/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/240516.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, May 16, 2024, Vol. 25, No. 99 Headlines B O S N I A A N D H E R Z E G O V I N A BOSNIA AND HERZEGOVINA: Moody's Assigns B3 LongTerm Issuer Ratings F R A N C E ILIAD SA: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable PIMENTE INVESTISSEMENT: Moody's Cuts CFR & Secured Term Loan to B3 RAMSAY GENERALE: Moody's Cuts CFR & Sr. Secured Term Loans to B1 G E R M A N Y ESPRIT: Commences Insolvency Proceedings for German Units I R E L A N D AVIA SOLUTIONS: Fitch Rates USD300 Sr. Unsec. Bonds 'BB' BLACKROCK EUROPEAN I: Moody's Affirms B1 Rating on Class F-R Notes CANYON EURO 2023-1: Fitch Assigns B-sf Final Rating to Cl. F Notes CARLYLE EURO 2024-1: Fitch Assigns 'B-sf' Final Cl. E Notes Rating CARLYLE GLOBAL 2014-3: Fitch Affirms 'B+sf' Rating on Cl. E-R Notes FAIR OAKS V: Fitch Assigns 'B-sf' Final Rating to Class F Notes HARVEST CLO VIII: Fitch Affirms B+sf F-R Notes Rating, Outlook Neg HARVEST CLO XIX: Fitch Affirms B+sf F Notes Rating, Outlook Now Neg NAC AVIATION: Invesco VVR Writes Off $2.1MM Term Loan OAK HILL VI: Fitch Affirms 'B+sf' F Notes Rating, Outlook Now Neg. OCP EURO 2017-1: Moody's Ups Rating on EUR8MM Class F Notes to B1 I T A L Y ALBA 14 SPV: Moody's Assigns (P)Ba1 Rating to EUR175.1MM B Notes LOTTOMATICA SPA: Moody's Rates New EUR900MM Secured Notes 'Ba3' LOTTOMATICA SPA: S&P Rates New EUR900MM Senior Secured Notes 'BB-' TRS EVOLUTION: May 17 Bid Submission Deadline Set for Stake L A T V I A AIR BALTIC: Fitch Puts 'B' Final Rating to EUR340M Sr. Sec. Bonds N E T H E R L A N D S BOI FINANCE: Fitch Affirms 'B-' Rating on Sr. Unsecured Notes DOMI BV 2024-1: Moody's Assigns (P)B2 Rating to Class E Notes DOMI BV 2024-1: S&P Assigns Prelim. B-(sf) Rating on X-Dfrd Notes MILA 2024-1: Fitch Assigns 'B(EXP)sf' Rating to Class F Notes S W I T Z E R L A N D VAT GROUP: Moody's Upgrades CFR to Ba1 & Alters Outlook to Stable U N I T E D K I N G D O M ABRA WHOLESALES: Collapses Into Administration C.G. CLEANING: Goes Into Administration CAMBCOL LTD: Enters Administration, Owed GBP1.75 Million HOOPLA ANIMATION: Falls Into Administration MCEVOY ENGINEERING: Goes Into Administration MOLOSSUS BTL 2024-1: Fitch Assigns B+sf Final Rating to Cl. X Notes PRECISE MORTGAGE 2020-1B: Fitch Puts BB+sf Rating on Watch Negative - - - - - =========================================== B O S N I A A N D H E R Z E G O V I N A =========================================== BOSNIA AND HERZEGOVINA: Moody's Assigns B3 LongTerm Issuer Ratings ------------------------------------------------------------------ Moody's Ratings has assigned B3 local and foreign currency long-term issuer ratings to the Federation of Bosnia and Herzegovina (FBiH), as well as a b3 Baseline Credit Assessment (BCA). The outlook is stable. RATINGS RATIONALE The B3 rating and b3 BCA reflect the complex institutional structure that shapes the intergovernmental relations between the Bosnia and Herzegovina's (BiH, B3 stable) constitutional entities and challenges stemming from weak coordination among governing bodies. The rating action also reflects the FBiH's limited economic strength partly related to migration and an ageing population as well as its indirect exposure to the FBiH-owned companies' debt. The rating and BCA also take into account a number of credit strengths including the FBiH's fiscal autonomy, and its unique status and tax regime, protected by BiH's constitution. The FBiH's solid fiscal metrics, comfortable liquidity position and contained direct debt also underpin the ratings. The complex institutional framework, while offering substantial fiscal independence, poses difficulties in achieving consistent policies and harmonized decision-making process across the country. The multiple layers of government and the absence of effective coordination between the FBiH and Republic of Srpska (B3 stable) remain a significant hurdle in adopting structural reforms, which are necessary prerequisites for BiH's successful integration into the European Union (EU, Aaa stable), as well as the effective implementation of BiH's Economic Reform Plan. Furthermore, the complex and divisive political environment and persistent political tensions weigh on policy effectiveness. BiH's economy is relatively small, with low competitiveness internationally. The country's economic framework, which encompasses the FBiH, heavily relies on low value-added industries, contributing to economic vulnerability. The FBiH shows high unemployment rates, with a low rate of labor force participation which in turn heightens social risks and encourages migration outside the country over the years. The continuous outflow of workers, particularly the younger population, intensifies pressure on the labor market and exacerbates ageing trends which weighs on potential growth. Over the past few years, FBiH has posted moderate debt levels with debt-to-operating revenue ratio at 58% in 2023 from 74% in 2022. The increase in operating revenue and decrease of the FBiH's nominal debt will drive the gradual fall of its debt levels (excluding self-supporting debt of government-owned entities) to 53% of operating revenue projected in 2024 and 40% in 2025. Moody's forecasts that the FBiH's debt affordability will remain strong, supported by the FBiH's low appetite for debt financing and underpinned by good market access, including the access to international financial institutions. The FBiH's large investment needs are partly funded by the government-owned companies, cantons and municipalities, lifting their borrowing needs. When considering the debt of these entities, the total debt amounts to approximately 121% of operating revenue in 2023. However, Moody's considers the majority of the debt of FBiH's companies as self-supporting and therefore not posing significant risks to FBiH. The BiH unique institutional framework allows for a large degree of fiscal autonomy, enabling each entity to tailor its fiscal policies. FBiH has a broader tax base than the central government, encompassing a wider variety of revenue sources with a power to set tax rates and define the tax base, except for the shared Value Added Tax (VAT) which is the sole responsibility of the central government. Moody's expects that FBiH will sustain its solid operating performance in 2024-2025 driven by an increase in tax revenues, prudent budgetary management and control over the operating expenditure growth. Moody's forecasts BiH's real GDP growth to accelerate to 3% in 2024 up from 1.8% in 2023, driven by stronger private consumption, leading to a greater VAT proceeds, an important revenue source for the FBiH. This will drive the maintenance of solid gross operating balance of the FBiH at around 5% of projected operating revenue in 2024. FBiH's cash and cash equivalents remain sound averaging BAM848 million throughout 2023, accounting for 15.5% of operating revenue and covering about 0.72x of debt servicing costs falling due over the next 12 months. Furthermore, FBiH has demonstrated access to external liquidity, securing funds from a diverse range of investors. The B3 rating of FBiH incorporates a BCA of b3 and a low extraordinary support assumption from the Government of Bosnia and Herzegovina (B3 stable). RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects FBiH's capacity to preserve its solid financial position, which provides some degree of shock absorption capacity, benefiting from a supportive institutional framework that secures strong revenue flexibility. The outlook also reflects Moody's expectation that the FBiH will maintain its debt burden at similar levels over the next two years. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS FBiH's CIS-4 indicates that ESG considerations have a high impact on the current credit rating. This reflects the entity's exposure to a number of environmental risks, including physical climate risks, high exposure to social risks and a moderate governance profile. FBiH's exposure to environmental risks (E-3) stems from physical climate risks, water management and natural capital. FBiH's main environmental risk exposure is related to physical climate risk and weather-related events such as floods, heatwaves and weather changes that impact crop yields and result in mitigation expenses and economic loses. FBiH also has important forestry and mining sectors which has led to some environmental degradation. The (S-4) score assigned to FBiH reflects its high exposure to social risks primarily mirroring ageing population, negative net migration and high unemployment rates, in particular among the young and female population, with limited job opportunities which have led to high emigration. In long terms, these demographic challenges will hinder economic growth and put pressure on public finances. The (G-3) score assigned to FBiH is largely influenced by the entity's somewhat good financial management practices and prudent budgetary assumptions. Their policies and guidelines on debt and investment management are mostly followed, although the debt management poses some risks as evidenced by high exposure to foreign currency. However, the existence of Currency Board and the fact that BAM is pegged to EUR mitigates this risk. The specific economic indicators, as required by EU regulation, are not available for Bosnia and Herzegovina, Federation of. The following national economic indicators are relevant to the sovereign rating, which was used as an input to this credit rating action. Sovereign Issuer: Bosnia and Herzegovina, Government of GDP per capita (PPP basis, US$): 18,524 (2022) (also known as Per Capita Income) Real GDP growth (% change): 4.2% (2022) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 14.8% (2022) Gen. Gov. Financial Balance/GDP: 0.9% (2022) (also known as Fiscal Balance) Current Account Balance/GDP: -4.3% (2022) (also known as External Balance) External debt/GDP: 52.5% (2022) Economic resiliency: b2 Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. SUMMARY OF MINUTES FROM RATING COMMITTEE On May 9, 2024, a rating committee was called to discuss the rating of the Bosnia and Herzegovina, Federation of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, the issuer's institutions and governance strength, the issuer's governance and/or management, the issuer's fiscal or financial strength, including its debt profile, and the systemic risk in which the issuer operates. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade of Bosnia and Herzegovina's sovereign rating would result in upward pressure on the FBiH's rating provided that FBiH continues to post solid operating and financial performance along with moderate debt levels. A downgrade of Bosnia and Herzegovina's sovereign rating would lead to a similar action on the FBiH's rating. A significant deterioration in FBiH's financial performance and an increase in debt may also exert downward rating pressure. The principal methodology used in these ratings was Regional and Local Governments published in January 2018. The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable. "This rating action concerns a new rating for an issuer not previously publicly rated by us at the time that the EU sovereign release calendar was published, and is therefore being released on a date not listed in that publication," Moody's related. =========== F R A N C E =========== ILIAD SA: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable --------------------------------------------------------- Fitch Ratings has affirmed Iliad SA's (Iliad) Long-Term Issuer Default Rating (IDR) and its senior unsecured instrument rating at 'BB'. The Recovery Rating on the senior unsecured debt is 'RR4'. Fitch has also affirmed Iliad Holding S.A.S.'s Long-Term IDR at 'BB' and senior secured instrument rating at 'BB-'/'RR5'. The Outlook on both IDRs is Stable. The ratings of Iliad Holding and Iliad are based on a consolidated rating profile and reflect Iliad Holding's 97% ownership of Iliad. Iliad is an integrated telecom operator with presence in France, Poland and Italy. However, the company's operating profile is anchored around its French operations, which contributed almost 70% to its EBITDAaL (EBITDA after leases) and operating free cash flow (EBITAaL less capex including spectrum) in 2023. Iliad has a solid position in the French telecoms market based on the deployment of its own mobile and fixed network and partnerships with passive infrastructure providers. Iliad is also a key integrated operator of the Polish telecom market though Play and UPC acquisition and has presence in Italy with a 13.6% market share in mobile. The Stable Outlook reflects its expectation that EBITDA net leverage at Iliad Holding will remain within its sensitivities and trend towards the upgrade threshold by end-2026. Network investments are expected to keep free cash flow (FCF) generation negative over the next two years; however, these expected to turn positive from 2026. KEY RATING DRIVERS Strong Market Positions: Iliad has a solid position in its home market, being number two in fixed broadband and a strong number four in mobile, with 23% and 18% subscriber market shares at end-2023 respectively. Its technology and pricing innovation, coupled with an industry-leading cost structure, have enabled it to build a well-entrenched position in fixed broadband with strong cash generation. This is underscored by Iliad's domestic EBITDAaL margin of around 40% and operating FCF margin of around 14% in 2023. In Poland Iliad enjoys leadership in mobile and it is the second largest operator in fixed broadband. Acquisition of the Polish mobile operator Play in 2020 and cable operator UPC Poland in 2022 have enabled Iliad to create an integrated, fixed and mobile operator in Poland. Healthy Operating Performance: Iliad demonstrated sound operating results with revenue rising 8.2% in 2023 on a like-for-like basis and EBITDAaL by 2.1%. Revenue was supported by strong growth in the number of subscribers and increase in average revenue per user. Organic revenue grew 8.7% in France, 4% in Poland and 14.5% in Italy. The EBITDAaL margin decline was driven by higher energy costs and lease expenses in Poland as a result of a 50% sale of its fiber optic infrastructure. Fitch forecasts revenue to grow around 5%-7% in 2024-2027 with Fitch-defined EBITDA margin at around 33% (34.7% in 2023). Increased Leverage Capacity: Fitch has relaxed EBITDA net leverage sensitivities by 0.2x to 3.7x for the upgrade and by 0.3x to 4.3x for the downgrade. This reflects a reduction in FCF risk as a result of improved scale in Italy and growth in other parts of the group. Since entering the Italian mobile market in 2018, Iliad Italy is now EBITDA-positive and generated positive company-defined operating FCF for the first time in 2023, which is expected to further improve in the next two to three years. Iliad has increased its overall scale, with revenue and Fitch-defined EBITDA forecast at EUR9.9 billion and EUR3.3 billion in 2024, up from EUR5.9 billion and EUR1.8 billion in 2020, respectively. EBITDA Leverage Within Thresholds: Iliad Holding's EBITDA net leverage declined to 4.2x at end-2023, from its peak of 4.7x at end-2022 following the acquisition of UPC Poland and hefty one-off spectrum payments in Italy. Fitch expects leverage to remain broadly stable in 2024, despite the acquisition of a minority stake in Tele2. Fitch however forecasts Iliad Holding to deleverage to 4.0x in 2025 and to 3.7x in 2026, assuming no further M&A. Deleveraging will be supported by improved FCF generation, which Fitch expects to become positive from 2026. Investments Weigh on FCF Profile: The consolidated group's FCF has been consistently negative due to network investments, which Fitch expects to continue in 2024-2025. In particular FCF has been weighed down by Iliad's investment in Italy, which is still at a fairly early investment stage and yet to build sufficient scale to become FCF-generative. As a result, CFO less capex /debt at Iliad Holding is negative at around 3% in 2023 but expected to gradually improve to around 6% in 2027. Building Scale in Italy: Iliad has made good progress since entering the Italian market to reach 10.7 million mobile subscribers (13.6% market share) with around 1.2 million net subscriber additions at end-2023. Revenues in Italy grew to EUR1.1 billion in 2023 from EUR674 million in 2020 while EBITDAaL margin increased to 23.3% from a negative 19.7%. Margin improvement was enabled by the deployment of its own network and converting variable costs into fixed costs while reducing national roaming costs. Its ratings case envisages Fitch-defined operating FCF in Italy to remain negative in 2024-2025 and to turn positive in 2026 on continued growth in revenues and EBITDAaL margins and accompanied by a decline in capex intensity. Consolidated Rating Approach: Fitch sees a strong linkage between Iliad Holding and its stronger subsidiary Iliad based on its Parent-Subsidiary Linkage (PSL) Criteria. Iliad Holding's ownership and control of Iliad lead to 'open' access and control while covenant restrictions in bank loan indentures are not strong enough on their own to establish effective ringfencing, in its view. Iliad's Standalone Credit Profile (SCP) is one notch higher than the consolidated rating profile at 'bb+', due to lower leverage at the operating subsidiary. Structural Subordination of Debt: Fitch-defined consolidated gross debt was EUR14.9 billion at end-2023, of which EUR11.4 billion was issued by Iliad and the remainder by Iliad Holding. The quantum of gross debt issued by Iliad leads to structural subordination of the debt issued by the holding company. As result, the debt issued by Iliad Holding is rated one notch lower than its IDR. DERIVATION SUMMARY Iliad Holding and Iliad are rated on a consolidated basis, with Iliad driving the operating profile of both companies. Iliad's operating profiles in France and Poland are broadly in line with that of other alternative telecoms operators with well-entrenched domestic positions and ownership of both fixed- and-mobile network assets, such as The Sunrise Holding Group (BB-/Negative), Telenet Group Holding N.V (BB-/Stable) and VMED O2 UK Limited (BB-/Negative), although Iliad owns only 50% of its fixed network in Poland. Iliad Holding's and Iliad's higher IDRs reflect their lower leverage. The loosening of the EBITDA net leverage sensitivities for Iliad Holding and Iliad has also brought them in line with those of UPC, Telenet and VMED. Fitch rates Iliad Holding and Iliad on a par with Lorca Holdco Limited (BB/Positive), although Iliad's revised sensitivities are slightly tighter than for Lorca. This reflects Lorca's stronger market position following the merger between MasMovil and Orange Spain (with above a 40% consolidated market share in Spain both in fixed broadband and mobile) and full ownership of its fixed and mobile infrastructure. Iliad's operating profile is weaker then domestically focused incumbent operators', such as Royal KPN N.V. (BBB/Stable). The stronger operating profile of incumbent operators like Royal KPN reflects their higher service revenue market share in both mobile and fixed, network infrastructure ownership, network scale economics of servicing of all market segments and a market structure that is predominantly based on two to three duplicate mobile or local loop network infrastructures. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for Iliad and Iliad Holding - Revenue to grow around 7% in 2024-2025, before slowing to around 5% in 2027 - Fitch-defined EBITDA margin of around 33% in 2024-2027 - Capex including spectrum at around 23% of revenue in 2024, gradually declining to 17% by 2027 - Dividends paid by Iliad of EUR300 million per year and EUR30 million per year by Iliad Holding - Net acquisition spend of EUR500 million in 2024 RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade for Iliad Holding and Iliad: - Sustained competitive position in France and Poland and improved scale in Italy underscored by significant positive FCF generation - A disciplined financial policy that sustains Iliad Holding's consolidated Fitch-defined EBITDA net leverage below 3.7x - Iliad Holding's consolidated CFO less capex consistently at or above 9.0% of gross debt - Iliad Holding's EBITDA (excluding Iliad, including interest earned from inter-company loans) above 2x gross interest Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade for Iliad Holding and Iliad: - Iliad Holding's consolidated Fitch-defined EBITDA net leverage above 4.3x on a sustained basis - CFO less capex consistently at or below 7.0% of gross debt - Iliad Holding's EBITDA (excluding Iliad, including interest earned from inter-company loans) below 1.5x gross interest - A significant erosion of Iliad's market share of mobile or fixed broadband in France and Poland and/or operating FCF - Delayed prospects of FCF turning positive in Italy LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Iliad has comfortable liquidity, with cash and cash equivalents of EUR1.2 billion at end-2023 and undrawn revolving credit facilities (RCF) of EUR2 billion available until July 2028. In April 2024 Iliad completed a EUR500 million senior unsecured bond issue to repurchase its bonds maturing in October 2024 and April 2025. This provides sufficient capacity to cover expected negative FCF and EUR2.7 billion debt maturing in 2024-2025. Iliad Holding had an undrawn EUR300 million RCF maturing in July 2026 and cash and cash equivalents of EUR330 million at end-2023. Fitch expects Iliad Holding to receive about EUR300 million in dividends from Iliad in 2024. This comfortably covers annual interest payments and other company net outflows expected in 2024. As of end-2023 Iliad Holding had EUR2.1 billion of debt maturing in 2026 and EUR1.5 billion maturing in 2028. In April 2024 Iliad Holding completed a EUR1.3 billion senior secured bond issue to refinance its debt maturing in 2026. 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 ----------- ------ -------- ----- Iliad SA LT IDR BB Affirmed BB senior unsecured LT BB Affirmed RR4 BB Iliad Holding S.A.S. LT IDR BB Affirmed BB senior secured LT BB- Affirmed RR5 BB- PIMENTE INVESTISSEMENT: Moody's Cuts CFR & Secured Term Loan to B3 ------------------------------------------------------------------ Moody's Ratings has downgraded Pimente Investissement S.A.S.'s long-term corporate family rating to B3 from B2 and its probability of default rating to B3-PD from B2-PD. Pimente Investissement S.A.S. ("Pimente"), is the parent company of Panzani Group ("Panzani" or the company), a French vertically integrated manufacturer of dry pasta, sauces, couscous and semolina. Concurrently, Moody's has downgraded to B3 from B2 the senior secured ratings on the EUR525 million term loan B (including the EUR185 million add-on raised as part of this transaction) due in December 2028 and on the proposed upsized EUR70 million senior secured revolving credit facility, due in June 2028, both borrowed by Pimente Investissement S.A.S. The outlook remains stable. The company expects to use the proceeds from the proposed add-on to the existing term loan of EUR185 million to fund a dividend to shareholders and repay the shareholder loan within the capital structure which was considered equity by Moody's. "The downgrade reflects the company's shareholder-friendly financial policy as a results of the decision to re-leverage the company capital structure, resulting in weak credit metrics and neutral to slightly negative Moody's adjusted free cash flows over the next 12 to 18 months" said Valentino Balletta, Moody's Analyst and lead analyst for Panzani. "Following the transaction, the ratings will be weakly positioned; however, this is partially compensated by Moody's expectations that the company will maintain a good liquidity profile, supported by its sizeable cash on balance sheet that could potentially be used to fund accretive bolt-on acquisition and that the interest coverage will remain adequate for a B3 rating" added Valentino Balletta. RATINGS RATIONALE The downgrade of Panzani's CFR to B3 takes into account the significant dividend recapitalization transaction that will materially increase Panzani's leverage by approximately 2.1x debt-to-EBITDA, on a Moody's-adjusted basis. This is seen as extremely aggressive and governance considerations were an important driver of the rating action. In Moody's view, such decision demonstrates an aggressive financial policy, implying a lower commitment to de-leverage compare to Moody's previous expectations. At closing of the proposed transaction, Moody's anticipated the company's gross adjusted financial leverage will stand at 8.8x, which is considerably high for the B3 rating category. In addition cash flow generation capacity will remain constrained by the higher interest expenses. This is despite the beneficial hedging strategy applied to roughly half of the company's debt at a rate of 0.75% until March 2027. Moody's recognizes that Panzani's operating performances have been quite resilient despite the challenges faced over the last few years with a historical high EBITDA of EUR71 million in the last 12 months to March 2024. In addition, Moody's anticipates further growth in Panzani's earnings over the forthcoming 12 to 18 months, bolstered by its expansion into high-growth and profitable sectors such as fresh pastas and ethnic foods, as well as ongoing optimization of operations primarily through sourcing, industrial, and supply chain enhancements. Nevertheless, key credit metrics are likely to remain weak with Moody's adjusted leverage trending towards 7.5x over the next 12 to 18 months, which is still high and well above historic levels. Despite the company is weakly positioned within the rating category, the B3 rating takes into account the company's good liquidity and Moody's expectation that most of the post-transaction cash balance of EUR116 million will be preserved and primarily used to fund accretive bolt-on acquisitions as opportunities arise. Moreover, Moody's anticipates, pro forma for the proposed transaction, relatively good EBITA interest coverage ratios above 1.5x, which partially offset the high leverage. However, any additional shareholder distribution that reduces the liquidity buffers could have negative implications for the rating. Panzani's B3 rating continues to be supported by the company's leading market position in the dry pasta and sauces segments, with a well-known portfolio of brands, in a very stable industry; its vertically integrated production, which allows the company to exert a certain degree of control on a part of the value chain; and its flexible cost structure, which offers some protection in case of demand volatility. However, the ratings remain constrained by the company's mature product portfolio; geographical concentration in one country, France, which already has high household penetration of dry pasta; a degree of customer concentration among French retailers; exposure to volatility in raw material prices, which may temporarily erode margins because of the time lag to fully pass through higher costs to customers; and a highly levered capital structure that reduce the flexibility to absorb further potential shock in the industry. LIQUIDITY Moody's expects Panzani's liquidity to remain good in the next 12-18 months following the transaction, supported by an estimated post-closing cash balance of EUR116 million. Liquidity is further supported by a fully undrawn revolving credit facility (RCF) that will be increased up to EUR70 million from EUR60 million at present. The RCF includes one springing financial covenant, defined as net debt/EBITDA below 9.5x, to be tested only when drawings exceed 40% of the size of the facility, against which Moody's expects the company to maintain ample capacity. The company's cash flow generation capacity is constrained by the high interest expenses, despite the beneficial hedging strategy applied to roughly half of its projected debt at a rate of 0.75% until March 2027. This will lead to a slightly negative Moody's-adjusted FCF in 2024 and neutral in 2025 because of some project base capex investment, with positive improvements projected only after this period. Moody's expects the sizeable cash on balance sheet to be retained or reinvested in the business (i.e. through acquisitions) which offset the company's high Moody's-adjusted leverage tolerated for the current B3 rating. Assuming no RCF utilisation, the company will have no material debt maturities until 2028, when its term loan is due. STRUCTURAL CONSIDERATIONS The B3 ratings on the EUR525 million senior secured term loan B (including the EUR185 million add-on) and the EUR70 million RCF are in line with the CFR, reflecting the use of a 50% family recovery rate, consistent with an all-loan debt structure with a springing covenant. Both the term loan and the RCF benefit from the same ranking and security package, are secured by share pledges and are guaranteed by subsidiaries representing at least 80% of the group's EBITDA. RATIONALE FOR THE STABLE OUTLOOK The stable rating outlook reflects Moody's view that Panzani's key credit metrics will not deteriorate further from the current point and will gradually improve in the next 12-18 months, such that leverage reduces towards 7.5x. The stable outlook also incorporates the rating agency's expectation that Panzani will maintain an adequate liquidity over the next 18 months and will allocate part of the excess cash to fund bolt-on accretive acquisitions with no further shareholders distribution. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Because the company is weakly positioned in the B3 category, upward rating pressure is unlikely in the next 12 to 18 months. Over time, upward rating pressure could arise if Panzani continues to execute on its strategy while delivering sustained growth in earnings. An upgrade would require the company to reduces Moody's-adjusted gross debt to EBITDA ratio below 6.5x, to generates meaningful and positive free cash flow on a sustainable basis and maintain at least an adequate liquidity. An upgrade would also require the company to demonstrate a balanced financial policy. The rating could be downgraded if there is evidence that Panzani's credit metrics deteriorate further as a result of a weaker underlying operating performance or in case of more aggressive financial policy, including any additional shareholder distribution that reduces the liquidity buffer built overtime. Quantitatively, Moody's could downgrade Panzani's rating if its Moody's-adjusted gross debt/EBITDA does not trend towards 7.5x or its Moody's-adjusted EBITA interest coverage ratio declines below 1.0x; or if its liquidity deteriorates. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Consumer Packaged Goods published in June 2022. COMPANY PROFILE Panzani is a leading France-based food producer focused on dry pasta, cooking and pasta sauces, couscous, semolina and ready meals. The company sells its products primarily to the French market. In the 12 months that ended in March 2024, the company reported revenue of EUR589 million and adjusted EBITDA of EUR71 million. The group is controlled by funds managed by the private equity firm CVC Capital Partners. RAMSAY GENERALE: Moody's Cuts CFR & Sr. Secured Term Loans to B1 ---------------------------------------------------------------- Moody's Ratings has downgraded Ramsay Generale de Sante S.A.'s (Ramsay or the company) corporate family rating to B1 from Ba3 and its probability of default rating to B1-PD from Ba3-PD. Moody's has downgraded to B1 from Ba3 the instrument rating on the EUR1.45 billion senior secured term loans, the EUR100 million senior secured capital spending and acquisition facility, and the EUR100 million senior secured revolving credit facility (RCF). The outlook remains stable. RATINGS RATIONALE The ratings action reflects weakening of Ramsay's financial and credit profile, with Moody's-adjusted credit metrics being no longer commensurate with a Ba3 rating. Governance considerations were a key driver for this rating action, as tolerance to high leverage is part of financial strategy and risk management characteristics. Moody's reflects this risk in lowering Ramsay's governance issuer profile score (IPS) to G-4 from G-3 and accordingly the Credit Impact Score (CIS) to CIS-4 from CIS-3. In 2023, Ramsay's revenue was boosted by strong volume growth and that year's 5.4% tariff increase in France for the sector. On March 27, 2024, France's deputy minister in charge of health and prevention, Frederic Valletoux, announced the 2024 tariffs for public and private hospitals. In 2024, tariffs will increase 4.3% for public hospitals but only 0.3% for private hospitals. The limited tariff increase is credit negative. Conversations are currently underway between private hospitals and the French government, discussing various funding strategies aimed at addressing the limited tariff increment. The outcome of these talks is yet to be determined. Moody's anticipates these discussions will conclude in the coming weeks. Moody's believes it is probable that private hospitals will receive alternative forms of subsidies to bolster their revenue growth in 2024. Moody's will monitor whether these subsidies or other funding mechanisms are a one-time occurrence or if they will continue beyond 2024. Meanwhile, in Sweden, average tariffs for 2024 are set to increase by 2.5%, which will provide a boost to consolidated revenue. Positively, private hospitals activity has now returned to pre-coronavirus pandemic levels. However, profitability, measured as Moody's-adjusted EBITA margin, decreased to 5.2% in 2023 compared to 7% in 2022. The decline in profitability stemmed from higher inflation, which was not fully offset by the tariff increase in 2023, as well as a decrease in support mechanisms such as COVID-19 government subsidies. Ramsay will continue with cost-cutting measures to sustain profitability, notwithstanding execution risks. Indeed, the high fixed cost structure poses some limits to incremental efficiencies. For example, personnel costs account for around 50% of Ramsay's operating expenses. In 2024, Moody's forecasts adjusted EBITA margin of 4.8%. In light of the downward pressure on profitability, credit metrics are weakening. Moody's projections indicate an adjusted gross debt to EBITDA ratio of 7.2x for the financial year ending in June 2024, and 6.5x for the subsequent year ending in June 2025. Moody's forecasts a modest improvement in the adjusted EBITA to interest expense ratio reaching 1.2x for the financial year ending in June 2024, and 1.4x for the subsequent year ending in June 2025. Whilst the adjusted EBITA to interest expense ratio could improve assuming the ongoing tariff discussions with the French government yield a favorable result, Moody's forecasts the ratio to remain outside the Ba3 rating guidance, also considering the refinancing of 2026 and 2027 debt maturities with potentially higher interest costs. More generally, Ramsay Generale de Santé S.A.'s B1 ratings reflect (1) its large scale, strong reputation and leading position in the private hospital market, namely in France (Government of France, Aa2 stable) and the Nordic countries, in particular Sweden (Government of Sweden, Aaa stable); (2) the stable regulatory framework of the French healthcare system and high barriers to entry; (3) and favorable secular trends for private hospitals, driven by an ageing population with a higher life expectancy resulting in an increased demand for medical care. Conversely, the ratings are constrained by (1) weakening credit metrics, as evidenced by estimated Moody's-adjusted gross debt to EBITDA ratio of 7x and Moody's-adjusted EBITA to interest expense ratio of 1.1x for the 12 months ending December 2023; (2) the exposure to regulatory changes, in particular with regards to adverse change in tariffs; (3) persistent albeit reducing inflation exerting pressure on profitability, with staff shortages adding to the strain. LIQUIDITY Ramsay has an adequate liquidity. As of December 31, 2023, it had cash balance of EUR189 million, an undrawn revolving credit facility (RCF) of EUR100 million and a capital spending and acquisition facility of EUR100 million of which EUR75 million is undrawn as of April 30, 2024. Moody's forecast negative free cash flow generation of about EUR30 million for the financial year ending in June 2024. Going forward, Moody's forecast positive free cash flow of about EUR50-75 million per annum. Moody's expect capital spending to be around 3.5% of revenue which is the minimum level according to the company. Ramsay has high capital expenditure which constrain its free cash flow generation. However, these investments in medical equipment, real estate and renovation, digitalization and reinforcement of cybersecurity are essential. In Moody's view, these projects will support organic revenue growth and reinforce Ramsay's position as a leading clinic operator in France and the Nordic countries. There are no large debt maturities before April 2026 when the senior secured term loan B1, the RCF and capital spending and acquisition facility mature. STRUCTURAL CONSIDERATIONS The EUR1,450 million senior secured term loans, the EUR100 million RCF and the EUR100 million capital spending and acquisition facility are issued by Ramsay Générale de Santé S.A. The B1 instrument ratings reflect their pari passu ranking in the capital structure, with upstream guarantees from material subsidiaries that account for at least 75% of consolidated EBITDA. The security package mainly consists of share pledges on material subsidiaries and offers limited protection to creditors in case of a default. Furthermore, the capital structure includes EUR100 million Euro Private Placement notes having the same security package as the senior secured term loans. Immobiliere Santé, the main holding company for the real estate assets of Ramsay, entered into a EUR273 million loan agreement within its security trust. This loan is pledged by its security trust covering the shares of real estate subsidiaries holding the buildings of six private hospitals or clinics. The B1-PD probability of default reflects Moody's assumption of a 50% family recovery rate, typical for bank debt structures with limited or loose set of financial covenants. There is a springing net leverage covenant included in the RCF documentation which is set at 6.0x, triggered only when the RCF is drawn by more than 40%. The net leverage ratio as defined by the debt indenture was at 5.4x as of 31 December 2023. RATING OUTLOOK The stable outlook reflects Moody's expectation that Ramsay's operating performance will improve over the next 12 to 18 months, leading to credit metrics gradually improving towards the B1 rating guidance. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward rating pressure could arise if Moody's-adjusted gross debt to EBITDA falls below 6x; Moody's-adjusted EBITA to interest expense exceeds 2x; and Moody's-adjusted free cash flow to debt improves towards 5% - all on a sustainable basis. In addition, an upgrade would presume the absence of detrimental regulatory shifts or negative changes in financial policy. Downward rating pressure could develop if the company fails to deleverage to comfortably below Moody's-adjusted gross debt to EBITDA of 7x; Moody's-adjusted EBITA to interest expense remains below 1.5x; or Moody's-adjusted free cash flow remains negative - all on a sustained basis. Negative rating pressure could also occur in the event of large debt-financed acquisitions, distributions to shareholders or if liquidity materially deteriorates. The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Headquartered in France, Ramsay is one of the leading private hospitals in Europe, with strong market positions in France and Sweden. Ramsay offers a broad range of medical, surgical and psychiatric healthcare services. Ramsay is majority owned by Ramsay Health Care (UK) Limited (52.8%), a subsidiary of Ramsay Healthcare Limited, an Australian multinational healthcare provider and hospital network. Other shareholders comprise Predica (39.8%), a subsidiary of Crédit Agricole S.A. (Aa2 stable) specialising in insurance, and Groupe du Docteur Attia (6.6%). Ramsay is listed on the Euronext Paris. ============= G E R M A N Y ============= ESPRIT: Commences Insolvency Proceedings for German Units --------------------------------------------------------- Stefan Van Rompaey at Retail Detail reports that Esprit has started insolvency proceedings for its umbrella European holding and for six German companies. According to Retail Detail, the fashion retailer wants to restructure its European operations and is talking to investors. Esprit is filing for bankruptcy in the Duesseldorf court for its European parent company Esprit Europe GmbH and for six German companies, Retail Detail discloses. The company reported this in a press release on Wednesday, May 15. Operations in the Netherlands, France, the UK, Austria, Scandinavia and Poland are also affected by the insolvency proceedings, Retail Detail states. In Switzerland and Belgium, the fashion chain went bankrupt earlier this year, Retail Detail notes. The company's financial situation has become unsustainable due to high inflation costs, interest rates and energy prices, as well as the aftermath of the pandemic and the impact of international conflicts, reports the communiqué, Retail Detail relates. Insolvency proceedings should allow the company to restructure itself for a sustainable future, Retail Detail says. Meanwhile, operations can continue: shops and online shops would thus remain open. Esprit stresses that it wants to remain active in the market, Retail Detail relays. Several potential investors have already expressed interest in entering into a strategic partnership, according to Retail Detail. ============= I R E L A N D ============= AVIA SOLUTIONS: Fitch Rates USD300 Sr. Unsec. Bonds 'BB' --------------------------------------------------------- Fitch Ratings has assigned AVIA SOLUTIONS GROUP (ASG) PLC's (Avia) USD300 million senior unsecured bonds due 2029 a Long-Term senior unsecured rating of 'BB' with a Recovery Rating of 'RR4'. The bonds are issued by ASG Finance Designated Activity Company, which is 100% owned by Avia. Avia's 'BB' IDR was affirmed on 24 April 2024 and reflects its upwardly revised projections following Avia's updated business plan alongside the aviation sector's robust expansion driving international traffic close to pre-pandemic levels. This is coupled with steady debt increase due to growth in leased fleet, leading to EBITDAR leverage to remain close to 3.0x and EBITDA margins at around 6.5% during 2023-2027. The IDR is supported by the diversity of Avia's operations across the commercial aviation value chain and of geography with a focus on Europe, and by better revenue visibility than airlines. Key person risk stemming from majority ownership by one individual is a rating constraint, despite historically limited dividends. KEY RATING DRIVERS Passenger Traffic Recovery: The majority of Avia's business evolution is structurally linked to global air passenger volumes that have continued to recover in 2023 and its run rate is forecast to cross 2019 levels in 2024. In EMEA, Fitch expects passenger volumes (in revenue passenger kilometers) to increase 10% in 2024 before it eases to its long-term growth of mid-single digits to 2027. Strong Rebound in ACMI: Avia's aircraft wet leasing (ACMI) business, which was the most affected business in 2020, has rebounded strongly and grown to close to 4x its pre-pandemic size with further growth expected. This is driven by a change in major airlines' strategies to increase their operational flexibility through a larger share of their fleet being leased, by an ongoing shortage in aircraft availability on the back of delays in delivery by original equipment manufacturers (OEMs) as well as a shortage of crew. ACMI is the main contributor, with a 67% of total consolidated EBITDA in 2023. Stabilising Cargo Demand: Air cargo demand, which saw weakness in the beginning of 2023, after the boom years in 2021 and 2022, has stabilised and is expected to trend in line with, or better than, global GDP growth. Air cargo demand is also currently benefiting from disruptions to global shipping from the Red Sea attacks. Demand for air cargo across the industry in January 2024 was about 2.8% above pre-pandemic figures, and should support the performance of Avia's cargo fleet. Lower Profitability: Fitch conservatively forecasts EBITDA to increase slightly above EUR200 million in 2027 from about EUR140 million in 2023, reflecting an increase in lease payments, with around a 6.5% EBITDA margin for the group. This is below the 9% achieved in 2022 and limits rating upside currently. While Fitch expects overall passenger and cargo aviation demand to grow steadily, the dynamics of aircraft leasing, including ACMI, will depend to a large extent on the supply of new aircraft from OEMs, fleet strategies adopted by large scheduled carriers as well as broader supply-chain considerations. Avia's business strategy of growing into passenger and cargo capacity provision (including ACMI) has worked well and has the potential to generate higher profitability than its forecasts. Stable Leverage: Fitch expects Avia to maintain a strong financial profile in 2024-2027 with EBITDAR leverage around 3.0 on average, at the lower end of its rating sensitivities. This is based on its expectations of steady increase in adjusted debt by about EUR250 million each year, driven by an increase in leased fleet as well as consequent growth in EBITDAR while free cash flow (FCF) remains moderately positive, due to limited net capex and moderate dividend payments of around EUR26 million each year. Avia has modified the terms of its Certares investment, which it has also recently converted into equity, lowering its non-lease debt versus its previous forecasts. Well-Diversified Business Model: Avia's operations span most of the business-to-business (B2B) segments in the commercial aviation sector, ranging from aircraft maintenance (MRO), passenger and cargo charter, leasing, training to aircraft trading. Avia is one of the leading independent aviation operators in Europe (CEE) with its customers including some of the major European airlines. Avia continues to generate the majority of its revenue from the developed markets of Germany, UK, Ireland and the US, and has also expanded into markets in southeast Asia (Indonesia and Philippines) as well as into Turkey. DERIVATION SUMMARY Avia's business model is a combination of mostly service-oriented businesses and, to a lesser extent, the more asset-intensive business of aircraft trading. In contrast to passenger airlines, Avia operates in the B2B commercial aviation market. Given its operations in MRO, ground handling and leasing businesses, Fitch views its business profile as more stable than passenger airlines but similar to or marginally weaker than large pure ground handling companies. Avia operates on a smaller scale and with a different portfolio mix versus larger, well-established lessors such as AerCap Holdings N.V. (BBB/Stable) or Air Lease Corporation (BBB/Stable). KEY ASSUMPTIONS - Aviation support services (MRO, fuelling, logistics, charter and training) to grow gradually on industry demand to 2027 - Fitch-defined group EBITDA margin to remain in mid-to-high single digits to 2027 - Continued growth in total aircraft to 2027, with most of them to be lease-funded - Logistics and distribution revenues driven by number of aircraft and moderate annual growth in unit revenues to 2027 - Non-lease capex in line with management forecasts for 2024-2027 - Dividends of EUR26 million per year to 2027 - No IPO over the forecast horizon RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - EBITDAR leverage sustained below 3.0x, as continued business growth offsets the consequent increase in adjusted debt - Increase in consolidated Fitch-defined EBITDA margin to above 9% Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - EBITDAR leverage above 4.0x on a sustained basis due to a prolonged impact from a global economic crisis or implementation of a more ambitious-than-expected investment or dividend policy - Decline in consolidated Fitch-defined EBITDA margin to below 5%, due to inability to execute new business opportunities, while maintaining its current debt structure that was put in place to support investment-driven growth LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: At end-2023 Avia's liquidity consisted of EUR201 million of cash and equivalents, while Fitch-projected FCF after acquisitions in the 12 months from October 2023 is broadly neutral. This compares with EUR26 million of short-term bank debt. Avia has been repurchasing its USD300 million 2024 bonds in the market and at end-2023 USD180 million of bonds were outstanding. Avia's refinancing of this bond with its new USD300 million senior unsecured issue with a five-year maturity preserves its liquidity and supports further investments. ISSUER PROFILE Avia provides specialists services to the aviation industry in more than 160 countries across five continents. DATE OF RELEVANT COMMITTEE 12 April 2024 Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- ASG Finance Designated Activity Company senior unsecured LT BB New Rating RR4 BB(EXP) BLACKROCK EUROPEAN I: Moody's Affirms B1 Rating on Class F-R Notes ------------------------------------------------------------------ Moody's Ratings has upgraded the ratings on the following notes issued by BlackRock European CLO I Designated Activity Company: EUR32,000,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to Aa2 (sf); previously on Nov 20, 2023 Upgraded to Aa3 (sf) EUR24,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to Baa1 (sf); previously on Nov 20, 2023 Affirmed Baa2 (sf) Moody's has also affirmed the ratings on the following notes: EUR266,000,000 (current outstanding amount EUR157,496,502) Class A-R Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Nov 20, 2023 Affirmed Aaa (sf) EUR39,680,000 Class B-1-R Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Nov 20, 2023 Upgraded to Aaa (sf) EUR26,320,000 Class B-2-R Senior Secured Fixed Rate Notes due 2031, Affirmed Aaa (sf); previously on Nov 20, 2023 Upgraded to Aaa (sf) EUR25,500,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on Nov 20, 2023 Affirmed Ba2 (sf) EUR10,500,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed B1 (sf); previously on Nov 20, 2023 Affirmed B1 (sf) BlackRock European CLO I Designated Activity Company, issued in February 2016 and refinanced in March 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by BlackRock Investment Management (UK) Limited. The transaction's reinvestment period ended in June 2022. RATINGS RATIONALE The rating upgrades on the Class C-R and Class D-R notes are primarily a result of the deleveraging of the Class A-R notes following amortisation of the underlying portfolio since the last rating action in November 2023. The Class A-R notes have paid down by approximately EUR57.8 million (21.7%) since the last rating action in November 2023 and EUR108.5 million (40.8%) since closing. As a result of the deleveraging, over-collateralisation (OC) has increased for Class A/B, Class C and Class D. According to the trustee report dated April 2024 [1] the Class A/B, Class C and Class D OC ratios are reported at 152.2%, 133.1% and 121.7% compared to October 2023 [2] levels of 143.7%, 129.1% and 119.9% respectively. The affirmations on the ratings on the Class A-R, B-1-R, B-2-R, E-R and F-R notes are primarily a result of the expected losses on the notes remaining consistent with their current rating levels, after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralisation ratios. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR338.2m Defaulted Securities: EUR8.7m Diversity Score: 53 Weighted Average Rating Factor (WARF): 3008 Weighted Average Life (WAL): 3.3 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.74% Weighted Average Coupon (WAC): 3.12% Weighted Average Recovery Rate (WARR): 42.9% Par haircut in OC tests and interest diversion test: none The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance methodology" published in October 2023. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. -- Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. CANYON EURO 2023-1: Fitch Assigns B-sf Final Rating to Cl. F Notes ------------------------------------------------------------------ Fitch Ratings has assigned Canyon Euro CLO 2023-1 DAC final ratings, as detailed below. Entity/Debt Rating ----------- ------ Canyon Euro CLO 2023-1 DAC A Notes XS2776628765 LT AAAsf New Rating A-1 Loan LT AAAsf New Rating A-2 Loan LT AAAsf New Rating B-1 Notes XS2776628922 LT AAsf New Rating B-2 Notes XS2801340402 LT AAsf New Rating C XS2776629144 LT Asf New Rating D XS2776629490 LT BBB-sf New Rating E XS2776629656 LT BB-sf New Rating F XS2776629813 LT B-sf New Rating Subordinated XS2776633096 LT NRsf New Rating Z XS2776633252 LT NRsf New Rating TRANSACTION SUMMARY Canyon Euro CLO 2023-1 DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds were used to purchase a portfolio with a target par of EUR550 million. The portfolio is actively managed by Canyon CLO Advisors LP. The collateralised loan obligation (CLO) has a reinvestment period of about 5.2 years and an 9.2-year weighted average life test (WAL) at closing. KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch places the average credit quality of obligors at 'B'/'B-'. The Fitch-weighted average rating factor (WARF) of the identified portfolio is 25.0. High Recovery Expectations (Positive): At least 90% of the portfolio comprises 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 63.8%. Diversified Asset Portfolio (Positive): The transaction has six Fitch matrices. Two are effective at closing corresponding to a WAL of 9.2 years and another two are forward matrices corresponding to WAL of 8.2 years. The forward matrices could be elected one year after closing if the collateral principal amount (default at Fitch-calculated collateral value) is at least at the reinvestment target par balance. The matrices correspond to a fixed rate (FRA) limit of 5% and 12.5%, respectively. Another two matrices are effective two years after closing, corresponding to a 7.2-year WAL and FRA limit of 12.5%, with a target par condition at EUR550 million and EUR547.5 million, respectively. All matrices are based on a top-10 obligor concentration limit at 20%. 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 an approximately 5.2-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): The WAL used for the transaction's Fitch-stressed portfolio analysis is 12 months less than the WAL covenant at the issue date to account for the strict reinvestment conditions envisaged by the transaction after its reinvestment period. These conditions include, among others, passing the coverage, the Fitch WARF and the Fitch 'CCC' bucket limitation tests after reinvestment, as well as a WAL covenant that gradually steps down over time, both before and after the end of the reinvestment period. Fitch believes these conditions reduce the effective risk horizon of the portfolio during the stress period. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would lead to downgrades of no more than one notch for the class B and D notes, to below 'B-sf' for the class F notes and have no impact on the class A, C and E notes. Based on the identified portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio than the Fitch-stressed portfolio, the class B to F notes have a rating cushion of up to five notches. The class A notes have no rating 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 across all ratings and a 25% decrease of the RRR across all ratings of the Fitch-stressed portfolio would lead to downgrades of up to four notches for the notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 25% reduction of the mean RDR across all ratings and a 25% increase in the RRR across all ratings of the Fitch-stressed portfolio would lead to upgrades of up to five notches, except for the 'AAAsf' rated notes. During the reinvestment period, based on the Fitch-stressed portfolio, upgrades may occur on better-than-expected portfolio credit quality and a shorter remaining WAL test, meaning the notes are able to withstand larger-than-expected losses for the transaction's remaining life. After the end of the reinvestment period, upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. 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. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Canyon Euro CLO 2023-1 DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. CARLYLE EURO 2024-1: Fitch Assigns 'B-sf' Final Cl. E Notes Rating ------------------------------------------------------------------ Fitch Ratings has assigned Carlyle Euro CLO 2024-1 DAC final ratings, as detailed below. Entity/Debt Rating ----------- ------ Carlyle Euro CLO 2024-1 DAC Class A1 Loan LT AAAsf New Rating Class A1 Notes XS2787777825 LT AAAsf New Rating Class A2 Notes XS2787778120 LT AAsf New Rating Class B Notes XS2787778476 LT Asf New Rating Class C Notes XS2787778633 LT BBB-sf New Rating Class D Notes XS2787778807 LT BB-sf New Rating Class E Notes XS2787779011 LT B-sf New Rating Subordinated Notes XS2787781934 LT NRsf New Rating TRANSACTION SUMMARY Carlyle Euro CLO 2024-1 DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds have been used to purchase a portfolio with a target par of EUR400 million. The portfolio is actively managed by Carlyle CLO Partners Manager L.L.C. The CLO has a reinvestment period of about 4.7-years and an 8.5-year weighted average life test (WAL) at closing. KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch places the average credit quality of obligors in the 'B' category. The Fitch weighted average rating factor of the identified portfolio is 24.3. High Recovery Expectations (Positive): At least 90% of the portfolio comprises 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 62.9%. Diversified Asset Portfolio (Neutral): The transaction has four matrices: two effective at closing with fixed-rate limits of 12.5% and 5%, and two one year post-closing with same fixed-rate limits. All four matrices are based on a top 10 obligor concentration limit of 20%. The closing matrices correspond to an 8.5-year WAL test while the forward matrices correspond to a 7.5-year WAL test. The switch to the forward matrices is subject to the aggregate collateral balance (defaults at Fitch collateral value) being at least at the target par. The transaction has reinvestment criteria governing the reinvestment 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. Portfolio Management (Neutral): The transaction has an approximately 4.7-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): The WAL used for the transaction's stress portfolio analysis is 12 months less than the WAL covenant at the issue date to account for the strict reinvestment conditions envisaged by the transaction after its reinvestment period. These include, among others, passing the coverage tests and the Fitch 'CCC' bucket limitation test post reinvestment, 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 in the mean default rate (RDR) across all ratings, and a 25% decrease in the recovery rate (RRR) across all ratings of the identified portfolio, would have no impact on the class A1 notes and lead to downgrades of one notch for the class A2 to D notes and to below 'B-sf' for the class 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 default and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio than the Fitch-stressed portfolio, the class A2 to E notes have a rating cushion of two notches. The class A1 notes have no rating 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 across all ratings and a 25% decrease of the RRR across all ratings of the Fitch-stressed portfolio would lead to downgrades of up to four notches for the class A1 to D notes and to below 'B-sf' for the class E notes. 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, meaning the notes are able to withstand larger-than-expected losses for the transaction's remaining life. After the end of the reinvestment period, upgrades may occur on stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY 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. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Carlyle Euro CLO 2024-1 DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. CARLYLE GLOBAL 2014-3: Fitch Affirms 'B+sf' Rating on Cl. E-R Notes ------------------------------------------------------------------- Fitch Ratings has affirmed Carlyle Global Market Strategies Euro CLO 2014-3 DAC. Fitch has also resolved the Rating Watch Positive on the class B-R notes. The Outlooks are Stable for all notes. Entity/Debt Rating Prior ----------- ------ ----- Carlyle Global Market Strategies Euro CLO 2014-3 DAC A-1A-R XS1751482305 LT AAAsf Affirmed AAAsf A-1B-R XS1751482644 LT AAAsf Affirmed AAAsf A-2A-R XS1751483022 LT AA+sf Affirmed AA+sf A-2B-R XS1751483451 LT AA+sf Affirmed AA+sf B-R XS1751483709 LT A+sf Affirmed A+sf C-R XS1751484004 LT A-sf Affirmed A-sf D-R XS1751484699 LT BB+sf Affirmed BB+sf E-R XS1751484343 LT B+sf Affirmed B+sf TRANSACTION SUMMARY The transaction is a cash flow CLO comprising mostly senior secured obligations. It is actively managed by CELF Advisors LLP and exited its reinvestment period in July 2022. KEY RATING DRIVERS Stable Asset Performance: The transaction's metrics indicate stable asset performance. The transaction is currently 2.7% below target par but is passing all collateral-quality, portfolio-profile and coverage tests. Exposure to assets with a Fitch-derived rating of 'CCC+' is 2.7%, according to the latest trustee report, versus a limit of 7.5%. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors at 'B'/'B-'. The weighted average rating factor, as calculated by Fitch under its latest criteria, is 26.5. High Recovery Expectations: Senior secured obligations comprise 98.5% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The weighted average recovery rate, as calculated by Fitch, is 63.1%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. No obligor represents more than 1.8% of the portfolio balance. Exposure to the three-largest Fitch-defined industries is 31.7% as calculated by Fitch. Deviation from Model-implied Ratings: The class A-2A-R, A-2B-R and B-R notes ratings are one notch below their model-implied ratings (MIR). The deviation reflects limited default-rate cushion at their MIRs under the Fitch-stressed portfolio and uncertain macro-economic conditions that increase risk. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Based on the current portfolio, downgrades may occur if the loss expectation is larger than assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Carlyle Global Market Strategies Euro CLO 2014-3 DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. FAIR OAKS V: Fitch Assigns 'B-sf' Final Rating to Class F Notes --------------------------------------------------------------- Fitch Ratings has assigned Fair Oaks Loan Funding V DAC's notes final ratings, as detailed below. Entity/Debt Rating ----------- ------ Fair Oaks Loan Funding V DAC A XS2793818316 LT AAAsf New Rating B-1 XS2793819710 LT AAsf New Rating B-2 XS2793820726 LT AAsf New Rating C XS2793841219 LT Asf New Rating D XS2793862132 LT BBB-sf New Rating E XS2793871802 LT BB-sf New Rating F XS2793885695 LT B-sf New Rating M XS2793887477 LT NRsf New Rating Subordinated Notes XS2793887121 LT NRsf New Rating X XS2793810842 LT AAAsf New Rating Z XS2793886826 LT NRsf New Rating TRANSACTION SUMMARY The transaction is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. The portfolio has a target par of EUR350 million. The portfolio is actively managed by Fair Oaks Capital Limited. The CLO has a 4.5-year reinvestment period and a 7.5-year weighted average life (WAL). KEY RATING DRIVERS Above-Average Portfolio Credit Quality (Positive): Fitch considers the average credit quality of obligors to be in the 'B' category. The Fitch weighted average rating factor of the identified portfolio is 24.2. High Recovery Expectations (Positive): At least 90% of the portfolio comprises 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 63.8%. Diversified Asset Portfolio (Positive): The transaction has a concentration limit for the 10 largest obligors of 20%. 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 the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has an approximately 4.5-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 one Fitch matrix effective from closing, which has a top 10 obligor concentration limit at 20% and fixed-rate asset limit at 10%. WAL Step-Up Feature (Neutral): One year after closing, and following the step-up determination date, the transaction can extend the WAL by one year. The WAL extension is at the discretion of the manager, but is subject to conditions including fulfilling the portfolio profile tests, collateral-quality tests, coverage tests and meeting the reinvestment target par, with defaulted assets at their collateral value on the step-up determination date. Cash-flow Analysis (Positive): Fitch's analysis of the matrix in effect on the closing date is based on a stressed-case portfolio with a 7.5-year WAL. Under the agency's CLOs and Corporate CDOs Rating Criteria, the WAL used for the transaction stress portfolio was 12 months less than the WAL covenant to account for structural and reinvestment conditions after the reinvestment period, including the over-collateralisation tests, and Fitch's 'CCC' limitation passing after reinvestment. This ultimately reduces the maximum possible risk horizon of the portfolio when combined with loan pre-payment expectations. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A 25% increase of the mean default rate (RDR) and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would have no impact on the class X and A notes, lead to downgrades of one notch for the class B-1 to E notes, and to below 'B-sf' for the class 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 default and portfolio deterioration. Due to the better metrics and shorter life of the identified portfolio, the class B to F notes display a rating cushion of two notches. Should the cushion between the identified portfolio and the stress portfolio be eroded either 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 stressed portfolio would lead to downgrades of up to four notches for the notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 25% reduction of the mean RDR and a 25% increase in the RRR across all ratings of Fitch's stress portfolio would lead to upgrades of up to three notches for the notes, 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 Fitch's stress 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 in case of stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover for losses on the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fair Oaks Loan Funding V DAC 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. Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Fair Oaks Loan Funding V DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. HARVEST CLO VIII: Fitch Affirms B+sf F-R Notes Rating, Outlook Neg ------------------------------------------------------------------ Fitch Ratings has upgraded Harvest CLO VIII DAC's Class B-1RR to C-R notes and affirmed the other notes. Fitch has also resolved the Rating Watch Positive on the class C-R notes. All Outlooks are Stable except for the class F-R notes, which are on Negative Outlook. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO VIII DAC A-RR XS1754145842 LT AAAsf Affirmed AAAsf B-1RR XS1754143557 LT AAAsf Upgrade AA+sf B-2RR XS1754144019 LT AAAsf Upgrade AA+sf C-R XS1754144795 LT AA-sf Upgrade A+sf D-R XS1754145172 LT BBB+sf Affirmed BBB+sf E-R XS1754145503 LT BB+sf Affirmed BB+sf F-R XS1754145255 LT B+sf Affirmed B+sf TRANSACTION SUMMARY Harvest CLO VIII DAC is a cash flow CLO comprising mostly senior secured obligations. The transaction is actively managed by Investcorp Credit Management EU Limited and exited its reinvestment period in January 2022. KEY RATING DRIVERS Performance Better Than Expected Case: Since Fitch's last rating action in January 2024, the portfolio's performance has been stable. Based on the last trustee report dated 4 April 2024, the transaction is failing its weighted average life (WAL) test, fixed-rate collateral debt obligations limit and top 10 obligor limit. The transaction is currently 3.6% below par. The portfolio has approximately EUR3.7 million of defaulted assets. However, exposure to assets with a Fitch-derived rating of 'CCC+' and below is 4.2%, versus a limit of 7.5% and the portfolio's total par loss remains below its rating case assumptions. Manageable Refinancing Risk: The transaction has manageable exposure to near- and medium-term refinancing risk, with 1.1% of the assets in the portfolio maturing before 2024 and 8.7% in 2025, as calculated by Fitch. In combination with the deleveraging of the class A notes, the transaction's performance has resulted in larger break-even default-rate cushions for the senior notes versus the last review. However, due to the limited default-rate cushion on the junior notes, the class F notes Outlook remains Negative. High Recovery Expectations: Senior secured obligations comprise 96.6% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate (WARR) of the current portfolio is 61.5%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration, as calculated by Fitch, is 22.5%, and no obligor represents more than 3% of the portfolio balance. Exposure to the three-largest Fitch-defined industries is 30.2% as calculated by the trustee. Fixed-rate assets are reported by the trustee at 6.3% of the portfolio balance, versus a limit of 6% Transaction Outside Reinvestment Period: The transaction exited its reinvestment period in January 2022, and the most senior notes are deleveraging. The manager can reinvest unscheduled principal proceeds and sale proceeds from credit improved/impaired obligations after the reinvestment period, subject to compliance with the reinvestment criteria. Although that the WAL test, fixed-rate obligation and top 10 obligor concentration limits are currently failing, the manager will still be able to reinvest proceeds on a maintain-or-improve basis. Given the manager's ability to reinvest, Fitch's analysis is based on a stressed portfolio using the agency's collateral quality matrix specified in the transaction documentation. Fitch used the matrix with a top-10 obligor limit at 20% and the largest and third-largest Fitch-defined industries at 17.5% and 40%, respectively. Fitch also applied a haircut of 1.5% to the WARR as the calculation of the WARR in the transaction documentation is not in line with the agency's latest CLO Criteria. Cash Flow Analysis: Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par-value and interest-coverage tests. Deviation from Model-implied Ratings: The class C-R and D-R notes are one notch below their model-implied ratings (MIR). The deviations reflect limited default-rate cushion at their MIRs amid heightened macro-economic risk. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Based on the current portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Harvest CLO VIII DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. HARVEST CLO XIX: Fitch Affirms B+sf F Notes Rating, Outlook Now Neg ------------------------------------------------------------------- Fitch Ratings has upgraded Harvest CLO XIX DAC class B1, B2 and C notes and revised the Outlook on the class F notes to Negative from Stable. All other notes have been affirmed. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO XIX DAC A XS1802400983 LT AAAsf Affirmed AAAsf B1 XS1802401106 LT AA+sf Upgrade AAsf B2 XS1802401528 LT AA+sf Upgrade AAsf C XS1802401957 LT A+sf Upgrade Asf D XS1802402252 LT BBB+sf Affirmed BBB+sf E XS1802402765 LT BB+sf Affirmed BB+sf F XS1802402500 LT B+sf Affirmed B+sf TRANSACTION SUMMARY Harvest CLO XIX DAC is a cash flow CLO mostly comprising senior secured obligations. The portfolio is managed by Investcorp Credit Management EU Limited and exited its reinvestment period in July 2022. KEY RATING DRIVERS Amortisation Raises Credit Enhancement: The class A notes are 25% paid down since the transaction closed in May 2018 and by EUR56.5 million since the last review in July 2023. The upgrades reflect class increased credit enhancement (CE) for the class B1, B2 and C notes, providing greater break-even default-rate cushions since July 2023. Exposure to assets with a Fitch-derived rating of 'CCC+' and below is 5.3%, according to the latest trustee report. Par Erosion; Weakening Portfolio: The portfolio is below target par by 1.6% and, as per the latest investor report, has had two defaults. The transaction is failing its weighted average life (WAL) and the weighted average spread tests, the maximum allowance of fixed-rate assets and the Moody's 'Caa' limit. The class F notes Negative Outlook reflects a modest cushion against defaults given its significant exposure to loans of concern, estimated at 10.2% by Fitch, which Fitch believes may lead to increased portfolio deterioration and defaults. The Negative Outlooks indicate potential downgrades but Fitch expects the ratings to remain within their current category. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the underlying obligors at 'B'/'B-'. The Fitch-calculated weighted average rating factor (WARF) of the current portfolio is 25.1 as reported by the trustee. High Recovery Expectations: Senior secured obligations comprise 94.9% of the portfolio as calculated by the trustee. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate of the current portfolio as reported by the trustee was 59.4%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration is 19.1%, and no obligor represents more than 2.4% of the portfolio balance, as calculated by Fitch. Deviation from MIRs: Despite their upgrades to 'AA+sf' the class B1 and B2 notes remain a deviation from their model-implied ratings (MIR) of 'AAAsf'. The deviation reflects Fitch's view that the default-rate cushion is not commensurate with an upgrade to the MIR, given heightened macro-economic risk. Transaction Outside Reinvestment Period: Although the transaction exited its reinvestment period in July 2022, the manager can reinvest unscheduled principal proceeds and sale proceeds from credit- impaired obligations subject to compliance with the reinvestment criteria. Given the manager's ability to reinvest, Fitch's analysis is based on a stressed portfolio using the agency's matrix specified in the transaction documentation. Cash Flow Analysis: Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par-value and interest-coverage tests. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Downgrades may occur if the build-up of the notes' CE following amortisation does not compensate for a larger loss expectation than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio quality and higher CE from the notes amortisation. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for this transaction. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. NAC AVIATION: Invesco VVR Writes Off $2.1MM Term Loan ----------------------------------------------------- Invesco Senior Income Trust ("VVR") has marked its $2,135,000 loan extended to NAC Aviation 8 Ltd. (Ireland) to market at $0 as of February 29, 2024, according to a disclosure contained in VVR's Form N-CSR for the fiscal year ended February 29, 2024, filed with the U.S. Securities and Exchange Commission. VVR is a participant in a Term Loan to NAC Aviation 8. The loan accrues interest at a rate of 9.44% per annum. The loan matures on December 31, 2026. VVR said the loan is "valued using significant unobservable inputs." It also noted that during the fiscal year ended February 29, 2024, NAC Aviation 8 is "among the largest detractors from absolute performance." VVR is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended, as a closed-end management investment company. VVR may participate in direct lending opportunities through its indirect investment in the Invesco Senior Income Loan Origination LLC, a Delaware limited liability company. VVR owns all beneficial and economic interests in the Invesco Senior Income Loan Origination Trust, a Massachusetts Business Trust, which in turn owns all beneficial and economic interests in the LLC. VVR may participate in direct lending opportunities through its indirect investment in the Invesco Senior Income Loan Origination LLC, a Delaware limited liability company. VVR owns all beneficial and economic interests in the Invesco Senior Income Loan Origination Trust, a Massachusetts Business Trust, which in turn owns all beneficial and economic interests in the LLC. VVR is led by Glenn Brightman, Principal Executive Officer; and Adrien Deberghes, Principal Financial Officer. The Trust can be reached through: Glenn Brightman Invesco Senior Income Trust 1555 Peachtree Street, N.E., Suite 1800 Atlanta, GA 30309 Tel: (713) 626-1919 NAC Aviation 8 Ltd. (Ireland) is a Private limited company. In December 2021, NAC Aviation 8 filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Eastern District of Virginia, along with affiliates including Nordic Aviation Capital Designated Activity Company (Bankr. E.D. Va. Lead Case No. 21-33693), the Hon. Kevin R. Huennekens presiding. The Debtors exited Chapter 11 protection in January 2023. NAC is a regional aircraft leasing company. It is based in Ireland and has offices in Singapore, Denmark, Toronto and Beijing. NAC served almost 70 airlines in approximately 45 countries at the time of the bankruptcy filing. In July 2023, NAC Aviation 29 Designated Activity Company commenced an offer to buy back its 4.75% Senior Secured Notes due June 30, 2026, and -- by way of assignment from lenders -- the loans under its term loan B credit agreement dated as of June 1, 2022. The maximum aggregate amount (at face value) of NAC 29 Debt to be purchased by the Company was $80 million. The accepted bid price ranged was $875.00 to $905.00 per $1,000.00 principal amount of NAC 29 Debt. OAK HILL VI: Fitch Affirms 'B+sf' F Notes Rating, Outlook Now Neg. ------------------------------------------------------------------ Fitch Ratings has upgraded Oak Hill European Credit Partners VI DAC's class B-1, B-2, C and D notes, and affirmed the others. The class C notes have been removed from Rating Watch Positive. Fitch has also revised the Outlook on the class F notes to Negative from Stable. Entity/Debt Rating Prior ----------- ------ ----- Oak Hill European Credit Partners VI DAC A-1 XS1720167664 LT AAAsf Affirmed AAAsf A-2 XS1720609434 LT AAAsf Affirmed AAAsf B-1 XS1720168043 LT AAAsf Upgrade AA+sf B-2 XS1720168399 LT AAAsf Upgrade AA+sf C XS1720168712 LT AA+sf Upgrade A+sf D XS1720169017 LT Asf Upgrade A-sf E XS1720169520 LT BB+sf Affirmed BB+sf F XS1720169876 LT B+sf Affirmed B+sf TRANSACTION SUMMARY The transaction is a cash flow CLO comprising mostly senior secured obligations. It is actively managed by Oak Hill Advisors (Europe), LLP and exited its reinvestment period in January 2022. KEY RATING DRIVERS Stable Asset Performance; Amortising Transaction: The class A-1 notes are 35% paid down since the transaction closed in January 2018. The class B-1, B-2, C and D notes upgrades reflect their stable performance and larger break-even default-rate cushions since the last review in August 2023. The transaction is currently 2.5% below par and exposure to assets with a Fitch-derived rating of 'CCC+' and below is 4.7%, according to the latest trustee report. The change in Outlook to Negative for the class F notes reflects limited default-rate cushions in the current portfolio and the Fitch-stressed portfolio. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors at 'B'/'B-'. The weighted average rating factor, as calculated by Fitch under its latest criteria, is 25.5. High Recovery Expectations: Senior secured obligations comprise 99.6% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The weighted average recovery rate, as calculated by Fitch, is 63.5%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. No obligor represents more than 2.5% of the portfolio balance. Exposure to the three-largest Fitch-defined industries is 26.1% as calculated by Fitch. Deviation from Model-implied Ratings: The class C and D notes ratings are one notch below their model-implied ratings (MIR). The deviation reflects limited default-rate cushions at their MIRs under the Fitch-stressed portfolio for which assets on Negative Outlook have been notched down by one level, and uncertain macro-economic conditions that increase risk. Cash Flow Modelling: The transaction exited its reinvestment period in January 2022, and is currently failing the weighted average life (WAL) test but can reinvest on a maintain-and-improve basis. The manager has not made any purchases since November 2023. Fitch's analysis is based on the Fitch-stressed portfolio with the WAL stressed to four years for the rating-default-rates to account for refinancing risk. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Based on the current portfolio, downgrades may occur if the loss expectation is larger than assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Fitch does not provide ESG relevance scores for Oak Hill European Credit Partners VI DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. OCP EURO 2017-1: Moody's Ups Rating on EUR8MM Class F Notes to B1 ----------------------------------------------------------------- Moody's Ratings has upgraded the ratings on the following notes issued by OCP EURO CLO 2017-1 Designated Activity Company: EUR34,700,000 Class B Senior Secured Floating Rate Notes due 2032, Upgraded to Aa1 (sf); previously on Sep 9, 2020 Affirmed Aa2 (sf) EUR20,500,000 Class C Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to A1 (sf); previously on Sep 9, 2020 Affirmed A2 (sf) EUR8,000,000 (Current outstanding amount EUR4,495,674) Class F Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to B1 (sf); previously on Sep 9, 2020 Confirmed at B3 (sf) Moody's has also affirmed the ratings on the following notes: EUR218,700,000 Class A Senior Secured Floating Rate Notes due 2032, Affirmed Aaa (sf); previously on Sep 9, 2020 Affirmed Aaa (sf) EUR22,600,000 Class D Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Baa3 (sf); previously on Sep 9, 2020 Confirmed at Baa3 (sf) EUR19,200,000 Class E Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Ba3 (sf); previously on Sep 9, 2020 Confirmed at Ba3 (sf) OCP EURO CLO 2017-1 Designated Activity Company, issued in May 2017 and refinanced in December 2019, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured/mezzanine European loans. The portfolio is managed by Onex Credit Partners, LLC with Onex Credit Partners Europe LLP acting as sub manager (together "Onex"). The transaction's reinvestment period will end in July 2024. RATINGS RATIONALE The rating upgrades on the Class B and C notes are primarily a result of the benefit of the shorter period of time remaining before the end of the reinvestment period in July 2024. In addition for Class F there has been an improvement in over-collateralisation (OC) ratio as a result of the diversion of excess interest to deleverage the Class F notes. The affirmations on the ratings on the Class A, D and E notes are primarily a result of the expected losses on the notes remaining consistent with their current rating levels, after taking into account the CLO's latest portfolio, its relevant structural features and its actual OC ratios. In light of reinvestment restrictions during the amortisation period, and therefore the limited ability to effect significant changes to the current collateral pool, Moody's analysed the deal assuming a higher likelihood that the collateral pool characteristics would maintain an adequate buffer relative to certain covenant requirements. The Class F OC ratio has increased because of the diversion of excess interest to deleverage the Class F notes. The Class F notes have paid down by approximately EUR1.2 million (21%) in the last 12 months and EUR3.5 million (44%) since closing. According to the trustee report dated April 2024 [1], the Class F OC ratios is reported at 108.93%, compared to March 2023 [2] level of 108.51%. Moody's notes that the April 2024 principal payments on Class F are not reflected in the reported OC ratio. The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR349.3m Diversity Score: 62 Weighted Average Rating Factor (WARF): 2748 Weighted Average Life (WAL): 4.18 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.95% Weighted Average Coupon (WAC): 3.26% Weighted Average Recovery Rate (WARR): 44.04% The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance methodology" published in October 2023. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: Once reaching the end of the reinvestment period in July 2024. The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. -- Weighted average life: The notes' ratings are sensitive to the weighted average life assumption of the portfolio, which could lengthen as a result of the manager's decision to reinvest in new issue loans or other loans with longer maturities, or participate in amend-to-extend offerings. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. ========= I T A L Y ========= ALBA 14 SPV: Moody's Assigns (P)Ba1 Rating to EUR175.1MM B Notes ---------------------------------------------------------------- Moody's Ratings has assigned the following provisional ratings to the Notes to be issued by Alba 14 SPV S.r.l. (the Issuer): EUR550.3 million Class A Asset-Backed Floating Rate Notes due January 2044, Assigned (P)Aa3 (sf) EUR175.1 million Class B Asset-Backed Floating Rate Notes due January 2044, Assigned (P)Ba1 (sf) Moody's has not assigned a rating to the EUR115.6M Class J Asset-Backed Floating Rate Notes due January 2044. The transaction is a static cash securitisation of lease receivables granted by Alba Leasing S.p.A. (NR) to small and medium-sized enterprises (SMEs) located in Italy. RATINGS RATIONALE The ratings of the Notes are primarily based on the analysis of the credit quality of the underlying portfolio, the structural integrity of the transaction, the roles of external counterparties and the protection provided by credit enhancement. In Moody's view, the strong credit positive features of this deal include, among others: (i) its static nature as well as the structure's efficiency, which provides for the application of all cash collections to repay the senior Notes should the portfolio performance deteriorate beyond certain limits (i.e. Class B interest subordination events); (ii) the granular portfolio composition as reflected by low single lessee concentration (with the top lessee and top 5 lessees group exposure being 0.77% and 3.13%, respectively); (iii) limited industry sector concentration (i.e. lessees from top 2 sectors represent not more than 40.28% of the pool); and (iv) no potential losses resulting from set-off risk as obligors do not have deposits and did not enter into a derivative contract with Alba Leasing S.p.A. However, the transaction has several challenging features, such as: (i) the impact on recoveries upon originator's default (in Italian leasing securitisations future receivables not yet arisen, such as recoveries, might not be enforceable against the insolvency of the originator); (ii) the building and real estate sectors of activity, in terms of Moody's industry classification, account for 26.59% of the portfolio, and (iii) the potential losses resulting from commingling risk that are not structurally mitigated but are reflected in the credit enhancement levels of the transaction. Moody's valued positively the appointment of Banca Finanziaria Internazionale S.p.A. (NR) as backup servicer on the closing date. Finally, Moody's considered a limited exposure to fixed-floating interest rate risk (10.54% of the pool reference a fixed interest rate) as well as basis risk given the discrepancy between the interest rates paid on the leasing contracts compared to the rate payable on the Notes and no hedging arrangement being in place for the structure. Key collateral assumptions Mean default rate: Moody's assumed a mean default rate of 9% over a weighted average life of 2.75 years (equivalent to a B1/Ba3 proxy rating as per Moody's Idealized Default Rates). This assumption is based on: (1) the available historical vintage data, (2) the stable performance of the previous transactions originated by Alba Leasing S.p.A., and (3) the characteristics of the lease-by-lease portfolio information. Moody's took also into account the current economic environment and its potential impact on the portfolio's future performance, as well as industry outlooks or past observed cyclicality of sector-specific delinquency and default rates. Default rate volatility: Moody's assumed a coefficient of variation (i.e. the ratio of standard deviation over the mean default rate explained above) of 54.6%, as a result of the analysis of the portfolio concentrations in terms of single obligors and industry sectors. Recovery rate: Moody's assumed a 35% stochastic mean recovery rate, primarily based on the characteristics of the collateral-specific loan-by-loan portfolio information, complemented by the available historical vintage data. In addition, Moody's assumed a 10.5% recovery rate mean upon insolvency of the originator. Portfolio credit enhancement: the aforementioned assumptions correspond to a portfolio credit enhancement of 20%, that takes into account the Italian current local currency country risk ceiling (LCC) of Aa3. As of March 23, 2024, the audited asset pool of underlying assets was composed of a portfolio of 9,918 contracts amounting to EUR833.7 million. The top industry sector in the pool, in terms of Moody's industry classification, is Construction and building (26.59%). The top borrower represents 0.77% of the portfolio and the effective number of obligors is 1,461. The assets were originated between 2010 and 2024 and have a weighted average seasoning of 1.58 years and a weighted average remaining term of 4.88 years. The interest rate is floating for 89.46% of the pool while the remaining part of the pool bears a fixed interest rate. The weighted average spread on the floating portion is 2.59%, while the weighted average interest on the fixed portion is 5.78%. Geographically, the pool is concentrated mostly in Lombardia (27.95%) and Emilia Romagna (11.85%). At closing, any loan in arrears for more than 30 days will be excluded from the final pool. Assets are represented by receivables belonging to different sub-pools: real estate (15.74%), equipment (57.65%) and auto transport assets (25.47%). A small portion (1.13%) of the pools is represented by lease receivables whose underlying asset is an aircraft, a ship or a train. The securitized portfolio does not include the so-called "residual value instalment", i.e. the final instalment amount to be paid by the lessee (if option is chosen) to acquire full ownership of the leased asset. The residual value instalments are not financed, i.e. it is not accounted for in the portfolio purchase price, and is returned back to the originator when and if paid by the borrowers. However, the Issuer benefits from the interest paid on the residual value, hence the excess spread will increase over time. Key transaction structure features Reserve fund: the transaction benefits from EUR7,254,000 reserve fund, equivalent to 1.00% of the original balance of the rated Notes. The reserve will amortise to a floor of 0.5% in line with the rated Notes. Counterparty risk analysis Alba Leasing S.p.A. acts as servicer of the receivables on behalf of the Issuer, while Banca Finanziaria Internazionale S.p.A. (NR) is the backup servicer and the calculation agent of the transaction. All of the payments under the assets in the securitised pool are paid into the servicer account and then transferred on a daily basis into the collection account in the name of the Issuer. The collection account is held at BNP Paribas (Aa3 long term bank deposits rating), acting through its Italian Branch, with a transfer requirement if the rating of the account bank falls below Baa2. Moody's has taken into account the commingling risk within its cash flow modelling. Principal Methodology The principal methodology used in these ratings was "Equipment Lease and Loan Securitizations methodology" published in September 2023. Factors that would lead to an upgrade or downgrade of the ratings: The Notes' ratings are sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The evolution of the associated counterparties risk, the level of credit enhancement and the Italy's country risk could also impact the Notes' ratings. LOTTOMATICA SPA: Moody's Rates New EUR900MM Secured Notes 'Ba3' --------------------------------------------------------------- Moody's Ratings has assigned a Ba3 rating to the proposed EUR900 million issuance to be split between new senior secured floating rate notes due 2031 and senior secured notes due 2030, all to be issued by Lottomatica S.p.A., a subsidiary of Lottomatica Group S.p.A. ("Lottomatica", or "the company"), the leading gaming company in Italy. Lottomatica's Ba3 Corporate Family Rating, Ba3-PD Probability of Default Rating remain unchanged. The Ba3 rating on Lottomatica S.p.A.'s existing senior secured notes also remain unchanged. The outlook is stable. RATINGS RATIONALE The rating of the proposed notes is in line with the existing senior secured debt, as it is a leverage-neutral refinancing transaction. The proceeds will be used to redeem the company's existing floating rate notes due 2028 and the existing senior secured notes due 2027, and to pay required redemption costs and related fees and expenses. The Ba3 CFR reflects Lottomatica's (1) strong business profile with a favourable position in the gaming value chain making it resilient to downturns; (2) good product diversification and increasing presence in the profitable and growing online segment; (3) good liquidity, supported by consistent strong free cash flow (FCF) generation; and (4) proven ability to integrate large targets and achieve synergies. The rating remains constrained by the company's: (1) geographical concentration in Italy, which exposes the company to a single regulatory and fiscal regime; (2) its exposure to concession renewal risks and the related cash outflow which can be material, and; (3) its presence in the mature retail gaming machine segment with limited growth prospects, although this segment has reduced its contribution to approximately 26% of the group's pro forma (PF) normalised adjusted EBITDA and provides a reliable steady cash flow. The company continued with its strong underlying performance in Q1 2024, with double digit organic growth in revenues and adjusted EBITDA (with normalised sports payout) driven mainly by online, achieving LTM March 24 company-adjusted PF run-rate EBITDA of EUR774 million (proforma for SKS365, Ricreativo B SpA and distribution insourcing Adjusted EBITDA contribution, sports payout normalization of EUR70 million and run rate synergies for SKS365 and Betflag) compared with EUR518 million in FY 2022 (PF for the Betflag acquisition and synergies already secured, excluding EUR6 million from Betflag). Guidance for 2024 revenue and adjusted EBITDA stands at EUR2,020 – EUR2,065million and EUR680- EUR700 million respectively which is in line with the agency's expectation that Moody's-adjusted debt/EBITDA will reduce to around 3.0x in the next 12-18 months from 3.5x in 2023 (PF SKS365). The SKS365 transaction was completed in April 2024. LIQUIDITY Moody's expects the company's liquidity profile to be good over the next 12-18 months supported by consolidated cash balances of around EUR319 million as of March 31, 2024. Further liquidity is provided by access to a fully undrawn revolving credit facility ("RCF") of EUR450 million (comprised of a EUR400 million RCF and a EUR50 million Guarantee Facility) maturing in 2028 and the agency expects a healthy free cash flow of around EUR100 million in the next 12-18 months. The company's liquidity sources can accommodate smaller bolt-on acquisitions, and there are no significant debt maturities before 2027. The super senior RCF documentation contains a springing financial covenant based on senior secured net leverage set at 8.3x and tested when the RCF is drawn by more than 40%. Moody's expect that Lottomatica will maintain good headroom under this covenant if it is tested. STRUCTURAL CONSIDERATIONS Lottomatica's Ba3-PD PDR is in line with the CFR, given the family recovery rate assumption of 50%, which is consistent with Moody's approach for capital structures that include a mix of bank debt and bonds. Lottomatica S.p.A.'s senior secured notes are rated Ba3, in line with the CFR. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that the company will continue to perform well in all of its segments, allowing the company's debt/EBITDA (as adjusted by Moody's) to remain below 4x over the next 12-18 months. It also assumes that the company will adhere to its plan for a more conservative financial policy going forward. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on the ratings could materialize if the company establishes a track record of following more conservative governance practices and financial policy, demonstrates that it is able to maintain Moody's-adjusted leverage below 3.0x on a sustainable basis, and continues to grow its EBIT margin above 20% while exhibiting good liquidity and generating strong positive free cash flow. Negative pressure on the rating could occur if Lottomatica's operating performance weakens or is hurt by a changing regulatory and fiscal regime, including the terms of a concession renewal, or if the company's financial profile weakens such that Moody's-adjusted leverage increases sustainably to above 4.0x, free cash flow deteriorates and liquidity weakens, or the company engages in large transformative acquisitions that could lead to integration risk and a material increase in leverage. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Gaming published in June 2021. COMPANY PROFILE Founded in 2006 and headquartered in Rome (Italy), Lottomatica is the leader in the Italian gaming market. Lottomatica (formerly Gamma Midco S.p.A.) is the publicly listed entity, consolidating entity for audited financials, and holding company of Lottomatica S.p.A. The company operates in three operating segments: (1) Online: online iSports and iGaming through a wide range of online products including games such as poker, casino games, bingo, horse racing and other sports betting; (2) Sports Franchise: games and horse-race betting through the retail network; and (3) Gaming Franchise: concessionary activities relating to the product lines: amusement with prize machines ("AWP"), video lottery terminals ("VLT") and management of owned gaming halls and AWPs ("Retail & Street Operations"). Lottomatica reported net revenue of EUR1,632 million and adjusted EBITDA of EUR580 million in 2023. LOTTOMATICA SPA: S&P Rates New EUR900MM Senior Secured Notes 'BB-' ------------------------------------------------------------------ S&P Global Ratings assigned its 'BB-' rating to Italy-based Lottomatica SpA's (BB-/Stable/--) proposed EUR900 million senior secured notes. The rating is in line with that on the company's outstanding notes. The recovery rating is '3', reflecting its expectation of meaningful recovery (50%-70%; rounded estimate: 55%) in the event of a payment default. Lottomatica is planning to issue a total of EUR900 million senior secured notes, in a combination of fixed and floating rate tranches, due in 2030 and 2031. The proceeds will be used to redeem the EUR350 million notes due 2027 and the EUR550 million notes due 2028. The transaction is leverage neutral and extends debt maturities, while potentially providing a reduction of annual interest expenses, given the high coupon on the older debt. S&P estimates Lottomatica could save EUR10 million-EUR20 million of interest annually compared to our previous base case. On April 30, 2024, Lottomatica posted good first-quarter results, with revenue of EUR440 million and company-adjusted EBITDA at EUR150 million. The company also executed its acquisition of SKS365 slightly ahead of schedule. S&P forecasts that good like-for-like performance and the integration of SKS365 will push the group's revenue to about EUR2.0 billion and S&P Global Ratings-adjusted EBITDA to about EUR0.6 billion in 2024, including eight months of SKS365's results. Issue Ratings--Recovery Analysis Key analytical factors -- S&P rates Lottomatica's EUR1,965 million senior secured notes 'BB-' with a recovery rating of '3', reflecting its expectation of meaningful (50%-70%; rounded estimate: 55%) recovery in the event of a payment default. -- The recovery rating on the senior secured notes is constrained by the prior-ranking EUR400 million super senior RCF and a substantial amount of senior secured debt. -- S&P considers Gamma Topco's margin loan to be structurally subordinated to all Lottomatica SpA's and Lottomatica Group SpA's debt instruments. -- In S&P's hypothetical default scenario, it assumes unfavorable changes in gaming regulations in Italy. These changes will significantly affect the company's business prospects, profitability, and cash flow generation. S&P also assumes increased competition from other gaming operators. -- S&P values the business as a going concern, given its leading brand and market share. Simulated default assumptions -- Year of default: 2028 -- Jurisdiction: Italy Simplified waterfall -- EBITDA at emergence: EUR284 million -- Implied enterprise value multiple: 5.5x (lower than the industry multiple of 6.5x, to reflect Lottomatica's single-country regulatory exposure) -- Gross enterprise value at default: EUR1.6 billion -- Net enterprise value after administrative costs (5%): EUR1.5 billion -- Estimated first-lien claims: EUR353 million -- Recovery rating: Not applicable -- Estimated senior secured claims: EUR2.0 billion -- Recovery rating: '3' (50%-70%; rounded estimate 55%) Note: The RCF is assumed 85% drawn at the time of default. All debt amounts include six months of prepetition interest. TRS EVOLUTION: May 17 Bid Submission Deadline Set for Stake ----------------------------------------------------------- TRS Evolution Spa, pursuant to a "Concordato Semplificato" [Simplified Composition Agreement] (Reg no. 7/2023 - Court of Milan), transfers 99.90% stake in LLC TRS Distribution with registered office in Ulitsa Sretenka 24-2, Building 1 - 107045 Moscow (Russian Federation). The base price is set at EUR500,000. The deadline to submit bids is on Friday, May 17, 2024. Tender is expected to take place on May 20, 2024, at 12:00 a.m. For information and conditions of sale can be found at https://pvp.giustizia.it/pvp/ =========== L A T V I A =========== AIR BALTIC: Fitch Puts 'B' Final Rating to EUR340M Sr. Sec. Bonds ----------------------------------------------------------------- Fitch Ratings has assigned Air Baltic Corporation AS's (airBaltic) senior secured EUR340 million bonds a final long-term rating of 'B' with a Recovery Rating of 'RR3'. Proceeds from the new senior secured bonds due 2029 are being used to refinance airBaltic's EUR200 million bonds due in July 2024. Fitch has also affirmed airBaltic's 'B-' Issuer Default Rating (IDR) with Stable Outlook. The IDR reflects airBaltic's weak financial profile, due to high lease debt driven by fleet growth, and limited financial flexibility. Rating strengths are its market position as the leading network carrier in the Baltic region, new-generation and fuel-efficient fleet and business diversification through wet leasing under-utilised aircraft. The senior secured rating incorporates its recovery analysis. The Stable Outlook reflects successful bond refinancing, business growth in line with the fleet growth plan and broadly stable profitability leading to EBITDAR gross leverage falling to within its current negative rating sensitivities by 2025. The IDR does not incorporate any uplift from airBaltic's Standalone Credit Profile of 'b-' after assessing moderate linkages with its key shareholder, the government of Latvia (A-/Positive). The potential for equity-type support is limited by EU state aid regulation. KEY RATING DRIVERS Final Terms of Senior Secured: airBaltic's liquidity profile has improved following a successful issue of new senior secured bonds, which are being used to refinance its EUR200 million bond maturing in July 2024. The final amount of issue (EUR340 million) is higher than the launch amount (EUR300 million). The increased amount is being used to repay EUR36 million of other prior-ranking secured debt (a shareholder loan). Improvement in Profitability: In 2023 airBaltic improved its EBITDAR to EUR171 million (about 60% increase YoY), which led to a decrease in EBITDAR leverage to 6.7x (from 9.9x in 2022). Better profitability is driven by underlying operating performance. Load factor grew to 76.7% (2022: 71.2%), while ASKs (available seat kilometres) increased 27% YoY. Fitch expects steady growth in revenues on the back of planned fleet growth, and stable EBITDAR margins. Strong Market Position in Baltics: airBaltic is the market leader in the Baltic states, particularly in Latvia, covering more than half the market out of Riga. It provides essential connectivity to and from Latvia through its hub-and-spoke model, which is supported by airBaltic's strong airline partnerships through 23 code share and 40 inter-line agreements with European and global network carriers. Streamlined and Efficient Fleet Structure: airBaltic has transformed its fleet structure through its order book of A220-300 aircraft, of which 46 were received at end-2023 and with new orders, its fleet is planned to grow to 100 aircraft by 2029. Fitch views the planned fleet size and structure as more than sufficient for its needs in the medium-to-long term, based on demand from its home markets. A220-300 is a new generation, highly fuel-efficient aircraft with 130-150 seats, which makes it ideal for airBaltic. Wet Leasing Improves Business Profile: The new aircraft also make airBaltic a solid operator in wet leasing (aircraft, crew, maintenance, insurance - (ACMI)). It has around 30% of its fleet under ACMI operations with contracts with larger European network carriers. These operations provide airBaltic with diversification, revenue visibility, higher profitability as well as flexibility to increase its own network based on demand. The ACMI market has emerged stronger post-pandemic and Fitch expects airBaltic to continue to deploy any under-utilised aircraft for ACMI. IPO to Fund Growth: airBaltic plans to launch an IPO before 2026, both to strengthen its financial structure and to justify to the EU the economic rationale of the support provided during the pandemic. The IPO would be key in allowing fleet expansion while maintaining a sustainable financial structure. Fitch assumes a cash-in of EUR250 million from the IPO in 2025 and annual capex to average about EUR130 million from 2025. With fleet-driven growth in revenues, Fitch forecasts EBITDAR leverage to decrease to about 5.7x in 2025. In the absence of an IPO, Fitch expects airBaltic to materially reduce uncommitted growth capex to preserve cash. Operational Risks from PW Engine: airBaltic's A-220 aircraft are exposed to Pratt and Whitney's (PW) GTF engine issue that had resulted in about nine aircraft being grounded in the past year. It has received commercial support from PW. However, the continuation of engine issues on some of its A220-300 aircraft has led us to expect airBaltic to broadly maintain its capacity by wet-leasing aircraft to make up for aircraft-on-ground due to the engine issues. Further grounding raises operational risk for airBaltic and could also lead to adverse financial impact in case of disagreement on commercial support from PW. Higher Fuel Prices Risk: airBaltic is also exposed to oil prices, as it currently has limited fuel price hedges in place (20% of fuel consumption hedged for 2024). It has a policy of hedging up to 50% of its fuel requirement, which is also a less conservative than rated European airlines'. Fuel prices in its forecasts are comparable with other airlines' but higher than Fitch's oil price forecasts, while also taking into account EU emissions trading system costs. Moderate State Linkages: Fitch views support from the Latvian government, which owns 98% of the airline, as 'Strong' for both the responsibility-to-support factors, but 'Not Strong Enough' under both the incentive-to-support factors. While the government continues to see airBaltic as a strategic asset due primarily to the connectivity it provides to its population, the planned IPO will reduce the government's ownership, and along with EU state aid rules, will make it difficult to provide equity-like support to the company, in its view. Fitch also does not expect contagion risk for Latvia from an airBaltic default. DERIVATION SUMMARY airBaltic's business profile is similar to that of a smaller network carrier, which places it in the 'b' category. Comparable rated peers include Hawaiian Airlines, Inc. (B-/Rating Watch Positive) while rated European network airlines are generally larger. airBaltic's IDR of 'B-' is driven by its financial profile, which Fitch forecasts to be in the 'b' category following recovery in its operations over the medium term and is comparable with that of Hawaiian Airlines, Inc. and WestJet Airlines Ltd. (B/Stable). KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer: - Fleet growth and capex in line with management's plan for 2024-2027 - Slower recovery in capacity deployed with load factors remaining lower than large legacy carriers' and significantly below that of low-cost carriers - ACMI revenues in line with management plan due to contracts in place and firm industry-wide demand - Broadly stable yields to 2027 - Jet fuel price, after including EU ETS costs, remaining above USD1,000/mt during 2024-2027 - No dividends for 2023-2027 - No further equity support from government - IPO proceeds of EUR250 million in 2025 RECOVERY ANALYSIS KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that airBaltic would be reorganised as a going concern (GC) in bankruptcy rather than liquidated. airBaltic's GC EBITDA assumption of EUR57 million is based on sustainable steady growth. An enterprise value (EV) multiple of 4.5x EBITDA is applied to the GC EBITDA to calculate a post-reorganisation EV. This is the standard multiple used for EMEA airlines. After deducting 10% for administrative claims, its waterfall analysis generated a ranked recovery in the 'RR3' band, indicating a 'B' instrument rating for the senior secured bond. The waterfall analysis based on current metrics and assumptions yields recoveries of around 68%. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Improvement in EBITDAR leverage to below 5.0x and EBITDAR fixed charge coverage above 1.5x, both on a sustained basis - Successful implementation of its strategy including profitable own network operations as well as ACMI operations resulting in an EBITDA margin of 8%-10% - Positive free cash flow (FCF) generation in the absence of fleet expansion capex Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - EBITDAR leverage sustained above 6.0x and EBITDAR fixed charge coverage below 1x, both on a sustained basis - Ambitious growth capex not backed by equity increase leading to pressure on liquidity - Increased competition or deterioration in underlying business characteristics LIQUIDITY AND DEBT STRUCTURE Improved Liquidity: The EUR340 million bond issue has substantially improved the company's liquidity, which Fitch now views as sufficient. The proceeds from the issue should support liquidity till end-2025, including the repayment of EUR200 million bonds in July 2024. Fitch expects FCF to remain negative in the medium term with a cumulative outflow of EUR213 million during 2024-2027, including 14.5% interest on the newly issued bonds, which is slightly higher than expected. Given the projected FCF burn and the absence of credit facilities the company will require external funding from 2026, in the absence of an IPO, based on its projections. ISSUER PROFILE airBaltic, founded in 1995, is the airline operating in Baltic region, with hubs in Riga, Tallinn and Vilnius and market shares of 51%, 22% and 11%, respectively. 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 ----------- ------ -------- ----- Air Baltic Corporation AS LT IDR B- Affirmed B- senior secured LT B New Rating RR3 B(EXP) ===================== N E T H E R L A N D S ===================== BOI FINANCE: Fitch Affirms 'B-' Rating on Sr. Unsecured Notes ------------------------------------------------------------- Fitch Ratings has revised the Outlook on the Long-Term Issuer Default Ratings (IDRs) of five Nigerian banks and one bank holding company to Positive from Stable. The Long-Term IDRs have been affirmed at 'B-'. The affected issuers are Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc (UBA), Guaranty Trust Bank Limited (GTB), Guaranty Trust Holding Company Plc (GTCO) and Bank of Industry Limited (BOI). The revision of the Outlooks on the Long-Term IDRs of Access Bank, Zenith Bank, UBA, GTB and GTCO mirrors the recent sovereign Outlook revision and reflects Fitch's view that Nigeria's Long-Term IDRs are likely to represent less of a constraint on the issuers' standalone creditworthiness in the near term. The revision of the Outlook on BOI's Long-Term IDR reflects its view that the government's ability to provide support to the policy bank is likely to improve. Fitch revised the Outlook on Nigeria's Long-Term IDRs to Positive on 3 May 2024 (see Fitch Revises Nigeria's Outlook to Positive; Affirms at 'B-'). The revision partly reflected government reforms over the last year to support the restoration of macroeconomic stability and enhance policy coherence and credibility. Exchange rate and monetary policy frameworks have been adjusted, fuel subsidies reduced, coordination between the ministry of finance and the Central Bank of Nigeria (CBN) improved, central bank financing of the government scaled back and administrative efficiency measures are being taken to raise the currently low government revenue, as well as oil production. The issuers' National Ratings are unaffected by the event. As a policy bank, BOI's Government Support Rating (GSR) has been affirmed at 'b-'. The GSRs of the other issuers are unaffected. KEY RATING DRIVERS The Long-Term IDRs of Access Bank, Zenith Bank, UBA, GTB and GTCO are driven by their standalone creditworthiness, as expressed by their Viability Ratings (VR) of 'b-'. The VRs are constrained by Nigeria's Long-Term IDRs due to high sovereign exposure in the form of fixed-income securities and cash reserves and FX swaps with the CBN relative to capital. The VRs also capture the issuers' strong business profiles, characterised by sizeable market shares and revenue diversification, in addition to strong profitability, and large capital and foreign-currency (FC) liquidity buffers. The Positive Outlooks on the Long-Term IDRs mirror that on the sovereign. The VRs of Zenith Bank, UBA, GTB and GTCO remain one notch below their implied VRs of 'b', reflecting the operating environment/sovereign rating constraint. Operating conditions remain challenging despite the sovereign Outlook revision, with implemented reforms presenting significant near-term credit and market risks to the banking sector. The Nigerian naira has devalued by over 65% against the US dollar since end-May 2023, exerting pressure on the banking sector's capitalisation and heightening credit concentration risks, and the FX market has yet to stabilise. Inflation (March: 33.2%) has accelerated, partly due to exchange rate pass-through and rising food prices, and is forecast to remain high in the near term (2024: 26.3%). The banking sector's ability to tolerate these risks will be supported by a marked increase in equity issuance over the next two years to comply with a significant increase in paid-in capital requirements by end-1Q26. The CBN has stepped up efforts to reform the monetary and exchange rate framework, including by increasing the monetary policy rate by a total 600bp in February and March, and the large differential between the official and parallel market exchange rate has collapsed. Average daily FX turnover at the official FX window has risen sharply from 2H23, albeit there has been renewed volatility, and the CBN has cleared USD4.5 billion of the backlog of unpaid FX forwards, which is positive for the banking sector's FC liquidity. However, USD2.2 billion of "unverified" FX forwards have yet to be cleared and there are risks of the CBN introducing more regulations that are detrimental to the banking sector to support macroeconomic stability. Fitch believes that the five issuers can comfortably tolerate the credit, market and regulatory risks emanating from the challenged operating environment due to their strong pre-impairment operating profits, which provide significant headroom to absorb loan impairment charges, and their large capital and FC liquidity buffers. BOI's Long-Term IDR is driven by its GSR of 'b-', which reflects potential support from the Nigerian government, if required. Fitch considers the government has a high propensity to support BOI given its 99.9% state ownership, well-established and clearly defined policy role, and significant share of government-guaranteed funding (end-2022: 77% of borrowings). However, the government's ability to provide support is limited by its own creditworthiness, as indicated by its Long-Term IDR of 'B-'. The Positive Outlook on BOI's Long-Term IDR mirrors that on the sovereign. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A downgrade of the Long-Term IDRs and VRs of Access Bank, Zenith Bank, UBA, GTB and GTCO could result from a downgrade of Nigeria's Long-Term IDRs if Fitch believes that the direct and indirect effects of a sovereign default would likely erode capitalisation and FC liquidity insofar as to undermine viability. However, this is unlikely considering the Positive Outlook on Nigeria's Long-Term IDRs. A downgrade may also result from the combination of a naira devaluation and a marked increase in problem loans, resulting in a breach of capital requirements without near-term prospects for recovery, or a severe tightening in FC liquidity. BOI's Long-Term IDR and GSR would be downgraded if Nigeria's Long-Term IDRs were downgraded or as a result of a reduced propensity to provide support to the policy bank. The latter may be indicated by a change in BOI's policy role, such as an increasing shift towards commercial activities, or a material reduction in government ownership. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade An upgrade of the Long-Term IDRs and VRs of Access Bank, Zenith Bank, UBA, GTB and GTCO would require an upgrade of Nigeria's Long-Term IDRs in conjunction with a stable financial profile. An upgrade of BOI's Long-Term IDR and GSR would require an upgrade of Nigeria's Long-Term IDRs. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS Senior unsecured debt is rated in line with the respective issuer's IDRs as the likelihood of default on these obligations reflects that of the issuer. The Recovery Ratings are 'RR4', indicating average recovery prospects. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Senior unsecured debt ratings would move in tandem with their anchor ratings. VR ADJUSTMENTS The business profile scores of Access Bank and Zenith Bank of 'b' are below the 'bb' category implied score due to the following adjustment reason: business model (negative). The earnings and profitability scores of Zenith Bank, UBA, GTB and GTCO of 'b+' are below the 'bb' category implied score due to the following adjustment reason: earnings stability (negative). The capitalisation and leverage scores of Access Bank, Zenith Bank, UBA, GTB and GTCO of 'b-' are below the 'bb' category implied score due to the following adjustment reason: risk profile and business model (negative). The funding and liquidity scores of UBA, GTB and GTCO of 'b' are below the 'bb' category implied score due to the following adjustment reason: foreign-currency liquidity (negative). PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BOI's Long-Term IDR and GSR are directly linked to Nigeria's Long-Term IDRs. ESG CONSIDERATIONS BOI has an ESG Relevance Score of '4' [+] for Human Rights, Community Relations, Access & Affordability due to its policy role, which promotes financing to underbanked and underserved communities. This has a positive impact on the government's propensity to support and is therefore relevant to BOI's ratings 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 ----------- ------ -------- ----- Zenith Bank Plc LT IDR B- Affirmed B- ST IDR B Affirmed B Viability b- Affirmed b- senior unsecured LT B- Affirmed RR4 B- senior unsecured ST B Affirmed B United Bank For Africa Plc LT IDR B- Affirmed B- ST IDR B Affirmed B Viability b- Affirmed b- senior unsecured LT B- Affirmed RR4 B- senior unsecured ST B Affirmed B BOI Finance B.V. senior unsecured LT B- Affirmed RR4 B- Guaranty Trust Holding Company Plc LT IDR B- Affirmed B- ST IDR B Affirmed B Viability b- Affirmed b- Access Bank Plc LT IDR B- Affirmed B- ST IDR B Affirmed B Viability b- Affirmed b- senior unsecured LT B- Affirmed RR4 B- senior unsecured ST B Affirmed B Bank of Industry Limited LT IDR B- Affirmed B- ST IDR B Affirmed B Government Support b- Affirmed b- Guaranty Trust Bank Limited LT IDR B- Affirmed B- ST IDR B Affirmed B Viability b- Affirmed b- DOMI BV 2024-1: Moody's Assigns (P)B2 Rating to Class E Notes ------------------------------------------------------------- Moody's Ratings has assigned provisional ratings to the Notes to be issued by Domi 2024-1 B.V.: EUR[]M Class A Mortgage Backed Floating Rate Notes due June 2056, Assigned (P)Aaa (sf) EUR[]M Class B Mortgage Backed Floating Rate Notes due June 2056, Assigned (P)Aa2 (sf) EUR[]M Class C Mortgage Backed Floating Rate Notes due June 2056, Assigned (P)A2 (sf) EUR[]M Class D Mortgage Backed Floating Rate Notes due June 2056, Assigned (P)Baa3 (sf) EUR[]M Class E Mortgage Backed Floating Rate Notes due June 2056, Assigned (P)B2 (sf) EUR[]M Class X Mortgage Backed Floating Rate Notes due June 2056, Assigned (P)B3 (sf) Moody's has not assigned a rating to the EUR [ ]M Class Z Notes due June 2056. RATINGS RATIONALE The Notes are backed by a static pool of Dutch buy-to-let ("BTL") mortgage loans originated by Domivest B.V. ("Domivest"). This represents the seventh issuance of this originator. The total portfolio as of April 30, 2024 is EUR322 million. The Reserve Fund is funded at 0.75 % of the Notes balance of Class A at closing with a target of 1.50% of Class A Notes balance until the step-up date. The total credit enhancement for the Class A Notes at closing will be roughly 8.19% including the credit support provided by the reserve fund. 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 static portfolio, low CLTV at 65.9%, and an amortising reserve fund sized on aggregate at closing at 0.75% of Class A Notes' principal amount that will increase after closing to 1.5% using excess spread. However, Moody's notes that the transaction features some credit weaknesses such as a small and unregulated originator also acting as master servicer and the focus on a small and niche market, the Dutch BTL sector. Domivest, with its current size and set-up acting as master servicer of the securitised portfolio, would not have the capacity to service the portfolio on its own. However, the day-to-day servicing of the portfolio is outsourced to Stater Nederland B.V. ("Stater", NR) as subservicer and HypoCasso B.V. (NR, 100% owned by Stater) as delegate special servicer. Stater and HypoCasso B.V. are obliged to continue servicing the portfolio after a master servicer termination event. This risk of servicing disruption is further mitigated by structural features of the transaction. These include, among others, the issuer administrator acting as a backup servicer facilitator who will assist the issuer in appointing a backup servicer on a best-effort basis upon termination of the servicing agreement. Moody's determined the portfolio lifetime expected loss of 1.4% and Aaa MILAN credit enhancement ("MILAN CE") of 12.0% related to the mortgage portfolio. The expected loss captures Moody's expectations of performance considering the current economic outlook, while the MILAN CE captures the loss Moody's expect the portfolio to suffer in the event of a severe recession scenario. Expected loss and MILAN CE 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 1.4%: This is higher than the average in the Dutch RMBS sector and is based on Moody's assessment of the lifetime loss expectation for the pool taking into account: (i) that little historical performance data for the originator's portfolio is available; (ii) benchmarking with comparable transactions in the Dutch owner-occupied and BTL market and the UK BTL market; (iii) peculiarities of the Dutch BTL market, such as the relatively high likelihood that the lender will not benefit from its pledge on the rents paid by the tenants in case of borrower insolvency; and (iv) the current stable economic conditions and forecasts in The Netherlands. The MILAN CE for this pool is 12.0%: Which is higher than that of other BTL RMBS transactions in the Netherlands mainly because of: (i) the fact that no meaningful historical performance data is available for the originator's portfolio and the Dutch BTL market; (ii) the weighted average current loan-to-market value (LTMV) of approximately 65.9%; and (iii) the high interest only (IO) loan exposure (99.0% of the loan balance are IO loans). Borrowers could be unable to refinance IO loans at maturity because of the lack of alternative lenders. Furthermore, while Domivest is using the market value in tenanted status in assessing the LTV upon origination, Moody's apply additional stress to the property values to account for the higher illiquidity of rented-out properties when being foreclosed and sold in rented state in a severe stress scenario. Due to the small and niche nature of the Dutch BTL market and the high tenant protection laws in The Netherlands Moody's consider a higher likelihood that properties will have to be sold with tenants occupying the property than in other BTL markets, such as UK. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in October 2023. Please note that a Request for Comment was published in which Moody's requested market feedback on potential revisions to one or more of the methodologies used in determining these Credit Ratings. If the revised methodologies are implemented as proposed, it is not currently expected that the Credit Ratings referenced in this press release will be affected. 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 that would lead to an upgrade of the ratings 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 (b) the risk of increased swap linkage due to a downgrade of a currency swap counterparty ratings; and (ii) economic conditions being worse than forecast resulting in higher arrears and losses. DOMI BV 2024-1: S&P Assigns Prelim. B-(sf) Rating on X-Dfrd Notes ----------------------------------------------------------------- S&P Global Ratings assigned its preliminary credit ratings to Domi 2024-1 B.V.'s class A and B-Dfrd to X-Dfrd notes. At closing, Domi 2024-1 will also issue unrated class Z notes. Domi 2024-1 is a static RMBS transaction that securitizes a portfolio of EUR321.7 million buy-to-let mortgage loans (as of April 30, 2024) secured on properties in the Netherlands. The loans in the pool were originated by Domivest B.V. between December 2017 and 2024. It will be the seventh in the series of Domi RMBS securitizations. Around 20% of the loans in Domi 2024-1 are currently securitized in Domivest's inaugural transaction, Domi 2019-1 B.V., which is expected to be terminated on its June 2024 call date. At closing, the issuer will use the issuance proceeds to purchase the full beneficial interest in the mortgage loans from the seller. The issuer will grant security over all its assets in the security trustee's favor. The assets held in Domi 2019-1 will be purchased two days after closing if certain conditions are met. Credit enhancement for the rated notes will consist of subordination from the closing date. The transaction will feature a general reserve fund to provide liquidity. There are no rating constraints in the transaction under our counterparty, operational risk, or structured finance sovereign risk criteria. S&P considers the issuer to be bankruptcy remote. Preliminary ratings CLASS PRELIM. RATING* PRELIM. AMOUNT (MIL. EUR) A AAA (sf) 297.6 B-Dfrd AA (sf) 12.9 C-Dfrd A (sf) 6.4 D-Dfrd BBB (sf) 3.2 E-Dfrd B- (sf) 1.6 X-Dfrd B- (sf) 6.4 Z NR N/A *S&P's preliminary ratings address timely receipt of interest and ultimate repayment of principal on the class A notes, and the ultimate payment of interest and principal on the other rated notes. NR--Not rated. N/A--Not applicable. MILA 2024-1: Fitch Assigns 'B(EXP)sf' Rating to Class F Notes ------------------------------------------------------------- Fitch Ratings has assigned MILA 2024-1 B.V. class A to F notes expected ratings. The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. Entity/Debt Rating ----------- ------ Mila 2024-1 B.V. A LT AAA(EXP)sf Expected Rating B LT AA+(EXP)sf Expected Rating C LT A+(EXP)sf Expected Rating D LT BBB+(EXP)sf Expected Rating E LT BBB-(EXP)sf Expected Rating F LT B(EXP)sf Expected Rating TRANSACTION SUMMARY Mila 2024-1 B.V. is the inaugural securitisation of a pool of unsecured consumer loans sold by Lender & Spender (L&S, not rated), a Dutch consumer lending company that started operations as a marketplace lender in 2016. The loan receivables are derived from loan agreements with individuals located in the Netherlands, originated mainly via a broker network, sales cooperation partners as well as L&S's direct online platform. KEY RATING DRIVERS Underwriting Standards Reduce Default Expectations: The Dutch regulator, AFM, mandates minimum underwriting standards, particularly on the maximum monthly debt service amount considered prudent for household budgets. These standards have lowered default rates across recent Dutch unsecured consumer loan portfolios. Historical Performance Data Limited: Fitch has received L&S's book performance data since it started lending in 2016, but substantial volumes have only been originated since 2020. Accordingly, the default base case of 2.0% reflects a combination of credit performance in the L&S book as well as wider proxy data for Dutch unsecured consumer loans. This leads to the base case being higher than suggested solely by the L&S data. In addition, Fitch applied a default multiple above the regular range to address associated uncertainty. Transaction Structure Adds Risk: The transaction features pro rata amortisation of the rated notes and a 12-month revolving period. These features are subject to performance triggers, of which Fitch considers the principal deficiency ledger triggers the most effective. Replenishment adds some uncertainty to asset performance, which is reflected in the asset assumptions. Pro rata amortisation can lengthen the life of the senior notes and expose them to adverse developments towards the end of the transaction. Fitch has accounted for this in its cash flow modelling. Hedging Structure Exposed to Mismatches: Interest rate risk is hedged using an interest rate swap with a fixed schedule. The actual outstanding amount of the portfolio and the hedged notes can differ substantially from the fixed schedule, depending on default rates, prepayments and in particular the actual length of the revolving period. Early termination of the revolving period and high defaults combined with high prepayments expose the structure to over-hedging, which reduces excess spread in a decreasing rate environment. Fitch considered this risk in its ratings. Servicing Set-Up Reduces Seller-dependency: Primary servicing is performed by L&S, with special servicing being outsourced to Vesting Finance from closing. Acting as back-up servicer, Vesting would also take over primary servicing in case of a servicer default. Payment interruption risk is reduced by a liquidity reserve, which covers more than three months of senior expenses, swap and interest on the class A to F notes. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The ratings may be negatively affected if losses are larger and more front- or back-loaded depending on the notes and respective stress scenarios. The ratings of notes at the lower end of the capital structure are vulnerable to the revolving period ending early resulting in over-hedging of the interest exposure. Expected impact on the notes' ratings of increased defaults (class A/B/C/D/E/F): Increase default rate by 10%: 'AAAsf'/'AA+sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'Bsf' Increase default rate by 25%: 'AAAsf'/'AA+sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'Bsf' Increase default rate by 50%: 'AA+sf'/'AAsf'/'A-sf'/'BBBsf'/'BB+sf'/'Bsf' Expected impact on the notes' ratings of decreased recoveries (class A/B/C/D/E/F): Reduce recovery rates by 10%: 'AAAsf'/'AA+sf'/'A+sf'/BBB+sf'/'BBB-sf'/'Bsf' Reduce recovery rates by 25%: 'AAAsf'/'AA+sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'Bsf' Reduce recovery rates by 50%: 'AAAsf'/'AA+sf'/'Asf'/'BBBsf'/'BB+sf'/'Bsf' Expected impact on the notes' ratings of increased defaults and decreased recoveries (class A/B/C/D/E/F): Increase default rates by 10% and decrease recovery rates by 10%: 'AAAsf'/'AA+sf'/'Asf'/'BBB+sf'/'BBB-sf'/'Bsf' Increase default rates by 25% and decrease recovery rates by 25%: 'AAAsf'/'AAsf'/'A-sf'/'BBBsf'/'BB+sf'/'Bsf' Increase default rates by 50% and decrease recovery rates by 50%: 'AAsf'/'Asf'/'BBBsf'/'BB+sf'/'BB-sf'/CCCsf' Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The ratings may be positively affected if credit enhancement ratios increase as the transaction deleverages or losses are smaller than assumed. Expected impact on the notes' ratings of decreased defaults and increased recoveries (class A/B/C/D/E/F): Decrease default rates by 10% and increase recovery rates by 10%: 'AAAsf'/'AAAsf'/'AA-sf'/'Asf'/'BBB+sf'/'BB-sf' Decrease default rates by 50% and increase recovery rates by 50%: 'AAAsf'/'AAAsf'/'AAAsf'/'AA+sf'/'A+sf'/'BBB-sf' USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS Mila 2024-1 B.V. has an ESG Relevance Score of '4' for Data Transparency & Privacy due to limited historical data, which has a negative impact on the credit profile, and is relevant to the rating[s] 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. ===================== S W I T Z E R L A N D ===================== VAT GROUP: Moody's Upgrades CFR to Ba1 & Alters Outlook to Stable ----------------------------------------------------------------- Moody's Ratings upgraded VAT Group AG's corporate family rating to Ba1 from Ba2, as well as the company's probability of default rating to Ba1-PD from Ba2-PD. Concurrently, Moody's changed the outlook to stable from positive. RATINGS RATIONALE The rating action reflects: (i) VAT's overall resilient key credit metrics for the full-year 2023 despite the concurrent downturn affecting the company's key semiconductor end-market; (ii) improving industry trading conditions throughout the next 12-18 months, underpinning a rise in demand for VAT's products and services; (iii) expected retention of solid credit metrics, including EBITDA margins in the low 30s in percentage terms and Moody's-adjusted gross leverage ranging between 0.5x-1.0x and (iv) good liquidity position, including Moody's expectation of successful refinancing of upcoming debt maturities in May 2025. As expected, VAT's revenue contracted 23% in 2023 on account of the cyclical correction in the semiconductor industry that followed robust trading levels in 2021-22. VAT nevertheless achieved revenue of $1.1 billion equivalent and resilient EBITDA margins (Moody's-adjusted) of around 30%, leading to Moody's-adjusted gross debt to EBITDA of 0.9x at year-end 2023. This is about twice as high as 2022 levels but still well below the rating agency's requirement for a rating upgrade. Rising investments in wafer fabrication equipment and spending on leading-edge technology with high vacuum-valve content are already underway and shall support growing demand for VAT's products and after-sale services. Coupled with VAT's flexible cost structure and progress on its "best-cost country " sourcing strategy (a procurement strategy that seeks to find the most cost-effective location for manufacturing or obtaining goods and services), Moody's expects key credit metrics to strengthen further in the next 12-18 months. Industry cycles will continue to influence the company's operational and financial performance. However, the free cash flow (FCF)-generative nature of VAT's business model along with the company's strong track record of abiding by conservative financial policies provide sufficient financial flexibility to withstand corrections. VAT publicly commits to return up to 100% of excess cashflow generation to shareholders and has no public leverage guidance, but it also has a strong track record of running a lowly-levered balance sheet: in Moody's view, the latter helps maintain metrics commensurate with the current Ba1 rating. VAT's niche market focus and customer base comprising large original equipment manufacturers (OEM) result in a small revenue base alongside customer concentration, two main constraints to VAT's credit quality at this stage. ESG CONSIDERATIONS Moody's Credit Impact Score (CIS) of CIS-2 reflects moderate exposure to environmental risks, along with low exposure to social and governance risks. VAT has a relatively concentrated production footprint and, as a manufacturer, is moderately exposed to risks arising from carbon transition or labour relations, while stands to benefit from overall secular trends towards greater digitisation. VAT adopts conservative financial policies to counterbalance the inherently high volatility of its primary semiconductor end-market. The company's stable and experienced management team has built a good track record of managing the business through demand troughs. As a listed company, VAT's disclosure and level of organizational complexity do not pose additional risks from a governance perspective. LIQUIDITY VAT's liquidity is good. Moody's assessment incorporates the expectation that VAT will (i) continue to generate positive underlying FCF despite substantial shareholder returns (ii) retain adequate cash balances and access to external sources of liquidity, and (iii) successfully and proactively address the refinancing of its CHF200 million term loan due May 2025. RATING OUTLOOK Moody's expects VAT to maintain a strong market position, preserve robust profitability margins on the back as well as abide by conservative financial policies to support the retention of strong metrics and liquidity position through future industry downturns. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Further positive rating pressure on VAT's ratings is unlikely at this juncture, given the company's focus on a mission-critical but niche segment within the broad semiconductor industry. As a result, a substantially larger scale (measured by revenue and Moody's-adjusted EBITDA), for instance resulting from a solid market position in a larger market, or a combination of leading positions in several niche markets, is a necessary pre-condition for an upgrade of VAT's CFR to Baa3. A rating upgrade would concurrently require a large share of recurring revenue streams to dilute the impact of industry cyclicality, as well as EBITDA margins in excess of 40% and Moody's-adjusted leverage being kept below 1.0x. Conversely, negative rating pressure on VAT's CFR would arise as a result of: -- Evidence of loss of market share -- Moody's-adjusted EBITDA margin falling below 30% on a protracted basis or -- A relaxation in VAT's cost discipline and capital investment, for example, if consistent and significantly negative FCF (after dividend payments) results in a deterioration in the company's liquidity position or in Moody's-adjusted debt/EBITDA rising above 1.5x The principal methodology used in these ratings was Semiconductors published in October 2023. PROFILE Swiss-based VAT is a specialised manufacturer of vacuum valves, serving a range of customers in the semiconductor, flat-panel display (FPD), industrial vacuum and photovoltaic industries. The company also produces multivalve modules, and provides aftermarket sales and related services. VAT generated CHF885 million of revenue and CHF255 million of Moody's-adjusted EBITDA in 2023. =========================== U N I T E D K I N G D O M =========================== ABRA WHOLESALES: Collapses Into Administration ---------------------------------------------- Business Sale reports that Abra Wholesales Limited, a supplier of products for off-licence stores and caterers, fell into administration earlier this month, with Philip Armstrong and Philip Watkins of FRP Advisory appointed as joint administrators. In March 2024, the company's director Dee Thaya confirmed that he was seeking to sell the business "as soon as possible" due to personal circumstances, Business Sale relates. The company has a depot in Edmonton, North London and has been operating since 2003. In the company's accounts for the year to March 31, 2023, it reported turnover of GBP52.2 million, up from GBP45.7 million a year earlier, but saw its post-tax profits fall from GBP337,303 to GBP141,202, Business Sale discloses. At the time, its fixed assets were valued at slightly over GBP500,000 and current assets at GBP12.4 million, while net assets stood at GBP2.4 million, Business Sale notes. C.G. CLEANING: Goes Into Administration --------------------------------------- Business Sale reports that C.G. Cleaning Limited, a commercial window cleaning provider based in Bolton, fell into administration last week, with Phil Deyes and Sean Williams of Leonard Curtis' Leeds office appointed as joint administrators. According to Business Sale, in the company's accounts for the year to December 31, 2022, its total assets were valued at around GBP1.9 million, with net assets amounting to GBP734,281. CAMBCOL LTD: Enters Administration, Owed GBP1.75 Million -------------------------------------------------------- Business Sale reports that CambCol Limited, a Cambridge-based manufacturer of medical collagen products, fell into administration at the beginning of May, with Craig Povey and Gareth Prince of Begbies Traynor appointed as joint administrators. According to Business Sale, in the company's accounts for the year ending December 31, 2022, its fixed assets were valued at GBP740,859 and current assets at GBP452,866. However, at the time, the company's net liabilities totalled close to GBP1.75 million, Business Sale notes. HOOPLA ANIMATION: Falls Into Administration ------------------------------------------- Business Sale reports that Hoopla Animation Limited, an animation studio previously known as Daisy Boo & Monkey Too Limited, fell into administration at the beginning of May, with Lloyd Hinton of Insolve Plus appointed as administrator. In the company's accounts for the period from May 3, 2022 to November 30, 2022, its fixed assets were valued at GBP8.4 million and current assets at GBP431,135, Business Sale discloses. At the time, its net assets amounted to GBP5.4 million, Business Sale notes. MCEVOY ENGINEERING: Goes Into Administration -------------------------------------------- Business Sale reports that McEvoy Engineering Limited, a steel fabrication, pipework, welding and integrated engineering solutions specialist based in Glasgow, fell into administration earlier this month, with James Stephen and Lee Causer of BDO appointed as joint administrators. According to Business Sale, in the company's accounts for the year to January 31, 2023, its fixed assets were valued at GBP588,624 and current assets at slightly over GBP1 million. At the time, the firm's net assets amounted to GBP1.1 million, Business Sale notes. MOLOSSUS BTL 2024-1: Fitch Assigns B+sf Final Rating to Cl. X Notes ------------------------------------------------------------------- Fitch Ratings has assigned Molossus BTL 2024-1 PLC (Molo 2024-1) final ratings, as detailed below: Entity/Debt Rating Prior ----------- ------ ----- Molossus BTL 2024-1 PLC Class A XS2793365268 LT AAAsf New Rating AAA(EXP)sf Class B XS2793366662 LT AAsf New Rating AA(EXP)sf Class C XS2793366746 LT Asf New Rating A(EXP)sf Class D XS2793366829 LT BBB+sf New Rating BBB(EXP)sf Class E XS2793367041 LT BB+sf New Rating BB+(EXP)sf Class F XS2793367124 LT BBsf New Rating B+(EXP)sf Class G XS2793367397 LT NRsf New Rating NR(EXP)sf Class X XS2793367637 LT B+sf New Rating B-(EXP)sf Class Z XS2793367710 LT NRsf New Rating NR(EXP)sf TRANSACTION SUMMARY Molo 2024-1 is a securitisation of buy-to-let (BTL) mortgages originated in England and Wales by ColCap Financial UK Limited (ColCap). ColCap acquired 80% of Molo Finance's shares in February 2023. ColCap is a wholly owned subsidiary of ColCap Financial Limited, an Australian non-bank mortgage lender. KEY RATING DRIVERS Limited Performance Data: The loans within the pool have characteristics in line with standard UK BTL mortgages. ColCap UK only started originating BTL mortgages in 2019, under the brand Molo Finance, and did not have material origination volumes until 2021. The limited history of origination and subsequent performance data is sufficiently mitigated through available proxy data and adjustments made to the foreclosure frequency (FF) in Fitch's analysis. Newly Originated Asset Pool: Over 98% of loans in the mortgage pool were originated after 2020. The pool has a weighted average (WA) original loan-to-value (OLTV) of 72.6% and a WA current LTV (CLTV) of 72.3%, leading to a WA sustainable LTV (sLTV) of 82.8%. The pool also has a Fitch-calculated WA interest coverage ratio (ICR) of 81.1%. Unhedged Basis Risk: The pool includes 2.8% of loans linked to Bank of England base rate (BBR). The rest comprises fixed-rate loans reverting to BBR plus a margin. The fixed-to-floating interest rate risk is hedged. Fitch has stressed the transaction cash flows for basis risk between BBR and SONIA, in line with its UK RMBS Rating Criteria. No Product Switches Permitted: No product switches are allowed to be retained in the pool and, if offered, will be repurchased by the seller. This mitigates the potential for pool migration towards lower-yielding assets and the need for additional hedging. Fixed Hedging Schedule: At closing, the issuer has entered a swap agreement to mitigate the interest rate risk arising from the fixed-rate mortgage loans before their reversion date. The swap is based on a defined schedule assuming no defaults or prepayments, rather than the balance of fixed-rate loans in the pool. If loans prepay or default, the issuer will be over-hedged. The excess hedging is beneficial to the issuer when interest rates rise and detrimental when they fall. Tighter Pricing Drives Final Ratings: The final ratings on the class D, class F, and class X ratings are higher than their expected ratings due to tighter pricing than initially modelled by Fitch. On a weighted average basis, the pre-step-up margin has seen a reduction of 20bp and the post-step-up margin has seen a 29bp reduction. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Material increases in the frequency of defaults and loss severity on defaulted receivables producing losses greater than Fitch's base-case expectations may result in negative rating action on the notes. Fitch found that a 15% increase in the WAFF, along with a 15% decrease in the WA recovery rate (RR), would lead to downgrades of up to two notches for the class B and F notes and one notch for the class A, C, D, E and X notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing credit enhancement and, potentially, upgrades. Fitch found that a decrease in the WAFF of 15% and an increase in the WARR of 15% would lead to upgrades of up to three notches for the class C, D, E, F, and X, and two notches for the class B notes. CRITERIA VARIATION Fitch tested a sensitivity scenario whereby the recovery timing was extended by 12 months, as for an untested servicer of UK mortgage assets Fitch anticipates that the recovery period may be extended compared with similar transactions from peer lenders until sufficient institutional experience is obtained. The ratings of the class B, C, and F notes are assigned one notch below their model-implied ratings (MIR) and the class E notes two notches below the MIR as a result of this sensitivity. As Fitch's UK RMBS Rating Criteria permit a one-notch difference between the MIR and the assigned rating the two-notch difference applied for the class E notes constitutes a variation with respect to the rating determination section of the criteria. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS 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. PRECISE MORTGAGE 2020-1B: Fitch Puts BB+sf Rating on Watch Negative ------------------------------------------------------------------- Fitch Ratings has placed Precise Mortgage Funding 2019-1B PLC's (PMF 2019-1B) class C, D and E notes and Precise Mortgage Funding 2020-1B PLC's (PMF 2020-1B) class D and E notes on Rating Watch Negative (RWN). Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Precise Mortgage Funding 2019-1B PLC A2 XS1923737354 LT AAAsf Affirmed AAAsf B XS1923737438 LT AAAsf Affirmed AAAsf C XS1923737511 LT AAAsf Rating Watch On AAAsf D XS1923737602 LT AAsf Rating Watch On AAsf E XS1923737867 LT BBB-sf Rating Watch On BBB-sf Precise Mortgage Funding 2020-1B PLC A1 XS2097423060 LT AAAsf Affirmed AAAsf A2 XS2097425354 LT AAAsf Affirmed AAAsf B XS2097426246 LT AAAsf Affirmed AAAsf C XS2097426329 LT AA+sf Affirmed AA+sf D XS2097426832 LT A+sf Rating Watch On A+sf E XS2097426915 LT BB+sf Rating Watch On BB+sf TRANSACTION SUMMARY The transactions are securitisations of buy-to-let (BTL) mortgages originated by Chartered Court Financial Services, trading as Precise Mortgage in the UK. KEY RATING DRIVERS Fixed-rate Loans Re-fixed, Unhedged: About 78% of PMF 2019-1B's pool is currently fixed-rate, with the majority of these being recent re-fixed loans. These re-fixes are not treated as product switches (which are due to be repurchased) but according to the servicer are agreed with borrowers to control or manage actual or anticipated arrears, as allowed by the transaction documentation. However, since the swap on the PMF 2019-1B is no longer active, the transaction is completely unhedged. PMF 2020-1B also contains about 72% fixed-rate loans, about 23% of which are covered by the swap, as of the March 24 interest payment date. Fitch has tested a potential impact of re-fixes if the transactions are not redeemed on their optional redemption dates in June 2024 for PMF 2019-1B and December 2024 for PMF 2020-1B. Fitch assumed currently floating-rate loans (23% and 29%, respectively) would obtain a two-year fixed-rate loan, at current market mortgage rates. Fitch assumed they remain unhedged. This sensitivity shows a potential one-notch negative impact for PMF 2019-1B's class C notes and more than one rating category for the class D and E of. Similarly, PMF 2020-1B's class D and E notes could be affected by one notch. Fitch has placed these notes on RWN. Limited Defaults: To date, only one repossession has taken place in 2019-1B and none in 2020-1B, leading to a low or zero constant default rate. Fitch factors prior performance and its forward-looking expectations into its ratings through a performance adjustment factor (PAF) applied to the foreclosure frequency (FF). The PAF is subject to a floor that reduces as a transaction's seasoning increases. At this review, Fitch has reduced the PAF for 2019-1B to 80% from 90% and for PMF 2020-1B to 90% from 100%, in line with its UK RMBS Rating Criteria. Strong Asset Performance: One- and three-month plus arrears for both transactions are well below the Fitch BTL index. The transactions' performance has been slightly deteriorating, but from a very strong base, with one-month plus arrears now at 1.68% (2019-1B) and 1.24% (2020-1B). Since its last review, there has been a minor uptick in arrears in both transactions. Late-stage arrears stand at 1.15% for PMF 2019-1B and 0.35% for PMF 2020-1B. The increase in credit enhancement (CE) and strong asset performance has contributed to the affirmation of PMF 2019-1B's class A2 and B notes and PMF 2020-1B's class A1, A1, B and C notes. ESG Score: At this review Fitch assigned an ESG Relevance score of '5' for Transaction Parties and Operational Risk under Governance, due to the significant re-fixing of assets, which has resulted in material under-hedging. Potential arrears management of this magnitude is uncommon in Fitch-rated UK RMBS to date. Material re-fixing and resulting under-hedging has a negative impact on the transactions, as reflected by the RWN. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The transactions' performance may be affected by changes in market conditions and economic environment. Weakening economic performance would be strongly correlated to increasing levels of delinquencies and defaults that could reduce CE available to the notes. Additionally, unanticipated declines in recoveries could also result in lower net proceeds, which may make certain notes susceptible to potential negative rating action, depending on the extent of the decline in recoveries. Fitch conducts sensitivity analyses by stressing both a transaction's base-case FF and recovery rate (RR) assumptions, and examining the rating implications for all classes of notes. Fitch tested a sensitivity assuming a 15% increase in the weighted average (WA) FF and a 15% decrease in the WARR. The results indicate an impact of one notch for PMF 2019-1B's class C notes, one category for the class D notes and multiple categories for the class E notes. The impact is about one notch for PMF 2020-1B's class D notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE and potential upgrades. Fitch tested an additional rating sensitivity scenario by applying a decrease in the FF of 15% and an increase in the recovery rate (RR) of 15%. PMF 2020-1B's class C and D notes could be upgraded by up one notch and one category, respectively. CRITERIA VARIATION A criteria variation was applied against the Rating Determinations provisions in Fitch's UK RMBS Rating Criteria to place PMF 2019-1B's class E notes on RWN rather than downgrading. The criteria states that for existing ratings, where an updated analysis results in a model-implied rating (MIR) no more than three notches below the current rating (e.g. MIR of 'BBB+sf' and current rating of 'Asf'), the current rating may be affirmed or downgraded to any level between the current rating and the MIR. As the MIR for class E rating would imply a multi-category downgrade, the RWN on the current rating constitutes a criteria variation. This variation is based on the binary outcome of the imminent optional redemption date (June 2024). If the transaction is called next month the class E bonds will be paid in full, if not a downgrade will ensue. The RWN reflects this risk for the short period between this annual review and the call option. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Precise Mortgage Funding 2019-1B PLC, Precise Mortgage Funding 2020-1B PLC Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Prior to the transactions closing, Fitch sought to receive a third party assessment conducted on the asset portfolio information, but none was available for these transactions. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG CONSIDERATIONS With this review Fitch assigned an ESG Relevance score of '5' for Transaction Parties and Operational Risk under Governance, due to the significant re-fixing of assets, which resulted in material under-hedging. Potential arrears management of this magnitude is uncommon in Fitch-rated UK RMBS to date. Material re-fixing and resulting under-hedging has a negative impact on the transactions, as reflected by the RWN. 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. ********* 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. 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