/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230630.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, June 30, 2023, Vol. 24, No. 131 Headlines A R M E N I A [*] Moody's Takes Actions on 5 Armenian Banks F R A N C E CASINO GUICHARD: To Convert Up to EUR1.5BB Secured Debt Into Equity I T A L Y ALBA 13 SPV: Moody's Assigns Ba1 Rating to EUR267.6MM Cl. B Notes F-BRASILE SPA: S&P Affirms 'CCC+' ICR & Alters Outlook to Positive P O L A N D ALIOR BANK: S&P Raises LongTerm Issuer Credit Rating to 'BB+' U N I T E D K I N G D O M CLARITAS GROUP: Creditors Owed GBP7MM+ at Time of Collapse HOWARD RUSSELL: Subcontractors Owed GBP4.6MM at Time of Collapse NEPTUNE ENERGY: Moody's Puts 'Ba2' CFR on Review for Upgrade THAMES WATER: Appoints Sir Adrian Montague as New Chair THAMES WATER: Publication of Accounts at Risk of Being Delayed YORKSHIRE WATER: Raises GBP50 Million to Shore Up Balance Sheet X X X X X X X X [*] BOOK REVIEW: PANIC ON WALL STREET - - - - - ============= A R M E N I A ============= [*] Moody's Takes Actions on 5 Armenian Banks --------------------------------------------- Moody's Investors Service took rating actions on five Armenian banks. These follow the change of outlook on the Government of Armenia's Ba3 long-term issuer rating to stable from negative on June 22, 2023. RATINGS RATIONALE According to Moody's Armenian banks have benefitted from significant improvement in their operating environment in 2022 which enabled them to significantly improve profitability, loss absorption capacity, asset quality and liquidity. The Armenian economy expanded by 12.6% in 2022 amid a surge in income, capital and labour from Russia, which in turn boosted domestic demand. Moody's projects real GDP growth to moderate to around 7% in 2023 and 5-6% in 2024, on the expectation that financial and labour flows would ease from the high pace recorded in 2022. Higher foreign currency trading gains due to high volatility of the Commonwealth of Independent States (CIS) regional currencies and stronger cross-border transactions were one of the key revenue contributors for Armenian banks. Stronger revenues allowed improvements in provisioning coverage while problem loan recovery and write-offs reduced the share of problem loans. Moody's expects that the banks' profitability will moderate although solvency and liquidity metrics will remain robust in the next 12 -18 months. The change of outlook on the Government of Armenia's Ba3 long-term issuer rating to stable from negative benefits Armenian banks' rating outlooks, reflecting lessened constraint by the sovereign rating, thanks to the improved creditworthiness of the government, and in some cases, reflecting benefits from government support. BANK-SPECIFIC RATING DRIVERS AMERIABANK CJSC (Ameriabank) Moody's upgraded Ameriabank's Baseline Credit Assessment (BCA) to ba3 from b1 and affirmed the bank's long-term deposit ratings at Ba3. The rating agency also changed the outlook on the Ba3 long-term deposit ratings to stable from negative. The upgrade of Ameriabank's BCA and Adjusted BCA to ba3 from b1 is driven by the bank's asset quality resilience through pandemic combined with dramatically improved capital adequacy and profitability over the last two years. The upgrade of the bank's long-term Counterparty Risk Ratings (CRRs) to Ba2 from Ba3, and the upgrade of the long-term Counterparty Risk Assessment (CR Assessment) to Ba2(cr) from Ba3(cr) follows the BCA upgrade. Ameriabank continues to demonstrate robust performance as reflected in a very high return on tangible assets of 3.6% in 2022 and 3.5% (annualised) during the first quarter of 2023 (Q1 2023). This was supported by strong pre-provision income, lower credit costs and robust cost efficiency with a cost to income ratio of 45% in Q1 2023. Moody's says that it expects that the bank's return on tangible assets will moderate amid lower foreign currency gains in the next 12-18 months. The bank also materially improved its asset quality in 2021-2022 following the pandemic. The share of problem loans (defined as Stage 3 lending) decreased to 2.5% as of Q1 2023 from 4.2% at the end of 2020. Problem loan coverage by reserves remains robust at 80% as of Q1 2023. Moody's expects that Ameriabank will maintain strong control over its asset quality amid ongoing economic growth in Armenia, with a problem loan ratio falling within 2%-3.5% range over the next 12-18 months. Ameriabank's capital buffer has materially strengthened over the recent years amid strong profitability and modest loan book growth, with a Tangible Common Equity (TCE) to Risk Weighted Assets (RWA) ratio of 13.6% as of Q1 2023 up from 11.1% as of year-end 2020. The bank's reliance on market funding declined to 16% of tangible banking assets as of Q1 2023 from 29% at the end of 2021 amid strong inflow of resident customer accounts. The bank continues to maintain a healthy liquidity cushion with liquid assets exceeding 35% of total assets as of Q1 2023. The bank's liquidity is supported by a well-diversified and granulated customer base coupled with strong local banking franchise. Ameriabank's long-term deposit ratings of Ba3 are based on the bank's BCA of ba3 and Moody's assessment of a high probability of government support for the bank in the event of need, reflecting its systemic importance as one of the largest banks in Armenia. However, this support does not provide any rating uplift to Ameriabank's long-term deposit ratings because Armenia's Ba3 long-term issuer ratings are at the same level as the bank's BCA. The outlook on Ameriabank's long-term deposit ratings is stable, reflecting Moody's view that the bank will maintain its sound fundamentals over the next 12-18 months, and is in line with the stable outlook on Armenia's long-term issuer ratings. ARDSHINBANK CJSC (Ardshinbank) Moody's upgraded Ardshinbank's BCA to ba3 from b1 and affirmed the bank's long-term deposit ratings at Ba3. The rating agency also changed the outlook on the Ba3 long-term deposit ratings to stable from negative. The upgrade of Ardshinbank's BCA and Adjusted BCA to ba3 from b1 is driven by the bank's demonstrated asset quality resilience through the pandemic and significantly improved capital adequacy and profitability over the last two years. The upgrade of the bank's long-term CRRs to Ba2 from Ba3, and the upgrade of the long-term CR Assessment to Ba2(cr) from Ba3(cr) follows the BCA upgrade. Ardshinbank reported strong profitability as reflected in a very high return on tangible assets of 4.0% in 2022 and 4.5% (annaulised) during Q1 2023. The bank's robust performance has been supported by strong pre-provision income and lower credit costs. Moody's says that it expects that the bank's return on tangible assets will moderate amid lower foreign currency gains in the next 12-18 months but will remain stronger than its historical average. The bank also materially improved its asset quality in 2021-2022 following the pandemic. The share of problem loans (defined as Stage 3 lending) decreased to around 5.0% in 2022 from 7.43% at the end of 2020. Problem loan coverage by reserves increased to 76% in 2022 from around 50% in 2020. Moody's expects Ardshinbank's asset quality to remain stable amid ongoing economic growth in Armenia and the bank's increased focus on secured mortgages. Ardshinbank's capital buffer has materially strengthened over the recent years amid very strong profitability and modest RWA growth, with a TCE/RWA ratio of 17% as of year-end 2022 up from 11.6% as of year-end 2020. The bank's reliance on market funding declined to 17% of tangible banking assets as of Q1 2023 from 29% at the end of 2021 amid strong inflow of customer accounts. The bank continues to maintain a healthy liquidity cushion with liquid assets exceeding 40% of total assets as of Q1 2023. Ardshinbank's long-term deposit ratings of Ba3 are based on the bank's BCA of ba3 and Moody's assessment of a high probability of government support for the bank in the event of need, reflecting its systemic importance as one of the largest banks in Armenia. However, this support does not provide any rating uplift to Ardshinbank's long-term deposit ratings because Armenia's Ba3 long-term issuer ratings are at the same level as the bank's BCA. The outlook on Ardshinbank's long-term deposit ratings is stable, reflecting Moody's view that the bank will maintain its sound fundamentals over the next 12-18 months, and is in line with the stable outlook on Armenia's long-term issuer ratings. CONVERSE BANK CJSC (Converse bank) Moody's upgraded Converse bank's BCA to b1 from b2 and affirmed the bank's long-term deposit ratings at B1. The rating agency also changed the outlook on the B1 long-term deposit ratings to stable from negative. The upgrade of Converse bank's BCA and Adjusted BCA to b1 from b2 is driven by the bank's strengthened capital adequacy, profitability, and liquidity over the last two years. The upgrade of the bank's long-term CRRs to Ba3 from B1, and the upgrade of the long-term CR Assessment to Ba3(cr) from B1(cr) follows the BCA upgrade. Converse bank materially improved its profitability in terms of return on tangible assets to 3.1% in 2022 up from 1.1% in 2021 and 0.8% in 2020 largely driven by material foreign currency trading gains last year. Moody's expects moderation of trading gains through 2023 although net financial result will be supported by stronger net interest margin owing to high interest rate environment, and lower credit costs amid robust economic growth in the next 12-18 months. The bank's asset quality somewhat improved in 2021-2022 following the pandemic. The share of problem loans (defined as Stage 3 lending) decreased to 5.1% at the end of 2022 from 6.2% at the end of 2020. The problem loan coverage by reserves compared with local peers remained modest at 50% as of year-end 2022. Moody's expects that Converse bank's problem loan ratio will fall within 5%-6% range amid modest loan book growth over the next 12-18 months. Converse bank's capital adequacy has markedly strengthened over the recent two years amid strong profitability and modest RWA growth, with TCE/RWA ratio of 15.2% as of year-end 2022 up from 13.6% as of year-end 2020. In 2022 the bank experienced material inflow of customer deposits which surged by 31% largely owing to non-resident customers coming from Russia. The bank conservatively allocated these funds into cash and securities as deposit stickiness is still to be tested. Converse bank's liquidity provides a sufficient buffer against potential outflow amounting to 49% of its tangible assets as of year-end 2022. Converse bank's long-term deposit ratings of B1 are based on the bank's BCA of b1 and Moody's assessment of a moderate probability of government support for the bank in the event of need, based on the bank's market share of around 6% in total assets, loans and retail deposits. However, this support does not provide any rating uplift to Converse bank's long-term deposit ratings. The outlook on Converse bank's long-term deposit ratings is stable, reflecting Moody's view that the bank will maintain its sound fundamentals over the next 12-18 months. INECOBANK CJSC (Inecobank) Moody's upgraded Inecobank's BCA to ba3 from b1 and the bank's long-term deposit ratings to Ba3 from B1. The outlook on the Ba3 long-term deposit ratings remains stable. The upgrade of Inecobank's long-term deposit ratings to Ba3 from B1 is driven by the upgrade of the bank's BCA and Adjusted BCA to ba3 from b1 and reflects the bank's asset quality resilience through the pandemic and material improvement its solvency over the last two years. The upgrade of the bank's long-term CRRs to Ba2 from Ba3, and the upgrade of the long-term CR Assessment to Ba2(cr) from Ba3(cr) follows the BCA upgrade. Inecobank's profitability materially improved in 2022 and will remain strong in the next 12-18 months with return on tangible assets of around 4.5 % in 2022 and around 5% in Q1 2023. This improvement was mainly a result of stronger interest income and fees and commission income, lower credit costs, and foreign currency gains. Moody's expects that the bank's return on tangible assets will moderate amid lower foreign currency gains in the next 12-18 months but to remain stronger compared to its historical average. The bank also materially improved its asset quality in 2021-2022 following the pandemic. The share of problem loans (defined as Stage 3 lending) decreased to around 1.5% in 2022 from 5.23% at the end of 2020. Problem loan coverage by reserves increased to 127% in 2022 from 92% in 2020. Moody's expects that Inecobank's asset quality to remain broadly stable amid ongoing economic growth in Armenia and good diversification of its loan book. Inecobank's solid capital buffer has been its key credit strength in recent years with TCE/RWA ratio of around 16% as of year-end 2022 and Moody's expects it to remain stable in the next 12-18 months. The bank's reliance on market funding declined to 17% of tangible banking assets as of Q1 2023 from 29% at the end of 2021 amid strong inflow of resident customer accounts. Inecobank has a diversified funding base, supported by its good customer reach and long-standing partnerships with international financial institutions (IFIs). The bank continues to maintain a healthy liquidity cushion with liquid assets exceeding 30% of total assets as of Q1 2023. Inecobank's long-term deposit ratings of Ba3 are based on the bank's BCA of ba3 and Moody's assessment of a moderate probability of government support for the bank in the event of need, reflecting its market shares and systemic importance. However, this support does not provide any rating uplift to Inecobank's long-term deposit ratings because Armenia's Ba3 long-term issuer ratings are at the same level as the bank's BCA. The outlook on Inecobank's long-term deposit ratings is stable, reflecting Moody's view that the bank will maintain its sound fundamentals over the next 12-18 months, and is in line with the stable outlook on Armenia's long-term issuer ratings. UNIBANK OJSC (Unibank) Moody's affirmed Unibank's BCA at b3 and the bank's long-term deposit ratings at B2. The outlook on the B2 long-term deposit ratings remains stable. The affirmation of the bank's long-term deposit ratings at B2, and BCA and Adjusted BCA at b3, respectively, is driven by the bank's resilient performance over the recent two years. Unibank materially improved its profitability in terms of return on tangible assets to 1.1% in 2022 after two consecutive years of net losses. The net financial result of AMD3.4 billion was supported by material trading gains from foreign currency, driven by the high volatility of regional currencies and material currency conversion by its customers. Moody's expects moderation of trading gains through 2023 although net financial result will be supported by stronger net interest margin thanks to loan book expansion and moderate credit costs amid robust economic growth in the next 12-18 months. The bank's still weak asset quality remains the main factor constraining its BCA. Starting from 2018, the share of problem loans (defined as Stage 3 loans) exceeded 15% of gross loans and amounted to 18.9% as of year-end 2022 despite material write-offs. The problem loan coverage remained modest at 43% compared with local peers at the end of 2022. Unibank's capital adequacy has strengthened over the last two years but remains weak compared to local peers with TCE/RWA ratio of 10.4% as of year-end 2022 up from 10.0% as of year-end 2020. The bank's capital position remains challenged by the large gap between problem loans and loan loss reserves, which made it vulnerable to unexpected credit losses. Despite extraordinary revenues in 2022 the bank's problem loans in relation to its TCE and loan loss reserves (Texas ratio) remained broadly flat at 70% at the end of 2022 compared to 73% a year before. In 2022 the bank experienced material inflow of customer deposits which surged by 31% largely owing to non-resident customers coming from Russia. The bank conservatively allocated these funds into deposits with the Central Bank of Armenia and sovereign bonds. Unibank's liquidity cushion at 55% of assets as of year-end 2022 provides a sufficient buffer against potential deposits outflow. Unibank's long-term deposit ratings of B2 are based on the bank's BCA of b3 and Moody's assessment of a moderate probability of government support for the bank in the event of need, based on the bank's market share of more than 5% in customer deposits and around 7% in retail deposits, which translates into one notch of rating uplift to Unibank's long-term deposit ratings. The stable outlook on its long-term deposit ratings reflects Moody's assessment that risks to Unibank's credit profile are balanced in the next 12-18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The deposit ratings of Ameriabank, Ardshinbank and Inecobank are at the same level as Armenia's Ba3 issuer rating. Therefore, a rating upgrade would require both strengthening of the banks' standalone fundamentals and improvement in the sovereign's creditworthiness. An improvement of the asset-quality metrics, coupled with sustainable robust profitability and capital levels of Converse bank and Unibank, may lead to an upgrade of the banks' BCA and deposit ratings. A downgrade of Armenia's issuer rating could exert downward pressure on the deposit ratings of Ameriabank, Ardshinbank and Inecobank. BCA and deposit ratings of all five banks could be downgraded or the outlook on the long-term deposit ratings could be changed to negative if their solvency or liquidity were to deteriorate materially or in case of remarkable deterioration of operating environment. LIST OF AFFECTED RATINGS Issuer: Ameriabank CJSC Upgrades: LT Counterparty Risk Rating (Foreign Currency), Upgraded to Ba2 from Ba3 LT Counterparty Risk Rating (Local Currency), Upgraded to Ba2 from Ba3 LT Counterparty Risk Assessment, Upgraded to Ba2(cr) from Ba3(cr) Baseline Credit Assessment, Upgraded to ba3 from b1 Adjusted Baseline Credit Assessment, Upgraded to ba3 from b1 Outlook Actions: Outlook, Changed To Stable From Negative Affirmations: ST Counterparty Risk Rating (Foreign Currency), Affirmed NP ST Counterparty Risk Rating (Local Currency), Affirmed NP LT Bank Deposits (Foreign Currency), Affirmed Ba3, outlook changed to STA from NEG LT Bank Deposits (Local Currency), Affirmed Ba3, outlook changed to STA from NEG ST Bank Deposits (Foreign Currency), Affirmed NP ST Bank Deposits (Local Currency), Affirmed NP ST Counterparty Risk Assessment, Affirmed NP(cr) Issuer: Ardshinbank CJSC Upgrades: LT Counterparty Risk Rating (Foreign Currency), Upgraded to Ba2 from Ba3 LT Counterparty Risk Rating (Local Currency), Upgraded to Ba2 from Ba3 LT Counterparty Risk Assessment, Upgraded to Ba2(cr) from Ba3(cr) Baseline Credit Assessment, Upgraded to ba3 from b1 Adjusted Baseline Credit Assessment, Upgraded to ba3 from b1 Outlook Actions: Outlook, Changed To Stable From Negative Affirmations: ST Counterparty Risk Rating (Foreign Currency), Affirmed NP ST Counterparty Risk Rating (Local Currency), Affirmed NP LT Bank Deposits (Foreign Currency), Affirmed Ba3, outlook changed to STA from NEG LT Bank Deposits (Local Currency), Affirmed Ba3, outlook changed to STA from NEG ST Bank Deposits (Foreign Currency), Affirmed NP ST Bank Deposits (Local Currency), Affirmed NP ST Counterparty Risk Assessment, Affirmed NP(cr) Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed Ba3, outlook changed to STA from NEG Issuer: Converse Bank CJSC Upgrades: LT Counterparty Risk Rating (Foreign Currency), Upgraded to Ba3 from B1 LT Counterparty Risk Rating (Local Currency), Upgraded to Ba3 from B1 LT Counterparty Risk Assessment, Upgraded to Ba3(cr) from B1(cr) Baseline Credit Assessment, Upgraded to b1 from b2 Adjusted Baseline Credit Assessment, Upgraded to b1 from b2 Outlook Actions: Outlook, Changed To Stable From Negative Affirmations: ST Counterparty Risk Rating (Foreign Currency), Affirmed NP ST Counterparty Risk Rating (Local Currency), Affirmed NP LT Bank Deposits (Foreign Currency), Affirmed B1, outlook changed to STA from NEG LT Bank Deposits (Local Currency), Affirmed B1, outlook changed to STA from NEG ST Bank Deposits (Foreign Currency), Affirmed NP ST Bank Deposits (Local Currency), Affirmed NP ST Counterparty Risk Assessment, Affirmed NP(cr) Issuer: Inecobank CJSC Upgrades: LT Counterparty Risk Rating (Foreign Currency), Upgraded to Ba2 from Ba3 LT Counterparty Risk Rating (Local Currency), Upgraded to Ba2 from Ba3 LT Bank Deposits (Foreign Currency), Upgraded to Ba3 STA from B1 STA LT Bank Deposits (Local Currency), Upgraded to Ba3 STA from B1 STA LT Counterparty Risk Assessment, Upgraded to Ba2(cr) from Ba3(cr) Baseline Credit Assessment, Upgraded to ba3 from b1 Adjusted Baseline Credit Assessment, Upgraded to ba3 from b1 Outlook Actions: Outlook, Remains Stable Affirmations: ST Counterparty Risk Rating (Foreign Currency), Affirmed NP ST Counterparty Risk Rating (Local Currency), Affirmed NP ST Bank Deposits (Foreign Currency), Affirmed NP ST Bank Deposits (Local Currency), Affirmed NP ST Counterparty Risk Assessment, Affirmed NP(cr) Issuer: Unibank OJSC Outlook Actions: Outlook, Remains Stable Affirmations: LT Counterparty Risk Rating (Foreign Currency) Affirmed B2 LT Counterparty Risk Rating (Local Currency), Affirmed B2 ST Counterparty Risk Rating (Foreign Currency), Affirmed NP ST Counterparty Risk Rating (Local Currency), Affirmed NP LT Bank Deposits (Foreign Currency), Affirmed B2 STA LT Bank Deposits (Local Currency), Affirmed B2 STA ST Bank Deposits (Foreign Currency), Affirmed NP ST Bank Deposits (Local Currency), Affirmed NP LT Counterparty Risk Assessment, Affirmed B2(cr) ST Counterparty Risk Assessment, Affirmed NP(cr) Baseline Credit Assessment, Affirmed b3 Adjusted Baseline Credit Assessment, Affirmed b3 PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks Methodology published in July 2021. =========== F R A N C E =========== CASINO GUICHARD: To Convert Up to EUR1.5BB Secured Debt Into Equity ------------------------------------------------------------------- Adrienne Klasa, George Steer and Robert Smith at The Financial Times report that Casino Guichard-Perrachon SA said it would convert up to EUR1.5 billion of secured debt into equity, warning that its shareholders would be "massively" diluted by the move. Between EUR1 billion and EUR1.5 billion of Casino's assets in secured debt would be converted into equity in order to reach a debt structure "compatible" with cash flow generation laid out in its 2023-25 business plan, the company said on June 28, the FT relates. This comes on top of the EUR3.6 billion of unsecured debt the group had previously said would be converted into equity, as part of an ongoing debt restructuring negotiations with creditors in a race to shore up the retail group's finances, the FT notes. "The current shareholders of Casino will be massively diluted and [parent company] Rallye will no longer control Casino," the FT quotes the company as saying. Casino began voluntary negotiations with its creditors - called a procedure to conciliation - in late May, which will last for several months, the FT recounts. The grocery retailer and its parent companies are facing EUR4.9 billion in debt repayments due by 2025, though credit rating agencies question if these can be met, the FT discloses. Rating agency Moody's downgraded Casino in late May, saying that a default over the next 12 months remained likely given the retailer's weak liquidity position and "unsustainable" capital structure, the FT recounts. Stakeholders in the proceedings were on June 28 asked by Casino to submit new equity offers by July 3 "at the latest" in order to reach an agreement on the terms of the restructuring by the end of the month, the FT relays. The agreement will have to include an equity contribution of at least EUR900 million, Casino said, the FT notes. Casino, as cited by the FT, said that a report prepared for creditors by auditor Accuracy did "not anticipate any liquidity issue until the end of the conciliation period" at the end of October. However, in order to sustain this, Casino's finances would need to be shored up with revenues from ongoing asset sales and a reprieve on payment of tax and social security obligations granted in principle by the French government, the FT states. The conciliator also submitted a request for creditors to grant the company a standstill on all debt payments until the end of the negotiation period, the company said last week, according to the FT. ========= I T A L Y ========= ALBA 13 SPV: Moody's Assigns Ba1 Rating to EUR267.6MM Cl. B Notes ----------------------------------------------------------------- Moody's Investors Service has assigned the following definitive ratings to the debts issued by Alba 13 SPV S.r.l. (the Issuer): EUR522.6 million Class A1 Asset-Backed Floating Rate Notes due December 2042, Assigned Aa3 (sf) EUR263.1 million Class A2 Asset-Backed Floating Rate Notes due December 2042 Assigned Aa3 (sf) EUR267.6 million Class B Asset-Backed Floating Rate Notes due December 2042, Assigned Ba1 (sf) Moody's has not assigned a rating to the EUR 196.4M Class J Asset-Backed Floating Rate Notes due December 2042. The transaction is a static cash securitisation of lease receivables granted by Alba Leasing S.p.A. (NR) to small and medium-sized enterprises (SMEs) located in Italy. RATINGS RATIONALE The ratings of the notes are primarily based on the analysis of the credit quality of the underlying portfolio, the structural integrity of the transaction, the roles of external counterparties and the protection provided by credit enhancement. In Moody's view, the strong credit positive features of this deal include, among others: (i) its static nature as well as the structure's efficiency, which provides for the application of all cash collections to repay the senior Notes should the portfolio performance deteriorate beyond certain limits (i.e. Class B interest subordination events); (ii) the granular portfolio composition as reflected by low single lessee concentration (with the top lessee and top 5 lessees group exposure being 0.8% and 3.1% respectively); (iii) limited industry sector concentration (i.e. lessees from top 2 sectors represent not more than 40.1% of the pool); and (iv) no potential losses resulting from set-off risk as obligors do not have deposits and did not enter into a derivative contract with Alba Leasing S.p.A. However, the transaction has several challenging features, such as: (i) the impact on recoveries upon originator's default (in Italian leasing securitisations future receivables not yet arisen, such as recoveries, might not be enforceable against the insolvency of the originator); and (ii) the potential losses resulting from commingling risk that are not structurally mitigated but are reflected in the credit enhancement levels of the transaction. Moody's valued positively the appointment of Banca Finanziaria Internazionale S.p.A. (NR) as back up servicer on the closing date. Finally, Moody's considered a limited exposure to fixed-floating interest rate risk (6.5% of the pool reference a fixed interest rate) as well as basis risk given the discrepancy between the interest rates paid on the leasing contracts compared to the rate payable on the Notes and no hedging arrangement being in place for the structure. Key collateral assumptions Mean default rate: Moody's assumed a mean default rate of 11% over a weighted average life of 2.9 years (equivalent to a B1 proxy rating as per Moody's Idealized Default Rates). This assumption is based on: (1) the available historical vintage data, (2) the stable performance of the previous transactions originated by Alba Leasing S.p.A. and (3) the characteristics of the loan-by-loan portfolio information. Moody's took also into account the current economic environment and its potential impact on the portfolio's future performance, as well as industry outlooks or past observed cyclicality of sector-specific delinquency and default rates. Default rate volatility: Moody's assumed a coefficient of variation (i.e. the ratio of standard deviation over the mean default rate explained above) of 48%, as a result of the analysis of the portfolio concentrations in terms of single obligors and industry sectors. Recovery rate: Moody's assumed a 35% stochastic mean recovery rate, primarily based on the characteristics of the collateral-specific loan-by-loan portfolio information, complemented by the available historical vintage data. Portfolio credit enhancement: the aforementioned assumptions correspond to a portfolio credit enhancement of 22%, that takes into account the Italian current local currency country risk ceiling (LCC) of Aa3. As of May 13, 2023, the audited asset pool of underlying assets was composed of a portfolio of 12,899 contracts amounting to EUR1,239 million. The top industry sector in the pool, in terms of Moody's industry classification, is Construction and building (25.9%). The top borrower represents 0.8% of the portfolio and the effective number of obligors is 1383. The assets were originated between 2010 and 2023 and have a weighted average seasoning of 1.4 years and a weighted average remaining term of 5.2 years. The interest rate is floating for 93.5% of the pool while the remaining part of the pool bears a fixed interest rate. The weighted average spread on the floating portion is 2.56%, while the weighted average interest on the fixed portion is 3.2%. Geographically, the pool is concentrated mostly in Lombardia (29.1%) and Emilia Romagna (10.6%). At closing, any loan in arrears for more than 30 days will be excluded from the final pool. Assets are represented by receivables belonging to different sub-pools real estate (19%), equipment (63%) and auto transport assets (16%). A small portion (2%) of the pools is represented by lease receivables whose underlying asset is an aircraft, a ship or a train. The securitized portfolio does not include the so-called "residual value instalment", i.e. the final instalment amount to be paid by the lessee (if option is chosen) to acquire full ownership of the leased asset. The residual value instalments are not financed - i.e. it is not accounted for in the portfolio purchase price - and is returned back to the originator when and if paid by the borrowers. However, the Issuer benefits from the interest paid on the residual value, hence the excess spread will increase over time. Key transaction structure features Reserve fund: The transaction benefits from EUR 10,533,000 reserve fund, equivalent to 1.00% of the original balance of the rated Notes. The reserve will amortise to a floor of 0.5% in line with the rated Notes. Counterparty risk analysis Alba Leasing S.p.A. acts as servicer of the receivables on behalf of the Issuer, while Banca Finanziaria Internazionale S.p.A. (NR) is the back-up servicer and the calculation agent of the transaction. All of the payments under the assets in the securitised pool are paid into the servicer account and then transferred on a daily basis into the collection account in the name of the Issuer. The collection account is held at BNP Paribas (Aa3 long term bank deposits rating), acting through its Italian Branch, with a transfer requirement if the rating of the account bank falls below Baa2. Moody's has taken into account the commingling risk within its cash flow modelling. Principal Methodology The principal methodology used in these ratings was "Equipment Lease and Loan Securitizations Methodology" published in September 2022. Factors that would lead to an upgrade or downgrade of the ratings: The notes' ratings are sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The evolution of the associated counterparties risk, the level of credit enhancement and the Italy's country risk could also impact the notes' ratings. F-BRASILE SPA: S&P Affirms 'CCC+' ICR & Alters Outlook to Positive ------------------------------------------------------------------ S&P Global Ratings revised its outlook to positive from negative and affirmed its 'CCC+' issuer and issue ratings on aeroengine part maker F-Brasile SpA. The recovery rating is unchanged at '4', indicating its expectation of 30%-50% (rounded estimate: 35%) recovery prospects in a default scenario. The positive outlook indicates that if improving operating performance translates into adjusted debt to EBITDA trending toward and remaining below 8.0x and sustainably positive FOCF, S&P could raise the rating on F-Brasile within the next six to 12 months. Turnover at Italy-based part manufacturer F-Brasile is forecast to recover to pre-pandemic levels by 2024. In 2022, F-Brasile's top line reached EUR351 million, up 28% on 2021, mainly thanks to expanding volumes in both aerospace and defense (A&D) and industrials. Before the pandemic, the group mainly relied on wide-body platforms, which have been slow to recover. The company therefore expanded into the narrow-body segment. It won several new contracts there in recent years, which will soon come into force. S&P Global Ratings anticipates that F-Brasile's top line will grow by over 15% in 2023-2024, largely because of the ongoing recovery in the commercial aerospace industry. Although the progressive recovery of wide-body engine flying hours will support the sale of engines for platforms that had been key to F-Brasile, such as the Trent XWB 84, S&P forecasts that most of the growth will come from its new narrow-body contracts. In 2019, revenue from wide-body platforms represented about 70% of F-Brasile's A&D business, and narrow-body only 13%. By 2024, we anticipate that wide-body contracts will represent only 55% of A&D revenue and narrow-body contracts about 20%-25%. F-Brasile is expected to expand into the military and space segments and, by 2024, could generate the remaining 20%-25% of its A&D revenue from these segments, combined with business jet and other activities. On the industrial side, the macroeconomic backdrop has been less favorable, but the rollout of gas and energy development projects in Europe should continue to support demand in power generation. Industrial subsegments are likely to be mostly muted in 2023, except for power generation. S&P forecasts that industrial revenue could contract slightly this year and grow by around 6% in 2024. This contrasts with 2022, when sales were about EUR136 million and year-on-year revenue growth was 26%. This largely stemmed from strong demand from the oil and gas and general mechanics segments, which accounted for more than 55% of industrial revenue in 2022. For 2023-2024, components for gas turbines and flanges for wind power should drive the growth in power generation, which by 2024 should become the most important industrial subsegment, by revenue. S&P forecasts that revenue from power generation will grow by about 25% a year in 2023-2024, implying that it could comprise about 35%-40% of F-Brasile's total industrial revenue by the end of 2024. EBITDA, bolstered by the increase in revenue and the improvement in margins, should help the company reduce its leverage. S&P said, "Under our revised base case, we predict that F-Brasile's adjusted EBITDA margin will be comfortably over 16% in 2023 and more than 18% in 2024, putting it above the pre-pandemic level (17.4% in 2019). We attribute the improvement to reduced operating leverage and lower cost inflation. In particular, we anticipate that the company will benefit from ongoing initiatives to boost cost efficiency and cost optimization, and that turnover expansion will help it absorb fixed costs more effectively. We expect the increase in profitability and revenue to boost F-Brasile's EBITDA and ultimately enable it to reduce leverage, such that adjusted debt to EBITDA approaches 9.0x this year and drops to about 7.0x in 2024, from 11.3x in 2022." European energy prices have collapsed since their peak last year. Given the better market conditions and the improvement in the company's pass-through clauses and hedging strategies, we now expect the impact of energy costs on revenue to stabilize in 2023 and improve in 2024. In the industrial segment, F-Brasile will continue to cover energy costs on the spot market. In the aerospace segment, however, the company agreed adjustments to sales prices with some of its customers. These are effective from 2023 and improve its ability to pass on cost inflation. Although FOCF turned negative in 2022, S&P expects this to be temporary. The company built up its safety stock over 2022, in response to the shortage of critical raw materials. This created a EUR33 million spike in working capital needs. As supply-chain bottlenecks are easing, the company is likely to normalize its inventory over the next six to 12 months. This will affect its FOCF generation for 2023. Releasing the stock could reverse working capital movements by about EUR10 million-EUR15 million in 2023, causing F-Brasile's reported FOCF to reach break-even as soon as 2023. That said, S&P's adjusted measure of FOCF is likely to remain negative because of F-Brasile's increasing utilization of nonrecourse factoring. F-Brasile is not yet materially affected by rising interest rates because most of its term debt pays a fixed rate. The company's US$505 million senior secured notes represented about 94% of its long- and short-term debt in 2022 (excluding leases). They pay a fixed interest rate of 7.375% and fall due in 2026. Nevertheless, depreciation of the euro during 2022 caused an increase in reported debt. This is largely responsible for the estimated EUR7 million increase in cash interest expenses during 2023 (to EUR42 million). However, owing to EBITDA expansion, S&P forecasts that adjusted funds from operations (FFO) cash interest coverage will remain broadly unchanged in 2023, at 1.5x, before improving to 2.0x in 2024. The positive outlook indicates that S&P could raise the rating on F-Brasile within the next six to 12 months. S&P could revise its outlook to stable if F-Brasile is unable to reduce leverage as we expect, so that adjusted debt to EBITDA trends toward 8.0x and then remains below that level. Although not likely at this stage, S&P could downgrade F-Brasile if its FOCF remains negative, causing its liquidity to decline sharply from the current level. In this scenario, S&P could see the ratio of sources of liquidity to uses deteriorating to 1x or below. S&P could raise its rating if: -- FOCF turns positive and can be sustained at that level; -- Leverage trends sustainably downward and can maintained below 8.0x once it reaches that level; and -- Liquidity sources cover uses by more than 1.2x, while FFO interest coverage remains comfortably above 1.5x. ESG credit indicators: E-2, S-4, G-3 S&P said, "Social factors are a negative consideration in our credit rating analysis on F-Brasile. The company derives a significant portion of its revenue from wide-body engine platforms serving the commercial aerospace market. This segment has recovered relatively slowly from the pandemic-related restrictions that were imposed. Although global air travel continues to recover, we consider it unlikely to return to its pre-pandemic (2019) level until 2024. "Governance factors are a moderately negative consideration, as is the case for most rated entities owned by private-equity sponsors. We consider that the company's highly leveraged financial risk profile points to corporate decision-making that prioritizes the interests of the controlling owners. This also reflects the generally finite holding periods and a focus on maximizing shareholder returns." =========== P O L A N D =========== ALIOR BANK: S&P Raises LongTerm Issuer Credit Rating to 'BB+' ------------------------------------------------------------- S&P Global Ratings has taken several rating actions on Polish banks: -- S&P affirmed its 'BBB/A-2' long- and short-term ICRs on mBank S.A. and downgraded to 'BB+' from 'BBB-' the bank's senior subordinated instruments. -- S&P raised to 'BB+' from 'BB' its long-term ICR on Alior Bank S.A. and affirmed at 'B' its short-term ICR. -- S&P affirmed its 'BBB+/A-2' long- and short-term ICRs on Bank Polska Kasa Opieki S.A. (Pekao) and assigned its 'BBB+' long-term issue rating to Pekao's proposed senior unsecured bond issuance. The outlooks on S&P's long-term ratings on all three entities are stable. S&P said, "In our view, financial stability in the Polish banking sector has strengthened over the past year. Higher interest rates have boosted operating profitability at domestic banks and reinforced their ability to absorb higher costs. Consequently, we now see the trend in industry risks for Polish banks as stable." The ECJ ruling on June 15, 2023, clarified that banks may not charge borrowers for the use of capital if a loan is declared invalid by a local court; they will receive no remuneration in such cases.In recent years, thousands of mortgage loans issued in the early 2000s and denominated in foreign currencies have been annulled by Polish courts because they contained invalid foreign exchange clauses. If banks have not already accounted for the possibility of lost income, should a loan be declared invalid, they will have to adjust their provisioning models to account for this risk. In addition, S&P anticipates that the ruling will encourage additional cohorts of foreign currency mortgage borrowers to start legal action, making settlements more costly for banks. S&P's observed that Polish banks made use of their higher operating profitability in 2022 to build up material legal risk provisions against these loans. The current environment has also bolstered banks' capacity to absorb these costs. That said, the need to make additional legal risk provisions in differing degrees may depress the bottom line at specific banks and could weigh on their capital positions. The renewed focus on capital management needed to prevent regulatory capital breaches could prompt banks to cut back on new lending, leading to lost opportunities. Loan demand is currently weak but could pick up during 2023 and 2024. Of the top banks, S&P considers Bank Millennium S.A and mBank to be the most exposed to this remaining legal risk. S&P's view is supported by the size of their Swiss franc (CHF) denominated mortgage books, existing provisions, and excess capitalization, combined with their earnings capacity over the next two years. Although Polish banking supervision adheres to the EU bank regulation framework, intervention from the government is an additional risk factor for Polish banks. For example, in 2022, the government responded to the increased interest rates by introducing a very extensive "credit holidays" scheme that allowed all mortgage borrowers of loans denominated in Polish zloty to postpone eight monthly installments over 2022 and 2023. In light of the upcoming general elections, the government could prolong the scheme further or interfere in other ways in the banking sector in a populistic way. This makes banks' 2023 profitability harder to predict. Another structural weakness of the Polish banking sector is that the interests of different stakeholders are not always well balanced and could be affected by government intervention. In our opinion, this could make it harder for domestic banks to attract international investors for bonds issued as part of their minimum requirement for own funds and eligible liabilities (MREL). That said, participation by the European Bank for Reconstruction and Development has helped several domestic banks place senior nonpreferred bonds with domestic investors in recent months. S&P said, "We do not expect government interference to affect the orderly replacement of the Warsaw Interbank Offer Rate (WIBOR) reference rate with Warsaw Interest Rate Overnight (WIRON). For legacy contracts that have no proper fallback language, we would expect a regulatory conversion, including a spread adjustment, to lead to economically equivalent terms. We do not anticipate additional risks linked to potential legal cases questioning the general use of WIBOR in loan contracts." The Russia-Ukraine war is expected to continue to make the near-term outlook for economic risk in Poland difficult. This could make it harder to bring down core inflation from elevated levels, contribute to volatile financing conditions, and weaken European demand. In addition, there is uncertainty about the disbursement of some EU transfers. That said, S&P expects the labor market to remain resilient, with unemployment remaining near historical lows. This should support house prices and prevent a material rise in credit losses in the retail business. Nevertheless, S&P forecasts that nonperforming loans (NPLs) will rise, especially in the small and midsize enterprise sector. Although the government is providing material economic support, high energy and financing costs will still hit borrowers hard. mBank S.A. S&P said, "We affirmed our 'BBB/A-2' ICRs on mBank and revised the outlook to stable from developing because, although the bank is subject to two opposing credit trends, their impact on its senior unsecured creditors largely cancel each other out. "We anticipate that the ECJ ruling will materially increase the bank's legal costs and make earnings more volatile for the next few years. mBank has a material legacy portfolio of foreign currency-denominated mortgage loans. At the end of March 2023, these had a combined carrying value of Polish zloty (PLN) 5 billion. mBank also had PLN8 billion in fully repaid loans on this date. We now estimate that the bank will incur PLN3 billion in additional legal costs for the full year, of which PLN2.32 billion has been booked in the first half alone. "We forecast the bank's underlying profits to remain sizable, supported by its good operational efficiency and high interest rates in the Polish market. We also expect mBank to focus on maintaining capital management measures to meet regulatory capital requirements. Given this context, we no longer view mBank's capital and earnings position as a rating strength and therefore revised our assessment of the bank's stand-alone credit profile (SACP) to 'bbb-'from 'bbb'. "At the same time, we expect the bank to maintain sustainable buffers, with about 650 basis points (bps) of additional loss-absorbing capacity (ALAC) comprising eligible debt instruments. This is comfortably above the adjusted threshold of 350 bps and provides protection to the bank's senior creditors. As a result, we incorporate one notch of uplift for ALAC in the ICR. Although the bank will need to issue further ALAC instruments by Jan. 1, 2024, to meet regulatory requirements, we anticipate that it will be able to issue these instruments in the Polish market. "The lowering of our issue ratings on mBank's senior subordinated debt was based on its lower SACP. The SACP is the starting point for our ratings on hybrid instruments, which we consider have an incrementally higher risk of failure. Our base case is for these instruments to absorb losses under a resolution scenario." Outlook The stable outlook reflects S&P's view that mBank's underlying profitability and capitalization over the next 12-24 months will allow it to absorb future legal costs deriving from its exposures to CHF-related mortgage loans and potential further government-obligated costs, such as a prolongation of credit holidays. Downside scenario: S&P said, "We could revise down our SACP assessment, and lower all our ratings on mBank, if the bank's underlying profitability were to prove weaker than expected. This would limit the bank's ability to absorb additional credit and legal costs. We could also revise down the bank's SACP if additional credit or legal costs materially exceed our already conservative assumptions, causing a substantial dent in the bank's capital adequacy." Upside scenario: S&P could revise its SACP assessment upward, and raise all its ratings on mBank, if the bank materially reduces the legal risks it faces, and thereby makes its earnings less volatile and its capital cushions more comfortable. An upgrade would also depend on the bank's underlying profitability remaining satisfactory and commensurate with that of higher-rated peers. Ratings score snapshot TO FROM Issuer credit rating BBB/Stable/A-2 BB/Developing/A-2 SACP bbb- bbb Anchor bbb bbb Business position Adequate (0) Adequate (0) Capital and earnings Adequate (0) Strong (+1) Risk position Moderate (-1) Moderate (-1) Funding and liquidity Adequate and Adequate and strong (0) strong (0) Comparable ratings analysis (0) (0) Support (1) (0) ALAC support (1) (0) GRE support (0) (0) Group support (0) (0) Sovereign support (0) (0) Additional factors (0) (0) SACP--Stand-alone credit profile. ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. ESG credit indicators: E-2, S-3, G-2 Alior Bank S.A. The upgrade reflects S&P's view that the bank has improved its capitalization level and capacity for internal capital generation by further reducing risk. S&P's main measure of capital, the risk-adjusted capital ratio (RAC), had increased to 10.1% at end-2022 from 8.5% at end-2021, mainly because Alior retained all its profit during the year and materially reduced its exposure to some high-risk asset classes, such as commercial real estate. The gradual shift toward mortgage loans from unsecured consumer lending also contributed to the strengthening of Alior's risk-weighted capital buffer. Management has set targets to further reduce the share of higher risk lending in the overall portfolio; continues to work out or sell NPLs; and expects to persist with full profit retention. Therefore, S&P expects the RAC ratio to strengthen to about 11% over the next two years. S&P also anticipates that Alior can maintain a strong capital buffer, even after it starts dividend payments. Alior has only negligible exposure to legacy CHF-denominated loans and its strong capital buffer facilitates growth. These factors give it a robust competitive position, compared with that of some Polish peers still burdened by legacy issues linked to CHF loans. Over the past two years, Alior's new management team has demonstrated its ability to deliver respectable profitability, after a prolonged period of underperformance. Increased interest rates fueled much of the material improvement in profitability in 2022, but S&P acknowledges that management's efforts to reduce risk benefit earnings stability over the cycle. Despite this improvement, Alior's NPLs remain high at about 10%; about twice the peer average. Alior's portfolio includes a higher share of riskier lending than the system average. S&P does not expect a significant drop in the NPL ratio over the next two years unless Alior undertakes material NPL sales. The management team at Alior is starting to become more stable, after recent fluctuations. The bank is gradually developing a record of maintaining prudent lending standards, without apparent intervention from the (indirect) state owner. If these changes persist, our concerns regarding governance risks may diminish, although S&P still views the bank's business and risk positions as constrained. Residual governance risks remain at the system level, and at the bank specifically, given its link to the state owner. Outlook S&P said, "The stable outlook indicates that, over the next 12 months, we expect Alior to report organic lending growth and continued reduction of NPLs from their current elevated level. We anticipate that Alior will remain moderately strategic to the Polish state-controlled insurance group Powszechny Zaklad Ubezpieczen S.A. (PZU; A-/Stable/--), and that PZU would provide support to Alior, if needed." Downside scenario: S&P could lower the rating on the bank if aggressive growth or unexpected losses caused Alior's RAC ratio to deteriorate to below 10%. The rating could also come under pressure if there were renewed turnover in the management team. S&P could also downgrade Alior if it considered that its importance to PZU had decreased, particularly if it also demonstrated only mediocre profitability, below the group's standards. Upside scenario: S&P views an upgrade as remote but could raise the ICR if the bank continues to diversify into less risky assets. An upgrade would also depend on: -- The management team remaining stable; -- Stringent execution of the business plans; and -- A material improvement in the quality and granularity of the lending portfolio. In particular, S&P will monitor the cost of risk, which attests to the bank's risk appetite. In its view, continued reduction of risk and increased diversification will make revenue more stable and support profitability and capital buffers through the cycle. S&P could also upgrade the bank in the next 12 months if it considered that it had become more important to PZU. Ratings score snapshot TO FROM Issuer credit rating BB+/Stable/B BB/Stable/B SACP bb bb- Anchor bbb bbb Business position Constrained (-2) Constrained (-2) Capital and earnings Strong (+1) Adequate (0) Risk position Constrained (-2) Constrained (-2) Funding and liquidity Adequate and Adequate and adequate (0) adequate (0) Comparable ratings analysis (0) (0) Support (1) (1) ALAC support (0) (0) GRE support (0) (0) Group support (1) (1) Sovereign support (0) (0) Additional factors (0) (0) SACP--Stand-alone credit profile. ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. ESG credit indicators: To E-2, S-2, G-3 From E-2, S-2, G-4 Bank Polska Kasa Opieki S.A. (Pekao) S&P said, "We affirmed our 'BBB+/A-2' long- and short-term ICRs on Pekao to reflect the bank's limited exposure to legacy CHF-denominated loans, which puts the bank in a comfortable position regarding this legal risk. Also, considering its strong capitalization, supported by our forecast RAC ratio exceeding 13% over the coming years, Pekao might actually benefit from competitors' capital constraints and gain market share in the domestic corporate and retail business should loan demand pick up in the future. In addition, we consider that Pekao's strong capital and robust profitability provide comfortable buffers to absorb costs from potentially adverse scenarios. Its affiliation with its largest single investor, state-owned insurance company PZU, benefits its franchise in the domestic corporate banking business and also supports the placement of MREL instruments with domestic investors in our view. We expect Pekao to meet solo and consolidated MREL requirements by Jan. 1, 2024. "However, we do not expect Pekao to build sufficiently high ALAC buffers over the coming years to provide material protection to senior unsecured creditors. For rating uplift, we would expect Pekao to meet a threshold of more than 350 bps of our calculated risk-weighted assets (RWAs). The threshold adjustment of 50 bps over the standard threshold of 300 bps reflects our expectation that Pekao will not issue more than about 10 instruments that we consider ALAC-eligible, which will lead to some maturity concentration. "We anticipate that Pekao will continue to issue subordinated instruments of about PLN500 million over the rest of 2023 and annually through to 2026 and refinance its maturing Tier 2 instruments. We forecast its ALAC buffer will reach about 280 bps by 2026. Pekao's proposed issuance of PLN1 billion in MREL-eligible senior nonpreferred and senior preferred instruments supports meeting regulatory requirements and is incorporated in our forecast." Outlook The stable outlook reflects S&P's view of Pekao's solid earnings prospects over the next 12-24 months, which should enable it to build a solid buffer to absorb the expected moderate increase in credit losses and potential costs from further government-obligated costs, such as a prolongation of credit holidays. Downside scenario: S&P considers a downgrade unlikely over the next 24 months. However, S&P could consider downgrading Pekao if a combination of the negative scenarios below occurred at the same time: -- A weakening of the bank's RAC ratio to below 10%, resulting from extraordinary costs or strong future RWA growth; -- A deterioration of asset quality; -- An increase in risk for Poland's banking sector over the next 12-24 months that weighed on our view of the bank's 'bbb+' SACP; and -- A weakening of Pekao's strategic importance for PZU and, consequently, a reduced likelihood of extraordinary support from the parent. Upside scenario: S&P could upgrade Pekao if it believed the bank would sustainably build its ALAC beyond its adjusted threshold of 3.5% of S&P Global Ratings' RWA in the next 24 months. Alternatively, a positive rating action on Pekao could stem from an upgrade of PZU, of which the bank is expected to remain a moderately strategic subsidiary, since this would indicate PZU's stronger capacity to support Pekao if needed. Generally, an upward revision of our assessment of Pekao's stand-alone strength would need to be supported by improving asset quality, for example, through a reduction of the NPL ratio. Ratings score snapshot TO FROM Issuer credit rating BBB+/Stable/A-2 BBB+/Stable/A-2 SACP bbb+ bbb+ Anchor bbb bbb Business position Adequate (0) Adequate (0) Capital and earnings Strong (+1) Strong (+1) Risk position Adequate (0) Adequate (0) Funding and liquidity Adequate and Adequate and strong (0) strong (0) Comparable ratings analysis (0) (0) Support (0) (0) ALAC support (0) (0) GRE support (0) (0) Group support (0) (0) Sovereign support (0) (0) Additional factors (0) (0) SACP--Stand-alone credit profile. ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. ESG credit indicators: E-2, S-2, G-3 BICRA Score Snapshot Poland TO FROM BICRA group 4 4 Economic risk 4 4 Economic resilience High risk High risk Economic imbalances Low risk Low risk Credit risk in the economy Intermediate risk Intermediate risk Trend Stable Stable Industry risk 5 5 Institutional framework High risk Intermediate risk Competitive dynamics High risk Very high risk Systemwide funding Low risk Low risk Trend Stable Negative Banking Industry Country Risk Assessment (BICRA) economic risk and industry risk scores are on a scale from 1 (lowest risk) to 10 (highest risk). Ratings List BANK POLSKA KASA OPIEKI S.A. RATINGS AFFIRMED BANK POLSKA KASA OPIEKI S.A. Issuer Credit Rating BBB+/Stable/A-2 Resolution Counterparty Rating A-/--/A-2 NEW RATING Senior Unsecured BBB+ MBANK S.A. RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION TO FROM MBANK S.A. Issuer Credit Rating BBB/Stable/A-2 BBB/Developing/A-2 RATINGS AFFIRMED Resolution Counterparty Rating BBB+/--/A-2 BBB+/--/A-2 Senior Unsecured BBB BBB DOWNGRADED Senior Subordinated BB+ BBB- ALIOR BANK S.A. UPGRADED TO FROM ALIOR BANK S.A. Issuer Credit Rating BB+/Stable/B BB/Stable/B =========================== U N I T E D K I N G D O M =========================== CLARITAS GROUP: Creditors Owed GBP7MM+ at Time of Collapse ---------------------------------------------------------- Grant Prior at Construction Enquirer reports that subcontractors and suppliers to the collapsed Claritas Group have been left holding unpaid invoices totaling more than GBP7 million. The Kent-based contractor confirmed earlier this month that it was heading for liquidation following cash flow and inflationary pressures, the Enquirer relates. According to the Enquirer, a statement of affairs seen by the Enquirer ahead of the company being wound-up details debt levels across the business. Details show trade creditors owed GBP2.7 million and subcontractors a further GBP4.6 million with 250 firms hit by the failure of Claritas, the Enquirer discloses. HOWARD RUSSELL: Subcontractors Owed GBP4.6MM at Time of Collapse ---------------------------------------------------------------- Grant Prior at Construction Enquirer reports that more than 200 suppliers and subcontractors were owed GBP4.6 million when Northumberland-based Howard Russell Construction went into administration. Administrators from FRP Advisory took control of the business in May, the Enquirer recounts. According to the Enquirer, an update on the administration filed at Companies House said the firm was sunk by a combination of rising materials costs, project delays and defect liability claims. It also detailed the level of debts with 208 unsecured creditors left holding unpaid invoices, the Enquirer notes. FRP said suppliers would get some money back for their debts once the company's assets were realised during a liquidation, the Enquirer relates. Howard Russell worked across the UK as a design and build contractor for a wide range of sectors. Latest results for the firm for the year to March 31 2022 show a pre-tax profit of GBP790,000 from a turnover of GBP43.5 million with 31 staff working at the company, the Enquirer discloses. NEPTUNE ENERGY: Moody's Puts 'Ba2' CFR on Review for Upgrade ------------------------------------------------------------ Moody's Investors Service has placed Neptune Energy Group Midco Ltd.'s (Neptune) Ba2 corporate family rating and Ba2-PD probability of default rating on review for upgrade. Concurrently, Moody's revised the outlook on Neptune to ratings under review from stable. The Ba3 instrument rating of the USD850 million backed senior unsecured notes issued by Neptune's wholly-owned subsidiary Neptune Energy Bondco Plc remains unchanged and the outlook on Neptune Energy Bondco Plc remains stable as no action was taken on this entity. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rating action follows Neptune's announcement made on June 23, 2023[1] whereby Italian oil major ENI S.p.A. (ENI, Baa1 negative)'s wholly-owned subsidiary Eni International BV has signed a sale and purchase agreement to acquire Neptune with Var Energi ASA (Var, Baa3 stable) simultaneously signing an inter-conditional sale and purchase agreement to acquire Neptune Energy Norge AS. Excluding Neptune's German business, which is not part of the transaction, the transaction entails an aggregate enterprise value (subject to customary adjustments) of $4.9 billion. Subject to customary adjustments and approvals, closing is expected during Q1 2024. Moody's anticipates that Neptune will use proceeds from the abovementioned transactions to fully repay its outstanding financial indebtedness, which mainly included around $1.1 billion drawings under the company's revolving base lending facility (RBL) as at March 31, 2023 and $850 million of senior unsecured notes issued by Neptune Energy Bondco Plc. As a result, Moody's did not take an action on Neptune Energy Bondco Plc's senior unsecured rating. Along with the expectation of a debt-free financial profile, Moody's projects the company to retain a substantial amount of cash on balance sheet on a pro-forma basis. The review for upgrade will focus on (1) the transactions concluding as planned, (2) confirmation that proceeds will be deployed towards redemption of Neptune's outstanding debt instruments, (3) any conditions placed on the company in order to obtain approval from relevant authorities. Based on current information, Moody's anticipates that an upgrade of Neptune's ratings could exceed one notch at the conclusion of the review. As Moody's previously stated, Neptune's ratings could be upgraded if production volumes grow durably above 225 kboepd supported by an adequate reserve life, while keeping Moody's-adjusted debt to average daily production below $7,500/boe and retained cash flow (RCF) to total debt above 45% on a sustainable basis in a $60/boe oil price scenario. An upgrade would also require a well-defined and conservative shareholder remuneration policy, and maintenance of strong liquidity backed by positive FCF generation. Conversely, Moody's would consider downgrading Neptune's ratings if the production profile and/or reserve life of the company deteriorate significantly, or FCF generation is consistently negative as a result of large shareholder distributions and/or capital outspending, which would strain the company's liquidity; or Moody's-adjusted debt to average daily production is above $15,000/boe or RCF/gross debt falls below 30% for a prolonged period. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Independent Exploration and Production published in December 2022. COMPANY PROFILE Neptune is a UK-based independent oil and gas E&P company, whose portfolio of gas-weighted hydrocarbon producing assets is diversified across Norway, the Netherlands, the UK, Germany, Indonesia, Algeria and Egypt. Additionally, the company conducts exploration activities in Australia. In the 12 months that ended March 31, 2023, the company produced on average 137 kboepd (57% natural gas, 19% LNG and 24% oil), generating $4.9 billion of revenue and $4.0 billion of Moody's-adjusted EBITDA. Neptune's main shareholders are China Investment Corporation (49.0%), Carlyle Group (30.6%) and CVC Capital Partners (20.4%), while management holds the remaining 1%. THAMES WATER: Appoints Sir Adrian Montague as New Chair ------------------------------------------------------- Jim Pickard, Arash Massoudi and Gill Plimmer at The Financial Times report that Thames Water has appointed Sir Adrian Montague, an experienced City troubleshooter, to step in as the new chair of Britain's largest water company as it struggles to raise crucial funding. Mr. Montague, who has previously chaired British Energy and Anglian Water and was deputy chair of Network Rail, acknowledged the "challenges" facing the industry and said it was a "critical time" for water companies, the FT relates. "I now look forward to working with the board and executive team and Thames Water's regulators and investors, to focus on the company's turnround plan and its future financing needs to ensure it delivers on its responsibilities to serve its customers and communities well and benefit the environment," the FT quotes Mr. Montague as saying in a statement. Mr. Montague is also chair of Cadent Gas, the UK's largest gas distribution network and of Manchester Airports Group. The British government is on standby for a potential taxpayer rescue of the company, which was recently identified by the water regulator Ofwat as the most leveraged group in a debt-laden sector, the FT notes. Thames Water's executives will be hauled before MPs on the environment select committee on July 12 to explain the company's financial predicament, it announced on June 29, the FT discloses. It intends to grill the former and current senior management of Thames Water, as well as water minister Rebecca Pow and senior managers at water regulator Ofwat, the FT states. Rising interest rates are putting pressure on many water companies, with Ofwat having in December expressed concerns about Thames Water, Yorkshire Water, SES Water and Portsmouth Water, according to the FT. Thames announced a year ago that it wanted to raise GBP1.5 billion from its existing shareholders -- large institutional investors such as the Universities Superannuation Scheme and the China Investment Corporation -- but it has so far raised only GBP500 million of this, leaving a GBP1 billion gap, the FT recounts. The previous chief executive, Sarah Bentley, suddenly stepped down this week and one of her co-successors recently admitted the company may need to raise more than GBP1 billion given the pressures on the business. THAMES WATER: Publication of Accounts at Risk of Being Delayed -------------------------------------------------------------- Anna Isaac and Sandra Laville at The Guardian report that Thames Water has refused to say when it will publish its annual report and accounts, which had been expected by investors next week, as concerns mount over the company's financial viability. According to The Guardian, the risk of delay will add to the turmoil engulfing England's 11 privatised water companies, after a day in which board directors, ministers and regulators scrambled to restore calm as discussions continued over a potential temporary nationalisation of Thames Water. The Guardian revealed on June 28 that England's largest water company, which serves 15 million customers in an area than spans the Thames Valley from London to Oxford and beyond, may have to spend GBP10 billion improving its pipes and treatment works to meet the legal minimums required by regulators. Thames Water is under a regulatory obligation to file its financial results by July 15, when its accounts for the year to March 2023 would be made public, The Guardian notes. In previous years, it has filed during the first week of July, and investors said they had been told by the company to mark July 4 as the publication date for 2023, The Guardian states. However, the company is refusing to say publicly whether the accounts will appear next week, or even before the regulator's deadline, The Guardian discloses. According to The Guardian, sources familiar with the emergency talks are raising questions about whether the financial issues could cause its auditor, PwC, to delay signing off the accounts. Ofwat tried to restore calm on June 29. Releasing a "statement on financial resilience in the water sector", it said Thames Water had "significant issues to address" but that the company had "strong liquidity", having recently received an additional GBP500 million from shareholders, and it now had GBP4.4 billion in cash and committed funding, The Guardian relates. YORKSHIRE WATER: Raises GBP50 Million to Shore Up Balance Sheet --------------------------------------------------------------- Gill Plimmer, Mercedes Ruehl and Olaf Storbeck at The Financial Times report that Yorkshire Water has raised GBP500 million from shareholders, the latest sign of the UK's debt-laden water companies racing to shore up their balance sheets. According to the FT, the equity raising, which came this week, is part of a plan outlined in October to inject GBP940 million in equity over five years and comes on top of GBP700 million raised from bondholders since February, Yorkshire Water said on June 29. Shareholders, which include Singapore's sovereign wealth fund GIC, German asset manager DWS and private equity group Corsair Capital, agreed to commit cash faster, the company said, describing the capital raise as "better than anticipated", the FT relates. Concerns are growing for the overall health of the water industry at a time of rising rates and pressure for more infrastructure investment, the FT discloses. "We understand the importance of continuing to have robust financial structures in place and we've been significantly improving our financial position over the past six months with a stronger and more resilient balance sheet and we have the appropriate liquidity to meet future cash needs," the FT quotes Yorkshire Water, which serves 2.3mn households and 130,000 businesses, as saying. Last year, Ofwat requested Yorkshire Water's owners inject GBP940 million to pay down debt over five years after warning over the strained balance sheet, the FT recounts. The company's debt-to-equity ratio -- or gearing -- stood at 77% as of March 2021, the FT notes. =============== X X X X X X X X =============== [*] BOOK REVIEW: PANIC ON WALL STREET ------------------------------------- A History of America's Financial Disasters Author: Robert Sobel Publisher: Beard Books Softcover: 469 Pages List Price: $34.95 Review by: Gail Owens Hoelscher http://www.beardbooks.com/beardbooks/panic_on_wall_street.html "Mere anarchy is loosed upon the world, the blood-dimmed tide is loosed, and everywhere the ceremony of innocence is drowned; the best lack all conviction, while the worst are full of passionate intensity." What a terrific quote to find at the beginning of a book on a financial catastrophe! First published in 1968. Panic on Wall Street covers 12 of the most painful episodes in American financial history between 1768 and 1962. Author Robert Sobel chose these particular cases, among a dozen or so others, to demonstrate the complexity and array of settings that have led to financial panics, and to show that we can only make; the vaguest generalizations" about financial panic as a phenomenon. In his view, these 12 all had a great impact on Americans of the time, "they were dramatic, and drama is present in most important events in history." They had been neglected by other financial historians. They are: William Duer Panic, 1792 Crisis of Jacksonian Fiannces, 1837 Western Blizzard, 1857 Post-Civil War Panic, 1865-69 Crisis of the Gilded Age, 1873 Grant's Last Panic, 1884 Grover Cleveland and the Ordeal of 183-95 Northern Pacific Corner, 1901 The Knickerbocker Trust Panic, 1907 Europe Goes to War, 1914 Great Crash, 1929 Kennedy Slide, 1962 Sobel tells us there is no universally accepted definition if financial panic. He quotes William Graham Sumner, who died long before the Great Crash of 1929, describing a panic as "a wave of emotion, apprehension, alarm. It is more or less irrational. It is superinduced upon a crisis, which is real and inevitable, but it exaggerates, conjures up possibilities, take away courage and energy." Sobel could find no "law of panics" which might allow us to predict them, but notes their common characteristics. Most occur during periods of optimism ("irrational exuberance?"). Most arise as "moments of truth," after periods of self-deception, when players not only suddenly recognize the magnitude of their problems, but are also stunned at their inability to solve them. He also notes that strong financial leaders may prove a mitigating factor, citing Vanderbilt and J.P. Morgan. Sobel concludes by saying that although financial panics have proven as devastating in some ways as war, and while much research has been carried out on war and its causes, little research has been done on financial panics. Panics on Wall Street stands as a solid foundation for later research on the topic. ********* 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 * * *