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       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, August 3, 2023, Vol. 24, No. 155

                           Headlines



C R O A T I A

ULJANIK BRODOGRADILISTE: Shareholders Further Cut 1856 Stake Price


F R A N C E

LA FINANCIERE: S&P Lowers LT ICR to 'CCC+', On Watch Negative


I T A L Y

MARATHON SPV: Moody's Hikes Rating on EUR33.70MM B Notes from Ba2


S W I T Z E R L A N D

GAM HOLDING: Says Liontrust Rescue Deal Essential to Survival


U N I T E D   K I N G D O M

ACCROFAB AND BROMFORD: Enact Fund Acquires Business, Assets
ACTIVE ELECTRICAL: In Administration, Owes Creditors GBP390,000
AUXEY BIDCO: S&P Assigns 'B+' Long-Term ICR, Outlook Stable
METALAST: Impact of Ukraine War Prompts Administration
QUALIA CARE: Birchley Hall Care Home Shuts Down

SAGE AR 2021: S&P Lowers Class E Notes Rating to 'B+ (sf)'

                           - - - - -


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C R O A T I A
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ULJANIK BRODOGRADILISTE: Shareholders Further Cut 1856 Stake Price
------------------------------------------------------------------
Annie Tsoneva at SeeNews reports that the shareholders of Croatia's
bankrupt shipbuilding company Uljanik Brodogradiliste have decided
to cut the price they are seeking for their combined stake in
Uljanik Brodogradnja 1856 shipyard to EUR13.8 million (US$15.5
million), the minutes of a court sitting showed.

The new price request equals 50% of the estimated value of the
stake that the shareholders are offering for sale at an open
bidding auction, after a previous attempt to sell it at 75% of the
value failed, SeeNews relays, citing minutes of the meeting of
creditors held on July 17 at the Commercial Court in Pazin.

According to earlier minutes of sitting of the same court, the size
of the stake for sale is 54.77%, SeeNews discloses.  The Croatian
government is the largest creditor of Uljanik, SeeNews notes.




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F R A N C E
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LA FINANCIERE: S&P Lowers LT ICR to 'CCC+', On Watch Negative
-------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
cleaning and facility management services provider La Financiere
Atalian SAS (Atalian) and its issue rating on its senior unsecured
debt to 'CCC+' from 'B-'. S&P also placed all its ratings on
Atalian on CreditWatch with negative implications.

S&P said, "The CreditWatch placement indicates that we could lower
our ratings on Atalian if we do not believe that it can
successfully refinance its debt before it matures, or if we
consider that the risk of a debt restructuring is increasing.

"We have lowered our forecasts to reflect a slower restoration of
EBITDA margins than we previously expected. Delays in passing cost
inflation on to customers and the start-up costs associated with
new contract wins have adversely affected Atalian's operations in
France. Atalian has made some progress on price negotiations and
has regained some of its lost profitability. It has also put in
place several operational-efficiency and cost-control programs.
However, the improvement in profitability is gradual, and we expect
that Atalian's margins in France will remain at about 8% in 2023,
compared to their level of above 10% up until 2021. In addition, we
forecast that Atalian could incur exceptional costs associated with
the implementation of its new strategy.

"Based on these assumptions, we forecast that FOCF after leases
will remain negative by EUR60 million-EUR70 million in 2023 and
negative by EUR20 million-EUR30 million in 2024. At the same time,
Atalian's S&P Global Ratings-adjusted leverage will remain
elevated, at about 10.7x in 2023 and 8.5x in 2024. We therefore
consider Atalian to be dependent upon favorable business,
financial, and economic conditions to meet its financial
commitments. Based on second-quarter 2023 results, we acknowledge
that the company has continued to win contracts and maintain
retention rate above 90% in most of its markets. Underpinned by
these factors along with Atalian's good presence in France and
scale of operations, our view of business risk is currently
unchanged."

S&P believes that continued headwinds in Atalian's core business
and weak market conditions heighten refinancing risks.After
Atalian's sale of its U.K., Asia, and Aktrion businesses earlier
this year, there have been several changes in the top tier of
management, including the appointment of a new CEO, who joined in
May 2023, and a new CFO, who joined in July 2023. The new
management team has two pressing and related concerns:

-- Addressing the refinancing of the upcoming debt maturities,
namely, the EUR625 million notes due in May 2024 and the EUR350
million and GBP225 million notes due in May 2025; and

-- Developing a strategy to improve profitability and cash flow
generation.

S&P said, "Despite the EUR685 million in proceeds that Atalian
received from the recent sale of its U.K., Asia, and Aktrion
businesses, we believe that its liquidity is insufficient to cover
its near-term debt maturities. We believe that Atalian's ability to
refinance its capital structure will hinge on the improvement of
its profitability in France and the U.S., which could prove
challenging in the current macroeconomic environment.

"The CreditWatch placement signals the potential for a downgrade if
we do not believe that Atalian can successfully refinance its
upcoming debt maturities in line with its original promise. In
resolving the CreditWatch placement, we will monitor Atalian's
progress toward refinancing its capital structure. We aim to
resolve the CreditWatch within the next few months."

ESG Indicators: E-2, S-2, G-4




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I T A L Y
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MARATHON SPV: Moody's Hikes Rating on EUR33.70MM B Notes from Ba2
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two notes in
Marathon SPV S.r.l. The rating action reflects better than expected
collateral performance which translates into an increased credit
enhancement for the Notes.

EUR286.47M Class A Notes, Upgraded to A2 (sf); previously on Jul
19, 2021 Upgraded to Baa1 (sf)

EUR33.70M Class B Notes, Upgraded to A3 (sf); previously on Jul
19, 2021 Upgraded to Ba2 (sf)

Maximum achievable rating is Aa3 (sf) for structured finance
transactions in Italy, driven by the corresponding local currency
country ceiling of the country.

RATINGS RATIONALE

The rating action is prompted by better than expected collateral
performance.

Better than expected collateral performance

The Marathon SPV S.r.l. transaction has consistently overperformed
its original business plan, with the Cumulative Collection Ratio
(computed as the ratio between actual net collections and net
collections expected in the original business plan) at 105.18% as
of the most recent IPD and consistently above 102% since the
transaction closed.

The Servicer has updated its original projections upwards two times
around December 2020 and March 2021, with a final positive
revaluation in November 2021 at about +2.22% when compared to their
original expectations.

The pace of collection has shown particular resilience during the
life of the transaction, including during the coronavirus pandemic,
with gross collections consistently above EUR16mm per quarter, with
collections in Q1 2023 equal to EUR18.4mm.

The main recovery strategy put in place by the Servicer to collect
recoveries from the securitised pool of asset has been to swap
defaulted positions for "cambiali" plans. "Cambiali" are akin to
promissory notes. As at the March 2023 interest payment date around
60% of gross collections recorded since deal closing came from
"cambiali" plans, and Moody's understand this has contributed to
the resilience and stability Moody's could observe in the pace of
cash collections.

Increase in Available Credit Enhancement

The advance rate on Class A Notes, the ratio between Class A Notes'
balance and the outstanding gross book value of the backing
portfolio, decreased to 1.13% as of the April 2023 interest payment
date from 5.70% at closing. A lower advance rate translated into
higher protection against credit losses for Class A Notes. Indeed
when Moody's compare servicer's net expected collections from April
2023 onwards to the balance of the Notes, the ratio is over 3.5x
for Class A notes.

Between closing and the April 2023 interest payment date the gross
book value of the pool of assets has decreased to around EUR4.73bn
from around EUR5.03bn, while Class A and Class B Notes have
amortized, respectively, by around EUR232.71mm and EUR26.71mm.
Class A and Class B Notes have amortized pro rata since closing,
subject to performance-related triggers. Moody's also notes that
Class B deferral triggers have not been hit up to date. The notes
are paying a fixed interest rate coupon and therefore the
transaction is not exposed to interest rate risk. The securitised
portfolio is made entirely of unsecured non-performing loans.
Considerations about the potential volatility of NPL collections
and benchmarking with other Italian NPL transactions were part of
the analysis.

Counterparty Exposure

The rating action took into consideration the notes' exposure to
relevant counterparties, such as servicer, or account banks.

The cash proceeds may be invested in eligible investments rated at
least Baa2.

The principal methodology used in these ratings was Non-Performing
and Re-Performing Loan Securitizations Methodology 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: (i) the recovery process of the non-performing
loans producing significantly higher cash-flows in a shorter time
frame than expected; (ii) improvements in the credit quality of the
transaction counterparties; and (iii) a decrease in sovereign
risk.

Factors or circumstances that could lead to a downgrade of the
ratings include: (i) significantly lower or slower cash-flows
generated from the recovery process on the non-performing loans;
(ii) deterioration in the credit quality of the transaction
counterparties; and (iii) increase in sovereign risk.



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S W I T Z E R L A N D
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GAM HOLDING: Says Liontrust Rescue Deal Essential to Survival
-------------------------------------------------------------
Sally Hickey at The Financial Times reports that GAM has made a
fresh attempt to assuage shareholder concerns over its takeover
offer from UK asset manager Liontrust that it says is essential to
its survival.

A day ahead of its results announcement, in which it is expected to
confirm a CHF23 million (US$26.2 million) loss in the first half,
the Swiss investment house laid out its responses to a group of
shareholders balking at Liontrust's offer, reiterating that the
deal is essential "to continue as a going concern", the FT
relates.

The move forms the latest in a series of efforts by GAM in recent
months to convince any holdouts to accept Liontrust's offer, which
is facing a mounting challenge from an investor group, which
includes Newgame and wealth management company Bruellan, the FT
notes.

Time is running out before Liontrust's twice-extended Aug. 4
deadline to seal the deal it outlined in May, the FT discloses.
Barring a last-minute delay to GAM's scheduled results, today, Aug.
3, could provide the 40-year-old investment house -- one of the
largest in Europe before it stumbled in to scandal in 2018 -- with
a final opportunity to push the deal over the line, the FT states.

"Newgame's proposals ignore business realities and do not provide a
credible path forward," the FT quotes GAM's board as saying in a
statement last week.  "They do not provide the required immediate
funding and materially underestimate the scale of funding needed to
restructure the business and to support it as a going concern.
Liontrust is the only viable option."

Portfolio managers at GAM have also voiced support for the deal,
while Liontrust's chief executive John Ions has warned the clock is
at "one minute to midnight" for GAM's future, the FT relays.

GAM has struggled to recover from its involvement in the Greensill
scandal -- an episode that led to the ejection of one of its star
managers, a fine of GBP9.1 million over conflicts of interest, and
a 96% collapse in its share price, the FT recounts.

London-listed Liontrust, which has snapped up seven smaller asset
managers in 11 years, stepped forward with a proposed acquisition
in May -- a move swiftly recommended by GAM's board and its fund
managers, the FT relates.  As part of the offer, Liontrust extended
a GBP17.8 million loan to GAM, half of which has already been paid,
in an arrangement that will be terminated at the end of the year if
the deal has not been completed, the FT discloses.

It is offering 0.06 of its own shares for each share in GAM, which
now trades at CHF0.53, and last week it extended the deadline for
its tender offer for GAM's shares to Friday, Aug. 4.  It also
removed a clause that required GAM's fund management services
business to be sold for the deal to go ahead, and issued a second
show of support from GAM's fund managers, the FT states.  "The
acquisition is Liontrust's full and final offer," the company said
in a statement.

But Liontrust and GAM face resistance from activist investors led
by French telecoms billionaire Xavier Niel, who say they own 9.6%of
GAM's shares, according to the FT.  They have said the proposal
significantly undervalues the company and the potential value a
turnaround could generate for shareholders, and have launched their
own offer for 17.5% of the company at CHF0.55 per share, the FT
relates.




===========================
U N I T E D   K I N G D O M
===========================

ACCROFAB AND BROMFORD: Enact Fund Acquires Business, Assets
-----------------------------------------------------------
Business Sale reports that The Enact Fund, which is managed by
private equity firm Endless, has acquired the business and certain
assets of precision engineering businesses Accrofab and Bromford
Industries.

According to Business Sale, the deal sees Enact take on Accrofab's
business and base in Derby, as well as the Alcester site of
Bromford Industries.  However, Accrofab's Leicester facility has
not been included in the acquisition, Business Sale notes.

Accrofab and Bromford Industries precision engineer fabricated
components used in the power generation and aerospace sectors and
have a considerable base of international blue-chip clients.
Despite this, the business fell into administration in March 2023
following a downward trend in demand in the wake of COVID-19,
rising energy and raw material costs and supply chain disruption,
Business Sale recounts.  The Leicester site had also experienced
operational issues, exacerbating the business' liquidity problems,
Business Sale discloses.

Chris Pole and Ryan Grant of Interpath Advisory were appointed as
joint administrators on March 9, Business Sale relays.  After
trading the business for close to five months, the administrators
secured a sale to The Enact Fund, part of Endless LLP's Enact Fund
III, according to Business Sale.

Following the completion of the deal, the business will exclusively
trade under the Accrofab brand, Business Sale states.  Endless will
provide funding for the current management team, under the
leadership of CEO Ed Ashworth, to separate the businesses from the
Bromford Group, as well as investing in the business' operations,
Business Sale notes.

"After trading the business for twenty weeks, we're delighted to
have secured this transaction which not only sees production
continue uninterrupted at both sites in Alcester and Derby, but
which importantly safeguards the jobs of 220 members of staff,"
Business Sale quotes joint administrator and Interpath Managing
Director Ryan Grant as saying.


ACTIVE ELECTRICAL: In Administration, Owes Creditors GBP390,000
---------------------------------------------------------------
Business Sale reports that an electrical contracting firm based in
Lincolnshire has fallen into administration after posting two
separate notices of intention to appoint administrators (NOI) in
July.

Active Electrical Services (AES) is based in Stamford, Lincolnshire
and employed an average of 11 staff last year, according to recent
financial accounts.

The company appears to have been struggling for some time, having
filed NOIs on July 3 and July 14, as it sought protection from its
creditors, Business Sale relates.  According to the company's
accounts for the year ending June 30, 2022, it owed creditors close
to GBP390,000 and had two outstanding charges against it from the
Royal Bank of Scotland (RBS) and Aldermore Bank, Business Sale
notes.

The firm, which was founded in 2014, has now moved to appoint joint
administrators Charles Ranby-Gorwood and Arabella Ranby-Gorward of
CRG Insolvency & Financial Recovery.  The joint administrators will
handle the day-to-day operation of the company.

In AES's accounts for the year to June 30 2022, its fixed assets
were valued GBP7,575 and current assets at GBP359,427, down from
over GBP0.5 million a year earlier,  Business Sale discloses.  The
company's debts to its creditors, however, left it with net
liabilities of close to GBP220,000 at the time of filing, Business
Sale states.



AUXEY BIDCO: S&P Assigns 'B+' Long-Term ICR, Outlook Stable
-----------------------------------------------------------
S&P Global Ratings assigned a long-term issuer credit rating of
'B+' to U.K.-based talent acquisition and management services
provider Auxey Bidco Ltd. (trading as Alexander Mann Solutions;
AMS). S&P also assigned an issue rating of 'B+' and recovery rating
of '3' to the GBP373 million-equivalent TLB (equivalent amount
based on the USD/GBP exchange rate of about 0.774), maturing June
2027.

The stable outlook reflects S&P's expectation that AMS will
generate free operating cash flow (FOCF) of more than GBP10 million
over the next 12-24 months, while maintaining adjusted leverage of
less than 5x and funds from operations (FFO) cash coverage of more
than 2x. This will be on the back of strong organic growth and an
adjusted EBITDA margin of about 14%.

S&P's 'B+' ratings reflect its expectation of adjusted leverage of
less than 5x and positive FOCF of more than GBP10 million over the
next 12-24 months. AMS' amendment and extension of its senior
secured TLB is largely leverage neutral, since the company will use
the approximately GBP373 million in proceeds to pay down existing
debt equivalent to GBP356 million and cover estimated transaction
costs. The existing TLB has two tranches: one of GBP200 million and
one of $201 million. The transaction has extended the maturity date
of the existing TLB by two years, to June 2027 from June 2025. In
S&P's view, the transaction is a proactive way of addressing the
company's future refinancing needs. The equivalent TLB amount is
based on the USD to GBP exchange rate of about 0.774.

S&P said, "Pro forma the transaction, we forecast adjusted debt to
EBITDA of about 4.1x at the end of 2023 and FOCF of GBP10
million-GBP11 million. The new TLB will have a slightly higher
interest margin, but we forecast only a moderate increase in
interest expenses over 2023-2024 because we understand that AMS
will hedge the floating rates for the pound sterling and U.S.
dollar tranches at the same rates as for the current tranches until
mid-2024. We expect FFO cash interest coverage to be 2.2x-2.5x pro
forma the transaction.

AMS has been deleveraging since 2021 on the back of strong organic
growth. Strong EBITDA growth improved AMS' adjusted debt to EBITDA
to 4.6x in 2022 from 7.0x in 2019. This was despite
pandemic-related headwinds in 2020, when leverage temporarily
spiked to 11x. Despite our leverage estimate of 4.1x over the next
months, our view of a highly leveraged financial risk profile is
driven by our financial policy assessment. AMS has witnessed a
strong recovery since the pandemic, with topline growth of more
than 50% in both 2021 and 2022. This reflects tight labor
conditions; new contract wins, especially in the Americas; and the
implementation of a regional structure at the end of 2020.

AMS delivered a robust operating performance in 2022, with revenue
of GBP665 million, a 59% increase from the previous year, and up
from GBP291 million in 2019. However, the EBITDA margins stood at
12.5% in 2022, compared with 16.0% in 2021, because AMS is
investing in selling and marketing initiatives and has higher labor
and nonrecurring costs. FOCF was negative in 2022, by GBP13
million, due to a one-off working capital impact of GBP44 million.
Deleveraging was partly constrained by a $40 million increase in
adjusted debt to fund the acquisition of FlexAbility in July 2022.
This resulted in debt to EBITDA of 4.6x in 2022, compared with 4.8x
in 2021.

S&P said, "Our forecast for adjusted debt includes the GBP373
million-equivalent TLB and operating lease liabilities of about
GBP6 million-GBP7 million. We consider noncash-paying shareholder
loans of GBP592.5 million (including accumulated interest) as of
2023 as equity-like, in line with our criteria for the treatment of
noncommon equity in the capital structure."

AMS' fair business risk profile reflects its initiatives to
increase its scale and diversification. S&P expects AMS to benefit
from the strong demand for talent acquisition outsourcing in North
America following a targeted investment in the region's sales and
marketing functions. AMS has also strengthened its presence in Asia
with the acquisition of FlexAbility in July 2022. AMS' improvements
in scale and geographical and end-market diversity have helped it
mitigate the impact of the challenging macroeconomic environment.
This is evident from two consecutive years of substantial topline
growth in 2021 and 2022. In addition, AMS' management of all
aspects of talent acquisition and its high level of integration
with clients makes switching costs relatively high and supports the
EBITDA margins.

These factors are offset by AMS' relatively small size,
limited--but increasing--geographical and client diversification,
and operations in the highly fragmented talent acquisition
industry. Further expansion of the geographical footprint is a key
initiative, supported by continued investment in the sales and
marketing teams to support growth in the Americas and
Asia-Pacific.

However, securing new contracts remains vulnerable to uncertainty,
including potential delays in ramping up new contracts. A prolonged
weakness in market conditions could limit AMS' growth prospects on
a long-term basis. For example, global placement volumes were
significantly down during the pandemic in 2020 due to slow hire
rates. Management offset this by cutting costs and capital
expenditure (capex) to preserve cash. S&P also acknowledges the
countercyclical nature of AMS' cash flow generation.

The stable outlook reflects S&P's expectation that AMS will
generate positive FOCF of more than GBP10 million in the next 12-24
months, while maintaining adjusted leverage of less than 5x and FFO
cash coverage of about 2x. This will be on the back of strong
organic growth and an adjusted EBITDA margin of about 14%.

S&P could lower the ratings if:

-- AMS' operating performance deteriorates, such that its leverage
is sustainably above 5x;

-- FOCF is materially lower than our forecasts due to a weak
operating performance and an inability to sustain FFO cash coverage
of more than 2x; or

-- S&P believes that AMS' financial policy has become more
aggressive, with a tolerance for sustaining higher leverage than
current levels.

Although unlikely in the near team, S&P could take a positive
rating action if AMS commits to a more conservative financial
policy, with adjusted debt to EBITDA staying below 4x. This would
likely occur if the private-equity sponsor relinquished effective
control over the company. An upgrade would also require a material
improvement in AMS' scale and diversification.

ESG credit indicators: E-2, S-2, G-3

S&P said, "Governance is a moderately negative consideration in our
credit rating analysis of AMS. Our assessment of the company's
financial risk profile as highly leveraged reflects decision-making
that prioritizes the interest of the controlling owners, in line
with our view of most rated entities owned by private-equity
sponsors. Our assessment also reflects such owners' generally
finite holding periods and focus on maximizing shareholder
returns."


METALAST: Impact of Ukraine War Prompts Administration
------------------------------------------------------
Anna Cooper at TheBusinessDesk.com reports that a Dudley supplier
of ballast and counterweight products has fallen into
administration, due to the impact of the war in Ukraine.

Metalast, which was set up 15 years ago, supplied solutions to the
marine, civil engineering, and heavy lifting industries with
clients such as Siemens, JLR and Aston Martin.

According to TheBusinessDesk.com, the business has been severely
affected by the war in Ukraine as it halted sales to two of its
main markets in Russia and Ukraine.

Turnover was approximately GBP2.6 million in 2022, with the company
employing five people from its 20,000 sq ft facility,
TheBusinessDesk.com discloses.

Chris Lewis and Diana Frangou of RSM UK Restructuring Advisory were
appointed as joint administrators of the firm on Aug. 2,
TheBusinessDesk.com relates.  Administrators are seeking a buyer
for the business or they will look to sell assets for the benefit
of Metalast's creditors, TheBusinessDesk.com notes.


QUALIA CARE: Birchley Hall Care Home Shuts Down
-----------------------------------------------
Conal Cunningham at St Helens Star reports that a care home that
has stood for half a century has closed as its former director is
found to have been involved in an "illegal investment scheme" worth
GBP57 million.

As previously reported by the Star, it was announced in June that
Birchley Hall care home would close as no buyer had been found
since the facility was placed into administration.

Operated by Qualia Care, Birchley Hall was one of ten care homes
that fell into administration in October 2022 after allegations of
unauthorised investment schemes were made against its director
Robin Forster, the Star notes.

On the same day of the Billinge care home's closure, on Tuesday,
Aug. 1, the Financial Conduct Authority announced that Mr. Forster
had lost a High Court case which found that GBP57 million had been
taken from 380 care home investors, the Star relates.

Following a trial in May, the High Court agreed that Mr. Forster
had made "false and misleading statements" to investors about the
sustainability of the "unlawful" care home investment scheme, the
Star discloses.

Following the ruling, the court will now determine the sums that
need to be paid back to investors, the Star states.

Although all Qualia Care facilities were drafted under the
supervision of Healthcare Management Solutions (HMS) during
administration, Birchley Hall is the first to close for good,
according to the Star.

It is believed that administrators found difficulties in finding a
buyer due to recurring problems with the historic building's
facilities, with faulty lifts and chair lifts often restricting
residents' movement, according to the Star.


SAGE AR 2021: S&P Lowers Class E Notes Rating to 'B+ (sf)'
----------------------------------------------------------
S&P Global Ratings lowered to 'AA (sf)', 'A (sf)', 'BBB (sf)', 'BB
(sf)', and 'B+ (sf)' from 'AAA (sf)', 'AA- (sf)', 'A- (sf)', 'BBB-
(sf)', and 'BB- (sf)' its credit ratings on Sage AR Funding 2021
PLC's class A, B, C, D, and E notes, respectively.

The downgrades follow its review of the transaction's five key
rating factors (the securitized assets' credit quality, legal and
regulatory risks, operational and administrative risks,
counterparty risks, and payment structure and cash flow
mechanisms).

The property portfolio's rental value has increased since closing
due to rent indexation effective April 1, 2023. As a result, our
S&P Global Ratings value has increased by 9.4% to GBP258.2 million
from GBP236.0 million at closing.

S&P said, "At the same time, we adjusted the base recovery rates to
reflect GBP27.5 million in amortization, whereas at closing we made
a GBP55.0 million adjustment for amortization over the fully
extended loan term ahead of an assumed default.

"Given the current and projected medium-term higher interest rates,
we are concerned about the borrower's ability to secure new annual
interest rate hedging at an affordable rate commensurate with the
rise in the rental revenue. Based on our conversations with the
sponsor, we expect that the hedging will be extended in "November
2023. However, if the borrower fails to secure new hedging in the
future, the loan may terminate earlier than we initially expected,
and the total amortization received by the issuer over time may be
lower than anticipated. We have therefore reduced the amortization
benefit in our analysis.

"The increase in our S&P Global Ratings value is outweighed by the
lower amortization adjustment and we therefore lowered our ratings
on all classes of notes."

Sage AR Funding 2021 is a CMBS transaction backed by a GBP274.9
million loan on a portfolio of 1,712 social housing units located
throughout the U.K.

The issuer on-lent the note proceeds to the borrower (Sage Borrower
AR2 Ltd.) through an issuer/borrower loan. A portion of the class A
notes, equal to GBP5.7 million, was used to fund the issuer
liquidity reserve.

The borrower is a wholly owned subsidiary of Sage Rented Ltd.
(SRL), the parent registered provider (RP), which is a for-profit
RP of social housing ultimately owned by Blackstone Inc. alongside
the Regis Group PLC.

The issuer/borrower loan provides for cash trap mechanisms set at a
rated loan-to-value (LTV) ratio greater than 78%, or a debt yield
less than 3.56%. The loan has an initial term of five years with 20
one-year extension options available, subject to satisfying certain
conditions. There is no amortization in the initial five years,
but, if extended, the loan amortizes by 1.0% of principal on the
initial repayment date and cash sweep starting in year six.

The portfolio's reported market value based on the market value
subject to tenancies (MV-STT) is GBP376.9 million, as of October
2021, which equates to an LTV ratio of 68.0% (based on the rated
notes) and 72.9% for the full loan (including the class R retention
piece). The LTV ratio has remained unchanged since closing. As of
May 2023, the debt yield increased to 4.43% from 4.25% at issuance.
Both the debt yield and LTV ratio are in compliance with the cash
trap triggers.

The portfolio is currently fully occupied compared with 84%
occupied at closing. The contracted annual rent is GBP14.7 million
as of May 2023, compared with gross rental income (actual and
estimated for vacant units) of GBP14.3 million at issuance, and the
annual net rental income increased to GBP11.3 million from GBP10.9
million over the same period.

  Loan and collateral summary

                                    CURRENT REVIEW      AT CLOSING
                                     (DATA AS OF  (DATA AS OF
                                      MAY 2023)      OCTOBER 2021)


  Senior loan balance (mil. GBP)          274.9          274.9

  Rated notes-to-market value ratio (%)*   68.0           68.0

  Debt yield (%)                           4.4            4.3

  Gross rental income per year (mil. GBP) 14.7           14.3

  Net rental income per year (mil. GBP)   11.3           10.9

  Vacancy rate (%)                         0.0           16.0

  Market value (mil. GBP)                376.9          376.9

*Excludes the portion of class A notes used for issuer liquidity
reserve.

S&P said, "We consider the portfolio's net cash flow (NCF) to be
GBP11.5 million on a sustainable basis. This is based on a fully
let rent of GBP15.7 million, which takes into account 7% rent
indexation effective April 1, 2023, to the most recently reported
GBP14.7 million contracted annual rental income, and is adjusted
for 5% vacancy and 23% for nonrecoverable expenses. Our vacancy and
nonrecoverable expenses assumptions have not changed since
closing.

"We applied a 4.2% capitalization rate against this S&P Global
Ratings NCF. We then deducted 5% of purchase costs to arrive at our
S&P Global Ratings value. Our S&P Global Ratings value of GBP258.2
million represents a 31.5% haircut to the October 2021 market value
of GBP376.9 million."

  S&P Global Ratings' key assumptions

                                       CURRENT REVIEW   AT CLOSING

  S&P Global Ratings rent fully let
    (mil. GBP)                                 15.7        14.2

  S&P Global Ratings vacancy (%)                5.0         5.0

  S&P Global Ratings expenses (%)              23.0        23.0

  S&P Global Ratings net cash flow (mil. GBP)  11.5        10.5

  S&P Global ratings value (mil. GBP)         258.2       236.0

  S&P Global Ratings cap rate (%)               4.2         4.2

  Haircut-to-market value (%)                  31.5        37.4

  S&P Global Ratings loan-to-value ratio
  (before recovery rate adjustments; %)       106.5       116.5


S&P also assessed whether the cash flow from the securitized assets
would be sufficient, at the applicable ratings, to make timely
payments of interest and ultimate repayment of principal by the
notes' legal final maturity date, after considering available
credit enhancement and allowing for transaction expenses and
liquidity support.

The loan is hedged with an interest rate cap with a strike rate of
1% per year. The cap agreement has an initial term of two years and
expires in November 2023. Under the loan agreement, the borrower is
required to extend the cap at a strike rate of the higher of 1.0%
and a strike rate that ensures a hedged interest coverage ratio
(ICR) of a minimum of 1.5x. S&P expects that the hedging will be
extended in November 2023. If the hedging is not extended, a loan
event of default would be triggered and the 4% Sterling Overnight
Index Average (SONIA) cap on the notes will be activated.

S&P said, "Our analysis also includes a full review of the legal
and regulatory risks, operational and administrative risks, and
counterparty risks. Our assessment of these risks remains unchanged
since closing and is commensurate with the ratings.

"Our ratings address the issuer's ability to meet timely interest
payments and principal repayment no later than the legal final
maturity in November 2051.

"The property portfolio's gross rental income has increased since
closing. We consider the long-term sustainable value to be 9.4%
higher than at closing.

"The increase in our S&P Global Ratings value results in an S&P
Global Ratings LTV ratio before recovery rate adjustments of
106.5%, compared with 116.5% at closing. Together with
transaction-level considerations, these translate into 'AA (sf)',
'A (sf)', 'BBB (sf)', 'BB (sf)', and 'B+ (sf)' ratings for the
class A, B, C, D, and E notes, respectively. We have therefore
lowered our ratings on the class A to E 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.

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