/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230907.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, September 7, 2023, Vol. 24, No. 180 Headlines A Z E R B A I J A N STATE OIL: Moody's Affirms 'Ba1' CFR, Outlook Remains Stable F R A N C E REXEL SA: S&P Assigns 'BB+' Rating to EUR400MM New Sr. Unsec. Notes I R E L A N D ALME LOAN III: Moody's Affirms Ba3 Rating on EUR20MM Cl. E-R Notes I T A L Y WEBUILD SPA: S&P Raises Long-Term Issuer Credit Rating to 'BB' L U X E M B O U R G CULLINAN HOLDCO: S&P Places 'B+' Long-Term Issuer Credit Rating S P A I N TARNOW INVESTMENT: Case Summary & 20 Largest Unsec. Creditors U N I T E D K I N G D O M BIRMINGHAM CITY COUNCIL: Declares Bankruptcy Over GBP760MM Bill BUCKINGHAM GROUP: Council in Talks with Alternative Contractors GLENSKIRLIE CASTLE: Bought Out of Administration by Khungha JOULES: Harborough Council Writes Off GBP460,000 Debt PHILIPS TRUST: Police Pauses Probe Into GBP13MM Financial Scandal WILKO LTD: Further 1,332 Redundancies Announced After B&M Deal - - - - - =================== A Z E R B A I J A N =================== STATE OIL: Moody's Affirms 'Ba1' CFR, Outlook Remains Stable ------------------------------------------------------------ Moody's Investors Service has upgraded the Baseline Credit Assessment (BCA) of State Oil Company of the Azerbaijan Republic (SOCAR) to ba2 from ba3. Concurrently, Moody's has affirmed SOCAR's corporate family rating at Ba1. The outlook remains stable. RATINGS RATIONALE The rating action, including the upgrade of the BCA, reflects the improvement in SOCAR's financial performance and credit metrics amid supportive oil and gas market environment; the company's strategic importance for the government of Azerbaijan; and a recent track record of more discipline in strategic and shareholder decisions, investment spending and shareholder distributions which translate into positive cash generation and good liquidity. Because SOCAR is 100% state owned, Moody's applies the Government-Related Issuers (GRI) methodology to determine the company's CFR. SOCAR's Ba1 CFR incorporates (1) the company's BCA of ba2, which measures its standalone credit strength, excluding any extraordinary government support; (2) the Ba1 foreign currency issuer rating of the Government of Azerbaijan, with a stable outlook; (3) the very high default dependence between the state and the company; and (4) the high probability of the government providing support to the company in the event of financial distress. SOCAR's business and financial profile strengthened over recent years thanks to buoyant hydrocarbon price environment, stable to growing production, and sound trading operations. Following a 56% growth in 2021, revenue increased by 54% to AZN119 billion ($70 billion) in 2022. Moody's-adjusted EBITDA surged to AZN14 billion ($8 billion) in 2022, a record high, from AZN7 billion in 2021 and AZN4 billion a year on average in 2017-20. Revenue is likely to moderate to AZN80 billion-AZN90 billion a year in 2023-24 under Moody's oil price assumptions. EBITDA will be around AZN10 billion a year over the same period, lower than in 2022 but higher than in 2017-21. Although the government exerts substantial influence over SOCAR, the state has demonstrated more discipline in strategic and financial management of the company lately. This, together with robust financial performance in 2021-22, led to positive cash generation and the accumulation of a sizeable cash position. The company recorded free cash flow (FCF) of AZN2.6 billion in 2021 and AZN6.8 billion in 2022 after negative cash generation in 2019-20. Moody's expects SOCAR to sustain its positive FCF over the next 12-18 months, although the size of that depends on the company's execution of its capital spending programme, oil and gas market conditions, and the shareholder's strategic decisions. The recommendation also reflects the improvement in SOCAR's credit metrics. Its leverage reduced to 1.5x in 2022 from 3.4x in 2021 and 4.9x average in 2017-20, and is likely to remain around this level over the next two years. Moody's-adjusted EBIT/Interest expense improved to 7.6x in 2022 from 3.7x in 2021, 0.8x in 2020 and around 3.0x in 2017-19. Moody's expects interest coverage to remain solid at 5.0x-6.0x in 2023-24. The company's liquidity also improved. Its cash balance of AZN12.5 billion as of year-end 2022 and forecasted cash generation of around AZN4.0 billion-AZN5.0 billion over 2023-24 will be sufficient to cover estimated debt maturities of AZN11.2 billion over this period. In addition, SOCAR's credit quality reflects its (1) key role in the oil and gas sector of Azerbaijan and its importance to the national economy; (2) sustainable hydrocarbon production volumes; and (3) close links with the Azerbaijan government, which has accumulated substantial reserves and should be in a position to provide financial support to the company if needed. However, the company's rating also takes into account its (1) sizeable trading operations which reduce its consolidated margins, inflate leverage through the use of short-term debt and limit predictability of financial results because of the inherent volatility of these activities; (2) governance considerations, including its complex organisational structure, limited transparency and disclosure, and concentrated ownership which may lead to rapid changes in its strategy and financial profile; and (3) high operational concentration in Azerbaijan. ESG CONSIDERATIONS In addition to governance factors mentioned above, SOCAR has high exposure to environmental factors related to carbon transition risk and waste & pollution as decarbonisation efforts and transition towards cleaner energy continues. The company also has high exposure to social factors, mainly driven by demographic & societal pressures and the push for responsible production, which are common for oil and gas companies. Overall, ESG considerations do not have material impact on the current credit rating. The company's high environmental, social and governance risks are mitigated by the high probability of government support in the event of financial distress. RATIONALE FOR THE STABLE OUTLOOK The stable outlook on SOCAR's rating is in line with the stable outlook on Azerbaijan's sovereign rating and reflects Moody's view that the company's specific credit factors, including its operating and financial performance, market position and liquidity, will remain commensurate with its rating on a sustainable basis. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's could upgrade SOCAR's rating if Moody's were to upgrade Azerbaijan's sovereign rating, provided there was no significant deterioration in the company's specific credit factors, including its operating and financial performance, market position, credit metrics and liquidity, and no weakening in the probability of extraordinary state support in the event of financial distress. Moody's could downgrade SOCAR's rating if (1) it were to downgrade Azerbaijan's sovereign rating; or (2) there was evidence that the government's capacity and willingness to provide support to SOCAR was diminishing; or (3) the company's BCA is downgraded. SOCAR's BCA could come under pressure if (1) the government's actions significantly impaired its standalone credit profile (including unfavourable regulatory or tax changes, significant equity withdrawals, or increased exposure to large state-initiated investment projects without funding support); or (2) its operating and financial performance deteriorated materially; or (3) its liquidity weakened significantly. Numerically, the BCA could be downgraded if the company's retained cash flow (RCF)/net debt declined below 20% and EBIT/interest expense below 4.0x, both on a Moody's-adjusted and sustained basis. LIST OF AFFECTED RATINGS Upgrades: Issuer: State Oil Company of the Azerbaijan Republic Baseline Credit Assessment, Upgraded to ba2 from ba3 Affirmations: Issuer: State Oil Company of the Azerbaijan Republic Probability of Default Rating, Affirmed Ba1-PD LT Corporate Family Rating, Affirmed Ba1 Outlook Actions: Issuer: State Oil Company of the Azerbaijan Republic Outlook, Remains Stable PRINCIPAL METHODOLOGY The methodologies used in these ratings were Integrated Oil and Gas published in September 2022. CORPORATE PROFILE State Oil Company of the Azerbaijan Republic (SOCAR) is a 100% state-owned, vertically integrated national oil and gas company headquartered in Baku, Azerbaijan. The company has a monopoly position in supplying oil and gas products to the domestic market and is the state's official representative in all oil and gas projects in Azerbaijan, including all international consortia. SOCAR has an integrated offering including crude oil and petroleum products, natural gas, refining products, oilfield services, and sales and distribution (including trading). Apart from Azerbaijan, the company mainly operates in Switzerland, Turkiye, the UAE and Georgia. In 2022, SOCAR reported revenue of AZN119 billion ($70 billion). =========== F R A N C E =========== REXEL SA: S&P Assigns 'BB+' Rating to EUR400MM New Sr. Unsec. Notes ------------------------------------------------------------------- S&P Global Ratings assigned its 'BB+' issue rating to the EUR400 million proposed senior unsecured notes, due in 2030, to be issued by France-based electrical supplies distributor Rexel S.A. The '4' recovery rating indicates its expectation of average recovery prospects (30%-50%; rounded estimate: 40%) for debtholders in the event of a payment default. The recovery rating considers the notes' structural subordination to sizable prior-ranking liabilities, including the four securitization programs and other credit facilities. This is combined with the unsecured and unguaranteed debt, limited protection offered to noteholders, and reliance on payments from subsidiaries to service obligations under the notes. The issue and recovery ratings are based on preliminary information and are subject to their successful issuance and S&P's satisfactory review of the final documentation. Rexel intends to use the proceeds for general operation purposes, including the acquisition of Wasco. S&P expects the proposed notes' documentation to be fully in line with that of the existing notes. Rexel will only be constrained from issuing additional debt by a standard minimum 2.0x incurrence-based interest coverage covenant under the notes, with carve-outs and permitted debt baskets. The documentation for the company's revolving credit facility includes a 3.50x net total leverage covenant, tested semi-annually, which can be breached three times: twice for a maximum 3.75x and once for a maximum of 3.90x. The cross-default and acceleration provisions threshold will remain in excess of EUR100 million. S&P said, "In our hypothetical default scenario, we assume a sustained economic slowdown and increased competitive pressure leading to declining demand, shrinking margins, deteriorated payment discipline, and a material reduction in cash generation. We believe that this, combined with deteriorated capital markets and liquidity pressure, could prevent the company from refinancing or repaying its debt, when due, and trigger a payment default. "We value Rexel as a going concern, reflecting our view of the group's leading market position and wide customer and end-market diversification." Simulated default assumptions -- Year of default: 2028 -- Jurisdiction: France -- EBITDA multiple: 6.0x Simplified waterfall -- Gross recovery value: EUR2.8 billion -- Net recovery value for waterfall after administration expenses (5%): EUR2.7 billion -- Estimated priority claims: EUR1.7 billion -- Unsecured debt claims: EUR2.2 billion -- Recovery prospects: 30%-50% (rounded 40%) -- Recovery rating: 4 ============= I R E L A N D ============= ALME LOAN III: Moody's Affirms Ba3 Rating on EUR20MM Cl. E-R Notes ------------------------------------------------------------------ Moody's Investors Service has upgraded the ratings on the following notes issued by ALME Loan Funding III Designated Activity Company: EUR32,400,000 Class B-1-R Senior Secured Floating Rate Notes due 2032, Upgraded to Aaa (sf); previously on Mar 4, 2022 Upgraded to Aa1 (sf) EUR8,000,000 Class B-2-R Senior Secured Fixed Rate Notes due 2032, Upgraded to Aaa (sf); previously on Mar 4, 2022 Upgraded to Aa1 (sf) EUR28,000,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to Aa3 (sf); previously on Mar 4, 2022 Affirmed A2 (sf) EUR25,200,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to Baa2 (sf); previously on Mar 4, 2022 Affirmed Baa3 (sf) Moody's has also affirmed the ratings on the following notes: EUR250,400,000 (current outstanding amount EUR187,809,000) Class A-R Senior Secured Floating Rate Notes due 2032, Affirmed Aaa (sf); previously on Mar 4, 2022 Affirmed Aaa (sf) EUR20,000,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Ba3 (sf); previously on Mar 4, 2022 Affirmed Ba3 (sf) ALME Loan Funding III Designated Activity Company, issued in December 2014, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Apollo Management International LLP. The transaction's reinvestment period ended in April 2022. RATINGS RATIONALE The rating upgrades on the Class B-1-R, Class B-2-R, Class C-R, Class D-R notes are primarily a result of the deleveraging of the Class A notes following amortisation of the underlying portfolio since the last review in December 2022. The affirmations on the ratings on the Class A-R and E-R notes are primarily a result of the expected losses on the notes remaining consistent with their current ratings after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization (OC) levels. The Class A notes have paid down by approximately EUR61.7 million (24.6%) since the last review in December 2022. As a result of the deleveraging, over-collateralisation (OC) has increased across the capital structure. According to the trustee report dated November 2022 [1] the Class A/B, Class C, Class D and Class E OC ratios are reported at 137.48%, 125.37%, 116.17% and 109.77% compared to July 2023 [2] levels of 147.27%, 131.18%, 119.43% and 111.51%, respectively. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR336.1m Diversity Score: 48 Weighted Average Rating Factor (WARF): 2903 Weighted Average Life (WAL): 3.87 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.62% Weighted Average Coupon (WAC): 3.72% Weighted Average Recovery Rate (WARR): 45.22% The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank and swap provider, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in June 2022. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. ========= I T A L Y ========= WEBUILD SPA: S&P Raises Long-Term Issuer Credit Rating to 'BB' -------------------------------------------------------------- S&P Global Ratings raised its long-term issuer credit rating on Italy-based engineering and construction group Webuild SpA to 'BB' from 'BB-'. At the same time, S&P raised its issue rating on Webuild's outstanding senior unsecured notes to 'BB' from 'BB-'. The recovery rating remains at '4'. The stable outlook reflects S&P's expectation that Webuild's FFO to debt should stand in the range 30%-35% in 2023-2024, well above 2022's level of 22.8%, reflecting increased volume of activities, particularly in Italy and Australia, and a resilient profitability margin notwithstanding the still-high cost inflation context. S&P said, "The upgrade reflects Webuild's improved financial risk profile. Webuild's credit metrics significantly improved in 2022 and we expect further progress in 2023-2024. In 2022, FFO to debt jumped to 22.8%, from 8.1% in 2021 when the group's profitability was affected by several negative one-offs related to the pandemic. In 2023-2024, we anticipate that FFO to debt will be about 30%. Most of the improvement is due to higher revenue as result of significant new business gained; revenue rose by a sizable 26% in 2022, and we anticipate a further 13% rise in 2023 and 8% in 2024, significantly outperforming GDP growth. Webuild's solid order backlog covers most of its target revenue in 2023-2025. As of June 30, 2023, the backlog was EUR60.7 billion, up 14% versus December 2022. Italy's National Plan for Recovery and Resilience, which aims to relaunch the economy after the pandemic, is boosting Webuild's activity in its domestic market (48% of its backlog and 30% of its revenue in the first half of 2023, up from 31% and 10%, respectively, in 2018). Credit metrics improvement also reflects a progressive growth of the EBITDA margin, which should stand between 8% and 9% in the forecast period; Webuild's margin benefits from the contribution of recently acquired contracts, as well as some contract resets that ease cost pass-through in the current context of high cost inflation. "We believe that Webuild's improved credit metrics are sustainable, as they are driven by the company's strategic priority to reduce the group's risk. Webuild has progressively shifted its business activity to developed countries and reduced the number of countries it focuses on. In the first half of 2023, about 75% of backlog and 80% of revenue have been from low risk countries, compared with 53% in 2018. In the same period, Italy made up 30% of revenue, followed by Australia with 21%, and North America and rest of Europe, both with 16%. The remaining share is from Middle East, Africa, and Latin America. Following the acquisition of Astaldi in 2019 and the entry of Italian government financial arm CDP in its shareholding, Webuild is now the large, reference infrastructure construction group in Italy. In Australia, the acquisition of Clough in February 2023 has allowed the group to increase its local presence and gain new projects. In the next few years, we anticipate the share of revenue from Italy and Australia will increase further, which mirrors the increased importance of those two countries in the company's backlog. Webuild's increased presence in developed markets reduces the volatility of its profitability margin and the risk of delayed payments from clients and litigation, as happened in the past decade with projects in Panama and Venezuela. Furthermore, Webuild is increasing the share of contracts in backlog that contain price formulas to adjust to high raw material costs, as shown with the recent Snowy 2.0 project reset. Last, the company is optimizing its supply chain management through its centralized procurement, and is adopting a more selective bidding approach, both of which should translate into better margins and cash conversion over next few years. "Still, we anticipate limited gross debt reduction over the next three years. Webuild is working to improve its EBITDA cash-conversion rate and increase its receivables collection. Together with new advance payments received ahead of gained contracts, this should translate into less working capital cash absorption and progressive operating cash flow improvement, when compared with the average of the past five years. Over 2023-2025, we assume that working capital cash outflow should be almost nil, notwithstanding the significant business growth. Nevertheless, we do not believe that Webuild's free operating cash flow (FOCF) will allow significant gross debt reduction in 2023-2025. This is because the company's capital expenditure (capex) will increase compared with the past few years to finance its business growth, at about 3.5%-4.0% of revenue compared with 2.5% in 2021-2022. As result, leverage reduction should largely be due to increased absolute profits. "Webuild's business risk profile benefits from the company's strong expertise in executing complex construction projects. The company's activity includes constructing bridges, dams, high-speed trains, metro lines, and roads. Webuild is the world leader in water and hydraulic works and is among the top 10 players in highways and rails. Its technology and engineering expertise is a supportive factor enabling the company to work on large complex projects in its main areas of focus--sustainable mobility (metros, high-speed railway lines, and roads) and hydroelectric infrastructure. The company is benefiting from the current booming market due to the focus on energy and climate transition and the post pandemic effort to boost GDP and to improve quality of life. The company is also closely monitoring the touted public and private investments in sea transport (addressable market worth an estimated EUR200 billion in 2023 and 2024), information systems (data centers, addressable market of EUR113 billion in 2023-2024), water and waste treatment plants (addressable market of EUR20 billion in the same period). "Webuild's smaller size and scale compared with peers and legacy exposure to risky markets remain rating constraints.Compared with large engineering and construction companies such as Hochtief or Strabag, Webuild remains smaller in terms of revenue and activity, notwithstanding the anticipated business growth. This is because current positive momentum in the infrastructure construction sector is benefiting most players. Despite improving over the last few years, Webuild's project concentration is still somewhat high compared with industry peers, as its top 10 projects represent about 37% of its revenue. Last, Webuild has some outstanding projects in Africa and central Asia, where operational, legal, and political risks tend to be higher, which could add to cash flow volatility. "The stable outlook reflects our expectation that Webuild's FFO to debt should stand in the range 30%-35% in 2023-2024, well above 22.8% in 2022, reflecting increased volume of activities, particularly in Italy and Australia, and a resilient profitability margin, notwithstanding the still high-cost inflation environment. We also anticipate that FOCF will be significantly positive in 2023, reflecting sizable advance payments received in the first half of the year, but largely neutral in the period 2023-2025 due to the group's sustained volume growth." S&P could lower the ratings if: -- The company faces material project postponements or delays in collecting payments, leading to a material decline in operating margins and FOCF; -- FFO to debt falls below 20% with low prospects for swift recovery; -- Liquidity weakens. S&P could raise the ratings if: -- Webuild builds a track record of positive FOCF generation capacity notwithstanding the sustained business growth, reflecting increased profitability margin and more efficient cash flow management; -- FFO to debt improve to sustainably above 40%; -- Liquidity remains at least adequate. S&P said, "Environmental and social factors have an overall neutral influence on our credit rating analysis of Webuild. The company focuses on large infrastructure construction related to sustainable mobility, water, hydroelectric energy, and green buildings. About 92% of Webuild's construction backlog in 2022 related to projects that target Sustainable Development Goals. Webuild's governance factors also have an overall neutral influence on our credit rating analysis. We acknowledge that the company has increased its focus on low-risk countries, such as Australia, the U.S. and Europe, and the progressive adoption of cost-plus contract types is translating into lower litigation than in the past. The company still has some outstanding litigation cases, largely in legacy high-risk countries, but this has not translated into significant cash outflows since 2021, and we believe that overall Webuild is not an outlier compared with peers. We also appreciate Webuild's improved operational processes and qualified management team, which is translating into better risk management and working capital trend." =================== L U X E M B O U R G =================== CULLINAN HOLDCO: S&P Places 'B+' Long-Term Issuer Credit Rating --------------------------------------------------------------- S&P Global Ratings placed its 'B+' long-term issuer credit and issue ratings on Cullinan Holdco (parent of Graanul Invest) and its debt on CreditWatch with negative implications. S&P said, "We intend to meet with management and discuss the upcoming situation, and to resolve the CreditWatch over the coming three months. It is possible that we will downgrade Cullinan by more than one notch. "The CreditWatch negative placement reflects that leverage risk will be well above our expectations for 2023 due to rapidly decreasing cash flow. Higher costs associated with production and operations have resulted in Cullinan's EBITDA being well below our expectations during the first half of 2023. While we note the operations' seasonal structure, which affects sales and production, we see a major risk that debt to EBITDA will be substantially higher for 2023 and 2024, potentially up to 6x-7x compared with our previous forecast of 4.0x-4.5x. "The stability of the group's operating performance relies heavily on the contract structure; an inability to re-gain the previous EBITDA margin could heighten business risk. Our assessment of Cullinan's business risk profile gives weight to the stability stemming from the group's robust contract structure. Until now, almost 85% of revenue has stemmed from long-term contracts. The ongoing dispute with one of the main contractors, which constituted a high 42% of expected sales in 2023, highlights the concentration risk. The dispute relates to a take-or-pay contract whereby the counterparty is unwilling to change the terms regarding compensation for increased costs. Given the high inflation in the Baltics, with levels at about 20%, it appears that Cullinan is not able to pass on all its costs. When we resolve the CreditWatch, we will therefore reassess how fit for purpose Cullinan's existing take-and-pay contracts with its customers are. If we believe the contract structure does not guarantee stability of earnings, including the ability to pass through higher costs, we will likely revise downward our business risk assessment. "Exposure to variable-rate debt could further pressure the group's free operating cash flow (FOCF) due to several macroeconomic factors. We highlight that 40% of Cullinan's financial debt is subject to variable interest rates, LIBOR+4.75%. Due to rising interest rates in Europe during 2023, this will raise the group's cash interest by about EUR8 million-EUR10 million in 2023 from the 2022 level. Since this comes on top of weaker operating performance, it will burden FOCF materially during 2023. "However, we note that demand for heating and pellets is about to increase as the colder months approach. This should strengthen demand and raise spot prices, which would benefit Cullinan. That said, we believe a successful renegotiation relating to the ongoing dispute is key for Cullinan to return its profit margins to historical levels, meaning that a shift in market conditions may not suffice. "The CreditWatch negative placement reflects that we expect Cullinan to continue to post weaker credit metrics in 2023 and for most of 2024 due to higher costs and contract issues. We now expect debt to EBITDA to remain above 4.5x at least for the next two years. "We intend to resolve the CreditWatch placement in the next 90 days as we gain greater visibility over the company's strategic decisions to improve finances. These could include support from the owners or contract renegotiations, including the ability to fully pass-through costs in a timely manner. "We could downgrade Cullinan if we believe that it will be unable to reduce debt to EBITDA closer to 4.5x over the coming quarters 2024. We don't fully exclude that we could downgrade Cullinan more than one notch, if we believe that, due to lack of contract support, its cash flow will become more volatile." ========= S P A I N ========= TARNOW INVESTMENT: Case Summary & 20 Largest Unsec. Creditors ------------------------------------------------------------- Three additional affiliates of An Global LLC (Bank. D. Del. Case No. 23-11294) that filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code: Debtor Case No. ------ -------- Tarnow Investment, S.L. 23-11376 Camino Fuente de la mora 9 28050 Maldrid, Spain AgileThought Argentina S.A. 23-11377 Guemes 676, Pdo. de Vicente Lopez Pcia. de Buenos Aires Buenos Aires, Argentina AGS Alpama Global Services Mexico, S.A. de C.V. 23-11378 Av. Sierra Vista 1305, piso 4, int 8 Colonia Lomas del Tecnologico, CO 78215 San Luis Potosi Mexico Business Description: The Debtors are global providers of agile- first, end-to-end digital transformation services in the North American market using on-shore and near-shore delivery. The Company helps its clients transform by building, improving and running new solutions at scale. The Debtors operate their business through ten "Guilds," which act as agencies within the Company. Chapter 11 Petition Date: September 1, 2023 Court: United States Bankruptcy Court District of Delaware Judge: Hon. J. Kate Stickles Debtors' Co-General Bankruptcy Counsel: Jeremy W. Ryan, Esq. Gregory J. Flasser, Esq. Sameen Rizvi, Esq. POTTER ANDERSON & CORROON LLP 1313 North Market Street, 6th Floor Wilmington, Delaware 19801 Tel: (302) 984-6000 Fax: (302) 658-1192 Email: jryan@potteranderson.com gflasser@potteranderson.com srizvi@potteranderson.com - and - Kathryn A. Coleman, Esq. Christopher Gartman, Esq. Jeffrey S. Margolin, Esq. Elizabeth A. Beitler, Esq. HUGHES HUBBARD & REED LLP One Battery Park Plaza New York, NY 10004-1482 Tel: (212) 837-6000 Fax: (212) 422-4726 Email: katie.coleman@hugheshubbard.com chris.gartman@hugheshubbard.com jeff.margolin@hugheshubbard.com elizabeth.beitler@hugheshubbard.com Debtors' General Mexican Restructuring Counsel: GARRIGUES MEXICO, S.C. Debtors' Financial Advisor: TENEO CAPITAL LLC Debtors' Investment Banker: GUGGENHEIM SECURITIES, LLC Debtors' Claims, Noticing & Balloting Agent: KURTZMAN CARSON CONSULTANTS LLC Estimated Assets: $100 million to $500 million Estimated Liabilities: $100 million to $500 million The petitions were signed by James S. Feltman as chief restructuring officer. Full-text copies of the petitions are available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/LX72TQY/Tarnow_Investment_SL__debke-23-11376__0001.0.pdf?mcid=tGE4TAMA https://www.pacermonitor.com/view/LTADNFI/AgileThought_Argentina_SA__debke-23-11377__0001.0.pdf?mcid=tGE4TAMA https://www.pacermonitor.com/view/3WVXK2Q/AGS_Alpama_Global_Services_Mexico__debke-23-11378__0001.0.pdf?mcid=tGE4TAMA Consolidated List of Debtors' 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount 1. Tax Administration Service Tax $203,333,138 (Mexico) Av. Hidalgo 77 Col. Guerrero Ciudad De Mexico, 06300 Mexico Phone: (52) 55 627 22 728 2. Monroe Capital LLC Fee $3,451,615 Jeff Cupples 311 South Wacker Drive Suite 6400 Chicago, IL 60606 Tel: 312-523-2385 Fax: 312-258-8350 Email: jcupples@monroecap.com 3. Microsoft Corporation Trade $1,808,548 Edgar I. Blanco PO Box 842103 Dallas, TX 75284 Phone: 469-775-0391 Email: edgarblanco@microsoft.com 4. Exitus Capital Sapi De Debt $1,580,000 CV Sofom ENR Jacobo Montoya Carretera Mexico- Toluca Numero 5420 Piso 8 Colonia El Yaqui Cuajimalpa De Morelos CDMX 05320 Mexico Tel: 55-41709910 Fax: 55-36490804 Email: jmontoya@exitus.com 5. Mayer Brown LLP Professional $1,524,203 Lucas Giardelli Services 230 South LaSalle St Chicago, IL 60604 Phone: 646-469-4914 Email: lgiardelli@mayerbrown.com; mgomez2@mayerbrown.com 6. Cousins Fund II Tampa III, LLC Lease $1,130,032 Jillian Tahan 3344 Peachtree Rd NE Suite 1800 Atlanta, GA 30326 Phone: 813-289-2600 Email: mdessler@cousins.com; jtahan@cousins.com 7. SAP Mexico SA De CV Trade $1,106,302 Omar Torres Av. Paseo De La Reforma 509 Piso 20 CDMX, 06500 Mexico Tel: 52 55 4588 2887 Fax: 52 (81) 8152 1701 Email: omar.tores01@sap.com; vanessa.dalmas@sap.com; eduarda.foresta@sap.com 8. Korn Ferry Professional $949,447 Max Kershner, Barbara Jordan Services N50 Suite 25000 1201 West Peachtree Atlanta, GA 55402 Phone: 404 577 7542 Email: max.kershner@kornferry.com; barbara.jordan@kornferry.com 9. Factoring Corporativo Factoring $917,592 SA De CV Sofo Agreement L Rodriquez Reforma No. 2654 Interior 1003 Reforma No. 2654 Interior 1003 Mexico City, 11950 Mexico Phone: 55 508109910 Ext 124 Email: lrodriguez@faccorp.net 10. KC Rentals S.A. De C.V. Lease $828,531 Ricardo Mendieta, Rosalba Cesareo 10 De may #47-A Tlalnepantla De Baz, 54080 Mexico Phone: 52 55 5365 Ext 421; 52 55 1525 8836 Email: rmendieta@kapali.com.mx; rcesareo@kapali.com.mx 11. AGS Group Debt $775,931 Mauricio Rioseco 907 Ranch Road 620 South, Suite 302 Lakeway, TX 78734 Email: mauricio.rioseco@rw.com.mx 12. Tennessee Department of Revenue Tax $684,561 Collection Services Division 500 Deaderick St Nashville, TN 37242 Phone: 844-729-8689 Email: revenue.collection@tn.gov; tdor.bankruptcy@tn.gov 13. Link X S.A. De C.V. Trade $680,137 Blanca Gomez, Jose Luis Chacon Jose Pages Yergo La Magdalena 104 Toluca, 50010 Mexico Phone: 52 55 7858 0472 52 55 8868 8713 Email: bigomez@linkx.mx; casegura@linkx.mx; jlchacon@linkx.mx 14. KPMG LLP Professional $566,571 Spencer Feld Services 2323 Ross Avenue Suite 1400 Dallas, TX 75201 Tel: 402-650-3441 Fax: 214-840-2297 Email: sfeld@kpmg.com; lacosta@kpmg.com 15. BDO USA, LLP Professional $490,070 TJ Nunez Services 770 Kenmoor SE Suite 300 Grand Rapids, MI 49546 Phone: 813-302-6622 Email: clewis@bdo.com; tnunez@bdo.com 16. PricewaterhouseCoopers Professional $462,368 Ivanna Nazar Services 2121 N. Pearl Street Suite 2000 Dallas, TX 75201 Phone: 31 06 41587682 Email: ivanna.nazar@pwc.com 17. Microstrategy Mexico S Trade $434,004 DE RL De CV Leticia Perez Juan Salvador Agraz 50 602 Santa Fe Cuajimalpa, 05348 Mexico Tel: 52 55 6827 8367 Fax: 52 55 4140 6112 Email: lperez@microstrategy.com 18. Anovorx Litigation $395,000 Kyle P. Truitt 1710 N Shelby Oaks Dr Suite 3 Memphis, TN 38134 Tel: 901-359-8896 Fax: 901-201-5470 Email: kyle.truitt@anovorx.com 19. Datavision Digital Trade $383,641 Norma Diaz Avenida Patriotismo 48 Miguel Hidalgo, 11800 Mexico Phone: 52(55) 5273-2903 Email: norma.diaz@datavision.com.mx 20. Banco Ve Por Mas, S.A. Trade $349,750 Javier Garcia, Sion Cherem Peseo De La Reforma 243 Piso 21 Cuauhtemoc CDMX, 06500 Mexico Phone: 52 55 7919 3828 Email: javier.garcia@simetricgi.com; sion.cherem@simetricgi.com =========================== U N I T E D K I N G D O M =========================== BIRMINGHAM CITY COUNCIL: Declares Bankruptcy Over GBP760MM Bill --------------------------------------------------------------- Sky News reports that Birmingham City Council has effectively declared bankruptcy after being hit with a GBP760 million bill to settle equal pay claims. The council said it had issued a section 114 notice, confirming that all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately, Sky News relates. In a statement declaring itself in financial distress, the local authority said it will "tighten the spend controls already in place and put them in the hands of the section 151 officer to ensure there is complete grip", Sky News notes. The Labour-run council is the largest local authority in Europe, comprising 101 councillors (65 Labour, 22 Conservative, 12 Liberal Democrat and two Green). According to Sky News, the statement read: "Birmingham City Council has issued a s.114 notice as part of the plans to meet the council's financial liabilities relating to equal pay claims and an in-year financial gap within its budget which currently stands in the region of GBP87 million. "In June, the council announced it had a potential liability relating to equal pay claims in the region of GBP650 million to GBP760 million, with an ongoing liability accruing at a rate of GBP5 million to GBP14 million per month. "The council is still in a position where it must fund the equal pay liability that has accrued to date [in the region of GBP650 million to GBP760 million], but it does not have the resources to do so." In a joint statement, council leader John Cotton and his deputy, Sharon Thompson, as cited by Sky News, said: "Like local authorities across the country, it is clear that Birmingham City Council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates income, to the impact of rampant inflation. "We implemented rigorous spending controls in July, and we have made a request to the Local Government Association for additional strategic support." BUCKINGHAM GROUP: Council in Talks with Alternative Contractors --------------------------------------------------------------- Swansea Bay News reports that Swansea Council has revealed that it's in talks with alternative contractors following news that the original main contractor for its Copr Bay scheme -- Buckingham Group -- has gone into administration. The Copr Bay scheme stretches from close to the former St David's Shopping Centre site to the area of the marina, Swansea Bay News discloses. The majority of the scheme has been complete and open since spring last year, so the council say it's business as usual at Swansea Arena, the Copr Bay south car park, the coastal park, the Green Room Bar and Kitchen, and the residential unit on the north side of Oystermouth Road, Swansea Bay News notes. Unfinished work includes the car park on the north side of Oystermouth Road and some other snagging works on site, Swansea Bay News states. According to Swansea Bay News, the council has said that the north side car park site has now been made secure and handed over to the administrators. The council added that it has put insurance, scaffolding, emergency lighting and security arrangements in place there, Swansea Bay News relays. GLENSKIRLIE CASTLE: Bought Out of Administration by Khungha ----------------------------------------------------------- John Glover at The Scottish Sun reports that a luxurious Scottish wedding venue has been saved after it plunged into administration. According to The Scottish Sun, Glenskirlie Castle was acquired by Khungha Investments following several months on the market. The business and its assets were bought for an undisclosed sum, which includes the castle, restaurant, facilities and ground, The Scottish Sun relates. The popular events venue will retain all 32 staff and transfer them to the new business, The Scottish Sun states. And it will remain "business as usual" for existing wedding and events bookings, The Scottish Sun notes. The award-winning hotel was opened in 2007 and designed in the style of a 16th century Scottish castle. FRP Advisory were appointed as administrators on Sept. 5 following unsustainable cash flow and financial problems stemming from Covid and the soaring costs affecting the hospitality sector, The Scottish Sun recounts. JOULES: Harborough Council Writes Off GBP460,000 Debt ----------------------------------------------------- HFM News reports that Joules owed Harborough District Council over GBP460,000 in business rates when it went into administration last year. According to HFM News, the debt has now been written off, after the authority conceded there was no prospect of recovering it. The Market Harborough-based fashion retailer was nearly GBP114 million in the red when it collapsed, before a partnership between Next and the company's original founder Tom Joule bought the firm, HFM News relates. Next purchased Joules' Rockingham Road headquarters for GBP7 million, HFM News discloses. Members of the council's Cabinet approved the write-off at a meeting this week, HFM News notes. PHILIPS TRUST: Police Pauses Probe Into GBP13MM Financial Scandal ----------------------------------------------------------------- Chris Burn at Yorkshire Post reports that police have paused an investigation into a GBP138 million financial scandal affecting scores of elderly people from Yorkshire linked to family trusts they set up in their local building society. According to Yorkshire Post, an e-mail from Greater Manchester Police sent to a family member involved in a case seen by this newspaper confirms the force have closed a record of crime "at this time" into the matter due to the administration period for Philips Trust Corporation, the company at the centre of the issue being extended until 2026. WILKO LTD: Further 1,332 Redundancies Announced After B&M Deal -------------------------------------------------------------- Hannah McDonald and Tom Pyman at Daily Mail report that a further 1,332 redundancies at collapsed retailer Wilko were announced on Sept. 5 -- just hours after it emerged that rival B&M had bought 51 of its 400 stores for GBP13 million. According to Daily Mail, administrators confirmed the jobs bloodbath will see 52 stores shut. The GMB Union said that 24 of these sites will close next Tuesday, Sept. 12, with the remaining 28 being shuttered two days later. This will lead to 1,016 redundancies, bosses said, Daily Mail relates. The job losses also include 299 at the company's two warehouses, Daily Mail discloses. These workers will be invited to a meeting on Wednesday, Sept. 13, after which they will be allowed to go home, GMB said, Daily Mail notes. There will be a further 17 redundancies among the company's digital team at its support centre, Daily Mail states. The GMB said that PwC is still working with a bidder for Wilko "who has made an offer for a significant part of business", according to Daily Mail. The union also indicated that workers at the 51 shops that B&M said earlier on Sept. 5 that it had bought will not transfer automatically to the new owner, Daily Mail relays. Wilko, which sells everything from hardware goods to cleaning products, toys and gardening equipment, went into administration last month, with insolvency experts from PwC trying to hammer out a rescue deal in recent weeks. Hopes that the chain might be saved appeared to have been extinguished last week when a bid by the boss of HMV to purchase 300 stores stalled over funding issues, putting some 12,500 jobs at risk, Daily Mail recounts. But B&M's last-ditch purchase is expected to have saved a substantial number of employees from the axe -- although it has not yet been confirmed which of Wilko's stores will be rescued by the sale, Daily Mail notes. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *