/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230607.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 Wednesday, June 7, 2023, Vol. 24, No. 114 Headlines D E N M A R K SKILL BIDCO: Fitch Assigns Final 'B' LongTerm IDR, Outlook Stable F R A N C E ELECTRICITE DE FRANCE: Moody's Cuts Subordinate Debt Rating to Ba2 ELIOR GROUP: Moody's Lowers CFR to B3, Outlook Remains Negative I R E L A N D VIRGIN MEDIA: Fitch Affirms LongTerm IDR at 'B+', Outlook Stable P O L A N D CYFROWY POLSAT: Fitch Assigns 'BB' LongTerm IDR, Outlook Stable U N I T E D K I N G D O M BLUEROCK DIAMONDS: Set to Go Into Administration EG GROUP: Moody's Affirms 'B3' CFR, Outlook Remains Stable HOPKINSONS ESTATE: Difficult Trading Conditions Spur Liquidation LONDON IRISH: May Go Out of Business, Jobs at Risk PORT DINORWIC MARINA: Financial Difficulties Prompt Administration PRESS ACQUISITIONS: Faces Threat of Being Put Into Administration TEAM PRECISION: Almost 100 Jobs Lost Following Administration X X X X X X X X [*] Veld Capital Announces Three Senior Appointments - - - - - ============= D E N M A R K ============= SKILL BIDCO: Fitch Assigns Final 'B' LongTerm IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has assigned Skill BidCo APS a final Long-Term Issuer Default Rating (IDR) of 'B' with a Stable Outlook and its EUR750 million senior secured notes 'B+' with a Recovery Rating of 'RR3'. The assignment reflects the closure of the acquisition by Skill Bidco of SGL International A/S and its affiliates (SGL) and the completion of all the regulatory approvals. Fitch forecasts EBITDA gross leverage to 2026 at around its positive rating sensitivity, while rising funding costs should lead to a deterioration of its coverage ratio towards its negative rating sensitivity, resulting in the Stable Outlook. Fitch is withdrawing Skill Bidco's expected senior secured ratings of its EUR370 million temporary bonds as they were cancelled. KEY RATING DRIVERS 1Q23 Performance as Expected: SGL's performance for 1Q23 was in line with management's expectations, benefiting from price adjustment of the freight forwarding industry, which results in a higher gross profit margin and modest working capital release during periods of decreasing rates. Management has reaffirmed its guidance for the full year on expectation of activity picking up from the summer onwards with freight rates stabilization. Fitch has conservatively maintained its forecasts with EBITDA at the lower end of management's guidance and some working capital build-up, as volumes accelerate. Unchanged Strategy: Fitch does not expect any material change in the company's strategy despite its new ownership structure. Fitch expects SGL to maintain its acquisitive attitude, targeting both smaller bolt-on acquisitions and, potentially, larger targets in regions where it is not yet fully established. Organic growth into other segments should also add diversification and grow its business. Fitch also expects SGL to opportunistically opt for standard mandates from well-established commercial relationships. Higher Funding Costs: In the current interest-rate environment, Fitch expects interest expenses to take up a significant portion of operational cash flow and partially constrain the company's growth strategy. A portion of its pre-existing debt has fixed interest rate while the recently issued EUR750 million notes are floating-rate. Despite the company's interest rate and currency hedging measures, Fitch still forecasts that higher interest rates and debt amount will drive EBITDA interest coverage towards its negative rating sensitivity of 2.3x, which is a rating constraint. Positive Performance in 2021-2022: Performance during 2021 and 2022 benefited largely from the successful integration of acquisitions, increasing mandates from existing clients and expansion into new segments. Further, increased congestion and limited capacity have allowed carriers and adjacent businesses to report record profits, including SGL, whose EBITDA rose to USD212 million in 2022 from USD45 million in 2020. Fitch forecasts a normalization in yields over the next two years, representing a downside risk for the industry as a whole. New Debt Structure: The new debt structure implies a moderate increase in gross leverage and has prevented a higher rating compared with the previous capital structure of SGLT Holding I LP (which held all the assets before Skill Bidco's acquisition). The EUR750 million senior secured notes were issued in February 2023 at Skill Bidco level, with prior-ranking debt limited to smaller working capital facilities, contemplated in the carveouts detailed in the new notes documentation. The new notes have more conservative incurrence and distribution tests than the previous notes documentation, which Fitch views as credit positive. The EUR750 million new senior secured notes proceeds were used to repay SGLT Holding's outstanding bonds and to replace the temporary bonds. Decreasing Leverage: Fitch expects SGL to continue on its deleveraging path (funds from operations (FFO) gross leverage was an average 11.0x in 2017-2020 and 3.3x in 2022), supported by more stringent note documentation. Fitch expects debt-funded acquisitions to be offset by supportive operational performance, resulting in higher EBITDA of USD220 million in 2024 (after a drop in 2023) and average EBITDA gross leverage at or below its 4.5x rating sensitivity over the rating horizon. Deleveraging relies on the successful implementation of the company's business plan and the more conservative incurrence tests being met. Niche Operator: SGL is a small but fast-growing company in the freight-forwarding market. It operates in all main modes of transport. It focuses on forwarding complex transportation projects and non-standardized goods in sectors including aid & relief, food ingredients and additives, fashion and retail, specialty automotive, and, more recently, sovereign defence, with a focus on quality of service rather than price. Its strategy reduces direct competition with larger peers, but SGL remains exposed to the highly competitive nature of the freight-forwarding sector. Portfolio Diversification: Together with diversified logistics solutions (by mode of transport and geography), SGL serves more than 25,000 customers with the 20 largest customers having an average tenure of around eight years and no client accounting for more than 3% of gross profit. In addition, SGL provides forwarding services to non-governmental organizations through its ADP division, which tends to be less cyclical than commercial segments. Asset-light Balance Sheet: SGL's business model is asset-light and capex needs are limited, which protect cash flows even with large declines in sales volumes. Its cost structure is flexible with a high share of variable costs (mainly purchases of freight capacity). Fitch views freight forwarding as less volatile than shipping with some margin resilience against economic downturns. DERIVATION SUMMARY Fitch sees SGL's debt capacity and credit metrics as being in line with that of 'B' rated peers. The credit profile is supported by the diversification of its end-customer portfolio by industry. Fitch views SGL's earnings as less volatile than that of sole carriers, such as shipping companies, but its small size constrains its debt capacity. Fitch views InPost S.A. (BB/Stable) as a broad industry peer. InPost is a niche leader with good revenue visibility and limited competition translating into high operating margins. It also has a more conservative financial structure, which explains the several-notch rating difference. KEY ASSUMPTIONS -- Ocean and air gross profit yields (gross profit per 20-foot equivalent unit (TEU) or tonne) decreasing towards 2021 levels (around USD700 per tonne for air volumes and USD400 per TEU for ocean volumes) throughout the rating horizon, with volumes increasing at a CAGR of 10% through 2026 -- Average yearly EBITDA contribution from acquisitions of USD20 million, with implied enterprise value (EV) multiple of 5.0x and an EBITDA/gross profit margin of 35% -- Wage cost increasing as a portion of gross profit towards 50% -- Additional USD200 million financing post-acquisition closing to fund new M&A -- Interest rates close to 10% at closing, decreasing towards 8% to 2026 -- Outstanding days sales and days payables at 65 and 40, respectively, throughout the rating horizon -- Capex around USD30 million per year to 2026 -- No dividend distributions or equity injections KEY RECOVERY RATING ASSUMPTIONS: Fitch's going concern (GC) EBITDA of USD138 million assumes a sharp downturn in the transportation industry. The assumed GC EBITDA is 35% lower than SGL's EBITDA in 2022. Around USD40 million of the 2022 EBITDA is related to the integration of previously acquired companies and which Fitch assumes would be written off under its recovery analysis. Fitch also assumes the remaining business activity would contract 20%. The 35% cut to 2022 EBITDA is thus a conservative assumption reflecting inherent execution risk in integrating new businesses and trading underperformance in a distressed economic environment and an increased debt burden. Fitch applies a distressed enterprise value (EV)/EBITDA multiple of 5x to calculate a GC EV, which is in line with the median for 'B' companies in the sector. The waterfall analysis output percentage on current metrics and assumptions was 65%, which is commensurate with 'RR3', providing a one-notch uplift to the senior secured bond rating from the IDR. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: -- Successful implementation of growth strategy, resulting in EBITDA gross leverage consistently below 4.5x or FFO gross leverage consistently below 5.5x -- EBITDA interest coverage consistently above 2.8x -- Consistently positive free cash flow (FCF) generation (before acquisitions) Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: -- EBITDA gross leverage consistently above 5.5x or FFO gross leverage consistently above 6.5x -- EBITDA interest coverage consistently below 2.3x -- Negative FCF through the economic cycle LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: Liquidity reached USD361 million at end-March 2023 and SGL subsequently extended its DKK750 million committed revolving credit facility until 2027. The company has no financing needs in the medium term, despite negative FCF after acquisitions. SGL is exposed to refinancing risk in 2028 when the new notes mature. ISSUER PROFILE SGL is an asset-light freight forwarder and logistics provider with a global footprint, and particularly active in the Nordics and North America. 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 ----------- ------ -------- ----- Skill BidCo ApS LT IDR B New Rating B(EXP) senior secured LT WD Withdrawn B+(EXP) senior secured LT B+ New Rating RR3 B+(EXP) =========== F R A N C E =========== ELECTRICITE DE FRANCE: Moody's Cuts Subordinate Debt Rating to Ba2 ------------------------------------------------------------------ Moody's Investors Service has affirmed the Baa1 long-term issuer rating and senior unsecured ratings of Electricite de France (EDF). It has also affirmed EDF's senior unsecured MTN program ratings at (P)Baa1. Concurrently, the Baseline Credit Assessment (BCA) has been downgraded to ba1 from baa3. Moody's has also downgraded EDF's perpetual junior subordinate debt and program ratings to Ba2 and (P)Ba2 from Ba1 and (P)Ba1 respectively. Finally, Moody's has affirmed the Baa3 long-term issuer ratings for EDF Trading Limited (EDFT), Edison S.p.A. (Edison) and EDF Energy Holdings Ltd (EDF Energy). At the same time, Moody's has affirmed the Prime-2 short-term Commercial Paper and backed Commercial Paper ratings for EDF. The outlook on EDF, EDFT, Edison and EDF Energy has been changed to stable from negative. RATINGS RATIONALE The rating action reflects Moody's view that EDF's lower BCA is offset by a high probability of support from EDF's sole shareholder upon renationalization, the Government of France (Aa2 stable). The downgrade of the BCA to ba1 reflects (1) EDF's slow progress in recovering output; (2) the high sensitivity of earnings and financial metrics to potential production shortfalls in the context of high and volatile wholesale electricity prices and the group's significant debt burden; (3) stalled progress towards new regulation supportive of credit quality, in a broader context of discussions around European market design; and (4) exposure to an ambitious new nuclear programme. Following the renationalization to be completed in early June 2023, nuclear will remain the priority of EDF's strategic roadmap. The company's focus will continue to be the recovery in nuclear output from the existing fleet after a record low of 279TWh in 2022. However, the targeted improvement in the nuclear fleet availability appears to be modest, with nuclear output expected to be between 300-330TWh in 2023 and 315-345TWh in 2024. This compares with an historical output exceeding 400TWh, the future production still being affected by corrosion repairs and extensive planned 10-year inspections. In addition to the 10-year inspections, the rating agency also notes that EDF's electricity output has been gradually declining since 2016 as a result of outages for regular refueling and maintenance operations, which have become longer. Moody's expects the trend to continue as a consequence of fleet ageing and stricter safety requirements. In addition, even if Moody's recognises that the corrosion faults were unexpected and associated repairs difficult to assess, these faults evidenced the group's earnings vulnerability to potential shortfalls in production, given the prevalence of nuclear in France's generation mix. In 2022, the decrease in nuclear output by c. 82TWh caused a EUR-29.1 billion extra cost because EDF had to buy on markets the power the group had committed to deliver. Moody's considers that given the relatively short history of French nuclear assets and associated difficulties in predicting their availability over time, the likelihood of unexpected new defaults requiring immediate fix has increased. The nuclear fleet underperformance has occurred in a context of the group's high leverage, resulting from a decade of negative free cash-flow (FCF), regardless the level of power prices. At the end of December 2022, EDF reported a EUR64.5 billion net financial debt, up EUR21.5 billion. Over 2023-25, the rating agency expects EDF to benefit from the current elevated prices, even with the continuous reduction in power prices in the French market towards more normalized levels since December 2022. However, Moody's anticipates that net debt will further grow and trend towards c. EUR70 billion, as a result of a reverse in working capital requirement and rising capex affected by the recent global inflation. Since 2020, the French government has considered and discussed with the European Commission (EC) options to replace the ARENH regime, a mechanism which forces EDF to deliver up to 150 TWh (100 TWh in 2023) at a price set up by the government (EUR42/MWh since 2012) at the alternative suppliers' option and which will terminate by the end of 2025. As part of broader discussions around a new electricity market design in Europe, France has committed to align with the current proposals, encouraging long term PPAs for the existing nuclear output, which will rule out the previously contemplated nuclear regulation. If the EC approves such a scheme, EDF will benefit in the near term from the current levels of power prices which significantly exceed nuclear production costs. However, Moody's considers that the relatively high volatility of power prices over time could have negative implications if market conditions were to become unfavourable, given the group's generation mix remaining predominantly merchant. The French government also expects EDF to further develop new nuclear power plants, in France and internationally, and to ensure the completion of the two projects under construction. EDF will gradually build, own and operate between six and fourteen European Pressurized Reactors 2 (EPR2) in France from 2024, supplemented with the group's objective to become a global nuclear reactor supplier through its subsidiary Framatome. Given the c. EUR10 billion cost overrun and 14-year delay for the most advanced EPR under construction at Flamanville (France), as well as the high risk that the second EPR currently under construction at Hinkley Point (UK) experiences a new c. 15 month schedule overrun, Moody's believes that the risks borne by EDF by committing to these projects could further strain EDF's financial flexibility. The rating affirmation reflects that EDF's credit quality remains underpinned by support from its shareholder, the Government of France, as demonstrated by the recent renationalization, the government's decision to convert into shares the Oceane bonds, as well as the subscription to a capital increase completed in April 2022, reflecting the 84% ownership at that time. EDF falls under Moody's Government-Related Issuers Methodology and its Baa1/P-2 ratings incorporate an expectation that the Government of France would continue to provide support if needed. The issuer and senior unsecured ratings incorporate a three-notch uplift from the ba1 BCA for such potential government support, capturing the credit quality of the Government of France, and Moody's assessment of there being "high" probability of government support in the event of financial distress, as well as "high" default dependence. The ba1 BCA is underpinned by (1) the scale and breadth of EDF's businesses across the energy value in France, which account for more than 75% of its EBITDA on average over 2017-21, 2022 being not representative given the material reported loss; (2) the contribution to earnings from its domestic regulated activities and renewables business, which together account for around one-third of the group's EBITDA, as a result of new connections and additional capacity driven by the energy transition plan outlined in the multi-year energy programme; and (3) its geographical diversification given its sizeable positions in Italy and in the United Kingdom. These positives are balanced by (1) EDF's fixed-cost merchant power generation in France and the UK, which exposes it to power prices volatility and unpredictability, which could be exacerbated with production shortfall, as illustrated by the large moves since October 2021; (2) a significant capital spending programme in a context of high leverage, which structurally results in negative FCF; and (3) the construction risk associated with the Flamanville new nuclear reactor in France and the Hinkley Point C (HPC) new nuclear project in the UK. The Ba2 perpetual junior subordinated debt ratings, which is one notch below EDF's ba1 BCA, reflects (1) the features of the hybrids that receive basket 'C' treatment, i.e. 50% equity or "hybrid equity credit" and 50% debt for financial leverage purposes; and (2) that the Baa1 senior unsecured rating benefits from three notches of uplift based on Moody's expectations for potential extraordinary government support. The difference in ratings takes into account Moody's view that, in a distressed scenario, support from the French State could entail distinctions between deeply subordinated notes and senior unsecured bonds. The affirmation of EDFT's Baa3 rating takes into account the criticality of EDFT's role within EDF business mix. In the context of liquidity risks exacerbated in 2022 and cash flow volatility that characterizes wholesale energy trading, EDFT's credit profile is supported by its strategic importance derived from its exclusive right to transact energy for EDF on the European wholesale energy markets. This is evidenced by the cash pooling and credit lines granted by EDF to its subsidiary and access to contingency funding from EDF in case of emergency. Moody's expects that EDF will continue to provide support to EDFT as the latter pursues its mandate to optimize the group's access to wholesale energy markets. The rating agency also notes that several governments across Europe have acted to provide direct financial support to utilities facing issues associated with their trading operations in 2022. The affirmation of Edison's Baa3 rating reflects the strong improvement in the company's credit profile, following the full exit from E&P activities and the strategic focus on gas and renewable capacity in Italy. This also takes into account the company's improved, solid balance sheet since 2016; a positive momentum in earnings growth and stronger cashflow generation on the back of increased electricity generation capacity; the optimised flexibility and appropriate indexation of gas contracts; and the long-term exposure to wholesale power prices in Italy, Government of (Baa3 negative). Moody's recognises Edison's autonomy, from a managerial, reporting, and operational perspective, even if Edison is significantly integrated with EDF, with the latter expected to continue to tightly oversee Edison's operations. The affirmation of EDF Energy's Baa3 rating reflects its close integration into the EDF group and the importance of nuclear within EDF group, as evidenced by the majority of financing needs being procured by EDF through cash and equity injection, resulting in a solid financial profile with low leverage. EDF Energy's credit quality is based upon (1) its scale and business risk profile as a major UK integrated utility; (2) it not being responsible for the funding of qualifying nuclear liabilities associated with existing plants, except costs related to unused fuel, under the agreements signed with the British government; (3) the company's recovery in its nuclear fleet's availability, supplemented with a two-year lifetime extension for two reactors (2.2 GW); (4) its exposure to volatile power prices as a result of a predominantly fixed-cost generation fleet; and (5) the risks associated with construction of the HPC new nuclear plant. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that EDF's leverage will stabilise in the next 18-24 months, as a result of favourable market conditions, on the back of elevated power prices, and that nuclear output in France will gradually recover towards 350 TWh. LIQUIDITY Liquidity remains good in the next 18 months for EDF. EDF's strong liquidity is supported by EUR29.4 billion of available cash and financial assets and a total of EUR14 billion of undrawn committed credit facilities as of December 31, 2022. These include EUR2.6 billion credit facilities maturing within one year. These sources are sufficient to cover the group's EUR4 billion debt maturities and negative FCF over the next 18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward rating pressure is unlikely in the near term, given EDF's business mix, earnings exposure to volatile power prices and nuclear fleet's availability, as well as commitment to nuclear projects on the long term. Nevertheless, upward rating pressure could develop over time if there were an improved track record in the availability of the French existing nuclear fleet, solid evidence that EDF can develop new nuclear plants on time and budget and that the French government will further support the financing of the forthcoming construction, and EDF managed to deliver at least neutral free cash flow on a sustainable basis. The ratings could be downgraded if (1) EDF's credit metrics appear likely to fall persistently below guidance for a ba1 BCA, namely funds from operations (FFO)/net debt in the mid to high teens in percentage terms on a sustainable basis; (2) a change in the group's relationship with the French government were to cause us to remove the uplift for government support; or (3) there were to be a significant downgrade of France's government rating. The ratio guidance for a Ba1 BCA might be revised if EDF's risk profile evolves. EDFT's rating could be upgraded following an upgrade to EDF's BCA. A downgrade of EDF's BCA would likely result in a corresponding downgrade of EDFT's rating. EDFT's rating could also be downgraded following financial performance issues (for example, trading losses) or an increase in external debt at EDFT. Edison's rating could be upgraded following an upgrade to EDF's BCA. A downgrade of EDF's ba1 BCA would likely result in a corresponding downgrade of its Italian subsidiary's rating. Edison's rating could also be downgraded if Edison's operating performance or capitalisation were to deteriorate significantly, namely for instance FFO/net debt being sustainably below the historical average. EDF Energy's rating could be upgraded following an upgrade to EDF's BCA. Any downgrade of EDF's ba1 BCA would likely result in a corresponding downgrade of its UK subsidiary's rating. EDF Energy's rating could also be downgraded if EDF Energy's operating performance or capitalisation were to deteriorate, or it were no longer considered financially and operationally integrated within the EDF group as a result of a change in EDF's strategy or financial policy. Any change in outlook or ratings for EDF would likely be reflected in an equivalent change for EDFT, Edison and EDF Energy. With a net installed generation capacity of 123 GW as of year-end 2022, EDF is one of Europe's largest integrated utilities, providing electricity generation, distribution and supply services. The group is organised along the following business lines: (1) France - generation and supply, where it is the dominant power generator and supplier; (2) France - regulated, which primarily includes electricity distribution through its subsidiary Enedis; (3) UK, through EDF Energy, the country's largest generator following the acquisition of British Energy; (4) Italy, where it is the third-largest generator through Edison; (5) other international, which mainly consists of Belgium, where Luminus is the second-largest electricity group in the Belgian market; (6) EDF Renouvelables (EDFR), the group's wholly owned investment vehicle for renewables, excluding hydro; and (7) other activities, which include Framatome, EDFT and energy services through Dalkia. From June 8, 2023, EDF will be fully state-owned. LIST OF AFFECTED RATINGS Issuer: Electricite de France Affirmations: Commercial Paper, Affirmed P-2 Backed Commercial Paper, Affirmed P-2 LT Issuer Rating, Affirmed Baa1 Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa1 Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa1 Senior Unsecured Regular Bond/Debenture, Affirmed Baa1 Senior Unsecured Shelf, Affirmed (P)Baa1 Backed Senior Unsecured Shelf, Affirmed (P)Baa1 Downgrades: Baseline Credit Assessment, Downgraded to ba1 from baa3 Junior Subordinated Regular Bond/Debenture, Downgraded to Ba2 from Ba1 Junior Subordinated Medium-Term Note Program, Downgraded to (P)Ba2 from (P)Ba1 Outlook Actions: Outlook, Changed To Stable From Negative Issuer: Edison S.p.A. Affirmations: LT Issuer Rating, Affirmed Baa3 Outlook Actions: Outlook, Changed To Stable From Negative Issuer: EDF Energy Holdings Ltd Affirmations: LT Issuer Rating, Affirmed Baa3 Outlook Actions: Outlook, Changed To Stable From Negative Issuer: EDF Trading Limited Affirmations: LT Issuer Rating, Affirmed Baa3 Outlook Actions: Outlook, Changed To Stable From Negative The principal methodologies used in rating Electricite de France were Unregulated Utilities and Unregulated Power Companies published in May 2017. ELIOR GROUP: Moody's Lowers CFR to B3, Outlook Remains Negative --------------------------------------------------------------- Moody's Investors Service has downgraded Elior Group S.A.'s corporate family rating to B3 from B2, the probability of default rating to B3-PD from B2-PD, and the rating on the backed senior unsecured notes due 2026 to B3 from B2. The outlook remains negative. RATINGS RATIONALE The downgrade of Elior's CFR to B3 reflects Moody's expectations that Elior's profitability, on a standalone basis, will be lower than previously forecasted in the next 12-18 months, as a consequence of the ongoing inflationary pressure that the business faces and the time lag required to fully pass-through price increases to customers. The rating agency expects that Derichebourg Multiservices (DMS), whose acquisition closed on April 18, 2023, will positively contribute to the company's profitability, albeit not fully offset the negative trends on the company's standalone business in fiscal 2023. Consequently, Moody's expects that FCF generation, on a Moody's adjusted basis and including DMS, will remain negative in fiscal year ending September 2023 (fiscal 2023) and for the fourth consecutive year, thus preventing any significant improvement in the liquidity profile. Governance was considered a key rating driver for this rating action, as a consequence of changes in guidance and the turnover in top management in the recent past. Elior disclosed a positive reported EBITA in H1 2023 (ending March) of EUR41 million and a recovery in its EBITA margin, in the same period, to 1.7% (compared to -0.7% in H1 2022 and -1.1% in fiscal 2022), thanks to ongoing price increases and operating efficiencies. However, management also commented that inflationary trends, particularly in food, are now expected to abate later than initially anticipated. Consequently, the reported EBITA margin in fiscal 2023 is now expected to end in the lower range of the previous guidance of 1.5% to 2%, despite the ongoing pass-through of inflation to customers. Moody's understands that this profitability guidance includes DMS's asset contribution. As a consequence, the rating agency now forecasts that Moody's adjusted EBITA margin, including DMS contribution, will remain well below 2% in fiscal 2023 and will only trend towards 2% in the next 12-18 months, while Moody's adjusted FCF will continue to remain negative, break even at best, in the same period. Similarly, the rating agency forecasts Moody's adjusted EBITA/ interest to remain below 1x in fiscal 2023 and to marginally improve in fiscal 2024, while Moody's adjusted debt/ EBITDA is expected to remain above 7x in fiscal 2023 and to moderately improve in fiscal 2024. The B3 CFR is nevertheless supported by the company's leading market position in contract catering, its balanced end market diversification and its steady progress in contract renegotiations, coupled with ongoing pass-through of price increases, gradually improving profitability. LIQUIDITY Moody's continues to view Elior's liquidity as weak, which reflects the rating agency's expectations of ongoing cash burn and tight covenant leeway. The company ended H1 2023 with cash and equivalents on balance sheet of EUR45 million, while the undrawn, committed credit facility amounted to EUR300 million and the remaining available receivable securitization program, expiring in October 2024, amounted to EUR19 million. Moody's expects the company to burn around EUR60 million of FCF on a Moody's adjusted basis in fiscal 2023 and thereafter to gradually improve FCF. The company will need to reimburse a total of EUR56 million in fiscal 2024, relating to the amortization of the EUR225 million French state guaranteed loan. Moody's expect the net leverage covenant to be complied with in the next 18 months, albeit with tight headroom, particularly as of March 2024 testing date. ESG CONSIDERATIONS Moody's changed its assessment of Management Credibility and Track Record to 4 from 3, reflecting the turnover in top management and guidance changes. The rating agency also changed its assessment of Board Structure and Policies to 3 from 2, reflecting the change in ownership with Elior now majority owned by Derichebourg SA. The overall exposure to governance risks (Issuer Profile Score) is unchanged at G-4. Elior's Credit Impact Score ("CIS") remains CIS-4. STRUCTURAL CONSIDERATIONS The B3 rating on the backed senior notes, at the same level as the CFR, reflects their pari passu ranking with the RCF and the term loan. The backed senior notes, the RCF and the term loan are unsecured, but benefit from upstream guarantees from material subsidiaries accounting for at least 80% of consolidated EBITDA. Moody's understand that debt proceeds were on-lent to the subsidiary guarantors, meaning that there are no limits on the guarantee of the subsidiary guarantors under the debt indenture. The backed senior notes, the RCF and the term loan are senior to the French state-guaranteed loan, which is unsecured and unguaranteed from operating companies. RATING OUTLOOK The negative outlook reflects execution risks with regards to the full pass-through of inflation to customers which could delay the return to positive FCF and weaken the liquidity profile. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Considering the negative outlook, an upgrade is unlikely in the next 12-18 months. The outlook could be stabilized if FCF generation, on a Moody's adjusted basis, turns positive, with a Moody's adjusted EBITA interest coverage of at least 1x and an adequate liquidity, all on a sustainable basis. The rating could be upgraded if Moody's adjusted EBITA margin increases well above 2% on a sustainable basis, thus leading to sustainably positive FCF generation on a Moody's adjusted basis. An upgrade would also require Moody's adjusted EBITA/ interests to increase to at least 1.5x, liquidity to remain at least adequate and Moody's adjusted debt/ EBITDA to decline below 6.5x. The rating could be downgraded if the company's operating performance and FCF further deteriorate, thus additionally affecting the liquidity, or if there is evidence of an unsustainable capital structure. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Headquartered in France, Elior is a global player in contract catering and support services. In the fiscal year ended September 2022, the company generated revenues of almost EUR4.5 billion. ============= I R E L A N D ============= VIRGIN MEDIA: Fitch Affirms LongTerm IDR at 'B+', Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Virgin Media Ireland Limited's (VMI) Long-Term Issuer Default Rating (IDR) at 'B+', with a Stable Outlook. Fitch has also affirmed its senior secured EUR900 million term loan B (TLB) at 'BB' with a Recovery Rating of 'RR2'. The IDR reflects VMI's high leverage relative to investment-grade peers', a higher proportion of TV advertising revenues and a highly competitive telecom market. VMI is more weakly positioned in mobile than peers due to its less than 5% market share of subscribers and a lack of network ownership as a mobile virtual network operator (MVNO). Rating strengths are VMI's leading cable position in Ireland, an operating profile supported by a well-converged customer base and strong EBITDA margins. The Stable Outlook reflects its expectation that leverage will be maintained by shareholder Liberty Global (LG) at around 5x net debt / EBITDA, an approach consistent with some of the group's other entities. KEY RATING DRIVERS Lower Margins Increase Leverage: Fitch expects VMI's Fitch-defined EBITDA margins to fall to 37% in 2023 from 40% in 2022. This reflects an increase in energy, IT and other system costs related to the fiber to the home (FTTH) roll-out. Global energy price increases were not fully reflected in 2022 EBITDA due to VMI's 12-month hedging strategy. This supported EBITDA margin growth in 2022 but will be a constraint in 2023 as prices are reset. With minimal cash held at VMI by LG, Fitch expects Fitch-defined net debt / EBITDA to increase to 5.2x in 2023 from 4.8x in 2022. This is slightly above VMI's leverage target of 5x but still leaves ample leverage headroom relative to its rating downgrade threshold of 5.6x. Faster Fibre Deployment Expected: VMI plans to upgrade its cable network and roll out FTTH to 1 million homes by 2025, which should better position it to take advantage of wholesale access opportunities in Ireland. VMI rolled out fiber to 220k homes during the last 12 months to March 2023 but to meet its target will need to increase the pace of its build to around 270k homes per year. Fitch expects VMI's original average capex cost per home passed of EUR200 to increase in 2023. This reflects a higher inflationary environment and its impact on the cost of materials and labour. Fitch expects capex as a share of revenue to increase in 2023-2025 to around 28%, from 25% in 2022. Network Footprint Overlap: Following its upgrade to DOCSIS3.1 in 2020, VMI's entire cable network of just under 1 million homes passed is capable of gigabit speeds. VMI has a much higher share of its subscribers on packages with speeds above 500Mbps than the national average at over 90%. The domestic incumbent eircom Holdings (Ireland) Limited has now rolled out gigabit-capable FTTH to over 1 million homes in Ireland at end-March 2023. Vodafone Group plc-backed JV SIRO has also passed around 500k homes with the same technology. With competing builds expected to continue, the footprint overlap with competitors' high-speed networks will increase. Increasing Fixed-Line Competition: VMI's fixed-line subscriber numbers have been in decline. Fitch expects VMI's competitors to target market share growth of broadband subscribers on 500Mbps and above packages given higher average revenue per user (ARPU). Fixed broadband prices offered by VMI's two largest fixed-line competitors, eircom and Vodafone, are EUR9 per month cheaper than VMI's for the highest speeds of 1Gbps. As competing builds increasingly overlap VMI's network footprint Fitch expects fixed-line competition to intensify and fixed-line subscriber numbers to continue their decline in 2023. Wholesale Deals Extend Reach: VMI announced two major wholesale access deals in 2022. It will now sell wholesale access to its fiber network to Vodafone and has extended the reach of its own marketable fiber footprint with a wholesale deal to access SIRO's network. The deal with Vodafone supports VMI's strategic decision to upgrade its network to fiber rather than DOCSIS4. Where Vodafone up-sells existing customers onto fiber over VMI's network this will add new revenue opportunities for VMI but Vodafone's price discounts relative to VMI's may risk cannibalising higher ARPU retail customers for wholesale access revenues. Well-Converged Customer Base: VMI has one of the most subscribed to pay-TV products in the Irish market, which still has a fairly high rate of pay-TV penetration at around 59% of homes. With its growing mobile business and high-speed fixed broadband, the company has a highly converged customer base and a fixed-line ARPU that is above its peers' at over EUR60. Convergence increases customer loyalty and switching costs, which help offset pressures from market price competition. Mobile Boosts Revenue Growth: In 2022, growth in mobile revenues outpaced that in other segments and more than offset a decline in the largest segment, consumer fixed-line services. VMI's market share of mobile subscribers in Ireland is currently less than 5% but has grown rapidly as it adopted a fairly aggressive pricing strategy. Fitch expects it to continue to increase market share, albeit at a slower rate after increasing prices on certain packages including sim-only. This should increase ARPUs across the mobile base and result in continued mobile revenue growth in 2023. DERIVATION SUMMARY VMI's ratings reflect its position as the leading cable operator in Ireland with one of the widest coverages of high-speed broadband homes passed in the country. It's fixed-line network is of similar size to domestic peer eircom Holdings (Ireland) Limited's (B+ / Stable) FTTH network. Fitch expects low single-digit free cash flow (FCF) margins as the company ramps up the roll-out of FTTH till 2025. Its leverage relative to that of other western European telecom operators such as Vodafone Group plc (BBB / Stable) is high and is a constraint on the ratings. VMI has lower EBITDA than other LG assets such as Telenet Group Holding N.V (BB- / Stable) and VodafoneZiggo Group B.V. (B+ / Stable). VMI also has a much smaller scale in mobile and a greater share of revenue from volatile free-to-air TV advertising. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: - Flat to mild revenue growth between 2023 and 2026, as stiff competition in the fixed-line business and traditional voice revenue declines are offset by continued growth expected in mobile, B2B and other services - Fitch-defined EBITDA margin to decline to 36% in 2023, reflecting higher energy, IT & system costs. This is followed by a gradual increase to 37% by 2026 - Capex at around 28% of sales between 2023 and 2025 as the company completes its FTTH roll-out to 1 million premises. - Excess cash flows channeled to LG KEY RECOVERY RATING ASSUMPTIONS - The recovery analysis assumes that VMI would be considered a going concern (GC) in bankruptcy and that it would be reorganised rather than liquidated - A 10% administrative claim - Its GC EBITDA estimate of EUR140 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA - An enterprise value (EV) multiple of 6x is used to calculate a post-reorganisation valuation and reflects a distressed multiple - Fitch estimates the total amount of debt claims at EUR1 billion, which includes full drawings on an available revolving credit facility (RCF) of EUR100 million. Its recovery analysis indicates a 76% recovery for the senior secured debt, resulting in an instrument rating and a Recovery Rating of 'BB' and 'RR2', respectively RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Strong and stable FCF generation and a more conservative financial policy resulting in Fitch-defined net debt/EBITDA below 4.8x on a sustained basis - Cash flow from operations less capex/gross debt consistently above 5% - No deterioration in the competitive or regulatory environment Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - Fitch-defined net debt/EBITDA above 5.6x on a sustained basis - Further intensification of competitive pressures leading to deterioration in operational performance LIQUIDITY AND DEBT STRUCTURE Ample Liquidity: All debt is long-dated with a EUR900 million term loan having a bullet maturity in 2029 and VMI has access to an undrawn EUR100 million revolving credit facility. Fitch expects low single-digit FCF margins over the next three years as the company rolls out FTTH but expect net debt to be managed by LG at around 5x EBITDA. ISSUER PROFILE VMI is the largest cable operator in Ireland with a fully converged product offering covering fixed line and mobile services. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Virgin Media Ireland Limited LT IDR B+ Affirmed B+ senior secured LT BB Affirmed RR2 BB =========== P O L A N D =========== CYFROWY POLSAT: Fitch Assigns 'BB' LongTerm IDR, Outlook Stable --------------------------------------------------------------- Fitch Ratings has assigned Cyfrowy Polsat S.A.'s (Polsat) a Long-Term Issuer Default Rating (IDR) of 'BB'. The Outlook is Stable. The rating is constrained by a competitive market environment, adverse macro conditions, and the addition to the group's business profile of two new segments - renewable energy and real estate - which results in increased leverage and an evolving business risk profile over the rating horizon. Rating strengths are the group's strong market position in Poland, with a fully converged telecom and media profile. Polsat has shown adequate access to capital, as demonstrated by the recent refinancing of its senior facility agreement (SFA). Access to capital is key to continuing funding its asset-intensive renewables and real estate investments even though Fitch currently expects a portion of capex to be financed by internally-generated cash flow from operations (CFO) between 2023 and 2026. KEY RATING DRIVERS Integrated Media, Telecoms: The rating reflects Polsat's fully integrated telecom and media profile, with strong market position in its segments of operations. It provides a wide range of complementary services, through well-established brands on the Polish market that allow for upselling and bundling products to increase average revenue per user (ARPU), which, together with customer loyalty, are at the core of the group's strategy. Mature Telecom Market: Fitch views the Polish telecom market as mature and saturated with key operators comprising incumbent Orange and three other mobile network operators, Plus, Play and T-Mobile. Competition is stiff, which has historically limited the scope of major price rises. However, as mobile and broadband prices in Poland are among the lowest in the EU, Fitch sees some room for gradual price increases, especially as customers become more prone to accepting price rises in a high inflation environment. Fitch views Polsat as firmly positioned to leverage on its diversified business profile and bundle offer, supported by strong 5G coverage. Declining EBITDA Margin in TMT: Fitch has observed a gradual decline in Polsat's TMT segment margin, predominantly attributable to pressure on operating expenditure, led by salary and energy costs in 2022. While Poland is among EU countries with the highest inflation, Polish telecoms have limited possibility to introduce inflation-linked indexation formulas in their contracts with customers. However, Fitch expects the resultant pressure on Polsat's EBITDA to ease and the trend to reverse, supported by renewable segment consolidation and a gradual ARPU increase. Renewables to Add Value: Fitch expects the consolidation of the renewables segment into the group's structure planned for July 2023 to curb energy costs that nearly doubled in 2022 due to adverse macroeconomic conditions, despite some natural hedging in place. Polsat's energy consumption (including mobile network) is to be covered with renewable sources in 2024 once some of its wind and solar farms are completed, while the remainder of produced energy is to be sold externally. Fitch deems the renewables strategy as well-considered and neutral to the group's overall rating profile, albeit with some execution risks. Successful Debt Refinancing: In May 2023 Polsat refinanced its 2024 and 2025 term loan (TL) maturities of PLN7.8 billion and revolving credit facility (RCF) with new variable-rate, sustainability-linked, senior secured facilities comprising a PLN7.3 billion TLA, a EUR506 million TLB, and a PLN1 billion RCF, maturing in April 2028. The proceeds may also be used to finance investment projects in the renewables and real estate segments. In January 2023, the group refinanced most of its bond debt with PLN2.67 billion sustainability-linked, floating-rate bonds that fall due in 2030. However, it still has PLN3 billion of debt to be repaid over 2024-2027, including amortization of a local-currency TL under the new SFA. Fitch regards both transactions as evidence of good access to debt markets. Higher Interest Cost Ahead: Bonds and SFA debt include floating rates, while only 30% of the debt notional is hedged by 2024. Fitch expects a major increase in interest payments over the rating horizon, driven by a gradually increasing debt quantum and high interest rates in Poland. This poses a downside risk to the rating profile, and adds additional pressure on free cash flow (FCF). Fitch sees interest coverage decreasing to 3.1x from 2025, which is commensurate with a 'b' rating category, although liquidity remains satisfactory. Major Developmental Capex: Fitch expects the group to invest PLN6.5 billion-PLN7 billion in renewables and real estate over the rating horizon, with renewables investments peaking in 2023 and real estate in 2025-2026. The exact timing of the real estate investments is still to be determined by the group. This removes some visibility over the evolution of cash flows. Looser Financial Policy: Fitch expects the new investments will result in an additional PLN5.2 billion of project finance and corporate debt, which will drive Fitch-defined EBITDA net leverage higher to 3.8x-4.0x over the rating horizon, from 2.9x at end- 2022. The bank documentation constrains dividend payments if the group-defined EBITDA net leverage exceeds 3.5x. Fitch expects management to prioritize new ventures over dividend payments. Fitch expects M&A activities to be conducted on an opportunistic basis, prioritizing operating fit, with possible small fibre operators acquisitions or wind/solar farms add-ons. Transition to Capex-Light in TMT: Since 2021 disposal of passive and active tower infrastructure to Cellnex, capex intensity (excluding spectrum payments) under the TMT segment has been gradually declining (to 8.6% of revenue in 2022 from 10.5% in 2019). Fitch expects a further decline thereafter. Fitch does not expect any major fibre capex from fully owned wireline subsidiary, Netia, which Fitch believes may expand its fibre footprint through M&A given a fairly fragmented market. DERIVATION SUMMARY Fitch views Polsat's fully integrated telecom and media profile as a distinguishable factor within its peer group of other single-market telecom operators in Europe. The group's diversified product portfolio can support its ARPU through offering bundles within its more-for-more strategy, despite slower price increases, due to its limited ability of introducing indexation formulas in contracts with customers on the Polish market. On the other hand, its media and advertising segment is more volatile and less profitable, which drives the group's margins below that of lower- or similarly rated peers, such as UPC Holding BV (BB-/Stable), Telenet Group Holding N.V (BB-/Stable) and VodafoneZiggo Group B.V. (B+/Stable), despite comparable revenue (UPC and Telenet). Polsat's EBITDA net leverage is significantly above that of higher-rated peers, such as Royal KPN N.V. (BBB/Stable), Telefonica Deutschland Holding AG (BBB/Stable), and NOS, S.G.P.S., S.A. (BBB/Stable). Fitch expects its leverage to increase on planned major investments into new business segments, but for it to remain below its 'BB-' rated peers'. Fitch notes, however, that adding, and developing, renewable energy and real estate segments to the group's business profile is unprecedented among European telecom companies. Fitch views renewable energy business as neutral to the rating profile of Polsat, over the longer term, although new debt poses some pressure on leverage metrics, despite expected upside to absolute EBITDA and margins. KEY ASSUMPTIONS - Revenue to increase 4% and 5.5%, respectively, in 2023 and 2024 to above PLN14 billion, driven by renewable energy addition, and 2.9% and 0.8% in 2025 and 2026, respectively - Fitch-defined EBITDA margin of 23.7% in 2023 due to high operating spending, before improving to 26%-27% on easing energy costs post-renewable energy segment consolidation - Major increase in capex (excluding spectrum payments) to 22.4% of revenue in 2023, and easing to 15.7%-19.4% in 2024-2027, driven by investments in new segments - Net leverage to peak at 4.0x at end-2023, declining to 3.6x at end-2024 and then rising to 3.8x at end-2025 and 2026 - Higher interest rates driving EBITDA interest coverage lower to 3.1x-3.4x over 2023-2027 RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Fitch-defined EBITDA net leverage below 3.3x (funds from operations (FFO) net leverage below 3.8x) on a sustained basis. However, positive rating action is unlikely over the medium term due to capex- intensive development projects in renewable energy and real estate, and a related loosening of financial policy - FCF returning to positive levels - Cash flow from operations (CFO) less capex/net debt returning to positive levels - EBITDA interest cover above 4.0x on a sustained basis Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - Fitch-defined EBITDA net leverage above 4.2x (FFO net leverage above 4.7x) on a sustained basis - EBITDA interest cover falling below 3.0x on a sustained basis - Major operational, execution, regulatory or financial risks emerging in regard to developing the renewable energy and real estate segments - Investments in renewable energy and real estate significantly exceeding expectations on capex and debt or renewable energy significantly underperforming EBITDA synergy expectations - Further inflationary pressure driving EBITDA margins lower LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: Polsat had PLN1.5 billion of cash at end-1Q23, while its RCF was fully drawn to cover PLN847 million spectrum payment made in January 2023. In May 2023 the group's previous SFA, including its drawn RCF, was fully refinanced. After its January 2023 bond and SFA refinancing, the group has maturity peaks in 2028 and 2030. It still has outstanding bond payments of PLN308 million and PLN164 million in 2026 and 2027, respectively. Also, its new PLN7.3 billion TL will be repaid in quarterly, variable instalments totaling PLN311 million in 2024, PLN621 million in 2025, PLN778 million in 2026, and PLN830 million in 2027. Negative FCF Forecast: Developing renewable energy and real estate projects will keep the group's FCF significantly negative over the rating horizon, and will largely be financed by new debt issuance (PLN5.2 billion in total as per its rating case). Increased quantum of debt, in combination with a high interest-rate environment in Poland, will put additional pressure on FCF and liquidity. 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 ----------- ------ Cyfrowy Polsat S.A. LT IDR BB New Rating =========================== U N I T E D K I N G D O M =========================== BLUEROCK DIAMONDS: Set to Go Into Administration ------------------------------------------------ Michael Susin at Dow Jones Newswires reports that BlueRock Diamonds said on June 6 that it has decided to be placed under administration as operations at the Kareevlei Diamond Mine in South Africa remain suspended. According to Dow Jones, the London-listed diamond producer said it has filed a notice of appointment of administrators in the English high court given that the group is unlikely to receive unsubordinated claims of Kareevlei, its main operating subsidiary which has been placed into voluntary business rescue as it can't pay its debt. Negotiations for the restructuring of Kareevlei are in progress, it added, Dow Jones states. The company's share trading will remain suspended from London's alternative investment market, Dow Jones notes. EG GROUP: Moody's Affirms 'B3' CFR, Outlook Remains Stable ---------------------------------------------------------- Moody's Investors Service has affirmed the B3 corporate family rating of UK-based global independent fuel forecourt retailer EG Group Limited (EG or the company) and its B3-PD probability of default rating. Concurrently, Moody's has affirmed the B3 and Caa2 ratings on EG's first and second lien term loans and backed senior secured instrument ratings issued by its subsidiaries EG Finco Limited, EG Global Finance plc., EG America LLC, EG Dutch Finco B.V. and EG Group Australia Pty Ltd. The outlook on the ratings is stable. The rating action follows the announcement made, on May 30, 2023, that ASDA (Bellis Finco PLC, B2 stable) has agreed to acquire the majority of EG's fuel forecourts operations in the UK and Ireland (UK&I) for an enterprise value of $2.8 billion, contributing around $246 million EBITDA in 2022. The proceeds from the sale, together with the $1.4 billion net proceeds from the recently completed sale and leaseback agreement in the US, will be used to reduce debt and as a result Moody's adjusted debt/ EBITDA will decrease to around 6.6x from 7.6x, as reported for 2022. Although the transaction will result in deleveraging, alleviating some of the pressure on the rating, for the B3 CFR Moody's expects the company to address its 2025 maturities in short succession of this transaction and Moody's expects this to be no later than Q3 2023. The UK&I transaction is expected to close in Q4 2023 but remains subject to regulatory approvals. RATINGS RATIONALE EG's B3 CFR continues to reflect its strong position as an independent motor-fuel forecourt operator owning multiple networks of petrol stations, convenience stores and foodservice outlets in Europe, the United States and Australia. The business has grown rapidly through a series of acquisitions to become one of the leading independent motor-fuel forecourt operators across several regions. Although the deal with ASDA significantly reduces its exposure to the UK&I, it maintains a foothold in the UK by retaining 30 sites, most notably sites which are used for innovation and it will be responsible for the rollout of emerging fuels and electric vehicle (EV) chargers across the network, and third-party locations. The sector benefits from broadly stable patterns because favourable trends in convenience shopping and foodservice largely offset gradually falling fuel demand due to increased vehicle fuel efficiency and rising electric vehicle penetration. EG's B3 CFR reflects its significant operating leverage due to the prevalence of the company owned, company operated (COCO) business model compared to other operating models. EG has a history of rapid, large and debt funded acquisitions, although the pace of external growth has much reduced over the last few years. Its credit metrics remain weak, with interest cover, as measured by Moody's expected adjusted EBIT/ interest expense, remaining in the low to mid 1.0x range post the transaction and minimal free cash flow expected to be generated over the next 12-18 months. Moody's also recognises the longer term challenge the company faces to manage the transition to alternative fuel and the investment requirements. ENVIRONMENTAL, SOCIAL & GOVERNANCE CONSIDERATIONS EG's ESG Credit Impact Score of CIS-5 indicates that the rating is lower than it would have been if ESG risk did not exist. EG's CIS-5 is driven by Moody's assessment of very high governance risk exposures including an aggressive financial strategy, weak credit metrics, and a majority private equity ownership. Governance risks are somewhat mitigated by the positive progress made over the past two years during which EG has appointed independent directors to its board, improved internal controls and published its 2020 consolidated accounts with an unqualified opinion by its new auditors since 2020. EG's high environment risk exposure is largely driven by the company's exposure to carbon transition risk through the longer-term trend away from fuel consumption towards alternative fuel, for which EG is building out its ultra-fast electric vehicle charging infrastructure. EG's high exposure to social risk relates to exposure to demographic and societal trends, in line with Moody's sector heatmap for retailers and reflects EG's exposure to structural shifts in consumer demand. LIQUIDITY EG has large debt maturities in 2025, including $5.6 billion bank term loans and $2.9 billion senior secured notes maturing, the notes are issued by EG Global Finance plc. and all the term loans are issued by EG America LLC, EG Dutch Finco B.V., EG Finco Limited and EG Group Australia Pty Ltd. Moody's expects management to announce plans on how it will address these maturities by Q3 2023. EG has a substantial freehold portfolio valued independently in excess of $6 billion, according to management. The ability of the company to make use of its large estate as an alternative source of liquidity was demonstrated by the recent sale and leaseback transaction in the US worth $1.5 billion, completed in May 2023. Cash on balance sheet and available revolving credit facilities amounted to $466 million and $393 million, respectively as at December 31, 2022 pre-transaction. Moody's understands that management intends to repay the $318 million senior secured notes due in February 2024 in full with the proceeds received from the sale and leaseback transaction. STRUCTURAL CONSIDERATIONS The B3 rating of the backed senior secured instruments is in line with the CFR and reflects the fact that they represent most of the debt in the capital structure. The relatively small second lien debt is rated Caa2, reflecting its position behind the first lien instruments in the event of a default. RATING OUTLOOK The stable outlook reflects Moody's expectation that the company will address its 2025 debt maturities in a timely manner following the sale of its UK&I operations. The outlook also reflects the expectation that the transaction will close without major regulatory headwinds and will conclude in line with the original plans. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating pressure could develop if the company is able to address its debt maturities while at the same time reducing leverage, as evidenced by Moody's adjusted gross debt to EBITDA, sustained below 6.5x, with no meaningful gap between reported and pro forma leverage, improving interest coverage, as measured by adjusted EBIT / interest expense, sustainably above 1.5x, and significant positive free cash flow generation. An upgrade would also require the company to maintain at least adequate liquidity. Negative rating pressure could develop if the company fails to address its large debt maturities by Q3 2023 and sustainably improve its debt metrics. LIST OF AFFECTED RATINGS Affirmations: Issuer: EG America LLC Senior Secured Bank Credit Facility, Affirmed B3 Issuer: EG Dutch Finco B.V. Senior Secured Bank Credit Facility, Affirmed B3 Issuer: EG Finco Limited Senior Secured Bank Credit Facility, Affirmed B3 Senior Secured Bank Credit Facility, Affirmed Caa2 Issuer: EG Global Finance plc. BACKED Senior Secured Regular Bond/Debenture, Affirmed B3 Issuer: EG Group Australia Pty Ltd BACKED Senior Secured Bank Credit Facility, Affirmed B3 Issuer: EG Group Limited Probability of Default Rating, Affirmed B3-PD LT Corporate Family Rating, Affirmed B3 Outlook Actions: Issuer: EG America LLC Outlook, Remains Stable Issuer: EG Dutch Finco B.V. Outlook, Remains Stable Issuer: EG Finco Limited Outlook, Remains Stable Issuer: EG Global Finance plc. Outlook, Remains Stable Issuer: EG Group Australia Pty Ltd Outlook, Remains Stable Issuer: EG Group Limited Outlook, Remains Stable PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Retail published in November 2021. COMPANY PROFILE EG Group is a global retailer operating petrol stations, convenience stores and foodservice outlets in the UK & Ireland, Europe, the United States and Australia. The group was created through the merger of Euro Garages and European Forecourt Retail (EFR) Group in 2016. EG has evolved through a series of acquisitions to become one of the leading independent motor-fuel forecourt operators in Europe, the US and Australia. The company announced in May 2023 it had agreed to sell its UK & Ireland operations to ASDA. Proforma for this transaction the company reported EBITDA was around $1.1 billion (excluding IFRS 16). The group is headquartered in Blackburn, England and is owned equally by funds managed by TDR Capital LLP and the two brothers who founded Euro Garages, Mohsin and Zuber Issa. HOPKINSONS ESTATE: Difficult Trading Conditions Spur Liquidation ---------------------------------------------------------------- Vicky Carr at The Stray Ferret reports that a Harrogate estate agency founded 14 years ago has gone into liquidation, blaming difficult trading conditions during the pandemic. Hopkinsons Estate Agents, a trading name of Howroyd Estates Limited, went into insolvent liquidation on Monday, June 5, according to a notice in The Gazette on June 6, The Stray Ferret relates. The Harrogate-based business was founded in 2009 and Jeremy Hopkinson had been the sole director since 2015. He has applied to continue using the trading name of Hopkinsons Estate Agents and has vowed to continue trading with his existing team, The Stray Ferret notes. Mr. Hopkinson told the Stray Ferret: "Howroyd Estates Limited has entered voluntary liquidation due to trading difficulties during the pandemic period. "A deal has been agreed to acquire the business to continue to trade as Hopkinsons Estate Agents. "There are no staff redundancies and the business will continue to offer its quality services to its existing and new clients." Holroyd Estates' most recent accounts show debts of just over GBP550,000, up from GBP162,000 in 2018, The Stray Ferret discloses. LONDON IRISH: May Go Out of Business, Jobs at Risk -------------------------------------------------- Nick Purewal at Evening Standard reports that London Irish have been thrown out of the English league system, with more than 100 players and staff losing their jobs. The Exiles ought to be gearing up to celebrate their 125th anniversary, but are now preparing instead to go out of business, Evening Standard discloses. According to Evening Standard, owner Mick Crossan failed to meet the RFU's 4:00 p.m. deadline on Tuesday, June 6, of paying the remaining 50% of club wages for May, having paid only half the Exiles' payroll last week. The Powerday founder has turned down the chance to commit to funding the Exiles for the full 2023/24 season -- and Irish have been unable to complete the long-mooted takeover by a US consortium, Evening Standard states. The group of former NFL and NBA stars that had been in talks to buy Irish for six months have failed all along to provide the RFU with any substantive information on the composition of their consortium and the source of funding, Evening Standard notes. So now despite repeated assurances that "institutional funding" would be forthcoming, the Exiles takeover discussions are at an end -- and a third proud Premiership club will go bust in one solitary season, according to Evening Standard. PORT DINORWIC MARINA: Financial Difficulties Prompt Administration ------------------------------------------------------------------ Lauren Phillips at BusinessLive reports that a marina in north Wales, which is part of a network of marinas owned by Cardiff-based Marine & Property Group, has gone into administration. According to BusinessLive, Simon Monks, Nicola Clark, and Colin Haig, of accountancy firm Azets, have been appointed joint administrators of Port Dinorwic Marina Limited. Port Dinorwic Marina Limited dates back to 1763 and has been providing berthing and marine services at the picturesque Grade II listed marina at Y Felinheli for many years. It has 180 berths offering a year-round cruising of the nearby Menai Strait, which separates Anglesey with mainland Wales. However, the marina has experienced financial difficulties in recent months, administrators said, with the operations not reaching their potential during ongoing economic and financial uncertainty since the beginning of this year, BusinessLive relates. In January, there were reports of staff not being paid at the marina with many employees claiming this had been an ongoing problem since March 2022, BusinessLive recounts. According to Companies House, accounts made up to the year ending December 31, 2021 for Port Dinorwic Marina show the business filed a turnover of GBP504,966 and a gross profit of GBP331,307, BusinessLive discloses. The joint administrators said they will continue to trade Port Dinorwic Marina while completing a rapid assessment of marina operations, BusinessLive notes. "Port Dinorwic Marina Limited has been experiencing significant financial difficulties in recent months, to the extent a viable turnaround could not be achieved outside of an administration process, despite the best efforts of the board," BusinessLive quotes Simon Monks, restructuring director with Azets and joint administrator, as saying. "We will immediately begin the process of understanding the underlying issues and finding a sustainable solution, with a view to achieving the very best outcome for staff, creditors and the local community. "In the meantime, the continued cooperation of stakeholders is appreciated." PRESS ACQUISITIONS: Faces Threat of Being Put Into Administration ----------------------------------------------------------------- Mark Sweney at The Guardian reports that the future ownership of the Daily and Sunday Telegraph has once again been thrust into the spotlight, after it emerged that the newspaper group's parent company faces the threat of being put into administration by lenders. Lloyds Banking Group has threatened to put Press Acquisitions, the company controlled by the Barclay family that owns the newspapers' parent company, Telegraph Media Group (TMG), into administration after a breakdown in talks over loans the business has racked up over the years, The Guardian relates. If the two sides do not come back to the negotiation table to hammer out a new deal over about GBP65 million in loans, then Lloyds is prepared to call in a restructuring advisory group and appoint insolvency practitioners "within days", The Guardian relays, citing the Times. According to The Guardian, one source said that TMG is in "good financial shape" and cautioned that trouble with one of the Barclay family's holding companies did not mean that the newspapers will once again be up for sale. "The loans in question are related to the family's overarching ownership structure of the family's media assets," The Guardian quotes a spokesperson for the Barclay brothers as saying. "They do not, in any way, affect the operations or financial stability of TMG. "The businesses within our portfolio continue to trade strongly, are run by independent management teams, are well capitalised with minimal debt and strong liquidity. They have no liability for any holding company liabilities, continue to operate as normal and are unaffected by issues in the holding company structure above them." TMG boosted profits to GBP29.6 million last year and recently returned to acquisition mode, buying the Chelsea Magazine Company, the publisher of titles including the English Home and Classic Boat in March, The Guardian states. "Speculation about the business entering administration is unfounded and irresponsible," said the spokesperson. TEAM PRECISION: Almost 100 Jobs Lost Following Administration ------------------------------------------------------------- Elizabeth Birt at South Wales Guardian reports that almost 100 jobs have now been lost after an Amman Valley company went into administration. TEAM Precision Pipe Assemblies Limited went into administration on March 1 due to financial difficulties, and administration duties were taken on by EY-Parthenon, South Wales Guardian relates. When Lucy Winterborne and Dan Hurd of EY-Parthenon's turnaround and restructuring strategy team were appointed as joint administrators, 16 of the roughly 170 jobs at the business were lost, South Wales Guardian recounts. In recent days, an additional 81 people have also lost their jobs at the company, which manufactures pipes and assemblies for air conditioning and HVAC (heating, ventilation and air conditioning) units, primarily used in the automotive sector, South Wales Guardian discloses. This leaves 48 employees left at the business, which is continuing to trade, South Wales Guardian notes. According to South Wales Guardian, a statement from the administrators said: "The administrators are continuing to explore options for the sale of the business and are in discussions with a number of interested parties. "However, regrettably, due to the current financial position of the company, it was necessary to make an additional 81 employees redundant with effect from May 31, 2023. "The company is continuing to trade, and 48 employees have been retained to operate the business. "The administrators are liaising with other organisations to provide support to the impacted employees." =============== X X X X X X X X =============== [*] Veld Capital Announces Three Senior Appointments ---------------------------------------------------- Veld Capital, a leading European private credit specialist investor, on June 5 announced the promotions of Konstantin Karchinov and Sebastien Wigdo to Partner, as well as the appointment of Richard Kirkby to Chief Financial Officer ("CFO"), further bolstering its dedicated and highly experienced senior management team. These appointments follow the carve-out of AnaCap Financial Partner's successful credit business, including all of its legacy funds, to form Veld Capital at the end of last year, aligning ownership, management and strategy for the long term. The establishment of Veld Capital as an independent business marks the start of an exciting new chapter, presenting the most enticing investment backdrop in over a decade. Mr. Karchinov joined Veld Capital (*as AnaCap Credit) in 2009 and previously acted as Managing Director, with senior oversight and responsibility for deal origination and execution of credit investments. Prior to AnaCap Credit, Konstantin worked at J.P. Morgan, where he was a part of the Principal Investments team in New York and later London, focusing on whole loans portfolios, asset-backed lending as well as servicing and origination platforms. Mr. Wigdo joined Veld Capital (*as AnaCap Credit) in June 2019, and previously acted as Managing Director, with senior oversight and responsibility for deal origination and execution of real estate-backed investments. Prior to joining Veld, Mr. Wigdo worked at King Street Capital for 6 years, where he was part of the Investment team in London, and at Deutsche Bank for 5 years, initially within the M&A team in Paris and later in Acquisition Finance in London. Mr. Kirkby joined Veld Capital from CVC Credit Partners where he had been Head of Fund Accounting, having previously worked in risk management at Davidson Kempner European Partners. He will take responsibility for finance across Veld Capital's dedicated platform, including all funds and management entities. Veld Capital, which has successfully raised over EUR2.7 billion since inception of the credit strategy in 2009, combines an opportunistic, mid-market focus with localised origination, underwriting and asset management expertise. This is supported by a dedicated and highly developed Pan-European platform, with 55 full-time professionals across its Investment, Asset Solutions and Operations teams based across 6 offices in London, Madrid, Milan, Lisbon, Luxembourg and Mumbai. Justin Sulger, Managing Partner at Veld, commented: "I am delighted to underline the significant contributions to date of both Sebastien and Konstantin, who have consistently performed to exceptional standards and delivered strong results for our business, in joining me as Partners at Veld Capital. We are also very excited to bring Richard into the business as CFO, as we begin this exciting new chapter. We look forward to continuing to deliver outstanding returns to our investors by leveraging an established Pan-European platform developed over almost 13 years and maintaining an agile approach to capturing exceptional opportunities in an increasingly dislocated market. 2023 promises to be an exciting year for Veld Capital, particularly as we look to launch our next flagship Credit Opportunities fund." ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *