/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230825.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, August 25, 2023, Vol. 24, No. 171 Headlines I R E L A N D ALME LOAN V: S&P Affirms 'B- (sf)' Rating on Class F Notes N E T H E R L A N D S HOLLAND LIFT: Enters Liquidation, Ceases Trading U N I T E D K I N G D O M FREIGHT MANAGEMENT: Goes Into Administration MAR ESTATES: Put Into Administration, Explores Options MEREWAY KITCHENS: Bought Out of Administration by Sigma 3 UNIQUE PUB: S&P Lowers Class A4 Notes Rating to 'BB (sf)' WILKO LTD: Administrators Say No Plan to Close Stores Next Week WILKO LTD: HMV Owner Emerges as Potential Last-Minute Buyer X X X X X X X X [*] BOOK REVIEW: The First Junk Bond - - - - - ============= I R E L A N D ============= ALME LOAN V: S&P Affirms 'B- (sf)' Rating on Class F Notes ---------------------------------------------------------- S&P Global Ratings raised its credit ratings on ALME Loan Funding V DAC's class B-1 and B-2 notes to 'AA+ (sf)' from 'AA (sf)', class C-1 and C-2 notes to 'AA (sf)' from 'A (sf)', and class D notes to 'A- (sf)' from 'BBB (sf)'. S&P affirmed its 'AAA (sf)', 'BB (sf)', and 'B- (sf)' ratings on the class A, E, and F notes, respectively. ALME Loan Funding V is a cash flow CLO transaction securitizing leverage loans and is managed by Apollo Management International LLP. The rating actions follow the application of its relevant criteria and our credit and cash flow analysis of the transaction based on the July 2023 trustee report. Since the transaction was reset in 2018: -- The portfolio's credit quality has deteriorated slightly, however, its weighted-average rating remains at 'B'. -- Despite the CLO entering its amortization phase, the portfolio has become more diversified (the number of performing obligors increased to 124 from 109). -- The portfolio's weighted-average life has decreased to 3.88 years from 6.17 years. -- The percentage of 'CCC' rated assets has increased to 2.99% from 2.57%. Despite a slight deterioration in credit quality, the portfolio's scenario default rates (SDRs) have decreased for all rating scenarios, mainly due to its lower weighted-average life and improved diversification. Table 1 Transaction key metrics AS OF AUGUST 2023 (BASED ON THE JULY TRUSTEE REPORT) AT RESET SPWARF 2740.48 2470.73* Default rate dispersion 628.37 688.88 Weighted-average life (years) 3.88 6.17 Obligor diversity measure 94.06 88.25 Industry diversity measure 17.12 16.73 Regional diversity measure 1.28 1.69 Total collateral amount (mil. EUR)§ 318.51 400.00 Defaulted assets (mil. EUR) 0 0 Number of performing obligors 124 109 Portfolio weighted-average rating B B 'AAA' SDR (%) 59.66 66.31 'AAA' WARR (%) 36.88 33.99 *Calculated using the portfolio at closing and applying our current CLO criteria to derive an SPWARF for the comparison of portfolio credit quality. §Performing assets plus cash and expected recoveries on defaulted assets. SDR--Scenario default rate. SPWARF--S&P Global Ratings' weighted-average rating factor. WARR--Weighted-average recovery rate. On the cash flow side: -- The reinvestment period ended in July 2022. The class A notes deleveraged by EUR79.83 million since then. -- No class of notes defers interest. -- All coverage tests are passing as of the July 2023 trustee report. Table 2 Credit analysis results CREDIT ENHANCEMENT AS OF AUGUST 2023(%) CURRENT AMOUNT (BASED ON THE JULY CREDIT ENHANCEMENT CLASS (MIL. EUR) TRUSTEE REPORT) AT RESET (%) A 143.173 55.05 44.25 B-1 47.947 33.39 27.00 B-2 21.053 33.39 27.00 C-1 15.526 25.54 20.75 C-2 9.474 25.54 20.75 D 19.700 19.35 15.83 E 22.700 12.22 10.15 F 10.600 8.90 7.50 Credit enhancement = [Performing balance + cash balance + recovery on defaulted obligations (if any) – tranche balance (including tranche balance of all senior tranches)] / [Performing balance + cash balance + recovery on defaulted obligations (if any)]. In S&P's view, the portfolio is diversified across obligors, industries, and asset characteristics. S&P said, "Based on the improved SDRs and higher available credit enhancement, we raised our ratings on the class B-1, B-2, C-1, C-2, and D notes as the available credit enhancement is now commensurate with higher stress levels. At the same time, we affirmed our ratings on the class A, E, and F notes. "Our cash flow analysis indicated higher ratings than those currently assigned for the class C-1, C-2, D, E, and F notes. The transaction has continued to amortize since the end of the reinvestment period in July 2022. However, we have considered the limited break-even default rate cushion at higher ratings, while noting that the manager may still reinvest unscheduled redemption proceeds and sale proceeds from credit-impaired and credit-improved assets. Such reinvestments rather than repayment of the liabilities may prolong the note repayment profile for the most senior class of notes. We also considered the considerable portion of senior notes outstanding and current macroeconomic conditions. "In our view, the portfolio is granular, and well-diversified across obligors, industries, and asset characteristics compared to other CLO transactions we recently rated. Hence, we have not performed any additional sensitivity analysis. "Counterparty, operational, and legal risks are adequately mitigated in line with our criteria. "Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk to be limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria." ===================== N E T H E R L A N D S ===================== HOLLAND LIFT: Enters Liquidation, Ceases Trading ------------------------------------------------ Euan Youdale at Access International reports that Holland Lift has gone into liquidation and has ceased all its activities. The Netherlands-based scissor lift specialist is owned by Pro Delta Investments, which acquired the company in 2013 and is also the owner of access rental specialist Riwal. Established in 1984 and headquartered in Hoorn, Holland Lift International employs around 70 people in the Netherlands, and Germany through Servi-Tec GmbH. According to Access International, the company said that it had faced several challenges in recent years, among those being the substantial increase of steel prices, increasing overall running costs and severe supply chain issues following the Covid pandemic, along with the war in Ukraine. In addition, Holland Lift noted fierce competition from "low price newcomers". "Despite a staff reorganisation [in 2021], and heavy investments, which resulted in the launch of new designs and products and other measures," added the company, "It proved not to be feasible to ensure long term viability for the company." =========================== U N I T E D K I N G D O M =========================== FREIGHT MANAGEMENT: Goes Into Administration -------------------------------------------- Sam Metcalf at TheBusinessDesk.com reports that a Burton logistics firm has fallen into administration after weeks of troubled trading. According to TheBusinessDesk.com, Freight Management European, which trades as AMCO Logistics and was set up in 1998, has appointed Currie Young to look after the day-to-day running of the firm. The move comes after AMCO posted a second notice of intention (NOI) to appoint administrators on Aug. 1, TheBusinessDesk.com notes. In its latest available accounts, made up to the end of 2021, the firm employed 37 people, TheBusinessDesk.com discloses. MAR ESTATES: Put Into Administration, Explores Options ------------------------------------------------------ Paul Trainer at Glasgow World reports that five star hotel Marr Hall Golf and Spa Resort in Renfrewshire's faces an uncertain future after the business was placed into administration. The stately home hotel, located on a 240-acre woodland estate in Bishopton, currently employs over 100 staff. Management consulting company EY-Parthenon's Turnaround and Restructuring Strategy team were appointed as joint administrators of Mar Estates Limited and routes to a potential sale will now be sought, Glasgow World relates. The administrators said the hotel will continue to trade while options are explored, Glasgow World notes. According to Glasgow World, a statement reads: "On August 22, 2023, Andrew Dolliver, Kris Aspin and Luke Charleton of EY-Parthenon's Turnaround and Restructuring Strategy team were appointed as Joint Administrators of Mar Estates Limited, trading as Mar Hall Golf & Spa Resort ("the Resort"). "The Resort will be marketed for sale, with the Joint Administrators anticipating significant interest for this high-profile asset." MEREWAY KITCHENS: Bought Out of Administration by Sigma 3 --------------------------------------------------------- Business Sale reports that a family-run kitchen manufacturer has been acquired out of administration by Sigma 3 Group, parent company of Masterclass Kitchens. Birmingham-based Mereway Kitchens fell into administration earlier this month, saying it had faced a challenging few years of trading, Business Sale relates. According to Business Sale, the future of the firm has now been secured, however, after its business and assets were acquired out of administration by Sigma 3 Group, in a deal that the buyer described as a "significant milestone" in its growth plans. Mereway Kitchens was founded in 1986 and served as the UK supplier to more than 100 independent retailers and national retailer John Lewis. Despite reporting nearly GBP19 million in turnover for the year to December 2021 (up almost 30% year-on-year), the company filed notice of intention to appoint administrators earlier this month, Business Sale recounts. At the time, the company, as cited by Business Sale, said that the notice, filed on Aug. 2, would provide it with time to agree a sale of the business. The company confirmed that it was in the final stages of talks with a then-unnamed buyer for a deal that would secure the business' future and provide "significant new investment" with "no disruption to supply", Business Sale discloses. UNIQUE PUB: S&P Lowers Class A4 Notes Rating to 'BB (sf)' --------------------------------------------------------- S&P Global Ratings lowered to 'BB (sf)' from 'BB+ (sf)' its credit rating on Unique Pub Finance Co. PLC (The)'s class A4 notes. At the same time, S&P affirmed its 'B (sf)' and 'B- (sf)' ratings on the class M and N notes. Transaction Structure Unique Pub Finance is a corporate securitization of the U.K. operating business of the leased and tenanted (L&T) pub estate operator Unique Pub Properties Ltd. (UPP or the borrower). It originally closed in June 1999 and was last tapped in February 2005. The transaction features three classes of notes (A4, M, and N), the proceeds of which have been on-lent by Unique Pub Finance to UPP via issuer-borrower loans. The operating cash flows generated by UPP are available to repay its borrowings from the issuer that, in turn, uses those proceeds to service the notes, alongside any amounts available under the liquidity facility and cash reserve. In S&P's opinion, the transaction would qualify for the appointment of an administrative receiver under the U.K. insolvency regime. An obligor default would allow the noteholders to gain substantial control over the charged assets prior to an administrator's appointment, without necessarily accelerating the secured debt, both at the issuer and at the borrower level. Rating Rationale S&P said, "Our ratings address the timely payment of interest and principal due on the class A4 notes and the ultimate payment of interest and principal on the deferrable class M and N notes. They are based primarily on our ongoing assessment of the borrowing group's underlying business risk profile (BRP), the integrity of the transaction's legal and tax structure, and the robustness of operating cash flows supported by structural enhancements. "As part of our analysis, we assess whether the operating cash flows generated by the borrower are sufficient to make the payments required under the notes' loan agreements by using a debt service coverage ratio (DSCR) analysis under a base-case and a downside scenario. Our view of the borrowing group's potential to generate cash flows is informed by our base-case operating cash flow projection and our assessment of its BRP, which we derive using our corporate methodology." Business risk profile S&P said, "We continue to assess the borrower's BRP as Fair, supported by the group's sizeable scale of operations as part of the consolidated Stonegate Pub Company (the largest pub operator in the U.K.), its higher-than-average profitability, and the earnings stability provided by L&T model. We believe the group is well positioned to profit from the recovery in the industry after the drop in demand resulting from pub closures and absorb shocks from inflationary pressures and impact on demand in the current cost of living crisis in the U.K." Recent performance and events Since the end of the financial year 2022, UPP has disposed of 18 pubs, ending the period to June 2023 with a securitized estate of 1,761 pubs. Despite the reduction, it is still the largest estate among our rated U.K. pub universe. Most of UPP's estate are community pubs, which are less exposed to the reduced footfall in city centers following the aftermath of the pandemic. For the financial year 2022, UPP reported total revenues of GBP133.35 million, a 45% increase from financial year 2021, while reported EBITDA of GBP112.9 million was about 55% above the reported financial year 2021 results. However, this is still below pre-pandemic results and reflects the reduced estate size; in 2019, the group reported GBP147.6 million of revenues and GBP125 million EBITDA. The overall improved performance in financial year 2022 compared with the previous year's is predominantly due to recovery from the pandemic and full reopening of the group's estate, with the EBITDA margin improving to 84.7%, from about 80.0%. This is in line with pre-COVID-19 levels, driven by UPP's low-cost base, where publicans face most of the cost pressures. Cost inflation headwinds continue to pose a major challenge to the hospitality sector as a whole, most notably in utilities, wages, and food cost, even as energy prices ease. S&P said, "We believe that the high levels of inflation seen during the first half of 2023 will decline toward the end of 2023 and continue to normalize toward 2.4% in 2024 and will remain below 2.0% from 2025-2026. While companies within the sector have increased prices and passed through some of the cost inflation, weaker consumer confidence and pressure on discretionary spending may limit the pace of earnings recovery. As the cost of living crisis continues to constrain customer's disposable incomes, we think that pressures on profitability margins will remain elevated compared to the historical level, and we expect the observed recovery in earnings and cash generation to be delayed and more gradual for the industry." Given UPP's L&T business model, the company itself is less directly exposed to increasing inflationary costs as these are largely borne by the publicans. It generates revenue mostly from rent and tied-in drink supply agreements. Although S&P recognizes that the recovery in earnings and cash generation is faster in the L&T model, economic conditions remain challenging and may still affect publicans' ability to pay their rent, which can consequently pressure UPP's ability to collect payments from the publicans. Issuer's liquidity position During financial year 2022, the issuer made GBP100 million of principal repayments (plus GBP38 million of interest payments). After the June 2023 payment date, the outstanding issuer/borrower loan balance reduced to GBP425.75 million (versus GBP535 million at the end of financial year 2022). To meet principal and interest payments for the in third quarter (Q3) financial year 2023, the issuer used cash generated by the securitized estate and received a GBP6.0 million equity injection from the wider Stonegate Group. The cash reserve remains fully depleted and its account balance after the June 2023 payment date is nil, GBP65 million below its target level. Given the expected debt service in the next three quarters, the reserve fund is unlikely to be replenished to its required level in the next two to three years. The committed liquidity facility remains fully undrawn with GBP89 million available to the issuer as of June 2023 (while GBP6.0 million was drawn on the liquidity facility in Q2 financial year 2023, it was subsequently repaid in Q3 following the GBP6.0 million equity injection received from the wider Stonegate Group). The liquidity facility available commitment is amortizing and reduced to GBP89 million in June 2023 from GBP140 million in June 2022, and will progressively reduce to GBP37 million in June 2024. Amounts available to the class M and N notes are capped at GBP32.5 million while the class A4 notes are outstanding, and at GBP12.5 million for the class N notes while the class M notes are outstanding. S&P rates the class M and N notes on a deferrable basis in line with the transaction documents. This means that if there are insufficient funds available to the issuer to pay principal and interest on the class M and N notes, the unpaid amounts could be deferred and ultimately due in March 2032, along with accrued interest on the deferred amounts. Non-payment on the class M and N notes prior to March 2032 will not lead to an issuer event of default. Despite the deferrable feature of the class M notes, UPP has indicated they intend to adhere to the scheduled amortization profile and expect to fully repay class M notes by March 2024 (the outstanding class M note balance after the June 2023 payment date is GBP61 million). S&P said, "Consequently, we expect drawings on the liquidity facility will be required given the class M notes' rapid amortization and insufficient cash flow projections coming from the operating business. In total, we expect that by March 2024 about GBP8.5 million will be drawn on the liquidity." Given the cash reserve has also been fully depleted, the remaining liquidity of approximately GBP29.5 million after the March 2024 interest payment date would only provide six months of debt service coverage for the class A4 notes. The issuer's liquidity position will start improving once the class M notes fully repay, but it will take time. The liquidity facility and the reserve fund are expected to be replenished to their target levels within two to three years after the class M notes expected repayment in March 2024. During this period, the issuer's liquidity position will remain materially weakened. DSCR analysis S&P's cash flow analysis serves to both assess whether cash flows will be sufficient to service debt through the transaction's life and to project minimum DSCRs in our base-case and downside scenarios. Base-case forecast S&P said, "Our base-case EBITDA and operating cash flow projections in the short term and the company's satisfactory BRP rely on our corporate methodology. We give credit to growth through to the end of financial year 2024. Beyond that, our base-case projections are based on our methodology and assumptions for corporate securitizations, from which we then apply assumptions for capital expenditures (capex) and taxes, to arrive at our projections for the cash flow available for debt service." UPP's earnings depend largely on general economic activity and discretionary consumer demand. Considering the economic outlook, and UPP's financial year 2022 results, S&P has revised its forecasts of Unique Pub Finance's business performance through to 2025. S&P's current macroeconomic assumptions are: -- The U.K. economic outlook has improved but continues to face challenging times. S&P now expects flat growth for 2023 compared with a 0.5% contraction in its previous forecast. S&P expects positive growth of 0.9% in 2024 and average growth of 1.6% in 2025-2026. -- Inflation remains elevated but S&P expects it to fall substantially to just above 4.0% by year-end 2023, to 2.4% in 2024, and below 2% in 2025-2026. S&P said, "Downside risks to our forecasts prevail. They are still mainly linked to geopolitical developments and the consequences of higher interest rates, in terms of the calibration of monetary policy for both demand and financial stability. Risks to global sentiment and energy and commodity prices from an escalation of Russia's war on Ukraine remain elevated, although less so than a few months ago partly thanks to continental Europe's better preparedness for next winter." Considering our macroeconomic outlook and UPP's signs of recovery, S&P revised slightly upwards its operating cash flows forecasts through to financial year 2025. S&P said, "We expect financial year 2023 overall revenues to be about 10% higher than the previous year's levels and relatively flat thereafter as a result of the fewer pubs given the business' expected disposal profile. "We expect RPI-linked rental income, which has already exceeded the pre-pandemic levels, to support revenue growth. Drink and food income has largely recovered to the pre-pandemic levels, and we expect it to continue to grow supported by pass-through price increases resulting from inflationary pressures. However, recent beer price increases have decreased demand and total sales of beer. This follows a long-term trend of diminishing beer consumption. "We typically do not give any credit to disposal proceeds in our cash flow analysis as we do not consider them to be internal cash generated by the assets. Equally, we do not consider the buildup of disposal proceeds in the disposal account as a source of cash for debt service as we cannot discount the possibility that the borrower could apply disposal proceeds to non-debt service payments. However, given the confirmation provided by the management that UPP's business strategy is to dispose of weaker-performing or closed-for-business pubs and reinvest all net sale proceeds to fund the maintenance and development capex, we accounted for it in our analysis. "In financial year 2023 and financial year 2024 we assumed that the borrower will reinvest about GBP25 million of disposals proceeds to fund capex. In the first three quarters of financial year 2023, UPP disposed of 18 tenanted pubs from the securitization estate for net sale proceeds of about GBP22 million based on the investor reports. We expect further disposals to happen in Q4 financial year 2023." S&P established an anchor of 'bb' for the class A4 notes and an anchor of 'b-' for the class M and N notes based on: -- S&P's assessment of UPP's Fair BRP, which it associates with a business volatility score of 4. -- The minimum DSCR achieved in our base-case analysis, which considers both scenarios: only operating-level cash flows, and operating-level cash flows with disposal proceeds in financial year 2023 and financial year 2024. Under both scenarios the output of the base-case DSCR analysis supported the established anchor for each tranche. -- No credit given to issuer-level structural features (such as the liquidity facility). -- In the context of low DSCRs for the class M and N notes S&P considered the borrower's creditworthiness and the notes' deferrable feature. Downside DSCR analysis S&P said, "Our downside DSCR analysis tests whether the issuer-level structural enhancements improve the transaction's resilience under a moderate stress scenario. UPP falls within the pubs, restaurants, and retail industry. Considering U.K. pubs' historical performance during the financial crisis of 2007-2008, in our view, a 25% decline in EBITDA from our base case is appropriate for the tenanted pub subsector. "We applied the decline to the base case at the point where we believe the stress on debt service would be greatest. "Our downside DSCR analysis resulted in a satisfactory resilience score for the class A4 notes, lower than at our previous review, and a weak resilience score for the class M and N notes, which remains unchanged. "This reflects the headroom above a 1.3:1.0 DSCR threshold that is required under our criteria to achieve a satisfactory resilience score after considering the level of liquidity support available to class A4 notes." Both the class M and N notes have limits on the amount of the liquidity facility they may use to cover liquidity shortfalls. Due to their deferrable feature, which means that these notes cannot default before their legal final maturity date (March 2032), these classes of notes will not experience interest shortfalls under S&P's downside DSCR analysis within three to four years. Consequently, the resulting resilience scores are weak for both classes of notes. The combination of a satisfactory resilience score and the 'bb' anchor derived in the base case results in a resilience-adjusted anchor of 'bbb-' for the class A4 notes. Similarly, the combination of a weak resilience score and the 'b-' anchor derived in the base case results in resilience-adjusted anchors of 'b' for the class M and N notes. Liquidity facility adjustment Currently the liquidity facility amount available to the issuer for the class A4 notes represents a significant level of liquidity support, measured as a percentage of their total current outstanding balance. S&P said, "Considering the class A4 targeted amortization schedule, the liquidity facility's amortizing profile, and the anticipated drawings to support the repayment of the class M notes, we expect liquidity support available to the class A4 notes to weaken to about 19.0% from 51.0% but it will remain above the 10% threshold anticipated by our corporate securitization criteria. Thereafter the liquidity facility amount available to class A4 notes is expected to improve. We have therefore maintained a one-notch increase to the resilience-adjusted anchor for the size of the available liquidity support relative to the class A4 note balance." S&P did not adjust the class M and N notes' resilience-adjusted anchors, unchanged from our previous review and in line with its corporate securitization criteria. Modifiers analysis S&P said, "We applied a one-notch downward adjustment to the class N notes to reflect their subordination and weaker access to the security package compared to the class M notes. We have also applied a two-notch downward adjustment to the class A4 notes to reflect the weaknesses of the effectiveness of the two main covenant tests (financial covenant and restricted payment condition covenant), which is unchanged since our Nov. 22, 2019 review." Comparable rating analysis S&P said, "Based on our corporate securitization criteria, the rated notes should benefit from liquidity provisions at the securitization issuer level, to cover for disruption of cash flows arising from an insolvency of the operating company. We typically expect 12-18 months of the debt service coverage for a sufficient liquidity position. Under the transaction structure, a GBP65 million cash reserve at the borrower level combined with an amortizing tranched liquidity facility at the issuer level aims to cover about 18 months of debt service (including deferrable notes) and constitutes strong liquidity support for the class A4 notes. "As noted above, we expect the issuer's liquidity position will deteriorate over the next three quarters as the concurrent amortization of the class A4 and class M notes until March 2024 represents a significant debt burden for the structure. In our view, satisfaction of the target notes' repayment profile will require drawdowns on the liquidity facility, and the cash reserve has already been fully depleted to meet prior debt service payments. "In our view, utilization of the available liquidity for the class M notes repayment puts the class A4 notes' liquidity position at risk. Considering the expected GBP8.5 million drawdowns on the liquidity, there will be limited coverage in the structure-six-months' debt service coverage. We recognize that this is a temporary issue and the issuer's liquidity position will start improving once class M notes are paid in full, but it will take time, about two years, to restore it to a satisfactory level." Peer transactions within the same sector have about 18 months of debt service coverage in their structures. S&P said, "Overall, based on the comparable rating analysis, we applied a one-notch negative adjustment to the class A4 notes' potential rating. "We also applied a one-notch downward adjustment to the class N notes' potential rating to reflect their subordination and weaker access to the security package compared to the mezzanine class M notes." Counterparty risk S&P's ratings on the notes are not currently constrained by the long-term issuer credit ratings on any of the counterparties, including the liquidity facility provider (Barclays Bank PLC) and bank account providers (National Westminster Bank PLC and Barclays Bank PLC). Outlook S&P said, "We expect the pub sector's earnings growth to remain subdued over the next 12-24 months as the sector continues to be challenged by the macroeconomic situation in the U.K. where high inflation and pressures on discretionary income could further pressure the publicans. Improvement in UPP's profitability in 2023 paired with debt repayments as per the targeted amortization schedule should help continue reducing leverage, while decreasing liquidity over the next 12 months. Our expectations of recovery in profitability and credit metrics in the reminder of 2023 and 2024 as well as the group's liquidity profile will be the key factors in shaping our views of issuers' underlying credit quality and will be the main reason for any future rating actions. "We anticipate that wet-led operators may fare better over the near term in the face of the inflationary pressures and its effects on customer demand and the cost of living in the U.K. For many rated pub operators, their significant freehold property portfolios have offered substantial operational and financial flexibility, but we have yet to see meaningful large-scale valuation support from conversions or alternative uses for pub properties. Rather, we expect that their quality of earnings will be a more defining factor in the credit profile compared with the quantum of real estate ownership. "We expect the L&T model to show more resilience going forward than the managed model. This is because under the latter the pub is directly exposed to increasing costs, which creates higher pressure and volatility on earnings. For our complete view of the sector and the factors that will shape its performance over the near to medium term." Downside scenario S&P said, "We may consider lowering our rating on the class A4 notes if the minimum projected DSCRs in our downside scenario have a material-adverse effect on the class A4 notes' resilience-adjusted anchor. "We may also consider lowering our rating on the class A4 notes if the minimum forecast DSCR weakens in our base-case scenario, or if there are higher liquidity draws than we currently expect. "We could lower our ratings on the class M or N notes if there was a deterioration in our assessment of the borrower's overall creditworthiness, which reflects its financial, liquidity, and operational strength over the short-to-medium term. This could be the result of increased leverage at UPP, driven by a material increase in outstanding debt." Upside scenario S&P said, "We could raise our rating on the class A4 notes if our minimum DSCR improves to the upper end of the 1.80x-1.30x range in our base-case scenario. Alternatively, we could take a positive rating action if UPP's BRP were to increase, although this is unlikely over the near to medium term. Following redemption of the class M notes, and subject to an improvement of the liquidity position for the class A4 improves we will consider if removing the comparable rating analysis negative adjustment is warranted." WILKO LTD: Administrators Say No Plan to Close Stores Next Week --------------------------------------------------------------- Simon Walton at York Press reports that administrators for the stricken retailer Wilko have denied plans to close stores next week after the GMB union said "the majority" would be shut. According to York Press, the GMB said it was told the high street chain -- which has a branch in York at Clifton Moor and also at Abbey Walk Shopping Centre in Selby -- is set to announce a raft of redundancies as a result. However, administrators at PricewaterhouseCoopers (PwC) said claims the stricken retailer would close stores next week were "speculation", York Press relates. The GMB, which represents more than 3,000 of Wilko's 12,500 staff, issued another statement on Aug. 23 saying closures would occur "within weeks" rather than "within a week", York Press recounts. The retailer tumbled into administration two weeks ago, putting the future of its 400 shops in doubt, York Press discloses. Administrators from PwC then sought offers from potentially interested firms in an effort to save jobs and stores, York Press relays. According to York Press, the union said on Aug. 23 it was told in a meeting that "there is no longer any prospect that the majority of the business will be saved". As a result, it said there are expected to be redundancies affecting staff in stores and call centres, York Press notes. Some stores may still be bought, either individually or as part of larger packages, as part of the insolvency process, York Press discloses. According to York Press, in a statement, the joint administrators of Wilko denied the claims and said: "In the immediate term, all stores remain open, continue to trade and staff continue to be paid. "Contrary to speculation, there are currently no plans to close any stores next week." But the administrators admitted "redundancies and store closures in the future" were "likely" and said employees representatives had been informed. WILKO LTD: HMV Owner Emerges as Potential Last-Minute Buyer ----------------------------------------------------------- Daniel Woolfson at The Telegraph reports that the Canadian businessman who brought HMV back from the brink of oblivion has emerged as a potential last-minute buyer for collapsed chain Wilko. According to The Telegraph, Doug Putman, who is credited with reversing the fortunes of HMV after buying it out of administration in 2019, has initiated talks with Wilko's administrators at PwC about acquiring around half of Wilko's 400 shops -- although it is understood no formal bid has been tabled. Around 10 other parties are understood to be interested in acquiring stores, including a small number that have expressed an interest in potentially buying more than 50 stores, The Telegraph discloses. News of Mr. Putman's interest, first reported by The Times, raises the prospect that thousands of jobs could be saved at the fallen high street chain, which collapsed into administration earlier this month after struggling to recover from the pandemic and failing to secure a buyer, The Telegraph notes. Mr. Putman would, reportedly, continue to run a number of shops under the Wilko brand if he were to acquire them. It is expected a further announcement on the future of Wilko will be made over the coming week, The Telegraph states. It comes one day after PwC warned it was likely many of Wilko's stores would close and jobs would be lost, The Telegraph relays. "While discussions continue with those interested in buying parts of the business, it's clear that the nature of this interest is not focused on the whole Group," The Telegraph quotes the company as saying on Aug. 23. A PwC spokesman added on Aug. 24: "As administrators we're intent on achieving the best outcome for everyone involved while preserving as many jobs as possible and adhering to our statutory duty to act in the best interests of the creditors as a whole. "It would be inappropriate to comment on individual bidders or interested parties at this stage in the process." Rival discount retailers including B&M, which is run by the Arora brothers, are also reportedly interested in acquiring some of Wilko's stores, The Telegraph states. =============== X X X X X X X X =============== [*] BOOK REVIEW: The First Junk Bond ------------------------------------ Author: Harlan D. Platt Publisher: Beard Books Softcover: 236 pages List Price: $34.95 http://www.beardbooks.com/beardbooks/the_first_junk_bond.html Only one in ten failed businesses is equal to the task of reorganizing itself and satisfying its prior debts in some fashion. This engrossing book follows the extraordinary journey of Texas International, Inc. (known by its New York Stock Exchange stock symbol, TEI), through its corporate growth and decline, debt exchange offers, and corporate renaissance as Phoenix Resource Companies, Inc. As Harlan Platt puts it, TEI "flourished for a brief luminous moment but then crashed to earth and was consumed." TEI's story features attention-grabbing characters, petroleum exploration innovations, financial innovations, and lots of risk taking. The First Junk Bond was originally published in 1994 and received solidly favorable reviews. The then-managing director of High Yield Securities Research and Economics for Merrill Lynch said that the book "is a richly detailed case study. Platt integrates corporate history, industry fundamentals, financial analysis and bankruptcy law on a scale that has rarely, if ever, been attempted." A retired U.S. Bankruptcy Court judge noted, "[i]t should appeal as supplementary reading to students in both business schools and law schools. Even those who practice.in the areas of business law, accounting and investments can obtain a greater understanding and perspective of their professional expertise." "TEI's saga is noteworthy because of the company's resilience and ingenuity in coping with the changing environment of the 1980s, its execution of innovative corporate strategies that were widely imitated and its extraordinary trading history," says the author. TEI issued the first junk bond. In 1986 it achieved the largest percentage gain on the NYSE, and in 1987 suffered the largest percentage loss. It issued one of the first bonds secured by a physical commodity and then later issued one of the first PIK (payment in kind) bonds. It was one of the first vulture investors, to be targeted by vulture investors later on. Its president was involved in an insider trading scandal. It innovated strip financing. It engaged in several workouts to sell off operations and raise cash to reduce debt. It completed three exchange offers that converted debt in to equity. In 1977, TEI, primarily an oil production outfit, had had a reprieve from bankruptcy through Michael Milken's first ever junk bond. The fresh capital had allowed TEI to acquire a controlling interest of Phoenix Resources Company, a part of King Resources Company. TEI purchased creditors' claims against King that were subsequently converted into stock under the terms of King's reorganization plan. Only two years later, cash deficiencies forced Phoenix to sell off its non-energy businesses. Vulture investors tried to buy up outstanding TEI stock. TEI sold off its own non-energy businesses, and focused on oil and gas exploration. An enormous oil discovery in Egypt made the future look grand. The value of TEI stock soared. Somehow, however, less than two years later, TEI was in bankruptcy. What a ride! All told, the book has 63 tables and 32 figures on all aspects of TEI's rise, fall, and renaissance. Businesspeople will find especially absorbing the details of how the company's bankruptcy filing affected various stakeholders, the bankruptcy negotiation process, and the alternative post-bankruptcy financial structures that were considered. Those interested in the oil and gas industry will find the book a primer on the subject, with an appendix devoted to exploration and drilling, and another on oil and gas accounting. Dr. Harlan D. Platt is a professor of Finance at D'Amore-McKim School of Business at Northeastern University. He is a member of the Board of Directors of Millennium Chemicals Inc. and is on the advisory board of the Millennium Liquidating Trust. He served as the Associate Editor-Finance for the Journal of Business Research. He received a Ph.D. from the University of Michigan, and holds a B.A. degree from Northwestern University. This book may be ordered by calling 888-563-4573 or by visiting www.beardbooks.com or through your favorite Internet or local bookseller. ********* 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 * * *