/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/230912.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 Tuesday, September 12, 2023, Vol. 24, No. 183 Headlines B E L A R U S BELARUS: S&P Suspends 'SD/SD' SCRs Due to Lack of Information F R A N C E BANIJAY GROUP SAS: Fitch Affirms LongTerm IDR at B+, Outlook Stable I R E L A N D CARLYLE GLOBAL 2014-1: Fitch Alters Outlook on 'B+sf' Rating to Neg FINANCE IRELAND NO. 6: S&P Assigns Prelim BB(sf) Rating to E Notes HARVEST CLO XXX: Fitch Gives 'B-sf' Final Rating to Class F Notes N E T H E R L A N D S KETER GROUP: EUR231MM Bank Debt Trades at 27% Discount LEALAND FINANCE: $500MM Bank Debt Trades at 48% Discount P O L A N D BANK MILLENNIUM: Fitch Gives 'BB(EXP)' Rating to Sr. Non-Pref Bonds GLOBE TRADE: Fitch Lowers LongTerm IDR to BB+, Rating on Watch Neg. S P A I N RURAL HIPOTECARIO IX: Fitch Affirms 'CCsf' Rating on Cl. E Notes U N I T E D K I N G D O M ILKE HOMES: Owes Homes England GBP68 Million ISOSPACES: Goes Into Administration, Heritage Center Plans Halted ONTO: Goes Into Administration, Explores Options ORIFLAME INVESTMENT: S&P Lowers ICR to 'CCC+', Outlook Negative RMAC 3 PLC: Fitch Gives 'B-(EXP)sf' Rating to Class F Notes SCOTGOLD: At Risk of Falling Into Administration WILKO LTD: All 400 Stores Set to Close by Early October - - - - - ============= B E L A R U S ============= BELARUS: S&P Suspends 'SD/SD' SCRs Due to Lack of Information ------------------------------------------------------------- S&P Global Ratings suspended its long- and short-term 'SD/SD' foreign currency and 'CCC/C' local currency sovereign credit ratings on the Republic of Belarus due to a lack of sufficient and timely information to maintain its ratings. For example, S&P lacks data on the government's budgetary performance, the composition of its debt stock, and its debt repayment schedule. S&P said, "We will resume our surveillance and reinstate the ratings if the missing data becomes available and we conclude that it meets our standards for quantity, timeliness, and reliability. If, after a reasonable period of time, our information requirements for surveillance are still not met, we will withdraw the ratings." =========== F R A N C E =========== BANIJAY GROUP SAS: Fitch Affirms LongTerm IDR at B+, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has assigned Banijay Entertainment SAS's proposed EUR450 million and USD500 million (around EUR900 million equivalent) senior secured notes 'BB-(EXP)'/'RR3' expected ratings. Fitch has also affirmed Banijay Group SAS's Long-Term Issuer Default Rating (IDR) at 'B+' with a Stable Outlook. The proceeds from the new senior secured notes will be used to repay Banijay's existing outstanding EUR575 million and USD348 million senior secured notes in full, together with related transaction fees. The assignment of final ratings is contingent on completion of the refinancing, when Fitch will also withdraw the ratings on the existing senior secured notes. Banijay's 'B+' IDR reflects its approach for a stronger parent - FL Entertainment N.V (FLE) - and weaker subsidiary - Banijay - where Fitch applies a bottom-up assessment with a single notch uplift from Banijay's Standalone Credit Profile (SCP) of 'b'. The Stable Outlook reflects Fitch's view that Banijay's credit metrics will remain consistent with the 'b' level in 2023-2024. Interest cover metrics will likely be pressured by higher rates on the notes, but the maturity extension of the capital structure improves the company's financial flexibility. KEY RATING DRIVERS Refinancing Addressed, Higher Rates: After the refinancing, the majority of Banijay's capital structure will be extended into 2028 and beyond (around EUR2 billion equivalent of senior secured debt). The term loans (EUR555 million and USD560 million) are still linked, via a springing maturity, with the maturity of the EUR400 million 2026 senior notes in Banijay Group SAS. However, Fitch also expects the company to pro-actively address the 2026 maturities. Given that the refinancing is for the same amount as the existing debt (with the addition of transaction costs), it is largely leverage neutral. However, interest cover metrics will reduce to around 2.0-3.0x EBITDA in 2024-2025, due to higher rates on the new notes. Acquisition of Adjacent Vertical: The company has signed, but not yet closed, a majority acquisition of Balich Wonder Studio, a global live entertainment company organising ceremonies, events and brand experiences. With this acquisition, Banijay is introducing a new business vertical, Banijay Live Events. Fitch believes visibility of revenue and profitability will be lower in this segment, with higher seasonality and less reoccurrence of revenues. Banijay expects some revenue synergies, leveraging its production and distribution expertise. The live events market is fragmented with consolidation opportunities. Balich is expected to contribute around EUR47 million of company-defined EBITDA in 2023 and around EUR370 million of revenue. The transaction is being funded by cash on balance sheet (net of cash; EUR90 million). Fitch includes 100% of Balich EBITDA from FY24 onwards (closing expected end-2023), although there will be a 49% minority at the outset. 'b' SCP: Banijay's 'b' SCP reflects a robust business model with increasing scale and diversification that is balanced by leverage (gross and net) and interest cover metrics in the 'b' category. Fitch forecasts that earnings and FCF will remain resilient through the economic cycle. In 2022, there was some margin pressure from higher staff costs, but also a mix effect from more scripted content (around 24% of revenues in 2022, up from 20% in 2021), with structurally lower margins. Fitch expects some continued margin pressure into 2023 due to inflation and higher staff costs. Fitch expects EBITDA gross and net leverage metrics to remain consistent with the 'b' level in 2023-2024. EBITDA interest cover will likely be pressured by higher rates on the notes, and is currently forecast at 2.0-3.0x for 2023-2024. Deleveraging Aims: Banijay aims to deleverage further, to below 4.0x company-defined EBITDA leverage in two years, from 4.5x (company-defined) at end-2022. If achieved, this could create upward rating pressure over the next 18-24 months. However, it is tempered by an appetite for opportunistic M&A, which decreases visibility of timing and speed of deleveraging. Underlying Secular OTT Growth: Fitch expects Banijay to grow above the market with mid-single-digit revenue growth in 2023 (including 2022 M&A). It is well-positioned to grow with streamers and digital platforms at broadcasters in the over-the-top (OTT) niche, currently representing around 18% of its production and distribution revenues (from 13% in 2021). Its focus on strong local content should benefit from demand from streamers facing jurisdictional local content regulation in Europe. This is supplemented by Banijay's cost-efficient non-scripted content in times of weaker consumer purchasing power and broadcasters' cost-cutting. Continued global TV market growth will be driven by OTT growth at streaming platforms, but also via digital platforms developed by traditional broadcasters. Fitch expects extraordinary content spend in 2020-2022, predominantly by streamers, to slow towards 2% organic annual growth in 2023, due to fewer large budget productions and economic pressure on consumer spend and advertising. PSL Approach: In applying its Parent-Subsidiary Linkage (PSL) Criteria, Fitch assesses the legal and operational incentives for FLE to support Banijay as 'Low' with no operational overlap between the parent and subsidiary. There are no cross defaults or guarantees between FLE and Banijay. Fitch views strategic incentives to support as 'Medium', as Banijay represents around two-thirds of FLE's consolidated EBITDA. This assessment leads to an overall bottom-up approach where Banijay's 'B+' IDR is lifted one notch above its 'b' SCP. Stronger Parent/Weaker Subsidiary: Fitch views FLE's consolidated business profile as corresponding to the low to mid 'bb' range. FLE's larger scale and business diversification is partly constrained by material regulatory oversight in the online gaming subsidiary, Betclic. However, the consolidated profile benefits from a stronger financial structure and financial flexibility, with estimated Fitch-defined EBITDA net leverage of around 4.0x in 2022, which Fitch forecasts will decline in 2023. Deleveraging is further supported by FLE's financial policy at below 3.0x group-defined net debt/EBITDA (3.1x at end-2022). DERIVATION SUMMARY Banijay is the largest independent TV production firm globally. Its primary competitors are ITV Studios, Fremantle Media and All3Media. Banijay has a greater proportion of non-scripted content than its peers, although the company has increased its scripted content towards 24% (public guidance to remain under 25%). UK and US peers in the diversified media industry such as TFCF Corporation (A-/Stable; owned by Disney) and NBC Universal Media LLC (A-/Stable; owned by Comcast) are much larger and more diversified, occupy stronger competitive positions in the value chain and are less leveraged than Banijay. Compared with these investment-grade companies, Banijay's profile is more consistent with the 'B' rating category. Fitch views Banijay's business profile as stronger than Spanish-based sports and media entertainment group Subcalidora1 S.a.r.l. (Mediapro, B/Stable), owing to the latter's lower scale, weaker FCF and high dependence on key accounts. Mediapro has lower leverage than Banijay for the same SCP. KEY ASSUMPTIONS Key Assumptions In Its Rating Case for the Issuer: - Organic revenue growth of 6% in 2023, followed by around 2% in 2024 (13% including Balich); - Fitch-defined EBITDA margin of 13% in 2022 (14.1% in 2021), before falling towards 12% in 2023 (Fitch adjusts for leases and around EUR20 million of recurring outflows related to staff incentive programmes and restructuring costs); - Working-capital outflows below 1% of revenue in 2023-2024; - Capex at around EUR60 million in 2023 and EUR70 million in 2024; - Common dividends of around EUR60 million per year from 2023 (to part-fund FLE's dividend policy); - No further M&A is assumed due to lack of visibility. KEY RECOVERY RATING ASSUMPTIONS - Fitch assumes Banijay would be reorganised as a going concern in distress or bankruptcy rather than liquidated; - Post-restructuring EBITDA estimated at EUR325 million (including acquired EBITDA), reflecting weaker demand for non-scripted formats and increasing price pressure from both broadcasters and streaming platforms; - A distressed enterprise value multiple of 5.5x to calculate a post-restructuring valuation; - Fitch deducts 10% for administrative claims and allocate the residual value according to the liability waterfall. Fitch first deducts EUR145 million of factoring and EUR152 million of local facilities ranking prior to Banijay's senior secured debt. Fitch expects its EUR170 million revolving credit facility (RCF) to be fully drawn in a default, ranking pari-passu with its senior secured term loans and senior secured notes. Thereafter Fitch deducts its lowest-ranking EUR400 million senior unsecured notes; - Based on current metrics and assumptions, the waterfall analysis generates a ranked recovery at 62% in the 'RR3' band for the senior secured loans and notes, and 0% in 'RR6' for the senior unsecured notes. These indicate a 'BB-' senior secured instrument rating for the senior secured term loans and notes, and a 'B-' unsecured instrument rating for the EUR400 million notes. RATING SENSITIVITIES Factors That Could, Individually Or Collectively, Lead To Positive Rating Action/Upgrade - EBITDA net leverage below 4.8x on a sustained basis, together with visibility of the use of high cash balances (and less divergence between gross and net leverage metrics), will be a key consideration for an upgrade; - Continued growth of EBITDA and FCF, with continued demand for non-scripted and scripted content without significant increase in competitive pressure; - Stronger legal, strategic or operational incentives for consolidated FLE to support Banijay's credit profile; - EBITDA interest cover sustained above 3.3x. Factors That Could, Individually Or Collectively, Lead To Negative Rating Action/Downgrade - Total EBITDA net leverage above 5.8x (and/or greater divergence between gross and net leverage metrics) on a sustained basis; - EBITDA interest coverage sustained below 2.8x; - Deterioration of EBITDA because of failure to renew leading shows, increase in competition or inability to control costs; - Weaker linkages between FLE and Banijay, with reduced incentives to support Banijay's SCP; - An overall weaker consolidated credit profile of FLE, so that the parent's consolidated credit profile is no longer stronger than Banijay's SCP. LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Banijay's cash equivalent was EUR396 million at end-2022. In addition, Banijay has access to a EUR170 million undrawn RCF. Fitch forecasts positive FCF post-dividends in 2023-2024, which combined with its cash position pro-forma for the term loan B extension and senior secured notes' refinancing, provides satisfactory liquidity for working-capital requirements, earn-outs and growth M&A opportunities. Manageable Refinancing Risks: The extended and upsized senior secured term loans now mature at the earlier of March 2028 and three months prior to the existing senior secured and unsecured notes' respective maturities (March 2025 (refinancing launched) and 2026, respectively). Fitch expects refinancing to be manageable, based on its current and expected leverage profile, FCF and interest cover remaining at the 'b' level, adjusted for a higher interest-rate environment. ISSUER PROFILE Banijay is the largest independent content producer and distributor globally; home to over 130 production companies across 21 territories, and a multi-genre catalogue boasting over 172,000 hours of original standout programming. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Banijay Entertainment SAS senior secured LT BB-(EXP)Expected Rating RR3 senior secured LT BB- Affirmed RR3 BB- Banijay Group SAS LT IDR B+ Affirmed B+ senior unsecured LT B- Affirmed RR6 B- Banijay Group US Holding, Inc. senior secured LT BB- Affirmed RR3 BB- ============= I R E L A N D ============= CARLYLE GLOBAL 2014-1: Fitch Alters Outlook on 'B+sf' Rating to Neg ------------------------------------------------------------------- Fitch Ratings has revised Carlyle Global Market Strategies Euro CLO 2014-1 DAC's class E-RR and F-RR notes Outlook to Negative from Stable. All notes have been affirmed. Entity/Debt Rating Prior ----------- ------ ----- Carlyle Global Market Strategies Euro CLO 2014-1 DAC A-RR XS1839726426 LT AAAsf Affirmed AAAsf B-1-RR XS1839725964 LT AA+sf Affirmed AA+sf B-2-RR XS1839726004 LT AA+sf Affirmed AA+sf B-3-RR XS1847616296 LT AA+sf Affirmed AA+sf C-1-RR XS1839726186 LT A+sf Affirmed A+sf C-2-RR XS1847611495 LT A+sf Affirmed A+sf D-RR XS1839726269 LT BBB+sf Affirmed BBB+sf E-RR XS1839726343 LT BB+sf Affirmed BB+sf F-RR XS1839725295 LT B+sf Affirmed B+sf TRANSACTION SUMMARY Carlyle Global Market Strategies Euro CLO 2014-1 DAC is a cash flow-collateralised loan obligation (CLO). The underlying portfolio of assets mainly consists of leveraged loans and is managed by CELF Advisors LLP. The deal exited its reinvestment period in October 2022. KEY RATING DRIVERS Par Erosion; High Refinancing Risk: Since Fitch's last rating action in September 2022, the portfolio has seen further erosion of 70bp of par value. As per the last trustee report on 10 August 2023, the transaction was below par by 1.7%. Reported defaults stand at EUR8.6 million, or 1.8% of the target par. The Negative Outlook on the class E-RR and F-RR notes reflects a limited default-rate cushion against credit-quality deterioration. In addition, the notes are vulnerable to near- and medium-term refinancing risk, with approximately 3.3% of the portfolio maturing within the next 18 months, and 18.0% in 2025, which in Fitch's opinion could lead to further deterioration of the portfolio with an increase in defaults. The Negative Outlook indicates a potential downgrade but Fitch expects the ratings to remain within the current rating category. Sufficient Cushion for Senior Notes: Although the par erosion has reduced the default-rate cushion for all notes, the senior classes have retained sufficient buffer to support their current ratings and should be capable of withstanding further defaults in the portfolio. This supports the Stable Outlook of the class A-RR to D-RR notes. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the obligors at 'B'/'B-'. The Fitch-calculated weighted average rating factor (WARF) of the current portfolio is 26.7, and of the portfolio including entities with Negative Outlook that are notched down one level as per its criteria was 27.9 as of 2 September 2023. High Recovery Expectations: Senior secured obligations comprise 99.3% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate (WARR) of the current portfolio as reported by the trustee was 65.4%, based on outdated criteria. Under the current criteria, the Fitch WARR calculated by the agency is 63.4%. Diversified Portfolio: The top-10 obligor concentration as calculated by the trustee is 13.5%, which is below the limit of 18%, and no obligor represents more than 1.5% of the portfolio balance. Deviation from Model-implied Ratings: The class B-1-RR, B-2-RR and B-3-RR notes ratings at 'AA+sf' and D-RR notes ratings at 'BBB+sf' are a deviation from their model-implied ratings (MIR) of 'AAAsf' and 'A-sf', respectively. The deviation reflects limited cushion on the Fitch-stressed portfolio at their MIRs. Transaction Outside Reinvestment Period: Although the transaction exited its reinvestment period in October 2022 the manager can reinvest unscheduled principal proceeds and sale proceeds from credit-risk obligations also the reinvestment period, subject to compliance with the reinvestment criteria. Given the manager's ability to reinvest, Fitch's analysis is based on a stressed portfolio using the agency's collateral quality matrix specified in the transaction documentation. Fitch used the matrix with a top-10 obligor limit at 18%, which is currently used by the manager, rather than the 20% obligor limit in the documentation, as it is closer to the 13.5% concentration reported in the August 2023 trustee report. Fitch also applied a haircut of 1.5% to the WARR as the calculation of the WARR in the transaction documentation is not in line with the agency's current CLO Criteria. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade An increase of the default rate (RDR) at all rating levels in the current portfolio by 25% of the mean RDR and a decrease of the recovery rate (RRR) by 25% at all rating levels will have no impact on the class A-RR to D-RR notes, a downgrade of three notches on the class E-RR notes and to below 'B-sf' for the class F-RR notes. Downgrades may occur if build-up of the notes' credit enhancement following amortisation does not compensate for a larger loss expectation than initially assumed due to unexpectedly high levels of defaults and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A reduction of the RDR at all rating levels in the stressed portfolio by 25% of the mean RDR and an increase in the RRR by 25% at all rating levels would result in upgrades of up to three notches for all notes, except for the 'AAAsf' notes, the class B-1-RR, B-2-RR, B-3-RR, C-1-RR and C-2-RR notes. Further upgrades except for the 'AAAsf' notes may occur if the portfolio's quality remains stable and notes start to amortise, leading to higher credit enhancement across the structure. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. FINANCE IRELAND NO. 6: S&P Assigns Prelim BB(sf) Rating to E Notes ------------------------------------------------------------------ S&P Global Ratings assigned preliminary credit ratings to Finance Ireland RMBS No. 6 DAC's class A notes and class B-Dfrd to E-Dfrd notes. At closing, the issuer will also issue unrated class X-Dfrd, Y, Z-Dfrd, R1, and R2 notes. Finance Ireland RMBS No. 6 is a static RMBS transaction that securitizes a portfolio of EUR240.85 million owner-occupied mortgage loans secured on properties in Ireland. This transaction is similar to its predecessor, Finance Ireland RMBS No. 5 DAC. The loans in the pool were originated between 2016 and 2023 by Finance Ireland Credit Solutions DAC (Finance Ireland) and Pepper Finance Corp. (Ireland) DAC (Pepper). Finance Ireland is a nonbank specialist lender, which purchased Pepper's residential mortgage business in 2018. The pool comprises warehoused loans newly originated by Finance Ireland (41.76%) and loans that were previously a part of the Finance Ireland RMBS No. 2 DAC transaction (58.24%). The collateral comprises prime borrowers, and there is a high exposure to first-time buyers. All of the loans were originated relatively recently and thus under the Central Bank of Ireland's mortgage lending rules limiting leverage and affordability. The transaction benefits from liquidity provided by a general reserve fund, and in the case of the class A notes, a class A liquidity reserve fund. Principal can be used to pay senior fees and interest on the notes subject to various conditions. Credit enhancement for the rated notes will consist of subordination and the general reserve fund from the closing date. The class A liquidity reserve can also ultimately provide additional enhancement subject to certain conditions. The transaction incorporates a swap to hedge the mismatch between the notes, which pay a coupon based on the three-month Euro Interbank Offered Rate (EURIBOR), and the loans, which pay fixed-rate interest before reversion. The notes are expected to be issued on the closing date, Sept. 22, 2023, with the assets purchased on Sept. 25, 2023. In the interim days, the proceeds of the notes will be held in cash with the issuer account bank. If the asset sale does not occur, a mandatory redemption event will occur one week later. Furthermore, the redemption amount of the notes as mentioned above equals the issue price multiplied by the original note balance of each tranche. Please refer to our presale report for more information. There are no rating constraints in the transaction under our counterparty, operational risk, or structured finance sovereign risk criteria. We consider the issuer to be bankruptcy remote. Preliminary ratings CLASS PRELIM. RATING CLASS SIZE (EUR) A AAA (sf) 221,580,000 Y NR 5,000 B-Dfrd AA- (sf) 7,820,000 C-Dfrd A- (sf) 4,210,000 D-Dfrd BBB- (sf) 3,010,000 E-Dfrd BB (sf) 2,400,000 Z-Dfrd NR 1,834,000 X-Dfrd NR 4,800,000 R1 NR 10,000 R2 NR 10,000 NR--Not rated. HARVEST CLO XXX: Fitch Gives 'B-sf' Final Rating to Class F Notes ----------------------------------------------------------------- Fitch Ratings has assigned Harvest CLO XXX DAC final ratings, as detailed below. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO XXX DAC A XS2653485214 LT AAAsf New Rating AAA(EXP)sf B-1 XS2653494471 LT AAsf New Rating AA(EXP)sf B-2 XS2653494554 LT AAsf New Rating AA(EXP)sf C XS2653494638 LT Asf New Rating A(EXP)sf D XS2653494711 LT BBB-sf New Rating BBB-(EXP)sf E XS2653494802 LT BB-sf New Rating BB-(EXP)sf F XS2653494984 LT B-sf New Rating B-(EXP)sf Subordinated XS2653496336 LT NRsf New Rating NR(EXP)sf Z XS2653495015 LT NRsf New Rating TRANSACTION SUMMARY Harvest CLO XXX DAC is a securitisation of mainly senior secured obligations (at least 96%) with a component of senior unsecured, mezzanine, second-lien loans, first-lien last-out loans, and high-yield bonds. Note proceeds were used to fund a portfolio with a target par of EUR400 million. The portfolio is actively managed by Investcorp Credit Management EU Limited. The collateralised loan obligation (CLO) has a 4.6-year reinvestment period and a seven-year weighted average life (WAL) test. KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch assesses the average credit quality of obligors at 'B'/ 'B-'. The Fitch weighted average rating factor of the identified portfolio is 24.7. High Recovery Expectations (Positive): At least 96% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate of the identified portfolio is 60%. Diversified Portfolio (Positive): The transaction includes two Fitch matrices, corresponding to a top-10 obligor concentration limit at 20%, a seven-year WAL test, and fixed-rate asset limits at 5% and 10%. The transaction also includes various other concentration limits, including a maximum exposure to the three-largest Fitch-defined industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a 4.6-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. The transaction could extend the WAL test by one year from the date that is one year from closing if the aggregate collateral balance (defaulted obligations at collateral value) is at least at the reinvestment target par amount and if the transaction is passing all relevant tests. Cash Flow Modelling (Positive): The WAL used for the Fitch-stressed portfolio and matrices analysis is 12 months less than the WAL covenant. This is to account for structural and reinvestment conditions after the reinvestment period, including the over-collateralisation (OC) test and Fitch 'CCC' limitation test, among others. Fitch believes these conditions would reduce the effective risk horizon of the portfolio during the stress period. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would lead to a downgrade of no more than one notch for the class B, C, D, E and F notes and would have no impact on the class A notes. Based on the identified portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio than the Fitch-stressed portfolio, the class B, D, E and F notes have a cushion of two notches, the class C notes one notch and the class A notes zero notches. Should the cushion between the identified portfolio and the stressed portfolio be eroded due to manager trading or negative portfolio credit migration, a 25% increase of the mean RDR across all ratings and a 25% decrease of the RRR across all ratings of the stressed portfolio would lead to downgrades of up to four notches. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 25% reduction of the mean RDR across all ratings and a 25% increase in the RRR across all ratings of the Fitch-stressed portfolio would lead to upgrades of up to five notches, except for the 'AAAsf' rated notes. During the reinvestment period, based on the Fitch-stressed portfolio, upgrades may occur on better-than-expected portfolio credit quality and a shorter remaining WAL test, meaning the notes are able to withstand larger-than-expected losses for the transaction's remaining life. After the end of the reinvestment period, upgrades may occur on stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. DATA ADEQUACY The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ===================== N E T H E R L A N D S ===================== KETER GROUP: EUR231MM Bank Debt Trades at 27% Discount ------------------------------------------------------ Participations in a syndicated loan under which Keter Group BV is a borrower were trading in the secondary market around 72.7 cents-on-the-dollar during the week ended Friday, September 8, 2023, according to Bloomberg's Evaluated Pricing service data. The EUR230.9 million facility is a Term loan that is scheduled to mature on October 31, 2023. The amount is fully drawn and outstanding. Keter Group BV manufactures and markets resin-based household and garden consumer products. The Company offers furniture, storage, and organization solutions, such as sheds, deck boxes, dining tables, seating lounge sets, cabinets, shelves, workbenches, sawhorses, tool chest systems, and outdoor toys. The Company’s country of domicile is the Netherlands. LEALAND FINANCE: $500MM Bank Debt Trades at 48% Discount -------------------------------------------------------- Participations in a syndicated loan under which Lealand Finance Co BV is a borrower were trading in the secondary market around 52.3 cents-on-the-dollar during the week ended Friday, September 8, 2023, according to Bloomberg's Evaluated Pricing service data. The $500 million facility is a Term loan that is scheduled to mature on June 30, 2025. The amount is fully drawn and outstanding. Lealand Finance is an affiliate of CB&I Holdings B.V. and Chicago Bridge & Iron Company B.V. The Company's country of domicile is the Netherlands. =========== P O L A N D =========== BANK MILLENNIUM: Fitch Gives 'BB(EXP)' Rating to Sr. Non-Pref Bonds ------------------------------------------------------------------- Fitch Ratings has assigned Bank Millennium S.A.'s (Millennium; BB/Positive) planned inaugural issue of foreign-currency senior non-preferred (SNP) bonds a 'BB(EXP)' expected long-term rating. The assignment of a final rating is contingent on the receipt of final documents conforming to the information already received. KEY RATING DRIVERS Millennium's SNP debt is rated in line with the bank's IDR, reflecting its expectations that the bank will use only SNP and more junior debt to meet its minimum requirement for own funds and eligible liabilities (MREL) resolution buffer. On the consolidated level, starting from end-2023 the bank must comply with MREL requirement set at 21.64% (including the combined buffer requirement of 2.75%) of risk-weighted assets (RWA) of the resolution group, which excludes its mortgage bank subsidiary. The bank can meet part of its MREL requirements with senior preferred debt, but it is limited to a low 0.27% of RWA. Millennium's IDRs and debt ratings balance the benefits of a well-established retail franchise and a record of adequate asset quality with an above-average exposure to non-financial risks from foreign-currency mortgage loans. A materialisation of the latter, combined with the high cost of mortgage credit holiday imposed by the authorities, has led to sizeable losses and capital erosion triggering the launch of a capital recovery plan in 2022. The bank has been progressing well with its implementation. The Positive Outlook on the bank's Long-Term IDR reflects its base-case expectation for medium-term improvements of the bank's risk profile through a further gradual reduction of risks related to its foreign-currency mortgage loan portfolio. It also reflects its expectations that its improved core profitability will absorb ongoing legal costs and potential government intervention, leading to a further recovery of the bank's capitalisation. The bank is in the midst of its capital recovery plan following the breach of regulatory capital buffers in mid-2022. Capitalisation metrics had partly recovered by end-1H23, with a Tier 1 ratio of 11.7% resulting in a buffer of around 150bp above the regulatory minimum (excluding Pillar 2 guidance). In its base case Fitch expects capitalisation to recover further on a combination of improved internal capital generation and RWA optimisation. The bank's capital structure is supplemented by subordinated debt, equivalent to about 3.3% of RWA, maturing in 2027 (PLN700 million) and 2029 (PLN830 million), which supports its regulatory capitalisation and MREL-eligible liabilities. The bank's funding structure is dominated by customer deposits (about 97% of total funding at end-1H23), with household deposits accounting for around 70% of total customer deposits. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The SNP debt rating would be downgraded if the bank's Long-Term IDR is downgraded. The SNP debt would also be downgraded to one notch below the bank's Long-Term IDR if becomes clear that Millennium will use senior preferred debt to meet its MREL requirement while SNP and more junior debt would not exceed 10% of the Millennium resolution group's RWA on a sustained basis. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The SNP debt rating could be upgraded if the bank's Long-Term IDR is upgraded. ESG CONSIDERATIONS Millennium's ESG Relevance Score for Management Strategy is '4', reflecting its view of higher government intervention risk in the Polish banking sector, which affects the banks' operating environment and their ability to define and execute on strategy. This has negative implications for the credit profile and is relevant to the rating in combination with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating ----------- ------ Bank Millennium S.A. Senior non-preferred LT BB(EXP) Expected Rating GLOBE TRADE: Fitch Lowers LongTerm IDR to BB+, Rating on Watch Neg. ------------------------------------------------------------------- Fitch Ratings has downgraded Globe Trade Centre S.A.'s (GTC) Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' and placed it on Rating Watch Negative (RWN). Fitch has also downgraded GTC's senior unsecured debt rating and GTC Aurora Luxembourg S.A.'s senior unsecured bond rating to 'BB+' from 'BBB-' and placed them on RWN. The bond, which is guaranteed by GTC, has a Recovery Rating of 'RR4'. The downgrades reflect GTC's leverage exceeding Fitch's downgrade rating sensitivity threshold of 9.5x net debt/EBITDA and an uncertain path to deleveraging. This uncertainty is unaided by the shareholders' decision to distribute around EUR30 million of dividends despite GTC management's intention to retain 2022 profits within the company. Recent changes to the management board mean that a coherent strategy leading to leverage reduction will take time to develop. Any Ultima acquisition-related cash spend may put additional pressure on GTC's credit metrics, and asset disposals will take time, especially in the current inconducive market environment. Fitch expects to resolve the RWN when the final terms of the Ultima transaction, including its financing sources, are known. KEY RATING DRIVERS Persistently High Leverage: Fitch forecasts net debt/EBITDA to decrease to 10.8x by end-2023 (end-2022: 11.5x). The reduction is aided by 2023's rent indexation, proceeds from the sale of an office project in Debrecen (Hungary) and rents from a development completed in 2Q23. Although next years' rent indexation (albeit lower than in 2023) and developments' rents coming onstream will help to reduce leverage, it will remain above Fitch's negative sensitivity of 9.5x (2026: 10x). Fitch-calculated loan-to-value (LTV; net debt/investment property) was 57% at end-June 2023. Potential