/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/231222.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, December 22, 2023, Vol. 24, No. 256 Headlines I R E L A N D SONA FIOS I: Fitch Assigns 'B-(EXP)sf' Rating to Cl. F Notes L U X E M B O U R G AUNA SA: S&P Raises ICR to 'B+' on Lower Leverage, Outlook Stable N E T H E R L A N D S CASPER DEBTCO: Fitch Affirms Then Withdraws 'CCC-' LongTerm IDR R O M A N I A BANCA TRANSILVANIA: Moody's Rates EUR790MM Sr. Unsecured Debt 'Ba1' S P A I N NH HOTEL: Moody's Upgrades CFR to B1 & Alters Outlook to Positive S W E D E N HOVDING AB: Files for Bankruptcy After Helmet Issues S W I T Z E R L A N D ARCHROMA HOLDINGS: S&P Alters Outlook to Neg., Affirms 'B' LT ICR U K R A I N E FERREXPO PLC: S&P Reinstates 'CCC/C' ICRs, Outlook Negative U N I T E D K I N G D O M CONDOR: Chief Executive Dismisses Administration Rumors FORGE BAKEHOUSE: Bought Out of Administration LOCHACE LTD: Goes Into Administration X X X X X X X X [*] BOOK REVIEW: PANIC ON WALL STREET - - - - - ============= I R E L A N D ============= SONA FIOS I: Fitch Assigns 'B-(EXP)sf' Rating to Cl. F Notes ------------------------------------------------------------ Fitch Ratings has assigned Sona Fios CLO I DAC expected ratings. The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. Entity/Debt Rating ----------- ------ SONA FIOS CLO I DESIGNATED ACTIVITY COMPANY A-1 Loan LT AAA(EXP)sf Expected Rating A-1 XS2714440877 LT AAA(EXP)sf Expected Rating A-2 XS2720029672 LT AAA(EXP)sf Expected Rating B-1 XS2714440950 LT AA(EXP)sf Expected Rating B-2 XS2714441099 LT AA(EXP)sf Expected Rating C XS2714441172 LT A(EXP)sf Expected Rating D XS2714441255 LT BBB-(EXP)sf Expected Rating E XS2714441339 LT BB-(EXP)sf Expected Rating F XS2714441412 LT B-(EXP)sf Expected Rating Subordinated Notes XS2714441503 LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY Sona Fios CLO I DAC is a securitisation of mainly senior secured obligations (at least 92.5%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds will be used to purchase a portfolio with a target par of EUR425 million. The portfolio will be actively managed by Sona Asset Management (UK) LLP. The CLO has a 4.6-year reinvestment period and an 8.5-year weighted average life test (WAL). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch assesses the average credit quality of obligors to be in the 'B' category. The Fitch weighted average rating factor of the identified portfolio is 24.5. High Recovery Expectations (Positive): At least 92.5% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate of the identified portfolio is 63.1%. Diversified Portfolio (Positive): The transaction has a top 10 obligor concentration limit at 20% and a maximum fixed rate asset limit at 12.5%. The transaction also includes various concentration limits, including the maximum exposure to the three largest (Fitch-defined) industries in the portfolio at 40%. These covenants ensure that the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a 4.6-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. The transaction includes two Fitch matrices, one effective at closing and the other one year after closing. The second can be selected by the manager at any time from one year after closing as long as the aggregate collateral balance (including defaulted obligations at their Fitch collateral value) is at least at the target par. Cash Flow Modelling (Positive): The WAL used for the transaction stress portfolio is reduced by 12 months from the WAL covenant. This reduction to the risk horizon accounts for the strict reinvestment conditions envisaged by the transaction after its reinvestment period. These include, among others, passing both the coverage tests and the Fitch 'CCC' test post reinvestment as well as a WAL covenant that progressively steps down over time. 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-1 notes, A-1 loan, A-2 and C notes, would lead to a downgrade of one notch for the class B-1, B-2, D, E and F notes. Based on the identified portfolio, downgrades 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 Fitch-stressed portfolio, the class B-1, B-2, D, E, and F notes have a cushion of two notches and the class C one notch. The class A-1 notes, A-1 loan and A-2 notes have no cushion. Should the cushion between the identified portfolio and the Fitch-stressed portfolio be eroded, due to manager trading or negative portfolio credit migration, a 25% increase of the mean RDR and a 25% decrease of the RRR across all ratings of the Fitch-stressed portfolio would lead to downgrades of up to four notches. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 25% reduction of the mean RDR across all ratings and a 25% increase in the RRR across all ratings of the Fitch-stressed portfolio would lead to upgrades of up to three notches, except for the 'AAAsf' rated notes, which are at the highest level on Fitch's scale and cannot be upgraded. During the reinvestment period, based on the Fitch-stressed portfolio, upgrades may occur on better-than-expected portfolio credit quality and a shorter remaining WAL test, allowing the notes to withstand larger-than-expected losses for the remaining life of the transaction. After the end of the reinvestment period, upgrades may occur on stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. DATA ADEQUACY SONA FIOS CLO I DESIGNATED ACTIVITY COMPANY The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations 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. =================== L U X E M B O U R G =================== AUNA SA: S&P Raises ICR to 'B+' on Lower Leverage, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings raised its issuer credit rating on Luxembourg-domiciled health care services provider Auna S.A. to 'B+' from 'B'. At the same time, S&P raised its issue-level ratings on Auna's 2029 senior secured notes to 'BB-' from 'B+' and on its 2025 senior unsecured notes to 'B+' from 'B'. The recovery ratings remain '2' for its 2029 notes and '3' for its 2025 notes. The stable outlook reflects that S&P expects Auna to have a steady operating and financial performance in the next 12 months, resulting in continued deleveraging toward gross debt to EBITDA below 4.0x and EBITDA interest coverage within 2.0x-2.5x by year-end 2024. On Dec. 12, 2023, Auna closed the exchange offer of its 6.5% senior unsecured notes due 2025 for new 10% senior secured notes due 2029, with a total principal amount tendered of $243.4 million, out of the $300 million offered. In addition, the company closed a dual-currency tranche syndicated term loan for $550 million--of which the equivalent of $300 million is denominated in Mexican pesos (MXN) and the rest in U.S. dollars--to refinance its $505 million private placement due in April 2028. S&P said, "In our view, the transactions successfully extend the company's debt maturity profile and are aligned with its strategy to lower risk on its balance sheet. The new syndicated term loan has quarterly growing amortizations starting in November 2024. Moreover, we expect the company to refinance or repay the remaining $56.6 million of its outstanding 2025 notes at least a year ahead of its maturity on Nov. 20, 2025. As a result, we believe that Auna's liquidity has improved, and the company also benefits from higher funds from operations (FFO) and manageable capital expenditures (capex) for the next 12-18 months. "Our base-case scenario assumes revenue near Peruvian nuevos soles (PEN) 3.8 billion in 2023 and PEN4.2 billion in 2024, and an EBITDA margin close to 21% in 2023 and 24% in 2024. The higher margin reflects larger EBITDA margins at subsidiaries OCA and IMAT-Oncomedica, as well as our expectation for dilution of fixed costs. Moreover, we anticipate Auna will remain prudent about capital deployment, including capex near PEN160 million in 2023 and PEN248 million in 2024, which it will fully fund with its operating cash flow. "Given our assumptions that Auna will keep its close-to-zero-dividend policy at least for the next two years, we don't expect additional financing requirements. We also expect Auna's board of directors and top management to remain fully committed and focused on deleveraging the company's balance sheet. As a result, we estimate Auna's adjusted gross leverage to be around 4.7x at the end of 2023 and below 4.0x by the end of 2024, while its EBITDA interest coverage should be about 2x in both years. In our view, the lower leverage metrics will primarily come from higher EBITDA, gradual gross debt reduction, and, to a lesser extent, expected policy rate cuts in 2024-2025. "The 2022 acquisitions made Auna the second-largest private health care services provider in Latin American Spanish-speaking countries, and the fifth-largest provider in the region in terms of number of hospital beds. In our view, Auna benefits from a leading market position in the region's underserved and growing private health care markets. It has a vertically integrated oncology program and affordable costs, as well as horizontally integrated regional high complexity health care service networks. We also consider its diversified health care service offerings and payor profile, with limited exposure to government contracts." ===================== N E T H E R L A N D S ===================== CASPER DEBTCO: Fitch Affirms Then Withdraws 'CCC-' LongTerm IDR --------------------------------------------------------------- Fitch Ratings has affirmed Casper Debtco B.V.'s (Dummen Orange) Long-Term Issuer Default Rating (IDR) at 'CCC-'and super senior debt rating at 'B-' with a Recovery Rating 'RR1'. Fitch has downgraded the senior secured debt rating to 'C'/'RR6' from 'CC'/'RR5'. Fitch has subsequently withdrawn all ratings. Fitch has chosen to withdrawn Dummen Orange's ratings for commercial reasons and will no longer provide ratings or analytical coverage of the entity. KEY RATING DRIVERS Strained Liquidity Situation: Dummen Orange's rating continues to be materially affected by its strained liquidity position, as the company requires access to working capital lines, and Fitch projects its internal liquidity generation will remain negative. Fitch expects some operating performance recovery in the financial year ending September 2024 (FY24), but in its view, Dummen Orange will be required to continue with rigorous operating cost reduction and cash flow preservation measures to contain the cash burn. Fitch also estimates that the company will need to secure additional funding for operational purposes in the near-term. High Refinancing Risk: Fitch considers refinancing risk high, given the prospect of weak EBITDA profitability, persistently negative free cash flow (FCF) and excessive leverage until debt maturity in 2026. Consistently Negative FCF: An onerous restructuring process with a longer-than-expected operating recovery and high capital intensity has led to persistently negative FCF. After a very weak operating performance in FY23, Fitch projects that FCF will remain negative in the medium term, due to slower than previously anticipated EBITDA recovery and intrinsically high capex of around 6%-7% of sales. Highly Speculative Recovery Prospects: Fitch regards Dummen Orange's operational restructuring as increasingly challenging with highly-speculative recovery prospects in the medium term. At the same time, Fitch notes the company's strong flower breeding innovation competence across multiple crop types, which in its view is the most valuable part of its business model and may support its commercial viability in some form. DERIVATION SUMMARY Dummen Orange's rating reflects its tight liquidity position as well as the uniqueness of its business model, which combines features of a crop science company with a high level of importance placed on R&D, and labour-and capital-intensive flower-propagation operations. To a limited extent, it also shares the operating risk of manufacturers of consumer products, given its exposure to volume risk driven by customer demand and changing consumer preferences. The high inherent operating risks of issuers operating in the agriculture market make them less suitable for a highly-leveraged capital structure. The higher ratings of vertically integrated agro-industrial business Camposol Holding PLC (B/Negative) is supported by its higher operating and cash flow margins combined with considerably lower leverage. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: FY23 revenue decline of 14% following the divestiture of the Quick Plug (QP) business Excluding the QP divestiture, FY23 revenue to decline by 7% on worsening macroeconomic conditions and poor performance of the tropical business Revenue to increase by 3% in FY24 on some recovery in the tropical segment and price increases, followed by low-to-mid single-digit annual revenue growth to FY26 Negative EBITDA in FY23, recovering to an EBITDA margin of around 5% in FY24, gradually increasing towards 7% by FY26 Annual capex of around EUR24 million in FY23-FY26 Annual net working-capital outflow of around 1% of sales on average in FY23-FY26 No M&A activity to FY26 RECOVERY ANALYSIS KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that Dummen Orange would be reorganised as a going concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. Fitch estimates a going concern EBITDA at EUR25 million, a reduction from EUR32 million previously, based on its revised expectations of the company's post-reorganisation EBITDA level, which assumes operational restructuring and cash flow preservation measures, and upon which Fitch bases the enterprise valuation (EV). A multiple of 5.0x EBITDA is applied to the going concern EBITDA to calculate a post-reorganisation enterprise value and accounts for the continued exposure of the company to viruses and climate risk. The multiple is in the low- to mid-range for the sector but is supported by high barriers to entry, the significant value of Dummen Orange's intellectual property and R&D, as well as expected modest long-term growth for the floriculture sector. The allocation of value in the liability waterfall results in a Recovery Rating of 'RR1' for the super senior term loan of EUR55 million, ranking pari passu with a EUR6 million cash pooling facility, an additional super senior EUR25 million facility and the revolving note of USD30 million, which Fitch expects will be fully drawn prior to distress, under Fitch's Corporates Recovery Ratings and Instrument Ratings Criteria. This indicates a 'B-' instrument rating for the super senior term loan with a waterfall-generated recovery computation (WGRC) of 97% compared with 100% previously. The Term Loan B of EUR195.6 million has a Recovery Rating of 'RR6', leading to a 'C' instrument rating with a WGRC of 0%, a downgrade to 'C/RR6/0% from 'CC/RR5/14%. Both percentages have been revised down from the previous assessment due to a reduction in going concern EBITDA assumption. RATING SENSITIVITIES Not applicable as the ratings have been withdrawn. LIQUIDITY AND DEBT STRUCTURE Fragile Liquidity Position: As of end-September 2023, Fitch projects a minimal cash balance of around EUR2.0 million and the critical need to maintain access to working capital lines with the revolving facility which maturity was recently extended until July 2025. In its view, Dummen Orange will need to secure additional financing to fully cover its operating needs in FY24-FY25, particularly in case of any potential underperformance. ISSUER PROFILE Dummen Orange is a Netherlands-based based breeder and propagator of flowers and plants with a wide selection of crops and international production and commercial footprints. ESG CONSIDERATIONS Casper Debtco B.V. has an ESG Relevance Score of '4' for Exposure to Environmental Impacts due to the influence of climate change and extreme weather conditions on Dummen Orange's assets, productivity and operating performance, which has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Casper Debtco B.V. LT IDR CCC- Affirmed CCC- LT IDR WD Withdrawn CCC- senior secured LT WD Withdrawn C senior secured LT C Downgrade RR6 CC super senior LT WD Withdrawn B- super senior LT B- Affirmed RR1 B- ============= R O M A N I A ============= BANCA TRANSILVANIA: Moody's Rates EUR790MM Sr. Unsecured Debt 'Ba1' ------------------------------------------------------------------- Moody's Investors Service has assigned a first-time foreign currency junior senior unsecured debt rating of Ba1 to Banca Transilvania S.A. (BT)'s non-preferred eligible notes due April 27, 2027 and totalling EUR790 million. All other ratings and assessments of BT are unaffected by the rating action. RATINGS RATIONALE The Ba1 junior senior unsecured rating reflects BT's ba1 Baseline Credit Assessment (BCA) and Adjusted BCA, as well as the results of Moody's Advanced Loss Given Failure (LGF) analysis, which takes into account the severity of loss faced by the different liability classes in resolution. For BT's junior senior unsecured debt instruments, the rating agency's forward-looking Advanced LGF analysis indicates a moderate loss severity in the event of the bank's failure, leading to a rating at the level of the bank's Adjusted BCA. This reflects the loss absorption provided by more junior ranking instruments and the expected volumes of junior senior debt for the bank to be issued in order to comply with the minimum requirement for own funds and eligible liabilities (MREL). The rating of this junior senior class of debt does not benefit from government support uplift, in line with Moody's assumption of a low probability of government support to be forthcoming to instruments specifically designated as loss-absorbing in resolution. BT's ba1 standalone BCA reflects the bank's robust capital, strong and sustainable profitability, granular deposit-based funding and ample liquidity. The bank's adjusted tangible common equity-to-risk-weight assets ratio was 17.1% as of June 2023. The BCA also captures elevated asset risks – a reflection of the more fragile operating conditions; material share of foreign-currency (FC) lending, at around one-third of total loans; and credit exposure to some higher risk segments – as well as tail risks from a high share of FC deposits (42% of the total as of end-2022). FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The junior senior unsecured debt rating could be upgraded if the Adjusted BCA of BT is upgraded, which could occur in case of a significant strengthening of BT's combined solvency, and specifically if asset quality improves further and currency risks decline while capital buffers remain robust. The rating could also be upgraded following a significant increase in the volume of junior senior unsecured debt, subordinated debt or Additional Tier 1 capital instruments, beyond Moody's current expectations. This may lead to a further reduction in the loss severity of this instrument class in resolution and additional rating uplift under Moody's Advanced LGF analysis. The rating of the junior senior unsecured debt could be downgraded following a downgrade of BT's Adjusted BCA, for example if the bank's solvency weakens, or in case of an unexpected meaningful outflow of deposits such that it impacts the bank's combined liquidity. The rating could also be downgraded if the volume of junior senior and subordinated instruments decreased materially as a proportion of assets, triggering an increase in the junior senior unsecured debt's loss severity. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks Methodology published in July 2021. ========= S P A I N ========= NH HOTEL: Moody's Upgrades CFR to B1 & Alters Outlook to Positive ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of NH Hotel Group S.A. including its corporate family rating to B1 from B2 and probability of default rating to B1-PD from B2-PD. Moody's also upgraded NH Hotel's instrument rating of its EUR400 million senior secured notes due 2026 to Ba3 from B1. The outlook has been changed to positive from stable. NH Hotel's ratings have been upgraded due to a faster-than-anticipated path to deleveraging, driven by sustained improvements in profitability, lease liabilities reduction and early debt repayment, a reflection of management's firm commitment to return to pre-pandemic credit metrics. This, coupled with sustained cost-cutting measures, will boost profitability with a projected EBITA margin of 15% in 2023, above the 2019's level while leverage will stay consistently well below 5x. Improved cash-flows thanks to demand strength and limited shareholder distributions will support liquidity amid the resumption of capital expenditures said Elise Savoye, CFA, a Moody's Vice President-Senior Analyst and lead analyst for NH Hotel. The positive outlook is based on Moody's anticipation that NH Hotel will maintain a strong position in the B1 category thanks to robust booking trends, with expected leverage below 4x and coverage approaching 3x over the next 12 to 18 months. RATINGS RATIONALE The upgrade reflects NH Hotel's strong results achieved year to date ahead of Moody's previous expectations. The recovery is supported by a strong expected Average Daily Rate (ADR) of EUR138 in 2023 vs EUR103 in 2019 ADR and a recovering occupancy rate only four percentage points below that of 2019, leading to a Revenue Per Available Room of EUR93 by year-end 2023. This reflects strong demand throughout both business and leisure segments while robust bookings year-to-date point to a resilient demand over the next 12 months despite deteriorating macroeconomic conditions and ongoing cost of living crisis. Thanks to strong demand, a gradual shift toward more profitable upper upscale segment and long lasting effect of cost cutting measures, Moody's expect NH Hotel to post EUR328 million EBITA (or 15% EBITA margin) as of year-end 2023, well ahead of Moody's previous expectations. While ADR growth will decline over the next 12 to 18 months, Moody's believe NH Hotel profitability will remain above its pre-pandemic level at around 14%. NH Hotel also used its free cash flow to reduce its financial debt– the company paid down about EUR130 million of debt this year through the end of September using cash and cash flow. NH Hotel is also actively reducing the share of its fixed rate leases (30% of total leases contracts as of 2023-2024) which contributes to the reduction of lease liabilities, which Moody's incorporate into Moody's adjusted debt (EUR1,944 million as of June 2023). As result of growing profits and debt reduction, the company's Moody's estimated adjusted debt/EBITDA improved to 4.1x as of last twelve months ending June 2023, down from 4.9x in 2022 and 4.7x in 2019. Moody's expect that Moody's adjusted debt/EBITDA will remain below 4.0x over the next 12 to 18 months. After partial debt repayment, NH Hotel financial debt is only 12% exposed to variable rate, which will support a robust Moody's adjusted EBITA interest cover around 2.7x over the next 12 to 18 months. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS NH Hotel's ESG considerations have a limited impact on the current credit rating with potential for greater negative impact over time. In line with the lodging industry, the company is exposed to environmental risk mainly stemming from carbon transition. The company is also exposed to social risk primarily linked to customer relations, demographic shifts and evolving societal trends. NH Hotel's exposure to governance risk mainly lies with its concentrated ownership. The company's B1 CFR also reflects governance risks primarily linked to the company's concentrated ownership. Board structure & policies and procedure risks are negative on the back of highly concentrated ownership (96%) by Minor International Public Company Limited (Minor), which counterbalances the positive of the company's public status on reporting transparency and good disclosure. NH Hotel's financial strategy & risk management has remained consistent during the pandemic with a good track record to execute its financial plan i.e. increase its liquidity position and reduce its leverage. NH Hotel also has a moderate leverage appetite and is back to pre-pandemic leverage. LIQUIDITY NH Hotel's liquidity is good supported by EUR302 million of cash, EUR42 million of undrawn and committed revolving credit facility (RCF) (maturing in March 2026) and EUR52 million of undrawn committed credit lines (maturing 2025) as of September 2023. Operating business seasonality during December to February months leads to large intra-year variations, with a lowest cash balance in February. Capital expenditures are resuming, with repositioning capex estimated at around EUR130 million over 2024-2025, which will weight on free cash flow. Moody's liquidity assessment considers the cash-funded purchase of five hotels in Portugal announced on December 18, 2023. The parent company Minor has historically supported NH Hotel through equity injections and withheld dividends in 2023, leading us to anticipate continued support if cash-flow generation falls short. The company's liquidity is further strengthened by no significant maturities until 2026 and substantial headroom under its RCF covenants. NH Hotel also boasts a significant property portfolio, including unencumbered assets of EUR1,049 million of which EUR774 million are fully-owned (compared with EUR2,508 Moody's adjusted debt as of June 2023), which could be leveraged for secured borrowing. This asset base provides high recovery for secured creditors in case of default. STRUCTURAL CONSIDERATIONS The senior secured notes due 2026 are rated Ba3, one notch above the CFR reflecting the support from a security package that includes real assets. NH Hotel's capital structure also includes secured bank debt, unsecured credit lines, subordinated debt as well as lease commitments. RATIONALE FOR THE POSITIVE OUTLOOK The positive outlook reflects NH Hotel's strong positioning within the B1 rating category and Moody's expectation that the company will be able to reduce its leverage below 4.0x while coverage could approach 3.0x over the next 12 to 18 months. The positive outlook also assumes that the company will generate sufficient cash flow to meet its contracted debt repayment obligations and to cover for the resumption of its capital expenditure over the next 12-18 months, while Moody's expect NH Hotel to address its 2026 maturities well in advance of their due dates, and maintain at all times an adequate liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A rating upgrade could develop if there is a combination of the following: -- Improvement in credit metrics with debt/EBITDA maintained below 4.0x with EBITA/interest expense approaching 3.0x, all on a sustained basis and including Moody's standard adjustments -- Liquidity remains good at all times supported by no aggressive cash outflow to Minor and the refinancing of the senior secured notes maturing in July 2026 is addressed well in advance -- There is no material deterioration in the loan-to-value (LTV) coverage of the senior secured notes. Negative rating pressure on NH Hotel's ratings could arise if: i) the company's liquidity weakens with negative Moody's adjusted free cash flow on a sustained basis; ii) deteriorated profitability or lower revenue generation lead to sustained increase of leverage with debt/EBITDA towards 5.0x or a deterioration of interest coverage to below 2.5x, all on a sustained basis and including Moody's standard adjustments; iii) the LTV coverage of the senior secured notes deteriorates, exerting pressure on Moody's recovery assumptions including for the senior secured notes. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE NH Hotel is among the top 10 largest European hotel chains, with 352 open hotels and 55,800 rooms in 30 countries. Besides Europe, NH Hotel has a limited presence in Latin America (7% of net turnover for full-year 2022). NH Hotel focuses on midscale and upscale urban bleisure hotels, and has been shifting its portfolio towards an asset-light strategy through management contracts and variable leases, but still owns close to 20% of its hotels (EUR2.1 billion as of end 2021). The company reported revenue of EUR2,027 million for LTM June 2023. =========== S W E D E N =========== HOVDING AB: Files for Bankruptcy After Helmet Issues ---------------------------------------------------- Jonas Ekblom at Bloomberg News reports that Hovding AB, a Swedish company that has made headlines for the first mass-market bicycle airbag helmet, filed for bankruptcy on Dec. 21 after regulators stopped the sales of its main product. The decision comes after the Swedish Consumer Agency forced a complete halt of all sales of the Hovding 3 helmet on Dec. 15, due to concerns that it wouldn't inflate properly on impact. The company has fiercely criticized the decision, saying the agency is "killing a life-saving innovation," and while an appeal is pending, it said in a statement on Dec. 21 that the damage caused by the ruling leaves no option but to file for bankruptcy. ===================== S W I T Z E R L A N D ===================== ARCHROMA HOLDINGS: S&P Alters Outlook to Neg., Affirms 'B' LT ICR ----------------------------------------------------------------- S&P Global Ratings revised its rating outlook on Switzerland-headquartered Archroma Holdings S.a.r.l. (Archroma) to negative from stable. At the same time, S&P affirmed the 'B' long-term issuer credit rating and the 'B+' issue rating on its term loans. The negative outlook reflects that S&P could lower the rating by one notch within 12 months if Archroma does not generate healthy FOCF or improve its FFO cash interest coverage comfortably above 2x. S&P said, "Archroma has delivered weaker than anticipated results in fiscal 2023 and we anticipate the environment to remain challenging in fiscal 2024. Archroma's reported EBITDA declined to about $89 million in fiscal 2023 from $147 million, despite the contribution from Huntsman TE starting March 2023. The company's margins were below our expectations due to weaker economic conditions that led to a drop in demand for brand and performance textile specialties. Moreover, Archroma's results were depressed by a stronger U.S. dollar (reporting currency) compared with most major currencies, because Archroma is exposed to emerging markets (including Pakistan, China, Egypt, and India). We anticipate the operating environment will remain challenging, and we do not expect a significant rebound in demand over the next quarters. We therefore revised our forecast and anticipate that the company's EBITDA could increase to about $200 million in fiscal 2024, against our previous assumption of about $300 million. "The negative outlook reflects the limited rating headroom due to our expectation of low FOCF and a lower FFO cash interest coverage ratio. Our revised EBITDA assumption of about $200 million in fiscal 2024, combined with elevated cash interests close to $90 million, should translate to the FFO cash interest coverage ratio remaining below 2x. At the same time, we project capital expenditure (capex) could increase toward $50 million in fiscal 2024 from about $15 million in fiscal 2023. We also anticipate that Archroma will report modest working capital outflows, leading to our expectation of low FOCF (excluding integration costs) of about $10 million-$20 million. We therefore think a further reduction in EBITDA to below $200 million could deteriorate the company's FFO cash interest coverage ratio to below 2x and consume FOCF. That said, we positively note that Archroma could adjust capex and spend approximately $35 million if the environment is not supportive, which should reduce additional pressure on FOCF generation. "Improving EBITDA and an adequate liquidity position currently support the 'B' issuer credit rating. Our base case for 2024 incorporates an improvement in gross margins supported by the company's transformation program initiatives and integration of Huntsman TE. We anticipate raw material price improvements, better plant utilization, network optimization, and procurement savings will support Archroma's EBITDA growth in the next quarters. Our base case also assumes revenue growth supported by market share gains, cross-selling in textile effects, and an increase in sales from systems supporting brands in achieving their targets. Moreover, the company's liquidity remains adequate, supported by its recent amend and extend transaction. Archroma successfully extended its term loans to June 2027 and increased its revolving credit facility (RCF) to $225 million while extending the maturity to March 2027. "The negative outlook reflects that we could lower the rating by one notch if Archroma does not generate healthy FOCF or improve its FFO cash interest coverage ratio to comfortably above 2x within the next 12 months. "We could lower the ratings if the group experienced margin pressure, due to weaker than expected recovery in the operating performance or a more difficult integration of Huntsman TE's business, leading to debt to EBITDA remaining significantly above 6.5x coupled with limited FOCF or FFO cash interest coverage falling below 2x for a sustained basis. "We could revise the outlook to stable if Archroma successfully improves its FOCF generation and maintains its FFO cash interest coverage ratio comfortably above 2x. This could result from the realization of synergy plans on time and on budget, recovery in demand, and better plant utilization, which would allow the company to improve its EBITDA margin substantially." ============= U K R A I N E ============= FERREXPO PLC: S&P Reinstates 'CCC/C' ICRs, Outlook Negative ----------------------------------------------------------- S&P Global Ratings reinstated its issuer credit ratings on Ferrexpo PLC, which S&P had suspended on March 3, 2022, at 'CCC/C', in line with the long- and short-term sovereign ratings on Ukraine. The negative outlook reflects the prevailing uncertainty under which Ferrexpo is operating, from operational, governance, and legal perspectives. Despite the challenges imposed by the Russia-Ukraine conflict, Ferrexpo continues to export and operate, demonstrating agility managing elevated country and operational risks. S&P said, "This track record allowed us to reinstate the ratings. In March 2022, we suspended our ratings on Ferrexpo, and on other Ukraine-exposed metals and mining companies, because of reduced operational visibility. Although the conflict continues, we have reinstated our ratings on Ferrexpo based on the company's resilient performance since the suspension, low liquidity risks, and low leverage. We note that Ferrexpo is listed on the London Stock Exchange. The company continues to publish full-year and half-year results, as well as quarterly production updates. The auditors' report on the 2022 statutory account was unqualified, although it included a separate section regarding a material uncertainty related to its status as a going concern." Currently, two out of four of Ferrexpo's pelletizer lines are in operation, mainly due to constraints on logistics. For the six months to June 30, 2023, the company reported total pellet production of about 3.2 million tons, 40% less than the 5.6 million tons produced in the same period of 2022 and 60% less than the 8.1 million tons produced in the same period of 2021, before the start of the conflict. This highlights the shock the company had to absorb in its production capacity. Similarly, reported underlying EBITDA was $64 million in the first half of 2023, compared with $486 million in first-half 2022, $868 million in first-half 2021, and $352 million in first-half 2020. The security situation on the ground remains dynamic and risks to the company's future business integrity remain important. The company is subject to rapidly evolving economic, security, energy supply, and logistical factors, which together substantially constrain its operations. Despite being an exporter (all Ferrexpo's production assets are in Ukraine), the company remains particularly vulnerable to prevailing domestic conditions. Due to the geographic concentration of producing assets and high sensitivity to domestic operational and security conditions, notably for business continuity, S&P does not consider it appropriate to rate Ferrexpo above the sovereign ratings on Ukraine. Ferrexpo continues to face indirect legacy legal risks due to the allegations against its controlling shareholder. Mr. Kostyantin Zhevago, who, alongside two members of his family, has a 49.3% shareholding in Ferrexpo, was charged in Ukraine with embezzlement and money laundering involving a bank that failed in 2015. In December 2022, Mr. Zhevago was arrested in France but has not been extradited to Ukraine. He resigned from his position as non-executive director following the arrest. In 2023, the Ukrainian State Enforcement service issued an order to freeze shares in three of the company's domestic subsidiaries. According to media sources, authorities are also discussing a potential asset seizure in the order of $1.2 billion. S&P said, "However, we understand Ferrexpo has not received evidence supporting these news. Furthermore, the company is facing a dispute with the Ukrainian government over royalty payments. We are not able to assess the merits nor the potential financial consequences of these legal risks were they to crystallize in some form. However, we recognize they could weigh on the company's credit quality." In addition to the unresolved legal actions, the company has faced governance challenges throughout 2023. Two senior non-executive directors stepped down from the board, and the company's CEO and executive director Mr. Jim North resigned from his position in May 2023 after nine years with the company. Mr. North has been replaced but the board positions may prove more difficult to fill at a time when the company needs to strengthen its governance. An unforeseen event, operational or legal, would be most likely to trigger a downgrade, rather than liquidity risks. S&P considers it less likely that Ferrexpo will experience a classic payment default, as the company currently has no debt outstanding ($4 million of finance leases as of June 30, 2023), and liquidity is well managed considering the circumstances. The company has kept a cash balance of about $80 million-$130 million since the war began. The negative outlook is explained rather by event risk, including the broader country risk in the context of the conflict on the ground and the ongoing legal issues surrounding Mr. Zhevago, which could affect the company. The negative outlook reflects the prevailing uncertainty under which the company is operating, both from an operational and a legal perspective. On the one hand, S&P cannot rule out a worsening of the conditions on the ground that could further affect the Ferrexpo's ability to produce or to export iron ore pellets, hindering its ability to continue as a going concern. On the other hand, a negative rating action could also be triggered by any consequences the company faces as a result of the actions against its controlling shareholder. S&P could lower the rating if: -- Operations ceased or were negatively impacted due to unforeseen events related to the ongoing conflict or to governance considerations (including seizure of assets by the state or other forms of direct or indirect negative intervention); or -- S&P lowered its sovereign ratings on Ukraine. S&P said, "We could revise the outlook to stable or consider an upgrade once we see positive developments in the ongoing legal and governance challenges that the company is facing, accompanied by more predictable and normalized operating conditions. We would need to see both conditions being met before taking a positive rating action." =========================== U N I T E D K I N G D O M =========================== CONDOR: Chief Executive Dismisses Administration Rumors ------------------------------------------------------- Richard Heath at Jersey Evening Post reports that Condor's chief executive has rubbished "malicious rumours" that the firm was going into administration and vowed it would be serving the islands "for the long-term". In an exclusive interview with the JEP, John Napton admitted that business had been "tough" and that the operator had been "squeezed" by rocketing costs and a drop in projected passenger numbers partly caused by the washout summer. But he stressed that the firm was continuing to talk to Jersey and Guernsey over a new long-term operating agreement -- and revealed that he was open to discussions about the governments part-owning the firm to provide greater security and stability in the future, the JEP relates. Outlining the difficulties faced by Condor during the last three years, Mr. Napton described how the firm had been contending with a litany of soaring costs coupled with an unexpected hit in passenger revenues this summer, the JEP notes. Just a week before the firm was forced to deny rumours about its financial situation, it faced fierce criticism from a number of businesses after announcing a near 19% hike in freight costs, the JEP recounts. At the time, Mr. Napton, as cited by the JEP, said Condor had faced significant price increases of its own and could no longer afford to absorb costs. Against a backdrop of rising costs and unpredictable passenger bookings, Condor is continuing to talk to the Jersey and Guernsey governments over establishing a new long-term operating agreement, the JEP discloses. Currently, the firm has an operating agreement with Jersey, but only a memorandum of understanding with Guernsey, to provide a ferry service until 2025, the JEP notes. Condor, the JEP says, has long hoped for a tripartite agreement, and Mr. Napton has signalled his desire for the governments to have a closer relationship with the firm. He stressed that Condor was not currently looking to sell any part of the business and he had not been involved in any discussions about part-ownership -- but he was "not against having those conversations", the JEP relays. FORGE BAKEHOUSE: Bought Out of Administration --------------------------------------------- Business Sale reports that Forge Bakehouse, a Sheffield-based bakery and cafe chain, has been acquired out of administration by a company headed by its original owner. According to Business Sale, the company has been restructured following its acquisition by CPLG Ltd, with the deal securing 47 jobs. The company, which was founded in 2012, has a cafe in Abbeydale and outlets in Kelham Island, Beauchief and Sheffield Station, serving homemade baked goods, breads and pastries. Despite being described as an "extremely well known" brand in the Sheffield area, Forge Bakehouse was heavily impacted by several of the challenges facing businesses in the retail and food industries, including rising costs and low consumer spending amid the cost-of-living crisis, Business Sale relates. As a result, the business sought the advice of Leonard Curtis' restructuring team and took the decision to enter administration ahead of a sale to CPLG Ltd (led by original owner Craig Guest) and subsequent restructuring. The restructured company is now targeting growth in 2024, Business Sale discloses. LOCHACE LTD: Goes Into Administration ------------------------------------- Bethany Wales at Eastern Daily Press reports that a Norfolk trucking firm has gone into administration after it said demand had fallen for haulage services. Lochace Ltd, trading as the Harleston-based Bomfords Group, will begin winding down after more than 40 years in business, Eastern Daily Press discloses. According to Eastern Daily Press, the firm said it made the "difficult decision" after it became clear the business couldn't continue due to "a downturn in the general haulage sector, coupled with the high interest rates". Company owners said they had tried to find alternative funding options, but had been unsuccessful, Eastern Daily Press relates. All staff at the company, which provides warehousing and goods transportation, will lose their jobs, although managing director Ian Howell said some would be asked to continue into 2024 to help wind the business down, Eastern Daily Press notes. =============== X X X X X X X X =============== [*] BOOK REVIEW: PANIC ON WALL STREET ------------------------------------- A History of America's Financial Disasters Author: Robert Sobel Publisher: Beard Books Softcover: 469 Pages List Price: $34.95 Review by: Gail Owens Hoelscher http://www.beardbooks.com/beardbooks/panic_on_wall_street.html "Mere anarchy is loosed upon the world, the blood-dimmed tide is loosed, and everywhere the ceremony of innocence is drowned; the best lack all conviction, while the worst are full of passionate intensity." What a terrific quote to find at the beginning of a book on a financial catastrophe! First published in 1968. Panic on Wall Street covers 12 of the most painful episodes in American financial history between 1768 and 1962. Author Robert Sobel chose these particular cases, among a dozen or so others, to demonstrate the complexity and array of settings that have led to financial panics, and to show that we can only make; the vaguest generalizations" about financial panic as a phenomenon. In his view, these 12 all had a great impact on Americans of the time, "they were dramatic, and drama is present in most important events in history." They had been neglected by other financial historians. They are: William Duer Panic, 1792 Crisis of Jacksonian Fiannces, 1837 Western Blizzard, 1857 Post-Civil War Panic, 1865-69 Crisis of the Gilded Age, 1873 Grant's Last Panic, 1884 Grover Cleveland and the Ordeal of 183-95 Northern Pacific Corner, 1901 The Knickerbocker Trust Panic, 1907 Europe Goes to War, 1914 Great Crash, 1929 Kennedy Slide, 1962 Sobel tells us there is no universally accepted definition if financial panic. He quotes William Graham Sumner, who died long before the Great Crash of 1929, describing a panic as "a wave of emotion, apprehension, alarm. It is more or less irrational. It is superinduced upon a crisis, which is real and inevitable, but it exaggerates, conjures up possibilities, take away courage and energy." Sobel could find no "law of panics" which might allow us to predict them, but notes their common characteristics. Most occur during periods of optimism ("irrational exuberance?"). Most arise as "moments of truth," after periods of self-deception, when players not only suddenly recognize the magnitude of their problems, but are also stunned at their inability to solve them. He also notes that strong financial leaders may prove a mitigating factor, citing Vanderbilt and J.P. Morgan. Sobel concludes by saying that although financial panics have proven as devastating in some ways as war, and while much research has been carried out on war and its causes, little research has been done on financial panics. Panics on Wall Street stands as a solid foundation for later research on the topic. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *