/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/240607.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, June 7, 2024, Vol. 25, No. 115 Headlines B E L G I U M AZELIS GROUP: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable F I N L A N D MULTITUDE SE: Fitch Gives 'B+(EXP)' Rating on Unsecured Bond F R A N C E BISCUIT HOLDING: S&P Raises LongTerm ICR to 'B-', Outlook Stable CMA CGM: Moody's Affirms 'Ba1' CFR, Outlook Remains Stable MEDIAWAN HOLDING: Fitch Assigns 'B' LongTerm IDR, Outlook Stable G E R M A N Y ONE HOTELS: S&P Assigns 'B-' LongTerm ICR, Outlook Stable I R E L A N D DRYDEN 32 EURO 2014: Moody's Affirms Ba2 Rating on E-R Notes HARVEST CLO IX: Fitch Affirms B+ Rating on Class F-R Notes INVESCO EURO VIII: Moody's Assigns (P)Ba3 Rating to Cl. E-R Notes MILLTOWN PARK CLO: Moody's Affirms B2 Rating on EUR12MM E Notes NASSAU EURO IV: Fitch Assigns 'B-(EXP)sf' Rating on Class F Notes NASSAU EURO IV: S&P Assigns Prelim. B-(sf) Rating on Class E Notes I T A L Y A2A SPA: Moody's Rates New Perpetual Subordinated Securities 'Ba1' A2A SPA: S&P Rates Proposed Hybrid Capital Securities 'BB+' L U X E M B O U R G KERNEL HOLDING: Fitch Affirms 'CC' Issuer Default Ratings R O M A N I A [*] ROMANIA: Number of Insolvent Cos. Up 15% in Jan-April 2024 U N I T E D K I N G D O M F.R. SHADBOLT: Collapses Into Administration G.E. STARR: Goes Into Administration GEMINI PRINT: Set to Go Into Administration, 126 Jobs at Risk INTERNATIONAL PERSONAL: Fitch Puts 'BB-' LongTerm IDR on Watch Pos. PIPER HOMES: Goes Into Administration SATUS PLC 2021-1: Moody's Affirms B3 Rating on GBP13.3MM F Notes SUREPAK LTD: Halts Operations Despite Overwhelming Interest VIYELLA: Set to Go Into Administration X X X X X X X X [*] BOOK REVIEW: The First Junk Bond - - - - - ============= B E L G I U M ============= AZELIS GROUP: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Azelis Group NV's Long-Term Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook. It also affirmed its senior unsecured rating at 'BB+'. The Recovery Rating is 'RR4'. The IDR reflects Azelis' position as a leading specialty chemical distributor with strong diversification of suppliers, customers and products against its high leverage due to recurring acquisitions. It also captures the company's record of stable profit margins and positive free cash flow (FCF), which supports EBITDA-accretive bolt-on acquisitions. The rating and the Stable Outlook reflect its expectation that Fitch-calculated EBITDA net leverage will remain close to but below 3.5x in 2024-2027, despite its assumption that Azelis will spend more aggressively on acquisitions than chemical distributor peers. KEY RATING DRIVERS Global Specialty Distributor: Azelis is the second-largest pure specialty chemical distributor by revenue behind IMCD N.V., and fourth-largest when considering Brenntag's and Univar Solutions, Inc's specialty segments. Its critical mass in a fragmented industry allows Azelis to benefit from longstanding exclusivity contracts with suppliers and a large number of customers globally. Azelis' market position continues to be strengthened with organic growth in existing markets and small, bolt-on M&A in new and existing markets and geographies. Scale, technical and formulation expertise and geographical breadth provide competitive advantages against smaller peers in securing supply contracts with large chemical producers. Organic Growth to Return: Fitch believes that the specialty chemical distribution market will return to organic growth on a normalisation of inventory levels and a recovery in economic activity. Azelis revenues declined organically by 10% (including foreign-exchange impact) in 2023 and by 11% in 1Q24, after strong organic growth in 2021 and 2022, in line with the market. Fitch assumes an organic growth of 1.9% in 2024, partially offset by negative currency effects of 1.3%, followed by growth of 2.3% on average in 2025-2027. Volume recovery is visible in Azelis' life science division, while industrial chemicals is likely to lag. Diversified Markets, Resilient Margins: Azelis' diversification, variable cost structure and specialty product portfolio result in resilient organic revenues and margins. It also benefits from the resilience of specialty chemicals demand, and increasing distribution outsourcing. Fitch expects Fitch-calculated EBITDA margin to remain at around 11% in 2024-2027, a modest decline from its strong 2022 levels. Azelis operates in 63 countries across three main regions, with 60% of revenues from life science end-markets including food and nutrition, pharmaceuticals and personal care, which are typically less cyclical than commodity chemical markets. It has highly diversified customers and suppliers, limiting the impact of possible customer or supplier loss. An asset-light structure and a flexible cost base allow it to reduce costs during downturns, providing further margin resilience. Aggressive M&A Keeps Leverage High: Fitch believes that Azelis will continue to pursue an aggressive acquisition strategy to consolidate a fragmented market. Including all payments related to deferred considerations, M&A spend has far exceeded Azelis' free cash flow (FCF), keeping EBITDA net leverage above 3x. Fitch forecasts EUR300 million debt-funded bolt-on acquisitions per year, resulting in EBITDA net leverage averaging 3.3x in 2024-2027, and net debt trending towards EUR2 billion. While Azelis' acquisitive strategy is similar to industry peers, Azelis is spending greater amounts than its competitors. Deferred Considerations: Fitch includes deferred payments in its calculation of financial debt, which results in Fitch's EBITDA net leverage at 3x for 2023, higher than the 2.5x reported by the company. These liabilities are reported on the balance sheet and represent delayed M&A outflow. A majority of the deferred payments are to be paid in 2024. Acquisitions also frequently include earnouts and put options, which adds risk of further outflows, although these payments are usually linked to outperformance of the acquired companies. Nevertheless, this tends to affect the deleveraging trend. Positive FCF: Although Azelis' leverage remains high due to continued M&A, Fitch forecasts FCF margin after dividends to average 3.7% in 2024-2027, broadly in line with its historical trend, which supports its deleveraging capacity, especially should M&A spending slow down. Financial Policy: Azelis' public financial policy aims to maintain EBITDA net leverage between 2.5x and 3.0x. Given that the company does not include deferred considerations nor receivables financing in the calculation of leverage, this suggests that Azelis' EBITDA net leverage could breach Fitch's negative sensitivity for the rating, should Azelis operate at the upper band of its financial policy. DERIVATION SUMMARY Azelis' closest Fitch-rated peer is IMCD N.V. (BBB-/Stable). Both companies are pure specialty chemical distributors with market-leading positions, a similar growth strategy focused on FCF-funded bolt-on M&As and comparable diversification of suppliers and customers. Both companies have similar EBITDA and FCF margins, but IMCD has larger EBITDA and lower leverage. Blue Tree Holdings, Inc. (BB-/Stable) and Reliance, Inc. (BBB+/Stable) are leaders in North America for polymers and metals, respectively. Both companies operate in a fragmented market like Azelis, although they do not benefit from the same pricing power of specialty products. Azelis has higher leverage than both companies. Fitch forecasts through-the-cycle EBITDA net leverage to remain under 3.0x and 1.0x for Blue Tree and Reliance, respectively. Arrow Electronics, Inc. (BBB-/Stable) is a distributor of electronic components and enterprise computing solutions. Its EBITDA is larger than Azelis but it operates in an industry with lower switching costs and value-add for distributors, resulting in lower EBITDA margins of 4%-5%, and higher earnings volatility. Arrow Electronics has lower leverage than Azelis with through-the-cycle EBITDA net leverage at or below 3.0x. Windsor Holdings III, LLC (Univar) (B+/Stable) is the second-largest global chemical distributor behind Brenntag and is the largest North American chemical distributor in a fragmented industry. Supported by its value-added service offering, Univar generates stronger EBITDA margins than Blue Tree and Arrow Electronics. Post-Univar's leveraged take-private acquisition by affiliates of Apollo Global Management in August 2023, Univar's financial structure is weaker than peers', with an expected EBITDA leverage range of 5.5x-6.5x. KEY ASSUMPTIONS - Organic revenues growth (including foreign-exchange impact) of 0.6% in 2024, and 2.3% in 2025-2027 - Gross profit margin of 23.5% in 2024, decreasing to 23.1% in 2025 and 22.9% in 2026-2027 - EBITDA margin (Fitch-calculated) slightly decreasing to 11.1% in 2024, and 10.7% in 2025-2027 - Capex at 0.4% of revenues to 2027 - M&A outflow (including deferred considerations payments) of EUR504 million in 2024, EUR387 million in 2025, EUR325 million in 2026 and EUR300 million in 2027 - Dividends at 30% of prior-year net income RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - EBITDA net leverage below 2.5x on a sustained basis - FCF margin above 5% on a sustained basis - Conservative execution of the company's financial policy Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - EBITDA net leverage at or above 3.5x on a sustained basis - FCF margin below 2.5% on a sustained basis - Capital allocation prioritising acquisitions and growth over a prudent approach to managing leverage LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity for M&A: At end-2023, Azelis' liquidity stood at EUR835 million, consisting of EUR485 million in cash and an undrawn EUR350 million revolving credit facility. This will comfortably cover its assumption of acquisitions and the payments of deferred acquisition-related considerations in 2024 and will supplement FCF to fund M&A in the following years, although additional funding will be needed in its rating case. The bonds issued in 2023 have diversified Azelis' funding, but maturities remain fairly concentrated, with about EUR1 billion term loans due in 2026. ISSUER PROFILE Azelis is a global specialty chemical distributor headquartered in Belgium. SUMMARY OF FINANCIAL ADJUSTMENTS Lease liabilities are excluded from financial debt; amortisation of right-of-use assets and lease-related interest expense are reclassified as cash operating costs. Factoring is added to financial debt and trade receivables are increased by the same amount. Cash flow statement is adjusted to reflect changes in factoring use in cash flows from financing activities rather than cash flows from operating activities. Amortised issuance costs are added back to financial debt to reflect debt amounts payable at maturity. Deferred payments liabilities related to acquisitions are added to financial debt. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in its credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. 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 ----------- ------ -------- ----- Azelis Group NV LT IDR BB+ Affirmed BB+ Azelis Finance NV senior unsecured LT BB+ Affirmed RR4 BB+ ============= F I N L A N D ============= MULTITUDE SE: Fitch Gives 'B+(EXP)' Rating on Unsecured Bond ------------------------------------------------------------ Fitch Ratings has assigned Multitude SE's upcoming senior unsecured bond - issued by its 100% subsidiary Multitude Capital Oyj - an expected long-term rating of 'B+(EXP)' with a Recovery Rating of 'RR4'. The bond's expected rating is based on the draft bond documentation reviewed by Fitch. The final rating of the senior unsecured bond is contingent on the receipt of final documents conforming to information already received. Fitch has simultaneously withdrawn the expected rating assigned to Multitude Bank plc's subordinated Tier 2 bonds in November 2023, as the bank has decided not to proceed with the issue. KEY RATING DRIVERS Multitude Capital's senior unsecured bond is rated in line with Multitude's Long-Term Issuer Default Rating (IDR) because Multitude acts as the guarantor of the bond issue. Multitude Capital is a wholly owned subsidiary of Multitude and functions as a dedicated funding vehicle for the group. Multitude's ratings are equalised with the consolidated group's 'b+' Standalone Credit Profile (SCP) due to adequate liquidity management, supported by revenues from intra-group services at the holding company level and material unencumbered cash held outside Multitude Bank (see 'Fitch Revises Multitude's Outlook to Positive; Affirms IDR at B+' dated 15 February 2024). The bond will constitute a direct and unsecured senior obligation of Multitude Capital and rank equally with all present and future senior unsecured obligations of the company. The rating alignment reflects Fitch's expectation of average recovery prospects of Multitude Capital's senior unsecured bond. Fitch expects the amount of the bond to be between EUR75 million and EUR100 million, which could be increased to EUR150 million by a subsequent issue. The upcoming issue will be used to refinance Multitude's EUR50 million senior bonds, which mature in December 2025 with a call option in June 2024. The maturity of the new bonds is four years. The remaining proceeds post-bond refinancing will be used for general corporate purposes. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The senior unsecured notes' rating is primarily sensitive to changes in Multitude's Long-Term IDR (see 'Fitch Revises Multitude's Outlook to Positive; Affirms IDR at B+' dated 15 February 2024) Inability to refinance the bond ahead of its maturity in December 2025, resulting in less diversified and stable funding with negative implications on business profile, could put negative pressure on the rating. Increase in double leverage at the holding company level, eg. from down-streaming senior bonds' proceeds in the form of regulatory capital to Multitude Bank, or changes to Fitch's assessment of recovery prospects for senior unsecured debt in default would result in the senior unsecured notes' rating being notched below the IDR. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The senior unsecured notes' rating is primarily sensitive to an upgrade to Multitude's Long-Term IDR. ESG CONSIDERATIONS Multitude has an ESG Relevance Score of '4' for Exposure to Social Impacts as a result of its exposure to the high-cost consumer lending sector. As the regulatory environment evolves (including a tightening of rate caps), this has a moderately negative influence on the credit profile via its assessment of its business model and is relevant to the rating in conjunction with other factors. Multitude has an ESG Relevance Score of '4' for Customer Welfare, in particular in the context of fair lending practices, pricing transparency and the potential involvement of foreclosure procedures, given its focus on the high-cost consumer credit segment. This has a moderately negative influence on the credit profile via its assessment of risk appetite and asset quality and is relevant to the rating in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation of the materiality and relevance of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Multitude Capital Oyj senior unsecured LT B+(EXP)Expected Rating RR4 Multitude Bank plc subordinated LT WD Withdrawn B-(EXP) =========== F R A N C E =========== BISCUIT HOLDING: S&P Raises LongTerm ICR to 'B-', Outlook Stable ---------------------------------------------------------------- S&P Global Ratings raised its long-term issuer credit rating on Biscuit Holding (BI) to 'B-' from 'CCC+', its issue ratings on the Biscuit Holding SAS's senior debt instruments to 'B-' from 'CCC+', with the recovery rating remaining at '3' (55%), and its issue rating on the company's second-lien instrument to 'CCC' from 'CCC-', with the recovery rating remaining at '6' (0%). The stable outlook reflects S&P's view that BI will further improve its operating performance in 2024, translating into higher profitability, more stable FOCF, and improved credit metrics. Thanks to management action, BI's improving operating performance in 2023 accelerated the company's deleveraging trend and we expect its leverage to improve in the next 12 months. The company reported net sales of EUR1.21 billion (+17.8% annual growth rate) in full-year 2023, and an S&P Global Ratings-adjusted EBITDA of EUR120 million, which translates into an adjusted EBITDA margin of 9.9% (from -3.7% in 2022). Better operating performance was primarily driven by the successful round of price increases over 2023 (+32% increase in 2023) to cover higher operating costs. Also, the group's successful change of its product mix emphasized profitable stock keeping units (SKUs) translating into higher profitability despite volume decline (-11% in 2023). Additionally, the easing of some raw material prices, such as wheat and energy costs, offset inflationary pressures from other raw materials (e.g., cocoa and sugar) and higher personnel costs enabled BI to maintain its cost base stable compared with last year. According to our calculations, BI's S&P Global Ratings-adjusted debt to EBITDA significantly reduced to 8.8x in 2023, compared with 10.1x previously forecast and funds from operations (FFO) cash interest coverage increased to 1.7x, from our previous anticipation of 1.0x-1.5x. S&P thinks the company will continue its deleveraging trend--although at a more moderate speed--mainly supported by EBITDA growth, which S&P sees at about 7.5x for the next 12 months. Revenue growth will likely be constrained in 2024, driven by lower volumes, before rebounding from 2025. S&P said, "We anticipate faster revenue growth in 2025, thanks to changes in the product mix and investments in new products. In our view, revenue growth will likely be minimal for BI in 2024, as consumers adjust to higher prices. Pricing actions and focus on margin-accretive SKUs in the product mix, should help offset volume loss, however, resulting in a modest profit growth. This is in the context of a challenging market environment of consumer spending trends in Europe, and increased advertising by national brands potentially making competition tougher for private label products made by BI. That said, we believe that BI has the ability to pass on raw material price inflation to its retail customers. We forecast modest revenue growth of 2.5%-3.0% in 2025, supported by continued innovation and stabilizing market shares for BI." A favorable price-product mix and efficient cost management will support S&P Global Ratings-adjusted EBITDA margin expansion to about 12.0%-12.5% in 2024 and thereafter. S&P said, "Over 2024, we anticipate that some prices of raw materials or wage inflation will further exacerbate pressures on BI's profitability. However, we believe that BI can protect its profitability by using pass-through mechanisms. In our view, BI will be able manage efficiently its cost base over 2024, thanks to an efficient hedging strategy and cost savings initiatives that should enable it to increase its productivity while lowering its operating cost base. We expect that the group's focus on the automation of its facilities should further contribute to higher EBITDA in 2024 and 2025." S&P said, "Although we expect high financing costs and increasing capital expenditure (capex), we believe that BI's FOCF generation will turn slightly positive in 2024 and improve thereafter. BI's higher EBITDA generation will enable the group's FOCF generation to turn positive in fiscal 2024, in our opinion, reaching about EUR6 million-EUR7 million, underlying better working capital management, despite higher capex investments. We project that capex will increase to EUR40 million over the forecast period as the group wants to support its organic growth with innovation. Strong credit metrics and positive FOCF over the next 12-18 months should bring leverage to a sustainable level. S&P Global Ratings-adjusted debt to EBITDA dropped to 8.8x in 2023 from above 10.0x in 2022 and is anticipated to decrease toward 7.5x in 2024, with the forecast EBITDA growth largely offsetting the increase in debt levels. Furthermore, FFO cash interest coverage improved to 1.7x in 2023 and is expected to increase to around 2.0x over the next 12-18 months. The positive development in credit metrics has been supported by the partial repayment of drawings on the EUR85 million revolving credit facility (RCF) in the second half of 2023 and in the first quarter of 2024, as well as significant improvement in performance. S&P said, "We still view BI's liquidity as adequate for the next 12 months. In our view, liquidity sources exceed uses by more than 1.2x because the group has EUR51 million in cash as of March 2024, about EUR55 million of FFO over the next 12 months, and about EUR68 million available under its RCF. We believe BI can effectively handle its intra-year working capital requirements, capex, and interest payments over the next year. We also view positively the lack of significant debt maturities until the RCF matures in 2026 and the term loan B matures in 2027. "The stable outlook reflects our view that BI's operating performance should continue improving over the next 12 months compared with 2023, leading to a gradual improvement in FOCF and stronger credit metrics. "We project S&P Global Ratings-adjusted debt leverage will decrease to 7.5x in fiscal 2024 from 8.8x in fiscal 2023, and that FFO cash interest coverage will rise to around 2.0x. We see BI generating neutral to positive FOCF, which means it can adequately fund its operations on a day-to-day basis. "We think this could occur if Biscuit Holding is able to continue implementing consistently its price and product mix strategy while containing volume decline and volatility of chocolate ingredients currently, translating into EBITDA margin at around 12.0%-12.5% this year, versus 9.9% in 2023." S&P could lower the rating on BI over the next 12 months if: -- EBITDA generation decreased sharply versus 2023, leading to rising long-term refinancing risk given the high level of debt in the capital structure. This could come in case of deterioration of the operating performance with strong accelerated volume decline in addition to inability to maintain profitability due to adverse product mix and pricing headwinds notably with chocolate-based products. -- The liquidity position weakened materially from a large negative FOCF or if financial covenant headroom reduces materially following a sharp drop in EBITDA. S&P said, "We could take a positive rating action over the next 12 months due to FOCF generation and credit metrics trending well above our base case and likely to remain there on a sustained basis. For example, if S&P Global Ratings-adjusted debt leverage decreases below 7x and FFO cash interest coverage well above 2x on a sustained basis. "We believe this could come from BI generating positive volume growth overall in 2024 while increasing profitability more than expected, meaning it had managed in a very profitable way the current high volatility in cocoa market prices." CMA CGM: Moody's Affirms 'Ba1' CFR, Outlook Remains Stable ---------------------------------------------------------- Moody's Ratings has affirmed the Ba1 corporate family rating of CMA CGM S.A. and its Ba1-PD probability of default rating. The outlook remains stable. "The rating action reflects CMA CGM's strengthened business profile as a result of the Bolloré Logistics acquisition, which will lead to third-party-logistics generating almost 30% of the group's EBITDA over the cycle" says Daniel Harlid, the Vice President - Senior Credit Officer and the lead analyst for CMA CGM. "While the ongoing military conflict in the Red Sea is keeping freight rates inflated, CMA CGM's strong liquidity and conservatively leveraged balance sheet provide ample cushion to mitigate the expected significant oversupply on the Asia – Europe trade lane", Mr. Harlid continues. RATINGS RATIONALE Over the last three years, CMA CGM has transitioned from a pure container shipping company to a diversified transport and logistics provider. With its most recent acquisition of Bolloré Logistics that was completed in February this year, CMA CGM will become one of the largest third-party-logistics (3PL) companies in the world, with a pro forma revenue of around $20 billion for 2023. Including the Bolloré acquisition, CMA CGM has spent $14 billion on acquisitions in logistics and terminals since the beginning of 2020. As more or less every transaction has been equity financed, its asset base has more than doubled while debt actually decreased. Although this would not have been possible without unprecedented freight rate levels that followed the pandemic, it was facilitated by the company refraining from high dividend pay-outs, unlike some of its peers, and instead reinvesting profits in its own business. The enhanced diversification of CMA CGM's business profile prompted Moody's to change the business profile sub score to Baa from Ba. Following the increasing number of attacks on vessels transiting the Red Sea, freight rates increased significantly as a result of rerouting of vessels via the Cape of Good Hope, effectively removing available capacity on the Asia – Europe trade lane. Rates peaked in January but reversed as new container ships were delivered into the market. This reversion came to a halt beginning of May and have now surpassed the January peak. Moody's believes current strong demand and consequently high freight rates is a reaction to high geopolitical risks and constrained capacity rather than very strong fundamentals. Nevertheless, Moody's has raised its EBIT margin forecast for CMA CGM to around 9% from low single digits for 2024. Moody's stresses that even if the Red Sea situation is not resolved during the remainder of 2024, the expected deliveries of new vessels will ultimately bring down freight rates again, most likely during the second half of 2024 or first half of 2025. With a Moody's-adjusted debt / EBITDA ratio of 2.0x and net debt / EBITDA ratio of 1.5x as of March 31, 2024, CMA CGM's Ba1 rating is strongly positioned, also factoring in the high unencumbered assets ratio and strong liquidity. Having said that, the company's orderbook of 97 vessels for a remaining capital commitment of almost $10 billion (spread over 2024-2026) will weigh on free cash flow generation and as such Moody's expect its FCF / debt ratio to be negative over this period. The company's strong rating positioning offers sufficient financial flexibility to accommodate these investments under the current rating category even in a declining freight rates environment. RATIONALE FOR THE STABLE OUTLOOK The stable outlook rests on CMA CGM maintaining debt / EBITDA below 3.0x and retained cash flow (RCF)/net debt at least in the high-20s in percentage terms over the next 12-18 months. Although Moody's expects the company's EBIT margin to through at 2% - 3% during 2025, its strong liquidity and balance sheet will more than offset the temporary headwinds the industry will experience as overcapacity increases over the next 18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Further positive rating pressure requires a track record of sustaining a higher degree of margin stability with an EBIT-Margin in the high-single digit percentages, a successful integration of recent acquisitions combined with sustained credit metrics reflected in debt/EBITDA at or below 2.0x, retained cash flow / net debt at least in the high 30s in percentage terms. Furthermore a preservation of a strong liquidity profile and a formal financial policy would be required. Negative ratings pressure could be the result of a debt / EBITDA ratio above 3.0x on a sustained basis, an EBIT margin below 5% over the cycle and a retained cash flow / net debt ratio below 20%. Repeated years of negative free cash flow with a deteriorating liquidity profile would also put negative pressure on the rating. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Shipping published in June 2021. COMPANY PROFILE Based in Marseille, France, CMA CGM is the third largest provider of global container shipping services. The company operates primarily in the international containerized maritime transportation of goods, but its activities also include container terminal operations, intermodal, inland transport and logistics. In 2023, the company reported revenue of $47 billion and EBITDA of $9 billion. The company is ultimately owned by the Saade family (73%), Yildrim Holding (24%) and BPI France (3%). MEDIAWAN HOLDING: Fitch Assigns 'B' LongTerm IDR, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has assigned French production and licencing studio Mediawan Holding SAS (Mediawan) a Long-Term Issuer Default Rating (IDR) of 'B' with a Stable Outlook. Fitch has also assigned the EUR500 million term loan B (TLB) to be issued by Mediawan Financing SAS an expected instrument rating of 'B+(EXP)' with a Recovery Rating of 'RR3'. The final rating is subject to the completion of the refinancing and to the receipt of final documentation conforming to information already received. The ratings reflect Mediawan's announced acquisition of German competitor Leonine Holding GmbH and the envisaged refinancing of the entire capital structure. Mediawan's rating post-merger will reflect the combined entity's leading position as a prominent independent studio in Europe, specialising in the production and distribution of original and acquired content. The ratings are underpinned by Mediawan's predominantly scripted content production activity and its developing licensing platform, benefiting from long-term relationships with premium home entertainment broadcasters and a relatively concentrated customer base. Fitch projects the combined entity will be able to generate revenue and EBITDA growth, driven by sustained investments in new production by video-on-demand (VOD) platforms. Mediawan's leverage is moderate relative to its sensitivities for a 'B' rating in its sector, but the predominance of production activities in the mix translates into some volatility in free cash flow (FCF) driven by content generation capex. The ratings give management financial headroom to execute organic and inorganic growth expansion. KEY RATING DRIVERS Independent Production and Licensing Platform: The Mediawan and Leonine merger leads to a prominent, independent content production platform, together with relevant licensing and distribution activities. Post integration, about 70% of produced content will be scripted. France will be the key country for the combined entity, with around 40%, of revenues followed by Germany, a legacy of Leonine. About 90% of business is European, while there is an expandable presence in the US. Mediawan's clients are predominantly subscriber-driven home entertainment platforms, pay and linear broadcasters. Customer diversification is limited, with the top 10 clients accounting for about half of revenue. Vertically-Integrated Model: Mediawan creates and produces its content, retaining the associated intellectual property rights. Most projects are funded by broadcasters, clients, and tax credits, covering roughly two-thirds of the initial costs in France. Contractual revenues are agreed in advance and received when content is delivered. After the initial broadcast period, Mediawan monetises the content through licensing, although this segment can fluctuate due to reliance on popular hits. Production costs capitalised on the balance sheet begin to be expensed on the income statement from delivery, leading to a substantial increase in cash flow. Typically, 95% of the production expenses are amortised at delivery. VOD Drives Revenue Growth: VOD platforms are driving revenue growth for companies like Mediawan. Industry forecasts suggest that spending on content in key European markets will see a CAGR of over 5% through 2027. As studios launch their own streaming services, the distinction between studios and VOD platforms is blurring. This competition for viewers is fuelling investment in content. This trend also affects advertising-driven media like linear TV, albeit with slower growth. Spain, Italy, and Germany are projected to be the fastest-growing markets, contributing to its estimates of Mediawan's revenue CAGR of about 7%. High Leverage, Adequate for Rating: Fitch estimates Mediawan's Fitch-EBITDA leverage at 5.2x for 2024 after the envisaged refinancing and pro-forma for the combined entity. Fitch expects leverage to drop to 4.9x by end-2025, the first full-year of trading for the combined entity, and then slowly reduce. Mediawan's leverage is moderate for the sector, reflecting volatile FCF generation and potential fluctuations of IP-related film and television content. Production Facilities: Its leverage calculations include about EUR260 million of production facilities used to fund shortfalls until associated tax credits are collected. These are non-recourse loans raised at the level of production studios and are secured by IP rights and broadcasters' revenues with no recourse to Mediawan. Net Leverage Headroom: Fitch estimates the refinancing will leave around EUR180 million of cash on balance sheet at end-2024, which Fitch expects to then slowly reduce. This leads to contained net leverage at 3.8x, set to improve below 3.5x by 2026 and offers headroom for bolt-on acquisitions, potentially contributing to faster gross deleveraging. However, Fitch does not assume this liquidity will be used to prepay debt and consequently use gross leverage in its analysis. Moderate EBITDA Margin Improvement: Fitch assesses Mediawan's EBITDA, deducting licensing and distribution amortisation costs directly associated with marketed IP, as is standard in the industry. Its calculation also adjusts for the adoption of IFRS 16. Following the merger, Fitch anticipates a slight uptick in Fitch-calculated EBITDA margins, bolstered by the growing share of the inherently higher margin production business and reductions in staff, IT, and marketing expenses. Fitch forecasts EBITDA margins to approach 13% by 2027, up from approximately 12% in 2024. Volatile FCF: Mediawan's FCF will initially be strained after the merger by significant production capex, due to content pre-financing. This effect is somewhat mitigated by positive cash flow from working capital, stemming from clients' advance payments for production projects. Fitch anticipates that the company's FCF will be neutral by 2026, following negative FCF in 2024-25 due to large production investments. Over the medium term, Fitch expects Mediawan's FCF to stabilise as EBITDA margins improve and the expansion of the IP library reduces the current heavy dependence on production. M&A an Option: Fitch believes that Mediawan may consider acquisitions and dividends, but these are not factored into its primary scenario. The company might adopt an opportunistic stance on acquisitions, particularly as suitable entities, like smaller production labels, emerge in a consolidating industry. Available cash might be directed towards extra payouts to shareholders, in accordance with financial agreements. Fitch expects that Mediawan's shareholders will pursue additional avenues for value creation, possibly through strategic mergers and acquisitions. DERIVATION SUMMARY Following the acquisition of Leonine, Mediawan has established itself as a prominent independent studio in Europe, specialising in the production and distribution of original and acquired content. It has significant market presence in France and Germany, making it a top independent studio in Europe. Mediawan's peers include ITV Plc (BBB-/ Stable), an integrated producer and broadcaster, and Subcalidora 1 S.a.r.l. (Mediapro, B/Stable), a Spanish sports and media rights manager. Mediawan generally holds its own against other Fitch-rated speculative grade studios and content producers, with Banijay Group SAS (B+/Stable) its nearest European counterpart. Banijay has larger scale, more geographic reach, and a focus on non-scripted content that contributes to steadier cash flow and less operational fluctuation. However, Mediawan's high-quality scripted content also has the potential to ensure stable cash flow. Banijay's IDR is influenced by Fitch's assessment of the robustness of its parent company, Banijay Group (formerly FL Entertainment N.V.), resulting in a one-notch increase from Banijay's 'b' Standalone Credit Profile. Mediawan and Lions Gate Entertainment Corp. (B-/Stable) have comparable EBITDA margins, although Lions Gate operates on a larger scale. Lions Gate's slightly superior business model is due to its vast film library, dominance in film and TV production, and the Starz subscription service, enhancing the steadiness of its media network. Similarly, Wildbrain Ltd. (B+/Negative) is on par with Mediawan in terms of size and financial leverage, with Wildbrain bolstered by its valuable IP rights in well-known children's programming. KEY ASSUMPTIONS - Leonine acquisition completed in 2024, with 2025 the first full year of trading for the merged entities - Pro-forma combined 2024-27 revenues GAGR of 7% led by scripted production, flat growth of licencing and distribution - Pro-forma combined EBITDA margin increasing to 12.8% in 2027 from 11.8% in 2024 - Content production related capital expenditure averaging around 11% for 2024-27 - No M&A or dividend payments - EUR25 million of annual increase in recourse to production credits RECOVERY ANALYSIS Its recovery analysis assumes that Mediawan will be considered a going concern (GC) in bankruptcy, and that it would be reorganised rather than liquidated. This is because most of its value lies within its production and rights management capabilities, strengthened by long dated client relationships and IP portfolio. Fitch assesses GC EBITDA at EUR105 million, after corrective measures and a restructuring of its capital structure would allow Mediawan to retain a viable business model. Financial distress leading to a restructuring may be driven by Mediawan losing some of its customer contracts, paired with a progressively deteriorating quality of its IP portfolio. These challenges could initially be tackled by a more conservative capex programme; however, they may lead to an untenable capital structure. Fitch applies a recovery multiple of 5.0x, which is in the mid-multiple range for media companies in EMEA. After deducting 10% for administrative claims, this generates a ranked recovery in the 'RR3' band, leading to a 'B+' instrument rating for the new TLB and revolving credit facility (RCF), ranking pari passu with each other. This results in a waterfall-generated recovery computation output percentage of 65%. Its estimates of creditor claims include a fully drawn EUR500 million TLB and a EUR225 million RCF ranking pari passu. Mediawan has access to incentive programmes and tax credits to fund content production costs. The company uses dedicated facilities to bridge the timing variations between content creation outflows and associated receipts. The use of these facilities fluctuates based on changes in the content creation schedules and tax receipt timing. The facilities are raised at the level of each production studios and are secured by broadcaster receivables and tax credits associated with the ongoing seasons. Fitch recognises the necessity of the facilities as a funding source and includes them in its leverage calculations. However, Fitch excludes them from its recovery analysis, assuming they are likely to remain in place in distress. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Revenue growth and EBITDA margins expansion resulting in total debt/Fitch calculated EBITDA sustainably below 5.0x with a conservative funding mix of cash, debt or equity funded M&A - Lower reliance on scripted production revenues and consolidation of the licencing business leading to lower capex requirements and consistently positive FCF generation through the cycle - EBITDA interest cover sustained above 3.5x Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - Total Debt/Fitch calculated EBITDA deteriorating to above 6.0x for EBITDA margin contraction or greater recourse to debt-funded acquisitions - Increasing capex requirements pressuring FCF to consistently neutral levels - EBITDA interest cover remaining below 2.8x LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Fitch estimates Mediawan's cash balance at around EUR180 million at end-2024. The relatively high cash balance is maintained throughout its rating horizon despite volatile FCF, according to its forecasts, especially by 2026. In addition, Mediawan has access to a fully undrawn committed RCF of EUR225 million with no significant debt maturing before 2029. ISSUER PROFILE The merger between Mediawan and Leonine will make for a prominent independent scripted and unscripted content production platform with licensing and distribution activities. DATE OF RELEVANT COMMITTEE 30 May 2024 Sources of Information Sources of information were Mediawan pre-merger financials, a presentation for rating agencies and a meeting with management and key shareholders. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in its credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. 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 ----------- ------ -------- Mediawan Financing SAS senior secured LT B+(EXP)Expected Rating RR3 Mediawan Holding SAS LT IDR B New Rating ============= G E R M A N Y ============= ONE HOTELS: S&P Assigns 'B-' LongTerm ICR, Outlook Stable --------------------------------------------------------- S&P Global Ratings assigned its 'B-' long-term issuer credit rating to One Hotels & Resorts GmbH and to its subsidiary One Hotels GmbH, and its 'B-' issue and '3' recovery ratings to One Hotels' term loan B and EUR500 million senior secured notes. The stable outlook reflects S&P's expectations that One Hotels & Resorts GmbH, through its subsidiary One Hotels GmbH, will continue to successfully integrate newly opened hotels over the next 12 months, generate free operating cash flow after lease payments, and maintain an S&P Global Ratings-adjusted leverage above 7.0x until at least 2025. The proceeds from the transaction will be used to finance One Hotels & Resorts GmbH minority buyout of Motel One GmbH. On April 2, 2024, One Hotels & Resorts GmbH, via its subsidiary One Hotels GmbH, bought the 35% minority stake it still did not own in Motel One GmbH from Proprium Capital Partners, for a total consideration of EUR1,250 million. As part of the buyout, Proprium agreed to receive EUR363 million of the total consideration in the form of a subordinated payment-in-kind (PIK) loan to One Hotels & Resorts GmbH maturing the latest in March 2032, unless it is voluntarily prepaid earlier than the term loan. Its interests can be paid in cash or can accrue as PIK at the choice of One Hotels & Resorts GmbH, though S&P understands from management's representations that this instrument will accrue over the period and not pay cash. To finance the buyout transaction, One Hotels GmbH issued an EUR800 million term loan B and EUR500 million in senior secured notes. These instruments, alongside the EUR76 million cash, will be used to finance the EUR887 million cash consideration for the acquisition and to repay an existing EUR438 million private loan borrowed by Mr. Dieter Muller, the founder of the Motel One franchise. As part of the transaction, One Hotels GmbH and its subsidiary Motel One GmbH will merge. S&P said, "We base our analysis and assessment approach for deriving our issuer credit rating on the consolidated financials of One Hotels & Resorts GmbH, which includes One Hotels GmbH and Motel One Real Estate GmbH (PropCo).One Hotels & Resorts GmbH, Motel One GmbH's ultimate parent, has high financial leverage, representing a major rating constraint. Post-transaction, the 31 hotels previously owned by Motel One GmbH have been carved out to an independent, stand-alone entity, Motel One Real Estate GmbH (PropCo), located outside of the restricted credit group of One Hotels GmbH. Of these 31 hotels, 11 are held by special purpose vehicles (SPVs) managed by private company LHI Leasing GmbH, and they are not consolidated in the German GAAP accounts of One Hotels & Resorts GmbH. We reconsolidate the 11 SPVs into the parent's credit metrics because these entities are fully owned by One Hotels & Resorts GmbH, and they generate about 11% of the group's earnings. The 11 SPVs are audited individually as of March 20, 2024, by Deloitte GmbH. At the date of the transaction, the capital structure of the Motel One group will include a EUR800 million term loan B, EUR500 million of other senior secured debt, EUR692 million of mortgage debt and EUR78 million junior debt borrowed at the level of the subsidiaries of Motel One Real Estate GmbH (of which EUR335 million was borrowed at the SPVs level) and the EUR363 million subordinated PIK loan borrowed by One Hotels & Resorts GmbH. The capital structure will also include other guarantees and miscellaneous debt items for about EUR50 million. Consequently, we project total S&P Global Ratings-adjusted net debt of EUR3,825 million at the end of 2024. This includes about EUR1,518 million leases, which are not capitalized in One Hotels & Resorts GmbH's account under German GAAP. We have capitalized the net present value of minimum future operating lease payments at the discount rate of 7%, in line with our standard adjustment for non-IFRS reporting companies. This translated into pro forma S&P Global Ratings-adjusted leverage of 8.3x as of end-2024. We estimate that this metric will remain above 7.0x until at least 2025. "The rating on One Hotels & Resorts GmbH and its subsidiary One Hotels GmbH is underpinned by positive FOCF after lease, supporting a trajectory of self-funded growth. Despite the high S&P Global Ratings-adjusted leverage at closing, we expect FOCF after lease payments in 2024 to support the rating, thanks to limited working capital changes and about EUR113 million of capital expenditure (capex), of which about 50% will be dedicated to maintenance capex while the rest will be allocated to the 16 new hotel openings the group has in its secured pipeline over the next three years (in total 23 new hotels in secured pipeline until 2027). Although interest expenses, pro forma for the transaction, will consume about EUR175 million (excluding interests on leases; including PIK interest and PropCo debt interest), we forecast that One Hotels & Resort GmbH will generate about EUR14 million of FOCF after leases in 2024 and EUR94 million in 2025, maintaining its ability to fund its growth with internally generated free cash flows. "Our rating reflects the group's good balance of business and leisure customers, supported by prime-inner-city locations and high customer loyalty, which translate into high revenue per available room (RevPar) and above-average EBITDA margins. In our view, the group's value-for-money proposition in inner-city locations, which attracts business (60%) and leisure (40%) guests, is less exposed to intra-year seasonality compared to holiday-focused "sun and beach" hotels. We view the focus on inner-city locations as a barrier to entry, as it is more difficult for competitors to open a hotel next door compared with the periphery of cities or on the countryside where land is more easily available." The high share of direct bookings, at about 70%, illustrates a strong brand recognition and customer loyalty, driving strong RevPar, compared with rated peers in the same segment. For instance, in 2023 the group's RevPar stood at about EUR90, compared with Travelodge's (Thame and London Ltd. [B-/Stable/--]) at roughly EUR60 and B&B Hotels' (Casper Topco [B/Stable/--]) at EUR50. The strong RevPar generation, combined with an efficient operating model, command an above-average S&P Global Ratings-adjusted EBITDA margin of about 45%-50%, similar to that of Travelodge and higher than B&B Hotels' approximately 40%. The rating is constrained by the group's asset-heavy business model and its limited diversification across geographies, brands, and value propositions. The group operates under an asset-heavy business model, as it leases or owns all its hotels, which is typical in European hotel chains, but which is less cost-flexible in times of weaker demand, especially given the long average lease period of about 20 years and the absence of break-out clauses in the contracts. Moreover, the group's geographical diversification is low, as 80% of its 26,500 rooms in its 94 hotels are located in the DACH region, despite its more recent expansion in other European countries, notably in the U.K. and Ireland since 2012. S&P said, "Finally, the group operates essentially under one brand, Motel One, in the budget segment, which we see as an additional constraint to the rating. While we note that the group is developing a new concept under its Cloud One brand, to date this only accounts for four hotels and has yet to yield stronger brand and value proposition diversification." Decision-making at Motel One is substantially influenced by its parent One Hotels & Resorts GmbH and its controlling shareholder, Mr. Muller. Mr. Muller owns about 40% of One Hotels & Resorts GmbH but retains about 61% of voting rights. Mr. Muller is also the chair of the management board of the parent company and his son Mr. Daniel Muller is Co-CEO of One Hotels GmbH. Given the absence of supervisory boards both at the parent and opco levels, we think that the senior Mr. Muller's influence could weigh on the group's creditworthiness. The subordinated PIK instrument has been used to repay a personal loan that Muller entered into in 2020 to finance private endeavors, though after its payment we understand from the company that there are no personal loans outstanding. However, S&P notes that there are provisions in the documentation that could allow for a potential early repayment of the PIK subordinated loan if the company chose to do so. The stable outlook indicates our expectations that One Hotels & Resorts GmbH will continue to successfully integrate newly opened hotels over the next 12 months, generate positive FOCF after lease payments, and maintain S&P Global Ratings-adjusted leverage above 7.0x until at least 2025. Downside scenario S&P could consider lowering the rating in the next 12 months if: -- FOCF after leases turns negative on a sustained basis, weakening the group's liquidity position and putting strain on its capital structure. This could occur, for example, as a result of weaker operating performance than expected, or if the group decided to pay interests on the subordinated loan from Proprium in cash rather than in PIK; or -- Financial leverage increases to such levels that would make the group vulnerable to adverse macroeconomic conditions or that would make the capital structure unsustainable in S&P's opinion. Upside scenario S&P could consider a positive rating action if it foresaw for One Hotels & Resorts GmbH: -- S&P Global Ratings-adjusted leverage reducing to below 6.5x on a sustained basis, with a financial policy supportive of these metrics; -- Substantial and incrementing FOCF after lease payments; and -- Adjusted FOCF to debt improving toward 5%. S&P said, "Environmental factors are a neutral consideration in our credit rating analysis on Motel One. The group makes efforts to reduce its C02 emissions, lowering the Scope 1 and 2 CO2-Emissions per room night from 2.4 kg CO2 in 2019 to 1.3 kg in 2022. "Social factors are a negative consideration in our credit rating analysis of Motel One. Employees at Motel One are not unionized, but about 95% are included in collective bargaining agreements. In 2023, hackers attacked Motel One and stole mainly old invoice data, however the operations were not affected. There were no enforcement actions against Motel One. In general, we see social risks as an inherent part of the hotel industry, which is exposed to health and safety concerns, terrorism, cyberattacks, and geopolitical unrests. "Governance factors are a moderately negative consideration, factoring in the significant influence of the founder, Mr. Dieter Muller and his family. Mr. Muller is also the chair of the management board of the parent company and his son is Co-CEO of One Hotels GmbH. There are no supervisory board neither for the parent nor for One Hotels GmbH. We also note that the visibility of liabilities in the structure is somewhat limited, given the carve-out of Motel One Real Estate GmbH, the significant portion of debt sitting at 11 non-consolidated SPVs, and additional debt raised at the parent company in the form of a PIK subordinated loan, raising potential risks for lenders to the restricted group." ============= I R E L A N D ============= DRYDEN 32 EURO 2014: Moody's Affirms Ba2 Rating on E-R Notes ------------------------------------------------------------ Moody's Ratings has upgraded the ratings on the following notes issued by Dryden 32 Euro CLO 2014 Designated Activity Company: EUR16,950,000 Class B-1-R Senior Secured Floating Rate Notes due 2031, Upgraded to Aaa (sf); previously on Aug 16, 2023 Affirmed Aa1 (sf) EUR24,050,000 Class B-2-R Senior Secured Fixed Rate Notes due 2031, Upgraded to Aaa (sf); previously on Aug 16, 2023 Affirmed Aa1 (sf) EUR12,275,000 Class C-1-R Mezzanine Secured Deferrable Floating Rate Notes due 2031, Upgraded to Aa2 (sf); previously on Aug 16, 2023 Affirmed A1 (sf) EUR12,225,000 Class C-2-R Mezzanine Secured Deferrable Fixed Rate Notes due 2031, Upgraded to Aa2 (sf); previously on Aug 16, 2023 Affirmed A1 (sf) EUR17,500,000 Class D-1-R Mezzanine Secured Deferrable Floating Rate Notes due 2031, Upgraded to Baa1 (sf); previously on Aug 16, 2023 Affirmed Baa2 (sf) EUR5,000,000 Class D-2-R Mezzanine Secured Deferrable Fixed Rate Notes due 2031, Upgraded to Baa1 (sf); previously on Aug 16, 2023 Affirmed Baa2 (sf) Moody's has also affirmed the ratings on the following notes: EUR230,945,000 000 (Current outstanding amount EUR173,039,158) Class A-1-R Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Aug 16, 2023 Affirmed Aaa (sf) EUR12,155,000 (Current outstanding amount EUR9,107,324) Class A-2-R Senior Secured Fixed Rate Notes due 2031, Affirmed Aaa (sf); previously on Aug 16, 2023 Affirmed Aaa (sf) EUR30,500,000 Class E-R Mezzanine Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on Aug 16, 2023 Affirmed Ba2 (sf) EUR12,500,000 Class F-R Mezzanine Secured Deferrable Floating Rate Notes due 2031, Affirmed Caa1 (sf); previously on Aug 16, 2023 Downgraded to Caa1 (sf) Dryden 32 Euro CLO 2014 Designated Activity Company, issued in July 2014, refinanced in February 2017 and reset in August 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by PGIM Limited. The transaction's reinvestment period ended in November 2022. RATINGS RATIONALE The rating upgrades on the Class B-1-R, Class B-2-R, Class C-1-R, Class C-2-R, Class D-1-R and Class D-2-R notes are primarily a result of the deleveraging of the Class A-1-R and Class A-2-R notes following amortisation of the underlying portfolio and the improvement in the credit quality of the underlying collateral pool since the last rating action in August 2023. The affirmations on the ratings on the Class A-1-R, Class A-2-R, Class E-R and Class 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 Class A-1-R and Class A-2-R notes have paid down by approximately EUR43.68million (17.97%) since the last rating action in August 2023 and EUR60.95million (25.07%) since closing. As a result of the deleveraging, over-collateralisation (OC) has increased. According to the trustee report dated April 2024 [1] the Class A/B, Class C and Class D OC ratios are reported at 142.15%, 129.58% and 119.85% compared to June 2023 [2] levels of 140.71%, 128.88% and 119.64%, respectively. Moody's notes that the May 2024 principal payments are not reflected in the reported OC ratios. The credit quality has improved as reflected in the improvement in the average credit rating of the portfolio (measured by the weighted average rating factor, or WARF). According to the trustee report dated April 2024 [1] the WARF was 3016 compared with 3110 in the June 2023 [2] report as of the last rating action. 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: EUR330.16m Defaulted Securities: EUR3.66m Diversity Score: 49 Weighted Average Rating Factor (WARF): 2831 Weighted Average Life (WAL): 3.33 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 4.05% Weighted Average Coupon (WAC): 4.16% Weighted Average Recovery Rate (WARR): 41.01% 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 May 2024. 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. HARVEST CLO IX: Fitch Affirms B+ Rating on Class F-R Notes ---------------------------------------------------------- Fitch Ratings has upgraded Harvest CLO IX DAC's class B-1R to C-R notes and affirmed others. Fitch has also resolved the Rating Watch Positive (RWP) on the class C-R notes. The class F-R notes Outlook has been revised to Negative from Stable. All other Outlooks are Stable. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO IX DAC A-RR XS2339366184 LT AAAsf Affirmed AAAsf B-1-R XS1653044039 LT AAAsf Upgrade AA+sf B-2-RR XS2339366424 LT AAAsf Upgrade AA+sf C-R XS1653044385 LT AAsf Upgrade A+sf D-R XS1653044625 LT A-sf Affirmed A-sf E-R XS1653045192 LT BB+sf Affirmed BB+sf F-R XS1653045432 LT B+sf Affirmed B+sf TRANSACTION SUMMARY Harvest CLO IX 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 August 2021. 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 3 May 2024, the transaction was failing its weighted average life (WAL) test and unhedged fixed-rate collateral debt obligations limit. The transaction is currently 3.7% below par. The portfolio has approximately EUR3.5 million of defaulted assets. However, exposure to assets with a Fitch-derived rating of 'CCC+' and below is 2.5%, 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 2.96% of portfolio assets maturing in 2025 and another 13.4% in 1H26, as calculated by Fitch. In combination with the paydown of the class A-RR 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 limited default-rate cushion on the junior notes, the class F-R notes Outlook is revised to Negative from Stable. High Recovery Expectations: Senior secured obligations comprise 98.3% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate (WARR) of the current portfolio is 61.8%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration, as calculated by Fitch, is 17.9%, and no obligor represents more than 2.7% of the portfolio balance. Exposure to the three-largest Fitch-defined industries is 27.1% as calculated by the trustee. Unhedged fixed-rate assets as reported by the trustee are at 5.5% of the portfolio balance, versus a limit of 5%. Transaction Outside Reinvestment Period: The manager can reinvest unscheduled principal proceeds and sale proceeds from credit-improved or -impaired obligations after the reinvestment period, subject to compliance with the reinvestment criteria. Although that the WAL test and unhedged fixed-rate obligation limits are currently failing, the manager can 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 15% and 35%, respectively. 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), reflecting 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 IX 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. INVESCO EURO VIII: Moody's Assigns (P)Ba3 Rating to Cl. E-R Notes ----------------------------------------------------------------- Moody's Ratings announced that it has assigned the following provisional ratings to refinancing notes to be issued by Invesco Euro CLO VIII DAC (the "Issuer"): EUR20,800,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned (P)A2 (sf) EUR27,200,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned (P)Baa3 (sf) EUR21,400,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2036, Assigned (P)Ba3 (sf) RATINGS RATIONALE The rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in Moody's methodology. As part of this refinancing, the Issuer will also amend minor features. The Issuer is a managed cash flow CLO. At least 90% of the portfolio must consist of secured senior loans or senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, high yield bonds and mezzanine loans. The underlying portfolio will be fully ramped as of the closing date and will comprise of predominantly corporate loans to obligors domiciled in Western Europe. Invesco CLO Equity Fund IV L.P. ("Invesco") will continue to manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's remaining three-year reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations credit improved obligations. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in May 2024. 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. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in May 2024. Moody's used the following base-case modeling assumptions: Reinvestment Target Par Amount: EUR397.18 million Defaulted Par: none Diversity Score: 48 Weighted Average Rating Factor (WARF): 3119 Weighted Average Spread (WAS): 4.38% Weighted Average Coupon (WAC): 4.72% Weighted Average Recovery Rate (WARR): 43.72% Weighted Average Life (WAL): 6.25 years Moody's has addressed the potential exposure to obligors domiciled in countries with local currency ceiling (LCC) of A1 or below. As per the portfolio constraints and eligibility criteria, exposures to countries with LCC of A1 to A3 cannot exceed 10% and obligors cannot be domiciled in countries with LCC below A3. MILLTOWN PARK CLO: Moody's Affirms B2 Rating on EUR12MM E Notes --------------------------------------------------------------- Moody's Ratings has upgraded the ratings on the following notes issued by Milltown Park CLO DAC: EUR26,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to Aa2 (sf); previously on Sep 7, 2023 Upgraded to A1 (sf) EUR19,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2031, Upgraded to A3 (sf); previously on Sep 7, 2023 Upgraded to Baa1 (sf) Moody's has also affirmed the ratings on the following notes: EUR248,000,000 (Current outstanding amount EUR179,832,159) Class A-1 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Sep 7, 2023 Affirmed Aaa (sf) EUR22,000,000 Class A-2A Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Sep 7, 2023 Upgraded to Aaa (sf) EUR20,000,000 Class A-2B Senior Secured Fixed Rate Notes due 2031, Affirmed Aaa (sf); previously on Sep 7, 2023 Upgraded to Aaa (sf) EUR25,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on Sep 7, 2023 Affirmed Ba2 (sf) EUR12,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed B2 (sf); previously on Sep 7, 2023 Affirmed B2 (sf) Milltown Park CLO DAC, issued in June 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Blackstone Ireland Limited. The transaction's reinvestment period ended in July 2022. RATINGS RATIONALE The rating upgrades on the Classes B and C notes are primarily a result of the deleveraging of the senior notes following amortisation of the underlying portfolio since the last rating action in September 2023. The affirmations on the ratings on the Class A-1, A-2A, A-2B, 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 over-collateralisation ratios. The Class A-1 notes have paid down by approximately EUR 41.4 million (18.7%) since the last rating action in September 2023 and EUR68.2 million (27.5%) since closing. As a result of the deleveraging, over-collateralisation (OC) has increased across the capital structure. According to the trustee report dated May 2024 [1] the Class A, Class C, Class D and Class E OC ratios are reported at 147.37%, 131.91%, 122.52% and 112.02% compared to August 2023 [2] levels of 141.34%, 128.63%, 120.70% and 111.65%, respectively. Key model inputs: 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: EUR327.3m Defaulted Securities: EUR4.1m Diversity Score: 51 Weighted Average Rating Factor (WARF): 3075 Weighted Average Life (WAL): 3.59 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.60% Weighted Average Coupon (WAC): 3.89% Weighted Average Recovery Rate (WARR): 44.28% Par haircut in OC tests and interest diversion test: 0.74% 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 May 2024. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as bank and swap provider, 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. NASSAU EURO IV: Fitch Assigns 'B-(EXP)sf' Rating on Class F Notes ----------------------------------------------------------------- Fitch Ratings has assigned Nassau Euro CLO IV DAC expected ratings. The assignment of final ratings is contingent on the receipt of final documents conforming to information already reviewed. Entity/Debt Rating ----------- ------ Nassau Euro CLO IV DAC Class A-1 XS2798984519 LT AAA(EXP)sf Expected Rating Class A-2 XS2798985086 LT AAA(EXP)sf Expected Rating Class B XS2798984782 LT AA(EXP)sf Expected Rating Class C XS2798985169 LT A(EXP)sf Expected Rating Class D XS2798985326 LT BBB-(EXP)sf Expected Rating Class E XS2798985672 LT BB-(EXP)sf Expected Rating Class F XS2798985839 LT B-(EXP)sf Expected Rating Sub Notes XS2798986050 LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY Nassau Euro CLO IV DAC is a securitisation of mainly senior secured obligations with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds will be used to purchase a portfolio with a target par of EUR400 million. The portfolio will be actively managed by Nassau Global Credit (UK) LLP. The collateralised loan obligation (CLO) will have a 4.5-year reinvestment period and a 7.5year weighted average life test (WAL test). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch assesses the average credit quality of obligors to be in the 'B' category. The Fitch weighted average rating factor (WARF) of the identified portfolio is 24.5. High Recovery Expectations (Positive): At least 92.5% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate of the identified portfolio is 63.5%. WAL Step-Up Feature (Neutral): The transaction can extend the WAL by one year at the step-up date one year after closing. The WAL extension is subject to conditions including fulfilling the portfolio-profile, collateral-quality, coverage tests and collateral principal amount being at or above the reinvestment target par, with defaulted assets at their collateral value on the step-up date. Diversified Portfolio (Positive): The transaction will include various concentration limits in the portfolio, including a fixed-rate obligation limit at 10%, a top 10 obligor concentration limit at 20% and a maximum exposure to the three-largest Fitch-defined industries at 40%. These covenants ensure the asset portfolio will not be exposed to excessive concentration Portfolio Management (Neutral): The transaction has a 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. Cash Flow Modelling (Positive): The WAL for the transaction's Fitch-stressed portfolio analysis is 12 months less than the WAL covenant. This is to account for the strict reinvestment conditions envisaged by the transaction after its reinvestment period, which include passing the coverage tests, the Fitch WARF test and the Fitch 'CCC' bucket limitation test after reinvestment as well as a WAL covenant that progressively steps down, before and after the end of the reinvestment period. Fitch believes these conditions would reduce the effective risk horizon of the portfolio during the stress period. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A 25% increase of the mean default rate (RDR) and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would not have any rating impact on the rated 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 C and F notes display a rating cushion of three notches, and the class B, D and E notes display a rating cushion of two notches. Should the cushion between the identified portfolio and the Fitch-stressed 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 Fitch-stressed portfolio would lead to downgrades of up to five 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 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 the Fitch-stressed portfolio, upgrades may occur on better-than-expected portfolio credit quality and a shorter remaining WAL test, leading to the ability of the notes to withstand larger-than-expected losses for the remaining life of the transaction. After the end of the reinvestment period, upgrades 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 Nassau Euro CLO IV 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. 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 Nassau Euro CLO IV 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. NASSAU EURO IV: S&P Assigns Prelim. B-(sf) Rating on Class E Notes ------------------------------------------------------------------ S&P Global Ratings assigned preliminary credit ratings to Nassau Euro CLO IV DAC's class A-1 to F European cash flow CLO notes. At closing, the issuer will issue unrated subordinated notes. Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will permanently switch to semiannual payments. The portfolio's reinvestment period will end 4.6 years after closing, while the non-call period will end 1.6 years after closing. The preliminary ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which S&P expects to be bankruptcy remote. -- The transaction's counterparty risks, which S&P expects to be in line with its counterparty rating framework. Portfolio benchmarks CURRENT S&P Global Ratings' weighted-average rating factor 2,732.33 Default rate dispersion 470.79 Weighted-average life (years) 4.30 Weighted-average life (years) extended to cover the length of the reinvestment period 4.56 Obligor diversity measure 143.82 Industry diversity measure 26.34 Regional diversity measure 1.29 Transaction key metrics CURRENT Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 0.00 Actual 'AAA' weighted-average recovery (%) 37.83 Actual weighted-average spread (net of floors; %) 4.19 S&P said, "Our preliminary ratings reflect our assessment of the preliminary collateral portfolio's credit quality, which has a weighted-average rating of 'B'. We understand that at closing the portfolio will be well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow CDOs. "In our cash flow analysis, we used the EUR400 million target par amount, the actual weighted-average spread (4.19%), the actual weighted-average coupon (4.74%), and the actual portfolio weighted-average recovery rates for all rated notes. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Until the end of the reinvestment period on Jan. 20, 2029, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, if the initial ratings are maintained. "Under our structured finance sovereign risk criteria, we expect the transaction's exposure to country risk to be sufficiently mitigated at the assigned preliminary ratings. "At closing, we expect that the transaction's documented counterparty replacement and remedy mechanisms will adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "We expect the transaction's legal structure and framework to be bankruptcy remote. The issuer is expected to be a special-purpose entity that meets our criteria for bankruptcy remoteness. "Our credit and cash flow analysis show that the class B, C, D, E and F notes benefit from break-even default rate (BDR) and scenario default rate cushions that we would typically consider to be in line with higher ratings than those assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our preliminary ratings on the notes. The class A-1 and A-2 notes can withstand stresses commensurate with the assigned preliminary ratings. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our preliminary ratings are commensurate with the available credit enhancement for the class A-1 to F notes. "In addition to our standard analysis, to indicate how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A-1 to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category--and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met--we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance S&P said, "We regard the exposure to environmental, social, and governance (ESG) credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average." Ratings PRELIM. PRELIM. AMOUNT CREDIT CLASS RATING* (MIL. EUR) ENHANCEMENT (%) INTEREST RATE§ A-1 AAA (sf) 240.00 40.00 Three/six-month EURIBOR plus 1.49% A-2 AAA (sf) 8.00 38.00 Three/six-month EURIBOR plus 1.70% B AA (sf) 40.00 28.00 Three/six-month EURIBOR plus 2.15% C A (sf) 26.80 21.30 Three/six-month EURIBOR plus 2.60% D BBB- (sf) 28.20 14.25 Three/six-month EURIBOR plus 3.95% E BB- (sf) 17.00 10.00 Three/six-month EURIBOR plus 6.74% F B- (sf) 13.00 6.75 Three/six-month EURIBOR plus 8.30% Sub. Notes NR 36.45 N/A N/A *The preliminary ratings assigned to the class A-1, A-2, and B notes address timely interest and ultimate principal payments. The preliminary ratings assigned to the class C, D, E, and F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. ========= I T A L Y ========= A2A SPA: Moody's Rates New Perpetual Subordinated Securities 'Ba1' ------------------------------------------------------------------ Moody's Ratings has assigned a Ba1 long-term rating to the proposed perpetual subordinated securities (the "Hybrid") to be issued by A2A S.p.A. The size and completion of the Hybrid are subject to market conditions. The outlook for A2A is stable. RATINGS RATIONALE The Ba1 rating assigned to the Hybrid is two notches below A2A's baa2 standalone Baseline Credit Assessment (BCA) and Baa2 Issuer Rating, reflecting the features of the Hybrid. It is a subordinated debt instrument ranking junior to all senior debt obligations but senior to all classes of share capital of A2A. In Moody's view, the Hybrid has equity-like features that allows it to receive Basket 'M' treatment (please refer to Moody's Hybrid Equity Credit methodology published in February 2024), i.e. 50% equity credit and 50% debt for financial leverage purposes. The features of the Hybrid include (1) an undated maturity; (2) the optional coupon with cumulative settlement; and (3) no step-up in coupon prior to year 10.25, with the step-up not exceeding a total of 100 basis points thereafter. As the Hybrid's rating is positioned relative to another rating of A2A, a change in either (1) Moody's relative notching practice; or (2) the senior unsecured rating of A2A, could affect the rating of the Hybrid. A2A's ratings are supported by (1) its well-diversified business mix, benefiting from its vertical integration in the energy business; (2) the low-risk and relatively stable Italian regulated network earnings; and (3) the group's financial policy that balances the interests of its shareholders and creditors. A2A's ratings are constrained by (1) the group's exposure to the volatile power prices in Italy, although this risk is mitigated by a moderately diversified fuel mix and the group hedging policy; (2) the exposure of the company's waste activities to the cyclical macroeconomic environment; and (3) its exposure to the macroeconomic conditions in Italy because essentially all of A2A's earnings are generated domestically. A2A is considered a Government-Related Issuer given its 25% ownership by the City of Milan (Baa3 stable) and 25% by the City of Brescia. Moody's does not, however, incorporate any notching uplift because City of Milan's own credit profile is weaker than that of A2A. A2A's rating is in line with its baa2 Baseline Credit Assessment (BCA), which measures the company's stand-alone credit quality. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects A2A's solid operating track record and Moody's expectation that it will continue to prudently manage its financial profile such that its credit metrics are positioned within the ratio guidance for a Baa2 rating, namely funds from operations (FFO)/net debt in the low 20s and retained cash flow (RCF)/net debt in the high teens, both in percentage terms and on a sustained basis. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Because of its exclusively domestic focus, A2A's rating would not be more than one notch above that of the Government of Italy. Consequently, any upgrade of the ratings would require an upgrade of the Italian government's rating. Furthermore, any upgrade would also require A2A to maintain a financial profile with its FFO/net debt in the high 20s and RCF/net debt in the mid 20s, both in percentage terms and on a sustained basis, while also maintaining solid liquidity and a diversified source of funding. A2A's ratings could be downgraded if a deterioration in the company's financial profile were to result in its FFO/net debt remaining below the low 20s and its RCF/net debt staying below the high teens, both in percentage terms. The ratings could also be downgraded if the Italian government's rating is downgraded. Downward rating pressure could also arise if any adverse fiscal measures are undertaken, there is adverse political interference that could hurt A2A, or the company's business risk profile deteriorates significantly. The methodologies used in this rating were Unregulated Utilities and Unregulated Power Companies published in December 2023. A2A is the largest Italian multi-utility and the third-largest electricity generator in the Italian market (14 TWh of electricity produced in 2023, excluding WTE). A2A's main shareholders are the City of Milan and the City of Brescia, both with a 25% stake. In 2023, A2A's EBITDA amounted to EUR1.9 billion. A2A is listed on the Milan Stock Exchange, with a capitalisation of around EUR5.9 billion. A2A SPA: S&P Rates Proposed Hybrid Capital Securities 'BB+' ----------------------------------------------------------- S&P Global Ratings assigned its 'BB+' long-term issue rating to the proposed undated, optionally deferrable, and subordinated hybrid capital securities to be issued by Italian multi-utility A2A SpA (BBB/Stable/A-2). The transaction remains subject to market conditions. Post-transaction, we also anticipate that the overall amount of hybrids with intermediate equity content may equal up to 7% of the company's adjusted capitalization (about EUR11.4 billion estimated at year-end 2024, versus about EUR10.2 billion at year-end 2023). S&P believes the proposed hybrid will have intermediate equity content until the first reset date, which it understands will fall no earlier than five years from issuance, in addition to the three-month par call period (not before 5.25 years). During this period, the securities meet our criteria in terms of ability to absorb losses or conserve cash, subordination, and deferability. S&P derive its 'BB+' issue rating on the proposed securities by notching down from our 'BBB' long-term issuer credit rating on A2A. As per S&P's methodology, the two-notch differential reflects: -- A one-notch deduction for subordination because the rating on A2A is above 'BBB-'; and -- An additional one-notch deduction to reflect payment flexibility--the deferral of interest is optional. S&P said, "The number of downward notches applied to the securities reflects our view that the issuer is relatively unlikely to defer interest. Should our view change, we may deduct additional notches to derive the issue rating. "Furthermore, to capture our view of the intermediate equity content of the proposed securities, we allocate 50% of the related payments on these securities as a fixed charge and 50% as equivalent to a common dividend, in line with our hybrid capital criteria. The 50% treatment of principal and accrued interest also applies to our adjustment of debt. "A2A can redeem the securities for cash any date in the three months immediately before the first reset date (which we understand will be no earlier than 5.25 years), then annually on every interest payment date. In our view, the likelihood that A2A will repurchase the notes on the open market is reduced by the company's statement of intent and its commitment to strengthen its balance sheet as investments accelerate in the new 2024-2035 strategic plan with the EUR1.2 billion power network acquisition from Enel SpA. Although the proposed securities are perpetual, they can be called at any time for events that we deem external or remote (such as a change in tax, accounting, or rating). In addition, A2A can call the instrument any time before the first call date at a make-whole premium (the make-whole call). We understand the company does not intend to redeem the instrument during this make-whole period, and do not consider that this clause creates an expectation that the issue will be redeemed in that time. Accordingly, we do not view it as a call feature in our hybrid analysis, even if it is referred to as a make-whole call clause in the documentation. "We understand that the interest on the proposed securities will increase by 25 basis points (bps) five years after the first reset date, then by additional 75 bps at the second step-up 20 years after the first reset date, so 15 years after the first step-up date. We view any step-up above 25 bps as presenting an incentive to redeem the instrument, and therefore treat the date of the second step-up as the instrument's effective maturity." Key Factors In S&P's Assessment Of The Instrument's Deferability S&P said, "In our view, A2A's option to defer payment on the proposed securities is discretionary. This means that the issuer may elect not to pay accrued interest on an interest payment date because doing so is not an event of default. However, any deferred interest payment will have to be settled in cash if A2A declares or pays an equity dividend or interest on junior or equally ranking securities, and if the issuer redeems or repurchases shares or equally ranking securities. Still, this condition remains acceptable under our methodology, because once the issuer has settled the deferred amount, it can still choose to defer on the next interest payment date." Key Factors In S&P's Assessment Of The Instrument's Subordination The proposed securities (and coupons) are intended to constitute A2A's direct, unsecured, and subordinated obligations, ranking senior to their common shares. =================== L U X E M B O U R G =================== KERNEL HOLDING: Fitch Affirms 'CC' Issuer Default Ratings --------------------------------------------------------- Fitch Ratings has affirmed Kernel Holding S.A.'s (Kernel) Long-Term Foreign- and Local-Currency Issuer Default Rating (IDR) at 'CC'. Fitch has also upgraded its senior unsecured debt rating to 'CC' from 'C' and placed the instrument rating on Rating Watch Negative (RWN). Its Recovery Rating has been revised to 'RR4' from 'RR6'. The IDR affirmation reflects Kernel's very high credit risks given the company's challenging operating environment since Russia's invasion of Ukraine. The company continues to operate with healthy results, with a Fitch-estimated EBITDA of around USD500 million in the financial year ending June 2024. However, Fitch sees considerable uncertainty over Kernel's ability to address imminent refinancing needs leading to a high probability of default. The RWN for the senior unsecured debt signals high likelihood of a near-term downgrade after today's upgrade following a reduction of Kernel's prior-ranking debt. Fitch sees acute refinancing risks and lack of refinancing options for Kernel's USD300 million of senior unsecured notes due October 2024. The refinancing risks are compounded by capital control restrictions imposed by the National Bank of Ukraine, despite Kernel having sufficient liquidity for operations and debt service. KEY RATING DRIVERS Imminent Refinancing Risk: Fitch sees imminent refinancing risk for Kernel's USD300 million October 2024 bond. Fitch estimates that its available cash balance of USD664 million as of March 2024 and expected free cash flow (FCF) generation in 2024 would allow it to repay the notes. However, cash balances kept outside Ukraine have to be repatriated to the country within 90 days of receipt, which constrains Kernel's ability to service its foreign-currency debt. Inability to refinance the near-term maturity or obtain an exception from National Bank of Ukraine for cross-border foreign currency payments by the bond maturity would likely lead to a downgrade. New Working-Capital Facilities: In 2023, Kernel repaid short-term borrowings of USD643 million, including bilateral secured and unsecured loans. As a result, its financing is no longer subject to most covenants or restrictions that had required waivers from lenders in the past. In addition, Kernel has secured around 90% of new working-capital financing and is working to add new facilities, which Fitch estimates will cover its trading needs for the peak season, while Fitch projects the company will operate on lower debt levels than in FY22-FY23. Strong Performance Despite War: Fitch estimates Kernel will generate around USD500 million of Fitch-adjusted EBITDA in FY24. Favourable weather conditions together with a new corridor in the Black Sea boosted volumes. However, despite new capacity being added and increased stability of the new grain corridor, visibility on profitability for FY25 remains limited by uncertainty about the stability of Kernel's operating environment, harvest volumes, commodity prices and freight costs. Reinforced Export Routes Availability: The Ukrainian Navy has established a new temporary corridor along the Black Sea, which Fitch sees as a more sustainable and efficient solution than the previous grain deal (expired in 2023). Since November 2023, Kernel has been exporting through this commercial route over 80% of its trading goods, with no bottlenecks, inspections or quotas, resulting in 25% higher export volumes during 9MFY24. In addition, Kernel could use the alternative Danube river route with a new port terminal as backup. DERIVATION SUMMARY Kernel's rating is driven by very high refinancing risk, due to limited access to capital markets and cross-border payment restrictions, and a highly challenging operating environment with Ukraine being under martial law. KEY ASSUMPTIONS - Revenue to decline of 6.6% and 8.3% in FY24 and FY25, respectively, due to lower export volumes and soft commodity prices - EBITDA margin at 16.3% in 2024, declining to 10.5% in 2025 - Capex of USD180 million in 2024 and USD130 million in 2025 - Net acquisitions of USD46 million in 2024 of agricultural land and transshipments - No dividends RECOVERY ANALYSIS Key Recovery Rating Assumptions The recovery analysis assumes that Kernel would be considered a going concern (GC) in bankruptcy and that it would be reorganised rather than liquidated. Fitch has assumed a 10% administrative claim. Fitch assesses Kernel's GC EBITDA through the cycle, reflecting the volatility of grain and sunflower oil prices, the impact of foreign-exchange (FX) risks, as well as by taking into account potential severe disruptions in exports and local operations resulting from Russia's invasion. The USD200 million GC EBITDA estimate reflects its view of a sustainable, post-reorganisation EBITDA level, on which Fitch bases the valuation of Kernel. Fitch uses an enterprise value/EBITDA multiple of 3.5x to calculate a post-reorganisation valuation and to reflect a mid-cycle multiple. The multiple is in line with that for MHP, a leading Ukrainian poultry producer. Fitch sees the reduction of prior-ranking debt (mainly PXF facilities) completed during 2023 as yielding a new sustainable capital structure for Kernel, assuming the Black Sea corridor will remain operational. The principal waterfall analysis generates a ranked recovery for the senior unsecured debt in the 'RR4' band, indicating a 'CC' rating for senior unsecured bonds and leading to today's upgrade and Recovery Rating revision. The waterfall analysis output percentage on current metrics and assumptions indicates a recovery rate of 39% (versus 0% before). Simultaneously with the upgrade of Kernel's senior unsecured debt, Fitch has placed it on RWN in light of imminent refinancing risk and absence of refinancing options for its USD300 million senior unsecured bond due in October 2024. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An upgrade is unlikely at this point. The continuation of export activities, an improved liquidity position and a relaxation of the restrictions on cross-border FX payments would be positive for the rating - The senior unsecured debt would be affirmed and removed from RWN if the 2024 maturity bond is redeemed or refinanced by a similar type of unsecured instrument Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Evidence of a default or default-like event, including entering into a grace period, a temporary waiver or standstill following non-payment of a financial obligation, announcement of a distressed debt exchange or uncured payment default - Refinancing of the 2024 maturity bond with prior-ranking debt would lead to a downgrade of the senior unsecured debt class LIQUIDITY AND DEBT STRUCTURE Debt Service Restricted by Moratorium: As of March 2024, Kernel had USD664 million of cash on balance sheet (part of which is held offshore), which together with undrawn facilities of USD87 million as of May 2024 is sufficient for operational needs and the next semi-annual coupons of USD20 million on the USD300 million 6.5% and USD300 million 6.75% bonds. However, lack of access to capital markets and capital control on cross-border foreign currency payments imposed by the National Bank of Ukraine limiting the ability to service foreign-currency debt obligations massively restricts Kernel's ability to redeem or refinance the imminent USD300 million bond maturity of October 2024. ISSUER PROFILE Kernel is the world's largest sunflower oil producer and exporter. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in its credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. 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 ----------- ------ -------- ----- Kernel Holding S.A. LT IDR CC Affirmed CC LC LT IDR CC Affirmed CC Natl LT CC(ukr)Affirmed CC(ukr) senior unsecured LT CC Upgrade RR4 C ============= R O M A N I A ============= [*] ROMANIA: Number of Insolvent Cos. Up 15% in Jan-April 2024 -------------------------------------------------------------- Bogdan Todasca at SeeNews reports that the number of insolvent Romanian companies increased by 15% year-on-year to 2,526 in the first four months of 2024, the country's trade registry office, ONRC, said. The highest number of insolvent companies and legal entities in the January-April period, 490, was registered in Bucharest, ONRC said in a data release on June 5, SeeNews relates. According to SeeNews, the highest number of insolvent companies was registered in the wholesale, retail and motor vehicles servicing sector - 677, up by an annual 9.9%, followed by construction with 523, up by 23%, and manufacturing with 287, up by 13%. At the end of 2023, there were 6,650 insolvent companies in Romania, virtually unchanged from 6,649 recorded a year earlier, SeeNews notes. =========================== U N I T E D K I N G D O M =========================== F.R. SHADBOLT: Collapses Into Administration -------------------------------------------- Business Sale reports that F.R. Shadbolt and Sons Limited, an Essex-based manufacturer of architectural veneered panels and performance doors and doorsets, fell into administration last month, with Irvin Cohen and Kevin Murphy of Begbies Traynor appointed as joint administrators. In the company's accounts for the year to December 31, 2022, it reported turnover of close to GBP12.2 million, up from GBP9.4 million a year earlier, but saw its operating losses widen considerably from GBP34,909 to GBP559,620, Business Sale discloses. The company stated that the COVID-19 pandemic had "affected the planning and commissioning of new construction projects" in 2020 and 2021, with these delays leading to "a reduction in project availability during 2022", Business Sale relates. The firm added that Russia's invasion of Ukraine led to subsequent issues around the cost and availability of construction raw materials, Business Sale notes. At the time, its fixed assets were valued at GBP591,245 and current assets at GBP3.4 million, with total equity standing at GBP2.5 million, according to Business Sale. G.E. STARR: Goes Into Administration ------------------------------------ Business Sale reports that G.E. Starr Limited, an engineering company that supplies metal pressings, assemblies, toolmaking and laser cutting, fell into administration last month, with Craig Povey and Gareth Prince appointed as joint administrators. In its accounts for the year to March 31 2023, the Birmingham-based company's fixed assets were valued at slightly over GBP298,000 and current assets at around GBP2 million, with net assets amounting to approximately GBP300,000, Business Sale discloses. GEMINI PRINT: Set to Go Into Administration, 126 Jobs at Risk ------------------------------------------------------------- Business Sale reports that a commercial printer based in Shoreham-by-Sea, West Sussex has ceased trading and says it will enter administration later this week. A total of 126 employees at Gemini Print Southern Limited have been made redundant, with around 10 staff retained in the short term to fulfil existing commitments and orders, Business Sale discloses. According to the company's board, the decision to place the business into administration was the result of an accumulation of factors, Business Sale relates. Trading had been seriously impacted by the COVID-19 pandemic and struggled to recover fully in the aftermath, Business Sale discloses. The company's challenges were exacerbated by inflationary pressures, which led to sharp increases in energy and rental costs, Business Sale recounts. A substantial debt owed to the company, meanwhile, remains unpaid and directors said it is likely to become subject to legal proceedings, according to Business Sale. In a statement, the board said the firm had been "placed in an impossible situation and has a legal obligation not to trade whilst insolvent", Business Sale relays. The directors added that, despite striving in recent months to address the company's financial issues, they have been unable to secure a solution to enable it to continue trading, according to Business Sale. Speaking to trade publication Printweek, the firm said that "every effort" had been made to avoid insolvency, "including seeking a sale of the business", Business Sale notes. The company added that the administrators, who have not yet been named, will seek to maximise creditor realisations, including "seeking offers on the company's unencumbered assets through specialist asset valuation and disposal agents Eddisons", Business Sale relates. Founded in 1971, the firm provided services including print and finishing, personalisation, creative and design and mailing and fulfilment. In its accounts to the year ending July 31, 2022, Gemini Print reported turnover of GBP16.5 million, compared to GBP17.3 million in the 18 months to July 31, 2021, and recovered from a pre-tax loss of GBP2.1 million to record pre-tax profits of nearly GBP250,000, Business Sale states. Prior to COVID-19, the company had reported turnover of close to GBP20 million. During the pandemic, however, production ceased at a site in Bristol and turnover fell as a result of the effect on its operations, Business Sale relays. INTERNATIONAL PERSONAL: Fitch Puts 'BB-' LongTerm IDR on Watch Pos. ------------------------------------------------------------------- Fitch Ratings has placed International Personal Finance plc's (IPF) 'BB-' Long-Term Issuer Default Rating (IDR) and senior unsecured debt rating on Rating Watch Positive (RWP). Fitch has also assigned IPF's proposed EUR300 million unsecured debt issuance an expected rating of 'BB-(EXP)', which has been placed on RWP. Fitch expects the proceeds from the new senior unsecured notes to be used to pay down the outstanding bond. Consequently, the issuance will not have a material impact on IPF's leverage, while extending maturity to 2029. KEY RATING DRIVERS The RWP primarily reflects the potential improvement in IPF's funding profile from successful execution of the proposed issuance. IPF's average debt tenor would materially lengthen, removing its upcoming maturity spike. Fitch will resolve the RWP following closing of the transaction. IPF's rating reflects its low balance-sheet leverage and structurally profitable business model despite high loan impairment charges, supported by a cash-generative fairly short-term loan book. The ratings remain constrained by IPF's focus on higher-risk customers, product evolution and the sector's susceptibility to changes in regulator sentiment, although historically this has been handled well by management. The successful completion of the proposed refinancing of at a size and tenor that address the main near-term maturities, would likely lead to a one-notch upgrade of the IDR and debt rating. If the issuance does not proceed, or does so on materially different terms, Fitch could either affirm the ratings or take negative action, depending on the reasons for the change of plan. IPF's EUR341 million senior unsecured notes, which is equivalent to GBP296 million at end-2023 or 25% of total assets, mature in November 2025. Deferring this maturity by four years offers IPF increased financial flexibility to accommodate its growth plans and successfully execute its strategy, in its view. In addition, IPF's cash-generative and short-term loan portfolio (with average maturity of 13.2 months at end-2023) and funding headroom (undrawn facilities and non-operational cash balances) of GBP174 million at end-March 2024 should support the liquidity profile. Fitch expects a moderate rise in IPF's loan impairment charges in 2024 and 2025 as the company seeks to expand its operations after the pandemic, especially in Mexico, where credit costs are typically higher than in Europe. IPF's Fitch-calculated loan impairment charges/average gross loan ratio increased to 12.2% in 2023 from 8.5% in 2022, but remained lower than the pre-pandemic average of 20% in 2016-2020. IPF's gross debt/tangible equity ratio remained low at 1.6x at end-2023 and profitability, as measured by pre-tax income/average assets ratio, was sound with 7.1%. Fitch expects the potential interest rate cap on credit cards in Poland to weigh on IPF's profitability in 2024, but the overall impact should be manageable, supported by sound growth in Mexico and European markets. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Non-completion of the proposed debt issuance, or a material change to its terms, could lead to the ratings being affirmed or negative action, if leading to perception that non-completion had reduced IPF's capacity to execute a refinancing of its 2025 Eurobond ahead of it becoming due. IPF's IDR would likely be downgraded if the following occurred: - any difficulty in accessing funding markets, leading to a reduction in liquidity headroom or a material portion of the company's borrowings becoming short term in remaining tenor. - a marked deterioration in asset quality amid macroeconomic pressures, reflected in weaker collections, higher loan impairments pressurising profitability or an increase in unreserved problem receivables - an increase in regulatory interventions (e.g. related to rate caps or early settlement rebates) with a material negative impact on IPF's capacity to conduct profitable business - significant weakening of solvency, with gross debt/tangible equity exceeding 5.5x, or material depletion of headroom against IPF's gearing (gross debt/total equity) covenant of 3.75x Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - The completion of the senior unsecured debt issuance on terms in keeping with those proposed would likely lead to an upgrade of the ratings by one notch to 'BB'. DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS The ratings of IPF's existing and proposed senior unsecured notes are equalised with the IDR as the notes will rank equally in the capital structure. The alignment of the senior unsecured debt ratings with the Long-Term IDR reflects Fitch's expectations for average recovery prospects, given that all of IPF's funding is unsecured and ranks pari-passu with other senior unsecured creditors. DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES IPF's senior unsecured debt rating is expected to move in tandem with its Long-Term IDR, in the absence of the introduction of a material secured or subordinated debt tranche. ADJUSTMENTS The business profile score has been assigned below the implied score due to the following adjustment reason(s): business model (negative). The asset quality score has been assigned above the implied score due to the following adjustment reason(s): collateral and reserves (positive). The earnings & profitability score has been assigned below the implied score due to the following adjustment reason(s): earnings stability (negative). The capitalisation & leverage score has been assigned below the implied score due to the following adjustment reason(s): risk profile and business model (negative). The funding, liquidity & coverage score has been assigned below the implied score due to the following adjustment reason(s): funding flexibility (negative). ESG CONSIDERATIONS IPF has an ESG Relevance Score of '4' for Exposure to Social Impacts stemming from its business model focused on high-cost consumer lending, and therefore exposure to shifts of consumer or social preferences, and to increasing regulatory scrutiny, including potential tightening of interest-rate caps. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. IPF has an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy & Data Security, driven by risk of losses from litigations including early settlement rebates customer claims. This has a negative impact on the credit profile, and is relevant to the 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 Prior ----------- ------ ----- International Personal Finance plc LT IDR BB- Rating Watch On BB- ST IDR B Affirmed B senior unsecured LT BB-(EXP)Expected Rating senior unsecured LT BB- Rating Watch On BB- PIPER HOMES: Goes Into Administration ------------------------------------- Anna Cooper at TheBusinessDesk.com reports that property developer Piper Homes has collapsed into administration. According to TheBusinessDesk.com, the Solihull-based firm saw turnover drop by almost half from GBP38 million in 2021 to GBP20 million in its accounts for 2022, citing a reduction in open market sales rates and "delays in achieving planning consent on new site starts" as factors to the year-on-year decrease in turnover. The firm was set up in 2015 and focuses on mainly greenfield sites in affluent areas of the Midlands and South West. It currently employs just under 40 staff and has three non-executive directors, TheBusinessDesk.com notes. It also reported a loss of GBP662,000, but expected turnover projections for 2023 to improve to be either comparable or higher than 2021, with 993 contracted plots in the pipeline, TheBusinessDesk.com discloses. Piper Homes had sites across the Midlands, particularly focusing on semi-rural locations, including Worcestershire, Warwickshire, Nottinghamshire, Oxfordshire, Gloucestershire and throughout the Cotswolds. SATUS PLC 2021-1: Moody's Affirms B3 Rating on GBP13.3MM F Notes ---------------------------------------------------------------- Moody's Ratings has upgraded the ratings of 3 Notes in SATUS 2021-1 PLC. The rating action reflects the increased levels of credit enhancement for the affected Notes. Moody's affirmed the rating of the Notes that had sufficient credit enhancement to maintain its current rating. GBP21.9M Class C Notes, Upgraded to Aaa (sf); previously on Dec 7, 2023 Affirmed Aa2 (sf) GBP11.8M Class D Notes, Upgraded to Aa2 (sf); previously on Dec 7, 2023 Upgraded to A1 (sf) GBP8.7M Class E Notes, Upgraded to A2 (sf); previously on Dec 7, 2023 Upgraded to Baa2 (sf) GBP13.3M Class F Notes, Affirmed B3 (sf); previously on Dec 7, 2023 Affirmed B3 (sf) RATINGS RATIONALE The rating action is prompted by the increase in credit enhancement for the affected tranches and by the better than expected collateral performance. Increase in Available Credit Enhancement Sequential amortization and the rapid repayment of the Notes led to the increase in the credit enhancement available in this transaction. For instance, the credit enhancement for Classes C, D and E Notes increased to 66.43%, 43.24% and 26.14% from 42.19%, 27.46% and 16.6%, respectively, since the last rating action. Key Collateral Assumptions As part of the rating action, Moody's reassessed its default probability and recovery rate assumptions for the portfolio reflecting the collateral performance to date. The performance of the transactions has continued to be stable since closing, with 90 days plus arrears, and cumulative defaults currently standing at 0.27% and 4.71% of current pool balance, respectively. Moody's decreased the default probability assumption as a percentage of current pool balance to 10% from 12% and the portfolio credit enhancement to 31% from 35%, and increased the assumption for the fixed recovery rate to 45% from 40%. Counterparty Exposure The rating action took into consideration the Notes' exposure to relevant counterparties, such as servicer, account bank or swap provider. Moody's considered how the liquidity available in the transaction and other mitigants support continuity of Notes payments in case of servicer default, using the CR assessment as a reference point for servicer. In SATUS 2021-1 PLC, the Junior Liquidity Reserve Fund, equal to 0.2% of closing pool balance, provides liquidity support for Classes C, D, E and F Notes only when they become the most senior Class. Therefore, the rating of the Class D Notes is constrained due to the lack of liquidity support in the event of servicer disruption. The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in November 2023. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include: (1) performance of the underlying collateral that is better than Moody's expected, and (2) an increase in available credit enhancement. Factors or circumstances that could lead to a downgrade of the ratings include: (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expected, (3) deterioration in the Notes' available credit enhancement, and (4) deterioration in the credit quality of the transaction counterparties. SUREPAK LTD: Halts Operations Despite Overwhelming Interest ----------------------------------------------------------- Business Sale reports that a Nottingham-based flexible packaging manufacturer that fell into administration earlier this year has ceased trading, despite "overwhelming" interest in the company from potential buyers. Surepak Limited fell into administration in February, with administrators from PKF Smith Cooper saying shortly afterwards that they were "very optimistic" of securing a rescue deal, Business Sale relates. However, PKF Smith Cooper have now confirmed that the business has ceased trading, saying in a statement: "The administrators are disappointed with the ultimate outcome in not securing a sale of the business and assets as a going concern, however they would like to wholeheartedly thank the employees for their hard work and dedication, as well as customers for their continued support throughout this difficult process." Surepak was incorporated in 1991, initially operating as a distributor before subsequently moving into manufacturing in 1995. The company carved out a strong position in the flexible packaging industry, becoming a leading supplier of bags and pouches to retailers, including all major UK supermarkets, as well as an array of other sectors. However, the company began struggling amid the global energy crisis of recent years, with administrators saying that its electricity costs had increased by more than 425%, Business Sale discloses. This was exacerbated by the loss of two significant contracts, leading to an approximately GBP1 million drop in turnover, Business Sale notes. Sole director Stuart Yorston filed for administration in February, in an effort to safeguard Surepak's business, assets and workforce from a winding-up petition served by a creditor, which was due to be heard on Feb. 14, Business Sale recounts. PKF Smith Cooper's Dean Nelson and Nick Lee were appointed as joint administrators on Feb. 12 and the company continued trading in the short-term as they sought to find a buyer, Business Sale relays. According to Business Sale, despite receiving interest from 96 parties, and numerous offers, the sale process was ultimately unsuccessful and Surepak ceased trading on May 10. The company's order book has been acquired by Polypouch UK, with its fixed assets, including stock, plant and machinery and office equipment, available for sale, Business Sale states. Surepak's balance sheet as of December 31, 2022, shows GBP1.48 million in fixed assets and slightly over GBP945,000 in current assets, with total equity of just under GBP771,000, Business Sale discloses. VIYELLA: Set to Go Into Administration -------------------------------------- Sam Metcalf at TheBusinessDesk.com reports that a Derbyshire firm which sells items of heritage clothing brand Viyella to consumers and independent retailers throughout the UK is set to fall into administration. Morrison McConnell, which runs the Viyella-online.co.uk website from an office in Riddings, has posted a notice of appointment to appoint administrators through law firm Browne Jacobson, TheBusinessDesk.com relates. Viyella was formed in 1874 and had a huge mill at Pleasley on the Nottinghamshire/Derbyshire border, but fell into administration into 2009 only to be bought by Austin Reed, which itself fell into administration in 2016 and rescued by Edinburgh Woollen Mill, TheBusinessDesk.com notes. In its latest accounts, made up to the end of December 2022, Morrison McConnell had assets of just over GBP605,000, but owed creditors some GBP953,000, TheBusinessDesk.com discloses. =============== X X X X X X X X =============== [*] BOOK REVIEW: The First Junk Bond ------------------------------------ Author: Harlan D. Platt Publisher: Beard Books Softcover: 236 pages List Price: $34.95 http://www.beardbooks.com/beardbooks/the_first_junk_bond.html Only one in ten failed businesses is equal to the task of reorganizing itself and satisfying its prior debts in some fashion. This engrossing book follows the extraordinary journey of Texas International, Inc. (known by its New York Stock Exchange stock symbol, TEI), through its corporate growth and decline, debt exchange offers, and corporate renaissance as Phoenix Resource Companies, Inc. As Harlan Platt puts it, TEI "flourished for a brief luminous moment but then crashed to earth and was consumed." TEI's story features attention-grabbing characters, petroleum exploration innovations, financial innovations, and lots of risk taking. The First Junk Bond was originally published in 1994 and received solidly favorable reviews. The then-managing director of High Yield Securities Research and Economics for Merrill Lynch said that the book "is a richly detailed case study. Platt integrates corporate history, industry fundamentals, financial analysis and bankruptcy law on a scale that has rarely, if ever, been attempted." A retired U.S. Bankruptcy Court judge noted, "[i]t should appeal as supplementary reading to students in both business schools and law schools. Even those who practice.in the areas of business law, accounting and investments can obtain a greater understanding and perspective of their professional expertise." "TEI's saga is noteworthy because of the company's resilience and ingenuity in coping with the changing environment of the 1980s, its execution of innovative corporate strategies that were widely imitated and its extraordinary trading history," says the author. TEI issued the first junk bond. In 1986 it achieved the largest percentage gain on the NYSE, and in 1987 suffered the largest percentage loss. It issued one of the first bonds secured by a physical commodity and then later issued one of the first PIK (payment in kind) bonds. It was one of the first vulture investors, to be targeted by vulture investors later on. Its president was involved in an insider trading scandal. It innovated strip financing. It engaged in several workouts to sell off operations and raise cash to reduce debt. It completed three exchange offers that converted debt in to equity. In 1977, TEI, primarily an oil production outfit, had had a reprieve from bankruptcy through Michael Milken's first ever junk bond. The fresh capital had allowed TEI to acquire a controlling interest of Phoenix Resources Company, a part of King Resources Company. TEI purchased creditors' claims against King that were subsequently converted into stock under the terms of King's reorganization plan. Only two years later, cash deficiencies forced Phoenix to sell off its non-energy businesses. Vulture investors tried to buy up outstanding TEI stock. TEI sold off its own non-energy businesses, and focused on oil and gas exploration. An enormous oil discovery in Egypt made the future look grand. The value of TEI stock soared. Somehow, however, less than two years later, TEI was in bankruptcy. What a ride! All told, the book has 63 tables and 32 figures on all aspects of TEI's rise, fall, and renaissance. Businesspeople will find especially absorbing the details of how the company's bankruptcy filing affected various stakeholders, the bankruptcy negotiation process, and the alternative post-bankruptcy financial structures that were considered. Those interested in the oil and gas industry will find the book a primer on the subject, with an appendix devoted to exploration and drilling, and another on oil and gas accounting. Dr. Harlan D. Platt is a professor of Finance at D'Amore-McKim School of Business at Northeastern University. He is a member of the Board of Directors of Millennium Chemicals Inc. and is on the advisory board of the Millennium Liquidating Trust. He served as the Associate Editor-Finance for the Journal of Business Research. He received a Ph.D. from the University of Michigan, and holds a B.A. degree from Northwestern University. This book may be ordered by calling 888-563-4573 or by visiting www.beardbooks.com or through your favorite Internet or local bookseller. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *