/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230502.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, May 2, 2023, Vol. 24, No. 88 Headlines A Z E R B A I J A N KAPITAL BANK: S&P Alters Outlook to Positive, Affirms 'BB-/B' ICR E S T O N I A COINLOAN: Declared Insolvent by Estonian Court F R A N C E BANIJAY GROUP: Fitch Affirms LongTerm IDR at 'B+', Outlook Stable EOS FINCO: Moody's Affirms 'B2' CFR, Outlook Remains Stable ERAMET SA: Fitch Publishes 'BB+' LongTerm IDR, Outlook Stable L U X E M B O U R G EOS FINCO: S&P Affirms 'B' ICR on Strategic Acquisitions FLINT HOLDCO: S&P Cuts Loan Ratings to 'D' on Missed Payments N E T H E R L A N D S MEDIAN BV: GBP250M Bank Debt Trades at 14% Discount VECHT RESIDENTIAL 2023-1: Moody's Assigns (P)Ba2 Rating to D Notes VECHT RESIDENTIAL 2023-1: S&P Assigns Prelim BB Rating to X1 Notes P O R T U G A L MAGELLAN MORTGAGES 3: Moody's Ups EUR36.75MM D Notes Rating to Ba1 THETIS FINANCE 2: Fitch Affirms B-sf Rating on F Notes, Outlook Pos R O M A N I A VIVRE DECO: Altex Acquires Banca Transilvania's EUR4.6MM Claim S P A I N NH HOTEL GROUP: Fitch Affirms B LongTerm IDR, Alters Outlook to Pos U K R A I N E CITY OF KYIV: S&P Affirms 'CCC+' Long-Term ICRs, Outlook Stable U N I T E D K I N G D O M DOWSON 2022-2: S&P Lowers Class E Notes Rating to BB- (sf) FALLEN ACORN: To Go Into Voluntary Liquidation This Week MARKET BIDCO: EUR1.30B Bank Debt Trades at 15% Discount MARKET BIDCO: EUR709.9M Bank Debt Trades at 15% Discount UNITY BREWERY: Reopens Under New Ownership Following Liquidation VUE ENTERTAINMENT: EUR648.6M Bank Debt Trades at 46% Discount [*] UK: Company Insolvencies in England, Wales Up 18% in Q1 2022 - - - - - =================== A Z E R B A I J A N =================== KAPITAL BANK: S&P Alters Outlook to Positive, Affirms 'BB-/B' ICR ----------------------------------------------------------------- S&P Global Ratings revised its outlook to positive from stable and affirmed its 'BB-/B' long- and short-term issuer credit ratings on Azerbaijan-based Kapital Bank OJSC. S&P expects that Kapital Bank will continue to exhibit better profitability than domestic and international peers. Kapital Bank's position as the third largest bank in Azerbaijan and its good diversification between corporate, small and midsize enterprise (SME), and retail banking support its track record of displaying the largest absolute profit in the domestic banking system. Its return on assets (ROA) averaged 4.5% in 2020-2022 versus the banking system average of 1.8%, and its return on equity (ROE) was 36% versus 14%. These profitability metrics also compare favorably with large banks in peer countries such as Egypt, Kazakhstan, Armenia, and Uzbekistan. Although we expect a mild deterioration in profitability metrics in the next two years, S&P believes that Kapital Bank will preserve its leadership among peers. The bank's large domestic franchise in consumer loans protects its premium net interest margin, which was 10.8% in 2022 and is expected to remain broadly stable. S&P said, "Kapital Bank has shown good improvements in asset quality, and we expect its Stage 3 loans to remain among the lowest of domestic and international peers. The bank's Stage 3 loans reduced to 2.3% of total loans at year-end 2022 from 3.9% a year earlier, reflecting recoveries and write offs. The fact that Kapital Bank mostly provides consumer loans to its deposit customers safeguards its asset quality. Even though we expect some mild deterioration in asset quality in the next few years as loans season and the bank gradually builds up its lending to SMEs, we believe that Stage 3 loans will remain lower than the domestic and international peer averages. For example, we expect Stage 3 loans in Azerbaijan to be about 6%-8% of total loans in the next 24 months. Positively, provisions covered Kapital Bank's Stage 3 loans by 173% at year-end 2022. We expect its cost of risk to exceed 2% in the next 24 months compared to our expectations for the system of about 1.5%, reflecting its conservative provisioning policy. "We anticipate that Kapital Bank's risk-adjusted capital (RAC) ratio will remain stable and higher than the peer average in 2023-2024.We forecast budgeted loan growth of about 25% in 2023 and about 15% afterward, as well as good profit generation, will support capitalization at adequate levels. This is despite high dividend payouts of about 60% of net income and no planned capital injections. We forecast a RAC ratio of 7.5%-8.5% in 2023-2024 compared with 8.5% at year-end 2022. "The positive outlook on Kapital Bank reflects our expectation that it will continue to outperform the majority of domestic and international peers in terms of profitability, capitalization, and asset quality in the next 12-24 months. "Over the next 12 months, we could revise the outlook back to stable if the macroeconomic and operating environment in Azerbaijan deteriorates such that is has a material negative effect on the bank's profitability, asset quality, and capitalization. "We could raise the ratings within the next 12 months if Kapital Bank continues to outperform its domestic and international peers, demonstrated by ongoing sound performance, stable asset quality, higher capital buffers, and adequate liquidity." ESG credit indicators: E-2, S-2, G-4 ============= E S T O N I A ============= COINLOAN: Declared Insolvent by Estonian Court ---------------------------------------------- Jamie Crawley at CoinDesk reports that Belgian cryptocurrency lending platform Bit4You has suspended its operations after one of its service providers, CoinLoan, was declared insolvent by a court in Estonia. Bit4You learned of CoinLoan's insolvency on April 24, and that it no longer has necessary registration as a digital asset custodian, the lender said in a blog post on April 26, CoinDesk relates. There has yet to be any indication that the funds held with CoinLoan will not be recovered, Bit4You added. Bit4You listed the quantities of different assets it had stored on CoinLoan, including 145.3 BTC (US$4.2 million), 1097.5 ETH (US$2.1 million) and 501.1 BNB (US$166,000), CoinDesk discloses. According to CoinDesk, a court in Estonia ordered CoinLoan to halt its operations, including withdrawals, on April 24. Last June, the platform limited withdrawals to US$5,000 per 24-hour period to stave off a run on its funds, following the fallout from the collapse of the Terra ecosystem, CoinDesk recounts. =========== F R A N C E =========== BANIJAY GROUP: Fitch Affirms LongTerm IDR at 'B+', Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Banijay Group SAS's (Banijay) Long-Term Issuer Default Rating (IDR) at 'B+' with a Stable Outlook upon closing of the term loan B (TLB) amend and restate (A&E) transaction. Fitch has assigned the new EUR555 million and USD560 million term loan facilities final 'BB-'/'RR3' ratings. Fitch has also affirmed the company's existing senior secured notes at 'BB-'/'RR3' and the senior unsecured notes at 'B-'/'RR6'. The new TLBs were upsized by around EUR200 million (EUR/USD equivalent) during syndication. Around EUR150 million will be used to fund future bolt-on acquisitions (and hence left as cash balance) and around EUR50 million will be used for a partial repayment of the existing senior secured notes. Its updated forecast leverage, including the upsized debt amount, is within the rating sensitivities. Other terms were largely in line with Fitch's expectations. Banijay's 'B+' IDR reflects its approach for a stronger parent - FL Entertainment N.V (FLE) - and a weaker subsidiary - Banijay - where Fitch applies a bottom-up assessment with a single notch uplift from Banijay's Standalone Credit Profile (SCP) of 'b'. The Stable Outlook reflects Fitch's view that Banijay's EBITDA leverage, interest cover and free cash flow (FCF) will remain consistent with a 'b' SCP in 2023-2024, adjusted for a higher interest rate environment and including a higher dividend payout to its parent. The proceeds from the new TLBs have been used to repay the existing term loans and Fitch has subsequently withdrawn the instrument ratings on the repaid TLBs. KEY RATING DRIVERS PSL Approach: In applying its Parent-Subsidiary Linkage (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. However, the consolidated profile benefits from a stronger financial structure and financial flexibility, with estimated Fitch-defined EBITDA net leverage of around 4.0x in 2022, which Fitch forecasts will decline in 2023. Deleveraging is further supported by FLE's financial policy at below 3.0x group-defined net debt/EBITDA (3.1x at 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 costs, 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 costs. 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 so EBITDA interest cover should remain around 3.0x for 2023-2024. Deleveraging Aims: Fitch expects FCF and interest cover to remain at 'b' even 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 4.5x at end-2022. If this is achieved, it 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 to remain under 25%). Fitch covers several UK and US peers in the diversified media industry such as TFCF Corporation (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 the '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 deducts 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 EUR555 million and USD560 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 61% 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 of 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 above 5.8x (and/or greater divergence between gross and net leverage metrics) on a sustained basis; - 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, so that the parent's consolidated credit profile was no longer stronger than Banijay's SCP. LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Banijay's cash equivalent stood at EUR396 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 pro-forma for the A&E transaction and undrawn RCF, provides satisfactory liquidity for working-capital requirements, earn-outs and growth M&A opportunities. Manageable Refinancing Risks: Banijay's existing senior secured notes mature in March 2025 and the unsecured notes in March 2026. The extended senior secured term loans now mature at the earlier of March 2028 and three months prior to the existing senior secured and unsecured notes respective maturities. 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 WD Withdrawn BB- senior secured LT BB- Affirmed RR3 BB- senior secured LT BB- New Rating RR3 BB-(EXP) Banijay Group SAS LT IDR B+ Affirmed B+ senior unsecured LT B- Affirmed RR6 B- Banijay Group US Holding, Inc. senior secured LT WD Withdrawn BB- senior secured LT BB- New Rating RR3 BB-(EXP) EOS FINCO: Moody's Affirms 'B2' CFR, Outlook Remains Stable ----------------------------------------------------------- Moody's Investors Service has affirmed Eos Finco S.a.r.l.'s (ETC or the company) B2 corporate family rating and the B2-PD probability of default rating. Concurrently, Moody's has also affirmed the B2 ratings of the existing EUR1,000 million equivalent (split in EUR and USD) backed senior secured term loan (TL) that has been upsized to around EUR1,650 million equivalent and the existing EUR185 million backed senior secured multi-currency revolving credit facility (RCF) that has been upsized to EUR230 million. The outlook remains stable. Net proceeds from the proposed TL add-on will be used to finance the acquisitions of Amadys SA (Amadys) and BTV Multimedia Group (BTV) for about two-third of the total considerations, while the remaining financing will be provided by an equity injection expected from the shareholders. The rating action reflects: the expected increase in scale and geographic diversification of ETC post acquisitions, coupled with the higher diversification of its customer base the rating agency expectations that the company will deleverage in the next 18-24 months, without embarking in further debt-financed acquisitions RATINGS RATIONALE ETC's B2 CFR reflects its leading market position as a global distributor of telecom equipment, with a comprehensive product offering, and its enhanced products portfolio and scale, which are expected to further improve after the completion of the announced acquisitions of Amadys and BTV. Moody's expects that, upon completion of these acquisitions, the combined group will improve its geographic diversification and significantly increase its dimension, with 2022 pro-forma (PF) revenues of around EUR2 billion, compared to EUR1.4 billion expected in 2022. At the same time, the combined group will also increase its clients diversification, with a reduction of the top three customers' weight to 35% (2022 PF revenues), from the existing 46%. Concurrently, the combined group will be more exposed to countries with higher growth opportunities in fiber to the home (FTTH) coverage, namely UK, Germany and Belgium, which are expected to account for 7%, 9% and 17% of 2022PF revenues. The acquisitions will offer meaningful revenue and cost synergies potential over the next few years. However, Moody's remains somewhat cautious of the execution risks associated with the successful integration of these acquisitions. The B2 CFR remains constrained by the company's highly acquisitive stance (eight acquisitions announced over 2020-2023) as well as the continued high leverage. On incorporating the acquisitions of Amadys and BTV (without including the unrealized synergies in the acquired EBITDA), Moody's adjusted gross debt/EBITDA, is expected to increase slightly above 5.5x on a 2022PF and to subsequently decrease to 4.8x on a 2023PF, coupled with Moody's adjusted free cash flow (FCF)/debt that is expected to remain below 5% over the next 12-18 months. Such metrics weakly position ETC in its rating category. Moody's nevertheless expects that ETC will progressively deleverage by reducing gross debt/EBITDA (as adjusted by Moody's) towards 4.5x by the end of 2024, while improving Moody's adjusted FCF/debt to around 5%, thanks to the sustained organic revenue growth and the continued improvements likely in profitability. Such expectations are founded on Moody's assumption that the company will not embark in further debt-financed acquisitions before having restored solid credit metrics for the current rating category. LIQUIDITY Moody's views ETC's liquidity as adequate, supported by the rating agency expectations of positive free cash flow generation averaging EUR67 million per year in 2023 and 2024, cash balances of EUR36 million expected at the end of 2022 and committed, undrawn, backed senior secured RCF of up to EUR230 million, post the closure of the add-on. The company will need to reimburse EUR23 million in 2024 under the amortization schedule foreseen for the upsized USD831.4 million backed senior secured term loan B1. The TL and the RCF will mature in October 2029 and October 2028. Moody's expects the company to maintain comfortable headroom under the springing covenant attached to the RCF and tested quarterly if drawn by 40%. STRUCTURAL CONSIDERATIONS The B2 ratings of to the backed senior secured TL and the backed senior secured RCF, in line with the CFR, reflect their pari passu ranking in the capital structure, a collateral package comprising substantially all assets of the US subsidiary guarantors among other things, and upstream guarantees from material subsidiaries of the group representing 80% of EBITDA. RATING OUTLOOK The stable outlook factors in Moody's expectations that the company will maintain strong organic growth in revenues and profitability (as measured by Moody's adjusted EBITA margin) at least in the next 12-18 months. The stable outlook also incorporates expectations that the company will not embark in further debt-financed acquisitions before having restored solid credit metrics for the current rating category, as evidenced by a steady reduction of Moody's adjusted debt/EBITDA towards 4.5x by 2024, coupled with Moody's adjusted FCF/debt trending toward 5% by the same year. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure on the rating could develop over time, if the company steadily reduces its customer concentration risk, while maintaining a strong organic revenue growth trend with significant improvements in its EBITA margin (Moody's adjusted). At the same time, positive pressure would require Moody's adjusted debt/EBITDA to reduce towards 4.0x and Moody's adjusted FCF/debt to increase to around 10%, coupled with a conservative financial policy with respect to debt-funded acquisitions and shareholder returns. Negative pressure on the rating could materialise in case the company is not able to maintain strong organic revenue growth or if Moody's adjusted EBITA margin materially declines. Rating pressure could also arise if further debt-funded acquisitions or shareholder distributions delay the company's deleveraging, as currently expected, resulting in Moody's adjusted debt/EBITDA remaining at 5.5x in the next 12-18 months or if Moody's adjusted FCF/debt remains sustainably below 5% or if liquidity weakens. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Distribution and Supply Chain Services published in February 2023. COMPANY PROFILE Headquartered in France, ETC is a leading global distributor of telecom equipment. Its product offering spans over 50 thousand stock-keeping units (SKUs) across fixed and mobile technologies as well as active and passive equipment. It generated revenue of around EUR1.4 billion in 2022 pro forma for acquisitions completed in 2022. ERAMET SA: Fitch Publishes 'BB+' LongTerm IDR, Outlook Stable ------------------------------------------------------------- Fitch Ratings has published French metals & mining group Eramet S.A.'s Long-Term Issuer Default Rating (IDR) of 'BB+' with a Stable Outlook. Fitch has also published a 'BB+' rating for Eramet's existing senior unsecured notes. The Recovery Rating is 'RR4'. Eramet's 'BB+' Long-Term IDR reflects its conservative and transparent capital allocation priorities, favourable cost positions, long reserve lives and integrated business model combining mining and processing. The rating is constrained by comparatively smaller operational scale, currently limited diversification of operations and end-markets as well as exposure to developing countries including Gabon and Senegal. Fitch forecasts EBITDA net leverage (capturing recurring dividends from associates and minority dividends paid) to rise to 1.4x due to sizeable investments in battery materials over 2023-2025 (2022: 0.4x) before moderating once these investments start contributing to earnings. The investment phase will allow for further business growth over the coming years, volume growth at existing operations and meaningful expansion into battery materials, as well as more balanced earnings contributions from different countries. This will improve the group's business profile beyond the forecast horizon. KEY RATING DRIVERS Financial Policy: Eramet's capital allocation priorities are i) to preserve its prudent balance sheet over the long term, with net debt/EBITDA (as reported by the company) below 1x on average through the cycle; ii) pursue volume growth at existing operations as well as diversify into battery materials; and iii) no defined pay-out ratio has been implemented for dividends. However, Fitch expects dividends to move with earnings and free cash flow generation, while preserving a conservative balance sheet. Exposure to Weaker Operating Environments: Operations in developing countries where Eramet operates, such as Gabon (B-/Positive, Country Ceiling: B; around 50-55% of earnings medium term), Senegal (not rated), Argentina (C, Country Ceiling: B-) and Indonesia (BBB/Stable, Country Ceiling: BBB) require an engaged dialogue with the government and other stakeholders to make sure that government policies balance maintaining a supportive investment climate, budget considerations and environmental and social development targets. Eramet's high exposure to countries with weak operating environment constrains its rating. Indonesian Country Ceiling Applied: EBITDA from operations in France, Norway and the US, together with repatriation of dividends and capital from Indonesia are sufficient to comfortably cover hard-currency gross interest expense over the forecast horizon, in accordance with Fitch's Corporates Exceeding the Country Ceiling Rating Criteria. Indonesia has the lowest Country Ceiling of 'BBB' among these countries, which is applied in this case. A Future in Batteries: Construction of the lithium project in Argentina is underway with anticipated commissioning in 2024 (Tsingshan Holding Group will hold 49.9% following scheduled capital increases). A final investment decision for the first stage of the second phase, which would ultimately triple the capacity of annual lithium production to 75 thousand tonnes, is expected by end-2023. The group is also working towards approving a high-pressure acid leach (HPAL) plant in Indonesia this year, which will allow processing of additional ore from Weda Bay into nickel and cobalt intermediates for battery value chains. The capex for this project will be sizeable and the investment is expected to be pursued together with BASF SE (49%), with BASF a major off-taker of production. Earnings Move Beyond Peak: Due to slowing global economic growth and high energy costs, Fitch forecasts earnings of EUR1.05 billion for 2023 (EBITDA plus dividends and capital repatriated from associates) compared with EUR1.7 billion in 2022. Over the medium term, Fitch expects earnings to rise to EUR1.35 billion, linked to volume growth across manganese, nickel and mineral sands as well as the lithium project in Argentina coming online (phase 1 will provide a full year earnings contribution from 2026). The HPAL plant could contribute dividends from 2027, but this is beyond its forecast horizon (meaning equity contributions to the joint venture are included in the forecast, but no earnings). Heavy Investment Phase: Total capex is expected to be around EUR850 million-EUR900 million for the next three years. Taking into account Eramet's funding contributions for the HPAL plant (at equity consolidated) as well as equity contributions from Tsingshan for the lithium investment, Fitch estimates net debt to rise to EUR1.8 billion in 2025 from EUR529 million at end-2022, after which growth capex comes down and cash flow generation strengthens. Net debt/EBITDA in Fitch's conservative rating case rises from 0.4x in 2022 to 1.4x in 2025 before moving back towards 1.0x. Favourable Cost Position: Fitch estimates that Eramet is positioned in the second quartile on average. The manganese operations are placed in the first/second quartile for business costs by CRU and make up the bulk of earnings over the medium term (60-65% in its forecast). The nickel operations are placed around the 25th percentile (Weda Bay in Indonesia) and fourth quartile (SLN in New Caledonia) for all-in sustaining costs by CRU (15% in its forecast). Existing cash cost guidance for the lithium project in Argentina is at USD3.5/kg. Even after factoring in recent cost inflation observed in the mining sector and the possibility of a slow ramp-up the asset should achieve a favourable placement on the cost curve (15% in its forecast). Weak Profitability at SLN: Nickel operations in New Caledonia have been held back by uncompetitive electricity supply and social unrest for years. While the local government authorised nickel ore exports of up to 6mt per year, rising energy costs and weather disruptions had a negative impact on earnings in 2022 (EBITDA of EUR75 million) and led to minus EUR89 million negative free cash flow at SLN. Consequently, the French government provided liquidity support in February 2023 through a EUR40 million increase in state loans. Negotiations with the New Caledonian government continue over a future competitive electricity supply. As a temporary solution, Eramet has leased an offshore oil-fired power plant to procure 180MW of capacity for its Doniambo smelter for the next three years. Management targets limiting capex and achieving neutral free cash flow until there is greater visibility of the asset's long-term business plan. DERIVATION SUMMARY Anglo American plc (BBB+/Stable) has similar (net) leverage metrics to Eramet, but stronger interest cover, liquidity and maturity profile. Anglo American has significantly larger scale (individual operations and overall group), stronger diversification across commodities and end-markets as well as country risk of operations. Endeavour Mining plc (BB/Stable) has a commitment to maintaining net debt/EBITDA below 0.5x, even in a lower gold price environment. The financial policy is more conservative than Eramet. Endeavour faces higher country risk than Eramet with around 35% of mine free cash flow coming from Burkina Faso. It has an incrementally better cost position, but shorter reserve life. This explains Eramet's higher rating. Sibanye-Stillwater Limited (BB/Stable) produces precious group metals that are required for the energy transition (mainly for catalytic converter processes) and prospectively battery materials. Sibanye also has gold assets in South Africa that sit in the fourth quartile of the global cost curve. The financial profile is comparable. Sibanye currently is net cash positive, but has an acquisitive growth strategy, particularly in the battery materials universe. As part of this, Sibanye is in the process of closing the acquisition of a 50% stake in the Rhyolite Ridge lithium-boron project in the US with anticipated annual production of 24,000 tonnes of lithium carbonate/hydroxide (approval of capital expenditure and finalising of project finance expected for this year) and executing capital investment for the Keliber project in Finland (85% stake) that will produce up to 15,000 tonnes of lithium hydroxide monohydrate with ramp up targeted for 2025. Across the portfolio, Eramet benefits from a better cost position and prospectively wider diversification of commodities (including battery grade nickel, lithium and cobalt derivatives), with mine lives being comparable or slightly longer. KEY ASSUMPTIONS - Manganese ore (realised) free on board price of USD4.5 per dry metric tonne (t) for 2023, in a range of USD4.1-4.3/t for later years; for silicomanganese and MC ferromanganese CRU prices for Europe, but applying discounts for realised prices in line with historical data. - Volumes in line with updated management guidance. - EUR850 million-EUR900 million of capex per year over 2023-2025, reducing to EUR500 million-EUR600 million for later years; equity contributions received from Tsingshan for the lithium project in Argentina and equity contributions made for the HPAL plant in Indonesia were factored in after free cash flow. - Effective tax rate in line with management guidance. - No defined pay-out ratio for dividends has been implemented. However, Fitch expects dividends to move with earnings and free cash flow generation while preserving a conservative balance sheet (first priority of capital allocation). The rating forecast indicates negative free cash flow for the next three years, so Fitch has assumed dividends for 2024 and subsequent years in line with 2022 (EUR72 million). For 2023 a dividend of EUR118 million was included. RATING SENSITIVITIES Factors That Could, Individually Or Collectively, Lead To A Positive Rating Action/Upgrade - An improvement in business profile linked to operational scale, diversification and country risk of operations Factors That Could, Individually Or Collectively, Lead To A Negative Rating Action/Downgrade - EBITDA net leverage (capturing recurring dividends from associates and minority dividends paid) above 1.5x on a sustained basis (2022: 0.35x) - EBITDA interest coverage falling below 7.5x on a sustained basis (2022: 15.8x) - Operating EBITDA margin dropping below 25% on a sustained basis linked to operational performance of assets - Deterioration of operating environment in Gabon, e.g. increased risk of Gabon tightening foreign-exchange controls or adversely changing the fiscal regime for Comilog or the wider sector, given the company's high exposure to Gabon - Ongoing/sustained negative free cash flow linked to capex and dividends or material debt-funded acquisitions - Failure to address major refinancing needs less than 12 months LIQUIDITY AND DEBT STRUCTURE Robust Liquidity: Eramet has built up around EUR1.5 billion of cash and cash equivalents (including bank deposits and 70% of other short-term investments that were reported as current financial assets in the accounts) ahead of progressing with major growth capex across the portfolio. The group has also refinanced its revolving credit facility at EUR935 million with maturity in June 2027, which remains entirely undrawn. The business is funded beyond December 2024, but Fitch expects it to raise additional financing over the next 12 months to pre-fund capital commitments in anticipation of the board sanctioning lithium expansion in Argentina and the HPAL plant in Indonesia. The bulk of liquidity is held at the corporate centre/offshore. While there are capital controls in place for Gabon, a jurisdiction with a large earnings contribution, only 35% of revenues need to be repatriated, which is less than combined operating and capital expenditure for those operations. SUMMARY OF FINANCIAL ADJUSTMENTS As of December 2022: - EUR170 million of off-balance sheet factoring was treated as debt. - EUR100 million of operating and finance leases were excluded from the total debt amount. EUR18 million of depreciation and EUR10 million of interest for leasing contracts were treated as operating expenditure, reducing EBITDA. - EUR17 million of development expenses were retained within operating EBITDA. 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 ----------- ------ -------- Eramet S.A. LT IDR BB+ Publish senior unsecured LT BB+ Publish RR4 =================== L U X E M B O U R G =================== EOS FINCO: S&P Affirms 'B' ICR on Strategic Acquisitions -------------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term issuer credit rating on global telecom materials distributor Eos Finco S.a.r.l. (ETC), and its 'B' issue rating and '3' recovery rating on its senior secured debt, including the approximately EUR650 million incremental debt under the existing TLB tranches. The stable outlook signifies that S&P expects ETC to maintain stable organic business and EBITDA margins of at least 15% in the coming years while successfully integrating acquisitions. High end-market activity and the improved operating leverage caused by its increasing scale and realization of synergies should support sound free operating cash flow (FOCF) and reduce leverage toward 6.0x over the next 12-18 months. S&P said, "Pro-forma the acquisitions, we forecast leverage of about 6.5x for ETC in 2023 (about 5.0x excluding the preferred equity certificates [PECs]), reducing below 6.0x in 2024 (4.5x excluding the PECs) on sound revenue growth. The acquisitions of Benelux and Germany focused telecom distributors Amadys and BTV will be funded with approximately EUR650 million of fungible add ons to the existing $540 million U.S.-dollar TLB-1 and EUR475 million TLB-2, respectively, alongside incremental equity and equity-like instruments. ETC's capital structure includes preference shares held by Cinven and management shareholders that we exclude from our financial analysis, since we believe there is alignment of economic interests between the common-equity financing and the non-common-equity financing, alongside EUR325 million of PECs held by minority owners that we consider to be debt-like. Although 2023 credit metrics will be affected by the timing of the acquisitions, we expect pro-forma leverage of about 6.5x in 2023, down from closer to 7.0x at year-end 2022, before reducing below 6.0x at year-end 2024. This will be due to like-for-like revenue growth of about 6.5%-8.5%, driven by good growth in the U.S.; Germany, Austria, and Switzerland (the DACH region); and the U.K., with the latter driven by continued elevated capex from telecom operators to support fiber-to-the-home (FTTH) rollouts. U.S. growth is expected to come from new client wins due to ETC's favorable market position, continued cross-selling, and government initiatives that should support ongoing FTTH deployments across the country, while we don't forecast any growth with ETC's largest customer, Altice US, with the recent scaling back of capex affecting FTTH deployment. In addition, we anticipate margin expansion of more than 100 basis points (bps), to 16.0%-16.5% by 2024, from our calculation of about 15% in 2022 based on preliminary results. This is thanks to synergy realization associated with procurement savings and back-office functions adding an additional EUR14 million of EBITDA, as well as improving operating leverage, since we expect the company to control costs and pass-through inflation, although partially offset by integration costs. "ETC's 2022 performance was ahead of our expectations thanks to strong top-line growth and margin expansion. The company outperformed our base case with leverage of 7.0x compared to our expectation of 7.6x at year-end 2022 thanks to strong top-line growth of 27% on a reported like-for-like basis and organic margin expansion of 200 bps. Most growth came via ETC's favorable market position in the U.S., benefiting from an acceleration of FTTH deployment, and management's ability to lift the margins of acquired businesses Walker, Comstar, and Comtec amid better operating leverage and margin-enhancing initiatives linked to procurement savings. FOCF excluding transaction costs, which we view as one-off, was about EUR40 million lower than we previously forecast due to EUR90 million of working capital outflows, of which half were associated with inventory buildup at Dec. 31, 2022, in anticipation of higher procurement costs during 2023. From 2023, we expect working capital requirements to normalize, resulting in outflows of about 1.5% of revenue to support organic growth, assuming no significant price increases for equipment or any supply chain disruption." The acquisitions will moderately strengthen ETC's business profile by increasing its scale, enhancing geographical diversity, and somewhat reducing customer concentration to Altice. Pro-forma the acquisitions, revenue will increase about EUR590 million, more than one-third of 2022 revenue. With the increasing scale of the business--at above EUR2 billion of pro-forma revenue--we expect enhanced purchasing conditions with suppliers, benefiting ETC standalone and the acquired companies in terms of profitability. In addition, both businesses improve ETC's geographical footprint by increasing its presence in the Benelux and DACH regions and reducing exposure to the U.S. to about 51% from close to 70% of 2022 revenue. S&P said, "Although Altice remains the largest customer at about 33% of revenue, exposing the business to customer concentration risk, we expect this to gradually decline to below 20% over the next three years. In our view, access to new markets will further support ETC's good growth trajectory amid continued elevated capex from telecom operators in countries such as Germany, Belgium, and the U.K. to support FTTH rollouts. Given the attractive market fundamentals in those countries, we anticipate further small bolt-on M&A funded by drawings under the acquisition capex facility of EUR100 million." S&P said, "We view rating headroom as constrained by tighter funds from operations (FFO) cash interest coverage, but continue to expect good FOCF, supporting a sound liquidity profile. We expect FOCF after lease payments of EUR20 million-EUR30 million in 2023, excluding the effects of transaction costs estimated at EUR55 million, before stepping up to EUR45 million-EUR55 million in 2024. The increase will come via the expanding EBITDA base, with moderate working capital outflows to support organic growth, and low capex requirements due to the asset-light nature of the business. This good cash flow, coupled with sound liquidity and no near-term maturities, mitigates temporarily tight FFO cash interest coverage over the next two years, which we forecast at moderately below 2.0x due to the higher interest rate environment. We forecast cash interest coverage will gradually improve toward 2.0x by 2025, alongside good cash flow, although weaker-than-expected operating performance and cash flow or higher-than-expected interest expenses may reduce rating headroom. "The stable outlook signifies that we expect ETC to maintain stable organic business and EBITDA margins of at least 15% in the coming years while successfully integrating acquisitions. High end-market activity and the improved operating leverage caused by its increasing scale and realization of synergies should support sound FOCF and reduce leverage toward 6.0x over the next 12-18 months." S&P could take a negative rating action if it sees: -- Weaker earnings or greater margin volatility from operational or integration issues, or increased competition, which could lead FOCF to remain negative. -- The company cannot sustain FFO cash interest coverage at about 2x. -- Debt-funded M&A or shareholder-friendly returns that result in adjusted debt to EBITDA staying above 7.0x (including PECs). S&P said, "Although we consider an upgrade unlikely in the coming 12 months, we could raise the ratings if the shareholders commit to and demonstrate a prudent financial policy, with adjusted debt to EBITDA maintained below 5x and continued solid FOCF. In addition, we would expect to see continued improvements in the margin trajectory following successful integration of acquisitions, supporting a relatively stable base, as well as customer diversification and improved scale." 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 ETC. Our assessment of the company's financial risk profile as highly leveraged reflects corporate decision-making that prioritizes the interests of the controlling owners, in line with our view of the majority of rated entities owned by private-equity sponsors. Our assessment also reflects generally finite holding periods and a focus on maximizing shareholder returns." FLINT HOLDCO: S&P Cuts Loan Ratings to 'D' on Missed Payments -------------------------------------------------------------- S&P Global Ratings lowered its issue ratings on Flint Holdco's first-lien and second-lien term loans to 'D', from 'CC' and 'C', respectively. S&P also affirmed its 'SD' (selective default) long-term issuer credit rating on the group as the company promptly services its other facilities, such as its factoring line. The lowering of the issue ratings on the first-lien and second-lien debt to 'D' reflects the company's missed interest payments due April 24, 2023. S&P said, "We expected this as it forms a part of the lock-up agreement between the company and majority lenders, announced on March 20, 2023, which contemplates a comprehensive recapitalization of the group's debt liabilities, including the reinstatement of the interest payable on April 24, 2023. According to our criteria, we view a missed interest payment as a default, irrespective of majority lender consent as described in our previous report." S&P said, "We understand Flint continues to service its other obligations in a timely manner, including its EUR40 million factoring facility. We therefore affirmed our 'SD' (selective default) long-term issuer credit rating on the group. "We also understand that the terms of the interest accrued will be capitalized on the outstanding balances at the effective restructuring date, i.e., will be ultimately paid. "Since the announcement on April 3, 2023, we understand that more than 94% of the lenders have acceded to the lock up agreement, and that the company is close to obtaining full consent in the coming weeks. A unanimous consent from all lenders could result in a faster completion of the reorganization process, potentially prior to the start of summer 2023. If full consent is not obtained, the group intends to implement the transaction through a U.K. Scheme of Arrangement. Given the significant level of lender support already obtained, we believe there is high likelihood the transaction will complete as outlined and agreed, and close in mid-summer 2023. "We anticipate we will assess the ratings on Flint and its post-restructuring facilities by reviewing the full documentation and the group's business plan to determine our credit metrics under the new capital structure." ESG credit indicators: E-2, S-2, G-4 ===================== N E T H E R L A N D S ===================== MEDIAN BV: GBP250M Bank Debt Trades at 14% Discount --------------------------------------------------- Participations in a syndicated loan under which Median BV is a borrower were trading in the secondary market around 85.9 cents-on-the-dollar during the week ended Friday, April 28, 2023, according to Bloomberg's Evaluated Pricing service data. The GBP250 million facility is a Term loan that is scheduled to mature on May 16, 2027. The amount is fully drawn and outstanding. Median B.V. is the result of the September 2021 private equity-led merger of Median (Germany) and Priory (UK), two leading providers of medical rehabilitation and mental care services in their respective countries. The Company's country of domicile is the Netherlands. VECHT RESIDENTIAL 2023-1: Moody's Assigns (P)Ba2 Rating to D Notes ------------------------------------------------------------------ Moody's Investors Service has assigned provisional ratings to the Notes to be issued by Vecht Residential 2023-1 B.V.: EUR[185.7M] Class A Mortgage Backed Floating Rate Notes due May 2058, Assigned (P)Aaa (sf) EUR[8.60M] Class B Mortgage Backed Floating Rate Notes due May 2058, Assigned (P)Aa2 (sf) EUR[6.00M] Class C Mortgage Backed Floating Rate Notes due May 2058, Assigned (P)A3 (sf) EUR[5.60M] Class D Mortgage Backed Floating Rate Notes due May 2058, Assigned (P)Ba2 (sf) EUR[4.70M] Class X1 Floating Rate Notes due May 2058, Assigned (P)Caa2 (sf) Moody's has not assigned provisional ratings to EUR[4.00M] Class Z1 Mortgage Backed Notes due May 2058, EUR[2.00M] Class Z2 Notes due May 2058 and EUR[2.00M] Class X2 Floating Rate Notes due May 2058. RATINGS RATIONALE The Notes are backed by a static pool of Dutch buy-to-let ("BTL") mortgage loans originated by Mogelijk Hypotheken B.V. ("Mogelijk"). This represents the first issuance of this originator. The total provisional portfolio as of December 31, 2022 is EUR209.9 million. The Reserve Fund is fully funded at closing, equal to 2.00% of the Notes balance of Class A at closing. The total credit enhancement for the Class A Notes at closing will be roughly 13.1% in addition to excess spread. The ratings are primarily based on the credit quality of the portfolio, the structural features of the transaction and its legal integrity. According to Moody's, the transaction benefits from various credit strengths such as a static portfolio and an amortising reserve fund fully funded at closing at 2.00% of the Notes balance of Class A. However, Moody's notes that the transaction features some credit weaknesses such as a small and unregulated originator also acting as master servicer and the focus on a small and niche market, the Dutch BTL sector. Mogelijk performs the day-to-day servicing of the portfolio, the special servicing is delegated to Vesting Finance Servicing B.V (NR) which acts also as the back-up servicer. The risk of servicing disruption is further mitigated by structural features of the transaction. These include, among others, the issuer administrator acting as a backup servicer facilitator who will assist the issuer in appointing a back-up servicer on a best effort basis upon termination of the servicing agreement. Moody's determined the portfolio lifetime expected loss of 2.50% and Aaa MILAN credit enhancement ("MILAN CE") of 14.0% related to the mortgage portfolio. The expected loss captures Moody's expectations of performance considering the current economic outlook, while the MILAN CE captures the loss Moody's expect the portfolio to suffer in the event of a severe recession scenario. Expected loss and MILAN CE 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 the ABSROM cash flow model to rate RMBS. Portfolio expected loss of 2.50%: This is higher than the average in the Dutch RMBS sector and is based on Moody's assessment of the lifetime loss expectation for the pool taking into account: (i) that little historical performance data for the originator's portfolio is available; (ii) benchmarking with comparable transactions in the Dutch BTL market and the UK BTL market; (iii) peculiarities of the Dutch BTL market, such as the relatively high likelihood that the lender will not benefit from its pledge on the rents paid by the tenants in case of borrower insolvency; and (iv) the current stable economic conditions and forecasts in The Netherlands. The MILAN CE for this pool is 14.0%: Which is in line with other RMBS transactions in the Netherlands owing to: (i) the fact that no meaningful historical performance data is available for the originator's portfolio and the Dutch BTL market; (ii) the weighted average current loan-to-market value (LTMV) of approximately 66.9%; and (iii) the high interest only (IO) loan exposure (64.9% of the loan balance are IO loans). Borrowers could be unable to refinance IO loans at maturity because of the lack of alternative lenders. Furthermore, while Mogelijk is using the market value in tenanted status in assessing the LTV upon origination, Moody's apply additional stress to the property values to account for the higher illiquidity of rented-out properties when being foreclosed and sold in rented state in a severe stress scenario. Due to the small and niche nature of the Dutch BTL market and the high tenant protection laws in The Netherlands Moody's consider a higher likelihood that properties will have to be sold with tenants occupying the property than in other BTL markets, such as UK. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in July 2022. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Factors that would lead to an upgrade or downgrade of the ratings: Factors that would lead to an upgrade of the ratings include: significantly better than expected performance of the pool together with an increase in credit enhancement of Notes. Factors that would lead to a downgrade of the ratings include: (i) increased counterparty risk leading to potential operational risk of (a) servicing or cash management interruptions and (b) the risk of increased swap linkage due to a downgrade of the swap counterparty rating; and (ii) economic conditions being worse than forecast resulting in higher arrears and losses. VECHT RESIDENTIAL 2023-1: S&P Assigns Prelim BB Rating to X1 Notes ------------------------------------------------------------------ S&P Global Ratings assigned preliminary credit ratings to Vecht Residential 2023-1 B.V.'s class A to D-Dfrd notes and uncollateralized class X1-Dfrd notes. At closing, Vecht Residential 2023-1 will also issue unrated class X2, Z1, and Z2 notes. Vecht Residential 2023-1 is a static RMBS transaction that securitizes a portfolio of EUR209.9 million buy-to-let (BTL) mortgage loans (as of Dec. 31, 2022) secured on residential properties in the Netherlands. The loans in the pool were originated by Mogelijk Hypotheken B.V. (Mogelijk) between 2020 and 2022. This is the first RMBS transaction originated by this specialist BTL lender. At closing, the issuer will use the issuance proceeds to purchase the full beneficial interest in the mortgage loans from the seller. The issuer will grant security over all its assets in the security trustee's favor. Credit enhancement for the rated notes will consist of subordination from the closing date. The transaction will feature a reserve fund to provide liquidity for the class A-Dfrd to D-Dfrd notes. There are no rating constraints in the transaction under S&P's operational risk or structured finance sovereign risk criteria. S&P assumes there are no rating constraints in the transaction under our counterparty and legal risk criteria, subject to our review of all documentation. S&P assumes the issuer to be bankruptcy remote. Preliminary Ratings CLASS PRELIM. RATING* PRELIMINARY AMOUNT (MIL. EUR)§ A AAA (sf) 185.70 B-Dfrd AA+ (sf) 8.60 C-Dfrd A+ (sf) 6.00 D-Dfrd BB (sf) 5.60 X1-Dfrd BB (sf) 4.70 X2 NR 2.00 Z1 NR 4.00 Z2 NR 2.00 *S&P's preliminary ratings address timely receipt of interest and ultimate repayment of principal on the class A notes, and the ultimate payment of interest and principal on the other rated notes. §Preliminary amount excludes pre-funding portion. NR--Not rated. =============== P O R T U G A L =============== MAGELLAN MORTGAGES 3: Moody's Ups EUR36.75MM D Notes Rating to Ba1 ------------------------------------------------------------------ Moody's Investors Service has upgraded the ratings of notes in three Portuguese RMBS transactions: Magellan Mortgages No. 3 plc, Magellan Mortgages No. 4 plc, and PELICAN MORTGAGES NO. 3. The upgrades reflect the better than expected collateral performances and increased levels of credit enhancement for the affected Notes. Issuer: Magellan Mortgages No. 3 plc EUR1413.75M Class A Notes, Upgraded to Aa2 (sf); previously on Sep 22, 2021 Upgraded to Aa3 (sf) EUR33.75M Class B Notes, Upgraded to Baa1 (sf); previously on Sep 22, 2021 Upgraded to Baa2 (sf) EUR15.75M Class C Notes, Upgraded to Baa3 (sf); previously on Sep 22, 2021 Upgraded to Ba1 (sf) EUR36.75M Class D Notes, Upgraded to Ba1 (sf); previously on Sep 22, 2021 Upgraded to Ba3 (sf) Issuer: Magellan Mortgages No. 4 plc EUR1413.75M Class A Notes, Upgraded to Aa2 (sf); previously on Sep 22, 2021 Upgraded to Aa3 (sf) EUR33.75M Class B Notes, Upgraded to A3 (sf); previously on Sep 22, 2021 Upgraded to Baa1 (sf) EUR18.75M Class C Notes, Upgraded to Baa2 (sf); previously on Sep 22, 2021 Upgraded to Baa3 (sf) EUR33.75M Class D Notes, Upgraded to Ba2 (sf); previously on Sep 22, 2021 Upgraded to Ba3 (sf) Issuer: SAGRES Sociedade de Titularizacao de Creditos (PELICAN MORTGAGES NO. 3) EUR717.375M Class A Notes, Upgraded to Aa2 (sf); previously on Aug 1, 2022 Affirmed A1 (sf) EUR14.25M Class B Notes, Upgraded to Baa2 (sf); previously on Aug 1, 2022 Affirmed Baa3 (sf) EUR12M Class C Notes, Upgraded to Ba1 (sf); previously on Aug 1, 2022 Upgraded to Ba2 (sf) EUR6.375M Class D Notes, Upgraded to Ba3 (sf); previously on Aug 1, 2022 Upgraded to B1 (sf) The maximum achievable rating is Aa2 (sf) for structured finance transactions in Portugal, driven by the corresponding local currency country ceiling of the country. RATINGS RATIONALE The rating action is prompted by decreased key collateral assumptions, namely the portfolio Expected Loss (EL) and MILAN CE assumptions due to better than expected collateral performance and an increase in credit enhancement for the affected tranches. Revision of Key Collateral Assumptions: The performance of the transactions has continued to be stable since the last rating action. Total delinquencies have slightly increased in the past year, with 90 days plus arrears of Magellan Mortgages No. 3 plc, Magellan Mortgages No. 4 plc, and PELICAN MORTGAGES NO. 3 currently standing at 0.32%, 0.18% and 0.10% of current pool balance. The net cumulative defaults currently stand at 4.55%, 2.64% and 0.0% of current pool balance respectively and remain broadly stable from a year earlier. Moody's decreased the expected loss assumption of Magellan Mortgages No. 3 plc, Magellan Mortgages No. 4 plc, and PELICAN MORTGAGES NO. 3 to 1.20%, 1.10% and 1.10% as a percentage of current pool due to the improving performance. The revised expected loss assumption corresponds to 2.45%, 1.64% and 0.4% as a percentage of original pool balance for those three transactions. Moody's also assessed loan-by-loan information as part of its detailed transaction review to determine the credit support consistent with target rating levels and the volatility of future losses. As a result, Moody's has decreased the MILAN CE assumption of Magellan Mortgages No. 3 plc to 7.5% from 8%; of Magellan Mortgages No. 4 plc to 7% from 7.5% and of PELICAN MORTGAGES NO. 3 to 6.5% from 7.0%. Increase in Available Credit Enhancement The non-amortizing reserve funds led to the increase in the credit enhancement available in Magellan Mortgages No. 3 plc and in Magellan Mortgages No. 4 plc. For instance, the credit enhancement for Class A notes in Magellan Mortgages No. 3 plc increased to 11.68% from 10.86% and the credit enhancement for Class A notes in Magellan Mortgages No. 4 plc increased to 11.34% from 10.55% since the last rating action in September 2021. For PELICAN MORTGAGES NO. 3, the reserve fund is also at its floor level which in combination with the notes' amortization resulted in an increase in credit enhancement for the affected tranches. For instance, the credit enhancement for Class A notes increased to 8.94% from 8.56% since the last rating action in August 2022. While the notes are currently paid pro rata, upon the pool factor decreasing below 10% of original pool balance, this will trigger sequential amortization. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in July 2022. The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) performance of the underlying collateral that is better than Moody's expected, (2) an increase in available credit enhancement, (3) improvements in the credit quality of the transaction counterparties and (4) a decrease in sovereign risk. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. THETIS FINANCE 2: Fitch Affirms B-sf Rating on F Notes, Outlook Pos ------------------------------------------------------------------- Fitch Ratings has affirmed six classes of Ares Lusitani - STC, S.A. / Thetis Finance No.2 (Thetis 2) notes. Fitch has also revised the Outlooks on the class B to F notes to Positive from Stable. The Outlook on the class A notes is Stable. Entity/Debt Rating Prior ----------- ------ ----- Ares Lusitani – STC, S.A. / Thetis Finance No.2 A PTLSNLOM0005 LT AA+sf Affirmed AA+sf B PTLSNMOM0004 LT A+sf Affirmed A+sf C PTLSNNOM0003 LT A-sf Affirmed A-sf D PTLSNOOM0002 LT BBB-sf Affirmed BBB-sf E PTLSNPOM0001 LT BBsf Affirmed BBsf F PTLSNQOM0000 LT B-sf Affirmed B-sf TRANSACTION SUMMARY The transaction is a three-year revolving securitisation of a portfolio of fully amortising auto loans originated in Portugal by Banco Credibom, S.A. Credibom is a specialist lender wholly owned by CA Consumer Finance (A+/Stable/F1), itself fully owned by Credit Agricole S.A. (A+/Stable/F1). KEY RATING DRIVERS Strong Asset Performance: The Positive Outlooks on the class B to F notes reflects the potential for an upgrade following the transaction's robust performance and the recalibration of intermediate stresses, following the new maximum achievable structured finance rating in Portugal (see: Fitch Upgrades 4 Portuguese ABS Transactions and Places 1 on RWP on Sovereign Upgrade). Given the transaction's performance outlook, Fitch's asset assumptions are unchanged with base case lifetime default and recovery rates of 9.8% and 50.7%, respectively, for the blended stressed portfolio. The portfolio includes loans for the acquisition of passenger cars (new and used) and motorcycles/tractors. The share of used cars has increased to 87%, higher than 84% at closing, but still below the 93% revolving period limit. Performance remains stable and in line with Fitch´s expectations, with early stage arrears contained (loans over 30 days past due stand at 0.4% of current portfolio balance) and gross cumulative defaults (GCD) at 0.4% (of initial portfolio balance including revolving period purchases) as of the latest reporting date. Revolving and Pro Rata Amortisation: The portfolio is currently in the second year of its revolving period, which will last until July 2024. After revolving, the class A to G notes have an initial sequential amortisation period until their credit enhancement ratios increase by 20% from the initial percentages, after which they will be repaid pro rata. A sequential amortisation event will occur if cumulative defaults on the portfolio exceed certain thresholds or a principal deficiency ledger (PDL) is recorded for two consecutive periods. Currently PDL and GCD stands at zero and 0.4%, respectively. Fitch views tail risk as mitigated by a mandatory switch to sequential amortisation when the portfolio balance is 10% or less of its initial balance. Liquidity Mitigates Servicing Disruption: No back-up servicer was appointed at closing. Servicing continuity risk is mitigated by the liquidity provided in the form of a dedicated cash reserve that would cover senior costs, net swap payments (if any) and interest on the class A to C notes for more than three months, a period Fitch deems sufficient to implement alternative arrangements if needed. As the class D to F notes are excluded from this liquidity arrangement, and their interest payments are deferrable even when they become the most senior tranche, their maximum achievable rating is 'A+sf' in accordance with Fitch's criteria. Rating Caps: The maximum achievable rating for this transaction is 'AA+sf', which is six notches above the sovereign Issuer Default Rating (IDR) in accordance with Fitch's Structured Finance and Covered Bonds Country Risk Rating Criteria. This is consistent with the minimum 'A- 'or 'F1' ratings for the swap counterparty that are contractually defined. The documentation establishes lower eligibility ratings for the swap counterparty if the most senior class of notes have lower ratings, which may limit upgrades for mezzanine tranches once they become the most senior notes. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade For the class A notes, a downgrade of Portugal's Long-Term IDR that could decrease the maximum achievable rating for Portuguese structured finance transactions. For all the notes, long-term asset performance deterioration such as increased delinquencies or reduced portfolio yield, which could be driven by changes in portfolio characteristics, macroeconomic conditions, business practices or the legislative landscape. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade For the class A notes, an upgrade of Portugal's Long-Term IDR that could increase the maximum achievable rating for Portuguese structured finance transactions. This is because the class A notes are rated at the maximum achievable rating, six notches above the sovereign IDR. For the class B to F notes, CE ratios increase as the transaction deleverages to fully compensate the credit losses and cash flow stresses commensurate with higher rating scenarios would result in upgrades. DATA ADEQUACY Ares Lusitani - STC, S.A. / Thetis Finance No.2 Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. 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. ============= R O M A N I A ============= VIVRE DECO: Altex Acquires Banca Transilvania's EUR4.6MM Claim -------------------------------------------------------------- Iulian Ernst at Romania-Insider.com, citing Wall-street.ro, reports that major Romanian electro-IT retailer Altex, which operates physical stores and an online store that hosts third-party sellers, purchased for an unspecified price a EUR4.6 million claim held by Banca Transilvania against insolvent online retailer of furniture and home decoration goods Vivre Deco. Altex has expanded its activity in recent years to new product categories, including furniture, DIY, automotive products, toys, beverages and sanitary products, Romania-Insider.com discloses. Vivre, known for selling affordable furniture and decorations through the online platform vivre.ro, would further diversify the range of products provided by Altex, Romania-Insider.com notes. According to Romania-Insider.com, the new creditor plans to further invest in Vivre and help it recover from the current financial situation. ========= S P A I N ========= NH HOTEL GROUP: Fitch Affirms B LongTerm IDR, Alters Outlook to Pos ------------------------------------------------------------------- Fitch Ratings has revised the Outlook on NH Hotel Group S.A.'s (NHH) Long-Term Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at 'B'. Fitch has also affirmed the senior secured long-term rating 'BB-'/'RR2'. At the same time, Fitch revised NHH's Standalone Credit Profile (SCP) to 'b+' from 'b', reflecting strong post-pandemic performance and prospects for deleveraging. Its approach to the application of Fitch's Parent-Subsidiary Linkage (PSL) Rating Criteria remains unchanged and considers the consolidated credit profile plus one notch as the rating cap. The rating of NHH reflects continued business recovery observed in 2022 and forecast for 2023, with continued improvement in occupancy level while room rates are anticipated to remain higher than pre-pandemic level, and positive free cash flow (FCF) forecast over the rating horizon. KEY RATING DRIVERS Improved SCP Assessment: Its updated view on NHH takes into account continued post-pandemic recovery of its operations, and materially improved deleveraging trajectory ahead of refinancing in 2026, with standalone credit metrics commensurate with a higher rating. NHH's IDR, however, remains constrained at one notch above the consolidated profile of Minor International (MINT), the major shareholder of NHH. PSL Criteria - Stronger Subsidiary: Fitch’s view NHH's credit profile as stronger than MINT's, and consider the latter's full effective control and ability to potentially change the board of directors of the former, although Fitch acknowledges the record of parent support during pandemic. Open effective control is only partially balanced by independent treasury at NHH. The resulting assessment of access and control as open is offset by the presence of porous legal ring-fencing in existing debt documentation that limits the shareholder's access to group cash flow and ultimately leads to a 'B' IDR for NHH. Occupancy Recovery Drives RevPAR: Under its forecast, Fitch anticipates 2023 RevPAR to grow by about 10%, while it recovered to its pre-pandemic value in 2022. This will be largely driven by an increased in occupancy and by average daily rates (ADR) that Fitch forecasts to exceed 2019 levels by about 20%. Fitch anticipates occupancy to continue to improve, with the added return of some business travel for 2023, which will be beneficial to NHH given its urban location. Fitch still assumes occupancies will be below pre-pandemic levels by about 9% in 2023, with business travel recovery continuing to lag behind leisure tourism. Its forecast does not incorporate full business travel recovery until at least 2025, and its assumptions for 2025 average occupancy are 300bp below 2019 levels. Room for Profitability Improvement: NHH showed one of the highest absorption rates among peers during the pandemic and continued to deploy efficient measures to further reduce staff and lease costs. As a result, it reached EBITDAR margin of 36.1% in 2022, which was still 200bp below 2019 due to the impact of Omicron in 1Q22. Fitch forecasts that cost optimisation measures introduced during the pandemic, along with strict cost controls in 2023 to mitigate inflation, will allow NHH to maintain EBITDAR margin at a broadly stable level in 2023, and to reach pre-pandemic profitability by 2025. Stronger Deleveraging Pace: NHH has been deleveraging recently both organically and through debt repayment, despite sizeable growth in lease payments that negatively affected the leverage ratios. EBITDAR net leverage was 5.5x at end-2022, close to Fitch's positive rating sensitivity level. Fitch forecasts further deleveraging over the medium term, with EBITDAR net leverage improving to below 5.0x by end-2025, driven primarily by EBITDAR growth and with scheduled debt repayments not fully offsetting the growth of lease equivalent debt. Capex Programme Catching Up: Although NHH is now increasingly focusing on asset-light expansion, Fitch forecasts the capex will increase compared with reduced spending during the pandemic. Its forecast assumes annual capex spend of EUR130 million-150 million for 2023-2025, at 6%-7% of revenue. This is above 3%-5% in 2021-2022, but still materially below double-digit capex intensity in 2019 and 2020. Fitch expects the capex will be internally funded, with positive, albeit modest FCF margins forecast over the four-year horizon. DERIVATION SUMMARY NHH is one of the ten largest European hotel chains. It is significantly smaller than global peers such as Accor SA (BBB-/Stable) or Meliá Hotels International by breadth of activities and number of rooms. NHH focuses on urban cities and business travelers, while Accor and Meliá are more diversified across leisure and business customers. NHH is comparable to Radisson Hospitality AB in urban positioning, although Radisson is present in a greater number of cities. NHH had an EBITDA margin of 14% in 2022 vs over 17% pre-pandemic, which is above that of close competitor Radisson but still far from that of asset-light operators such as Accor or Marriott International, Inc. NHH has been more severely affected by the pandemic due to an asset-heavy structure and the urban positioning, similar to Alpha Group SARL (CCC+). Fitch expects the company to recover its 2019 EBITDA by 2024 only, once inflationary pressure subsides. Given NHH's positioning, Fitch expects them to benefit the most from business travel return in 2023, benefiting its occupancy level. Fitch expects NHH's EBITDAR net leverage of 5.5x (adjusted for variable leases) at end-2022 to reduce under 5x over the rated horizon, just above pre-pandemic level of 4.5x. NHH's leverage is higher than peers' due to its large exposure to leases. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue increase by 6% per year on average for 2023-2025, driven by occupancy recovery and about 2% average price increase a year. Fitch still forecasts occupancy at slightly below pre-pandemic levels by 2025 - EBITDA to recover to 2019 levels by 2024, margin trending to 16% by end-2025 - About EUR530 million of aggregate capex for 2023-2026 to cover maintenance capex, additional repositioning within the portfolio, development of the current signed pipeline and some additional limited expansion - Repayment of debt maturities in 2023 - Dividend distribution in line with legal restrictions and historical policy from 2024 Recovery Assumptions: NHH's 'RR2' Recovery Rating for the senior secured notes' rating reflects the collateral EUR400 million secured notes and a EUR242 million revolving credit facility (RCF), which rank equally with each other. Collateral includes Dutch hotels as properties managed by NHH, a share pledge on a Dutch hotel, share pledges on Belgian companies owning hotels managed by NHH and finally a share pledge on NH Italy as a single legal entity operating and owning the whole Italian group. This includes both assets and operating contracts. The described collateral had a market value of EUR1,405 million at end-2021 as evaluated by a third-party appraiser. The expected distribution of recovery proceeds results in potential full recovery for senior secured creditors, including for senior secured bonds even after a conservative haircut of 45% on the collateral valuation. However, the Recovery Rating is constrained by Fitch's country-specific treatment of Recovery Ratings for Spain, which effectively caps the uplift from the IDR at two notches at 'BB-'/'RR2'. The waterfall generated recovery computation (WGRC) output percentage based on current metrics and assumptions remains capped at 90%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Improvement of the consolidated credit profile of MINT - Revision of PSL access & control assessment to 'Porous' or 'Insulated' and/or revision of PSL legal ring-fencing assessment to 'Insulated' The following developments would be considered for the assessment of NHH's SCP: - EBITDAR net leverage below 5.0x on a sustained basis - EBITDAR fixed-charge coverage sustainably above 1.8x - Continued improvement in the operating profile via EBIT margin growth towards 10% - Sustained positive FCF Factors that could, individually or collectively, lead to Outlook stabilization or a negative rating action/downgrade: - Weakening of the consolidated credit profile of MINT - Revision of PSL legal ring-fencing assessment to 'Open' The following developments would be considered for the assessment of NHH's SCP in the event of MINT displaying a stronger consolidated credit profile: - EBITDAR net leverage trending consistently above 5.5x. - EBITDAR fixed-charge coverage below 1.5x - Weakening trading performance leading to EBIT margin (excluding capital gains) trending towards 6% - Negative FCF LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: NHH's liquidity sources at end-2022 included EUR267 million of Fitch-calculated available cash, EUR242 million undrawn RCF and EUR25 million undrawn bilateral credit lines, comfortably covering upcoming debt maturities. Liquidity going forward will also be supported by forecast positive FCF in 2023-2026. NHH's ownership of unencumbered assets provides an additional source of financial flexibility in case of need. ISSUER PROFILE NHH operates as an urban hotel with a diversified portfolio in the upscale segment. The hotel portfolio comprises 350 hotels with 54,820 rooms in 30 countries in 2022, including leased/owned hotels (representing about 86% of all rooms) and managed hotels. 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 ----------- ------ -------- ----- NH Hotel Group S.A. LT IDR B Affirmed B senior secured LT BB- Affirmed RR2 BB- ============= U K R A I N E ============= CITY OF KYIV: S&P Affirms 'CCC+' Long-Term ICRs, Outlook Stable --------------------------------------------------------------- On Apr. 28, 2023, S&P Global Ratings affirmed its 'CCC+' long-term foreign and local currency issuer credit ratings on Ukraine's capital city Kyiv. The outlook remains stable. Outlook The stable outlook reflects the balance between Kyiv's high cash reserves and low debt service, and the significant uncertainty stemming from the ongoing war between Russia and Ukraine. Downside scenario S&P could lower the ratings in the next 12 months if it observed increased security risks, if Kyiv's liquidity position deteriorated significantly, or if there were indications that the city might deprioritize debt servicing in favor of meeting spending needs. Upside scenario S&P could consider raising the rating on Kyiv if it raised its T&C assessment on Ukraine, all other factors remaining unchanged. Rationale The 'CCC+' rating on Kyiv reflects our T&C assessment of Ukraine. S&P assesses Kyiv's stand-alone credit profile (SACP) as being one notch higher than its issuer credit rating. Kyiv's current liquidity position is sound, with cash reserves exceeding debt service by almost 9x in the next 12 months. The city repaid the last instalment of its only foreign-currency-denominated Eurobond in December 2022. Now Kyiv's debt is denominated solely in local currency. The city has a credit line from the State Savings Bank of Ukraine (Oschadbank) of Ukrainian hryvnia (UAH) 1.240 billion (about $34 million) maturing in 2023-2026, and three local currency bonds totaling UAH1.1 billion maturing in 2024-2026. Kyiv continues to pay debt service on these obligations. In S&P's view, Kyiv's ability to make debt-service payments remains uninterrupted for now, although it acknowledges that the situation might change quickly due to the war. According to the latest information available, the city is still honoring its debt-service obligations and has pledged to continue doing so. The rating on Kyiv is constrained by the Russia-Ukraine conflict, which brings significant uncertainties to the city's economy and financials. S&P said, "Our rating also remains constrained by the very volatile and centralized Ukrainian institutional setting for the country's local and regional governments (LRGs), the city's modest GDP per capita relative to LRGs in other countries, and very weak financial management, in our view. Our ratings are supported by the city's solid financials so far, high cash reserves, and very low debt-service needs. Kyiv's tax-supported debt is relatively low in an international context. "Ukraine's real GDP contracted by 30% in 2022, owing to a collapse of exports, consumption, and investment. Given the damage from Russia's continued missile attacks on critical infrastructure, including in the energy sector, we project Ukraine's GDP to contract by 2% in 2023, keeping the nominal GDP in U.S. dollar terms one-third below of its pre-war level. We project Kyiv's economy will follow the trajectory of the national economy, albeit as the capital, Kyiv remains Ukraine's most diversified and wealthy region. The city contributes more than 20% of national GDP and benefits from a strong labor market. Moreover, its GDP per capita is 3x above the national average. "We regard financial management as very weak. Our view is based on only emerging long-term planning and large deviations from the budget in the past. However, we expect the city to stay committed to honoring its debt obligations. We see for instance that the city's management demonstrated its commitment to not default when the Ukrainian government defaulted in August 2022." The city's administration remains fully operational despite the security challenges and managed to post very strong financial results in 2022. Kyiv's surplus after capital accounts made up 11.5% of total revenue in 2022 compared to the 3% we forecast for 2022 and the result for 2021. This was largely owing to stable tax revenue and a significant decrease in spending. S&P said, "We project the city will post a deficit after capital accounts of about 5.5% of total revenue in 2023 following the need to increase expenditure. We believe the deficit will be financed with accumulated cash reserves." S&P said, "We therefore expect that Kyiv's direct debt will remain very low through 2025. The city's direct debt consists of UAH1.1 billion in local currency bonds and the UAH1.240 billion credit line from Oschadbank. Kyiv continues to pay debt service on these obligations, and we don't anticipate any new borrowing this year. We assess the city's access to bank and capital market funding as uncertain. Also, we understand that Ukraine's capital markets and banking sector are not fully operational at the moment. "In addition to direct debt, our assessment of the city's total debt burden (tax-supported debt) includes liabilities of municipal government-related entities (GREs), which require assistance from the city's budget. In particular, we factor in all debt of GREs explicitly guaranteed by Kyiv (Kyivpastrans, Kyivmetro, GVP Energy Saving Company, and Kyivteploenergo), as well as the commercial debt of the water utility, given the ongoing support from the city's budget or strong links with the city. In 2021, Kyiv provided a new EUR140 million guarantee to its heating company, which has not yet been taken. We assume that Kyiv's contingent liabilities are low and include mostly accumulated payables at its utility and transportation companies. We include all municipal companies' debt in Kyiv's tax-supported debt." As of Jan. 1, 2023, Kyiv had about UAH10 billion (about $270 million) available in cash. S&P therefore believes the city has a solid liquidity position that covers debt service and repayment due in the next 12 months by 9x. The next 12 months' debt service of UAH960 million consists of roughly UAH660 million of coupon payments on local currency bonds and interest on the credit line, and a UAH300 million principal payment on the credit line. S&P Global Ratings notes a high degree of uncertainty about the extent, outcome, and consequences of the Russia-Ukraine war. Irrespective of the duration of military hostilities, related risks are likely to remain in place for some time. As the situation evolves, S&P will update its assumptions and estimates accordingly. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List RATINGS AFFIRMED KYIV (CITY OF) Issuer Credit Rating CCC+/Stable/-- =========================== U N I T E D K I N G D O M =========================== DOWSON 2022-2: S&P Lowers Class E Notes Rating to BB- (sf) ---------------------------------------------------------- S&P Global Ratings took various credit rating actions in Dowson 2021-1 PLC, Dowson 2021-2 PLC, Dowson 2022-1 PLC, and Dowson 2022-2 PLC. The rating actions follow S&P's review of the transactions' performance and the application of its current criteria, and reflect its assessment of the payment structure according to the transaction documents. S&P said, "We analyzed the transactions' credit risk under our updated global auto ABS criteria, which fully supersede our previous auto ABS criteria. Our standard recovery rate assumption for investment- and speculative-grade ratings, used in rating Dowson 2021-1 and Dowson 2021-2, was replaced with tiered recoveries (recovery rate base case and increasingly stressful recovery rate haircuts at higher ratings). Our rising, flat, and down stress interest rate scenarios, used in rating Dowson 2021-1 and Dowson 2021-2, were replaced by interest rate curves based on the Cox-Ingersoll-Ross framework specific to each rating category." The transactions have amortized strictly sequentially since their respective closing dates. This has resulted in increased credit enhancement for the outstanding notes, most notably for the senior and mezzanine notes, and is magnified with the passage of time since close. As of the February 2023 servicer reports, the pool factors (for non-defaulted receivables) had declined to 33.8% (Dowson 2021-1), 46.0% (Dowson 2021-2), 70.0% (Dowson 2022-1), and 81.7% (Dowson 2022-2), and the available credit enhancement for all classes of notes had risen to varying degrees as a result. The exceptions are the class F-Dfrd that are backed only by the reserve fund and the class X-Dfrd notes that are uncollateralized. The underlying collateral in these transactions comprises U.K. fully amortizing fixed-rate auto loan receivables arising under hire purchase agreements primarily for the purchase of used cars by near-prime borrowers. These borrowers may be more susceptible to greater financial pressure during the current cost of living squeeze, than prime borrowers. Cumulative gross losses to the end of February 2023 were 7.0% (Dowson 2021-1, 22 months after close), 6.2% (Dowson 2021-2, 17 months after close), 5.1% (Dowson 2022-1, 11 months after close), and 2.3% (Dowson 2022-2, six months after close). The base-case hostile termination assumptions have been adjusted to reflect the differing performance levels across the four transactions. S&P said, "The level of losses recorded on Dowson 2021-1 is lower than forecast, so we have lowered the base-case hostile termination rate to 11.5% from 13.0% at close. Gross losses in Dowson 2021-2 are tracking in line with expectations, so we have kept the base-case hostile termination rate at 11.64% (the rate at closing due to the pool consisting of loans from the called Dowson 2019 transaction). We lowered the hostile termination multiples on both Dowson 2021-1 and Dowson 2021-2 transactions to 4.00x from 4.30x at the 'AAA' rating level, bringing them in line with the multiples used at close to rate the two most recent transactions. "Dowson 2022-1 and Dowson 2022-2 only closed within the past 13 months, but the initial gross losses recorded have led us to raise the base-case hostile termination rate for both to 14.0% (from 13.0% and 12.13%, respectively). At close, the hostile termination multiple for both these transactions was 4.00x at the 'AAA' rating level. We have lowered this multiple to 3.75x at the 'AAA' rating level, with similar adjustments downward at investment-grade rating levels, effectively meaning the speculative-grade rating levels are relatively more affected by the base-case increase. "Voluntary terminations, given the differing periods of loan origination within each transaction, are in line with our expectations at closing. We have, however, lowered to the mid-point of the range from the peak of the range, the voluntary termination multiples for ratings 'BBB' and below on Dowson 2021-1 and Dowson 2021-2. This reflects the relatively high seasoning and low pool factors in these two transactions, which at the lower ratings levels reduces the voluntary termination stressed loss modeled in the condensed remaining transaction life. "At closing, a recovery rate base-case of 37.0% for all rating levels was modelled for Dowson 2022-1 and Dowson 2022-2 before a haircut was applied. Given the higher used vehicle sale prices observed in 2022, relative to 2021, we expect to see higher recovery rates on the vehicles sold in 2021. We have therefore assigned a recovery rate base-case of 40.0% for all rating levels to Dowson 2021-1 and Dowson 2021-2 (these two transactions were rated at close under a different methodology, so no comparison to at closing is available)." Lastly, as the collateral backing the notes comprises U.K. fully amortizing fixed-rate auto loan receivables arising under hire purchase agreements, the transaction is not exposed to residual value risk. S&P performed its cash flow analysis to test the effect of the amended credit assumptions and deleveraging in the structures. Dowson 2021-1 S&P said, "Our cash flow analysis indicates that the available credit enhancement for the class B, C, and D notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA', 'AA+' and 'A' rating levels, respectively. We therefore raised to 'AAA (sf)', 'AA+ (sf)', and 'A (sf)', from 'AA- (sf)', 'A (sf)', and 'BBB (sf)' our ratings on the class B, C, and D notes, respectively. "Our cash flow analysis indicates that the available credit enhancement for the class A notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA' rating level. We therefore affirmed our 'AAA (sf)' rating on the class A notes. The class E notes' cash flow simulations returned failures to pay ultimate interest at the 'BB+' rating level in the high prepayment scenarios (24% conditional prepayment rate). However, the failures were sufficiently small (maximum £3,100) that we deemed the notes to be equivalent to 'BB+' rating level. Accordingly, we affirmed our 'BB+ (sf)' rating on the class E notes. "The class F-Dfrd notes do not pass a 'B' level of credit and cash flow stress. We believe this class of notes is vulnerable to nonpayment, and depends on favorable business, financial, or economic conditions to be repaid, according to our criteria for assigning 'CCC+', CCC, 'CCC-', and 'CC' ratings. We therefore affirmed our 'CCC (sf)' rating on the class F-Dfrd notes." Dowson 2021-2 S&P said, "Our cash flow analysis indicates that the available credit enhancement for the class B, C, and D notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA', 'AA', and 'A' rating levels, respectively. We therefore raised to 'AAA (sf)', 'AA (sf)', and 'A (sf)', from 'AA (sf)', 'A (sf)', and 'A- (sf)' our ratings on the class B, C, and D notes, respectively. "Our cash flow analysis indicates that the available credit enhancement for the class A, E, and F-Dfrd notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA', 'BBB-', and 'B-' rating levels, respectively. We therefore affirmed our 'AAA (sf)', 'BBB- (sf) ', and 'B- (sf)' ratings on the class A, E, and F-Dfrd notes, respectively. "The class X-Dfrd notes do not pass a 'B' level of credit and cash flow stress. We believe this class of notes is vulnerable to nonpayment, and depends on favorable business, financial, or economic conditions to be repaid, according to our criteria for assigning 'CCC+', CCC, 'CCC-', and 'CC' ratings. We therefore affirmed our 'CCC (sf)' rating on the class X-Dfrd notes." Dowson 2022-1 S&P said, "Our cash flow analysis indicates that the increased credit enhancement for the class B, C, and D notes is sufficient to withstand the credit and cash flow stresses, including the increase in hostile termination base case, that we apply at the 'AAA', 'A+', and 'A-' rating levels, respectively. We therefore raised to 'AAA (sf)', 'A+ (sf)', and 'A- (sf)', from 'AA (sf)', 'A (sf)', and 'BBB (sf)' our ratings on the class B, C, and and D notes, respectively. "Our cash flow analysis indicates that the available credit enhancement for the class A and F-Dfrd notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA' and 'B-' rating levels, respectively. We therefore affirmed our 'AAA (sf)' and 'B- (sf)' ratings on the class A and F-Dfrd notes, respectively. "The class E notes' cash flow simulations returned failures to pay ultimate interest at the 'BB' rating level in the high prepayment scenarios (24% conditional prepayment rate). However, the failures were sufficiently small (maximum £4,900) that, when considered with the increasing credit enhancement, we viewed a lowering of the rating to be inappropriate. Accordingly, we affirmed our 'BB (sf)' rating on the class E notes." Dowson 2022-2 S&P said, "Our cash flow analysis indicates that the available credit enhancement for the class E notes is insufficient to withstand the credit and cash flow stresses that we apply at the 'BB' rating level. We therefore lowered to 'BB- (sf)' from 'BB (sf)' our rating on the class E notes. This is primarily as a result of the increased hostile termination base case and the insufficient passage of time to allow credit enhancement to increase to a level commensurate with a 'BB' rating. "Our cash flow analysis indicates that the available credit enhancement for the class A, B, C, D, and F-Dfrd notes is sufficient to withstand the credit and cash flow stresses that we apply at the 'AAA', 'AA', 'A', 'BBB+', and 'B-' rating levels, respectively. We therefore affirmed our 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB+ (sf)', and 'B- (sf)' ratings on the class A, B, C, D, and F-Dfrd notes, respectively. "The class X-Dfrd notes do not pass a 'B' level of credit and cash flow stress. We believe this class of notes is vulnerable to nonpayment, and depends on favorable business, financial, or economic conditions to be repaid, according to our criteria for assigning 'CCC+', CCC, 'CCC-', and 'CC' ratings. We therefore affirmed our 'CCC (sf)' rating on the class X-Dfrd notes. "Our credit stability analysis indicates that the maximum projected deterioration that we would expect at each rating level for one-year horizons under moderate stress conditions is in line with our criteria. "There are no rating constraints under our operational risk criteria. In addition, there are no rating constraints under our counterparty or structured finance sovereign risk criteria, and legal risks continue to be adequately mitigated, in our view." Ratings list CLASS RATING TO RATING FROM DOWSON 2021-1 PLC RATINGS RAISED B AAA (sf) AA- (sf) C AA+ (sf) A (sf) D A (sf) BBB (sf) RATINGS AFFIRMED A AAA (sf) AAA (sf) E BB+ (sf) BB+ (sf) F-Dfrd CCC (sf) CCC (sf) DOWSON 2021-2 PLC RATINGS RAISED B AAA (sf) AA (sf) C AA (sf) A (sf) D A (sf) A- (sf) RATINGS AFFIRMED A AAA (sf) AAA (sf) E BBB- (sf) BBB- (sf) F-Dfrd B- (sf) B- (sf) X-Dfrd CCC (sf) CCC (sf) DOWSON 2022-1 PLC RATINGS RAISED B AAA (sf) AA (sf) C A+ (sf) A (sf) D A- (sf) BBB (sf) RATINGS AFFIRMED A AAA (sf) AAA (sf) E BB (sf) BB (sf) F-Dfrd B- (sf) B- (sf) DOWSON 2022-2 PLC RATING LOWERED E BB- (sf) BB (sf) RATINGS AFFIRMED A AAA (sf) AAA (sf) B AA (sf) AA (sf) C A (sf) A (sf) D BBB+ (sf) BBB+ (sf) F-Dfrd B- (sf) B- (sf) X-Dfrd CCC (sf) CCC (sf) FALLEN ACORN: To Go Into Voluntary Liquidation This Week -------------------------------------------------------- Sophie Lewis at The News reports that Fallen Acorn Brewing Co, in Gosport, made the announcement on its social media page that they will be closing their doors to customers from this week due to the continual financial strain that has arisen from a number of factors. The company was established in 2016 as a result of a previous company, Oakleaf Brewing, going into administration, and the business gained a loyal following as time went on -- but they have been unable to keep up with the constant challenges, The News discloses. From export changes that came in after Brexit to the pandemic and multiple lockdowns and into the cost of living crisis and the reduction in customers, the brewery managed to overcome each hurdle, but over the last few months it has felt the pinch, The News relates. Tim Hoolahan, who has been the general manager at the brewery for three and a half years, said he is going to liquidate the company early this week but he said that the beer festival, Awakening, will continue as it is a separate entity. MARKET BIDCO: EUR1.30B Bank Debt Trades at 15% Discount ------------------------------------------------------- Participations in a syndicated loan under which Market Bidco Ltd is a borrower were trading in the secondary market around 84.6 cents-on-the-dollar during the week ended Friday, April 28, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR1.30 billion facility is a Term loan that is scheduled to mature on November 4, 2027. The amount is fully drawn and outstanding. Market Bidco Ltd was an entity formed by funds managed by private equity company Clayton, Dubilier & Rice, LLP, to acquire supermarket giant Wm Morrison Supermarkets Plc. The Company's country of domicile is the United Kingdom. MARKET BIDCO: EUR709.9M Bank Debt Trades at 15% Discount -------------------------------------------------------- Participations in a syndicated loan under which Market Bidco Ltd is a borrower were trading in the secondary market around 85.0 cents-on-the-dollar during the week ended Friday, April 28, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR709.9 million facility is a Term loan that is scheduled to mature on November 4, 2027. The amount is fully drawn and outstanding. Market Bidco Ltd was an entity formed by funds managed by private equity company Clayton, Dubilier & Rice, LLP, to acquire supermarket giant Wm Morrison Supermarkets Plc. The Company's country of domicile is the United Kingdom. UNITY BREWERY: Reopens Under New Ownership Following Liquidation ---------------------------------------------------------------- Jose Ramos at Southern Daily Echo reports that Unity Brewing has reopened just three months after going into liquidation. The Southampton brewery has been taken over by new owners, Southern Daily Echo relates. According to Southern Daily Echo, In February, founder Jimmy Hatherley said the pressures of Brexit, Covid, and the cost of living resulted in debts they were "unable to recover from". A post shared on the company's Instagram profile says: "It's been a rollercoaster of events these last few months, so let me take a moment to keep you up to date with what's happening. "To clarify, Unity Brewing Limited went into liquidation several weeks ago. "This was the business conceived, founded, and led by James Hatherley who is now slinging the best beer, wine and spirits out to us all at @goodlibationsshop. "Following the liquidation of Unity Brewing Limited, the brewery, assets and brand were purchased by two local businessmen under the new company Unity Brewery Limited. "James is not involved in the new company in any official capacity. "That said, it is fully the aim of the new ownership to continue what the original Unity brought to the south coast beer scene; fresh, balanced and above all approachable beer Southampton can be proud of!" VUE ENTERTAINMENT: EUR648.6M Bank Debt Trades at 46% Discount ------------------------------------------------------------- Participations in a syndicated loan under which Vue Entertainment International Ltd is a borrower were trading in the secondary market around 53.8 cents-on-the-dollar during the week ended Friday, April 28, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR648.6 million facility is a Term loan that is scheduled to mature on December 31, 2027. The amount is fully drawn and outstanding. Vue International, is a multinational cinema holding company based in London, England. [*] UK: Company Insolvencies in England, Wales Up 18% in Q1 2022 ---------------------------------------------------------------- David Milliken at Reuters reports that the number of companies declared insolvent in England and Wales in the first three months of 2023 was up 18% on a year earlier and remained close to the 13-year high recorded in the final quarter of 2022, government data showed on April 28. Some 5,747 companies in England and Wales were declared insolvent in the first quarter of this year compared with 5,969 in the final quarter of 2022, which was the highest number since mid 2009, the seasonally adjusted figures showed, Reuters notes. "We're seeing an increasing domino effect of insolvencies where firms fail and are unable to pay their debts, thus causing the failure of other firms to whom they owe money," Reuters quotes David Kelly, head of insolvency at accountancy firm PwC, as saying. Surging energy costs last year put pressure on many British smaller businesses, especially in hospitality, leisure and retail as households have less money to spend on non-essentials, Reuters discloses. Many firms were still carrying debts built up during closures caused by lockdowns to tackle the COVID-19 pandemic, Reuters states. Earlier this month, the International Monetary Fund forecast that Britain's economy would shrink 0.3% this year, the biggest fall it predicted for any major economy, Reuters notes. PwC, as cited by Reuters, said 98% of companies being liquidated had an annual turnover of less than GBP1 million (US$1.25 million). Looking just at the most common type of insolvency, creditors' voluntary liquidation, the number of companies going bust over the past four quarters was the highest since the series began in 1960, the government agency that released the data said, according to Reuters. Compulsory liquidations, which require a court order, have almost doubled over the past year but were still slightly lower than before the start of the pandemic, Reuters states. Measured as a proportion of companies actively trading, total insolvencies were the highest since 2014 at 0.508%, Reuters relays. ********* 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. 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