/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/240112.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, January 12, 2024, Vol. 25, No. 10 Headlines I R E L A N D OCP EURO 2022-6: S&P Assigns B- (sf) Rating to Class F Notes M O N T E N E G R O VEKTRA JAKIC: Milos Popovic Named New Bankruptcy Receiver N E T H E R L A N D S CLARKS: Several Dutch Stores Declared Bankrupt DOMI 2022-1: Moody's Ups Rating on EUR10MM Class X Notes to B1 IGNITION TOPCO: S&P Lowers LT ICR to 'D' on Forbearance Agreement U N I T E D K I N G D O M DIAMOND BUILD: Enters Liquidation, Ceases Operations GATWICK AIRPORT: Moody's Affirms Ba3 Rating, Alters Outlook to Pos. GBG INSURANCE: Enters Administration, Faces GFSC Investigation TXM PLANT: Files Notice of Intention to Appoint Administrator VEDANTA RESOURCES: Moody's Lowers CFR to Caa3, Outlook Negative X X X X X X X X [*] BOOK REVIEW: TAKING CHARGE: Management Guide to Troubled Cos. - - - - - ============= I R E L A N D ============= OCP EURO 2022-6: S&P Assigns B- (sf) Rating to Class F Notes ------------------------------------------------------------ S&P Global Ratings assigned ratings to OCP Euro CLO 2022-6 DAC's class A-Loan and class A-R to F European cash flow CLO notes. At closing, the issuer also issued unrated class Z notes and subordinated notes. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior-secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated loan and notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks CURRENT S&P weighted-average rating factor 2862.53 Default rate dispersion 535.53 Weighted-average life (years) 3.95 Weighted-average life (years) extended to cover the length of the reinvestment period 4.53 Obligor diversity measure 137.22 Industry diversity measure 23.35 Regional diversity measure 1.22 Transaction key metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 1.25 Actual 'AAA' weighted-average recovery (%) 36.91 Actual weighted-average spread (net of floors; %) 4.19 Actual weighted-average coupon (%) 3.73 Under the transaction documents, the rated loan and notes will pay quarterly interest unless a frequency switch event occurs. Following this, the loan and notes will switch to semiannual payments. Asset Priming Obligations And Uptier Priming Debt Under the transaction documents, the issuer can purchase asset priming (drop down) obligations and/or uptier priming debt to address the risk, where a distressed obligor could either move collateral outside the existing creditors' covenant group or incur new money debt senior to the existing creditors. Rationale The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior-secured term loans and senior-secured bonds. Therefore, S&P has conducted its credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we used the EUR400 million target par amount, the weighted-average spread (4.19%), the weighted-average coupon (3.73%), and the actual weighted-average recovery rates calculated in line with our CLO criteria for all classes. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Until the end of the reinvestment period on July 20, 2028, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the loan and notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and it compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. "Under our structured finance sovereign risk criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned ratings. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "The transaction's legal structure and framework is bankruptcy remote, in line with our legal criteria. "Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1-R to E-R notes could withstand stresses commensurate with higher ratings than those assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our ratings assigned to the notes. "The class A-Loan and class A-R notes can withstand stresses commensurate with the assigned ratings. In our view, the portfolio is granular in nature, and well-diversified across obligors, industries, and asset characteristics when compared with other CLO transactions we have rated recently. As such, we have not applied any additional scenario and sensitivity analysis when assigning our ratings to all classes in this transaction. "For the class F notes, our credit and cash flow analysis indicates that the available credit enhancement could withstand stresses commensurate with a lower rating. However, we have applied our 'CCC' rating criteria, resulting in a 'B- (sf)' rating on this class." The ratings uplift (to 'B-') reflects several key factors, including: The available credit enhancement for this class is in the same range as that of other recently issued European CLOs that S&P rates. The portfolio's average credit quality is similar to other recent CLOs'. S&P said, "Our model generated break-even default rate at the 'B-' rating level of 26.54% (for a portfolio with a weighted-average life of 4.53 years), versus if we were to consider a long-term sustainable default rate of 3.1% for 4.53 years, which would result in a target default rate of 14.04%." The actual portfolio is generating higher spreads versus the covenanted thresholds modelled in our cash flow analysis. S&P said, "For us to assign a rating in the 'CCC' category, we also assess (i) whether the tranche is vulnerable to nonpayments in the near future, (ii) if there is a one in two chance of this tranche defaulting, and (iii) if we envision this tranche defaulting in the next 12-18 months. Following this analysis, we consider that the available credit enhancement for the class F notes is commensurate with the assigned 'B- (sf)' rating. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for the class A-Loan and class A-R to F notes. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A-Loan and class A-R to E-R notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Ratings CLASS RATING* AMOUNT INTEREST RATE§ CREDIT (MIL. EUR) ENHANCEMENT (%) A-R AAA (sf) 186.00 3mE +1.70% 38.00 A-Loan AAA (sf) 62.00 3mE +1.70% 38.00 B-1-R AA (sf) 39.00 3mE +2.70% 27.00 B-2 AA (sf) 5.00 6.80% 27.00 C-R A (sf) 23.50 3mE +3.50% 21.13 D-R BBB- (sf) 26.50 3mE +4.80% 14.50 E-R BB- (sf) 16.00 3mE +7.66% 10.50 F B- (sf) 13.00 3mE +9.38% 7.25 Z NR 1.00 N/A N/A Subordinated NR 24.00 N/A N/A *The ratings assigned to the class A-Loan, A-R, B-1-R, and B-2 notes address timely interest and ultimate principal payments. The ratings assigned to the class C-R to F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. NR--Not rated. N/A--Not applicable. 3mE--Three-month Euro Interbank Offered Rate. =================== M O N T E N E G R O =================== VEKTRA JAKIC: Milos Popovic Named New Bankruptcy Receiver --------------------------------------------------------- Iskra Pavlova at SeeNews reports that Montenegro's Commercial Court said it appointed Milos Popovic new bankruptcy receiver at troubled wood-processing company Vektra Jakic. According to SeeNews, the court said in a statement on Jan. 10 Mr. Popovic was appointed after the previous receiver, Brankica Mosurovic, stepped down on Dec. 28 upon her own request. The bankruptcy procedure at Vektra Jakic was launched on Dec. 26 upon the request of Montenegro's revenue and customs administration, the Commercial Court said in a separate filing last month, SeeNews notes. Local daily Vijesti reported in December that the revenue and customs administration first submitted a bankruptcy request back in 2021, seeking EUR7.4 million (US$8.1 million) of overdue taxes and concession fees from Vektra Jakic, SeeNews, relates. ===================== N E T H E R L A N D S ===================== CLARKS: Several Dutch Stores Declared Bankrupt ---------------------------------------------- Sylvana Lijbaart at FashionUnited reports that the curtain has come down on several stores of British shoe brand Clarks. The stores in Amsterdam (two), Breda, The Hague, Eindhoven, Haarlem, Leidschendam, Maastricht, Rotterdam and Utrecht were declared bankrupt on Jan. 9, according to the public insolvency register. G.A. De Wit has been appointed receiver, FashionUnited relates. FashionUnited sought contact with the trustee, but is still waiting for a response, FashionUnited states. The reasons for the bankruptcies of Clarks Amsterdam B.V., Clarks Breda B.V., Clarks Den Haag B.V., Clarks Eindhoven B.V., Clarks Haarlem B.V., Clarks Kalverstraat B.V., Clarks Leidschenhage B.V., Clarks Maastricht B.V., Clarks Rotterdam B.V. and Clarks Utrecht B.V. are not yet known, FashionUnited notes. Furthermore, bankruptcy has been declared on Clarks Management B.V., FashionUnited discloses. The Dutch Clarks stores are operated by shoe family Mulder, according to the website. Mulder Schoenen expanded its portfolio in 2008 to include Clarks stores, the first of which opened in The Hague. The British shoe brand has been struggling for some time, however, FashionUnited relays. In November 2023, a company spokesperson told FashionUnited that it was cutting 103 jobs worldwide, FashionUnited recounts. According to FashionUnited, in a statement, the individual said: "The company has a stable financial base, but to sustain its post-pandemic recovery, operating costs must be kept strictly in check." The wave of layoffs was motivated by difficult economic headwinds and the current cost-of-living crisis, both of which are negatively impacting Clarks' operating results. DOMI 2022-1: Moody's Ups Rating on EUR10MM Class X Notes to B1 -------------------------------------------------------------- Moody's Investors Service has upgraded the rating of one class of notes in Domi 2022-1 B.V. The rating action reflects better than expected collateral performance and increased levels of credit enhancement for the affected notes. Moody's affirmed the ratings of the notes that had sufficient credit enhancement to maintain their current ratings. EUR298.5M Class A Notes, Affirmed Aaa (sf); previously on Oct 19, 2022 Affirmed Aaa (sf) EUR13.3M Class B Notes, Affirmed Aa1 (sf); previously on Oct 19, 2022 Affirmed Aa1 (sf) EUR8.3M Class C Notes, Affirmed Aa3 (sf); previously on Oct 19, 2022 Affirmed Aa3 (sf) EUR8.3M Class D Notes, Affirmed Baa1 (sf); previously on Oct 19, 2022 Affirmed Baa1 (sf) EUR5M Class E Notes, Affirmed Caa1 (sf); previously on Oct 19, 2022 Upgraded to Caa1 (sf) EUR10M Class X Notes, Upgraded to B1 (sf); previously on Oct 19, 2022 Upgraded to Caa1 (sf) RATINGS RATIONALE The rating action is prompted by decreased key collateral assumptions, namely the portfolio Expected Loss (EL) assumption due to better than expected collateral performance. Revision of Key Collateral Assumptions: As part of the rating action, Moody's reassessed its lifetime loss expectation for the portfolio reflecting the collateral performance to date. The performance of the transaction has continued to be stable since closing. Total delinquencies have been stable in the past year, with 90 days plus arrears currently standing at 0.00% of current pool balance. Cumulative losses currently stand at 0.00% of original pool balance. Moody's decreased the expected loss assumption to 1.92% as a percentage of current pool balance from 2.00% due to the improving performance. The revised expected loss assumption corresponds to 1.70% as a percentage of original pool balance. Moody's has also assessed loan-by-loan information as a part of its detailed transaction review to determine the credit support consistent with target rating levels and the volatility of future losses. As a result, Moody's has maintained the MILAN CE assumption at 15.00%. The Class X Notes amortized significantly from EUR10.0 million at closing to EUR4.2 million as of the October 2023 interest payment date, being repaid with available excess spread after payments of interest and PDL on the collateralized notes. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in October 2023. 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 (1) performance of the underlying collateral that is better than Moody's expected, (2) an increase in available credit enhancement and (3) improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. IGNITION TOPCO: S&P Lowers LT ICR to 'D' on Forbearance Agreement ----------------------------------------------------------------- S&P Global Ratings lowered its long-term issuer credit rating on IGM Resins' (IGM) parent company, Ignition Topco, to 'D' (default) from 'CCC'. At the same time, S&P lowered its issue ratings on IGM's EUR325 million term loan B due July 2025 and EUR50 million RCF due December 2024 to 'D' from 'CCC'. The '3' recovery ratings are unchanged, indicating its expectation of meaningful recovery (50%-70%; rounded estimate: 55%). The downgrade reflects IGM's decision to seek forbearance on its interest payments from Jan. 3, 2024, on both its term loan and RCF. In S&P's view, this represents a default on both facilities because IGM will not meet its contractual obligations of paying interest in a timely manner. S&P said, "We understand that on Dec. 31, 2023, the company had cash balances of EUR34 million-EUR35 million and that the nonpayment was driven by IGM's decision to retain sufficient operational liquidity in the business. IGM's operating performance has been severely depressed by challenging market conditions in the chemical industry. The company's core photo initiator products experienced volume and price pressure over the last several months amid increased competition from China, customer destocking, and the weak macroeconomic environment. Consequently, IGM's year-to-date management-adjusted EBITDA in November 2023 stood at EUR6.6 million versus the EUR18.6 million it budgeted in July 2023. This resulted in unsustainable leverage. We estimate that on Dec. 31, 2023, IGM breached the springing covenant incorporated in its RCF, which stipulates that senior secured net leverage must be below 7.7x. In December 2022, the RCF lenders agreed to temporarily waive the covenant test until Sept. 30, 2023. We note that IGM's capital structure and liquidity, the latter of which we assess as weak, are subject to recapitalization discussions that are currently underway. We factor in that management is progressing well with the turnaround plan, including the now complete sale of the Charlotte plant in the U.S., reduction of fixed costs at the Mortara plant in Italy, integration with Anquing, and the reorganization of the support functions in the broader organization." =========================== U N I T E D K I N G D O M =========================== DIAMOND BUILD: Enters Liquidation, Ceases Operations ---------------------------------------------------- Charlotte Banks at Construction News reports that a London-based public sector contractor has started liquidation proceedings after nearly 50 years in business. Diamond Build Plc and its subsidiary Diamond Fire Safety both ceased trading last Friday, Jan. 5, Construction News relates. A notice has been sent informing creditors that the companies will go into liquidation on Jan. 19, Construction News states. Diamond Build was set up in 1977 under the name PJ Diamond. It worked on public sector projects in London and the South East of England, including schools, hospitals, libraries and leisure centres. Some of its recent work includes a GBP28 million mixed-use development in Tottenham and 24 council homes in Holloway. The firm posted a GBP26.8 million turnover and made a pre-tax profit of GBP360,000 in 2022, Construction News discloses. According to Construction News, in its final set of accounts, the company wrote: "2022 has again been a difficult year for construction companies that rely on the public sector for work since this sector has not managed to meet the workload level that it was achieving prior to the start of the Covid epidemic." GATWICK AIRPORT: Moody's Affirms Ba3 Rating, Alters Outlook to Pos. ------------------------------------------------------------------- Moody's Investors Service has changed the outlook to positive from stable on Gatwick Funding Limited (Gatwick Funding), a finance company owned by Ivy Holdco Limited (together the "Gatwick airport group" or the "ring-fenced group"). Concurrently Moody's has affirmed the Baa2 senior secured ratings and the (P)Baa2 senior secured rating on the medium-term note programme of Gatwick Funding. Moody's has also changed the outlook to positive from stable on Gatwick Airport Finance plc (GAF), a holding company for the Gatwick airport group. Concurrently, Moody's has affirmed the Ba3 rating of the senior secured notes issued by GAF. RATINGS RATIONALE -- GATWICK FUNDING LIMITED -- The change in the outlook to positive recognises the Gatwick airport group's improving performance and the potential for the group's credit metrics to strengthen to the levels commensurate with a Baa1 rating. Traffic at Gatwick airport reached 88% of pre-pandemic levels in the 10 months to October 2023. In October alone, passenger volumes were up 11% on the comparable period in 2022. The increase in traffic has been driven primarily by strong outbound demand for short-haul European destinations. Passenger volumes recovery has lagged some of the other rated European airports because of Gatwick airport's traffic mix, competitive dynamics and issues at the air traffic control. While some of these factors will continue to impact Gatwick airport's traffic, at least in the near term, and the macroeconomic environment is relatively weak, Moody's expects passenger volumes to continue to grow. Growth rates will be, however, significantly lower, given a base effect but also because pent-up demand may be getting saturated. Traffic is an important driver of Gatwick airport's performance, although the group's earnings have been also supported by the positive dynamics regarding aeronautical yields and commercial segment performance. These have more than offset an increase in operating costs as a result of a high inflation environment. Moody's expects these revenue trends to continue, which will support the group's earnings and its financial profile. Nevertheless, the extent of an improvement in Gatwick airport group's credit metrics and its sustainability will also depend on investment plans as well as the company's financial policies and the level of distributions following the ring-fenced group's exit from the lock-up period this year. Overall, the Baa2 rating of the senior secured notes issued by Gatwick Funding reflects (1) the group's ownership of London Gatwick airport, the UK's second largest airport and a key airport within the London airport system; (2) a degree of competition in the London area system; (3) a high proportion of origin and destination passengers across a relatively diversified carrier base; (4) the features of the system of economic regulation; and (5) high financial leverage, with funds from operations (FFO)/debt of 8.9% in 2022, and the terms of the financing structure that offer some protection to creditors. -- GATWICK AIRPORT FINANCE PLC-- The change in the outlook to positive on GAF reflects Moody's expectation that (1) the Gatwick airport group will reduce its leverage, and (2) the ring-fenced group will be able to upstream cash to GAF well in excess of the holding company's debt service obligations starting from this year. In addition to the considerations for Gatwick Funding, the Ba3 rating of GAF reflects (1) the group's higher leverage because of GBP450 million of additional debt at the GAF level; (2) the terms of Gatwick Funding's financing structure, including lock-up provisions; (3) the deeply subordinated nature of creditors at the holding company; (4) the terms of GAF's financing structure and a pre-funded debt service reserve account to October 2024; and (5) disciplined financial policies and the strong credit quality of GAF's major shareholder – Vinci S.A. (A3 stable), which fully consolidates the group in its accounts. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Gatwick Funding's ratings could be upgraded if (1) Gatwick airport group's FFO/debt were to improve to at least 10% on a sustainable basis, (2) the company exhibited significant headroom against its financial covenants; and (3) the group maintained solid liquidity. Gatwick Funding's ratings could be downgraded if (1) Gatwick airport group were to exhibit a financial profile consistently below the levels considered commensurate with the current ratings, namely FFO/debt of at least 8%; (2) there was a risk of covenant breaches without adequate mitigating measures in place; or (3) there were concerns about the company's liquidity. GAF's rating could be upgraded if (1) there was a material improvement in the GAF group's financial profile; (2) there were no concerns about the ring-fenced group's ability to upstream cash providing a strong coverage of debt service requirements at GAF; and (3) the company had a solid liquidity. GAF's rating could be downgraded, if (1) it appeared likely that the ring-fenced group's credit metrics would not be commensurate with the current rating, namely FFO/debt of at least 8%; (2) there were concerns about the ring-fenced group's ability to upstream cash to GAF; (3) there was a risk of covenant breaches without adequate mitigating measures in place; or (4) there were concerns about the company's liquidity. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Privately Managed Airports and Related Issuers published in November 2023. COMPANY PROFILE Gatwick Funding Limited is a finance company owned by Ivy Holdco Limited, the security parent of the Ivy Holdco Limited group. It is fully owned by Gatwick Airport Finance plc. Gatwick Airport Finance plc is a holding company of Ivy Holdco Limited. The company is owned 50.01% by Vinci S.A. (A3 stable), while the remainder of the ownership is managed by Global Infrastructure Partners (GIP) on behalf of several investors. GBG INSURANCE: Enters Administration, Faces GFSC Investigation -------------------------------------------------------------- Jen Frost at Insurance Business reports that Guernsey-headquartered international travel, life and health insurance provider GBG Insurance has fallen into administration after a last-ditch December sale attempt fell through, marking the final bid to save the troubled insurer. Failed GBG Insurance faces an investigation from the Guernsey Financial Services Commission (GFSC) on how a "large hole" in its balance sheet discovered in March 2023 went unnoticed, the regulator said in December, Insurance Business relates. GBG Insurance provided individual and group policies on both a direct and reinsured basis, administering insurance across the US, Latin America, Europe and some Asian markets. Directors of GBG Insurance approached the regulator last March on discovering that while audited accounts showed the company was "in good health", assets totaling millions shown in the accounts did not exist, according to the GFSC, Insurance Business notes. Ratings agency AM Best withdrew GBG Insurance's BBB+ financial strength rating last April, citing a "lack of information available" to continue its interactive rating process, Insurance Business recounts. Despite a "strong prospect" that GBG Insurance could have been rescued by potential deals, the final opportunity slipped away last December when a potential buyer decided to pull out rather than inject large amounts of fresh capital into the business, the GFSC said in a notice shared on its website, Insurance Business relates. The GFSC's investigation is likely to be "lengthy and complex", with the commissioner having said it is unable to predict its outcome, Insurance Business states. TXM PLANT: Files Notice of Intention to Appoint Administrator ------------------------------------------------------------- Grant Prior at Construction Enquirer reports that road-rail equipment specialist TXM Plant has filed a notice of intention to appoint an administrator. According to Construction Enquirer, staff at the Wigan based business are now looking for new jobs following the news. Latest accounts for TXM show the company had a turnover of GBP38.9 million for the year to April 29, 2022, generating a pre-tax loss of GBP2.1 million while employing 276 staff, Construction Enquirer discloses. TXM has seven depots nationwide and is the largest supplier of road/rail vehicles in the UK. VEDANTA RESOURCES: Moody's Lowers CFR to Caa3, Outlook Negative --------------------------------------------------------------- Moody's Investors Service has downgraded to Caa3 from Caa2 the corporate family rating of Vedanta Resources Limited (VRL). At the same time, Moody's has downgraded to Ca from Caa3 its rating on the senior unsecured bonds issued by VRL and those issued by VRL's wholly owned subsidiary, Vedanta Resources Finance II Plc, and guaranteed by VRL. Moody's has maintained the negative rating outlook. VRL announced that holders of its US$ bonds have provided consent to the restructuring of its debt comprising a partial upfront payment of its bond maturities in 2024 and 2025 and the extension of the balance to 2027 and 2028. Bondholders also provided their consent to amend certain financial covenants towards leverage and debt cap limits, also taking into account the proposed demerger of VRL's operations into six separate listed companies. The debt restructuring transaction is expected to close in January. "Moody's view the debt restructuring as default avoidance and assess that the creditors have incurred an economic loss with respect to the original promise. Moody's consider the transaction to be a distressed exchange under Moody's criteria, which underpins Moody's downgrade of VRL's ratings," says Kaustubh Chaubal, a Moody's Senior Vice President. RATINGS RATIONALE As part of the restructuring, holders of the 13.875% $1 billion January 2024 notes will be paid upfront around half the principal and be issued an Amended Bond for the balance carrying the same coupon, due January 2027. Meanwhile, holders of the 6.125% $951 million August 2024 notes and the 8.95% $1.2 billion March 2025 notes will receive minimal upfront cash of 6% and 16% respectively, and will be issued amortising bonds maturing in 2028 for the remainder, carrying a coupon of 13.875%. In addition, bondholders will receive a consent fee for the restructuring. Holding company (holdco) VRL will fund the approximately $780 million upfront cash payment from a recently obtained loan of $1.25 billion due April 2026; the balance of the loan proceeds will be applied, in part, towards addressing some of the holdco's loan repayments. "Proforma the debt restructuring, holdco VRL's near-term liquidity will improve only slightly and its refinancing wall will start building up as it approaches its next bond maturity in April 2026. Furthermore, a springing covenant requiring holdco VRL to refinance its April 2026 bond maturity by December 2025, failing which all Amended Bonds will mature in April 2026, will keep refinancing risk elevated and the likelihood of further distressed exchanges high," adds Chaubal, who is also Moody's lead analyst for VRL. VRL's ratings reflect the company's unsustainable capital structure characterized by high financial leverage at the holding company and its perennially weak liquidity amid a period of continued large negative free cash flow. Moody's believes the company will still face material liquidity issues over the upcoming 24 months and that default risk remains high. VRL's consolidated debt/EBITDA leverage of around 4.0x is substantially strong for its ratings. Still, the company continues to face challenges in refinancing its debt, and the recent debt restructuring is a key credit concern. STRUCTURAL CONSIDERATIONS VRL's unsecured bonds are rated Ca; one notch lower than the Caa3 CFR, reflecting bondholders' weak position relative to creditors of operating subsidiaries. This risk reflects the fact that most of the claims are at the operating subsidiaries and have priority over claims at the holdco in bankruptcy. As such, the expected recovery for claims at the holdco will be lower. OUTLOOK The negative outlook reflects Moody's concerns over the company's ability to address its imminent cash needs, especially at the holdco. In addition, the negative outlook reflects the rating agency's view that the recovery prospects for VRL's debt instruments could decrease further given the holdco's high debt levels, weak liquidity and potential contagion risk impairing its operating subsidiaries' ability to raise funds to distribute dividends. LIQUIDITY Holdco VRL's liquidity remains persistently weak with management fees and dividends from operating subsidiaries insufficient to meet its looming debt maturities and interest servicing needs. Proforma the restructuring, holdco VRL's cash needs for the period April 2024 through September 2025 comprise $2.2 billion loan repayments (including $450 million of an intercompany loan repayment) and a large interest bill that has climbed to an annual amount of around $800 million. While holdco VRL should receive around $300 million annually in the form of management fees/brand fees from its operating subsidiaries, any other cash movement from operating subsidiaries may likely be in the form of dividends, entailing leakage given the presence of minority shareholders. Moreover, acute financial trouble at holdco VRL would, in the rating agency's view, impair its operating subsidiaries' ability to raise funds for dividend distributions, especially since liquidity at operating subsidiaries has substantially eroded over the past few years. As of September 2023, its operating subsidiaries held $2 billion cash, down from $4.5 billion as of March 2021. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS VRL's concentrated ownership with sole shareholder, Volcan Investments, keeps the risk elevated for related-party transactions to the detriment of creditors. In addition, several senior management departures in recent years pose risks to the continuity and stability of its operations, in Moody's view, especially at a time when the company's liquidity remains persistently weak. Moreover, VRL's unsustainable capital structure, weak liquidity and poor liability management exhibit signs of an aggressive risk appetite, a key credit negative. VRL is also exposed to environmental risks associated with carbon transition, water management and natural capital, as well as to social risks emanating from health and safety concerns, especially with the incidence of fatalities (13 in fiscal 2023) over the past few years. VRL's CIS-5 score reflects the rating agency's view that absent ESG risks, the company's large scale and efficient asset base could support a higher rating. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's is unlikely to upgrade VRL's ratings or revise its rating outlook to stable prior to the company substantially improving its liquidity profile. Any potential rating upgrade will depend on the company meeting its refinancing needs over at least the upcoming 12-18 months as well as establishing a sustainable capital structure. Moody's could downgrade VRL's ratings further if the risk of default increases materially higher than indicated by the current ratings. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Mining published in October 2021. COMPANY PROFILE Vedanta Resources Limited (VRL), headquartered in London, is a diversified resources company with interests mainly in India. Its main operations are held by Vedanta Limited (VDL), a 63.7% owned subsidiary. Through VRL's various operating subsidiaries, the group produces oil and gas, zinc, lead, silver, aluminum, iron ore, steel and power. In September 2023, VDL announced its demerger into six separate listed entities subject to relevant approvals. Shareholders of VDL will receive one share in each of the six companies – upon completion of the demerger, VDL as well as the six other companies will have the same shareholding; i.e. VRL will hold a 63.7% stake in VDL and the six new companies. Delisted from the London Stock Exchange in October 2018, VRL is now wholly owned by Volcan Investments Ltd. Founder chairman of VRL, Anil Agarwal, and his family, are the key shareholders of Volcan. For the last twelve months ending September 30, 2023, VRL generated revenues of $17.4 billion and adjusted EBITDA of $4.8 billion. =============== X X X X X X X X =============== [*] BOOK REVIEW: TAKING CHARGE: Management Guide to Troubled Cos. ----------------------------------------------------------------- TAKING CHARGE: Management Guide to Troubled Companies and Turnarounds Author: John O. Whitney Publisher: Beard Books Softcover: 283 Pages List Price: $34.95 Order a copy today at: http://beardbooks.com/beardbooks/taking_charge.html Review by Susan Pannell Remember when Lee Iacocca was practically a national hero? He won celebrity status by taking charge at a company so universally known as troubled that humor columnists joked their kids grew up thinking the corporate name was "Ayling Chrysler." Whatever else Iacocca may have been, he was a leader, and leadership is crucial to a successful turnaround, maintains the author. Mediagenic names merit only passing references in Whitney's book, however. The author's own considerable experience as a turnaround pro has given him more than sufficient perspective and acumen to guide managers through successful turnarounds without resorting to name-dropping. While Whitney states that he "share[s] no personal war stories" in this book, it was, nonetheless, written from inside the "shoes, skin, and skull of a turnaround leader." That sense of immediacy, of urgency and intensity, makes Taking Charge compelling reading even for the executive who feels he or she has already mastered the literature of turnarounds. Whitney divides the work into two parts. Part I is succinctly entitled "Survival," and sets out the rules for taking charge within the crucial first 120 days. "The leader rarely succeeds who is not clearly in charge by the end of his fourth month," Whitney notes. Cash budgeting, the mainstay of a successful turnaround, is given attention in almost every chapter. Woe to the inexperienced manager who views accounts receivable management as "an arcane activity 'handled over in accounting.'" Whitney sets out 50 questions concerning AR that the leader must deal with -- not academic exercises, but requirements for survival. Other internal sources for cash, including judiciously managed accounts payable and inventory, asset restructuring, and expense cuts, are discussed. External sources of cash, among them banks, asset lenders, and venture capital funds; factoring receivables; and the use of trust receipts and field warehousing, are handled in detail. Although cash, cash, and more cash is the drumbeat of Part I, Whitney does not slight other subjects requiring attention. Two chapters, for example, help the turnaround manager assess how the company got into the mess in the first place, and develop strategies for getting out of it. The critical subject of cash continues to resonate throughout Part II, "Profit and Growth," although here the turnaround leader consolidates his gains and looks ahead as the turnaround matures. New financial, new organizational, and new marketing arrangements are laid out in detail. Whitney also provides a checklist for the leader to use in brainstorming strategic options for the future. Whitney's underlying theme -- that a successful business requires personal leadership as well as bricks and mortar, money and machinery -- is summed up in a concluding chapter that analyzes the qualities that make a leader. His advice is as relevant in this 1999 reprint edition as it was in 1987 when first published. ********* 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 2024. 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 * * *