estimated EUR30 million of debt repayments due this year via drawings under its available facilities. We forecast the company's liquidity will remain adequate, supported by about EUR84 million of cash on the balance sheet and an undrawn revolving credit facility (RCF) of about EUR150 million. The company's variable interest rate exposure is largely hedged until year-end 2024. Upon expiry of these hedges, we estimate that its interest expenses could increase by about EUR25 million per year based on the current interest rate environment." Management expects to improve FOCF via several transformation initiatives to support its EBITDA and cash generation. They include procurement savings, commercial optimizations, and a more streamlined overhead and manufacturing structure. Management estimates these initiatives will improve EBITDA by EUR10 million in 2023, increasing to EUR50 million-EUR65 million per year from 2024. Costs linked to these initiatives are estimated at about EUR17 million in 2023 including restructuring and other one-off costs. S&P said, "We conservatively did not take any of these EBITDA improvements into account for 2023 and reflected EUR25 million-EUR30 million in 2024. With S&P Global Ratings-adjusted debt of EUR2.3 billion, the company's capital structure is highly leveraged. Our S&P Global Ratings-adjusted debt includes factoring and lease adjustments of about EUR0.4 billion. In the next few years, we expect any material deleveraging to be related to improvements in profitability." The stable outlook reflects our forecast that in the next 12 months KH2 will maintain adequate liquidity and continue to improve S&P Global Ratings-adjusted leverage, but only generate minimal FOCF. S&P could lower the ratings on KH2 if: -- S&P forecasts a deterioration in FOCF or liquidity. -- S&P anticipates EBITDA to cash interest of below 1.5x. -- S&P believes that the company is unable to refinance its debt facilities. -- S&P's assessment of KH2's financial policy indicates an elevated risk of leverage increasing beyond our base-case forecast, for example, due to large debt-funded acquisitions or shareholder distributions. S&P sees limited potential for an upgrade in the next 12 months. That said, upgrade triggers include: -- Substantially more positive FOCF. -- S&P Global Ratings-adjusted debt to EBITDA of below 7.5x with EBITDA to cash interest sustainably in excess of 2.0x. ===================== N E T H E R L A N D S ===================== KETER GROUP: S&P Downgrades ICR to 'CCC', Put on Watch Developing ----------------------------------------------------------------- S&P Global Ratings lowered the long-term issuer credit rating on Keter Group B.V., and its issue rating on its term loan B (TLB) and revolving credit facility (RCF), to 'CCC' from 'B-' as it notes uncertainty around the completion of the EUR1,205 million TLB refinancing. This rating action reflects rising uncertainty and longer than expected time to complete the refinancing, and is not driven by the company's operating performance. The CreditWatch developing listing reflects S&P's view that it could raise the ratings if the company successfully refinances its loan maturities, alleviating pressure on its liquidity position. The CreditWatch listing also reflects a potential further downgrade if Keter fails to do so over the following three months. S&P said, "We intend to resolve the CreditWatch placement as soon as we receive further details on the progress of the refinancing, but no later than in 90 days. "The downgrade reflects Keter's tight timing to complete a refinancing, rather than its operating performance. We have downgraded Keter as it has not yet been able to advance or secure refinancing of its EUR1,205 million TLB maturing on Oct. 31, 2023, despite working on various financing alternatives. We acknowledge these are complex negotiations with multiple parties, which may delay the final terms being agreed and completed, leading to uncertainty regarding timely completion of the refinancing and on the company's ability to secure it in the next few months. The company achieved solid results in the financial year 2022 (FY2022) and we expect improving operating performance over FY2023. Our current rating action reflects solely refinancing risk. Absent this, the company's operating performance would indicate a higher rating level all else being equal. "Keter achieved solid results FY2022 results and retains sufficient liquidity to finance its day-to-day operations. We lowered our liquidity assessment on Keter to weak according to our criteria reflecting the upcoming TLB and RCF maturities. We note, however, that Keter had about EUR63 million in cash-on-balance-sheet as of Jan. 31, 2023, which we view as sufficient to finance its day-to-day operations. The revolving credit facility (RCF) matures on July 31, 2023, and to our understanding was undrawn as of Jan. 31, 2023. "Keter's FY2022 results were hit by high cost inflation, particularly increases in the price of raw materials (namely resin), energy, and freight, as well as recessionary pressures and a decline in consumer purchasing power. Nevertheless, sales have proved resilient, rising by 3.7% despite softer demand driven by price increases. We estimate S&P Global Ratings-adjusted EBITDA of around EUR170 million in FY2022 versus EUR209 million in FY2021 and slightly positive FOCF thanks to working capital inflows partly driven by inventory releases. "We expect the improving sales mix and cost controls to help margins recover slightly during FY2023. For 2023, we forecast reduced revenue by about 4%-5% driven by overall lower volumes. However, we forecast S&P Global Ratings-adjusted EBITDA will return to close to 2021 levels of around EUR190 million-EUR210 million on the back of sales mix, decline in input costs, in particular resin and freight, and management's actions to continue to proactively address the cost base. We forecast slightly negative FOCF due to working capital investments to allow stock build-up ahead of 2024 and higher interest payments from the current interest rate environment. "The CreditWatch placement reflects perceived uncertainty around the timing of Keter's refinancing of its term loan due October 2023. Upon successful completion of the refinancing, we would consider this to be credit positive and likely raise the ratings by multiple-notches to 'B-', subject to the company's continuing operating performance in line with our expectations. Alternatively, we could lower the rating if Keter fails to successfully refinance its capital structure in the coming months. "We expect to resolve the CreditWatch placement in the coming months as we gain further clarification on the refinancing terms and the final capital structure. S&P Global Ratings notes this is not a static situation and would look to resolve this CreditWatch as soon as possible as further information and details emerge." Environmental, Social, And Governance ESG credit indicators: E-2, S-2, G-3 S&P said, "Governance factors are a moderately negative consideration in our credit rating analysis of Keter Group B.V., as is the case for most rated entities owned by private-equity sponsors. We believe the company's highly leveraged financial risk profile points to corporate decision-making that prioritizes the interests of the controlling owners. This also reflects the generally finite holding periods and a focus on maximizing shareholder returns. Environmental and social factors are an overall neutral consideration in our credit rating analysis. The company has successfully penetrated the online channel and benefits from supportive consumer demand for home and garden furniture." KOUTI BV: Fitch Puts Final B+ Sr. Sec Rating on EUR400M Term Loan ------------------------------------------------------------------ Fitch Ratings has assigned Kouti B.V.'s additional EUR400 million term loan B (TLB) a final senior secured rating of 'B+' with a Recovery Rating of 'RR3'. Kouti is a direct subsidiary of Titan Holdings II B.V.'s (Eviosys). Fitch has also affirmed Eviosys' Long-Term Issuer Default Ratings (IDR) at 'B' with a Positive Outlook. Proceeds from the additional TLB are being used for general corporate purposes, including payment of dividends to the shareholders of the group. KEY RATING DRIVERS EBITDA Improvement Drives Deleveraging: Eviosys' TLB of EUR400 million contracted in March 2023 to finance a special dividend will increase the group's leverage metrics by about 1.0x versus its previous expectations for 2023-2026. Nevertheless, Eviosys's expected EBITDA leverage continues to be under its positive sensitivity of below 6.0x over the rating horizon and underpins the Positive Outlook. Deleveraging of the group is driven by strong absolute EBITDA generation, which if not achieved could pressure leverage metrics and result in a negative rating action. Aggressive Financial Policy: Fitch views the financial policy of the group as aggressive, taking into account dividends paid in 2022 of EUR125 million and new debt attraction in March 2023 for additional dividend distribution. Eviosys' owners have no plans for material M&As and claim to not pay any further ordinary dividends until its profitability targets are achieved, which is viewed positively by Fitch. Any additional borrowings or shareholder-friendly cash deployment actions will reduce the group's deleveraging capacity, which would likely negatively affect the rating. Leverage Still Adequate: Fitch estimates improved revenue and EBITDA to have reduced EBITDA leverage to around 4.5x at end-2022 from about 7.5x at end-2021. The new TLB will not materially affect key ratios given expected solid operating performance in 2023. Fitch forecasts EBITDA leverage to increase to about 5.6x at end-2023 before it gradually declines to 5.1x in 2025. Maintaining leverage metrics that are consistent with its ratings in 2023 will depend on Eviosys' ability to pass on cost inflation to its customers. Steady EBITDA Margin Improvement: Eviosys' 2022 margin was significantly ahead of its expectations on strong price increases, despite softer volumes, and due to inventory-repricing effect. Fitch therefore estimates 2022 EBITDA to have been higher than its previous forecast, and for Eviosys to maintain a steady margin improvement from 2024. This should bring EBITDA margins more in line with peers' and result in a financial profile that is stronger than the current rating. The group's EBIT margin has historically been weaker than many peers', although Fitch expects steady improvement over 2022-2026. Temporary Free Cash Flow (FCF) Pressure: FCF was squeezed in 2022 by higher-than-expected Fitch-defined working capital (WC) outflow on increased use of factoring, the EUR125 million dividend distribution, the cessation of supply-chain financing facility usage, and larger capex than historically. Fitch forecasts a solid positive FCF margin of over 3.4% starting from 2023 despite ongoing higher capex at about 3% of revenue this year. This will be driven by strong pricing resulting in higher EBITDA margins, which Fitch expects to be largely maintained through cost optimisation and the absence of regular dividend payments. Capex has historically been around 1.5%-2% of revenue and Fitch expects this to return to around 2% over 2024-2026 to support growth. Strong Market Position: Eviosys is the largest metal food can producer in Europe with a market share of about 39%, supported by stable, non-cyclical end-markets. The group benefits from moderate to high barriers to entry that include a broad network of production facilities, and long-term relationships with key customers as well as suppliers of tinplate, the group's core raw material. Exposure to Europe Partly Mitigated: Eviosys' European exposure leaves the group vulnerable to energy rationing (gas usage is limited) although this is partly mitigated by packaging being an integral part of the food supply chain and by this risk peaking in 1Q and 4Q, which are the quieter manufacturing periods for Eviosys. Moreover, Eviosys has managed to hedge a material share of energy costs for 2023 and increased prices to additionally cover energy costs. Limited Diversification: Eviosys has limited geographical diversification as it is mainly concentrated in Europe. Its production facilities are located close to food producers'. About 85% of Eviosys' revenue is exposed to the production of metal food cans, which limits product diversification versus higher-rated peers'. This is mitigated by stable demand from food producers and supports Eviosys' solid position in the metal food can market. Stability from Contracted Positions: A significant part of sales, albeit lower than that of some Fitch-rated peers, is secured by long-term contracts with a cost pass-through mechanism, which enables the group to mitigate raw-material price volatility. Eviosys further benefits from an annual pricing arrangement with both customers and key raw material suppliers, thereby fixing a significant portion of both its revenue and cost base and limiting its volatility exposure. End-Markets Provide Resilience: Eviosys is exposed to a broad range of non-cyclical end-markets that are 95% covered under food, including fruit & vegetables, fish, pet food and infant formula. The high level of proven recyclability of metal can products places it favourably in comparison with some competing materials, particularly in light of increasing environmental regulations and customer concerns or requirements. DERIVATION SUMMARY Eviosys' business profile is weaker than that of higher-rated peers such as Smurfit Kappa Group plc (BBB-/Stable), Berry Global Group, Inc (BB+/Stable), Silgan Holdings Inc. (BB+/Stable) and CANPACK S.A. (BB-/Negative) due to a less diversified geographical presence and a more limited product range. This is mitigated by its leading market position in food metal packaging and expected sustainably strong FCF generation. Eviosys compares favourably with CANPACK and Ardagh Metal Packaging S.A. (AMP; B/Stable), which are focused on beverage metal packaging. Eviosys has similar scale to CANPACK but is much smaller than AMP. Similarly to these peers, Eviosys has limited product diversification. Eviosys' EBITDA margin historically was lower versus Fitch-rated peers', before rising in 2022 ahead of its expectations. Fitch expects its EBITDA margin to be healthy at over 15% during 2022-2026, which compares well with peers' reported 13%-20%. Fitch continues to forecast sustainably positive FCF margin of over 3.4% from 2023, which is comparable with that of Silgan Holdings Inc. (4.5%-6.6%) and Berry Global Group, Inc. (6.4%-8%). Eviosys' spin-off from Crown Holdings Inc lifted its Fitch-defined EBITDA leverage in 2021 to 7.5x. However, profitability improvement should allow the group to reduce EBITDA leverage to about 5.6x in 2023 despite the additional debt issue, followed by gradual improvement over the rating horizon. Its closest highly leveraged peer is Ardagh Group with leverage at over 9x in 2021, but its business profile is stronger than Eviosys' with greater diversification and a better contract structure with pass-through of most costs. Forecast strong cash flow generation should allow Eviosys to reduce EBITDA leverage to about 5.1x by end-2025, which supports its Positive Outlook. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue to have grown in high double digits in 2022, followed by high single digits in 2023 and low single digits during 2024-2026 - EBITDA margin of 17.1% in 2022, about 15% in 2023 before rising to 16.4% by 2026 - WC outflow of more than EUR200 million in 2022, and normalising from 2023 - Capex at about EUR75 million in 2022 and EUR90 million in 2023, and about EUR50 million p.a. during 2024-2026 - Additional dividend recapitalisation and no regular dividend payments during 2023-2026 - New TLB of up to EUR400 million with maturity due 2028 for dividend distribution - No M&A to 2026 Key Recovery Rating Assumptions: - The recovery analysis assumes that Eviosys would be deemed a going concern (GC) in bankruptcy and that it would be reorganised rather than liquidated - Its GC value available for creditor claims is estimated at about EUR1.5 billion, based on its revised GC EBITDA of EUR275 million - GC EBITDA also assumes a loss of a major customer and a failure to broadly pass on raw-material cost inflation to customers. The assumption also reflects corrective measures taken in reorganisation to offset the adverse conditions that trigger its default - A 10% administrative claim - An enterprise value (EV) multiple of 5.5x EBITDA is applied to GC EBITDA to calculate a post-reorganisation EV. The multiple is based on Eviosys' strong market position in Europe with resilient performance during the pandemic, good customer diversification with a long record of cooperation, and expected strong FCF generation. At the same time, the EV multiple reflects the group's concentrated geographical diversification and limited range of products - Fitch deducts about EUR425 million from the EV, due to Eviosys' high usage of factoring facility adjusted for discount, in line with Fitch's criteria - Fitch estimates the total amount of senior debt claims at EUR2,225 million, which includes an EUR275million senior secured revolving credit facility (RCF), EUR1,175 million senior secured TLB, EUR400 million senior secured additional TLB and EUR375 million subordinated notes - The allocation of value in the liability waterfall results in recoveries corresponding to 'RR3'/51% for the TLBs and to 'RR6'/0% for the subordinated notes RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - EBITDA gross leverage below 6.0x on a sustained basis supported by a consistent financial policy - EBITDA margin above 16% on a sustained basis - FCF margin sustained above 1% Factors that could, individually or collectively, lead to negative rating action/downgrade: - EBITDA gross leverage not declining below 7.0x by end-2023, for instance due to additional debt-funded distributions to shareholders - EBITDA interest coverage below 2.5x - Neutral to negative FCF margin on a sustained basis LIQUIDITY AND DEBT STRUCTURE Healthy Liquidity: At end-2022 Eviosys reported Fitch-defined readily available cash of EUR242 million, which was adjusted for EUR15 million to cover intra-year WC needs. Following the carve-out from Crown Holdings Inc in 2021 Eviosys has no material scheduled debt repayments until 2028. The additional TLD will also mature in 2028. Fitch-adjusted short-term debt is represented mainly by a drawn factoring facility of about EUR493million. This debt self-liquidates with factored receivables. In addition, Eviosys has an undrawn RCF facility of EUR275 million due in 2028, which supports its liquidity position. Eviosys' improvement in EBITDA and FFO generation and the general absence of dividend payments will further sustain positive FCF generation and in turn the group's healthy liquidity. ISSUER PROFILE Eviosys is the largest metal food can producer in Europe with a market share of about 39% and 45 manufacturing facilities across 17 countries. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Titan Holdings II B.V. LT IDR B Affirmed B Subordinated LT CCC+ Affirmed RR6 CCC+ Kouti B.V. senior secured LT B+ New Rating RR3 B+(EXP) senior secured LT B+ Affirmed RR3 B+ =========================== U N I T E D K I N G D O M =========================== HOLOXICA: Cashflow Challenges Prompt Liquidation ------------------------------------------------ Alistair Houghton at insider.co.uk reports that holographic technology firm Holoxica has entered liquidation due to cashflow challenges -- with bosses saying it could not continue without significant investment even though its tech had attracted international interest. According to insider.co.uk, Shona Campbell, insolvency partner at business advisory and accountancy firm Henderson Loggie, has been appointed as liquidator of Edinburgh-based Holoxica -- saying "changes in trading conditions because of Brexit and the pandemic have created cashflow challenges for the company". Now the company's tech and IP will be put on the market -- and its liquidators say they hope it will attract strong interest, insider.co.uk discloses. Holoxica was founded in 2008 to develop dynamically changeable holographic displays where multiple people can experience full colour motion video 3D images simultaneously without wearing headsets. METNOR GROUP: Goes Into Administration -------------------------------------- Tom Keighley at BusinessLive reports that construction services company Metnor Group has followed its subsidiary firms Metnor Construction and Norstead into administration. Insolvency experts at FRP Advisory were appointed to the Killingworth-based group which, in addition to its main construction and mechanical and electrical engineering firms, also owned a Norfolk-based pressure testing business which has supplied clients around the world, BusinessLive relates. It follows the demise of Metnor Construction, which was first to enter administration last month with the loss of 80 jobs following weeks of speculation about its future, BusinessLive notes. The former Tyneside and Northumberland company of the year traded for more than 20 years and was the principal contractor on private and public sector build projects including residential schemes, healthcare, student accommodation, hotel and leisure and commercial projects. According to BusinessLive, administrators said the firm had suffered the "havoc" caused by rapid inflation in the construction sector and the loss of contracts. Shortly after that, the group's mechanical and electrical engineering arm, Norstead, also called in administrators with the loss of 52 jobs across its Newcastle and Maidenhead operation, BusinessLive relays. Directors of the business had attempted to find a quick sale in order to save it but no viable offers had been made for the GBP20.3 million-turnover firm, BusinessLive discloses. FRP, BusinessLive says, is now in the process of winding up the company and marketing its assets for sale. MOORE LARGE: Goes Into Administration ------------------------------------- Alex Ballinger at BikeBiz, citing multiple sources, reports that Moore Large has entered administration. BikeBiz understands that the Derby-based distributor informed its staff on March 14 that it had entered administration. Moore Large's portfolio consists of recognisable brands including Tern e-bikes, Tru Tension maintenance and cleaning products, BMX brand WeThePeople, and its house-owned bike brand Forme, BikeBiz discloses. In February, Moore Large was due to exhibit at COREbike in Northamptonshire, but pulled out of the event at the last minute for unknown reasons, BikeBiz relates. According to insiders, management had continued to progress with plans for 2024/25 despite not attending the show. A skeleton staff are being retained to help with the administration process, BikeBiz understands. WTL TRAVEL: Goes Into Liquidation, Owes Staff GBP127,000 -------------------------------------------------------- Juliet Dennis at TravelWeekly reports that WTL Travel Services has gone into liquidation owing travel agency staff GBP127,000. The Blackpool-based firm was set up in March last year by David McDonald, director of Book in Style, which traded as agency chain World Travel Lounge, TravelWeekly recounts. World Travel Lounge staff were transferred across to work for WTL Travel Services. A Statement of Affairs filed by the liquidator shows the company failed owing GBP277, 784 to creditors, including 22 members of staff, and holding just GBP8,000 in assets, TravelWeekly states. Employees are owed more than GBP48,000 in wages and almost GBP79,000 in redundancy and notice pay, with most of the remaining debt owed to HM Revenue & Customs, TravelWeekly discloses. Ian Williamson and Christopher Brindle, of Campbell Crossley & Davis, were appointed liquidators on March 2, TravelWeekly relates. The company confirmed the liquidation was in its initial stages, TravelWeekly notes. According to TravelWeekly, Mr. McDonald, who set up World Travel Lounge in 2015 and grew the chain to 10 branches, said: "Covid had a huge impact and as such we have recently sold a number of stores – three to Protected Trust Services and [one taken over by] Holiday with Us -- while also closing a number of other stores, protecting as many roles as we could. "Our sole focus has always been our colleagues. We're doing everything we can to support them through this difficult time." XCAV8 SW: Goes Into Liquidation, Owes More than GBP1.6 Million -------------------------------------------------------------- William Telford at PlymouthLive reports that a Plymouth building company has gone bust leaving debts of more than GBP1.6 million unlikely to be paid. XCAV8 (SW) Ltd operated for more than a decade and worked on major construction schemes including Plymouth's Mount Wise redevelopment. But it has now gone into liquidation with debts of more than GBP1.8 million, most of which will probably not be paid, PlymouthLive discloses. According to PlymouthLive, documents filed at Companies House reveal assets of GBP388,034 which will be used to pay claims from employees, the taxman and GBP118,217 owed to Barclays Bank. It means GBP117,888 will be available for unsecured creditors, PlymouthLive states. But with claims of GBP1,830,571 it means there will be a shortfall of GBP1,652,682, PlymouthLive notes. XCAV8 (SW) was incorporated in February 2010. The company was based at the Devonshire Meadows industrial estate at Broadley Park, Roborough. XCAV8, a civil engineering and groundworks specialist, went into liquidation 10 days after calling a meeting of creditors, PlymouthLive recounts. The business had focused on the groundworks aspect of building projects/developments, from digging out and site preparation to road infrastructure and drainage. Unaudited accounts for the year to the end of February 2021 revealed net assets of GBP841,764. It employed 36 people. =============== X X X X X X X X =============== [*] BOOK REVIEW: Bankruptcy and Secured Lending in Cyberspace ------------------------------------------------------------- Author: Warren E. Agin Publisher: Bowne Publishing Co. List price: $225.00 Review by Gail Owens Hoelscher Red Hat Inc. finds itself with a high of 151 5/8 and low of 20 over the last 12 months! Microstrategy Inc. has roller-coasted from a high of 333 to a low of 7 over the same period! Just when the IPO boom is imploding and high-technology companies are running out of cash, Warren Agin comes out with a guide to the legal issues of the cyberage. The word "cyberspace" did not appear in the Merriam-Webster Dictionary until 1986, defined as "the on-line world of computer networks." The word "Internet" showed up that year as well, as "an electronic communications network that connects computer networks and organizational computer facilities around the world." Cyberspace has been leading a kaleidoscopic parade ever since, with the legal profession striding smartly in rhythm. There is no definition for the word "cyberassets" in the current Merriam-Webster. Fortunately, Bankruptcy and Secured Lending in Cyberspace tells us what cyberassets are and lays out in meticulous detail how to address them, not only for troubled technology companies, but for all companies with websites and domain names. Cyberassets are primarily websites and domain names, but also include technology contracts and licenses. There are four types of assets embodied in a website: content, hardware, the Internet connection, and software. The website's content is its fundamental asset and may include databases, text, pictures, and video and sound clips. The value of a website depends largely on the traffic it generates. A domain name provides the mechanism to reach the information provided by a company on its website, or find the products or services the company is selling over the Internet. Examples are Amazon.com, bankrupt.com, and "swiggartagin.com." Determining the value of a domain name is comparable to valuing trademark rights. Domain names can come at a high price! Compaq Computer Corp. paid Alta Vista Technology Inc. more than $3 million for "Altavista.com" when it developed its AltaVista search engine. The subject matter covered in this book falls into three groups: the Internet's effect on the practice of bankruptcy law; the ways substantive bankruptcy law handles the impact of cyberspace on basic concepts and procedures; and issues related to cyberassets as secured lending collateral. The book includes point-by-point treatment of the effect of cyberassets on venue and jurisdiction in bankruptcy proceedings; electronic filing and access to official records and pleadings in bankruptcy cases; using the Internet for communications and noticing in bankruptcy cases; administration of bankruptcy estates with cyberassets; selling bankruptcy estate assets over the Internet; trading in bankruptcy claims over the Internet; and technology contracts and licenses under the bankruptcy codes. The chapters on secured lending detail technology escrow agreements for cyberassets; obtaining and perfecting security interests for cyberassets; enforcing rights against collateral for cyberassets; and bankruptcy concerns for the secured lender with regard to cyberassets. The book concludes with chapters on Y2K and bankruptcy; revisions in the Uniform Commercial Code in the electronic age; and a compendium of bankruptcy and secured lending resources on the Internet. The appendix consists of a comprehensive set of forms for cyberspace-related bankruptcy issues and cyberasset lending transactions. The forms include bankruptcy orders authorizing a domain name sale; forms for electronic filing of documents; bankruptcy motions related to domain names; and security agreements for Web sites. Bankruptcy and Secured Lending in Cyberspace is a well-written, succinct, and comprehensive reference for lending against cyberassets and treating cyberassets in bankruptcy cases. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *