/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230615.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 Thursday, June 15, 2023, Vol. 24, No. 120 Headlines C R O A T I A [*] CROATIA: Insolvent Companies Expected to Rise by 10% in 2023 F R A N C E CONCERT'O: Creditors Urged to Vote Against Proposed Restructuring G R E E C E DANAOS CORP: S&P Raises ICR to 'BB+', Outlook Stable I R E L A N D BLACKROCK EUROPEAN XIV: S&P Assigns B- Rating on Cl. F Notes I T A L Y TELECOM ITALIA: KKR Offers to Raise Bid for Landline Grid S P A I N FONCAIXA FTGENCAT 5: Moody's Affirms C Rating on EUR26.5MM D Notes U N I T E D K I N G D O M BRITISH TELECOMMUNICATIONS: Moody's Rates New Hybrid Notes 'Ba1' CINEWORLD: To File for Administration as Part of Restructuring INEOS ENTERPRISES: Moody's Rates New EUR650MM Secured Loan 'Ba3' MB AEROSPACE II: Moody's Raises CFR to Caa1, On Further Review RAWDON ASSET: Director Gets 7-Year Sentence for Fraud [*] UK: Scotland Reports Biggest Rise in Business Insolvencies - - - - - ============= C R O A T I A ============= [*] CROATIA: Insolvent Companies Expected to Rise by 10% in 2023 ---------------------------------------------------------------- Annie Tsoneva at SeeNews reports that Austrian credit insurance company Acredia and international trade credit insurer Allianz Trade expect that the number of insolvent companies in Croatia will rise by around 10% to some 6,000 this year, Acredia said on June 13. "We see insolvency increasing particularly in construction and retail. Problems of the supply chains have been resolved to some extent and inflation is gradually easing, but the lack of workforce still persists," SeeNews quotes Acredia board member Michael Kolb as saying in a press release. High energy prices and tight financial market are other main reasons for concern for Croatian companies, he added, SeeNews notes. The number of insolvent companies in Croatia rose 9.8% last year, SeeNews relays, citing data from the country's statistical office. In the first quarter of this year alone, 1,428 companies filed for bankruptcy in the Adriatic country, SeeNews discloses. Acredia said on a global level, following an increase of 17% in the number of insolvent companies last year, this year their number is expected to rise by 21%, SeeNews relates. =========== F R A N C E =========== CONCERT'O: Creditors Urged to Vote Against Proposed Restructuring ----------------------------------------------------------------- The Support Club, comprised of investors with combined AUM of over $62 billion and holding EUR497 million of Orpea's unsecured claims, urge other creditors to vote against the proposed restructuring and stealth nationalization of France's largest health care provider on June 16. They argue the proposal tramples on EUR1.9 billion of unsecured creditors who are not supporting the plan, arbitrarily favors and enriches the French State's investment vehicle Caisse des depots et consignations (the CDC) and certain (primarily French) creditors over most others and threatens France's sustainability for foreign investments. Instead, they call on Orpea to engage with the Support Club and other stakeholders, and to consider an alternative restructuring proposal by Concert'O, which has been ignored by Orpea and its favored creditors to date. Concert'O's proposal delivers better value to stakeholders, equivalent to a 35% day-1 recovery on unsecured creditors' claims over CDC's proposal and offers all shareholders the chance to participate in Orpea's future value creation. In the event the creditor classes don't vote in favor of the plan, the Support Club anticipates the French state will pursue a cross class cram down via the Board of Orpea, a group of French banks, and the CDC. This would force all creditors to give economics in Orpea to the CDC at a significant undervaluation (take a haircut). This should not be sanctioned without the consent of all classes and the group argues it would breach at least two French laws. Firstly, nationalization has to follow due process to maximize the value of the company; Concert'O and the Support Club have been willing to put in more euros for less equity, but their proposal has been ignored by Orpea's Board. Secondly, other creditors, under pre-emption rights, should have the opportunity -- enshrined in French law -- to subscribe to any equitization, which so far they have been denied. In the case of a cross-class cram down, the Support Club argues it and the other unsecured creditors should be allowed to subscribe to the second capital increase. Orpea's unsecured creditors are being made three times the victim in this case. First, Orpea was operationally and financially mis-managed leading to a financial restructuring in the summer of 2022. Secondly, in the 2022 restructuring, the Company did not even consult its unsecured creditors and instead favored a group of overwhelmingly French banks to their detriment. Now, for the third time, unsecured creditors are being treated unfairly. From the very beginning and throughout the process, the Board of Orpea has issued misleading statements on the progress of, and support for, the restructuring. Most concerning of which, the Board claimed to have reached an agreement on the restructuring with 'about 50%' of the unsecured creditors of Orpea, when this cannot have been the case. Members of the Support Club are currently taking legal steps before the French and German Courts to challenge the two-step actions of Orpea to give preferred status to a group of secured creditors (French banks) and then to unfairly sweeten the deal for some but not all unsecured creditors. They hold a blocking position in the convertible bonds and are also seeking to vote down the proposed restructuring through the French safeguard process. Without broader resistance by creditors and shareholders, the Support Club is concerned that unfavored creditors will be crammed-down and deprived of rightful value, which will instead accrue to French creditors and the CDC, which will take the company by stealth. The Support Club says: "The flagrant disregard and refusal for months to engage on any alternative restructuring proposal, particularly one which is more favorable to all Orpea's stakeholders, and the unwillingness of Orpea's Board to consider it, forces one to question France's desire to be seen as a suitable and safe destination for foreign investment. France has recently enacted a new bankruptcy law which is meant to implement a European directive aimed at encouraging cross-border investments by reducing inconsistencies between insolvency rules across the region. The Orpea restructuring plan sets a terrible precedent for unsecured creditor treatment as the first major case under the new law. We do not want to see France go in the same direction as other nation states which have egregiously ignored creditor rights. Following Brexit, Europe is supposed to be open for business, but this attempt at stealth nationalization of a privately owned and financed care provider, which was and remains a viable profitable business, gives a contrary message. "The care home sector will require a huge amount of private investment and debt financing in the years ahead to support an aging population in France and Europe, and the Board and CDC's attempts to force a cross-class cram down are harmful to investor confidence. "We strongly urge all creditors to vote against the restructuring cooked up by the French-state backed investor CDC and the Board of Orpea on June 16. Furthermore, we are pursuing legal options to litigate the matter." About Support Club The Support Club is a group of funds managed by Fortress Investment Group, Kite Lake Capital, Kyma Capital, LMR Partners and Whitebox Advisors who are unsecured creditors of Orpea SA (a French healthcare provider), representing EUR497 million of Orpea's unsecured claims and managing over $62 billion in AUM. Support Club's financial advisor is Gleacher Shacklock LLP, and French legal advice is provided by Lantourne & Associes. =========== G R E E C E =========== DANAOS CORP: S&P Raises ICR to 'BB+', Outlook Stable ---------------------------------------------------- S&P Global Ratings raised its long-term issuer credit and issue ratings on Marshall Islands-registered containership owner and charterer Danaos Corp. and its unsecured notes to 'BB+' from 'BB'. The recovery rating remains 3, indicating meaningful recovery in the event of default (rounded estimate 65%). The stable outlook reflects that Danaos' adjusted FFO to debt ratio will remain above 50% due to its medium-term time charter (T/C) profile and prudent financial policy. S&P said, "The correction in charter rates has been faster and steeper than we expected, but we still think average T/C rates will remain profitable. Global container shipping boomed during the second half of 2020, throughout 2021, and into the first half of 2022, with tonnage providers (such as Danaos) and container liners posting record results. Then consumer durables saw a dip in demand, maritime ports were less congested, and in September-October 2022, container shipping rates crashed after a year and a half of unprecedented highs. The Clarksons Average Containership Earnings index stood at around $26,400 per day on June 2, 2023, down from its average of $85,700 per day in the first half of 2022 and $50,800 per day in 2021, but still above its pre-pandemic average of $13,700 in 2019. We believe rates will remain under pressure in 2023 and 2024 given the hefty new vessel deliveries, in addition to growing uncertainty about freight volumes. Accelerating containership supply growth on the back of the currently sizable orderbook (accounting for close to 30% of the total global fleet compared with an all-time low of 8% in October 2020, according to Clarkson Research) will likely surpass demand growth in the coming quarters. That said, we believe container liners (Danaos' customers) will implement capacity containing measures and manage excess supply with tested tools such as blank sailings, slow steaming, rerouting, swift capacity reallocation, and perhaps potential deferral of new vessel deliveries. Accordingly, in our base case we assume that average T/C rates over 2023-2025 will ultimately stabilize at profitable levels. "We anticipate Danaos will likely repeat its strong cash flow performance in 2023, despite the normalizing charter rates. We expect Danaos to report another strong performance in 2023, although softer than its record-high adjusted EBITDA of about $770 million. Our base case includes 2023 EBITDA of up to $705 million (compared with an adjusted average EBITDA of about $315 million per year over 2017-2020), as we think the company will continue to benefit from the benign charter rate environment that the shipping industry witnessed over 2021-2022. This is because Danaos locked in multi-year, noncancellable charter contracts at favorable fixed rates with global leading liner companies. However, we believe this level of EBITDA is not sustainable over the medium term, as the charter contracts will gradually be up for renewal at likely lower rates than in the current agreements. In May 2023, Danaos had an average remaining charter duration of 3.2 years, and its contracted revenue backlog was $2.3 billion. Its contracted vessel operating days coverage remains high at 98% for 2023, 84% for 2024, and 51% for 2025. This provides a certain amount of earnings visibility for the next couple of years and partly insulates the company from the industry's above-average underlying volatility, assuming its customers deliver on their commitments, which is our base case." Strong operating results and modest debt levels will help Danaos maintain its FFO to debt ratio of at least 50%. Danaos' strong cash flow generation and asset disposals in 2022, including vessel sales of about $130 million and the disposal of its stake in container liner ZIM for about $247 million, allowed the company to materially reduce its debt. This enhanced Danaos' financial flexibility and headroom under its credit metrics ahead of EBITDA normalization from the peak level in 2022-2023. Danaos was able to more than halve its debt to about $500 million reported at the end of 2022 from over $1.3 billion in 2021. At the same time, its discretionary spending, such as shareholder remuneration, was modest--$61 million paid in dividends and $30 million in share repurchases. S&P said, "We understand this was in line with the company's general capital allocation policy with management prioritizing debt reduction and liquidity build up, ahead of investing into fleet and shareholder returns, which we view positively. The debt reduction ahead of our expectations, combined with strong EBITDA, led to a solid FFO to debt ratio of over 130% for 2022. We expect this ratio to further improve in 2023 as Danaos prepaid its finance leases in April 2023 and as the remaining debt amortizes and reaches over 150% before it will start trending down, as Danaos will likely incur new debt to make final payments for new vessels on order in 2024." Danaos' ability and willingness to preserve ample liquidity as protection against operational adversities remains a key consideration in our view of its credit profile. Danaos has preserved a solid cash on hand position (about $360 million at end-March 2023 and $268 million at year-end 2022) even after material debt redemption and some shareholder returns in 2022. In addition, it secured a $383 million revolving credit facility, currently undrawn and available until 2027. S&P believes this points to management's willingness to secure liquidity protection as more vessels come for charter renewals. Despite some positive structural changes in the wider industry since the last downturn--such as more disciplined capacity management -- the container shipping industry will remain tied to cyclical supply-demand conditions and vulnerable to low-probability, high-impact events, which typically depress utilization and charter rates. Industry downturns in recent years prompted high-profile financial restructurings and defaults of liner companies that charter Danaos' vessels, such as ZIM and HMM. S&P therefore views Danaos' prudent liquidity management as critical to the 'BB+' rating. The company's current longer charter profile when compared to historic durations, as well as the improved credit quality of its counterparties, should protect Danaos' EBITDA against the abrupt and sharp charter rate corrections in late 2022. S&P said, "We believe Danaos' current medium-term T/C profile, underpinned by attractive rates, partly shields the company from the industry's cyclical swings. We understand the charter profile consists of fully noncancellable and fixed-rate contracts." Furthermore, Danaos benefits from good operating efficiency and predictable operating costs, with no exposure to volatile bunker fuel prices and other voyage expenses, which typically under T/C agreements are borne by counterparties. That said, Danaos remains exposed to volatile container shipping charter rates, in particular in the event of the counterparty's nonperformance on charter agreements or default. Consequently, Danaos' cash flow generation prospects are susceptible to counterparties'/container liners' financial capacity and willingness to deliver on their commitments. That said, Danaos' customers, among others container liners we rate--CMA CGM S.A., Hapag-Lloyd AG, and A.P. Moller - Maersk A/S--have improved their free operating cash flow and liquidity, and reduced debt, resulting in stronger credit metrics and upgrades in 2021-2022. S&P said, "The stable outlook reflects our expectation that Danaos' adjusted FFO to debt ratio will remain above 50% in the next 12 months due to largely contracted revenues and a prudent financial policy. "We could lower the rating if Danaos' earnings unexpectedly weakened due to a significant deterioration in charter rate conditions, resulting in adjusted FFO to debt dropping sustainably below 50%." Rating pressure would also arise if container liners' credit quality appeared to significantly weaken unexpectedly, increasing the risk of amendments to existing contracts, delayed payments, or nonpayment under the charter agreements. A negative rating action could also follow any unexpected deviations in financial policy, for example, if we believe the company is pursuing significant and largely debt-funded investments in additional tonnage or aggressive shareholder distributions, which would depress credit metrics. Although unlikely in the short term, S&P could upgrade Danaos if the company strengthened its business profile, for example, by materially increasing its scale and scope of operations. This would need to be further supported by its conclusion that the fundamental risk characteristics of the underlying container shipping industry have improved, while Danaos maintains its adjusted FFO to debt above 50%. An upgrade would also require adherence to a prudent financial policy to ensure this ratio level is sustainable and an ample liquidity cushion. ESG credit indicators: E-3, S-2, G-2 Environmental factors remain a moderately negative consideration in S&P's credit rating analysis of Danaos, as the global shipping industry faces a large regulatory workload. This is reflected in increasingly stringent shipping emission targets, fluctuating and demanding capital investments, for example in new vessels powered by alternative fuels and the use of more expensive emissions-compliant bunkers. That said, the company typically transfers the risk of fuel price inflation to counterparties via T/C contracts, which stipulate that the charterer pays for a ship's running costs. Danaos' management aims over time to replace aging containerships with new ones equipped with more fuel-efficient engines. It is also enhancing its energy efficiency and cutting emissions, including via bulbous bow optimization, propeller retrofits, and low friction paints. The company has also installed exhaust cleaning systems (scrubbers) on 11 of its vessels without significantly weakening its financial flexibility over 2019-2020. ============= I R E L A N D ============= BLACKROCK EUROPEAN XIV: S&P Assigns B- Rating on Cl. F Notes ------------------------------------------------------------ S&P Global Ratings assigned its credit ratings to BlackRock European CLO XIV DAC's class A, B-1, B-2, C, D, E, and F notes. The issuer also issued unrated subordinated notes. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which is in line with S&P's counterparty rating framework. Portfolio benchmarks CURRENT S&P Global Ratings weighted-average rating factor 2768.24 Default rate dispersion 555.36 Weighted-average life (years) 4.53 Obligor diversity measure 135.75 Industry diversity measure 20.30 Regional diversity measure 1.34 Transaction key metrics CURRENT Total par amount (mil. EUR) 400 Defaulted assets (mil. EUR) 0 Number of performing obligors 148 Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 2.11 'AAA' covenanted weighted-average recovery (%) 36.00 Covenanted weighted-average spread net of floors (%) 4.00 Asset priming obligations and uptier priming debt Under the transaction documents, the issuer can purchase asset priming obligations and/or uptier priming debt to address the risk, where a distressed obligor could either move collateral outside the existing creditors' covenant group or incur new money debt senior to the existing creditors. In this transaction, current pay obligations are limited to 5.0% of the collateral principal amount, including uptier priming debt (which are current pay obligations up to 2.5%). Corporate rescue loans and uptier priming debt that comprise defaulted obligations are limited to 5.0%. Rationale This is a European cash flow CLO transaction, securitizing a pool of primarily syndicated senior secured loans or bonds. The portfolio's reinvestment period ends approximately 4.4 years after closing, and the portfolio's maximum average maturity date is 8.5 years after closing. Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following this, the notes will switch to semiannual payment. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior-secured bonds. Therefore, S&P has conducted its credit and cash flow analysis by applying our criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we modeled the EUR400 million target par amount, the covenanted weighted-average spread of 4.00%, and the covenanted weighted-average recovery rates. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. “Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk is limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "The transaction's legal structure is bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our ratings are commensurate with the available credit enhancement for each class of notes. "Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1, B-2, C, D, and E notes is commensurate with higher ratings than those we have assigned. However, as the CLO will have a reinvestment period, during which the transaction's credit risk profile could deteriorate, we have capped our assigned ratings on these notes. The class A notes can withstand stresses commensurate with the assigned rating. "For the class F notes, our credit and cash flow analysis indicate that the available credit enhancement could withstand stresses that are commensurate with a lower rating. However, we have applied our 'CCC' rating criteria resulting in a 'B- (sf)' rating on this class of notes." The ratings uplift (to 'B-') reflects several key factors, including: -- The available credit enhancement for this class of notes is in the same range as other CLOs that we rate, and that have recently been issued in Europe. -- The portfolio's average credit quality is similar to other recent CLOs. -- S&P's model generated break-even default rate at the 'B-' rating level of 24.59% (for a portfolio with a weighted-average life of 4.53 years), versus if it was to consider a long-term sustainable default rate of 3.1% for 4.53 years, which would result in a target default rate of 14.04%. -- The actual portfolio is generating higher spreads versus the covenanted thresholds that S&P has modelled in its cash flow analysis. S&P said, "For us to assign a rating in the 'CCC' category, we also assess (i) whether the tranche is vulnerable to nonpayments in the near future, (ii) if there is a one in two chance of this tranche defaulting, and (iii) if we envision this tranche to default in the next 12-18 months. Following this analysis, we consider that the available credit enhancement for the class F notes is commensurate with a 'B- (sf)' rating. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance (ESG) S&P said, "We regard the exposure to ESG credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to the following industries: controversial weapons, sale and extraction of thermal coal and fossil fuels from unconventional sources, 25% or more production from sands or from shale and tight reservoirs, 10% or more production from fields located in the Arctic, 25% or more revenue from transactions in soft commodities, 25% or more revenue from tobacco or tobacco-related products, and violation of the United Nations Global Compact Ten Principles, International Labor Organization's (ILO) Conventions, OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. ESG corporate credit indicators S&P said, "The influence of ESG factors in our credit rating analysis of European CLOs primarily depends on the influence of ESG factors in our analysis of the underlying corporate obligors. To provide additional disclosure and transparency of the influence of ESG factors for the CLO asset portfolio in aggregate, we've calculated the weighted-average and distributions of our ESG credit indicators for the underlying obligors. We regard this transaction's exposure as being broadly in line with our benchmark for the sector, with the environmental and social credit indicators concentrated primarily in category 2 (neutral) and the governance credit indicators concentrated in category 3 (moderately negative). Corporate ESG credit indicators Environmental Social Governance Weighted-average credit indicator* 2.09 2.22 2.89 E-1/S-1/G-1 distribution (%) 0.73 0.25 0.00 E-2/S-2/G-2 distribution (%) 74.68 69.87 14.53 E-3/S-3/G-3 distribution (%) 8.00 8.67 65.77 E-4/S-4/G-4 distribution (%) 0.00 4.12 0.98 E-5/S-5/G-5 distribution (%) 0.00 0.50 2.12 Unmatched obligor (%) 6.60 6.60 6.60 Unidentified asset (%) 10.00 10.00 10.00 *Only includes matched obligor Ratings list CLASS RATING AMOUNT SUB (%) INTEREST RATE* (MIL. EUR) A AAA (sf) 244.00 39.00 Three/six-month EURIBOR plus 1.85% B-1 AA (sf) 30.00 29.00 Three/six-month EURIBOR plus 3.15% B-2 AA (sf) 10.00 29.00 6.95% C A (sf) 20.50 23.88 Three/six-month EURIBOR plus 3.90% D BBB- (sf) 26.00 17.38 Three/six-month EURIBOR plus 6.40% E BB- (sf) 16.50 13.25 Three/six-month EURIBOR plus 7.67% F B- (sf) 19.00 8.50 Three/six-month EURIBOR plus 10.22% Sub NR 26.40 N/A N/A *The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. ========= I T A L Y ========= TELECOM ITALIA: KKR Offers to Raise Bid for Landline Grid --------------------------------------------------------- Elvira Pollina and Akriti Sharma at Reuters report that U.S. fund KKR strengthened its lead in the race to secure the landline grid of Telecom Italia (TIM) when it offered to raise its bid by up to or over EUR2 billion (US$2.2 billion), two people with knowledge of the matter said. According to Reuters, the value of KKR's offer could top EUR23 billion overall, widening the gap with a rival proposal by a consortium comprising Italian state lender CDP and Australian fund Macquarie. The improved offer would still be short of a valuation of more than EUR30 billion for the grid sought by TIM's top shareholder Vivendi, Reuters states. But it remains TIM CEO Pietro Labriola's best option to pull off plans to rescue the debt-laden firm via a sale of the network, Reuters notes. Sources had previously told Reuters that both Mr. Labriola and some leading Italian officials already saw KKR as the strongest bidder prior to the June 9 proposal. TIM said late on June 9 it had received two new offers for its grid, without providing details. It had sought improved offers for its most valuable asset after having assessed as not yet adequate the proposals received in May, Reuters recounts. Mr. Labriola plans to focus TIM's efforts on its ServCo services business and sell its NetCo unit comprising the domestic fixed-access network and international submarine cable unit Sparkle to cut debt, Reuters discloses. The overall value of KKR's bid hinges on the terms of the contracts linking ServCo to NetCo, the sources said, adding that the fund had asked for four weeks to carry out due diligence to discuss such conditions, according to Reuters. TIM's board meets to review the proposals on June 19 and is expected to take a decision on June 22, Reuters states. ========= S P A I N ========= FONCAIXA FTGENCAT 5: Moody's Affirms C Rating on EUR26.5MM D Notes ------------------------------------------------------------------ Moody's Investors Service has upgraded the rating of Class C Notes in FONCAIXA FTGENCAT 5, FTA. The rating action reflects the increased credit enhancement for the affected Notes. Moody's affirmed the ratings of the Notes that had sufficient credit enhancement to maintain their current ratings. EUR449.4M (Current Outstanding Amount EUR57.6M) Class A (G) Notes, Affirmed Aa1 (sf); previously on Aug 24, 2022 Affirmed Aa1 (sf) EUR21M Class B Notes, Affirmed Aa1 (sf); previously on Aug 24, 2022 Affirmed Aa1 (sf) EUR16.5M Class C Notes, Upgraded to Aa3 (sf); previously on Aug 24, 2022 Upgraded to A2 (sf) EUR26.5M Class D Notes, Affirmed C (sf); previously on Aug 24, 2022 Affirmed C (sf) Maximum achievable rating is Aa1 (sf) for structured finance transactions in Spain, driven by the corresponding local currency country ceiling of the country. RATINGS RATIONALE The rating action is prompted by an increase in credit enhancement for the affected tranche. Revision of Key Collateral Assumptions: As part of the rating action, Moody's reassessed its default probability and recovery rate assumptions for the portfolio reflecting the collateral performance to date. The performance of the transaction has continued to be stable since the last rating action in August 2022. Total delinquencies have decreased in the past year, with 90 days plus arrears currently standing at 4.2% of current pool balance. Cumulative defaults currently stand at 8.4% of original pool balance in line with 8.3% a year earlier. For FONCAIXA FTGENCAT 5, FTA, the current default probability is 17% of the current portfolio balance and the assumption for the fixed recovery rate is 55%. Moody's has decreased the CoV to 56.5%% from 57.2%, which, combined with the revised key collateral assumptions, corresponds to a portfolio credit enhancement of 24.5%. Increase in Available Credit Enhancement Sequential amortization led to the increase in the credit enhancement available in this transaction. For instance, the credit enhancement for the Class C Notes increased to 27.9% from 23.5% since the last rating action. Counterparty Exposure The rating actions took into consideration the Notes' exposure to relevant counterparties, such as servicer, account bank or swap provider. The principal methodology used in these ratings was "Moody's Global Approach to Rating SME Balance Sheet Securitizations" published in July 2022. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings 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. =========================== U N I T E D K I N G D O M =========================== BRITISH TELECOMMUNICATIONS: Moody's Rates New Hybrid Notes 'Ba1' ---------------------------------------------------------------- Moody's Investors Service has assigned a Ba1 backed long-term rating to the proposed subordinated GBP-denominated capital securities due December 2083 (the hybrid securities) to be issued by British Telecommunications Plc (BT or the company, a subsidiary of BT Group plc) under its EMTN Program. The outlook is stable. "The Ba1 rating assigned to the hybrid debt is two notches below BT's issuer and senior unsecured ratings of Baa2. This reflects the instruments' deeply subordinated position in relation to the existing unsecured obligations in the company's capital structure" says Luigi Bucci, a Moody's AVP-Analyst and lead analyst for BT. "BT plans to use the proceeds from the offering for general corporate purposes" adds Mr Bucci. RATINGS RATIONALE The proposed hybrid securities, which will be guaranteed by BT Group Plc on a subordinated basis, are long-dated with a 60.5-year maturity and they do not present any cross-default provisions. The issuer can also opt to defer settlement of interest on the hybrid securities on a cumulative basis. The rating agency notes that the interest on the proposed hybrid securities will step-up by 25 basis points (bps) in December 2033, at least 10 years after the issuance/five years after the first reset date, and an additional 75 bps in December 2048, 20 years after the first reset date. The hybrid securities are deeply subordinated obligations ranking senior only to common shares, pari passu with preference shares, and junior to all senior and subordinated debt. They thus qualify for "basket C", i.e. 50% equity treatment, for the purpose of calculating Moody's credit ratios (please refer to Moody's cross-sector rating methodology 'Hybrid Equity Credit' dated September 2018). The hybrid securities' rating is positioned relative to BT's senior unsecured and issuer ratings. Thus a change in the company's issuer and senior unsecured ratings or a re-evaluation of the relative notching could impact the hybrid securities' rating. BT's Baa2 ratings reflect the company's: (1) strong business profile, and leading position as an integrated fixed and mobile telecommunications operator in the UK; (2) ongoing acceleration in its fibre-to-the-premise (FTTP) deployment; (3) improving operating performance and strong cost-saving capabilities; and (4) solid liquidity, supported by BT's cash balance and undrawn revolving credit facility. However, the ratings are constrained by the company's: (1) limited leverage reduction prospects; (2) sustained challenges in its Business segment; (3) ongoing pressures on free cash flow generation because of its high capital spending for FTTP/5G rollout and pension deficit payments; and (4) the intrinsic volatility of the IAS19 pension deficit, which can increase Moody's leverage projections. RATIONALE FOR STABLE OUTLOOK The stable rating outlook reflects Moody's expectation of an improvement in the company's financial performance, supported by significant price increases and a sustained take-up of fibre products at Openreach despite continued pressures in the Business segment. Such an improvement should keep Moody's-adjusted leverage below 3.5x and Moody's-adjusted retained cash flow (RCF)/net debt well above 18%, both on a sustained basis. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Moody's could upgrade BT's ratings if its: (1) underlying operating performance and cash flow generation substantially improve, with growing revenue and stronger key performance indicator (KPI) trends leading to a sustainable EBITDA growth trajectory, coupled with visibility into capital spending requirements; (2) Moody's-adjusted RCF/net debt remains above 22% on a sustained basis; and (3) Moody's-adjusted debt/EBITDA remains below 2.8x on a sustained basis. Downward pressure on the rating could arise if BT's: (1) operating performance weakens compared with the rating agency's current expectations, or the risks arising from the pension deficit significantly increase as a result of a widening in the deficit; (2) Moody's-adjusted RCF/net debt remains consistently below 18%; and (3) Moody's-adjusted adjusted debt/EBITDA exceeds 3.5x on a sustained basis. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Telecommunications Service Providers published in September 2022. COMPANY PROFILE BT Group Plc is a leading UK telecommunications and network operator and a leading provider of global communications services and solutions, serving customers in roughly 180 countries. Over fiscal 2023 (ending March), the company generated revenues and EBITDA -as reported- of GBP20.7 billion and GBP7.9 billion, respectively. CINEWORLD: To File for Administration as Part of Restructuring -------------------------------------------------------------- Mark Kleinman at Sky News reports that Cineworld's London-listed holding company is preparing to file for administration as part of a comprehensive financial restructuring that will wipe out its shareholders. Sky News understands that the multinational cinema operator is lining up AlixPartners to act as administrator to help effect a transfer of ownership to its lenders. An announcement is expected to be made by the end of next week, according to one source, Sky News notes. Cineworld trades from 128 sites in the UK, according to a spokesman, employing thousands of people. According to Sky News, insiders said its British operations will not be impacted by the insolvency process for the holding company. The restructuring will reduce Cineworld's indebtedness by $4.5 billion and be accompanied by an US$800 million rights issue to place the company on a sustainable financial footing, according to a statement in April, Sky News discloses. INEOS ENTERPRISES: Moody's Rates New EUR650MM Secured Loan 'Ba3' ---------------------------------------------------------------- Moody's Investors Service assigned Ba3 rating to INEOS Enterprises Holdings Limited's proposed EUR650 million equivalent senior secured term loan B (TLB) due 2030, currently being marketed by INEOS ENTERPRISES HOLDINGS II LIMITED and INEOS ENTERPRISES HOLDINGS US FINCO LLC. Other ratings of INEOS Enterprises Holdings Limited (INEOS Enterprises) and related entities are unaffected. These include INEOS Enterprises' Ba3 corporate family rating, its Ba3-PD probability of default rating, as well as the Ba3 ratings of INEOS ENTERPRISES HOLDINGS II LIMITED's senior secured term loan A and senior secured term loan B, both due 2026. The Ba3 rating of INEOS ENTERPRISES HOLDINGS US FINCO LLC's senior secured term loan B due 2026 is also unaffected. The outlook is stable for all entities. The proceeds of the proposed TLB will be used to refinance INEOS ENTERPRISES HOLDINGS US FINCO LLC's outstanding $360m senior secured TLB, repay EUR71 million currently outstanding under the receivables securitisation facility and to pay related transaction fees. Approximately EUR250 million are slated to be retained by INEOS Enterprises for general corporate purposes. RATINGS RATIONALE The rating action reflects diversified business profile of INEOS Enterprises, its leading positions in the markets where it operates, good liquidity with significant amount of cash on balance sheet and full availability under the company's EUR250 million securitisation facility and pro-active management of debt maturity profile. Rating action also takes into account currently weak trading against the challenging macroeconomic backdrop and softening credit metrics as a result. INEOS Enterprises reported EBITDA of EUR413 million for the last twelve months ending March 2023 (or EUR448 million pro-forma for acquisition of the chlorine business from ASHTA, renamed INEOS KOH, which closed in the fourth quarter of 2022). Performance in the first quarter of 2023 (EBITDA of EUR96 million) has deteriorated year-on-year (EBITDA of EUR143 million in first quarter of 2022), however it was an improvement over the fourth quarter of 2022 (EBITDA of EUR73 million). In the first quarter of 2023, demand has started to recover amidst still challenging market conditions, and INEOS KOH was consolidated for the full quarter adding EUR10 million to EBITDA, despite its operations being impacted by an unplanned outage in March. Composites segment improved as evidenced by an EBITDA increase of EUR9 million sequentially, supported by resilient demand in North America and improving orders in China. Solvents returned to positive EBITDA, as energy prices stabilised in Europe; however, volumes remain depressed due to availability of lower cost imports. Pigments segment saw its EBITDA sequentially decline as destocking continued, but margins remained stable thanks to firm pricing, while Chemical intermediaries performance continues to be challenged owing to fall in volumes and margins for PIA (purified isophthalic acid) and TMA (trimellitic anhydride) products in the Joliet business. Hygienics generated a loss of EUR6 million (EUR5 million in the prior year period) and remains focused on developing new product ranges and investing in marketing. Moody's-adjusted leverage stood at 3.7x as of March 2023 (pro-forma for INEOS KOH business). Moody's expects leverage to increase to 4.3x pro forma for the new debt issuance and to remain above 4.0x in 2023, as the rating agency does not anticipate trading conditions to improve materially before second half of 2023. Interest coverage of 5.1x (measured as EBITDA/Interest expense) is expected to decline closer to 3.0x in 2023 due to higher interest rates and increased gross debt quantum, before recovering in 2024. Free cash flow generation (after dividends) is expected to be slightly negative in 2023, driven by higher cash interest and assumption of continued voluntary repayments under shareholder loan, which Moody's treats as dividend payments. The rating will have limited headroom over the next few quarters for absorbing any operational underperformance. However, Moody's notes that company has meaningful cash amount on the balance sheet, that could be used towards bolt-on acquisitions. The Ba3 corporate family rating (CFR) of INEOS Enterprises reflects its robust business profile, which benefits from leading positions in many of its markets and high degree of diversification. INEOS Enterprises' assets and sales are evenly balanced between EMEA and the Americas, albeit with a limited presence in the fast growing Asia Pacific. Counterbalancing these strengths are the intrinsic cyclicality of INEOS Enterprises' business and the parent company's history of shareholder friendly policies. LIQUIDITY INEOS Enterprises' liquidity position is good. At the end of March 2023, the company reported EUR313 million of cash on hand along with a EUR250 million securitisation facility collateralised by trade receivables, of which circa EUR107 million were available. Liquidity is expected to improve further post debt issuance. The company has no near-term debt maturities. STRUCTURAL CONSIDERATIONS The Ba3 ratings of the TLA and TLB of INEOS ENTERPRISES HOLDINGS II LIMITED and the TLB of INEOS ENTERPRISES HOLDINGS US FINCO LLC, reflect the fact that both loans are senior secured obligations of the borrowers, rank pari passu with each other and benefit, to the extent legally possible, from the same first ranking guarantees from all material subsidiaries representing at least 85% of the restricted group's consolidated EBITDA and assets. The proposed new term loan B is expected to be pari passu with the existing debt and carry similar terms. RATING OUTLOOK The stable outlook reflects Moody's expectation that INEOS Enterprises' gross leverage will revert to the rating guidance of 4.0x or below over the next 12-18 months as demand recovers and that the company will not make significant one-off shareholder distributions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating momentum may arise over time should INEOS Enterprises demonstrate (i) consistent profitability by maintaining or growing its Moody's-adjusted EBITDA margin in the teens; (ii) sustained positive FCF generation after capex and dividends; (iii) Moody's-adjusted total and net debt to EBITDA below 3.0x and 2.5x through the cycle; and (iv) conservative financial policy in line with its stated net leverage target of below 3.0x through the cycle. Conversely, the ratings could come under downward pressure, should INEOS Enterprises' operating results fall short of Moody's expectations and FCF generation turn negative, resulting in some deterioration in liquidity and leverage reflected in Moody's-adjusted total and net debt to EBITDA rising above 4x and 3.5x for an extended period of time. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Chemicals published in June 2022. COMPANY PROFILE Headquartered in the UK, INEOS Enterprises Holdings Limited is a leading producer of intermediary chemicals with strong manufacturing platforms in Europe and North America, operating fourteen sites in each of the two regions. In the last twelve months ending March 2023, INEOS Enterprises reported pro-forma EBITDA of EUR448 million. MB AEROSPACE II: Moody's Raises CFR to Caa1, On Further Review -------------------------------------------------------------- Moody's Investors Service has upgraded all the ratings of UK-headquartered aerospace component manufacturer MB Aerospace Holdings II Corp. (MBA or the company) by one notch and placed the ratings on review for further upgrade. The outlook has been changed to ratings under review from negative. RATINGS RATIONALE The upgrade of MBA's corporate family rating to Caa1 from Caa2 reflects the announced acquisition of MBA by US-based aerospace and industrial equipment company Barnes Group on June 5, 2023 for an enterprise value of $740 million. It represents a high valuation of around 13x 2022 management adjusted EBITDA and reflects the attractivity of the business in the eyes of the buyer. The action further reflects the company's improved operating performance in 2022 and prospects for solid revenue and profit growth in 2023. Demand in the aerospace value chain remains very strong as flying activity from airlines has rebounded significantly and they seek to recover their pre-pandemic capacity while renewing their aircraft fleets. The upgrade of the senior secured first lien term loan and revolving credit facility (RCF) to B3 from Caa1 keeps their ratings one notch above the CFR, reflecting their ranking ahead of the company's $100 million senior secured second lien term loan. The review for upgrade reflects (i) Moody's expectation that the completion of the sale would result in the repayment of all the group's outstanding debt and (ii) Moody's assessment of the much higher credit quality of the acquirer compared with that of MBA. The completion of the sale is expected in Q4 2023 and is subject to customary approvals, including by regulatory authorities in various countries. The review process will primarily focus on the closing of the sale transaction while Moody's will continue to monitor improvements in MBA's trading performance and the adequacy of the company's liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Prior to the ratings review, Moody's said that an upgrade of MBA's ratings could occur if (i) the company grew its earnings and if its cash flows approached breakeven levels, leading to improved liquidity headroom, and (ii) if there was a reduction in leverage such that the company carried a more sustainable capital structure. Prior to the ratings review process, Moody's also said that MBA's ratings could be downgraded if (i) liquidity weakened, or (ii) the likelihood of a financial restructuring increased, or (iii) MBA failed to deliver material trading improvements and reduce leverage. LIST OF AFFECTED RATINGS Upgrades and Placed on Review for Upgrade: Issuer: MB Aerospace Holdings II Corp. Probability of Default Rating, Upgraded to Caa1-PD from Caa2-PD; Placed on Review for Upgrade LT Corporate Family Rating, Upgraded to Caa1 from Caa2; Placed on Review for Upgrade Senior Secured Bank Credit Facility, Upgraded to B3 from Caa1; Placed on Review for Upgrade Outlook Actions: Issuer: MB Aerospace Holdings II Corp. Outlook, Changed To Rating Under Review From Negative PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Aerospace and Defense published in October 2021. COMPANY PROFILE MB Aerospace Holdings II Corp. is a tier one and tier two supplier of original equipment parts for aero-engines, focused on large-diameter cases, housings, as well as rotating parts. In 2022, MBA reported $276 million revenue and $49 million EBITDA before exceptionals. MBA has been owned by private equity funds managed by Blackstone since October 2015. RAWDON ASSET: Director Gets 7-Year Sentence for Fraud ----------------------------------------------------- The Insolvency Service on June 9 disclosed that a Yorkshire-based finance boss has been found guilty of fraud and sentenced to 7 years imprisonment at Leeds Crown Court. An investigation by the Insolvency Service found Liam Francis Wainwright, 61, from Leeds, had falsified documents to mislead investors and spend their money on ventures including a racehorse syndicate and his own failed private businesses. These investors were victims of a classic Ponzi scheme, whereby the returns paid to them were funded by the capital injections from later investors. Mr. Wainwright, who had been a director of Rawdon Asset Finance Ltd, was disqualified for 11 years in November 2020 after investigators at the Insolvency Service found he had falsified around GBP12 million worth of entries in the company's loan book in the two years before the company entered administration in 2019. After a further criminal investigation, the Insolvency Service brought the director to court on counts of false accounting, fraud, forgery, and acting as a director while bankrupt. Julie Barnes, Chief Investigator for the Insolvency Service, said: Mr. Wainwright's greed and selfish actions had a devastating effect on the people who had put their trust in him and his business. His victims included elderly and vulnerable people. Many investors lost most or all of the money they had entrusted to him, and some lost their life savings. His sentencing shows that the Insolvency Service will seek the toughest penalties for those who break the law, to help ensure that the UK is a safe place for investors and for businesses. The court heard that Mr. Wainwright had enjoyed a lavish lifestyle as a result of his offending, and that his actions had had a devastating impact on individuals and families who had invested money into the business. Mr. Wainwright told investors and shareholders that Rawdon Asset Finance was lending money to businesses with security on property, land or plant and equipment, but was in fact using the cash to pay returns to other creditors, buy into a racehorse syndicate and to fund other companies, including a Lincolnshire-based property development and a redevelopment company in West Yorkshire, both linked to himself. By the time the company went into liquidation, Rawdon Asset Finance's creditors were owed more than GBP20 million. Liquidators have so far recovered GBP750,630. Mr. Wainwright admitted that he began to falsify accounts from around 2017, to hide the company's true financial position from his co-directors and investors. He also admitted he had earlier forged a mortgagor's signature on a legal charge to mislead investors and had -- between April 2010 and April 2011 -- breached the terms of a previous bankruptcy by acting as a director of the company the court's permission. The court also heard that Mr. Wainwright had lied about the company's accounts and the destination of funds in order to elicit GBP100,000 from one investor only weeks before the business collapsed, in the full knowledge that investors would not get their money back. Mr. Wainwright pleaded guilty on February 20, 2023, at Kirklees Magistrates' Court, and was sentenced at Leeds Crown Court by His Honour Judge Bayliss on June 9, 2023. The Judge passed concurrent sentences for all charges, except for the sentence for fraud against the final investor, which was added consecutively to reflect an escalation in Mr. Wainwright's culpability. [*] UK: Scotland Reports Biggest Rise in Business Insolvencies -------------------------------------------------------------- The Scotsman reports that an analysis of business insolvencies has found Scotland recorded the biggest rise out of all UK nations last year, with an increase in almost nine in ten UK local authorities compared to the year before the pandemic. According to The Scotsman, a report published has found 187 out of 221 upper tier authorities in the UK saw a rise in liquidations comparing 2019 to 2022 -- equivalent to an 85% share. The report states the withdrawal of UK Government support and soaring energy costs have been blamed for the rise, with retail and construction the hardest hit, The Scotsman notes. ********* 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 * * *