Acquisition of Ultima: GTC is negotiating the acquisition of Ultima, a developer, owner and manager of luxury hospitality assets mainly in Switzerland and France. Ultima's property portfolio was valued at CHF0.9 billion (including developments) and its reported LTV was 45% at end-2022. Ultima is 58% owned by its founders, including a 33% stake held by the CEO of Icona Capital. If acquired, it would improve GTC's diversifications and Icona Capital's participation on GTC's supervisory board should help reduce execution risk. Ultima Acquisition Financing: GTC's potential acquisition of a 58% stake in Ultima will be completed as a non-cash transaction involving the acquisition of a debt-like instrument from Optimum Venture Private Equity Funds (Optimum), a major GTC shareholder. In exchange Optimum will receive notes issued by GTC. GTC expects to treat the notes as equity under IFRS. Fitch's treatment of the notes as equity is contingent on the final terms agreed between GTC and Optimum. The acquisition of the remaining 42% in Ultima, around EUR25 million of payment to Ultima founders on obtaining permits for some of Ultima developments, will be in cash. Given the early stage and new management's mandated review of the transaction, Fitch has not included the Ultima acquisition in its forecasts. Related-party Transactions: Given Optimum's involvement in the Ultima acquisition the purchase is a 'related-party' transaction. This means that the final terms require the approval of GTC's supervisory board members not related to Optimum or Icona. In 2Q23 GTC completed two other related-party transactions to acquire two property assets for EUR13 million from an Optimum-related fund. Office Portfolio Under Pressure: The occupancy rate in GTC's office portfolio (64% of the total portfolio by value) remained at 84% (end-June 2023) as lower occupancy in Poland (to 79% from 80% at end-2022) and Hungary (to 88% from 89%) offset vacancy reduction in the remaining countries. The office portfolio's weighted average lease term (WALT) until expiry is short (end-June 2023: 3.5 years). Since the estimated rental values (ERVs) for this portfolio are below the reported in-place rents (between 1% and 10% depending on each market) Fitch sees a risk that a considerable part of the expiring leases may be renewed at lower rents. Management Board Changes: Effective end-August 2023 GTC's supervisory board appointed Gyula Nagy and Zsolt Farkas to replace Zoltan Fekete and Janos Gardai as CEO and COO, respectively. Previously, Mr. Nagy was Optima's (Optimum management company) board member and a member of the supervisory board of GTC. 2026 Debt Maturity Wall: Around 60% of GTC's debt falls due in the 12 months preceding end-June 2026 when the EUR500 million unsecured bond matures. Fitch believes that GTC should be able to extend ahead of time or prepay maturing debt. If debt reduction does not take place, its refinancing in the current interest rate environment means that Fitch's forecast EBITDA interest cover may decrease to 1.9x by end-2026. Stable Retail Assets Performance: The group's six retail assets (36% of the total portfolio by value) have stable average occupancy of 95% (end-June 2023). The occupancy decrease in Galeria Północna (the group's top asset) to 88% (end-March 2023: 91%) is temporary to make space for new international brands entering the asset. The reported average retail rent remained stable at EUR21.8/sqm/month. This portfolio's WALT until expiry was 3.8 years (end-2022: 3.7 years). Optimum Ownership: GTC's biggest shareholder is Optimum, which holds a 47% stake. Optimum acts in concert with Icona Group (16%), based on a shareholders agreement. GTC operates independently, including separate financing and treasury functions. Independent supervisory board members, including those elected by two pension funds together holding 20% of GTC's shares, provide some independent oversight over the company's management. Fitch rates GTC on a standalone basis. DERIVATION SUMMARY GTC's EUR2.0 billion portfolio is similar in size to the EUR2.8 billion office-focused portfolio of Globalworth Real Estate Investments Limited (BBB-/Negative). NEPI Rockcastle N.V.'s (BBB+/Stable) EUR5.7 billion retail-focused portfolio is more than twice as large. Compared with these immediate peers, only GTC's portfolio benefits from meaningful asset class diversification with offices (64% of market value) and retail (36%), as underscored in GTC's different leverage rating sensitivities. All the companies' assets are located in central and eastern Europe (CEE). The majority (39% by market value) of GTC's assets are located in Poland (A-/Stable) with the remainder in five countries rated in the 'BBB' rating category or below. This results in an average country risk exposure similar to that of NEPI, which is present in nine countries, but has 42% of assets located in countries rated 'A-' or above. Globalworth's average country risk is similar but its assets are almost equally split between Poland and Romania (BBB-/Stable). Fitch expects GTC's net debt/EBITDA to be 10.8x in 2023, decreasing to 10x in 2026. Fitch forecasts Globalworth's leverage at 8.4x-8.8x, aided by planned asset disposals. NEPI's financial profile is stronger than GTC's and Globalworth's. Although not all CEE peers quote directly comparable net initial yield data (NIY; which measures annualised net rents/investment property asset values), Fitch believes that GTC's portfolio quality is broadly similar to that of Globalworth and NEPI. The Lithuanian all-retail property company, Akropolis Group, UAB (BB+/Stable), and Serbia-focused Balkans Real Estate B.V. (BB(EXP)/Stable) whose portfolio is spread across retail and office, have conservative financial profiles with net debt/EBITDA forecast at below 5x and around 6x, respectively. However, their ratings are constrained by concentration on a limited number of assets, restricting asset, tenant and geographical diversification. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: - The group's rental income to increase 8% in 2023 due to CPI indexation of leases and rents from completed developments. In 2024-2026, the average increase in rental income of 5% per year will be due to contractual rent indexation, new developments coming onstream, a recovery (albeit slower than previously expected) in occupancy levels, which is partly offset by some rents decrease on renewals - Total capex of around EUR280 million during 2023-2026 - Around EUR30 million cash dividend paid in 2023. In the following three years, 66% of funds from operations per year is paid as cash dividends - Net cash inflow of EUR35 million related to asset rotation in 2023 - New debt refinanced with a 3.5% spread above reference rate RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Net debt/EBITDA below 9.5x - EBITDA net interest coverage above 1.7x - Weighted average debt tenor above five years - Unencumbered assets/unsecured debt trending towards 1.75x with no adverse selection - An improved operating profile with longer WALT, positive like-for-like rental growth and a group occupancy rate above 90% - Proportional increased exposure to higher-rated countries in the portfolio, either through expansion or country upgrades Factors That Could, Individually or Collectively, Lead to Downgrade: - Net debt/EBITDA above 10.5x - EBITDA net interest coverage below 1.5x - LTV above 55% - Operating metrics deterioration including occupancy below 90%, WALT (including tenants' earliest breaks) below three years and like-for-like rental decline - Unencumbered assets/unsecured debt below 1.25x - Twelve-month liquidity score below 1.0x LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: As at end-June 2023, GTC held EUR120 million of readily available cash and had access to an undrawn EUR94 million revolving credit facility that matures in October 2024. This adequately covers EUR44 million of debt maturing in the next 12 months. The next big debt maturities, totalling EUR733 million, are in the 12 months to end-June 2026, including a EUR500 million unsecured bond. ISSUER PROFILE GTC was established in 1994 and headquartered in Poland. It is a property investment company that holds and develops assets (mainly office and retail) in Poland and capital cities in the CEE region (particularly Budapest, Bucharest, Belgrade, Zagreb and Sofia). GTC is listed on the Warsaw and Johannesburg Stock Exchanges. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Globe Trade Centre S.A. LT IDR BB+ Downgrade BBB- senior unsecured LT BB+ Downgrade RR4 BBB- GTC Aurora Luxembourg S.A. senior unsecured LT BB+ Downgrade RR4 BBB- ========= S P A I N ========= RURAL HIPOTECARIO IX: Fitch Affirms 'CCsf' Rating on Cl. E Notes ---------------------------------------------------------------- Fitch Ratings has taken multiple rating actions on two Spanish RMBS transactions from the Rural Hipotecario series, including the upgrade of two tranches and the revision of Outlooks on another two tranches. Entity/Debt Rating Prior ----------- ------ ----- Rural Hipotecario VIII, FTA Class A2a ES0366367011 LT AAAsf Affirmed AAAsf Class A2b ES0366367029 LT AAAsf Affirmed AAAsf Class B ES0366367037 LT AA+sf Upgrade AAsf Class C ES0366367045 LT A+sf Affirmed A+sf Class D ES0366367052 LT Asf Affirmed Asf Class E ES0366367060 LT CCsf Affirmed CCsf Rural Hipotecario IX, FTA Class A3 ES0374274027 LT AAAsf Affirmed AAAsf Class B ES0374274035 LT AAsf Affirmed AAsf Class C ES0374274043 LT Asf Affirmed Asf Class D ES0374274050 LT Asf Upgrade BBB+sf Class E (RF) ES0374274068 LT CCsf Affirmed CCsf TRANSACTION SUMMARY The static Spanish RMBS transactions comprise fully amortising residential mortgages originated and serviced by multiple rural savings banks in Spain with a back-up servicer arrangement with Banco Cooperativo Espanol, S.A. (BBB/Stable/F2). KEY RATING DRIVERS Mild Weakening in Asset Performance: The upgrades and affirmations reflect Fitch's expectation of mild deterioration of asset performance, consistent with the weaker macroeconomic conditions linked to inflationary pressures, which is eroding real household and disposable income, especially for more vulnerable borrowers like self-employed individuals. Although these transactions are around 20% exposed to higher-risk self-employed borrowers, they maintain a low share of loans in arrears over 90 days (less than 1% of outstanding pool balance as of the latest reporting dates), are protected by substantial seasoning of the portfolios of around 17 years, and carry low current loan-to-value ratios below 35%. The transactions' cumulative defaults range between 2.2% and 5.1% of the portfolios' initial balances for Rural VIII and IX, respectively. Cumulative recoveries for Rural IX relative to cumulative defaults have been consistently below expectations. Sufficient Credit Enhancement (CE): The upgrades and affirmations reflect Fitch's view that CE protection on the notes is sufficient to fully compensate the credit and cash flow stresses associated with the corresponding ratings. For Rural VIII, Fitch expects CE ratios to increase, driven by the sequential note amortisation. On the other hand, Fitch expects Rural IX CE ratios to remain broadly stable in the short term due to the pro-rata amortisation of the notes that Fitch expects to switch to sequential when the outstanding portfolio balance represents less than 10% of its original amount (currently at 15.4%). Ratings Capped by Counterparty Risks: The class D notes' ratings in both transactions are capped at the transaction account bank (TAB) provider's 'A' deposit rating (Societe Generale S.A., IDR A-/Positive) as the cash reserves held at this entity represent 100% of total structural CE protection for these notes. The rating cap reflects the excessive counterparty dependence on the TAB holding the cash reserves, such that a loss of these funds would imply a downgrade of 10 or more notches in accordance with Fitch's Structured Finance and Covered Bonds Counterparty Rating Criteria. For Rural VIII class C notes, the Outlook revision to Negative signals the possibility of the rating becoming exposed to excessive counterparty risk in the short-to-medium term, as the contribution to total CE protection from the cash reserves held at the TAB has risen to a high 79.5%. Similarly, for Rural IX class C notes, an increasing over-reliance on the cash reserves held at the TAB as a proportion of total CE protection in the medium term could result in a rating cap at the TAB deposit rating. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade For the class A notes, a downgrade of Spain's Long-Term Issuer Default Rating (IDR) that could lower the maximum achievable rating for Spanish structured finance transactions. This because the class A notes are rated at the 'AAAsf' maximum achievable rating in Spain, six notches above the sovereign IDR. For Rural VIII and Rural IX class D notes, a downgrade to the TAB's deposit rating could lead to a corresponding downgrade in the notes' ratings, reflecting their excessive counterparty dependency. For Rural VIII class C notes, a downgrade to 'Asf' equivalent to the TAB deposit rating may occur if Fitch determines the tranche to be exposed to excessive counterparty dependency. Long-term asset performance deterioration, such as increased delinquencies or larger defaults, which could be driven by changes to macroeconomic conditions, interest rate increases or borrower behavior, will also be negative for ratings. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The class A notes are rated at the highest level on Fitch's scale and therefore cannot be upgraded. For Rural VIII and Rural IX class D notes, an upgrade to the TAB's deposit rating could lead to a corresponding upgrade in the notes' ratings. For mezzanine and junior notes, increases in CE as the transactions deleverage to fully compensate the credit losses and cash flow stresses that are commensurate with higher ratings may result in upgrades. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. Fitch has not reviewed the results of any third- party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Both transactions' class D note ratings are capped at the TAB provider deposit rating. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. =========================== U N I T E D K I N G D O M =========================== ILKE HOMES: Owes Homes England GBP68 Million -------------------------------------------- Will Ing at Construction News reports that Homes England is set to lose most of the GBP68 million it is owed by collapsed modular housebuilder Ilke Homes, administrators' reports have revealed. Ilke Homes made the "significant majority" of its 1,150 staff redundant when it entered administration in June, Construction News relates. ISOSPACES: Goes Into Administration, Heritage Center Plans Halted ----------------------------------------------------------------- Cait Findlay at CambridgeshireLive reports that plans for a dedicated heritage centre in Cambridgeshire's new town have been axed after a contractor went into administration. A "state-of-the-art" modular building was planned for the heritage centre to house archaeological finds dating back to the Roman period, CambridgeshireLive discloses. Cambridgeshire County Council said in October 2022 that the centre would be opening in spring 2023, CambridgeshireLive notes. According to CambridgeshireLive, the plans were halted in March after the main contractor -- IsoSpaces -- was placed into administration. Cambridgeshire County Council has since been working with partners to find a way forward, CambridgeshireLive states. A spokesperson for the council said options included finding a new contractor at an estimated cost of GBP550,000, stopping the project altogether and returning the leased space, or delivering the project in a different way, CambridgeshireLive relates. They added the council has now said it has found a different way to display the finds, according to CambridgeshireLive. ONTO: Goes Into Administration, Explores Options ------------------------------------------------ Anna Cooper at TheBusinessDesk.com reports that an electric vehicle leasing company has fallen into administration, following a drop in EV residual value and failing to secure additional funding from its shareholders. Founded in 2017 by Rob Jolly and Dannan O'Meachair, Warwick-based Onto offered an electric car monthly subscription service to customers. The business had grown to have more than 7,000 EVs in its fleet by the start of 2023 and introduced more than 20,000 people to electric cars through the subscription. According to TheBusinessDesk.com, the firm has struggled with the challenging economic climate with administrators citing "interest rates and the squeeze on disposable income" as major factors leading to the company's demise. The news comes after Onto secured more than GBP340 million from investors to help its mission of pushing electric car adoption, TheBusinessDesk.com notes. Legal & General invested GBP22.5 million this year, after leading a Series C funding round in July 2022, which raised GBP45 million in equity, TheBusinessDesk.com discloses. Teneo Financial Advisory has been appointed as administrators for the holding company, as well as its subsidiaries, TheBusinessDesk.com relates. The administrators say they will maintain business operations with minimal disruption to customers, as they explore strategic options for the business, TheBusinessDesk.com relates. ORIFLAME INVESTMENT: S&P Lowers ICR to 'CCC+', Outlook Negative --------------------------------------------------------------- S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based cosmetics and wellness manufacturer Oriflame Investment Holding PLC to 'CCC+' from 'B-'. At the same time, S&P lowered its issue-level rating on the company's senior secured notes maturing in 2026 to 'CCC+' from 'B-'. The recovery rating of '3' is unchanged, indicating recovery prospects of about 50%. S&P said, "The negative outlook reflects our view that there is still significant volatility attached to our base-case scenario, given the uncertainty about the speed of recovery of Oriflame's volumes and margins. In particular, we anticipate that a business turnaround process might necessitate additional spending over the next 12 months, ultimately affecting the group's FOCF generation. Under our base-case scenario, we believe the company's leverage will increase in the coming 12-18 months while FOCF will likely remain negative." The downgrade follows Oriflame's recent interim results which confirmed the ongoing pressure on the company's sales networks and its lessened ability to recover sales volumes and profitability after the pandemic, input cost inflation, and the war in Ukraine. During the first six months of the year, the company's reported sales declined by 12% to about EUR390 million (a 9% decline in local currency). This was driven by a volume decline of 26% year on year and partially offset by a positive price mix effect of about 17%. The average number of network members declined to about 1.7 million from 2.1 million at year-end 2022 and 2.5 million at year-end 2021. By geographies, all regions reported a negative operating performance, particularly in the group's core markets of Europe and Asia. Oriflame's reported EBITDA margin decreased to 7.4% in the first half of 2023, down from 10% during the same period in 2022. This was impaired by lower sales volumes, higher selling and marketing costs, and input cost inflation. Oriflame's FOCF was close to minus EUR32 million during first-half 2023 and we expect this will remain negative for full-year 2023 and full-year 2024. During the difficult operating conditions over the past three years, Oriflame's competitive position was undermined during the height of the pandemic by restrictions around in-person socializing, which is essential for its sales development. Following that, Russia's invasion of Ukraine necessitated the separation of its Russian business, which accounted for about 16% of sales in 2021. S&P notes that in April 2023, Oriflame completed the disposal of its Russia-based subsidiary Cetes Cosmetics LLC, receiving net cash proceeds of about EUR25 million. Additionally, global input cost inflation coupled with weakening consumer confidence has changed the economics of Oriflame's product franchise, which will require strategic measures to reset for future growth. S&P said, "Under our revised base case, we expect a longer turnaround time for the business with weaker credit metrics at year-end 2023 than we previously expected. In our revised base-case scenario for fiscal year 2023 (ending Dec. 31), we now expect Oriflame's revenue growth to remain negative in the range of 9%-11% year on year. This will be driven by volume declines, as membership improvements are yet to materialize, as well as local currencies in many of the group's markets being likely to remain weak against the U.S. dollar--a major currency for commodity input costs. At the same time, we expect an S&P Global Ratings-adjusted EBITDA margin in the range of 6%-7% (compared with about 9.2% in 2022), owing to higher marketing costs and high inflation not fully offset by pricing actions. We anticipate a gradual improvement in credit metrics in 2025 as management action takes hold. We estimate relatively flat revenue growth for 2024 and we project the improvement will accelerate in 2025 thanks to the full benefit of cost saving initiatives, an easier comparison base, and normalizing inflationary pressures alongside ongoing investments in marketing and sales initiatives (30%-32% of total sales) to recover lost membership. In addition, Oriflame's updates to its digital platform and the early signs of positive trends from the new beauty community model could help improve sales volumes. Nonetheless, we expect adjusted margins to remain below 10%, given the uncertainty around consumer confidence, intense competition from large global players, and increased selling and marketing expense requirements. The company has an updated leadership team, with the new CEO and CFO starting during the first half of 2023. We understand the management team is working on a new business plan, which it will announce in the coming months. The plan will target profitable growth and market share recovery. "The company does not have short-term refinancing needs, which could allow it to reposition its operations and execute cost-saving initiatives, although operational cash needs remain high. We note there are no near-term refinancing risks as the next key debt maturity is in May 2026 for the senior secured notes. The revolving credit facility (RCF; currently fully undrawn) matures in October 2025. However, given the slow recovery prospects for the group's franchise, we think Oriflame is still unable to fully self-fund its development with operational cash. As of June 30, 2023, the RCF of EUR100 million remains fully undrawn and the company reported about EUR76 million of cash and cash equivalents on its balance sheet. We also highlight that Oriflame paid cash dividends of EUR30.5 million in January 2023. We understand from management that no further shareholder remuneration has been planned over the short term. "The negative outlook reflects our view that there is further volatility attached to our base-case scenario owing to the uncertainty around the speed of recovery in Oriflame's sales networks. In particular, we anticipate the need for operational restructuring expenses and working capital investment will ultimately affect the group's cash flow generation. Under our base-case scenario, we believe the company's leverage will increase in the coming 12-18 months while FOCF will stay negative. "We could lower the ratings if Oriflame cannot halt the revenue decline and restore profitability, resulting in further credit metric deterioration. We would also lower the rating if specific liquidity stress scenarios emerge over next 12 months. "We could revise the outlook to stable or raise the rating if the company shows tangible improvements in its operating performance thanks to the implementation of its updated business plan. We would expect to see positive FOCF and deleveraging trends thanks to an improved top line and profitability." RMAC 3 PLC: Fitch Gives 'B-(EXP)sf' Rating to Class F Notes ----------------------------------------------------------- Fitch Ratings has assigned RMAC No.3 PLC (RMAC3) expected ratings. The assignment of final ratings is conditional on the receipt of final documents conforming to the information already reviewed. Entity/Debt Rating ----------- ------ RMAC No.3 PLC Class A LT AAA(EXP)sf Expected Rating Class B LT AA(EXP)sf Expected Rating Class C LT A(EXP)sf Expected Rating Class D LT BBB(EXP)sf Expected Rating Class E LT BB-(EXP)sf Expected Rating Class F LT B-(EXP)sf Expected Rating Class Z1 LT NR(EXP)sf Expected Rating Class Z2 LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY RMAC3 is a securitisation of UK owner-occupied (OO) and buy-to-let (BTL) loans originated by GMAC (now Paratus AMC) mainly between 2004 and 2005. The loans were previously securitised under the RMAC No.1 and RMAC No.2 transactions, not rated by Fitch. KEY RATING DRIVERS Seasoned Non-Prime Loans: The portfolio consists of seasoned loans, originated primarily between 2004 and 2005. The OO loans (89.7% of the pool) contain a high proportion of self-certified, interest-only (IO), county court judgements (CCJs) and restructured loan arrangements. Fitch therefore applied its non-conforming assumptions to the OO sub-pool. When setting the originator adjustment for the portfolio Fitch considered factors including the historical performance of the pool. This resulted in an originator adjustment of 1.0x for the OO sub-pool and 1.5x for the BTL sub-pool. Low-Margin Loans, Short Remaining Term: The asset pool consists predominantly (93.1%) of low-margin (with a weighted average (WA) margin of 1.9%) floating-rate assets that track the Bank of England base rate (BBR). The vast majority of the loans are bullet loans, predominantly maturing between 2028 and 2030. The pool's WA remaining term to maturity is 5.6 years, the shortest among comparable peer transactions. Reserves Provide Credit, Liquidity Support: The transaction's non-amortising general reserve (GRF) will be sized at a static 1.5% of the closing balance of the class A to Z1 notes, for which the liquidity reserve fund (LRF) is sized at 1.5% of the outstanding balance of the class A and B notes. As the liquidity portion decreases, in line with the amortisation of the class A and B notes, the portion that can be used to cover for losses increases, contributing to the available credit enhancement for the rated notes. Limited Excess Spread, Principal Drawings: Given the expected WA margins on the notes and the low-yielding assets, available excess spread will be limited. Rated notes need to meet timely interest payments on becoming the most senior outstanding. Principal funds are available to be cover interest payments on the class A and B notes (subject to principal deficiency ledger (PDL) conditions) or the most senior notes outstanding, creating a debit on the PDL of the unrated class Z1 notes, with limited funds to clear it across all its stressed scenarios. Unhedged Basis Risk: As the notes pay daily compounded SONIA, the transaction will be exposed to basis risk between the BBR and SONIA. Fitch stressed the transaction's cash flows for basis risk, in line with its criteria. Combined with the assets' low margins, this resulted in limited to no excess spread in Fitch's cash flow analysis, depending on the stress scenarios modelled. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The transaction's performance may be affected by adverse changes in market conditions and the economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce credit enhancement available to the notes. Additionally, unanticipated declines in recoveries could result in lower net proceeds, which may make certain note ratings susceptible to negative rating action depending on the extent of the decline in recoveries. Fitch found that a 15% increase in the WA foreclosure frequencies (FF) and 15% decrease in the WA recovery rate (RR) would result in downgrades of up to two categories for all rated notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing credit enhancement and, potentially, upgrades. A decrease in the WAFF of 15% and an increase in the WARR of 15% would result in upgrades of no more than one notch for the class C notes, two notches for the class B notes, four notches for the class D and E notes, and with no change for the class F notes. DATA ADEQUACY Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS RMAC3 has an ESG Relevance Score of '4' for 'Customer Welfare - Fair Messaging, Privacy & Data Security' due to legacy origination practices that include loans advanced with limited affordability checks, which has a negative impact on the credit profile and is relevant to the ratings in conjunction with other factors. RMAC3 has an ESG Relevance Score of '4' for 'Human Rights, Community Relations, Access & Affordability' due to legacy originations with a high concentration of IO loans, which has a negative impact on the credit profile and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation of the materiality and relevance of ESG factors in the rating decision. SCOTGOLD: At Risk of Falling Into Administration ------------------------------------------------ Mariaan Webb at Mining Weekly reports that Scotgold is at risk of falling into administration, the London-listed gold mining company warned on Sept. 11, explaining that it required a significant capital investment to deliver on its mine plan. According to Mining Weekly, the owner of the Cononish mine, in Scotland, said that the initial third-party review of its mine plan suggested no fatal flaws in the mineral resource estimate of grade control modelling process. However, to deliver to the plan, it would need to raise additional financing, Mining Weekly notes. Scotgold stated that it was in advanced discussions to raise funding that would be sufficient for the company to continue as a going concern, Mining Weekly relates. "The outcome of the funding discussions is highly uncertain and if the company cannot conclude a significant fundraise, it will cast material uncertainty for the company to continue as a going concern." Scotgold noted that one unsecured creditor had demanded full payment of outstanding interest, Mining Weekly discloses. Should the creditor not agree to a payment plan, a default is possible and could mean that the business faces administration in the next few weeks, Mining Weekly states. WILKO LTD: All 400 Stores Set to Close by Early October ------------------------------------------------------- BBC News reports that the Wilko name will disappear from UK High Streets after a rescue deal for the chain fell through. All of its 400 stores across the UK will close by early October, the GMB union has said, BBC relates. It means redundancies are likely for all 12,500 staff at the family-owned business, BBC discloses. It is understood no bidders are interested in running shops under the Wilko name, although some parties are interested in rebranding their stores, BBC notes. The billionaire owner of HMV, Doug Putman, hoped to keep up to 300 Wilko shops open, but his bid failed as rising costs complicated the deal, BBC states. This week will see the first Wilko stores close, after administrators PwC previously announced 52 shops across the country would cease trading on Tuesday and Thursday, BBC discloses. A further 124 stores will close between September 17 and 21 including sites in Bognor Regis, Humberstone in Leicestershire and Maidenhead, BBC states. Wilko's distribution centre operations will wind down on September 15, BBC notes. PwC said timings for the closure of the final 222 stores will be announced in due course, according to BBC. Wilko has struggled with strong competition from rival chains like B&M, Poundland, The Range and Home Bargains, as the high cost of living has pushed shoppers to seek out bargains, BBC recounts. B&M has said it will take on up to 51 of Wilko's 400 shops in a deal worth GBP13 million, BBC relates. The BBC understands that the stores will be rebranded as B&M shops, although it is not clear yet whether any jobs will be saved or if Wilko workers will be given preference if they apply for roles at the B&M shops. Many Wilko shops are in High Street locations in traditional town centres. While these locations are convenient for shoppers without cars, since the pandemic there has been a shift to bigger retail parks and out-of-town options with more space, benefiting its rivals like B&M, BBC says. Poundland is also understood to be interested in buying up to 70 stores as a way of boosting its own portfolio, BBC notes. The Wilko brand is also still up for grabs, with retailers including The Range proposing bids for the name specifically, BBC states. The cash-strapped chain announced in August it had collapsed into administration, raising concerns over the futures of its 12,500 employees, BBC recounts. So far, 1,016 redundancies have been announced at stores that are closing, BBC discloses. Another 299 redundancies have taken place at its two distribution centres in Worksop and Newport, which will close on Friday next week, while more than 260 redundancies have been made at its support centre, BBC relats. According to BBC, a rescue bid put forward by Canadian entrepreneur Doug Putman was hampered by the costs and difficulties thrown up by the need to overhaul Wilko's supply chains. He had originally been eyeing up to 300 shops, but the deal in its most recent form may have included about 100, BBC recounts. Day-to-day costs to keep everything running, rents and supplier contracts were also posing a challenge, BBC notes. Mr. Putman, as cited by BBC, said he had worked with administrators and suppliers over several weeks to seek a viable way to rescue the business and the failed bid was "a great disappointment". Wilko had already borrowed millions from restructuring specialist Hilco, cut jobs and rejigged its leadership team and sold off a distribution centre as it struggled with rising costs and keeping shops fully stocked, BBC discloses. ********* 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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