/raid1/www/Hosts/bankrupt/TCREUR_Public/231128.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, November 28, 2023, Vol. 24, No. 238
Headlines
B E L G I U M
OXURION NV: Board Opts to File for Bankruptcy Amid Cash Woes
F I N L A N D
[*] FINLAND: Company Bankruptcies Increase to 269 in October 2023
F R A N C E
EUTELSAT COMMUNICATIONS: Fitch Lowers LongTerm IDR to 'BB'
GENOMIC VISION: Nanterre Court Opens Receivership Procedure
G E R M A N Y
TELE COLUMBUS: EUR525.2MM Bank Debt Trades at 34% Discount
I R E L A N D
BAIN CAPITAL 2017-1: S&P Affirms 'B- (sf)' Rating on Class F Notes
HELIOS (EUROPEAN LOAN 37): DBRS Confirms B(high) Rating on E Notes
MAN EURO 2023-1: Fitch Assigns 'B-sf' Final Rating to Class F Notes
I T A L Y
BANCO BPM: Fitch Rates EUR300MM Additional Tier 1 Notes 'B+'
L U X E M B O U R G
BERING III: EUR146MM Bank Debt Trades at 17% Discount
TRAVELPORT FINANCE: $1.96BB Bank Debt Trades at 53% Discount
N E T H E R L A N D S
JUBILEE PLACE 5: DBRS Confirms BB(low) Rating on Class F Notes
N O R W A Y
HURTIGRUTEN GROUP: EUR655MM Bank Debt Trades at 31% Discount
P O R T U G A L
ELECTRICIDADE DOS ACORES: Moody's Affirms Ba1 CFR, Outlook Stable
[*] Moody's Upgrades 44 Tranches in Portuguese RMBS, ABS, NPL Deals
R O M A N I A
GLOBALWORTH REAL: S&P Affirms 'BB+' LT ICR, Outlook Now Negative
S P A I N
CAIXABANK RMBS 3: DBRS Confirms CC Rating on Series B Notes
S W E D E N
DOMETIC GROUP: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
SAS AB: Wins US Court Nod for US$1.2-Bil. Air France-KLM Deal
U N I T E D K I N G D O M
BLUE CHIP: Enters Administration, 15 Jobs Affected
CASTELL 2023-2: DBRS Gives Prov. BB(high) Rating to X Notes
ELVET MORTGAGES 2023-1: DBRS Finalizes BB(high) Rating on E Notes
FOODMEK: New Owner to Rehire Workers Following Acquisition
GEMGARTO PLC 2023-1: Moody's Assigns (P)B1 Rating to Class F Notes
HOPS HILL NO.2: S&P Raises Class E-Dfrd Notes Rating to 'BB (sf)'
HURRICANE BIDCO: Moody's Withdraws 'B3' Corporate Family Rating
NEWDAY FUNDING 2023-1: DBRS Gives Prov. BB Rating to Class E Notes
WN VTECH: Goes Into Administration, 230 Jobs at Risk
[*] UK: Kroll Restructuring Co-Head Comments on Autumn Statement
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B E L G I U M
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OXURION NV: Board Opts to File for Bankruptcy Amid Cash Woes
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Oxurion NV (Euronext Brussels: OXUR) a biopharmaceutical company on
Nov. 20 disclosed that topline data in its KALAHARI Phase 2, Part B
clinical trial for diabetic macular edema (DME) (KALAHARI trial)
did not demonstrate that its novel PKal Inhibitor, THR-149,
improved vision as much as the comparator, the anti-VEGF therapy
aflibercept, at Month 3 (the primary endpoint). The mean change in
best corrected visual acuity (BCVA) from baseline at Month 3 was
-0.2 letters for the THR-149 arm and +3.5 letters for the
aflibercept arm. The results confirmed that THR-149 was safe and
well tolerated. The KALAHARI trial is the only ongoing trial
sponsored by Oxurion.
In light of these results and the Company's low cash position, the
Company has therefore decided to take the necessary steps to file
for bankruptcy.
Oxurion's investigators over-enrolled the trial with a total of 112
patients, for whom the current standard of care is suboptimal in
treating their DME, reflecting the strong interest of both
investigators and patients.
The KALAHARI trial evaluated Oxurion's novel plasma kallikrein
(PKal) inhibitor THR-149 as a potential treatment for DME patients
who respond suboptimally to anti-VEGF therapy. The continuation of
the trial followed the recommendation from an Independent Data
Monitoring Committee (IDMC) in December 2022 that it would not be
futile for the KALAHARI trial to continue based on the outcome of a
pre-specified futility analysis that included an evaluation of
interim efficacy and safety data from 31 patients at Month 3 and
followed encouraging data from the Part A dose-selection part of
the KALAHARI trial.
Said Tom Graney, CEO, "We are deeply disappointed that the topline
data from the KALAHARI trial did not show improvement in vision
from THR-149. While we had hoped for a different result for
patients, we greatly appreciate the engagement of both the patients
and the clinical investigators for their participation in Phase 2
KALAHARI trial. The Board of Directors has made the difficult
decision to take the necessary steps to file for bankruptcy. I
would personally like to thank the incredible team at Oxurion for
designing and executing a trial that yielded clearly interpretable
results. So, while the outcome is not what we had hoped for
patients and the company, the trial provides important learnings
for the field. I want to encourage the community to continue to
invest in finding better treatments options for this large,
underserved patient population."
Diabetic Macular Edema (DME)
Approximately 22 million people worldwide have DME currently, with
prevalence increasing due to the growing global diabetic epidemic.
DME is the leading cause of vision loss in working-age people, and
the market for treatments is currently estimated at +$5 billion.
People who suffer from DME have leaking vessels in the back of the
eye, leading to a thickening of the retina that causes vision
problems such as blurriness in the center of vision, the appearance
of dark spots or patches in the field of vision, and colors to look
dull. These symptoms may affect the ability to read, write, drive,
and recognize faces -- presenting a significant patient and
caregiver burden.
About THR-149
THR-149 is a bicyclic peptide that selectively inhibits human
plasma kallikrein (PKal) with an inhibition constant of 0.22 nM.
Through the inhibition of the kallikrein-kinin system (KKS),
THR-149 prevents the induction of retinal vascular permeability,
neurodegeneration, and inflammation. THR-149 is currently being
evaluated in the KALAHARI Phase 2, Part B clinical trial as a
potential treatment for patients who respond suboptimally to
anti-VEGF the standard of care for treatment of DME.
KALAHARI Phase 2, Part B
The Phase 2 KALAHARI trial is a two-part, randomized, prospective,
multi-center trial assessing multiple (3) injections of THR-149 in
DME patients. Part B is double-masked and actively controlled, with
the high dose of THR-149 having been selected from Part A of the
trial. Part B of the trial enrolled 112 patients who have
previously shown a suboptimal response to anti-VEGF therapy, and
where THR-149 is being evaluated against aflibercept, the current
standard of care, as the active comparator.
KALAHARI Phase 2, Part A
Part A of the KALAHARI trial demonstrated that all dose levels of
THR-149 had a favorable safety profile. All adverse events in the
study eye were mild to moderate in intensity and no severe ocular
adverse events were reported and no inflammation was observed.
High-level data from Part A of the KALAHARI trial was first
presented in October 2021, which demonstrated that the eight
patients who received the highest dose of THR-149 achieved a mean
BCVA gain of 6.1 letters at Month 3, the primary endpoint.
A post-hoc analysis was performed by the masked central reading
center in February 2022 based on an OCT (Optical Coherence
Tomography) biomarker assessment. The analysis identified two
subjects with abnormalities at baseline, which could impact
responsiveness to any medical treatment. Excluding these two
subjects resulted in an improvement in mean BCVA of 9.3 letters at
Month 3, which was sustained until Month 6, the end of the trial,
and four months after the last THR-149 injection. The Month 6 data
also demonstrated THR-149's attractive safety profile and its
ability to stabilize the Central Subfield Thickness (CST). The
learnings from the Part A data were incorporated into Part B
through an amended trial design excluding patients that would not
respond to any treatment. More information can be found here:
NCT04527107
About Oxurion
Oxurion (Euronext Brussels: OXUR) -- http://www.oxurion.com-- is a
biopharmaceutical company developing next-generation standard of
care ophthalmic therapies, which are designed to improve and better
preserve vision in patients with retinal disorders including
diabetic macular edema (DME), the leading cause of vision loss in
working-age people, as well as other conditions. Oxurion intends to
play an important role in the treatment of retinal disorders,
including the successful development of THR-149, its novel
therapeutic for the treatment of DME. THR-149 is a potent plasma
kallikrein inhibitor being developed as a potential new standard of
care for the up to 50% of DME patients showing suboptimal response
to anti-VEGF therapy. Oxurion is headquartered in Leuven, Belgium,
with corporate operations in Boston, MA.
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F I N L A N D
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[*] FINLAND: Company Bankruptcies Increase to 269 in October 2023
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Statistics Finland on Nov. 20 disclosed that 269 bankruptcy
proceedings were instigated in October 2023, which is 53 more than
in the corresponding period one year earlier. The number of
staff-years in enterprises that filed for bankruptcy totalled
1,164, which is 300 staff-years more than in October 2022.
During the past 12 months, the number of bankruptcies was 20%
higher than in the 12 months preceding this period.
In October 2023, most bankruptcy proceedings were instigated in the
industries of construction and other service activities.
In the industry of other service activities, 89 bankruptcy
proceedings were instigated, and in construction 64 bankruptcies.
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F R A N C E
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EUTELSAT COMMUNICATIONS: Fitch Lowers LongTerm IDR to 'BB'
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Fitch Ratings has downgraded Eutelsat Communications S.A.'s
(Eutelsat) Long-Term Issuer Default Rating (IDR) to 'BB' from
'BBB-' and senior unsecured rating to 'BB-'/'RR5' from 'BB+'. The
Outlook on the IDR is Stable. Eutelsat S.A.'s senior unsecured debt
has been downgraded to 'BB/RR4' from 'BBB-'. The ratings have been
removed from Rating Watch Negative (RWN).
The downgrade follows the completion of the company's merger with
OneWeb, a low-earth-orbit (LEO) satellite constellation operator.
The lower rating reflects Eutelsat's significantly increased
execution and free cash flow (FCF) risks with reduced revenue
visibility at OneWeb while its key profitable segments remain under
pressure. This leads to lower deleveraging flexibility while EBITDA
net leverage has increased to close to 4x.
KEY RATING DRIVERS
Lower Revenue Visibility: The merger with OneWeb and continuing
revenue shrinkage in the video and government services segments
result in lower revenue visibility, heavier exposure to uncommitted
volume and commercial risks and ultimately lower quality of
earnings. Demand for LEO (and in combination with geostationary
equatorial orbit (GEO) B2B services, Eutelsat's targeted market
niche, remains largely untested and competition may be intense.
Fitch has consequently tightened the leverage thresholds per rating
band by 0.5x.
OneWeb's committed third-party revenue backlog of USD750 million
(excluding USD275 million of take-or-pay revenue with Eutelsat) as
of end-September 2023 corresponds to a fraction of the revenue
level that would allow positive EBITDA generation. Eutelsat's
revenue backlog at end-September 2023 was equal to 3.0x years of
the last 12 months' revenues (of which video's share was 57%),
compared with 4.4x (with 67% broadcast share) at end-2020. Fitch
believes potential growth in other segments is unlikely to
significantly improve this metric.
LEO Constellations Competition: LEO infrastructure competition will
be high as a few LEO constellations are being actively rolled out,
supported by multi-billion capex commitments. On top of this, SES
S.A., in partnership with Starlink started offering integrated
medium earth orbit (MEO)/LEO maritime services in direct
competition with Eutelsat's LEO/GEO solutions.
In addition to fully operational Starlink, which continues
launching new satellites, Amazon's Kuiper announced plans to launch
commercial service in 2H24 while Canada-based Telesat plans to
start providing a global service in 2027, reportedly having secured
funding and launches for its LEO project. This is likely to be
followed by the EU-sponsored IRIS constellation.
OneWeb's Competitive Edge: OneWeb has a first-mover advantage in
the LEO segment as it benefits from the number one priority
position in Ku-Band spectrum used for customer download
connections, and has high priority position in the Ka-Band that is
used for upload gateway links. The burden of coordination to avoid
interference, particularly in the Ku-Band, lies with other
operators.
Coupled with a higher orbital position, this allows Eutelsat to
operate fewer satellites and provide connection services on more
reliable service-level agreement (SLA) terms fit for
quality-sensitive B2B and government customers, Eutelsat's key
targeted segments. However, the size of the potential B2B SLA
market is limited and is exposed to substitution risk by
mass-market services if B2B customers find them of acceptable
quality.
OneWeb Key Growth Driver: OneWeb will be a key growth driver for
Eutelsat as the LEO constellation combined with GEO capabilities,
opens new markets for the group. Eutelsat's satellite experience
and its existing ground infrastructure, coupled with OneWeb's
comfortable spectrum position, should lead to operating efficiency
and significant cost savings, including on deploying the LEO
generation two-satellite constellation.
Video Under Pressure: Video is Eutelsat's largest segment (60% of
1QFY24 (financial year ending June 2024) revenues). It has been and
is likely to remain under at least moderate pressure. This reflects
a longer-term trend of declining popularity of traditional linear
TV, aggravated by a wider availability of alternative TV
distribution via broadband internet networks. Eutelsat's
traditional direct-to-home (DTH) geographical markets in Africa,
Middle East, Latin America and Europe have been more resilient than
in the US but attrition is likely to persist.
Moderate Contribution of Growing Segments: Fitch expects strong
annual growth of up to double digits in the mobile and fixed
connectivity segments, supported by higher broadband capacity from
new high-throughput satellites (HTS) and robust demand for mobility
services in both maritime and airplane applications. However, the
contribution of these segments is moderate (28% of 1QFY24 revenues)
and may be insufficient to fully offset pressures in other
segments, at least in the short to medium term.
Negative FCF: Fitch projects negative FCF for Eutelsat in the
medium term, with all cash generated at Eutelsat's profitable
segments (effectively Eutelsat before merger) applied to finance a
deployment of a generation two OneWeb constellation. The company
projects an increase in capex to an average level of EUR725
million-EUR875 million per year until 2030 and expects it to be
front-loaded compared with the previous guidance of below EUR400
million pre-merger. Positive FCF would require a realisation of
targeted revenue growth and operating synergies at OneWeb. Cash
flow will be helped by the announced dividend suspension.
High Leverage: Fitch estimates EBITDA net leverage to have
increased to slightly above 4x post merger on a pro-forma basis,
largely driven by negative EBITDA at OneWeb. Deleveraging will be
driven primarily by increasing revenue and EBITDA contribution at
OneWeb, helped by significant synergies but delayed by growing net
debt on the back of continuing negative FCF. Fitch projects
leverage will stabilise at below 4x in FY24-26. Eutelsat targets to
reduce its net leverage (company definition) to 3x in the medium
term.
DERIVATION SUMMARY
Eutelsat's rating reflects its capital-intensive business model
with some infrastructure qualities, supported by significant
barriers to entry due to substantial required investments into
satellite launches and the limited availability of regulated
orbital positions and spectrum. However, the industry also faces
risks related to technology-driven increases in industry capacity,
obsolescence and substitution. The demand for B2B LEO services
remains largely untested, and these services face strong
competition from pay-as-you-go LEO solutions without longer-term
contractual off-take commitments.
Eutelsat's strategy of developing a LEO constellation through the
merger with OneWeb contrasts with SES S.A.'s (BBB/Stable) focus on
building a high capacity medium-earth orbit constellation with
reasonably low latency to allow for time delay-sensitive
applications such as video conferencing.
Eutelsat's leverage thresholds for the rating are somewhat tighter
than SES and single-country integrated European telecoms operators,
such as Royal KPN N.V. (BBB/Stable), reflecting a stronger
contribution of nascent LEO services with lower revenue visibility
and negative FCF driven by investments into OneWeb's generation two
LEO constellation. Eutelsat has lower leverage than lower-rated
Intelsat Jackson Holdings S.A (B+/Positive) and higher leverage
than SES.
KEY ASSUMPTIONS
- 0%-2% revenue growth at former Eutelsat standalone, with
mid-single digits video decline compensated by growth in other
segments in FY24-27
- Modest EBITDA margin erosion at former Eutelsat standalone
segments in FY24-27
- OneWeb operations achieving positive EBITDA generation by FY25
- Receipt of C-band spectrum proceeds in FY24
- Capex at above the EUR875 upper end of the company's longer-term
guidance, assuming higher front-loaded investments
- No dividends
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA net leverage sustained at below 3.5x
- Visibility on cash flow turning positive through the cycle and
that revenue and EBITDA will not be adversely affected by changes
in sector trends and market structure
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA net leverage remaining above 4x on a sustained basis
- Significant pressure on FCF driven by EBITDA erosion as a result
of pricing pressure, protracted contraction of segments, increasing
global overcapacity or new competitive entrants, and
higher-than-expected capital intensity and shareholder
remunerations
- Slow progress with achieving sustainably strong EBITDA generation
at OneWeb
- Deteriorating refinancing situation with weaker access to
financial markets and bank financing
LIQUIDITY AND DEBT STRUCTURE
Comfortable Liquidity: Eutelsat has a comfortable liquidity
position with EUR482 million of cash on its balance sheet,
supported by EUR1 billion available credit lines as of end-FY23.
This is sufficient to cover EUR978 million debt maturing in
2H23-2025. Fitch assumes that the company would retain access to
new financing and manages its refinancing situation prudently.
A significant amount of debt at the level of Eutelsat's operating
subsidiary, Eutelsat S.A., leads to structural subordination for
Eutelsat's (holdco) creditors. Under Fitch's methodology, given the
lack of any guarantees from the opco, debt issued by Eutelsat
Communications S.A. is rated one notch below its IDR. At end-FY23
Fitch estimates the amount of debt at the level of Eutelsat S.A was
more than 3x the group's EBITDA.
ISSUER PROFILE
Eutelsat is a global satellite operator operating a GEO and LEO
constellation with most of its revenues generated in the non-US DTH
segment.
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
----------- ------ -------- -----
Eutelsat S.A.
senior unsecured LT BB Downgrade RR4 BBB-
Eutelsat
Communications S.A. LT IDR BB Downgrade BBB-
senior unsecured LT BB- Downgrade RR5 BB+
GENOMIC VISION: Nanterre Court Opens Receivership Procedure
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Genomic Vision (FR0011799907 - GV, the "Company"), a
Euronext-listed biotechnology company that develops products and
services for the highly accurate characterization of transformed
cells, disclosed that, following the Company's request, the
Commercial Court of Nanterre, decided on November 15, 2023 to open
a receivership procedure.
The Court appointed:
-- SELARL AJRS, mission led by Maître Thibaut Martinat, as
receiver;
-- and Maitre Patrick Legras de Grancourt as judicial
administrator.
The Company's operations will continue during the observation
period, in accordance with legal requirements.
Press releases will be published regularly as the procedure moves
forward.
The suspension of the listing of Genomic Vision shares, effective
since Nov. 6, is maintained until further notice.
About Genomic Vision
Genomic Vision -- http://www.genomicvision.com-- is a
biotechnology company that develops products and services for the
highly accurate characterization of genome modifications. We
deliver high-quality integrated genomic analysis solutions to
improve quality control and bioproduction standards of advanced
gene therapies at scale. Based on molecular combing technology and
artificial intelligence, The Company provides robust quantitative
measurements needed for high confidence characterization of
transformed cell lines and prediction of cell line performance, in
particular in the context of the biomanufacturing processes of cell
and gene therapies.
Genomic Vision's molecular combing technology has further
applications in drug development of agents targeting DNA
replication and damage response mechanisms, visualizing DNA
replication kinetics and telomere length maintenance.
Genomic Vision, based near Paris in Bagneux, is a public company
listed in compartment C of Euronext's regulated market in Paris
(Euronext: GV – ISIN: FR0011799907).
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G E R M A N Y
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TELE COLUMBUS: EUR525.2MM Bank Debt Trades at 34% Discount
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Participations in a syndicated loan under which Tele Columbus AG is
a borrower were trading in the secondary market around 65.7
cents-on-the-dollar during the week ended Friday, November 24,
2023, according to Bloomberg's Evaluated Pricing service data.
The EUR525.2 million facility is a Term loan that is scheduled to
mature on October 15, 2024. About EUR462.5 million of the loan is
withdrawn and outstanding.
Tele Columbus AG provides cable services. The Company offers cable
television programming, telephone, and internet connection services
to homeowners and the housing industry. Tele Columbus operates
throughout Germany.
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I R E L A N D
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BAIN CAPITAL 2017-1: S&P Affirms 'B- (sf)' Rating on Class F Notes
------------------------------------------------------------------
S&P Global Ratings raised its credit ratings on Bain Capital Euro
CLO 2017-1 DAC's class B-1 and B-2 notes to 'AAA (sf)' from 'AA
(sf)', class C to 'AA+ (sf)' from 'A (sf)', and class D to 'A (sf)'
from 'BBB (sf)'. S&P also affirmed its 'AAA (sf)' rating on the
class A notes, its 'BB (sf)' rating on the class E notes, and its
'B- (sf)' rating on the class F notes.
Bain Capital Euro CLO 2017-1 is a cash flow CLO transaction
securitizing a portfolio of primarily senior secured
euro-denominated leveraged loans and bonds issued by European
borrowers. The transaction is managed by Bain Capital Credit Ltd.
Its reinvestment period ended in October 2021.
The rating actions follow the application of S&P's relevant
criteria and its credit and cash flow analysis of the transaction
based on the October 2023 trustee report.
Since the end of the reinvestment period, the class A notes have
amortized to 66% of their initial size. As a result, the credit
enhancement has increased for the class A, B, C, and D notes.
S&P's scenario default rates (SDRs) have benefited from a reduction
in the portfolio's weighted-average life to 3.29 years from 6.06
years, and have decreased at each rating level.
According to the October 2023 trustee report, all classes are
current on their interest payments and all the coverage tests are
passing.
Table 1
Assets key metrics
CURRENT* AS OF CLOSING
Portfolio weighted-average rating B B
'CCC' assets (%) 9.3 1.1
Weighted-average life (years) 3.29 6.06
Obligor diversity measure 103.4 97.2
Industry diversity measure 23.8 16.4
Regional diversity measure 1.3 1.5
Total collateral amount (mil. EUR)§ 268.26 350.00
Defaulted assets (mil. EUR) 7.25 0.00
Number of performing obligors 133 106
'AAA' SDR (%) 56.03 66.70
'AAA' WARR (%) 36.33 36.81
*Based on the portfolio composition as reported by the trustee in
October 2023 and S&P Global Ratings' data as of November 2023.
§Performing assets plus cash and expected recoveries on defaulted
assets.
SDR--Scenario default rate.
WARR--Weighted-average recovery rate.
Table 2
Liabilities key metrics
CURRENT AMOUNT CURRENT CREDIT CREDIT ENHANCEMENT
CLASS (MIL. EUR) ENHANCEMENT (%) AT CLOSING (%)
A 136.03 49.3 41.0
B-1 31.50 32.0 27.7
B-2 15.00 32.0 27.7
C 22.00 23.7 21.4
D 17.50 17.2 16.4
E 22.50 8.8 10.0
F 10.50 4.9 7.0
Credit enhancement = [Performing balance + cash balance + recovery
on defaulted obligations (if any) – tranche balance (including
tranche balance of all senior tranches)] / [Performing balance +
cash balance + recovery on defaulted obligations (if any)].
S&P said, "Following the application of our relevant criteria, we
believe that the class B-1, B-2, C, and D notes can now withstand
higher rating stresses. We therefore raised our ratings on the
class B-1, B-2, and C notes, in line with the results of our credit
and cash flow analysis.
"Our standard cash flow analysis indicates that the available
credit enhancement levels for the class D and E notes are
commensurate with higher ratings than those assigned. Although the
transaction has amortized considerably since the end of the
reinvestment period in 2022, we also considered the level of
cushion between our break-even default rate (BDR) and SDR for these
notes at their passing rating levels, as well as current
macroeconomic conditions and these classes' relative seniority. We
therefore limited our upgrade on the class D notes, and affirmed
our rating on the class E notes.
"Our credit and cash flow analysis indicates that the class A notes
are still commensurate with a 'AAA (sf)' rating. We therefore
affirmed our rating on the class A notes.
"Our credit and cash flow analysis indicates the available credit
enhancement for the class F notes can withstand stresses
commensurate with a lower rating. However, we applied our 'CCC'
rating criteria, and affirmed our 'B- (sf)' rating on the notes."
In particular, S&P considered the following factors:
-- The portfolio's average credit quality has remained stable
since closing. Its weighted-average life has decreased, resulting
in lower SDRs at all rating levels.
-- Considering an observed long-term annual default rate of 3.1%,
the notes' 'B-' BDR of 17.22% exceeds an expected default rate of
10.20% (i.e. observed long-term annual default rate x portfolio's
weighted-average life).
-- S&P does not believe there is a one-in-two chance of this note
defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
-- Counterparty, operational, and legal risks are adequately
mitigated in line with S&P's criteria.
S&P said, "Following the application of our structured finance
sovereign risk criteria, we consider the transaction's exposure to
country risk to be limited at the assigned ratings, as the exposure
to individual sovereigns does not exceed the diversification
thresholds outlined in our criteria."
HELIOS (EUROPEAN LOAN 37): DBRS Confirms B(high) Rating on E Notes
-------------------------------------------------------------------
DBRS Ratings Limited confirmed its credit ratings on the following
classes of notes issued by Helios (European Loan Conduit No. 37)
DAC (the Issuer):
-- Class RFN notes at AAA (sf)
-- Class A notes at AAA (sf)
-- Class B notes at A (high) (sf)
-- Class C notes at BBB (sf)
-- Class D notes at BB (high) (sf)
-- Class E notes at B (high) (sf)
DBRS Morningstar also changed the trends on Classes A, B, C, and D
to Stable from Negative. The trend on Class RFN remains Stable and
the trend on Class E remains Negative.
The credit rating confirmations and the trend change on the Class A
to Class D notes reflect the transaction's stable performance over
the past 12 months and the improving credit metrics. DBRS
Morningstar maintained its Negative trend on Class E because of the
shortfall in interest distributed to Class E noteholders over the
last year with the exception of the quarter ended in August 2023.
Class E noteholders also did not receive the full accrued interest
amount on the November 2023 Interest Payment Date (IPD). The
shortfall in Class E interest payments does not accrue because of
the Available Funds Cap.
Helios (European Loan Conduit No. 37) DAC is the securitization of
a single loan, which had a balance of GBP 350 million at issuance.
The senior loan matures on 12 December 2024 and the final note
maturity is on May 2, 2030. The loan is secured by a portfolio of
49 limited-service hotels located across the United Kingdom. With
the exception of the Hampton by Hilton in Liverpool and the Park
Inn hotel in York, the portfolio entirely comprises Holiday Inn
Express hotels.
The ultimate beneficial owner of the portfolio is London & Regional
Group (L&R), which acquired the hotels from Lone Star Funds in
2016. The hotels are managed by Atlas Hotels Group, which was also
acquired as part of the transaction in 2016 and is now a wholly
owned operating company of L&R. The Park Inn York and Holiday Inn
Express Poole properties are subject to operating leases with
rental income received from the tenants.
Debt yield and loan-to-value (LTV) metrics both showed improvement
over the last year caused by an increase in the collateral's net
operating income and an increase in the market value of the
portfolio, respectively. The annual 0.75% amortization of the
senior loan also contributed to the improvement of these metrics.
The loan amortizes each quarter by GBP 656,250. The loan balance is
approximately GBP 310.8 million as of the August 2023 IPD.
According to Savills Advisory Services Limited's (Savills)
valuation dated 20 January 2023, the aggregated market value of the
49 properties in the securitized portfolio is GBP 490.0 million.
The most recent valuation represents an increase of 3.8% in market
value over the previous valuation of GBP 472.0 million, which was
carried out by Cushman & Wakefield in January 2021. The increase in
value, along with the amortization of the loan, resulted in a
decline in LTV to 63.43% as of the August 2023 IPD from 66.41% as
of the August 2022 IPD.
Net operating income (NOI) for the trailing 12 months (T-12)
similarly improved over the last year. T-12 NOI as of June 2023 was
GBP 45.6 million, up from the reported T-12 NOI of GBP 41.4 million
as of June 2022. The increase in NOI and the amortization of the
loan resulted in an increase in debt yield to 14.64% as of the
August 2023 IPD from 13.17% as of the August 2022 IPD.
While the loan metrics improved over the last year, Class E
distributed interest still shows a shortfall against the total
accrued interest amount for Class E. The November 2023 cash
manager's report indicates a shortfall of approximately GBP 127,000
in interest distributed to Class E noteholders.
The shortfall is due to the GBP 30.0 million prepayment of the
senior loan that took place in October 2021. which partially
redeemed Class A notes and caused the spread between the loan
margin and note margin to tighten. DBRS Morningstar calculates the
weighted-average margin of the notes to be 3.19%, which reduces the
excess spread between the note margin and the loan margin (3.25%)
and, together with the presence of the senior ranking issuer costs,
has started to eat into the interest amount payable in respect of
the Class E notes since the February 2022 IPD. While the full
accrued interest for Class E was distributed to the Class E
noteholders on the August 2023 IPD, the November cash manager's
report once again indicates a shortfall in Class E interest paid
out to noteholders for the November 2023 IPD. This shortfall does
not accrue because of the Class E Available Funds provision.
According to the Class E Available Funds Cap provision, interest
due and payable on the Class E notes, in the event that a shortfall
attributable to partial prepayments of the senior loan occurs, is
(on any note payment date prior to the service of a note
acceleration notice) subject to a cap equal to the lesser of (1)
the note interest amount applicable to the Class E notes (Class E
Interest Amount) and (2) the difference between the revenue
receipts or the available funds, as the case may be, available on
the relevant payment date and the sum of all amounts payable out of
the revenue receipts or the available funds, as the case may be, on
such payment date in priority to the payment of interest on the
Class E notes (Class E Adjusted Interest Amount).
DBRS Morningstar maintained its net cash flow (NCF) assumption at
GBP 33.0 million and the capitalization rate at 8.9%, which
translates into a DBRS Morningstar value of GBP 367.2 million, a
25.1% haircut to the latest market value provided by Savills, as of
January 2023. DBRS Morningstar maintained its underwritten 73%
portfolio-wide occupancy rate.
The transaction includes a reserve fund note (RFN), which funds 95%
of the liquidity reserve (i.e., the note share portion). As of
November 2023, the GBP 13.4 million RFN proceeds and the GBP 0.7
million vertical risk retention (VRR) loan contribution stood to
the credit of the transaction's liquidity reserve, which works
similarly to a typical liquidity facility by providing liquidity to
pay property protection advances, senior costs, and interest
shortfalls (if any) in relation to the corresponding VRR loan and
the Class A, Class B, Class C, and Class D notes (for further
details, please see the "Liquidity Support" section in DBRS
Morningstar's rating report for this transaction). According to
DBRS Morningstar's analysis, the liquidity reserve amount will be
equivalent to approximately 9.5 months on the covered notes, based
on the interest rate cap strike rate of 5% per year.
Because of prevailing market conditions, in November 2022 the
senior borrower requested that, in respect of the hedging agreement
to be entered into on a date not later than the date falling three
business days prior to the third anniversary of the utilization
date (in December 2022), the strike rate be set at 5% per annum as
opposed to 3% per annum as required by the Senior Facility
Agreement. The borrower agreed to deposit approximately GBP 6.2
million into the debt service account to mitigate any potential
cash flow shortfall that could result from the higher strike rate.
This request from the borrower was agreed to by the servicer with
an amendment letter dated November 17, 2022. The current hedging
agreement, which has an interest rate cap strike rate of 5%, will
expire in December 2023. The above-mentioned GBP 6.2 million was
drawn upon at each IPD in accordance with the Hedging Reserve
Amount schedule provided in the amendment letter. The schedule
indicates the amount allocated to each IPD starting on the January
2023 IPD up to and including the January 2024 IPD to cover the term
of the current hedging agreement. Unused funds left over from debt
service are remitted to the borrower at each IPD. The amount on
deposit will be zero once the January 2024 IPD transfers are
complete.
The final legal maturity of the notes is expected to be in May
2030, five-and-a-half years after the fully extended loan term.
Given the security structure and jurisdiction of the underlying
loan, DBRS Morningstar believes the final legal maturity date
provides sufficient time to enforce, if necessary, on the loan
collateral and repay the bondholders.
DBRS Morningstar's credit ratings on the notes issued by the Issuer
address the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
The associated financial obligations are principal amounts and
interest amounts.
DBRS Morningstar's credit ratings do not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. For example, Default Interest Amounts, Note Prepayment
Fees, and the excess of the Class E Interest Amount over the Class
E Adjusted Interest Amount in cases where the Available Funds Cap
applies.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued. The DBRS Morningstar short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Notes: All figures are in British pound sterling unless otherwise
noted.
MAN EURO 2023-1: Fitch Assigns 'B-sf' Final Rating to Class F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Man Euro CLO 2023-1 DAC's notes final
ratings, as detailed below.
Entity/Debt Rating
----------- ------
Man Euro CLO 2023-1 DAC
Class A XS2700382042 LT AAAsf New Rating
Class B-1 XS2700382398 LT AAsf New Rating
Class B-2 XS2700382554 LT AAsf New Rating
Class C XS2700382711 LT Asf New Rating
Class D XS2700382984 LT BBB-sf New Rating
Class E XS2700383107 LT BB-sf New Rating
Class F XS2700383362 LT B-sf New Rating
Subordinated XS2700383529 LT NRsf New Rating
TRANSACTION SUMMARY
Man Euro CLO 2023-1 is a securitisation of mainly senior secured
loans and secured senior bonds (at least 90%) with a component of
senior unsecured, mezzanine and second-lien loans. Note proceeds
have been used to fund a portfolio with a target par of EUR350
million. The portfolio is actively managed by GLG Partners LP. The
CLO has an approximately 2.1-year reinvestment period and an
approximately six-year weighted average life (WAL).
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors in the 'B' category. The Fitch
weighted average rating factor (WARF) of the identified portfolio
is 24.4.
High Recovery Expectations (Positive): At least 90% 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 (WARR) of the identified portfolio is 61.3.
Diversified Portfolio (Positive): The transaction includes various
concentration limits in the portfolio, including the maximum
exposure to the largest and three largest (Fitch-defined)
industries in the portfolio at 17.5% and 40%, respectively. These
covenants ensure the asset portfolio will not be exposed to
excessive concentration.
Portfolio Management (Neutral): The transaction has two Fitch
matrices, both effective at closing and corresponding to a top 10
obligor concentration limit at 26.5%, a fixed-rate asset limit at
5% and 10%, and a six-year WAL test.
The transaction has a 2.1-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.
Cash Flow Modelling (Positive): Fitch has modelled WAL at the
covenant level of six years. The transaction consists of strict
reinvestment conditions after its reinvestment period. These
include, among others, passing both the coverage tests and the
Fitch 'CCC' maximum limit, satisfaction of the Fitch WARF, as well
as a WAL covenant that progressively steps down over time, both
before and after the end of the reinvestment period. 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 have no impact on the class A and E
notes, but would lead to downgrades of no more than one notch for
the class B-1, B-2, C and D notes, and to below 'B-sf' for the
class F notes.
Downgrades, which are based on the identified portfolio, may occur
if the loss expectation is larger than initially assumed, due to
unexpectedly high levels of defaults and portfolio deterioration.
Due to the better metrics and shorter life of the identified
portfolio than the stressed-case portfolio, the class B-1 to F
notes display a rating cushion of up to two notches.
Should the cushion between the identified portfolio and the
stressed-case portfolio be eroded either 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-case portfolio would lead to downgrades of up to
four notches for the rated notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the RDR across all ratings and a 25% increase in
the RRR across all ratings of the stressed-case portfolio would
lead to upgrades of up to three notches for the rated notes, except
for the 'AAAsf' rated notes.
During the reinvestment period, upgrades, which are based on the
stressed-case portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, leading
to the ability of the notes to withstand larger-than-expected
losses for the remaining life of the transaction. After the end of
the reinvestment period, upgrades, except for the 'AAAsf' notes,
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.
=========
I T A L Y
=========
BANCO BPM: Fitch Rates EUR300MM Additional Tier 1 Notes 'B+'
-------------------------------------------------------------
Fitch Ratings has assigned Banco BPM S.p.A.'s (BBPM) EUR300 million
subordinated perpetual debt issue (ISIN: IT0005571309) a long-term
rating of 'B+'. The notes qualify as Additional tier 1 regulatory
capital.
All other issuer and debt ratings are unaffected.
KEY RATING DRIVERS
The notes are rated four notches below BBPM's 'bbb-' Viability
Rating (VR), comprising two notches each for loss severity and
incremental non-performance risk. The latter reflects the
instruments' fully discretionary interest payment.
The instruments' rating also reflects BBPM's comfortable headroom
before mandatory coupon-omission points as reflected in its common
equity Tier 1 ratio of 14.3% at end-September 2023 (14.9% pro-forma
for the treatment of insurance operations under the Danish
Compromise). This represents a buffer of around 560bp above
regulatory requirements. BBPM also had satisfactory distributable
items of about EUR3.3 billion at end-September 2023.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The notes would be downgraded if BBPM's VR is downgraded. The
notes' rating could also be downgraded on an increase in notching
from the bank's VR, which could arise if Fitch changes its
assessment of their non-performance risk relative to the risk
captured in the VR. This could reflect a change in capital
management or flexibility, or an unexpected decline in capital
buffers over regulatory requirements, for example.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The notes would be upgraded if BBPM's VR is upgraded.
ESG CONSIDERATIONS
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.
Entity/Debt Rating
----------- ------
Banco BPM S.p.A.
junior subordinated LT B+ New Rating
===================
L U X E M B O U R G
===================
BERING III: EUR146MM Bank Debt Trades at 17% Discount
-----------------------------------------------------
Participations in a syndicated loan under which Bering III Sarl is
a borrower were trading in the secondary market around 83.4
cents-on-the-dollar during the week ended Friday, November 24,
2023, according to Bloomberg's Evaluated Pricing service data.
The EUR146.4 million facility is a Term loan that is scheduled to
mature on November 30, 2024. The amount is fully drawn and
outstanding.
Bering III S.a.r.l operates as a newly formed parent company of
Iberconsa, a Spanish fishing company with operations in Argentina,
Namibia, South Africa and Spain. The Company's country of domicile
is Luxembourg.
TRAVELPORT FINANCE: $1.96BB Bank Debt Trades at 53% Discount
------------------------------------------------------------
Participations in a syndicated loan under which Travelport Finance
Luxembourg Sarl is a borrower were trading in the secondary market
around 47.4 cents-on-the-dollar during the week ended Friday,
November 24, 2023, according to Bloomberg's Evaluated Pricing
service data.
The $1.96 billion facility is a Term loan that is scheduled to
mature on May 29, 2026. The amount is fully drawn and
outstanding.
Travelport Finance Luxembourg Sarl operates as a subsidiary of
Travelport Holdings Ltd. The Company's country of domicile is
Luxembourg.
=====================
N E T H E R L A N D S
=====================
JUBILEE PLACE 5: DBRS Confirms BB(low) Rating on Class F Notes
--------------------------------------------------------------
DBRS Ratings GmbH confirmed its credit ratings on the loan and
notes issued by Jubilee Place 5 B.V. (the Issuer) as follow:
-- Class A loan at AAA (sf)
-- Class B notes at AA (sf)
-- Class C notes at A (sf)
-- Class D notes at BBB (high) (sf)
-- Class E notes at BB (high) (sf)
-- Class F notes at BB (low) (sf)
The credit rating on the Class A loan addresses the timely payment
of interest and the ultimate payment of principal by the legal
final maturity date in July 2059. The credit rating on the Class B
notes addresses the timely payment of interest when most senior and
the ultimate payment of principal by the legal final maturity date.
The credit ratings on the Class C to Class F notes (together with
the Class B notes, the Notes) address the ultimate payment of
interest and principal by the legal final maturity date. DBRS
Morningstar does not rate the Class G or Class R notes also issued
in this transaction.
The confirmations follow an annual review of the transaction and
are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and
losses as of the October 2023 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A loan and to
the Notes to cover the expected losses at their respective credit
rating levels.
The transaction is a bankruptcy-remote special-purpose vehicle
incorporated in the Netherlands. The Issuer used the proceeds from
the Class A loan and the Notes to fund the purchase of Dutch
mortgage receivables originated by Dutch Mortgage Services B.V.,
DNL 1 B.V., and Community Hypotheken B.V (together, the
originators), which were acquired from Citibank, N.A., London
Branch. The originators are specialized residential buy-to-let real
estate lenders operating in the Netherlands and started their
lending businesses in 2019. They operate under the mandate of
Citibank, which defines most of the underwriting criteria and
policies.
PORTFOLIO PERFORMANCE
As of the October 2023 payment date, loans up to three months in
arrears represented 0.2% of the outstanding portfolio balance, up
from 0.0% from closing date one year ago. The 90-plus days
delinquency ratio and the cumulative default ratio both remained at
0.0% in the same period.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining
pool of receivables and updated its Base Case PD and LGD
assumptions, corresponding to the B (sf) credit rating level, to
7.5% and 10.5%, respectively.
CREDIT ENHANCEMENT
As of the October 2023 payment date, DBRS Morningstar calculated
the credit enhancement for the Class A loan at 15.7%, which is
provided by the subordination of the Class B to Class G notes.
Credit enhancement for the Class B notes is 10.1% and is provided
by the subordination of the Class C to Class G notes. Credit
enhancement for the Class C notes is 7.3% and is provided by the
subordination of the Class D to Class G notes. Credit enhancement
for the Class D notes is 5.6% and is provided by the subordination
of the Class E to Class G notes. Credit enhancement for the Class E
notes is 4.5% and is provided by the subordination of the Classes F
and G notes. Credit enhancement for the Class F notes is 3.4% and
is provided by the subordination of the Class G notes.
The transaction benefits from an amortizing liquidity reserve fund
(LRF) that can be used to cover shortfalls on senior expenses and
interest payments on the Class A loan. The LRF was partially funded
at closing at 0.75% of the initial balance of the Class A loan and
was built up until it reached its target of 1.25% of the
outstanding balance of the Class A loan. The LRF is floored at 0.5%
of the initial balance of the Class A loan. The LRF indirectly
provides credit enhancement for the Class A loan and all classes of
notes, as released amounts are part of the principal available
funds. As of the October 2023 payment date, the LRF was EUR 4.3
million.
Citibank Europe plc, Netherlands Branch acts as the account bank
for the transaction. Based on the private credit rating of the
account bank, the downgrade provisions outlined in the transaction
documents, and other mitigating factors inherent in the transaction
structure, DBRS Morningstar considers the risk arising from the
exposure to the account bank to be consistent with the AAA (sf)
credit rating assigned to the Class A loan, as described in DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
Citibank Europe plc acts as the interest rate swap counterparty for
this transaction. DBRS Morningstar's public Long-Term Issuer Rating
of AA (low) on Citibank Europe plc is consistent with the first
credit rating threshold as described in DBRS Morningstar's
"Derivative Criteria for European Structured Finance Transactions"
methodology.
DBRS Morningstar's credit ratings on the Class A loan and the Notes
address the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
DBRS Morningstar's credit ratings on the Class A loan and the Notes
also address the credit risk associated with the increased rate of
interest applicable to the Class A loan and the Notes if the Class
A loan and the Notes are not redeemed on the Optional Redemption
Date in accordance with the applicable transaction documents.
DBRS Morningstar's credit ratings do not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction documents that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that the Issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in euros unless otherwise noted.
===========
N O R W A Y
===========
HURTIGRUTEN GROUP: EUR655MM Bank Debt Trades at 31% Discount
------------------------------------------------------------
Participations in a syndicated loan under which Hurtigruten Group
AS is a borrower were trading in the secondary market around 68.8
cents-on-the-dollar during the week ended Friday, November 24,
2023, according to Bloomberg's Evaluated Pricing service data.
The EUR655 million facility is a Term loan that is scheduled to
mature on February 28, 2027. The amount is fully drawn and
outstanding.
Hurtigruten is a Norwegian cruise ship operator that offers cruises
along the Norwegian coast, expedition cruises and land-based Arctic
experience tourism in Svalbard. In 2022, Hurtigruten reported
revenues of EUR577 million (2021: EUR223 million) and
company-defined adjusted EBITDA of EUR46 million (2021: negative
EUR107 million).
===============
P O R T U G A L
===============
ELECTRICIDADE DOS ACORES: Moody's Affirms Ba1 CFR, Outlook Stable
-----------------------------------------------------------------
Moody's Investors Service has affirmed the Ba1 long-term corporate
family rating of EDA - Electricidade dos Acores, S.A. (EDA).
Concurrently, Moody's has also affirmed EDA's ba1 Baseline Credit
Assessment (BCA). The outlook remains stable.
The rating action follows Moody's affirmation of the Ba1 rating of
the Autonomous Region of Azores ("RAA") and change in outlook to
stable from negative, on November 22, 2023.
RATINGS RATIONALE
The rating affirmation with a stable outlook reflects the view that
EDA will likely maintain a financial profile commensurate with the
current rating at least over the medium term. Financial performance
will likely remain weak in 2023 as a result of sharp increases in
fuel costs that occurred during 2022, while the difference between
actual and allowed revenues, under EDA's regulatory framework, will
get recovered with a two year delay.
EDA's BCA continues to reflect as positives: (1) the company's
position as the dominant vertically integrated utility in the RAA;
(2) the fully regulated nature of the company's activities in the
context of a relatively well-established and transparent regulatory
framework; and (3) a relatively sound financial profile against the
background of a gradually improving regional economy.
However, EDA's credit quality is constrained by: (1) the small size
of the company and a large investment plan for 2022-25 to shift its
generation mix from thermal to renewables sources; (2) the costs
and challenges associated with operating in a small, relatively
remote archipelago; (3) the tightened efficiency factors during the
2022-25 regulatory period; and (4) some working capital volatility
arising mainly from oil price movements, although this is likely to
decrease following the balancing of EDA's generation mix between
thermal and renewable generation.
With the RAA holding 50.1% of EDA's share capital, the company
falls under Moody's Government-Related Issuers Methodology
published in February 2020. Its rating comprises a BCA of ba1 with
strong Support and high Dependence. The company currently receives
no uplift from the assigned BCA under the methodology, given that
the BCA is already at the level of the rating of the RAA.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectation that EDA will
achieve and maintain metrics consistent with the assigned Ba1
rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
EDA's BCA and rating could be upgraded if EDA's standalone credit
quality improved as evidenced by Funds from operations (FFO)/debt
at least in the high-teens, in percentage terms, on a sustainable
basis. Also, EDA's rating could be upgraded if the rating of the
RAA were upgraded.
EDA's BCA could be downgraded if (1) EDA's credit profile weakened,
whether because of failure to reach efficiency targets, faster than
expected capital investment, or high dividend distributions, such
that FFO/debt was likely to fall below the mid-teens in percentage
terms; (2) a change in the company's financial policy appeared to
favor shareholders over creditors; or (3) following a significant
deterioration in EDA's liquidity position. A one notch downgrade in
EDA's BCA to ba2 would be unlikely to result in a downgrade of
EDA's rating.
PRINCIPAL METHODOLOGIES
The methodologies used in these ratings were Government-Related
Issuers Methodology published in February 2020.
[*] Moody's Upgrades 44 Tranches in Portuguese RMBS, ABS, NPL Deals
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 30 tranches
in 9 Portuguese RMBS transactions, 13 tranches in 4 Portuguese ABS
transactions and 1 tranche in Portuguese NPL transaction Guincho
Finance ("Guincho"). The rating action reflects:
-- the decrease in country risk as reflected by the increase of
the related Portuguese local currency country ceiling to Aaa on
November 17, 2023.
-- the upgrade of the Counterparty Risk assessment ("CR
assessment") for some Portuguese entities that act as servicer for
some of the transactions
(https://ratings.moodys.com/ratings-news/411641) therefore reducing
financial disruption and commingling risks;
-- better than expected collateral performance in the case of
Viriato Finance No. 1;
-- faster than anticipated cash-flows generated from the recovery
process on non-performing loans (NPLs), which translates into
increased credit enhancement for the Notes in the case of Guincho;
and
-- correction of an input error for Lusitano Mortgages No. 4 plc.
Moody's affirmed the ratings of the notes that had sufficient
credit enhancement to maintain the current ratings.
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=DjKhTJ
This list is an integral part of this Press Release and identifies
each affected issuer.
RATINGS RATIONALE
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=lE3bcp
This list is an integral part of this Press Release and provides,
for each of the credit ratings covered, Moody's disclosures on the
following items:
-- Principal Methodology Used
-- Key Rationale for Action
-- Constraining factors on the ratings
Decreased Country Risk
The rating action on 9 Portuguese RMBS, 4 ABS and 1 NPL
transactions follows Moody's increase of the Government of
Portugal's ("Portugal") local-currency bond ceiling to Aaa from Aa2
on November 17, 2023. This local-currency bond ceiling increase
followed the upgrade of the Government of Portugal's issuer and
bond ratings to A3 with a stable outlook from Baa2.
Portugal's country ceiling, and therefore the maximum rating that
Moody's can assign to a domestic Portuguese issuer under its
methodologies, including structured finance transactions backed by
Portuguese receivables, is Aaa (sf). The decrease in sovereign risk
is reflected in Moody's quantitative analysis for the affected
tranches. A higher country ceiling translates into a lower
probability of higher losses in the loss distribution, which has a
positive impact on all notes, including mezzanine and junior
notes.
Revision of Key Collateral Assumptions
For Viriato Finance No. 1, the current default probability
assumption is 8.5% of the current portfolio balance, decreasing the
default probability as a percentage of the original balance from
8.5% to 7.8%, while the rest of assumptions remain unchanged.
Increased levels of credit enhancement
Sequential amortization in some of the transactions and
non-amortising reserve funds have led to the increase in the credit
enhancement available in some transactions.
In particular, Class A notes in Guincho Finance repaid on the May
2023 payment date, so Class B notes are now the most senior notes.
The advance rate of the Class B Notes, being the ratio between the
Class B Notes' balance and the outstanding Gross Book Value,
decreased to 2.71% as of the May 2023 interest payment date from
5.14% as of the most recent action on January 2023. A lower advance
rate translates into higher protection against credit losses for
the Notes.
Correction of an analytical error
The rating action also reflects the correction of an input error by
Moody's in its analysis of the reserve fund available in Lusitano
Mortgages No. 4 plc. In previous rating actions, Moody's did not
reflect in the cash flow model the utilisation of any residual
reserve fund available at the end of the transaction to repay the
notes. The rating action incorporates the full benefit of the
reserve fund in all circumstances, which is positive for the rating
of Class D.
Counterparty exposure
Following the upgrade of Portugal's sovereign rating, some
Portuguese Banks Long Term deposit bank ratings and CR assessments
were also upgraded (see "Moody's takes rating action on seven
Portuguese banks", published November 22, 2023).
Some of the entities that act as servicer for some of the
transactions were affected, which reduced financial disruption and
commingling risks.
The rating actions took into consideration the notes' exposure to
relevant counterparties, such as servicers, account banks or swap
providers.
Moody's considered how the liquidity available in the transactions
and other mitigants support continuity of note payments in case of
servicer default, using the CR assessment as a reference point for
servicers.
Moody's assessed commingling risk in the transactions, taking CR
assessment as reference point.
Moody's assessed the rating cap to apply to the structured finance
transactions in relation to account bank exposure by referencing
the bank's deposit rating. Moody's also assessed the rating cap to
apply to the structured finance transactions in relation to the
eligible investments taking into account the minimum rating
required for these investments.
Moody's assessed the exposure to the swap counterparties. Moody's
considered the risks of additional losses on the notes if they were
to become unhedged following a swap counterparty default by using
CR assessment as reference point for swap counterparties.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include: (i) performance of the underlying collateral that
is better than Moody's expected or the recovery process of the
non-performing loans producing significantly higher cash-flows in a
shorter time frame than expected in the case of NPL transaction
(ii) deleveraging of the capital structure; and (iii) improvements
in the credit quality of the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the
ratings include: (i) an increase in sovereign risk; (ii)
performance of the underlying collateral that is worse than Moody's
expected or significantly lower or slower cash-flows generated from
the recovery process on the non-performing loans; (iii)
deterioration in the notes' available credit enhancement; and (iv)
deterioration in the credit quality of the transaction
counterparties.
=============
R O M A N I A
=============
GLOBALWORTH REAL: S&P Affirms 'BB+' LT ICR, Outlook Now Negative
----------------------------------------------------------------
S&P Global Ratings revised its outlook on Globalworth Real Estate
Investments Ltd. to negative from stable and affirmed its 'BB+'
long-term issuer credit and senior unsecured debt ratings.
The negative outlook reflects S&P's view that there is a
one-in-three chance the company may not be able to secure
sufficient funding or extensions of its credit lines, potentially
harming its liquidity profile within the next six to 12 months.
S&P said, "Our negative outlook on Globalworth reflects our view
that its refinancing needs remain significant beyond our 12-month
horizon, and if not addressed in a timely manner, these could harm
its liquidity profile and therefore weaken our rating assessment.
As of Sept. 30, 2023 our liquidity calculation over the next 12
months remains adequate. However, the company's EUR450 million
outstanding bond maturing in March 2025 will be included in our
liquidity calculation as of first quarter 2024. Credit market
conditions for real estate companies have deteriorated over the
past year due to rising interest rates and weakening trading
conditions, both in equity and debt capital markets. However, we
understand that the company is negotiating refinancing transactions
with banks that would cover its liquidity needs for the next 12-18
months and we consider the recently signed loans of about EUR145
million as supportive. To further preserve the sufficient liquidity
cushion, we understand the company is disposing non-core assets. We
note that Globalworth has sold assets for EUR75 million so far in
2023, including a major office building in Warsaw for EUR63
million, and is in advanced negotiations to sell another net EUR100
million-EUR150 million assets in the next three to six months. If
the company does not manage to secure sufficient funding to meet
this sizable debt maturity in a timely manner, its liquidity
profile could materially deteriorate, which would likely lead us to
lower the rating by at least one notch.
"We note that as of June 30, 2023, Globalworth's weighted-average
debt maturity (WAM) stood at 3.4 years, close to our rating
threshold of a minimum of three years. That said, we understand
that pro forma the recently signed loans its WAM improved to
3.5years. We expect Globalworth to take sufficient steps to ensure
a WAM of comfortably above three years going forward.
"Higher funding costs could also pressure the rating, and we
anticipate Globalworth's EBITDA interest coverage will tighten
close to our downside rating threshold over the coming 12-24
months. EBITDA interest coverage remained unchanged at 2.6x in the
12 months ending June. 30, 2023 compared with year-end 2022. The
company benefits from a hedging policy in place for around 85.0% of
the debt, which limits the impact from higher rates. For 2024 and
2025, we assume refinancing at an average interest rate of around
6.0%-6.5%, compared with average cost of debt of 3.29% as of June
2023. We assume average cost of debt will increase to 3.5%-4.0% in
2024 and 4.0%-4.5% in 2025. While there are very limited debt
maturities in 2024, we believe higher interest rates would likely
harm the company's coverage for 2025 refinancing needs, to be
likely refinanced throughout the year of 2024. We therefore
forecast EBITDA to interest coverage will fall closer to 2.5x,
closer to our downside threshold of 2.4x in 2024, but recover to
2.6x-2.7x in 2025 under our assumption of lower debt balance as a
result of asset disposals, lower investments and dividends,
combined with a lower underlying reference rate as well as
increasing EBITDA generation."
Globalworth's strong asset quality, high environmental standards,
and central location should help withstand its operating
performance amid challenging market conditions. For the first half
of 2023, the company reported a solid increase in like-for-like
rental income of 5.4%, which, was mainly driven by indexation of
8.8% to some extent offset by new or renewed leases at reduced
rates but over an extended period. The operating performance is in
line with other rated European office real estate peers, such as
Swedish office player Humlegarden AB (like-for-like rental growth
of 9.0%) or giant French based Gecina (like-for-like rental growth
of 6.9%).
S&P said, "In our view, there is continued polarization in the real
estate market, with high-quality office assets—well advanced in
terms of sustainability standards and central
locations—continuing to fare better than more remote locations.
We understand about 87.1% of Globalworth's standing commercial
portfolio value is "green" certified--via the Building Research
Establishment Environmental Assessment Method (BREEAM), the
Leadership in Energy and Environmental Design (LEED), and
others--in the very good, excellent, or outstanding categories.
Since we expect tenants and investors will increasingly focus on
green assets, this could support the company to secure leases
relative to peers. We anticipate the leasing market for offices
remains challenging amid slowing economies, and remote working
trends should have limited impact on Globalworth, but if supply
increases or tenants relocate, it could hurt Globalworth's
occupancy. Our base case assumes stable to slightly increasing
occupancy levels over the next 12-24 months.
"The negative outlook reflects that we could downgrade Globalworth
by at least one notch over the next six to 12 months if the company
does not secure sufficient funding sources to meet its upcoming
debt maturities in a timely manner, and thereby avoid a material
deterioration of its liquidity."
S&P would likely downgrade Globalworth if:
-- The company fails to address its upcoming 2025 debt maturities
in a timely manner, which would result in a significant
deterioration of its liquidity position;
-- Its weighted-average debt maturity falls below three years
sustainably with no credible refinancing plan;
-- EBITDA interest coverage falls to 2.4x or below on a
sustainable basis; or
-- The company fails to maintain debt to debt plus equity below
50% for a prolonged period or its debt-to-EBITDA ratio increases
beyond 11x.
S&P could also lower its issue rating on the company's senior
unsecured debt if it raises further secured debt such that its
outstanding group priority debt to total debt increases beyond 50%,
increasing the subordination risk for unsecured debtholders
substantially.
S&P could revise the outlook to stable if:
-- The company addresses its upcoming debt maturities in a timely
manner, sustainably improving its liquidity cushion.
-- Globalworth maintains an average debt maturity profile
comfortably above 3.0 years.
-- EBITDA interest coverage remains well above 2.4x, despite
higher interest rates, on the back of resilient performance and
cash flow generation, with its debt to debt plus equity ratio
remaining comfortably below 50%.
A revision of the outlook back to stable would also depend upon the
company's ability to maintain its stable operating performance,
including positive like-for-like growth, and maintaining stable or
improving occupancy levels.
=========
S P A I N
=========
CAIXABANK RMBS 3: DBRS Confirms CC Rating on Series B Notes
-----------------------------------------------------------
DBRS Ratings GmbH took the following credit rating actions on the
notes issued by Caixabank RMBS 3, FT (the Issuer):
-- Series A Notes upgraded to AA (sf) from AA (low) (sf)
-- Series B Notes confirmed at CC (sf)
The credit rating on the Series A Notes addresses the timely
payment of interest and the ultimate payment of principal on or
before the legal final maturity date in September 2062. The credit
rating on the Series B Notes addresses the ultimate payment of
interest and principal on or before the legal final maturity date.
The credit rating actions follow an annual review of the
transaction and are based on the following analytical
considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and
losses, as of the September 2023 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Series A Notes to
cover the expected losses assumed at the AA (sf) credit rating
level and to the Series B Notes at CC (sf) once the Series A Notes
are fully amortized and the reserve fund starts providing credit
enhancement.
The transaction is a securitization of Spanish residential mortgage
loans and drawdowns of mortgage lines of credit secured over
residential properties located in Spain and originated and serviced
by CaixaBank, S.A. (CaixaBank). The Issuer used the proceeds of the
Series A and Series B Notes to fund the purchase of the mortgage
portfolio. In addition, CaixaBank provided separate additional
subordinated loans to fund both the initial expenses and the
reserve fund.
PORTFOLIO PERFORMANCE
As of the September 2023 payment date, loans that were one to two
months and two to three months delinquent represented 0.24% and
0.01% of the portfolio balance, respectively, while loans more than
three months delinquent represented 2.73%. Gross cumulative
defaults amounted to 1.4% of the original collateral balance, of
which 40.6% has been recovered so far.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis on the remaining
pool of receivables and updated its base case PD and LGD
assumptions to 3.3% and 7.9%, respectively.
CREDIT ENHANCEMENT
The subordination of the Series B Notes and the reserve fund
provides credit enhancement to the Series A Notes. As of the
September 2023 payment date, credit enhancement to the Series A
Notes was 22.5%, up from 20.2% at the last annual review.
The transaction benefits from a reserve fund, which was initially
funded to EUR 114.8 million at closing. The reserve provides
liquidity support and credit support to the Series A Notes. The
reserve fund started amortizing two years after closing. The
reserve fund is currently at its target level of EUR 57.4 million.
Following the full repayment of the Series A Notes, the transaction
reserve fund will also provide liquidity and credit support to the
Series B Notes.
CaixaBank acts as the account bank for the transaction. Based on
the account bank reference rating of A (high) on CaixaBank (which
is one notch below the DBRS Morningstar Long Term Critical
Obligations Rating of AA (low)), the downgrade provisions outlined
in the transaction documents, and other mitigating factors inherent
in the transaction structure, DBRS Morningstar considers the risk
arising from the exposure to the account bank to be consistent with
the credit rating assigned to the notes, as described in DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
DBRS Morningstar's credit ratings on the rated notes address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction documents that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in euros unless otherwise noted.
===========
S W E D E N
===========
DOMETIC GROUP: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
----------------------------------------------------------------
Moody's Investors Service has affirmed the Ba2 long term corporate
family rating and Ba2-PD probability of default rating of Swedish
mobile leisure products manufacturer Dometic Group AB ("Dometic" or
"the group"). Concurrently, Moody's affirmed the Ba2 instrument
ratings on the group's 3.0% EUR300 million and 2.0% EUR300 million
senior unsecured bonds due 2026 and 2028, respectively. The outlook
remains stable.
RATINGS RATIONALE
The affirmation of Dometic's ratings recognizes its significantly
improved free cash flow generation in the recent quarters, which
increased to SEK3.3 billion (Moody's-adjusted) for the last 12
months ended September 30, 2023 (LTM Q3 2023) from a negative
SEK323 million in fiscal year 2022. Although mostly driven by a
reduction in trade working capital, particularly inventories, that
had considerably increased over 2021-2022, Moody's expects the
group to further lower its working capital and to keep generating
substantial positive FCF and a strong liquidity profile also next
year. Continued positive FCF generation supported by further
profitability improvements and working capital releases should help
Dometic reach its targeted reported net leverage of 2.5x (2.9x as
of LTM Q3 2023) by the end of 2024, assuming no material
acquisitions and dividend payments at the low end of its payout
guidance of at least 40% of net income.
Nonetheless, Dometic's ratings remain weakly positioned at this
stage, reflecting a persistent slowdown of the original equipment
manufacturers (OEM) recreational vehicle (RV) market, especially in
the US, which prompted the group's OEM related sales to decline by
14% yoy organically in the first three quarters of 2023. Also, the
group's aftermarket and services and distribution businesses
suffered from sluggish consumer demand and the ongoing destocking
at retailers that resulted in a 12% yoy organic decline in group
sales during the same period. Thanks to positive mix effects, price
increases and cost discipline, Dometic could keep its reported
EBITA margin before items affecting comparability largely stable at
14.3% in Q3 2023 (14.0% in Q3 2022), which constantly declined
since 2021. Its 12.1% EBITA margin on a Moody's adjusted basis as
of LTM Q3 2023, however, remains weak compared to Moody's guidance
for the Ba2 rating category (low teens in percentage terms at
least).
Due to the recent earnings slowdown, also Dometic's leverage of
4.8x (Moody's-adjusted gross debt/EBITDA) as of LTM Q3 2023 remains
well above the rating agency's 4.0x maximum guidance for the Ba2
rating category, despite the repayment of a EUR300 million senior
unsecured bond at maturity in September this year. Anticipating
additional debt repayments with available excess cash along
management's de-leveraging target, consistent positive FCF and
recovering earnings from 2025 at the latest, Moody's expects
Dometic's leverage to reduce towards 4x over the next 12-18 months.
Nevertheless, given that visibility into a sustained improvement in
market conditions is currently low, a possible prolonged demand
weakness prompting Dometic's earnings to decrease further and
preventing its leverage to reduce as anticipated, could exhaust the
headroom in the Ba2 rating category in the coming quarters.
Likewise, larger debt-funded acquisitions or materially increasing
shareholder distributions, which Moody's does not anticipate, could
exert negative rating pressure. That said, Moody's positively
considers Dometic's sizeable cash position relative to its
financial debt.
Considerations that continue to support Dometic's ratings include
its steady reduction of its exposure to the North American RV
market towards 25% in 2022 from 38% in 2016, by acquiring companies
in adjacent verticals such as marine and outdoor activities; solid
profitability and history of strong FCF generation. At the same
time, its 43% sales exposure to the cyclical RV, power boats and
commercial and passenger vehicles (CPVs) OEM markets in 2022
continues to constrain its business and credit profile.
LIQUIDITY
Dometic's liquidity is very good, benefitting from its substantial
SEK4.6 billion cash position and committed and fully available
EUR200 million revolving credit facility (RCF, maturing in 2026) as
of September 30, 2023. Together with Moody's forecast of around
SEK3.5 billion operating cash flow in 2024 (including an assumed
SEK1.1 billion working capital release), the group's internal cash
sources significantly exceed its next 12-18 months cash needs,
including annual capital spending of around SEK900 million
(Moody's-adjusted, including lease liability payments), dividend
payments of 40% of net income and smaller deferred acquisition
related considerations. Following the repayment of a EUR300 million
senior unsecured bond at maturity in September 2023, there were no
short-term debt maturities as of September 30, 2023. The group's
next major debt maturities are two loans and a SEK bond in an
aggregate amount of SEK6.6 billion due in 2025.
Moody's expects Dometic to maintain adequate capacity under its
(net leverage and interest cover) financial covenants over the next
12 months.
OUTLOOK
The stable outlook rests on Moody's expectation that some of
Dometic's recently weakened credit metrics will steadily recover
during 2024, including its Moody's EBITA margin exceeding 13%,
while its leverage should decline towards 4.0x in 2025 at the
latest. Moody's further expects the group to maintain a very strong
liquidity profile, supported by its ample cash position, undrawn
credit lines and projected FCF of around SEK2 billion in 2024.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive ratings pressure would build if Dometic's Moody's adjusted
debt/EBITDA decreased towards 3.0x and its Moody's adjusted
EBITA-margin increased to over 15%. Furthermore, an upgrade would
rest on a sustained balanced financial policy.
Negative ratings pressure would build if the group's Moody's
adjusted debt/EBITDA failed to decline to below 4x, Moody's
adjusted FCF/debt decreased towards 5%, or if its Moody's adjusted
EBITA margin failed to reach low teens in percentage terms.
Furthermore, a material weakening of the group's liquidity could
result in negative rating pressure.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Manufacturing
published in September 2021.
COMPANY PROFILE
Dometic Group AB (Dometic), headquartered in Solna, Sweden, is a
leading global manufacturer of various products in the areas of
Food & Beverage, Climate, Power & Control and Other Applications.
Dometic operates in the Americas, EMEA and Asia Pacific, providing
products for use in recreational vehicles, trucks and premium cars,
pleasure and workboats, and for a variety of other uses. The group
manufactures its products across 25 manufacturing sites in 11
countries under various brands, including its core Dometic and
other supporting brands.
In the 12 months through September 2023, Dometic generated revenue
of SEK28.6 billion and reported EBITDA of SEK4.3 billion (15.2%
margin). The group is listed on the Stockholm Stock Exchange with a
market cap of around EUR2 billion as of November 23, 2023.
SAS AB: Wins US Court Nod for US$1.2-Bil. Air France-KLM Deal
-------------------------------------------------------------
Stockholm-based SAS AB announced Nov. 21, 2023, that the U.S.
Bankruptcy Court for the Southern District of New York has approved
SAS' entry into the investment agreement with the winning bidder
consortium in SAS' exit financing solicitation process. The
winning bidder consortium consists of Castlelake, L.P., on behalf
of certain funds or affiliates, Air France-KLM S.A. and Lind Invest
ApS, together with the Danish state (collectively, the
"Investors").
On Nov. 4, 2023, SAS announced that it had entered into an
investment agreement with the Investors, subject to approval by the
Court. The agreed transaction structure includes a total
investment in reorganized SAS corresponding to USD 1,200 million
(SEK 13.2 billion), which includes USD 475 million (SEK 5.225
billion) in new unlisted equity and USD 725 million (SEK 7.975
billion) in secured convertible debt. On Nov. 21, SAS received
Court approval to enter into the investment agreement.
SAS also received final Court approval for its new
debtor-in-possession ("DIP") financing credit agreement with
Castlelake for USD 500 million (SEK 5.5 billion). The funding
related to the new DIP financing credit agreement is being used to,
among other things, refinance SAS’ original DIP term loan
with a significant extension of the DIP loan financing period
sufficient to bridge to final emergence from chapter 11. On
November 9, 2023, the Court authorized SAS to draw USD 450 million
(SEK 4.95 billion) and, today, the Court authorized SAS to draw the
remaining USD 50 million (SEK 550 million) under the new DIP
facility.
Anko van der Werff, President & Chief Executive Officer of SAS,
comments:
"The investment agreement that was approved by the court today is a
key milestone in our SAS FORWARD plan, and it shows that our new
investors believe in SAS and our potential to remain at the
forefront of the airline industry for years to come."
Conditionality of the transaction and expected recoveries in the
chapter 11 process
The agreed exit transaction remains subject to approval in
connection with the confirmation of SAS' chapter 11 plan of
reorganization (the "Chapter 11 Plan"). SAS currently aims to
receive approval from the Court of the Chapter 11 Plan in early
2024, to be followed by obtaining regulatory approvals and the
implementation of a Swedish company reorganization (Sw.
företagsrekonstruktion) at the SAS AB level (likely to be filed
by SAS AB in 2024). The effectiveness of the transaction will
occur upon the fulfilment of certain conditions precedent,
including receipt of all relevant regulatory approvals, as further
set out in the press release announced by SAS on Oct. 3, 2023. No
approval is expected to be required from the existing shareholders
of SAS AB for the transaction.
SAS reiterates its expectation set out in the press release
announced by SAS on Oct. 3, 2023 that there will be only a modest
recovery for general unsecured creditors, no recovery for
subordinated unsecured creditors and no value for SAS AB's existing
shareholders upon emergence from the chapter 11 process. Any
payment of recoveries to creditors will be made only after the
completion of the transaction and the fulfilment of any conditions
for payment to creditors. All of SAS AB's common shares and listed
commercial hybrid bonds are further expected to be cancelled,
redeemed and delisted (currently expected to occur during the
second quarter of 2024).
About Scandinavian Airlines
SAS SAB -- https://www.sasgroup.net/ -- Scandinavia's leading
airline, with main hubs in Copenhagen, Oslo and Stockholm, is
flying to destinations in Europe, USA and Asia. In addition to
flight operations, SAS offers ground handling services, technical
maintenance, and air cargo services. SAS is a founder member of the
Star Alliance, and together with its partner airlines offers a wide
network worldwide.
SAS AB and its subsidiaries, including Scandinavian Airlines
Systems Denmark-Norway-Sweden and Scandinavian Airlines of North
America Inc., sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 22-10925) on July 5,
2022. In the petition filed by Erno Hilden, authorized
representative, SAS AB estimated assets between $10 billion and $50
billion and liabilities between $1 billion and $10 billion.
Judge Michael E. Wiles oversees the cases.
The Debtors tapped Weil, Gotshal & Manges, LLP as global legal
counsel; Mannheimer Swartling Advokatbyra AB as special counsel;
FTI Consulting, Inc. as financial advisor; Ernst & Young AB as tax
advisor; and Seabury Securities, LLC and Skandinaviska Enskilda
Banken AB as investment bankers. Seabury is also serving as
restructuring advisor. Kroll Restructuring Administration, LLC is
the claims agent and administrative advisor.
The U.S. Trustee for Region 2 appointed an official committee to
represent unsecured creditors in the Debtors' Chapter 11 cases. The
committee is represented by Willkie Farr & Gallagher, LLP.
===========================
U N I T E D K I N G D O M
===========================
BLUE CHIP: Enters Administration, 15 Jobs Affected
--------------------------------------------------
Neil Hodgson at TheBusinessDesk.com reports that all 15 staff
members at Manchester-based PR business, Blue Chip Marketing, have
been made redundant following its collapse into administration.
Mike Dillon and Katy McAndrew, of Leonard Curtis, were appointed
joint administrators of the company which specialises in BTL (below
the line), shopper and digital marketing, TheBusinessDesk.com
relates.
A report by Leonard Curtis, published by Companies House, showed
the firm, which operated from Blackfriars House, Parsonage, had
debts of just over GBP1 million, TheBusinessDesk.com notes. It
means it has insufficient assets to be able to pay unsecured
creditors.
The business, which was incorporated on June 24, 2002, was owned by
directors Nicola Thompson, who held a 95% stake in the firm, and
Ian Morgan, who owned the remainder.
The company was thrown into turmoil after its largest client
removed work with immediate effect and without notice "which
removed GBP3.7 million from the company's projected income and
resulted in a major shortfall of turnover to break even",
TheBusinessDesk.com discloses.
According to TheBusinessDesk.com, Leonard Curtis's report said:
"Despite hosting further discussions with the client in an attempt
to maintain the business relationship, all further projects were
also cancelled. The company was therefore left with no income from
their major client, and no sign of any significant future revenue
to replace.
"In addition, various other projects have been delayed or cancelled
further exacerbating the company's cashflow issues. The company
took a number of steps to reduce costs, however these were not
sufficient and it fell behind in its obligations to creditors. In
particular trade creditors and HM Revenue & Customs."
It added: "Following a review of cashflow forecasts, the directors
identified that there was a significant risk of insufficient funds
being available to pay staff wages at the end of September. As a
result, the directors took steps to cease trading on 8 September
2023 and, all staff were made redundant."
Directors originally approached Leonard Curtis in August 2023, for
advice on the company's position, TheBusinessDesk.com recounts. It
was deemed "without an injection of working capital, which was
considered unlikely, it would appear that it had no alternative
other than to consider a formal insolvency process",
TheBusinessDesk.com states.
A Notice of Intention to Appoint Administrators was filed on Sept.
13, and joint administrators were appointed on Sept. 25,
TheBusinessDesk.com relays.
CASTELL 2023-2: DBRS Gives Prov. BB(high) Rating to X Notes
-----------------------------------------------------------
DBRS Ratings Limited assigned provisional credit ratings to the
residential mortgage-backed notes to be issued by Castell 2023-2
PLC (the Issuer) as follows:
-- Class A1 at AAA (sf)
-- Class A2 at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X at BB (high) (sf)
The credit rating on the Class A notes addresses the timely payment
of interest and the ultimate repayment of principal. The credit
ratings on the Class B notes address the timely payment of interest
once they are the senior most class of notes outstanding and the
ultimate repayment of principal on or before the final maturity
date. The credit ratings on the Class C, Class D, Class E, Class F,
and Class X notes address the ultimate payment of interest and
principal.
DBRS Morningstar does not rate the Class G and Class H notes also
expected to be issued in this transaction.
CREDIT RATING RATIONALE
The Issuer is a bankruptcy-remote special-purpose vehicle
incorporated in the United Kingdom of Great Britain and Northern
Ireland (UK). The notes to be issued shall fund the purchase of
British second-lien mortgage loans originated by UKML. Pepper (UK)
Limited (Pepper; the Servicer) is the primary and special servicer
of the portfolio. UKML, established in November 2013 and previously
known as Optimum Credit Ltd (Optimum Credit), is a specialist
provider of second-lien mortgages based in Cardiff, Wales. Both
UKML and Pepper are part of the Pepper Group Limited (Pepper
Group), a worldwide consumer finance business, third-party loan
servicer, and asset manager. Law Debenture Corporate Services shall
be appointed as the back-up servicer facilitator to the
transaction.
This is the second securitization from the Castell series this
year, following Castell 2023-1 Plc issued in April. The initial
mortgage portfolio consists of GBP 275 million of second-lien
mortgage loans collateralized by owner-occupied (OO) properties in
the UK. The portfolio features currently warehoused mortgage loans
as well as a portion of loans securitized in the past within the
Castell 2020-1 Plc transaction.
Relative to the other Castell transaction issued this year, Castell
2023-2 PLC differs in particular with regard to the existence of a
prefunding period, lasting from the closing date up to the first
interest payment date (IPD), as well as the increased portion of
product switches, now 15% of the portfolio's aggregate current
balance as of closing.
Liquidity in the transaction is provided by a liquidity reserve,
which shall cover senior costs and expenses as well as interest
shortfalls on the Class A1 and Class A2 notes (together, the Class
A notes) and Class B notes. In addition, principal borrowing is
also envisaged under the transaction documentation and can be used
to cover senior costs and expenses as well as interest shortfalls
on Class A to Class G notes. However, the latter will be subject to
a principal deficiency ledger (PDL) condition, which states that if
a given class of notes is not the most senior class outstanding,
when a PDL debit of more than 10% of such class exists, principal
borrowing will not be available. Interest shortfalls on Class B to
Class G notes, as long as they are not the most senior class
outstanding, shall be deferred and not be recorded as an event of
default until the final maturity date or such earlier date on which
the notes are fully redeemed.
The transaction also features a fixed-to-floating interest rate
swap, given the presence of a large portion of fixed-rate loans
(with a compulsory reversion to floating in the future) while the
liabilities shall pay a coupon linked to Sonia. The swap
counterparty to be appointed as of closing shall be BNP Paribas.
DBRS Morningstar currently rates BNPP with a long-term critical
obligations rating (COR) of AA (high) and a long-term issuer rating
(IR) of AA (low), both with Stable trends. The transaction
documents contain downgrade provisions if the DBRS Morningstar
long-term rating or the COR on BNPP fall below A or below BBB for
the first and second rating thresholds, respectively. The
collateral posting and replacement provisions are consistent with
DBRS Morningstar's "Derivative Criteria for European Structured
Finance Transactions" methodology.
Furthermore, Citibank, N.A., London Branch shall act as the Issuer
Account Bank, and National Westminster Bank Plc shall be appointed
as the Collection Account Bank. Both entities are privately rated
by DBRS Morningstar and meet the eligible ratings in structured
finance transactions and are consistent with DBRS Morningstar's
"Legal Criteria for European Structured Finance Transactions"
methodology.
Credit enhancement for the Class A notes is calculated at 25.0% and
is provided by the subordination of the Class B to Class H notes.
Credit enhancement for the Class B notes is calculated at 18.75%
and is provided by the subordination of the Class C to Class H
notes. Credit enhancement for the Class C notes is calculated at
13.25% and is provided by the subordination of the Class D to Class
H notes. Credit enhancement for the Class D notes is calculated at
8.75% and is provided by the subordination of the Class E to Class
H notes. Credit enhancement for the Class E notes is calculated at
6.75% and is provided by the subordination of the Class F to Class
H notes. Credit enhancement for the Class F notes is calculated at
5.25% and is provided by the subordination of the Class G and Class
H notes. Credit enhancement for the Class G notes is calculated at
2.5% and is provided by the subordination of the Class H notes.
Credit enhancement for the Class X notes is calculated at zero, as
these are excess spread notes with interest and principal payments
flowing through the revenue priority of payments.
DBRS Morningstar based its credit ratings on a review of the
following analytical considerations:
-- The transaction's capital structure, including the form and
sufficiency of available credit enhancement;
-- The credit quality of the mortgage portfolio and the ability of
the servicer to perform collection and resolution activities. DBRS
Morningstar estimated stress-level PD, loss given default (LGD),
and expected losses (EL) on the mortgage portfolio. DBRS
Morningstar used the PD, LGD, and EL as inputs into the cash flow
engine. DBRS Morningstar analyzed the mortgage portfolio in
accordance with its "European RMBS Insight: UK Addendum";
-- The transaction's ability to withstand stressed cash flow
assumptions and repay the Class A, Class B, Class C, Class D, Class
E, Class F, and Class X notes according to the terms of the
transaction documents. DBRS Morningstar analyzed the transaction
structure using Intex DealMaker. DBRS Morningstar considered
additional sensitivity scenarios of 0% CPR;
-- The sovereign rating of AA with a Stable trend on the United
Kingdom of Great Britain and Northern Ireland as of the date of
this report; and
-- The expected consistency of the transaction's legal structure
with DBRS Morningstar's "Legal Criteria for European Structured
Finance Transactions" methodology and the presence of legal
opinions that are expected to address the assignment of the assets
to the Issuer.
DBRS Morningstar's credit ratings on the rated notes address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated notes are the related
Interest Amounts and the related Class Balances.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in British pound sterling unless otherwise
noted.
ELVET MORTGAGES 2023-1: DBRS Finalizes BB(high) Rating on E Notes
-----------------------------------------------------------------
DBRS Ratings Limited (DBRS Morningstar) finalized its provisional
credit ratings on the residential mortgage-backed notes issued by
Elvet Mortgages 2023-1 PLC (the Issuer) as follows:
-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BB (high) (sf)
The credit ratings on the Class A and Class B notes address the
timely payment of interest and the ultimate repayment of principal
on or before the final maturity date in August 2065. The credit
ratings on the Class C, Class D, and Class E notes address the
ultimate payment of interest and principal.
DBRS Morningstar does not rate the Class Z notes, the VRR notes, or
the residual certificates also issued in this transaction. The VRR
notes represent 5% of the portfolio.
CREDIT RATING RATIONALE
The Issuer is a bankruptcy-remote special-purpose vehicle
incorporated in the United Kingdom (UK). The Issuer used the
proceeds from the issuance of the notes to fund the purchase of
prime and performing owner-occupied (OO) mortgage loans originated
by Atom Bank and secured over properties located in the UK. This is
the fifth securitization from Atom Bank and the second that is
rated by DBRS Morningstar. The mortgage portfolio consists of GBP
490 million of first-lien mortgage loans collateralized by OO
residential properties in England, Scotland, Wales, and Northern
Ireland. The mortgages were mostly granted between 2021 and 2023,
with a few cases dating back to 2017.
Atom Bank is the servicer of the transaction. In order to maintain
servicing continuity, Law Debenture Corporate Services Limited has
been appointed as the backup servicer facilitator. Atom Bank is
also the originator and the seller of this transaction. Atom Bank
was founded in 2014 in Durham, UK, as the UK's first app-based bank
with no physical branches. It launched its residential mortgage
platform in December 2016.
The Issuer issued six tranches of collateralized mortgage-backed
securities (the Class A to Class Z notes) to finance the purchase
of the portfolio. The transaction is structured to initially
provide 11.0% of credit enhancement to the Class A notes. This
includes subordination of the Class B to Class Z notes.
The transaction also features a general reserve fund (GRF) and a
liquidity reserve fund (LRF). The LRF is available to cover
shortfalls in senior fees and interest payments on the Class A and
Class B notes after the application of revenue and the GRF. The LRF
was funded from the issuance of the notes on the closing date and
its initial balance is 1.5% of the current balance of the portfolio
as at the cut-off date. On each interest payment date (IPD), the
target level of the LRF will be 1.5% of the current balance of the
portfolio as at the end of the collection period until the Class B
notes have been redeemed. The excess amounts after full
amortization of the Class A and Class B notes will form part of the
available revenue funds.
The GRF also provides liquidity and credit support to the rated
notes and the Class Z notes. It has a zero balance at closing but,
on each following IPD the target level will be 1.5% of the current
balance of the portfolio as at the cut-off date minus the LRF
target amount. The GRF is available to cover shortfalls in senior
fees, interest, and any principal deficiency ledger (PDL) debits on
the Class A to Class Z notes after the application of revenue. The
GRF will form part of available revenue funds on the payment date
that the Class Z notes will be redeemed in full.
Principal can be used to cure any shortfalls in senior fees or
unpaid interest payments on the most-senior class of the rated
notes outstanding after using revenue funds and both reserves.
Principal can also be used to cure any shortfalls on the notes that
are not the most-senior class of notes outstanding as long as the
relevant PDL balance for each of those notes is less than 10%. Any
use will be recorded as a debit in the PDL. The PDL comprises six
subledgers that will track the principal used to pay interest, as
well as realized losses, in a reverse-sequential order that begins
with the Class Z subledger.
The notes' terms and conditions allow interest payments, other than
on the Class A notes, to be deferred if the available funds are
insufficient, even when the class is the most senior, and deferred
interest becomes due at maturity.
On the interest payment date in November 2028, the coupon due on
the notes will step up and the notes may be optionally called. The
notes must be redeemed for an amount sufficient to fully repay
them, at par, plus pay any accrued interest.
As of August 31, 2023, the provisional portfolio consisted of 2,477
loans with an aggregate principal balance of GBP 489.7 million. The
majority of the loans in the pool were originated during 2023
(66.0%), 2022 (24.8%), and 2021 (6.2%). Because of this, the
weighted-average (WA) seasoning of the pool is relatively low at
nine months. The WA original loan-to-value (LTV) is 80.8% and the
WA indexed current LTV (CLTV) of the portfolio as calculated by
DBRS Morningstar is 79.1%, with 61.2% of the loans having an
indexed CLTV higher than 80%. The pool is primarily concentrated in
London (16.4%), Scotland (15.6%), and the South East (15.1%). The
majority of the loans in the portfolio (94.4%) were granted to
employed borrowers and the remainder mainly self-employed borrowers
(5.4%). None of the loans in the pool have prior county court
judgements or are currently in arrears, reflecting the good quality
of the portfolio.
All loans in the portfolio are fixed-rate loans for an initial
period of time (3.4 years on a WA basis) before they revert to Atom
Bank's standard variable rate (SVR), currently set at 7.14%. The
current WA coupon of the portfolio is 4.09%. The interest on the
notes is calculated based on the daily-compounded Sterling
Overnight Index Average (Sonia), which gives rise to interest rate
risk. As the SVR is set by the lender with no contractual margin
and no direct link to an index, DBRS Morningstar assumed the SVR to
be a compressed margin over Sonia.
The Issuer has entered into a fixed-floating swap with NatWest
Markets plc (NatWest) to mitigate the interest rate risk from the
fixed-rate mortgage loans and Sonia payable on the notes. Based on
DBRS Morningstar's ratings on NatWest (which has a Long-Term Issuer
Rating of "A" and a Critical Obligations Rating of AA (low)), the
downgrade provisions outlined in the documents, and the transaction
structural mitigants, DBRS Morningstar considers the risk arising
from the exposure to NatWest to be consistent with the ratings
assigned to the notes as described in DBRS Morningstar's
"Derivative Criteria for European Structured Finance Transactions"
methodology.
Monthly mortgage receipts are deposited into the collections
account at National Westminster Bank plc and held in accordance
with the collection account declaration of trust. The funds
credited to the collection account are swept on the next business
day to the Issuer's account. The collection account declaration of
trust provides that interest in the collection account is in favor
of the Issuer over the seller. Commingling risk is considered
mitigated by the collection account declaration of trust and the
regular sweep of funds. If the collection account provider is
downgraded below BBB (low), the collection account bank will be
replaced or guaranteed by an appropriately rated bank within 35
calendar days.
Citibank, N.A., London Branch (Citibank London) holds the Issuer's
transaction account from the closing date. The Issuer also holds an
additional transaction account at BNP Paribas, London Branch (BNPP
London) and, after the closing date, any amounts standing in the
Citibank London transaction account can be transferred to the BNPP
London transaction account on any business day. Based on DBRS
Morningstar's private ratings on Citibank London and BNPP London,
replacement provisions, and investment criteria, DBRS Morningstar
considers the risk arising from the exposure to Citibank London and
BNPP London to be consistent with the ratings assigned to the rated
notes as described in DBRS Morningstar's "Legal Criteria for
European Structured Finance Transactions" methodology.
DBRS Morningstar based its credit ratings on a review of the
following analytical considerations:
-- The transaction's capital structure and the form and
sufficiency of available credit enhancement.
-- The credit quality of the mortgage portfolio and the ability of
the servicer to perform collection and resolution activities. DBRS
Morningstar calculated the probability of default (PD), loss given
default (LGD), and expected loss (EL) outputs on the mortgage
portfolio. DBRS Morningstar uses the PD, LGD, and Els as inputs
into the cash flow tool. DBRS Morningstar analyzed the mortgage
portfolio in accordance with its "European RMBS Insight: UK
Addendum" methodology.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay the Class A, Class B, Class C, Class D, and
Class E notes according to the terms of the transaction documents.
-- The structural mitigants in place to avoid potential payment
disruptions caused by operational risk, such as a downgrade, and
replacement language in the transaction documents.
-- DBRS Morningstar's sovereign rating on the United Kingdom of
Great Britain and Northern Ireland at AA with a Stable trend as of
the date of this press release.
-- The consistency of the legal structure with DBRS Morningstar's
"Legal Criteria for European Structured Finance Transactions"
methodology and the presence of legal opinions that address the
assignment of the assets to the Issuer.
DBRS Morningstar's credit rating on the rated notes addresses the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated notes are the related
Interest Amounts and the related Class Balances.
DBRS Morningstar's credit rating on the rated notes also addresses
the credit risk associated with the increased rate of interest
applicable to each of the rated notes if the rated notes are not
redeemed on the Optional Redemption Date (as defined in and) in
accordance with the applicable transaction documents.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction documents that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in British pound sterling unless otherwise
noted.
FOODMEK: New Owner to Rehire Workers Following Acquisition
----------------------------------------------------------
Kristy Dorsey at Herald Scotland reports that the new owner of
Tayport-based Foodmek is looking to re-hire workers made redundant
earlier this year when the 52-year-old business went into
liquidation.
Clyde Associated Engineers (CAE) has acquired the assets of the
Fife-based business, which supplied processing equipment to some of
the biggest names in the food and drink industry. Foodmek went
into liquidation in October with all of its 32 staff made
redundant, Herald Scotland relates.
Trading since 1952 from its base in Clydebank, CAE provides fluid
handling equipment to industrial clients and had a long-standing
working relationship with Foodmek. The acquisition fits with CAE's
strategy for continued growth into new market sectors, particularly
the food industry.
According to Herald Scotland, CAE will now be recruiting in the
Tayport area and hopes that those who have been made redundant
under the liquidation of Foodmek will be interested in joining its
team.
The former directors of Foodmek appointed insolvency specialist
Shona Campbell of Henderson Loggie as liquidator after the business
suffered a downturn triggered by economic uncertainty amid
spiralling inflation, Herald Scotland discloses.
GEMGARTO PLC 2023-1: Moody's Assigns (P)B1 Rating to Class F Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to Notes
to be issued by Gemgarto PLC 2023-1:
GBP [ ] Class A Mortgage Backed Floating Rate Notes due December
2073, Assigned (P)Aaa (sf)
GBP [ ] Class B Mortgage Backed Floating Rate Notes due December
2073, Assigned (P)Aa3 (sf)
GBP [ ] Class C Mortgage Backed Floating Rate Notes due December
2073, Assigned (P)A3 (sf)
GBP [ ] Class D Mortgage Backed Floating Rate Notes due December
2073, Assigned (P)Baa2 (sf)
GBP [ ] Class E Mortgage Backed Floating Rate Notes due December
2073, Assigned (P)Ba1 (sf)
GBP [ ] Class F Mortgage Backed Floating Rate Notes due December
2073, Assigned (P)B1 (sf)
Moody's has not assigned a rating to the GBP [ ]M Class G Mortgage
Backed Floating Rate Notes due December 2073, GBP [ ]M Class Z
Floating Rate Notes due December 2073, GBP [ ]M Class S1
Certificate due December 2073 and GBP [ ]M Class S2 Certificate due
December 2073.
RATINGS RATIONALE
The Notes are backed by a static pool of UK residential mortgage
loans originated by Kensington Mortgage Company Limited. This
represents the sixth issuance out of the Gemgarto program.
The portfolio of assets amount to approximately GBP573.4 million as
of August 31, 2023 pool cut off date. The Reserve Fund will be
funded to 1.0% of the Classes A-G Notes balance at closing and the
total credit enhancement for the Class A Notes will be 14.0%.
The ratings are primarily based on the credit quality of the
portfolio, the structural features of the transaction and its legal
integrity.
According to Moody's, the transaction benefits from various credit
strengths such as a granular portfolio and a non-amortising general
reserve sized at 1.0% of Classes A-G Notes balance. However,
Moody's notes that the transaction features some credit weaknesses
such as an unrated servicer; however Kensington Mortgage Company
Limited (KMC), is a wholly owned subsidiary of Barclays Bank UK PLC
(BBUK) (A1/ P-1, deposit rating; Aa3(cr)/P-1(cr)); the UK
ring-fenced bank of Barclays Group. Several mitigants have been
included in the transaction to partially mitigate this. Namely: (1)
a back-up servicer facilitator (CSC Capital Markets UK Limited
(CSC) (NR)); and (2) estimation language whereby the cash flows can
be estimated should the latest servicer report not be available.
Moody's determined the portfolio lifetime expected loss of 2.7% and
Aaa MILAN Stressed Loss of 12.0% related to borrower receivables.
The expected loss captures Moody's expectations of performance
considering the current economic outlook, while the MILAN Stressed
Loss captures the loss Moody's expect the portfolio to suffer in
the event of a severe recession scenario. Expected defaults and
MILAN Stressed Loss are parameters used by Moody's to calibrate its
lognormal portfolio loss distribution curve and to associate a
probability with each potential future loss scenario in the ABSROM
cash flow model to rate RMBS.
Portfolio expected loss of 2.7%: This is higher than the UK prime
sector and is based on Moody's assessment of the lifetime loss
expectation for the pool taking into account: (i) the WA LTV of
84.1%; (ii) the percentage of loans with an adverse credit history,
however, no borrower had CCJs within three years prior to
origination; (iii) the collateral performance of Kensington
Mortgage Company Limited originated loans to date, as provided by
the originator and observed in previously securitised portfolios;
(iv) the current macroeconomic environment in the UK; and (v)
benchmarking with similar UK prime RMBS.
MILAN Stressed Loss of 12.0%: This is higher than the UK prime
sector average and follows Moody's assessment of the loan-by-loan
information taking into account the following key drivers: (i) the
collateral performance of Kensington Mortgage Company Limited
originated loans to date as described above; (ii) the percentage of
loans with an adverse credit history; (iii) the arrears level; and
(iv) seasoning of 1.2 years.
The principal methodology used in these ratings was "Residential
Mortgage-Backed Securitizations methodology" published in October
2023.
The analysis undertaken by Moody's at the initial assignment of a
rating for an RMBS security may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that may cause an upgrade of the ratings of the notes
include significantly better than expected performance of the pool
together with an increase in credit enhancement of Notes.
Factors that would lead to a downgrade of the ratings include: (i)
increased counterparty risk leading to potential operational risk
of (a) servicing or cash management interruptions and (ii) economic
conditions being worse than forecast resulting in higher arrears
and losses.
HOPS HILL NO.2: S&P Raises Class E-Dfrd Notes Rating to 'BB (sf)'
-----------------------------------------------------------------
S&P Global Ratings raised its ratings on Hops Hill No.2 PLC's class
B-Dfrd notes to 'AA+ (sf)' from 'AA (sf)', C-Dfrd notes to 'AA-
(sf)' from 'A (sf)', D-Dfrd notes to 'A (sf)' from 'BBB (sf)', and
E-Dfrd notes to 'BB (sf)' from 'B- (sf)'.
At the same time, S&P affirmed its 'AAA (sf)' rating on the class A
notes.
The rating actions reflect the improved credit coverage at all
rating levels since closing while the transaction has been
amortizing sequentially, resulting in a small increase in credit
enhancement for the outstanding asset-backed notes.
The rating actions also address S&P's full analysis of the most
recent transaction information that it has received, and the
transaction's structural features.
The pool performance has been strong since closing with no arrears
reported as of September 2023.
S&P applied its global RMBS criteria in its analysis. Since
closing, the weighted-average foreclosure frequency decreased at
all rating levels, reflecting a decrease in the effective
loan-to-value ratio.
S&P's weighted-average loss severity assumptions decreased at all
rating levels due to house price index growth.
Table 1
Credit analysis results
RATING LEVEL WAFF (%) WALS (%) CREDIT COVERAGE (%)
AAA 24.55 47.32 11.62
AA 16.57 39.41 6.53
A 12.48 26.65 3.33
BBB 8.59 18.83 1.62
BB 4.50 13.24 0.60
B 3.58 8.27 0.30
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
S&P said, "Under our credit and cash flow analysis, the class
B-Dfrd, C-Dfrd, D-Dfrd, and E-Dfrd notes can withstand stresses at
higher rating levels than those currently assigned. However, our
ratings on these classes also consider their ranking in the capital
structure ,and the sensitivity of the ratings to increased
defaults, extended recoveries, and higher interest rates. We
therefore limited our upgrades on these notes.
"Our credit and cash flow results indicate that the available
credit enhancement for the class A notes is commensurate with the
assigned ratings. We therefore affirmed our ratings on the class A
notes.
"There are no counterparty, legal and operational constraints on
the ratings. The replacement language in the documentation is in
line with our counterparty criteria."
Hops Hill No.2 is backed by a pool of buy-to-let mortgage loans
secured on residential properties located in England and Wales.
HURRICANE BIDCO: Moody's Withdraws 'B3' Corporate Family Rating
---------------------------------------------------------------
Moody's Investors Service has withdrawn the B3 corporate family
rating and B3-PD probability of default rating of Hurricane Bidco
Limited (Paymentsense or the company). Concurrently, Moody's has
withdrawn the B3 instrument rating of the backed senior secured
global notes due in 2025 issued by Hurricane Finance Plc. The
stable outlook for all entities has also been withdrawn.
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
COMPANY PROFILE
Headquartered in the UK, Hurricane Bidco Limited (Paymentsense) is
a payment processing company providing payment enablement to UK and
Irish SMEs, including terminals, value-added services and
omni-channel acceptance. The company is ultimately owned by trusts
that benefit its founders and other individuals. In the financial
year 2023, ended March 31, 2023, the company generated gross
revenue of GBP298 million and a company-adjusted EBITDA of GBP69
million.
NEWDAY FUNDING 2023-1: DBRS Gives Prov. BB Rating to Class E Notes
------------------------------------------------------------------
DBRS Ratings Limited assigned provisional credit ratings to the
notes (collectively, the Notes) to be issued by NewDay Funding
Master Issuer plc (the Issuer) as follows:
-- Series 2023-1, Class A1 Notes at AAA (sf)
-- Series 2023-1, Class A2 Notes at AAA (sf)
-- Series 2023-1, Class B Notes at AA (sf)
-- Series 2023-1, Class C Notes at A (sf)
-- Series 2023-1, Class D Notes at BBB (sf)
-- Series 2023-1, Class E Notes at BB (sf)
-- Series 2023-1, Class F Notes at B (high) (sf)
The credit ratings address the timely payment of scheduled interest
and the ultimate repayment of principal by the relevant legal final
maturity dates.
The provisional credit ratings are based on information provided to
DBRS Morningstar by the Issuer and its agents as of the date of
this press release. The credit ratings can be finalized upon a
review of final information, data, legal opinions, and the
governing transaction documents. To the extent that the information
or the documents provided to DBRS Morningstar as of this date
differ from the final information, DBRS Morningstar may assign
different final credit ratings to the notes.
The credit ratings are based on the following analytical
considerations:
-- The transaction's structure, including the form and sufficiency
of available credit enhancement to withstand stressed cash flow
assumptions and repay the Issuer's financial obligations according
to the terms under which the the Notes are issued.
-- The credit quality of NewDay Ltd.'s portfolio, the
characteristics of the collateral, its historical performance and
DBRS Morningstar's expectation of charge-offs, monthly principal
payment rate (MPPR), and yield rates under various stress
scenarios.
-- NewDay Ltd.'s capabilities with respect to origination,
underwriting, servicing, and its position in the market and
financial strength.
-- An operational risk review of NewDay Cards Ltd., which DBRS
Morningstar deems to be an acceptable servicer.
-- The transaction parties' financial strength regarding their
respective roles.
-- The consistency of the transaction's legal structure with DBRS
Morningstar's "Legal Criteria for European Structured Finance
Transactions" methodology.
-- The consistency of the transaction's hedging structure with
DBRS Morningstar's "Derivative Criteria for European Structured
Finance Transactions" methodology.
-- The sovereign rating on United Kingdom of Great Britain and
Northern Ireland, currently rated AA with a stable trend by DBRS
Morningstar.
TRANSACTION STRUCTURE
The Notes are backed by a portfolio of own-branded,
direct-to-consumer credit cards granted to individuals domiciled in
the UK by NewDay and are issued out of NewDay Funding Master Issuer
plc as part of the NewDay Funding-related master issuance structure
under the same requirements regarding servicing, amortization
events, priority of distributions and eligible investments.
The transaction includes a scheduled revolving period. During this
period, additional receivables may be purchased and transferred to
the securitized pool, provided that the eligibility criteria set
out in the transaction documents are satisfied. The revolving
period may end earlier than scheduled if certain events occur, such
as the breach of performance triggers or servicer termination. The
servicer may extend the scheduled revolving period by up to 12
months. If the notes are not fully redeemed at the end of the
respective scheduled revolving periods, the transaction enters into
a rapid amortization.
The transaction also includes a series-specific liquidity reserve
funded by NewDay at closing equal to [•]% of the balances of
Class A1, Class A2 (collectively Class A Notes), Class B, Class C
and Class D Notes (collectively with the Class A Notes, Senior
Notes) and will be replenished to the target amount of [•]% of
the Senior Notes' balances in the transaction's interest
waterfalls. The liquidity reserve is available to cover the
shortfalls in senior expenses, senior swap payments and interest on
the Senior Notes and would amortize to the target amount, subject
to a floor of GBP 250,000.
As the Class A2 Notes are denominated in U.S. dollars (USD) with a
Secured Overnight Financing Rate (SOFR) coupon rate, there is a
balance-guaranteed, cross-currency swap to hedge the currency and
interest rate mismatch between the British pound sterling (GBP)
denominated receivables and the Class A2 Notes. Other classes of
the Notes are denominated in GBP with floating-rate coupons based
on the daily compounded Sterling Overnight Index Average (Sonia)
and there is also an interest rate mismatch between the fixed-rate
collateral and the Sonia coupon rates. While the potential risk is
to a certain degree mitigated by excess spread and NewDay's ability
to increase the credit card annual percentage rates (APRs), the A
(sf) rated Class C Notes benefit from higher subordination to
compensate for higher notes margins than the other A (low) (sf)
rated notes issued separately out of the NewDay Funding-related
master issuance programme. This approach is consistent with DBRS
Morningstar's criteria in respect of the rating stability of a
master issuance structure.
COUNTERPARTIES
HSBC Bank plc (HSBC Bank) is the account bank for the transactions.
Based on DBRS Morningstar's private rating on HSBC Bank and the
downgrade provisions outlined in the transaction documents, DBRS
Morningstar considers the risk arising from the exposure to the
account bank to be commensurate with the credit ratings assigned.
Banco Santander S.A. is the swap counterparty for the Class A2
Notes swap. DBRS Morningstar has a Long-Term Issuer Rating of A
(high) on Banco Santander, which meets its criteria to act in such
capacity. The swap documentation also contains downgrade provisions
consistent with DBRS Morningstar's criteria.
PORTFOLIO ASSUMPTIONS
Recent total payment rates including the interest collections
continue to be higher than historical levels. Nonetheless, it
remains to be seen if these levels remain susceptible to the
current macroeconomic environment of persistent inflationary
pressures and interest rate increases. DBRS Morningstar therefore
elected to maintain the securitized portfolio's expected MPPR at 8%
after removing the interest collections.
The portfolio yield was largely stable over the reported period
until March 2020, the initial outbreak of the COVID-19 pandemic.
The most recent performance in September 2023 showed a total yield
of 33%, up from the record low of 25% in May 2020 due to the
consistent repricing of credit card rates by NewDay following the
Bank of England base rate increases since mid-2022. After
consideration of the observed increasing trend and the removal of
spend-related fees, DBRS Morningstar revised the expected yield
upward to 27% from 24.5%.
The reported historical annualized charge-off rates were high but
stable at around 16% until June 2020. The most recent performance
in September 2023 showed a charge-off rate of 11.4% after reaching
a record high of 17.1% in April 2020. Based on the analysis of
historical data and consideration of the current macroeconomic
environment, DBRS Morningstar continued to maintain the expected
charge-off rate at 18%.
DBRS Morningstar's credit ratings on the notes address the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the notes are the related
Interest Payment Amounts and the Class Balances.
DBRS Morningstar's credit rating on the notes also addresses the
credit risk associated with the increased rate of interest
applicable to the notes if the notes are not redeemed on the
initial scheduled redemption date as defined in and in accordance
with the applicable transaction documents.
DBRS Morningstar's credit ratings do not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in British pound sterling unless otherwise
noted.
WN VTECH: Goes Into Administration, 230 Jobs at Risk
----------------------------------------------------
Jon Robinson at BusinessLive reports that hundreds of jobs could be
at risk after a group of vehicle manufacturers entered
administration.
Teneo has been appointed to oversee the process at WN VTech, the
parent company to Mellor and minibus converter Treka as well as a
number of other specialist vehicle conversion businesses,
BusinessLive relates.
The group reported a loss of almost GBP2.6 million for 2022, down
from GBP5 million, and a turnover of GBP78 million, BusinessLive
discloses. According to documents filed with Companies House, WN
Vtech Holdings employed almost 500 people during 2022. WN Vtech
Limited employed 230, Treka Bus Limited employed 69, Vehicle
Conversion Specialists Limited employed 111, Promech Technologies
Limited employed 41 and JM Engineering (Scarborough) Limited
employed 19.
"Daniel Smith and Julian Heathcote, of Teneo Financial Advisory
Limited, have been appointed as joint administrators of WN Vtech
Holdings Limited and its subsidiaries: WN Vtech Limited, Treka Bus
Limited, Vehicle Conversion Specialists Limited, Promech
Technologies Limited and JM Engineering (Scarborough) Limited,"
BusinessLive quotes a statement from Teneo as saying.
"Like many companies in the automotive sector, the group has
experienced challenges around supply chain issues which has
impacted fulfilment of orders and working capital. The joint
administrators are continuing to trade all businesses as usual,
while exploring opportunities for a sale."
According to BusinessLive, a statement on WV Tech's website states:
"Daniel James Mark Smith and Julian Heathcote were appointed joint
administrators over Treka Bus Limited, Promech Technologies
Limited, Vehicle Conversion Specialists Limited, WN Vtech Holdings
Limited, JM Engineering (Scarborough) Limited and WN Vtech Limited
(together 'the Companies') on 20 November 2023.
"The affairs, business and property of the companies are managed by
the joint administrators. The joint administrators act as agents of
the companies and contract without personal liability."
[*] UK: Kroll Restructuring Co-Head Comments on Autumn Statement
----------------------------------------------------------------
Responding to the Chancellor's Autumn Statement, Sarah Rayment,
Co-Head of Global Restructuring at Kroll said: "Company
administrations are tracking 30 per cent higher than last year and
retail, hospitality and leisure businesses are high up that list
because they are generally more exposed to consumer confidence,
energy costs, cost inflation and higher interest rates. Increasing
the National Living Wage is another cost for them to absorb.
"This time of year is traditionally make or break for many
businesses across these sectors, so many have been watching
nervously to see whether the Chancellor would freeze the business
rates multiplier and extend the rate relief.
"Clearly the news will be welcome by some, but given the lobbying
effort from industry, many will feel it does not go far enough. The
rate relief and rates multiplier will only apply to smaller
hospitality and retail businesses, therefore for companies with
larger outlets or multiple stores, it's likely that we will see
more insolvencies."
About Kroll
As the leading independent provider of risk and financial advisory
solutions, Kroll leverages its unique insights, data and technology
to help clients stay ahead of complex demands. Kroll's team of more
than 6,500 professionals worldwide continues the firm's nearly
100-year history of trusted expertise spanning risk, governance,
transactions and valuation. Its advanced solutions and intelligence
provide clients the foresight they need to create an enduring
competitive advantage.
*********
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-
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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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