/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/250312.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 Wednesday, March 12, 2025, Vol. 26, No. 51 Headlines F R A N C E AUTONORIA DE 2023: DBRS Confirms B Rating on Class F Notes FORVIA SE: S&P Lowers ICR to 'BB-' on Slow Deleveraging G E R M A N Y AVIV GROUP: Fitch Assigns 'B+' Final LongTerm IDR, Outlook Stable I R E L A N D BAIN CAPITAL 2018-2: Moody's Cuts Rating on Class F Notes to B3 DRYDEN 52 EURO 2017: Moody's Affirms Ba3 Rating on E-R Notes RRE 23 LOAN: S&P Assigns BB-(sf) Rating on Class D Notes I T A L Y YOUNI ITALY 2024-1: Fitch Affirms 'Bsf' Rating on Class E Notes L U X E M B O U R G ROOT BIDCO: Fitch Assigns 'B-(EXP)' Rating on New Term Loan B P O L A N D KRUK SA: S&P Withdraws BB- LongTerm ICR at Company's Request S P A I N ELO: S&P Lowers LongTerm ICR to 'BB-', Outlook Stable NEW IMMO: S&P Downgrades ICR to 'BB-', Outlook Stable PORTAVENTURA: Moody's Withdraws 'B3' Corporate Family Rating ROOT BIDCO: S&P Assigns 'B-' Rating on EUR1,110MM New Term Loan B THETIS FINANCE NO. 2: S&P Hikes Cl. F-Dfrd Notes Rating to 'B-(sf)' S W E D E N MARSHALL GROUP: S&P Assigns 'B' ICR, Outlook Stable OPTIGROUP BIDCO: Fitch Alters Outlook on B LongTerm IDR to Negative U N I T E D K I N G D O M ACTION ARTIFICIAL: Mercian Advisory Named as Administrators BESPOKE METERING: FRP Advisory Named as Administrators DUNBAR EDUCATION: Path Business Named as Administrators ELSTREE FUNDING 4: DBRS Confirms BB(high) Rating on Class F Notes FEVERSHAM ARMS: PKF Littlejohn Named as Administrators GREENWICH BIDCO: S&P Assigns Preliminary 'B' ICR, Outlook Stable J B STAINLESS: Begbies Traynor Named as Administrators LGC SCIENCE: Term Loan Add-on No Impact on Moody's 'B3' CFR POLLOCK FARM: BDO LLP Named as Administrators PROPYORK LTD: Rushtons Insolvency Named as Administrators SONA FIOS IV: S&P Assigns B-(sf) Rating on Class F Notes SOUTHERN WATER: Moody's Ba1 CFR Remains Under Review for Downgrade STAR UK MIDCO: S&P Puts 'B-' ICR on Watch Pos. Amid Honeywell Deal SURREY HIRE: Begbies Traynor Named as Administrators TAURUS 2021-1: DBRS Confirms BB(high) Rating on Class E Notes TRAFFORD CENTRE: Fitch Hikes Rating on Class D1 Notes to 'BB+sf' TY MAWR: Begbies Traynor Named as Administrators VIALTO PARTNERS: Fitch Hikes LongTerm IDR to 'CCC+' WAGAMAMA (HOLDINGS): S&P Assigns 'B' LongTerm ICR, Outlook Stable - - - - - =========== F R A N C E =========== AUTONORIA DE 2023: DBRS Confirms B Rating on Class F Notes ---------------------------------------------------------- DBRS Ratings GmbH took the following credit rating actions on the bonds issued by Autonoria DE 2023 (the Issuer): -- Class A Notes confirmed at AAA (sf) -- Class B Notes confirmed at AA (high) (sf) -- Class C Notes confirmed at A (high) (sf) -- Class D Notes confirmed at A (low) (sf) -- Class E Notes confirmed at BB (sf) -- Class F Notes confirmed at B (sf) Morningstar DBRS did not assign a rating to the Class G Notes (collectively with the Rated Notes, the Notes) also issued in this transaction. The credit ratings on the Class A Notes and Class B Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the final maturity date in January 2043. The credit ratings on the Class C Notes, Class D Notes, Class E Notes, and Class F Notes address the ultimate payment (then timely as most-senior class) of interest and the ultimate repayment of principal by the final maturity date. CREDIT RATING RATIONALE The confirmations follow an annual review of the transaction and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the January 2025 payment date; -- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and -- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective credit rating levels. The transaction represents the securitization of receivables relating to a pool of retail auto loan receivables originated by BNP Paribas S.A., Niederlassung Deutschland (BNPP DE; the Seller and Servicer) through its Consors Finanz brand to German borrowers. The transaction closed in March 2023 with a portfolio balance of EUR 525 million and included a six-month revolving period, which ended on the September 2023 payment date. Prior to a sequential redemption event, principal is allocated to the Notes on a pro rata basis. Following a sequential redemption event, principal is allocated on a sequential basis. Once the amortization becomes sequential, it cannot switch to pro rata. PORTFOLIO PERFORMANCE As of the January 2025 payment date, loans that were one to two months and two to three months delinquent represented 0.4% and 0.1% of the principal outstanding balance of the portfolio, respectively, while loans that were more than three months delinquent represented 0.9%. Gross cumulative defaults amounted to 0.45% of the original portfolio balance, with cumulative recoveries of 45.2% to date. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and maintained its base case PD and LGD assumptions at 2.1% and 55.0%, respectively. CREDIT ENHANCEMENT The subordination of the respective junior notes provides credit enhancement to the rated Notes. As of the January 2025 payment date, credit enhancements to the Class A, Class B, Class C, Class D, Class E, and Class F Notes were 12.8%, 9.8%, 7.0%, 6.0%, 3.9%, and 3.0%, respectively. The credit enhancement has remained stable since Morningstar DBRS' initial credit rating because of the pro rata amortization of the Notes. If a sequential redemption event is triggered, the principal repayment of the Notes will become sequential and non-reversible. The transaction benefits from an amortizing liquidity reserve funded at closing by the seller in an amount equal to 1.55% of the Notes and floored at 0.50% of the Notes' initial balance as at the closing date, which is available to cover senior expenses, swap expenses, Class A Notes' interest and, if not deferred in the waterfalls, interest on the remaining Notes. The liquidity reserve is currently at its target of EUR 4.5 million. BNP Paribas SA (BNP Paribas) acts as the account bank for the transaction. Based on Morningstar DBRS' reference rating of AA on BNP Paribas (which is one notch below its Long-Term Critical Obligations Rating of AA (high)), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the Rated Notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology. BNP Paribas acts as the interest rate swap counterparty for the transaction. Morningstar DBRS' private rating on BNPPF is consistent with the first rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology. Notes: All figures are in euros unless otherwise noted. FORVIA SE: S&P Lowers ICR to 'BB-' on Slow Deleveraging ------------------------------------------------------- S&P Global Ratings downgraded Forvia SE's long-term issuer credit rating and issue rating on its unsecured debt to ‘BB-' from ‘BB'. The stable outlook reflects S&P's expectation that Forvia will maintain adjusted FFO to debt above 12% and positive adjusted free operating cash flow (FOCF) to debt above 2% in 2025, despite challenging market conditions. Difficult market conditions have hampered Forvia's profitability and deleveraging targets. Forvia's S&P Global Ratings-adjusted EBITDA margin declined to 7.3% in 2024 from 7.9% in 2023 because of declining global automotive production, high restructuring costs of about EUR300 million (albeit partially non-cash), and other one-off costs in its Interiors division. S&P said, "For 2025, we anticipate Forvia's adjusted EBITDA margin will improve to about 8.0%, mainly thanks to the first efficiencies from the restructuring initiatives launched in 2024 and lower one-off costs. That said, we think that muted automotive production--particularly in Europe where Forvia generates about 47% of its revenues--and restructuring costs staying elevated at EUR250 million-EUR300 million will constrain further upside in profitability and earnings growth. Tariffs between the U.S., Mexico, and Canada also pose additional downside risks to our profitability forecast as we think that these tariffs could result in production disruptions or delayed cost pass-through to auto original equipment manufacturers. Overall, we anticipate that Forvia's adjusted FFO to debt will moderately improve to about 13.8% in 2025 from 12.0% in 2024 but will remain below the 15%-20% level we view as commensurate for a higher rating." Depressed valuations hinder Forvia's debt reduction target through asset disposals. The group has delayed its target of completing its second EUR1 billion asset disposal program and reaching a reported net debt-to-EBITDA ratio of below 1.5x (from 2.0x as of Dec. 31, 2024) by one year to the end of 2026. S&P said, "We attribute this to the weak market valuations of European auto suppliers, which make divestments less economically attractive. In addition, Forvia announced that it is also considering larger asset disposals, potentially including full business units identified as noncore, which we think could result in slower execution than in the case of smaller assets or partial divestments. As a result, our base case for 2025 continues to exclude any reduction in adjusted debt stemming from asset disposal proceeds. In 2024, Forvia reduced its adjusted debt to about EUR8.8 billion from EUR9.4 billion thanks to total net proceeds from asset disposals of EUR238 million and adjusted discretionary cash flow (DCF) of EUR430 million (before lease repayments of about EUR250 million). Overall, we continue to view these divestments, along with the suspension of common dividend payments for 2025, as positive signals that Forvia's financial policy will continue to prioritize deleveraging." S&P said, "We expect Forvia's FOCF to be less dependent on working capital efficiencies in 2025. We forecast that the group will generate S&P Global Ratings-adjusted FOCF of EUR465 million in 2025, assuming a declining contribution from working capital inflows of about EUR250 million compared with about EUR630 million in 2024 (excluding factoring changes). We anticipate that Forvia's cash flow will be supported by some EBITDA growth, moderately lower cash interest expenses, and its capital expenditures (capex)-to-sales ratio declining to 3.5%, from 3.6% in 2024, and 4.2% in 2023. Considering the company's common dividend payout cancellation and higher dividend to minority shareholders of EUR150 million-EUR200 million, compared with about EUR90 million in 2024 due to cash upstreaming from subsidiaries to reduce gross debt, we estimate Forvia will maintain sound DCF of about EUR270 million in 2025. Overall, we view Forvia's forecast FOCF to debt of 5.3% for 2025 as representing solid headroom for the ‘BB-' rating. We also expect an improvement in the quality of Forvia's FOCF, since we estimate that this ratio before working capital effects will improve to 2.4% in 2025, from 0% in 2024, and -2.1% in 2023. "The stable outlook reflects our expectation that Forvia will maintain adjusted FFO to debt above 12% and FOCF to debt above 2% in 2025 despite challenging market conditions. "We could lower our rating on Forvia if we anticipate FFO to debt will fall well below 12% or if its FOCF to debt declines below 2% sustainably. This could stem from further contraction in global auto production, setbacks with cost-savings initiatives, or prolonged disruptions from a lengthy tariffs implementation, resulting in S&P Global Ratings-adjusted EBITDA margins declining to 7% or below. "We could raise our rating on Forvia if we anticipate its FFO to debt will improve above 15% sustainably and gradually converge toward 20%, while maintaining FOCF to debt sustainably above 5%. We estimate this would require Forvia's adjusted EBITDA margin to increase closer to 9% and could stem from stronger global auto production growth and faster execution of the group's targeted operating efficiencies." ============= G E R M A N Y ============= AVIV GROUP: Fitch Assigns 'B+' Final LongTerm IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has assigned digital real estate group AVIV Group GmbH (AVIV) a final Long-Term Issuer Default Rating (IDR) of 'B+' with a Stable Outlook. The final ratings are in line with the expected ratings assigned on January 20, 2025. Following strong demand for its EUR1,050 million term loan B (TLB) and favourable pricing, AVIV has decided to upsize its TLB by EUR75 million via a fungible add-on. Despite a minor increase in leverage, the upsize has no rating impact, as Fitch expects AVIV to deleverage to within its rating sensitivities by 2026. The 'B+' IDR is constrained by its high pro-forma leverage, but Fitch believes that margin improvement, alongside strong cash flow generation, will support a solid deleveraging capacity. Rating strengths are AVIV's leading market positions in France, Belgium and Israel, and its main challenger position in Germany. Fitch projects increasing EBITDA margins following significant costs savings and a recovery of the real estate market. Key Rating Drivers Leading Market Positions: AVIV is the market leader in France and Belgium by professional listings, and holds a number two position in Germany, which Fitch views as a strong competitive advantage in the classifieds industry. Being a market leader creates a positive loop by increasing traffic as consumers are attracted to platforms with a superior selection, in turn encouraging more listings. It makes the group more resilient against economic downturns and provides significant pricing power. AVIV also owns Yad2, the number one horizontal classifieds platform in Israel, adding diversification. Positive Growth Outlook: While Fitch estimates revenue to have remained flat in 2024, Fitch expects a rebound from 2025, likely in the mid-single digits in annual percentage terms. Growth will be supported by the positive outlook of the real estate market after few years of decline as previous sharp increases in interest rates start to reverse. Revenue growth will also be supported by its other revenue sources, allowing AVIV to diversify from its traditional core revenue mainly stemming from estate agents and new build contracts. These sources include private property listings, media ads, commissions from mortgage financing, or moving services leads. EBITDA Margin Improvement: Fitch expects Fitch-defined EBITDA margin to increase to 37.3% in 2027 from around 30% in 2024, supported by efficiency programmes, which are expected to lead to an optimised cost structure. Management targeted cost optimisation of EUR47 million for 2024, contributing about an 8pp increase to its adjusted EBITDA margin (company definition) of 31.8% in the same year. EBITDA will be further supported by mid-digit revenue growth expected for 2025-2027. High Leverage; Deleveraging Capacity: Fitch estimates AVIV's Fitch-defined EBITDA gross leverage at a high 6.6x at end-2024. Nevertheless, Fitch believes the company has a strong ability to rapidly deleverage, due to EBITDA improvement and sustainable cash flow generation, supported by its asset-light business model. Fitch expects AVIV to deleverage to 6x in 2025 and 5x in 2026, which are more commensurate with a 'B+' rating. Cash Flow-Generative Business: Fitch expects AVIV to continue generating positive cash flow to 2027, except in 2025 when the company will be affected by one-off costs. Fitch forecasts free cash flow (FCF) margin to improve to 10.2% in 2027 from 7.1% in 2024, supported by declining transformation-related capex and the lack of dividend distribution. Cash flow generation will further support a comfortable liquidity position. Cyclical End-Market: AVIV is exposed to the cyclicality of the real estate market, with its revenue and activity levels fluctuating in tandem with its end-market cycles. These cycles are influenced by interest rates, employment levels, and consumer confidence, which affect property values and transaction volumes. Nevertheless, AVIV's exposure to its cyclical end-market is mitigated by its leading market positions, which reduce their vulnerability to professional agents discontinuing the use of its services, which are essential to their operations. No Committed Financial Policy: Management's primary focus is on organic growth and deleveraging, as underlined in the lack of significant M&A activity and dividend distribution. However, AVIV does not have a committed target leverage and may remain opportunistic on acquisitions. Fitch also does not rule out dividends to shareholders once leverage reaches a certain threshold. Peer Analysis AVIV's key competitors include Immoscout24, the real estate classifieds leader in Germany, and Leboncoin, the main horizontal classifieds platform in France. While Immoscout24 is the clear market leader with significant pricing power compared with AVIV, Leboncoin outperforms AVIV in total real estate listings, including private listings, but not in the professional-only segment, which is AVIV's core market. AVIV's closest Fitch-rated peer in EMEA is Speedster Bidco GmbH (AutoScout24; B/Stable). AutoScout24 is one of the leading European digital automotive classifieds platforms for used and new cars, motorcycles and commercial vehicles to dealers and private sellers. AutoScout24 generates higher EBITDA margins and, following its Trader acquisition, has much bigger scale than AVIV. However, it has higher leverage and weaker cash flow generation potential because of high interest costs. The Stepstone Group Holding GmbH (B+/Stable), a leading job board and recruitment platform, generates similar EBITDA margins and has similar current gross leverage. However, it operates in a more cyclical end-market and has a lower deleveraging capacity than AVIV. This is mitigated by its bigger scale and better geographic diversification. Key Assumptions - Mid-single digit revenue growth from 2025 onwards, following 0.9% growth in 2024 - Fitch-defined EBITDA margin increasing to 37% by 2027 from 30% in 2024 - Working-capital outflows of EUR5 million-EUR15 million per year to 2027 - Capex steadily decreasing to 5% of revenue by 2027 from 13% in 2024 - No dividend payments for 2024-2027 - No M&A for 2025-2027 Recovery Analysis Its recovery analysis assumes that AVIV would be considered a going-concern (GC) in bankruptcy, and that it would be reorganised rather than liquidated. This is underscored by the company's immaterial tangible asset base, online platform, and existing user base of real estate agents, private sellers, buyers and renters. Fitch assesses post-restructuring GC EBITDA at EUR140 million after a sharp downturn in the real estate markets in the regions where AVIV operates, leading to a loss of customers and lower margins. At this level of EBITDA, Fitch expects FCF to be negative, resulting in an unsustainable capital structure. Fitch has used a recovery multiple of 6.0x and assumed 10% administrative claims. Following the EUR75 million upsize of the TLB, the Recovery Rating remains at 'RR3', leading to a senior secured debt instrument rating of 'BB-', one notch above the IDR, but the recovery percentage is reduced to 57% from 60%. The capital structure includes a EUR1,125 million TLB and an equally ranking revolving credit facility (RCF) of EUR200 million, assumed fully drawn in a default. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Pressure on EBITDA margins due to lower cost savings or pricing pressure in a competitive environment that keep Fitch-defined EBITDA leverage above 5.5x - Volatile FCF generation - EBITDA interest cover consistently below 3.0x Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Fitch-defined EBITDA leverage below 4.5x through the cycle on a sustained basis - FCF margin consistently above 10% - Greater commitment to a financial policy that is aligned with creditors' interests Liquidity and Debt Structure Fitch forecasts AVIV's unrestricted cash balance at around EUR50 million following the completion of the transaction. Liquidity is further supported by strong expected cashflow generation through to 2027 and by an undrawn RCF of EUR200 million. Issuer Profile AVIV is a leading digital real estate company operating across Europe. 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 ----------- ------ -------- ----- AVIV Group GmbH LT IDR B+ New Rating B+(EXP) senior secured LT BB- New Rating RR3 BB-(EXP) ============= I R E L A N D ============= BAIN CAPITAL 2018-2: Moody's Cuts Rating on Class F Notes to B3 --------------------------------------------------------------- Moody's Ratings has taken a variety of rating actions on the following notes issued by Bain Capital Euro CLO 2018-2 Designated Activity Company: EUR29,100,000 Class C Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to Aa1 (sf); previously on Nov 1, 2022 Upgraded to A1 (sf) EUR18,900,000 Class D Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to A3 (sf); previously on Nov 1, 2022 Affirmed Baa2 (sf) EUR11,600,000 Class F Senior Secured Deferrable Floating Rate Notes due 2032, Downgraded to B3 (sf); previously on Nov 1, 2022 Affirmed B2 (sf) Moody's have also affirmed the ratings on the following notes: EUR232,500,000 (Current outstanding amount EUR155,448,543) Class A Senior Secured Floating Rate Notes due 2032, Affirmed Aaa (sf); previously on Nov 1, 2022 Affirmed Aaa (sf) EUR13,800,000 Class B-1 Senior Secured Floating Rate Notes due 2032, Affirmed Aaa (sf); previously on Nov 1, 2022 Upgraded to Aaa (sf) EUR20,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2032, Affirmed Aaa (sf); previously on Nov 1, 2022 Upgraded to Aaa (sf) EUR22,900,000 Class E Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Ba2 (sf); previously on Nov 1, 2022 Affirmed Ba2 (sf) Bain Capital Euro CLO 2018-2 Designated Activity Company, issued in November 2018 and refinanced in April 2021, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Bain Capital Credit U.S. CLO Manager, LLC. The transaction's reinvestment period ended in January 2023. RATINGS RATIONALE The rating upgrades on the Class C and Class D notes are primarily a result of the deleveraging of the senior notes following amortisation of the underlying portfolio since the payment date in January 2024. The Class A notes have paid down by approximately EUR69.1 million (29.7%) in the last 12 months and EUR77.1 million (33.1%) since closing. As a result of the deleveraging, over-collateralisation (OC) has increased. According to the trustee report dated February 2025 [1] the Class A/B, Class C and Class D OC ratios are reported at 149.0%, 129.1% and 118.9% compared to February 2024 [2] levels of 139.0%, 124.9% and 117.2%,respectively. The downgrade of the rating on the Class F Notes is primarily a result of the deterioration in the over-collateralisation ratio since the payment date in January 2024. The over-collateralisation ratio of the Class F notes have decreased since the payment date in January 2024. According to the trustee report dated February 2025 [1] the Class F OC ratio is reported at 103.8% compared to February 2024 [2] levels of 105.3%. The affirmations on the ratings on the Class A, Class B-1, Class B-2 and Class 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 key model inputs Moody's uses in Moody's analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on Moody's published methodology and could differ from the trustee's reported numbers. In Moody's base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR279.7 million Defaulted Securities: EUR11.2 million Diversity Score: 52 Weighted Average Rating Factor (WARF): 2938 Weighted Average Life (WAL): 3.39 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.76% Weighted Average Coupon (WAC): 3.98% Weighted Average Recovery Rate (WARR): 43.67% The default probability derives from the credit quality of the collateral pool and Moody's expectations 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 Moody's 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, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in October 2024. 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. 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 Moody's other analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. DRYDEN 52 EURO 2017: Moody's Affirms Ba3 Rating on E-R Notes ------------------------------------------------------------ Moody's Ratings has upgraded the ratings on the following notes issued by Dryden 52 Euro CLO 2017 DAC: EUR16,000,000 Class B-1-R Senior Secured Floating Rate Notes due 2034, Upgraded to Aaa (sf); previously on Sep 1, 2023 Upgraded to Aa1 (sf) EUR20,000,000 Class B-2-R Senior Secured Fixed Rate Notes due 2034, Upgraded to Aaa (sf); previously on Sep 1, 2023 Upgraded to Aa1 (sf) EUR26,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate Notes due 2034, Upgraded to Aa3 (sf); previously on Sep 1, 2023 Affirmed A2 (sf) Moody's have also affirmed the ratings on the following notes: EUR246,000,000 (Current outstanding amount EUR184,824,350) Class A-R Senior Secured Floating Rate Notes due 2034, Affirmed Aaa (sf); previously on Sep 1, 2023 Affirmed Aaa (sf) EUR28,000,000 Class D-R Mezzanine Secured Deferrable Floating Rate Notes due 2034, Affirmed Baa3 (sf); previously on Sep 1, 2023 Affirmed Baa3 (sf) EUR20,000,000 Class E-R Mezzanine Secured Deferrable Floating Rate Notes due 2034, Affirmed Ba3 (sf); previously on Sep 1, 2023 Affirmed Ba3 (sf) EUR15,400,000 Class F-R Mezzanine Secured Deferrable Floating Rate Notes due 2034, Affirmed Caa1 (sf); previously on Sep 1, 2023 Downgraded to Caa1 (sf) Dryden 52 Euro CLO 2017 DAC, issued in July 2017 and refinanced in July 2021, 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 August 2023. RATINGS RATIONALE The upgrades on the ratings on the Class B-1-R, Class B-2-R and Class C-R notes are primarily a result of the deleveraging of the senior notes following amortisation of the underlying portfolio since the payment date in February 2024. The affirmations on the ratings on the Class A-R, Class D-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-R notes have paid down by approximately EUR57.5 million (23.4%) since February 2024 and EUR61.2million (24.9%) since closing. As a result of the deleveraging, over-collateralisation (OC) has increased. According to the trustee report dated January 2025 [1] the Class A/B and Class C ratios are reported at 143.8% and 130.2% compared to February 2024 [2] levels of 139.2% and 127.4%, respectively. Moody's note that the February 2025 principal payments are not reflected in the reported OC ratios. Key model inputs: The key model inputs Moody's uses in Moody's analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on Moody's published methodology and could differ from the trustee's reported numbers. In Moody's base case, Moody's used the following assumptions: Performing par and principal proceeds balance: EUR330,107,164 Defaulted Securities: EUR0 Diversity Score: 42 Weighted Average Rating Factor (WARF): 2959 Weighted Average Life (WAL): 3.5years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.92% Weighted Average Coupon (WAC): 3.81% Weighted Average Recovery Rate (WARR): 40.96% Par haircut in OC tests and interest diversion test: none The default probability derives from the credit quality of the collateral pool and Moody's expectations 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 Moody's 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 and swap provider, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in October 2024. 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. 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 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. 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 Moody's other analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. RRE 23 LOAN: S&P Assigns BB-(sf) Rating on Class D Notes -------------------------------------------------------- S&P Global Ratings assigned its credit ratings to RRE 23 Loan Management DAC's class A-1 to D notes. The issuer also issued unrated performance, preferred return, and subordinated notes. This is a European cash flow CLO transaction, securitizing a portfolio of primarily senior secured leveraged loans and bonds. The transaction is managed by Redding Ridge Asset Management (UK) LLP. The ratings assigned to RRE 23 Loan Management DAC's notes reflect our 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 is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Under the transaction documents, the rated notes will pay quarterly interest unless there is a frequency switch event. Following this, the notes will permanently switch to semiannual payments. The portfolio's reinvestment period will end approximately five years after closing, and the portfolio's maximum average maturity date is approximately 8.5 years after closing. Portfolio benchmarks S&P Global Ratings' weighted-average rating factor 2,826.19 Default rate dispersion 429.10 Weighted-average life including reinvestment(years) 5.01 Obligor diversity measure 96.12 Industry diversity measure 16.57 Regional diversity measure 1.24 Transaction key metrics Total par amount (mil. EUR) 400 Defaulted assets (mil. EUR) 0 Number of performing obligors 118 Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 0.50 Target 'AAA' weighted-average recovery (%) 36.75 Target portfolio weighted-average spread (%) 3.80 S&P said, "The portfolio is 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. As such, we have not applied any additional scenario and sensitivity analysis when assigning ratings to any class of notes in this transaction. "In our cash flow analysis, we used the EUR400 million target par amount, the actual weighted-average spread (3.80%), and the covenanted weighted-average coupon indicated by the collateral manager (3.30%). We assumed weighted-average recovery rates in line with those of the actual portfolio presented to us. 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. "Our credit and cash flow analysis indicates that the available credit enhancement for the class A-2, B, C-1, C-2, and D notes could withstand stresses commensurate with higher ratings than those assigned. However, as the CLO will be in its reinvestment phase starting from closing, during which the transaction's credit risk profile could deteriorate, we have capped the assigned ratings. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "Following the application of our structured finance sovereign risk criteria, the transaction's exposure to country risk is limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "The transaction's legal structure is bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our assigned ratings are commensurate with the available credit enhancement for the class A-1, A-2, B, C-1, C-2, and D notes. "In addition to our standard analysis, we have also included the sensitivity of the ratings on the class A-1 to D notes to four hypothetical scenarios. Environmental, social, and governance factors 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. For this transaction, the documents prohibit or limit assets from being related to certain industries. Since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." Ratings Amount Credit Class Rating* (mil. EUR) enhancement (%) Interest rate§ A-1 AAA (sf) 236.00 41.00 Three/six-month EURIBOR plus 1.26% A-2 AA (sf) 58.00 26.50 Three/six-month EURIBOR plus 1.75% B A (sf) 22.00 21.00 Three/six-month EURIBOR plus 2.00% C-1 BBB (sf) 24.00 15.00 Three/six-month EURIBOR plus 2.75% C-2 BBB- (sf) 4.00 14.00 Three/six-month EURIBOR plus 3.45% D BB- (sf) 18.00 9.50 Three/six-month EURIBOR plus 5.25% Performance notes NR 1.00 N/A N/A Preferred return notes NR 0.25 N/A N/A Sub notes NR 45.70 N/A N/A *The ratings assigned to the class A-1 and A-2 notes address timely interest and ultimate principal payments. The ratings assigned to the class B, C-1, C-2, and D notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. NR--Not rated. N/A--Not applicable. EURIBOR--Euro Interbank Offered Rate. ========= I T A L Y ========= YOUNI ITALY 2024-1: Fitch Affirms 'Bsf' Rating on Class E Notes --------------------------------------------------------------- Fitch Ratings has affirmed Youni Italy 2024-1 S.r.l. notes. Entity/Debt Rating Prior ----------- ------ ----- Youni Italy 2024-1 S.r.l. A IT0005593352 LT AAsf Affirmed AAsf B IT0005593360 LT A-sf Affirmed A-sf C IT0005593378 LT BBB-sf Affirmed BBB-sf D IT0005593386 LT BBsf Affirmed BBsf E IT0005593394 LT Bsf Affirmed Bsf Transaction Summary Youni Italy 2024-1 S.r.l. is a static true-sale securitisation of a pool of unsecured consumer loans granted to Italian borrowers by Younited S.A. KEY RATING DRIVERS Revised Recovery Assumptions: Fitch has revised recovery base cases and recovery haircut for all sub-pools, resulting in a higher recovery base case for the aggregate portfolio of 30% from 20% and lower haircut of 50% from 60%. This reflects the updated historical data received from the originator and the robust servicing practices. Other asset assumptions are unchanged, supported by asset performance in line with Fitch's expectations. Score-band Driven Assumptions: Fitch expects a portfolio weighted average (WA) lifetime default rate of 4.4%. The assumptions reflect the portfolio composition. By current balance, 65% is composed of loans in the two best score bands with default base cases of 1.4% and 3.2%, respectively. As of the January 2024 payment date, cumulative defaults stood at 0.8% of the original portfolio balance, which remains within Fitch's expectations. Sensitivity to Pro-Rata Length: Under Fitch's expected case, a switch to sequential amortisation is unlikely during the next four years, given its portfolio performance expectations relative to the transaction's defined triggers. It leaves the investment-grade notes more sensitive to the length of pro-rata amortisation. A mandatory switch to sequential pay-down when the outstanding collateral balance falls below a certain threshold mitigates tail risk. Interest-Rate Risk Mitigated: A swap agreement is in place to hedge interest-rate risk between the fixed-rate assets and floating rate of the rated notes. The issuer pays the swap rate to the swap counterparty and receives one-month Euribor payable to the rated notes. 'AAsf' Sovereign Cap: The class A notes are rated at their highest achievable rating, six notches above Italy's sovereign rating (BBB/Positive/F2), which is the cap for Italian structured finance and covered bonds. The Positive Outlook on the class A notes reflects that on the sovereign. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The class A notes' rating is sensitive to changes to Italy's Long-Term IDR and Outlook. A revision of the Outlook on Italy's IDR to Stable would trigger similar action on the notes. An unexpected increase in the frequency of defaults or a decrease in the recovery rates could produce larger loss levels than the base case. For example, a simultaneous increase in the default base case by 25% and a decrease in the recovery base case by 25% would lead to downgrades of up to two notches for the class A to E notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade An upgrade of Italy's IDR and revision of the related rating cap for Italian structured finance transactions could trigger an upgrade of the class A notes, provided sufficient credit enhancement was available to withstand the stresses associated with the higher ratings. An unexpected decrease in the frequency of defaults or an increase in the recovery rates could produce smaller losses than the base case. For example, a simultaneous decrease in the default base case by 25% and an increase in the recovery base case by 25% would lead to upgrades of up to three notches for all notes. 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 Youni Italy 2024-1 S.r.l. 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. Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. =================== L U X E M B O U R G =================== ROOT BIDCO: Fitch Assigns 'B-(EXP)' Rating on New Term Loan B ------------------------------------------------------------- Fitch Ratings has assigned Root Bidco S.a.r.l.'s (Rovensa; B-/Stable) proposed term loan B (TLB) an expected senior secured rating of 'B-(EXP)'. The Recovery Rating is 'RR4'. The proposed amend-and-extend (A&E) transaction will extend the legal maturity of Rovensa's TLB to September 2030 for an aggregate amount of EUR1.1 billion, upsized by around EUR80 million to provide additional liquidity. The TLB will be accompanied by a new undrawn committed revolving credit facility (RCF) of up to EUR165 million. Following the A&E, Rovensa will be funded over the medium term. Re-pricing is expected to marginally reduce funding costs. Rovensa's 'B-' IDR reflects a high debt burden, with EBITDA gross leverage expected to remain above 6.5x over the next 18 months and limited scope to reduce net debt amid high mandatory expenditure, including cash interest, tax, maintenance capex and some working capital, as well as sound growth prospects for its bio-solutions business, which represents around 80% of its total EBITDA. Key Rating Drivers High but Moderating Leverage: Fitch estimates end-2024 EBITDA of EUR123 million (after treating leases as operating expense) compared with gross debt of EUR1.2 billion, translating into EBITDA gross leverage of 9.9x. Based on 7%-8% revenue growth (blended rate across Rovensa Next and Ascenza) and synergies from closer integration of past acquisitions, Fitch estimates EBITDA at EUR155 million for FY25 (year-end June) and EUR174 million for FY26, indicating EBITDA gross leverage of 6.8x or net leverage of 6.5x at FYE26. Little Absolute Debt Reduction: Despite a forecast improvement in earnings, cash interest, cash taxes and moderate capex of around EUR30 million will absorb most of Rovensa's cash flow generation. After accounting for working capital and some non-operational expenses stemming from restructuring efforts, Fitch expects free cash flow (FCF) to be broadly neutral. As a result, Fitch does not anticipate meaningful cash accumulation on the balance sheet over the medium term. Cost Optimisation in Focus: Rovensa is targeting around EUR36.5 million savings across selling, general and administrative expenses by FYE25. These include headcount reductions, support functions, external services, travel expenses, and marketing efficiencies. The group has also closed three manufacturing sites. Together EUR8.5 million was realised in FY24. Its rating case has assumed that the group will be able to achieve EUR20 million of run-rate savings by FYE26, while also incurring EUR5 million per year of non-operational, implementation costs. Strong Growth in Biologicals: Food retail chains in developed markets are increasingly setting maximum residue levels linked to fertiliser and crop protection that are lower than legislated standards. As a result, food production using integrated farming methods is expanding, leading to greater use of biological nutrients and crop protection alongside traditional, chemical products and digital solutions to facilitate more targeted application of nutrients and crop protection. Fitch expects the biologicals market to grow around 10% per year globally over the medium term. Meaningful Future Potential: There has been increasing adoption of biologicals in Brazil, particularly for integrated pest control. In the US, Mexico, Argentina and Europe, more farmers are adopting bio-stimulants and bio-fertilisers into their practices. Large markets such as India and Africa remain largely undeveloped. To transform these markets, subsidy schemes or agreed crop prices with pre-funding of input materials would be necessary. India, in particular, is aiming to reduce the use of nitrogen fertilisers to reduce greenhouse gas emissions. Broad Stakeholder Engagement Key: Regulatory approval processes can be lengthy, particularly in Europe, where the same regulation applies for chemical and biological crop protection products. Integrating new products into farming practices in a local context for specific crops requires experience and training, including field trials. As part of that process it is important to provide the right type of data and technical expertise to distributors and farmers that need to be convinced of the efficacy, affordability, consistency and other features. Slow Recovery in Conventional: Global crop protection industry volumes seem to have stabilized, with channel inventories now closer to normal levels. However, the pricing environment remains competitive, particularly in Latin America. Prices for various crop commodities have continued to decline (whereas fruit and vegetables targeted by Rovensa demonstrate comparatively lower price volatility) reducing farmer income and hampering demand for input materials. Changing weather conditions affect the growing season, irrigation and pest control requirements from year to year. Peer Analysis Fitch compares Rovensa with private equity-owned specialty chemical producers Nouryon Holding B.V. (Nouryon, B+/Stable) and Italmatch Chemicals S.p.A. (B/Stable). Rovensa's bio-solutions business provides robust medium-term growth prospects and the group has strong EBITDA margins at or above 20% or in the high teens in weak market conditions like during 2023 and 2024. Those characteristics also apply to Nouryon, a company that is much larger with EBITDA above USD1 billion, much wider product diversification across non-industrial sectors and more balanced geographic diversification across Europe, Americas and Asia-Pacific. Rovensa's major earnings are from Europe, Brazil and Mexico. Nouryon also has lower EBITDA gross leverage at around 5.5x compared with Rovensa at above 7.5x expected for FY25. Italmatch has similar scale to Rovensa. Its product focus is on specialty chemicals including performance additives, lubricants and flame retardants for a range of end-markets, with EBITDA margins in the mid-teens. The business risk profile is incrementally weaker than Rovensa, but leverage is more moderate at 6.0-6.5x for 2024 and 2025. Key Assumptions - Revenue growth of 7%-8% over FY25 and FY26, reflecting robust growth in the bio-solutions market and slow recovery in more traditional crop protection - Average EBITDA margin of 20%-21% over FY25 and FY26, including the benefit of the cost optimisation programme - No acquisitions over the medium term - Capex of EUR29 million in FY25 and EUR31 million in FY26 - Non-operational expenditure of EUR5 million for FY25 and FY26 to facilitate implementation of the cost optimisation programme - No dividends Recovery Analysis The recovery analysis assumes that Rovensa would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated. Fitch uses a GC EBITDA of EUR120 million, which assumes a slowdown in demand growth and increasing competition that is mitigated by cost efficiencies An enterprise value (EV) multiple of 5.5x is applied to the GC EBITDA to calculate a post re-organisation EV Rovensa's EUR165 million revolving credit facility (RCF) and EUR125 million local operating company facilities are assumed to be fully drawn. The proposed EUR1,110 million TLB ranks equally with the RCF and other liquidity lines Fitch assumes that Rovensa's factoring programme would be replaced by a super-senior facility After deducting 10% for administrative claims, its analysis generated a waterfall-generated recovery computation (WGRC) in the 'RR4' band, indicating a 'B-(EXP)' TLB rating. The WGRC output percentage on current metrics and assumptions is 38%. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Slower-than-expected market recovery leading to EBITDA gross leverage remaining above 7.5x by FYE26 - Negative free cash flow leading to reducing liquidity buffer over the next 12-18 months Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Earnings growth leading to EBITDA gross leverage below 6.5x on a sustained basis - FCF margin above 2.5% Liquidity and Debt Structure As of end-2024, Rovensa had EUR79 million of cash and cash equivalents and EUR87 million available under its syndicated committed RCF maturing in March 2027. In addition, the group had EUR15 million undrawn operating company facilities in LatAm with availability of more than one year. The proposed transaction will increase liquidity from committed facilities up to EUR165 million under a new RCF tranche. Fitch expects the business to be broadly FCF-neutral in FY25-FY26. Issuer Profile Rovensa develops, manufactures and markets bio-solutions and crop protection for responsible and sustainable agriculture management for higher-value crops. Summary of Financial Adjustments As per end-June 2024: - Depreciation of right-of-use assets of EUR10.4 million and lease-related interest expense of EUR2.3 million reclassified as cash operating costs. Lease liabilities of EUR24.5 million removed from financial debt - Use of EUR83.7 million factoring added to financial debt. A working capital inflow of EUR37.2 million was added to the cash flow statement, reflecting the year-on-year change of the factoring balance. Factoring interest of EUR6.9 million reclassified as interest paid - Shareholder loans excluded from financial debt - Non-recurring expenses of EUR20.7 million reclassified from operating cash flow to investing activities. Capitalised internal R&D costs of about EUR7 million deducted from EBITDA Date of Relevant Committee 10 December 2024 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 ----------- ------ -------- Root Bidco S.a.r.l. senior secured LT B-(EXP) Expected Rating RR4 =========== P O L A N D =========== KRUK SA: S&P Withdraws BB- LongTerm ICR at Company's Request ------------------------------------------------------------ S&P Global Ratings affirmed its 'BB-' long-term issuer credit rating on Kruk S.A. S&P then withdrew the rating at the company's request. The outlook was stable at the time of the withdrawal. The rating reflected S&P's assessment of Kruk's sound competitive position, which balances some business concentration in distressed debt-purchasing and collections across four core countries, with a high operational efficiency, a solid track record in overall debt portfolio revaluation, and leading market shares in nonperforming loan markets. Additionally, the rating reflected the rising S&P Global Ratings' debt to cash-adjusted EBITDA, which S&P estimates was at 3.8x at the end of 2024, with expectations of exceeding 4.0x in 2025. Any potential deleveraging By Kruk beyond 2025 will rely on the growth in cash recoveries generated by the company, which will benefit from the significant investments made over the past four years, as well as the anticipated increase in debt to finance new debt portfolio acquisitions. ========= S P A I N ========= ELO: S&P Lowers LongTerm ICR to 'BB-', Outlook Stable ----------------------------------------------------- S&P Global Ratings lowered its long-term issuer credit ratings on ELO and the group's senior unsecured notes to 'BB-' from 'BB', and it affirmed the short-term issuer credit rating on ELO at 'B'. The stable outlook reflects S&P's expectation that the management's transformation plan will gradually improve the deteriorated performance of the French retail business, driving a gradual recovery of EBITDA, while asset disposals keep net financial debt under control, such that S&P Global Ratings-adjusted leverage (excluding Russia) declines to 4.5x-5.0x in 2025-2026. ELO's S&P Global Ratings-adjusted leverage (excluding Russia) spiked at 6.5x in 2024, driven by weak performance of retail and about EUR330 million of restructuring and other one-offs costs relating to the transformation plan. In 2024, ELO reported sales of EUR32.3 billion and EBITDA of EUR1.2 billion, about 17% lower than in 2023, marking its third year of continued decline. The group lost EBITDA in all key geographies and activities, with Auchan Retail's French EBITDA contracting by EUR147 million, of which about EUR100 million relates to Casino's stores; Auchan Retail Spain and Portugal EBITDA contracted by EUR24 million; Auchan Retail Russia and Ukraine contracted by EUR33 million; Auchan Retail Poland and Romania contracted by EUR5; and NIH contracted by about EUR40 million, mostly due to disposals. S&P said, "While the group's reported EBITDA was in line with our August forecast, our S&P Global Ratings-adjusted EBITDA was significantly lower, at about EUR900 million, due to the significant restructuring and one-offs costs, which we net from our adjusted numbers in line with our criteria. These included EUR250 million of provisions for the personnel restructuring of French operations, which will be disbursed in 2025-2026, about EUR32 million of acquisition and integration costs relating to Casino and Dia, and about EUR50 million of other nonrecurring, including costs for store closures. Therefore, the S&P Global Ratings-adjusted EBITDA margin dropped to 2.8%, from 4.4% in 2023, 5.2% in 2022, and 6.6% in 2021. The material deterioration of EBITDA brought S&P Global Ratings-adjusted leverage--excluding Russia--to 6.5x in 2024, from 3.4x in 2023 and compared to our previous expectation of 4.6x. Although we forecast leverage will decline to 4.5x-5.0x in 2025-2026, on the back of the transformation plan, we think the plan's execution risks are elevated, given the challenging conditions of the market and ELO's recent track-record of losing market share and profitability. In our base case, we conservatively include an extra annual EUR100 million of restructuring and transformation costs over 2025-2026." S&P said, "ELO's shareholder support and asset-rich balance sheet are strong mitigating factors, but do not fully compensate for the operational challenges and our perception of an unclear financial policy. In 2024, the group received EUR300 million of equity from shareholders and was able to raise about EUR800 million from asset disposals (mostly from NIH). These inflows allowed it to stabilize its reported net financial debt at about EUR2.9 million while strengthening its liquidity profile in view of its 2025 ad 2026 debt maturities. The group still has a strong asset base, including NIH's EUR6.7 billion portfolio and Auchan Retail's ownership of a considerable portion of its stores, which the management estimates have a value of EUR5.9 billion. We expect the group will execute additional disposals in 2025-2026 (managements expects EUR1.0 billion of cumulative disposals) to finance its transformation plan and sustain its liquidity. We also think that ELO's shareholders could inject additional equity if needed. That said, shareholders' support and disposals so far did not fully cushion the significant deterioration of credit metrics that occurred over 2022-2024, driven by the deterioration of operating performance, as well as the effects of the acquisitions in France, Spain, and Portugal. The significant and unpredictable leverage spike, together with the lack of a clear public leverage target at ELO's level, prompted us to revise our financial policy assessment to negative, from neutral. In the long term, the ability to maintain the current rating will depend on ELO's capacity to restore a sound retail business and positive free operating cash flow (FOCF)--and not only from shareholders' support or asset disposals. "We project a continuous cash-burn over 2025-2027, as higher fixed charges and investments fully absorb the EBITDA on the path to recovery. In 2025-2027, ELO's outflows will amount to at least EUR1.8 billion per year. These include about EUR1.0 billion of capital expenditure (capex), about EUR450 million of annual lease payments, about EUR275 million of annual interest expenses on financial debt, and about EUR100 of annual cash taxes. Given our EBITDA projections, this implies a continuous cash-burn over our forecast horizon, that the group expects to cover with disposals, while the transformation plan progressively increases the EBITDA. Over the last few years, ELO fixed charges increased markedly, due to the significant leases added through the acquisitions, as well as higher adjusted debt and higher interest rates. We project lease payment will increase to EUR470 million in 2025, compared with EUR315 million in 2022 (before the acquisition of Casino's stores), while cash interest expenses will reach EUR265 million, compared to EUR217 million in 2022. Lower EBITDA and higher fixed charges translated into a deterioration of the group's financial flexibility, as indicated by the EBITDAR coverage ratio, which fell to 1.3x in 2024, from 2.5x in 2023, and 3.5x in 2022. While we expect it to improve to 1.7x-1.8x in 2025-2026, this level remains weak, despite the group's ownership of a sizable portion of its store footprint." Continued deterioration of the core French retail market poses long-term challenges to the group's creditworthiness and increases the execution risks of the transformation. The main drag on ELO's profitability, cash-flow generation, competitive position, and ultimately on its ratings remain its deteriorated French retail operations. These activities represent about half of the group's revenue and their EBITDA has declined four years in a row. S&P said, "We estimate Auchan Retail's reported EBITDA margin in France was 0% in 2024, down from 1% in 2023, 2% in 2022, and 3% in 2021. When netting for the restructuring and other one-off transformation costs, as well as the negative contribution of loss-making Casino stores, we estimate that S&P Group Ratings-adjusted EBITDA of French retail was negative at about EUR300 million. This makes the French operations heavily cash-absorbing, despite their limited amount of financial debt. Auchan Retail's French operations have also faced years of progressive erosion of market share, which was 9.2% of January 2025--benefitting from the integration of Casino's stores--compared to 10.5% in 2018, according to Kantar. We think that this is due to the group's high dependance on large hypermarkets (estimated at two-thirds of French sales), combined with its relatively higher price point, which resulted in durable traffic erosion. While, since 2022, the group has invested in prices to the detriment of margins, traffic and volumes remain under pressure. This is because discounters and independents, including market-leader Leclerc, still have lower prices. At the same time, fast-growing specialized players, such as Grand Frais in the fresh food segment or Action in the nonfood segment, have eroded hypermarkets' traditional value proposition. ELO is working on a comprehensive transformation plan to improve the long-term profitability and attractiveness of its French retail operations. This includes leveraging on the new 10-year purchasing alliance with Intermarché, investing in prices and in the attractiveness of its hypermarkets by reducing surface area and reshaping the offering. However, we think that the turnaround will be challenging, gradual, and eventually require additional sizable one-off investments, thus weighing materially on the group's profitability and FOCF generation. We note that the group was able to stabilize its reported EBITDA (pre restructuring) in the second half of 2024, after several semesters of continuous decline." ELO is considering pushing down its external debt to NIH and Auchan Retail, but this would have no effect our on adjusted metrics and ratings. As of December 2024, NIH accounted for about 40% of ELO's consolidated adjusted EBITDA, but for about 60% of its EUR5.4 billion adjusted debt. Consequently, NIH had an adjusted leverage of 8.5x, while the holding company and Auchan Retail had a leverage of 4.3x, mostly constituted of lease obligations and a net cash position. S&P said, "In 2025, as Retail EBITDA recovers, we expect its adjusted leverage to decline to about 3.0x, while NIH's leverage will reduce to 8.2x-8.4x. From a financial standpoint, and in line with our rating approach for real estate companies, NIH can bear a much more leveraged capital structure relative to its EBITDA than regular corporate entities. Therefore, we think that ELO's credit quality is stronger than what its consolidated credit metrics suggest under our corporate rating methodology, justifying a one-notch uplift from the 'bb-' anchor. As of December 2024, ELO's consolidates EUR6.0 billion of gross financial debt, of which only about EUR0.54 billion is issued by NIH. ELO then pushes about EUR2.5 billion down to NIH through intercompany loans. We understand the group is considering increasing the external debt of NIH, while reducing intercompany loans and ELO's debt. While we will monitor the transaction, its implementation and its potential implications on the group's activity and governance, if any, the debt pushdown is credit neutral. This is because our rating on ELO is based on consolidated metrics, which do not depend on the location of the debt within the structure. We also do not expect immediate implications on the recovery and issue ratings of ELO's senior unsecured debt, which is capped at '3' by our criteria." Real estate subsidiary NIH provides ELO with a stable EBITDA stream and a rich balance-sheet. In 2024, NIH reported an EBITDA of EUR356 million, EUR37 million lower than in 2023, mostly due to EUR26 million perimeter effect following the asset disposals and EUR16 million of exceptional costs. S&P said, "We forecast NIH's adjusted EBITDA will be EUR360 million-EUR380 million in 2025-2027, supporting ELO's performance and business diversity. Despite the material rise in interest rates, NIH's portfolio value resisted well, reporting a 1.4% like-for-like improvement in 2024, after a moderate 1.5% decline over full-year 2023. This was better than our expectation and better than ELO's main peers. This is because the rise in yields was partly compensated by robust cash flow, and NIH's yields are already slightly higher than those of some peers in the office or residential sectors. We expect NIH will continue investing in its development pipeline, which will be self-financed through its cash flow generation and asset disposals. As such, in our base case and after the significant disposals of 2024, we do not expect NIH's investment strategy to drive any significant variation in ELO's net debt." ELO's leverage excluding Russia better represents the group's ability to repay its debt under the current circumstances. S&P said, "Although the group still operates in Russia, we consider ELO's adjusted leverage excluding EBITDA from Russia as a metric that better reflects the group's current creditworthiness. This is because, given the sanctions and the geopolitical tensions, we assume the group cannot rely on the cash flows generated in Russia to service its debt. Without our estimate of Russian EBITDA and Russian lease debt for 2024, our calculation of adjusted leverage increases about 0.5x." S&P said, "The stable outlook reflects our expectation that the management's transformation plan will gradually improve the deteriorated performance of the French retail business, driving a gradual recovery of EBITDA, while asset disposals keep net financial debt under control, such that S&P Global Ratings-adjusted leverage (excl. Russia) declines to 4.5x-5.0x in 2025-2026. "We could lower the rating if, over the next 12 months, ELO continues to underperform our base case, due to lack of performance recovery of retail operations or higher-than-expected costs from the transformation plan." S&P could lower the rating if: -- S&P sees no tangible sign of recovery in the performance of the French retail operations from their 2024 level; -- S&P Global Ratings-adjusted leverage does not decline structurally below 5.5x from 2025; -- Elo's cash flow does not improve in line with our projections; or -- The company is unable to execute disposals in a timely manner, putting its liquidity profile under pressure. S&P said, "We could raise the ratings if ELO overperforms our base case, showing a stronger-than-expected recovery in profitability and cash-flow generation of Auchan Retail, while disposals or shareholders support maintain a grip on net leverage. An upgrade would also be conditional on ELO's S&P Global Ratings-adjusted leverage (excluding Russia) structurally declining below 4.5x (excluding Russia), and the group committed to retain such level of leverage through the cycle and the transformation plan." NEW IMMO: S&P Downgrades ICR to 'BB-', Outlook Stable ----------------------------------------------------- S&P Global Ratings lowered its issuer credit ratings on property company New Immo Holding (NIH) and its issue ratings on NIH's senior unsecured notes to 'BB-' from 'BB'. S&P also affirmed the short-term rating on NIH at 'B' and kept its assessment of the stand-alone credit profile (SACP) at 'bbb'. S&P said, "The stable outlook reflects our expectation that the management's transformation plan will gradually improve the deteriorated performance of the French retail business, driving a gradual recovery of EBITDA, while asset disposals keep net financial debt under control, such that S&P Global Ratings-adjusted leverage (excluding the Russia operations) declines to 4.5x-5.0x in 2025-2026. We expect NIH's stable and predictable income generation to result in the EBITDA interest coverage ratio remaining around 2.8x-3.2x, debt to EBITDA of about 8.5x-9.0x, and debt to debt plus equity remaining below our 45% downside SACP threshold, thanks to prudent financial policy, asset disposals, and minimal, if any, portfolio devaluation. "On March 6, 2025, we lowered our long-term rating on NIH's parent ELO to 'BB-' from 'BB'. We continue to view NIH as integral to ELO's identity and future strategy, since it is one of the group's three main businesses, contributed about 40% of consolidated EBITDA in 2024, and represented 60% of its EUR5.4 billion adjusted debt. As a result, we link NIH's creditworthiness to that of its parent, and therefore we also lowered our issuer credit ratings and issue ratings on NIH to 'BB-' from 'BB'." Asset disposals in 2024, stabilization in asset values, and prudent financial policy restore headroom under downside thresholds. NIH made sizable asset disposals in 2024, with EUR498 million in cash net sale proceeds and stabilization in asset values with a 1.4% increase in like-for-like terms. Robust cash flow growth compensated for the negative impact on asset valuations of a small rise in yields in 2024. NIH's yields are already slightly higher than those of some peers in the office or residential sectors (7.82% discount rate in France, 9.01% in Western Europe, and 11.79% in Eastern Europe). The company reduced its S&P Global Ratings-adjusted debt to debt plus equity to around 42.9% at year-end 2024, from 45.5% a year earlier, restoring headroom under the 45% downside threshold. That said, and despite the notable debt reduction following the asset disposals and subsequent debt repayment, NIH suffered deteriorating operating performance, lower EBITDA margins, and higher cost of debt, which resulted in deteriorated EBITDA interest coverage to around 3.0x at year-end 2024 from 3.2x as of year-end 2023. Debt to EBITDA improved only slightly to around 8.5x from 8.8x last year. S&P said, "While NIH has large capital spending (capex) needs in line with the group's strategy focusing on reducing the footprint of Auchan Retail operations and converting them into mall space on NIH's balance sheet, we understand that the capex efforts will be funded via a combination of internally generated cash flow and asset disposals, with no recourse to additional debt funding. As a result, we expect net debt levels to remain around EUR3.1 billion, overall stable throughout our forecast period ending 2027. Therefore, we expect stability in asset values, S&P Global Ratings-adjusted debt to debt plus equity remaining around 40%-43% over the next 12-24 months, and debt to EBITDA remaining around 8.5x-9.0x over the same period." Subdued operating performance, lower scale, and below-par profitability weigh on EBITDA generation. Although NIH posted a 4.7% increase in rental income in 2024, fueled mainly by indexation, a lower rent collection rate (91.1% as of year-end 2024) compares negatively with that of peers like Mercialys and Carmila, at around 96%-98%. Increasing vacancy to 4.31% from 3.45% as of year-end 2023 and negative rental reversion on lease renewals also weigh on the group's cash flow generation and profitability ratios, with the EBITDA margin deteriorating to around 55% in 2024 from 61.1% as of year-end 2023. Similarly, the company's sizable disposals representing around 10% of portfolio value in 2024 resulted in the portfolio shrinking to EUR6.7 billion, from EUR7.3 billion as of year-end 2023. The overall portfolio value decrease was partially compensated by a positive 1.4% like-for-like increase in asset values. As a result, profitability deteriorated further because of the shrinking revenue base and considerable operating leverage associated with the large employee base and limited scale of Nhood's third-party asset management services. S&P said, "We expect NIH to generate EBITDA of about EUR350 million-EUR360 million in 2025 and EUR360 million-EUR370 million in 2026 as capex investments generate additional rents and the group optimizes its cost structure and improves its collection rates with EBITDA margin improving slightly toward 56%-57%. The subdued operating performance and profitability weighed on the company's interest-servicing capacity, as the higher average cost of debt and lower EBITDA base resulted in EBITDA interest coverage deteriorating to about 3.0x as of year-end 2024 from 3.2x at year-end 2023. The lower overall gross debt following the completed asset disposals and subsequent debt repayment should partially compensate the higher expected cost of debt of upcoming refinancing. As a result, we expect EBITDA interest coverage to remain around 2.8x-3.2x over the next 12-24 months." NIH's liquidity profile depends on that of the group in the current context of a comparatively low average debt maturity profile at 2.9 years and a high proportion of intragroup financing. NIH's capital structure is made mainly of intragroup loans toward ELO, which represented 78% of total gross debt at the NIH level. The average debt maturity stood at 2.9 years, which compares negatively with that of other real estate peers. These have longer-dated debt maturity schedules around four to six years, which mitigates refinancing risk and average cost of debt volatility. S&P said, "We understand that, while the large proportion of intragroup financing and the existing revolving credit facility (RCF) in place that was provided by ELO at the NIH level partially mitigates the refinancing risk, it increases the dependency of the stand-alone liquidity profile. As a result, we will continue to monitor the liquidity at the ELO level and the capacity of ELO to roll over NIH debt. We understand the company is seeking to externalize its funding sources and replace intragroup loans with longer-dated external funding. This should reduce liquidity dependency and improve the company's weighted average debt maturity profile. That said, the process will be gradual, and we will reevaluate the SACP when we have more visibility on the group's strategy regarding the capital structure of its subsidiaries." S&P said, "The stable outlook reflects that of ELO and our expectation that the management's transformation plan will gradually improve the deteriorated performance of the French retail business, driving a gradual recovery of EBITDA, while asset disposals keep net financial debt under control, such that S&P Global Ratings-adjusted leverage (excluding the Russia operations) declines to 4.5x-5.0x in 2025-2026." S&P could lower the rating if, over the next 12 months, ELO continues to underperform our base case, due to lack of performance recovery of retail operations or higher-than-expected costs from the transformation plan. In particular, it could lower the rating if: -- S&P sees no tangible sign of recovery in the performance of the French retail operations from their 2024 level; -- S&P Global Ratings-adjusted leverage does not decline structurally below 5.5x from 2025; -- ELO's cash flow does not improve in line with S&P's projections; or -- The company is unable to execute disposals in a timely manner, putting its liquidity profile under pressure. S&P said, "Although it would not result in a downgrade, we could revise down our assessment of the SACP on NIH from 'bbb' if its ratio of debt to debt plus equity exceeds 45%. This could arise due to more substantial capex or additional debt-funded acquisitions, indicating a less prudent financial policy at the subsidiary level and the potential for negative interference from the group. It could also happen with more pronounced devaluations than currently expected, or lower disposals than in our base case. Additionally, we could revise down the SACP if operating performance deteriorates further, for example because of falling occupancy rates, difficult rent collections, or persistent negative rental reversion, with a deteriorating EBITDA margin resulting in worsening credit metrics. As a result, we could revise down the SACP if the company's EBITDA interest coverage ratio decreases to below 2.4x. This would most likely be because of higher interest rates, higher margins on intragroup financing, or if its debt-to-EBITDA ratio exceeded 11x on a sustained basis. "We could raise the ratings if ELO overperforms our base case, showing a stronger-than-expected recovery in profitability and cash-flow generation of Auchan Retail, while disposals or shareholder support help maintain a grip on net leverage. An upgrade would also be conditional on ELO's S&P Global Ratings-adjusted leverage (excluding the Russia operations) structurally declining below 4.5x (excluding the Russia operations), and the group committed to retain such a level of leverage through the cycle and the transformation plan. "We could revise upward our assessment of NIH's SACP if the company's financial policy becomes more stringent. Such that its debt-to-debt-plus-equity decreases consistently to 35% or lower, while improving EBITDA interest coverage above 4.0x and debt-to-EBITDA materially below 9.5x. A positive revision would also hinge on NIH outperforming its peers. That said, such a revision of the SACP would not result in an upgrade." PORTAVENTURA: Moody's Withdraws 'B3' Corporate Family Rating ------------------------------------------------------------ Moody's Ratings has withdrawn International Park Holdings B.V.'s (PortAventura) B3 corporate family rating and B3-PD probability of default rating. The outlook prior to the withdrawal was stable. RATINGS RATIONALE Moody's have withdrawn PortAventura's ratings following the full repayment of its outstanding rated debt on January 23, 2025. COMPANY PROFILE Based in Vila-seca, Spain, PortAventura is a fully integrated destination resort that consists of three main theme parks: the PortAventura World Park, the PortAventura Caribe Aquatic Park, and the Ferrari Land Park. These resorts are complemented by a Convention Centre, six fully owned themed hotels and 3 hotels under management. In the twelve months that ended September 2024, the company generated revenue of around EUR311 million and company-adjusted EBITDA of around EUR118 million. The company is owned by funds advised by InvestIndustrial and KKR. ROOT BIDCO: S&P Assigns 'B-' Rating on EUR1,110MM New Term Loan B ----------------------------------------------------------------- S&P Global Ratings assigned its 'B-' issue rating to Rovensa's proposed EUR1,110 million new term loan B (TLB) due September 2030. The term loan is issued by Rovensa's holding company, Root Bidco S.a.r.l., to refinance the existing term loans of EUR520 million due 2027 and EUR508 million due 2027, and to repay outstanding revolving credit facility (RCF) drawings of EUR78 million. After the transaction, the capital structure will comprise EUR1,110 million of senior secured TLB and a senior secured RCF of up to EUR165 million--expected to be fully undrawn at closing. The group also has about EUR21 million of operating-lease liabilities and EUR51 million of other debt related to existing local facilities. S&P said, "While we view the refinancing as leverage neutral, we positively note that the transaction extends the company's maturity profile of both the TLB and the RCF by 3 years, lowers the cost of interest by about EUR4 million per year, and improves the liquidity profile following the RCF repayment. We project that Rovensa's adjusted gross debt to EBITDA will stand at an elevated 8.0x-9.0x for fiscal 2025 (ended June 30, 2025), down from 11.5x in fiscal 2024, before improving to 7.5x-8.0x in fiscal 2026 driven by higher EBITDA driven by ongoing cost control and modest market recovery. We forecast that free operating cash flow (FOCF) generation will be neutral to slightly positive in fiscal 2025, at about EUR1 million-EUR5 million. That said, we think that market-recovery driven working capital outflow could modestly pressure FOCF generation in fiscal 2026-2027. Our leverage calculations factor in about EUR155 million-EUR165 million of S&P Global Ratings-adjusted EBITDA projected for fiscal 2025." Issue Ratings--Recovery Analysis Key analytical factors Rovensa's proposed EUR1,110 million senior secured TLB due September 2030 has an issue rating of 'B-' and a recovery rating of '3'. This reflects S&P's expectations of meaningful recovery of 50%-70% (rounded estimate: 50%) in the event of a payment default. The lower recovery rate (55% previously) is driven by the higher amount of financial debt following the refinancing. The TLB and the RCF of up to EUR165 million (not rated), for which the maturity is being extended to March 2030 rank pari passu. The senior secured nature of both facilities, along with the minimum guarantor coverage test of 80% for consolidated EBITDA, according to the senior facility agreement, support the recovery rating. The prior-ranking liabilities related to the use of factoring facilities of about EUR140 million and confirming lines of about EUR51 million, as well as the large amount of senior secured first-lien debt, constrain the recovery rating. In S&P's hypothetical default scenario, it assumes increased competition among suppliers of agrochemicals, coupled with a significant drop in end-market demand for specialty crop nutrition and protection, which would result in substantially weaker performance of Rovensa. S&P values Rovensa as a going concern, given its leading position in key markets and diversified product offering. Simulated default assumptions -- Year of default: 2027 -- Jurisdiction: Spain/Portugal Simplified waterfall -- Emergence EBITDA: About EUR148 million -- S&P assumes minimum capital expenditure of 3% of revenue, or about EUR24 million, reflecting higher requirements for an expanding the business post the Cosmocel acquisition. -- Cyclical adjustment of 5%--standard for the sector. -- EBITDA multiple: 5.5x--standard for the sector. -- Gross recovery value: About EUR813 million -- Net recovery value for waterfall after administrative expenses (5%): About EUR773 million -- Priority claims (estimated factoring facilities utilization at the low seasonal point): EUR125 million* -- Total senior secured debt claims: Approximately EUR1,290 million* -- Recovery range: 50%-70% (rounded estimate: 50%) -- Recovery rating: 3 *All debt amounts include six months of prepetition interest. THETIS FINANCE NO. 2: S&P Hikes Cl. F-Dfrd Notes Rating to 'B-(sf)' ------------------------------------------------------------------- S&P Global Ratings raised its credit ratings on Ares Lusitani - STC, S.A. (Thetis Finance No. 2)'s class A notes to 'AA+ (sf)' from 'AA (sf)', class B notes to 'AA- (sf)' from 'A- (sf)', class C notes to 'A (sf)' from 'BBB (sf)', class D-Dfrd notes to 'BBB (sf)' from 'BB+ (sf)', class E-Dfrd notes to 'B (sf)' from 'B- (sf)', and class F-Dfrd notes to 'B- (sf)' from 'CCC (sf)'. S&P said, "While our ratings on the class A to C notes address the timely payment of interest and the ultimate payment of principal, our ratings on the class D-Dfrd to F-Dfrd notes address the ultimate payment of interest (even when the tranche is the most senior) and the ultimate repayment of principal by the legal maturity date. In this transaction, there is no compensation mechanism that would accrue interest on deferred interest, although we consider this feature common in the Portuguese market. "The rating actions follow our review of the transaction's performance and the application of our current criteria. They reflect our assessment of the payment structure according to the transaction documents. The transaction closed in July 2021 and had an initial three-year revolving phase, which ended in July 2024. Following the revolving period, the transaction is currently in an initial sequential amortization period, which will end when the rated notes' credit enhancement is at least 1.2 times the credit enhancement at closing. The transaction will then amortize pro rata, provided that the sequential redemption events--mainly driven by the cumulative gross loss ratios--do not take place. As of the December 2024 interest payment date, the pool balance has declined to EUR735.7 million from EUR840 million at closing, bringing the current pool factor (the outstanding collateral balance excluding defaults as a proportion of the original collateral balance) to approximately 87.6%. The liquidity reserve is at its target level of EUR3.64 million. As of the December 2024 interest payment date, the class A notes' outstanding balance is EUR399.7 million (from EUR504 million at closing). The other notes have not started amortizing. Consequently, available credit enhancement has increased for all the rated notes, considering subordination and the cash reserve. S&P said, "Despite the relatively short time elapsed since the end of the revolving period and the transaction's positive performance in terms of delinquencies, we have updated our mixed gross loss base case to reflect the pool composition between new and used vehicles at the end of the revolving period (i.e. 88% versus 93% in the worst-case pool during the revolving period). Therefore, our gross loss base case assumption has decreased to 11.52% from 11.72% at closing. The multiple remains unchanged at 4.25x at 'AA+'. Our recovery rate base case and haircut at 'AA+' remain unchanged since our last review in 2022, at 40% and 37%, respectively." Table 1 Haircuts above the base case Rating Haircut (%) AAA 42.00 AA 32.00 A 24.00 BBB 19.00 BB 14.00 B 9.00 Table 2 Credit assumptions Parameter Current Gross loss base case (%) 11.52 Recovery base case (%) 40.00 Gross loss multiple ('AA+') 4.25 Gross loss multiple ('AA-') 3.42 Gross loss multiple ('A') 2.75 Gross loss multiple ('BBB') 1.88 Gross loss multiple ('B') 1.38 Stressed recovery rate ('AA+') (%) 25.20 Stressed recovery rate ('AA-') (%) 28.28 Stressed recovery rate ('A') (%) 30.40 Stressed recovery rate ('BBB') (%) 32.40 Stressed recovery rate ('B') (%) 36.40 S&P said, "Our operational and legal analyses are unchanged since closing. We consider that the transaction documents adequately mitigate exposure to counterparty risk from Credit Agricole Corporate and Investment Bank S.A., as the issuer's general account bank provider; from Citibank Europe PLC, as the payment account bank provider; and from Credit Agricole Consumer Finance S.A., as the liquidity facility provider, up to an 'AAA' rating level, respectively; and from Credit Agricole Consumer Finance S.A., as swap counterparty, up to an 'AA+' rating level. "Our cash flow analysis indicates that the available credit enhancement for the class A to F-Dfrd notes is sufficient to withstand the credit and cash flow stresses that we apply at higher rating levels. We therefore raised our ratings on the class A to F-Dfrd notes. "The class F-Dfrd notes do not pass any of our cash flow stresses. We performed a steady state cash flow scenario considering mild stresses for these notes, applying an actual level of fees, prepayments, and margin compression. We believe the class F-Dfrd notes are not dependent upon favorable business, financial, or economic conditions to be repaid, according to our 'CCC' criteria. We therefore raised our rating on the class F-Dfrd notes to 'B- (sf)'. "The improved cash flow results reflect the end of the revolving period and the start of amortization, the actual pool's better credit quality compared to the revolving period worst-case pool, good collateral performance, and lower gross default base case. Additionally, our driver run was based on a heavily back-loaded default curve with recession starting in month 1 to assess the impact of concentrated defaults later in the transaction's life, rather than the pro rata default curve with delayed recession we used at closing. "We consider the transaction's resilience in case of additional stresses to some key variables, in particular defaults and recoveries. "In our view, the borrowers' ability to pay their auto loans is highly correlated with macroeconomic conditions, particularly unemployment and, to a lesser extent, consumer price inflation and interest rates. Our current unemployment rate forecast for Portugal is 6.5% for 2025 and 2026, and our inflation forecast is 2.1% in 2025 and 2.0% in 2026. "We therefore ran additional scenarios with increased gross defaults by up to 30% and reduced expected recoveries by up to 30%. The results of this sensitivity analysis indicate a deterioration of no more than six notches on the notes, which is in line with the credit stability considerations in our rating definitions." =========== S W E D E N =========== MARSHALL GROUP: S&P Assigns 'B' ICR, Outlook Stable --------------------------------------------------- S&P Global Ratings assigned its 'B' long-term issuer credit rating to Marshall Group's holding company, Marshall Group Holding (Luxembourg) S.a.r.l., and its 'B' issue and '3' recovery ratings to the proposed senior secured term loan B, based on 60% recovery prospects. The stable outlook reflects S&P's view that Marshall's operating performance will remain resilient over the forecast period, leading to adjusted leverage gradually declining to about 4.5x in 2026 as Marshall strengthens its competitive position within the dynamic premium audio industry. On Jan. 24, 2025, the investment firm HongShan (HSG) announced a definitive agreement to acquire Marshall Group, a Sweden-headquartered premium audio equipment maker that generated about Swedish krona (SEK) 4.6 billion net sales in 2024. Marshall Group benefits from its brand equity, strategic positioning in dynamic end markets, efficient operations, and strong cash conversion. Its competitive position is, however, modest compared with better-capitalized brands in the premium audio industry and it is vulnerable to potential market disruptions and relatively limited supplier diversification. S&P Global Ratings expects Marshall's capital structure to be highly leveraged after the acquisition. Funds managed by the investment firm HSG have entered into a definitive agreement to acquire a majority stake in Marshall Group. The transaction, which is subject to regulatory approval, will be partly funded by approximately SEK4.662 billion from a proposed euro-denominated term loan B and supported by about SEK674 million from a proposed euro-denominated revolving credit facility (RCF), undrawn at closing. S&P said, "After the transaction closes, we estimate about SEK500 million in cash overfunding to allow for sufficient liquidity. We expect S&P Global Ratings-adjusted leverage to be about 4.8x at closing, and to gradually decrease to about 4.5x by year-end 2026. In our view, the deleveraging path will be supported by the absence of further debt-funded acquisitions and dividend recapitalizations over the forecast period--HSG's relatively prudent financial policy should allow the group to focus on harnessing organic opportunities. That said, we do not net cash against debt because we assume management and owners will prioritize investment needs over debt repayments." S&P said, "Under our base case, we project 9%-10% sales growth over 2025-2026 as Marshall leverages its brand to strengthen its position in dynamic end markets, although investments in the sales platform will likely constrain profitability temporarily. We forecast that headphones and speakers will contribute to top-line growth, with headphones experiencing higher growth rates due to lower market penetration of Marshall's products and more favorable industry dynamics. Geographically, the faster-growing markets in the Asia-Pacific (APAC) region, where Marshall currently has a smaller market share, will contribute more than Europe, Middle East, and Africa (EMEA) and the U.S., where Marshall already has a stronger position. This will be complemented by expansion into adjacent categories and a slightly positive price mix effect. Our forecast is underpinned by positive trends in the premium audio market, notably in underpenetrated markets in APAC, which have favorable demographic trends. Additionally, increasing use cases (music and video streaming, podcast, etc.), evolving consumer lifestyles (remote work, virtual meetings, fitness trends, etc.) and innovation are increasing the adoption of new products and the replacement of old ones, positively driving the price mix. Marshall's high brand awareness in key markets contrasts with its limited scale compared with relevant peers such as Bose, Sony, or JBL. This presents an opportunity for Marshall to capture market share by improving its conversion rates across the sales funnel to match those of its peers in premium lifestyle channels, reinforcing visibility, availability, and in-store recommendation. On the other hand, investments in the sales funnel, particularly in marketing, sales, and innovation, will likely weigh on Marshall's profitability over 2025-2026. We forecast that the adjusted EBITDA margin will decrease to and remain at about 18.5%-19.5%, from 21.3% in 2024. This assumes a dilutive effect from increased net sales from offline channels, alongside the positive impact of operating leverage, a recovery in amplifier margins, and an uplift from higher-margin new categories. "FOCF will remain positive at SEK300 million-SEK 400 million over 2025-2026 thanks to Marshall's asset-light business and agile inventory management and despite long lead-times. Marshall operates an original design manufacturer (ODM) model that allows moderate capital expenditure (capex) of approximately 1.5% of annual sales to translate into solid FOCF conversion. Moreover, the company benefits from relatively smooth seasonality and disciplined working capital management that mitigates the risks of managing a supply chain with long lead times. Marshall forecasts sales monthly and places orders with suppliers a few months in advance for critical components. This allows for shorter purchase order lead times while limiting liability associated with long lead time components, instead of the full value of finished goods. Marshall continuously monitors inventory to address slow-moving items and ensure optimal stock levels. To mitigate inventory risk tied to product launches, Marshall delays buildup until certain consumer proof points are reached. On top of that, Marshall's global stock keeping unit strategy allows it to shift volumes to regions with higher demand, as needed. Marshall's strong brand equity and strategic positioning underpins its pricing premium and superior profitability versus peers in the premium audio space. Marshall has built a solid reputation as a premium audio specialist, with high brand awareness across end markets stemming from decades of association with world-class musicians across all genres, as well as the technological quality, signature acoustics, and design of its products. Marshall has traditionally targeted music lovers and musicians, with which it creates a strong emotional connection between the brand and the music world. In S&P's view, this favors loyalty, willingness to pay, and frequency of purchase. Moreover, the company benefits from long-standing partnerships with its customers, notably key consumer electronics retailers (this represents 48% of the premium audio industry), supported by solid margins for both parties, focus on sell-through rates, and differentiated value proposition compared to tech audio or lifestyle specialists. In our view, these partnerships allow Marshall to route its marketing and commercial investments toward brand awareness, product credibility, and volume growth through improved in-store and online execution. Despite the growth of ecommerce, consumer electronics are expected to remain the main channel for premium audio equipment, given that consumers prefer to visualize, test, and touch premium products when considering a purchase, along with in-person guidance. Despite the projected decrease, S&P expects Marshall to continue to command higher-than-average margins versus its peers in the premium audio space, except for Apple, which is much closer to lifestyle brands. This is primarily due to Marshall's pricing premium, supported by its brand power and favorable customer and channel mix, which drive higher gross margins alongside lean cost structure. Strong management execution has driven profitable growth above industry levels, with successful investments in dynamic categories and regions, notably China, as well cost initiatives. Marshall has outperformed the broad audio industry over recent years by successfully harnessing its strong brand through innovative and commercial initiatives in dynamic categories, particularly speakers, and in regions such as APAC and the Americas. Marshall achieved a steady long-term growth rate of 21% compound annual growth rate (CAGR) from 2014 to 2024, with only a dip during the pandemic due to reduced demand and supply challenges, followed by a strong rebound despite ongoing supply and logistics issues. Over 2021-2024, revenue growth accelerated to 24% CAGR, thanks to supply stabilization and successful product innovations under new management. At the same time, the company-adjusted EBITDA margin expanded to about 22% in 2024 from around 15% in 2021, driven by higher prices supported by Marshall's brand power; cost efficiency measures (such as product redesign with more affordable components and discontinuing unprofitable brands); and improvements in product mix (with a decrease in amplifier sales and an increase in online sales). Simultaneously, Marshall successfully expanded into China, outperforming the market and doubling its market share to about 3% over the past five years. The company achieved this through effective brand positioning as a lifestyle audio maker (outperformance versus pure tech-focused brands), along with high and efficient marketing investments and a strategic presence in key consumer electronics specialists (Sundan) and online retailers (JD Retail, JD Pop and Tmall). Marshall's differentiated European design and strong product rating versus local brands further support its competitiveness. S&P said, "We see relatively high execution risk since Marshall intends to expand into a crowded space dominated by better-capitalized brands, which will require a seamless strategic execution. With about a 1% market share in the global premium audio industry, we think Marshall's market position is relatively vulnerable to potential innovation disruptions or aggressive commercial initiatives. This is because it competes directly with bigger companies that have similar tech capabilities and brand power but significantly higher capacity to invest in technology and marketing. This was the case with the AirPods launch in 2016, which marked the creation of the in-ear wireless category and disrupted the existing headphones market. In the U.S. and EMEA, the industry is dominated by electronics generalists Apple and Sony, legacy tech audio specialists Bose and Sonos, and lifestyle brands such as JBL and Beats. Moreover, we see China as a complex market, given relatively subdued consumer sentiment, high-cost competitiveness, and stronger local brands compared with other markets. The headphones market is particularly challenging due to the stronger position of smartphone brands such as Apple and Huawei, given the higher frequency of joint purchases. In this context, we think the group requires a seamless strategic execution to continue differentiating and protecting its position in very competitive markets. "Marshall's size and relatively limited diversification constrain our assessment of the company's business risk. With reported net sales of about $430 million in 2024, Marshall remains a small brand that has larger, more diversified competitors that are financially strong. Marshall's scale is markedly lower than Sonos (about $1.5 billion in sales), Bose (about $3 billion), Sony (about $88 billion), Apple (about $391 billion). Additionally, we see high concentration in discretionary categories, notably premium speakers, which represented 68% of 2024 sales. In our view, this amplifies the risk of technology disruption from competitors, fast-changing consumer preferences, or a deteriorating economic landscape. Moreover, we see some degree of concentration risk given the company's reliance on a limited number of suppliers, mainly in Asia, with the top three accounting for 75% of the total cost of sales. Marshall operates an ODM model whereby the design and manufacturing of speakers and headphones is performed at the ODMs' premises with on-the-ground support from Marshall's teams for support and quality assurance. As the company expands its supply base, we may see increasing quality risks that the company mitigates by closely monitoring the quality delivered. "The stable outlook reflects our view that Marshall will maintain its competitive position within the dynamic premium audio industry thanks to its strong brand awareness, close partnerships with clients, and streamlined supply chain. Under our base case, we see adjusted debt to EBITDA gradually decreasing to about 4.5x in 2026, mainly driven by volume growth in speakers and headphones on the back of favorable industry trends, notably in APAC, and higher price points more than offsetting increasing marketing and commercial investments as well as some inflationary pressures. We also forecast Marshall will maintain positive FOCF in excess of SEK300 million annually, supported by its asset-light business model and prudent working capital management. "We could lower the rating if the company's leverage increases above 6.0x and FOCF deteriorates materially without signs of a rapid improvement. This could happen because of increasing competitive pressures in the form of disrupting innovations or aggressive commercial initiatives from competitors, leading to declining sales and a significant drop in profitability or operational disruptions with suppliers. "We could consider raising the rating if Marshall's adjusted debt to EBITDA decreases and remains at the stronger end of the 4.0x-5.0x range while generating significant FOCF to self-fund growth investments. This could happen through faster top-line and EBITDA expansion compared with our base case, as the company successfully captures market share with more efficient-than-expected marketing and commercial investments. For a positive rating action, we would need to see seamless execution of the growth plan and continuing commitment from shareholders to maintaining adjusted leverage at this level on a sustained basis." OPTIGROUP BIDCO: Fitch Alters Outlook on B LongTerm IDR to Negative ------------------------------------------------------------------- Fitch Ratings has revised Optigroup Bidco AB's Outlook to Negative from Stable, while affirming its ratings, including its Long-Term Issuer Default Rating (IDR) at 'B', and has simultaneously withdrawn all ratings. The Outlook revision mainly reflects uncertain organic recovery prospects for the company across its markets and subdued contribution from external growth, which could leave credit metrics weaker than required for a 'B' IDR. OptiGroup's IDR balances high leverage with a solid business profile. OptiGroup has leading market positions in the fragmented business-essentials distribution market as well as limited geographic, product, customer and supplier concentration. Fitch has withdrawn the ratings due to commercial reasons. Fitch will no longer provide ratings or analytical coverage of Optigroup. Key Rating Drivers Weak Credit Metrics: Fitch estimates OptiGroup ended 2024 with EBITDA leverage of 7.4x and EBITDA interest coverage of 1.3x, outside their rating sensitivities. Uncertainties around organic growth and mild contribution from acquisitions may impair Optigroup's ability to deleverage below 7.0x in the short term. Its deleveraging capacity is reliant on its ability to implement further cost-cutting to support margins. Persistently high leverage and low EBITDA interest coverage are underscored in the Negative Outlook prior to withdrawal. Soft Performance, Uncertain Recovery: Fitch estimates revenue to have fallen 3%-4% in 2024 due to a mid-single digit organic decline across all segments not compensated by external growth. Visibility on revenue and earnings recovery is currently limited. This reflects challenging macroeconomic conditions, a structural decline in the paper segment, a challenging packaging segment, as well as negative foreign-exchange effects in the Nordics. Softening Cash Flow Generation: Fitch estimates free cash flow (FCF) to have been negative in 2024, due to the higher cost of debt, one-off tax settlements, and normalised working capital outflows compared with 2023. Low capex requirement - at less than 1% of revenue - falling interest rates and lower tax payments should support a return to positive FCF from 2025 onwards to EUR5 million-EUR10 million per annum. Bolt-Ons Add Diversification: OptiGroup undertook a number of acquisitions in 2023 and 2024 which, while not material in size, contributed to segmental expansion. Fitch expects OptiGroup to continue its growth strategy of bolt-on acquisitions. Its rating case includes acquisitions totalling more than EUR120 million over 2025-2027, in line with the company's growth target including acquisitions. Fitch expects acquisitions to be moderate in size and mainly financed by internally generated cash flow. Positive Transition from Paper: Since OptiGroup was spun off from Stora Enso's paper distribution business in 2008, it has diversified into the distribution of other products with better growth prospects and away from non-core commodity paper by selling off its French and German businesses. OptiGroup's core operations in the FS, packaging and medical segments were around 70% of revenue in 2023, with the rest from paper and business supplies, which includes the declining pure paper segment. Sound Business Profile: Fitch estimates OptiGroup to have generated revenue of EUR1.6 billion in 2024 from the supply of products and solutions to the cleaning and facility management, hotel and restaurant, healthcare and manufacturing industries, as well as graphical paper sectors. Products in many of these end-markets relate to daily essentials and therefore enjoy non-cyclical demand. OptiGroup also has good geographic diversification across the Nordics, Benelux, Switzerland, Germany, and a growing number of other countries in Europe. Peer Analysis OptiGroup has close peers in other Nordic distributors, including Winterfell Financing S.a.r.l. (Stark; B/Stable) and Quimper AB (Ahlsell; B+/Stable), which was upgraded in 2024 on structurally lower leverage (below 5.0x to 2026) as the latter is less exposed to the new-build residential market. These two peers are larger by revenue and mainly exposed to the more cyclical construction and renovation sectors. OptiGroup's historical margins are broadly similar to those of Stark but weaker than Ahlsell's, as the latter is supported by its strong end-market diversification given its higher exposure to infrastructure and industrial end-markets. Other relevant peers are business services providers Irel Bidco S.a.r.l. (B+/Stable), TTD Holding III GmbH (B/Stable) and Polygon Group AB (B/Stable). These companies are smaller, with strong but niche market positions and generally have better margins than OptiGroup. OptiGroup has slightly higher leverage than many peers. Polygon's leverage is estimated at 7.4x at end- 2024, similar to Optigroup's, but is expected to fall more rapidly to 5.9x in 2026. Key Assumptions Fitch's Key Assumptions Within its Rating Case for the Issuer - Revenue to grow 5.7% in 2025, 2.3% in 2026 and 4.5% in 2027, after a 3.1% decline in 2024 - EBITDA margin at 6.5% from 2025 onwards due to cost efficiencies and contributions from acquired businesses -- Annual restructuring costs of EUR9 million to 2027, reflecting bolt-on acquisitions - Capex at 0.8% of revenue to 2027 - Acquisitions of EUR40 million a year to 2027, up from EUR31 million in 2024, funded by cash on balance sheet based on a 7.5x multiple and 8% EBITDA margin - No dividend distribution to 2027 Recovery Analysis Key Recovery Rating Assumptions The recovery analysis assumes that OptiGroup would be reorganised as a going concern (GC) in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. Its GC EBITDA estimate at EUR90 million reflects Fitch's view of a sustainable, post-reorganisation EBITDA level on which Fitch bases the enterprise valuation (EV). Fitch applies an unchanged EV multiple of 5.0x to the GC EBITDA to calculate a post-reorganisation EV. The 5.0x multiple is supported by OptiGroup's diversified market exposure, including good geographic coverage and strong market positions in a number of its sectors. The company's two revolving credit facilities (RCFs), totaling EUR60 million, are assumed to be fully drawn on default. The RCFs and term loan B are senior secured and rank equally between themselves in the recovery waterfall. The most senior debt is an asset-based facility and vendor financing totalling EUR31 million. OptiGroup has drawn down EUR15 million from its EUR80 million factoring facility in the last 12 months (deducted from EV using a discount in line with its criteria). The waterfall analysis output percentage on the above metrics and assumptions is 57% for senior secured debt, versus 58% previously, supporting 'RR3' and 'B+' debt rating, one notch above the IDR. RATING SENSITIVITIES Not applicable as the ratings have been withdrawn. Liquidity and Debt Structure Fitch views OptiGroup's liquidity as sufficient for 2025-2027, with low single-digit FCF margins and limited working-capital swings. The company estimates to have accumulated EUR173 million of cash at end-2024. Fitch restricts EUR20 million of cash in its analysis. OptiGroup's debt structure includes a EUR465 million first-lien term loan and a EUR200 million second-lien term loan maturing in 2029 and 2030, respectively. It also has access to EUR60 million in its RCFs, drawn by EUR1 million at end-2023. The RCFs mature in 2028. Issuer Profile Swedish-based OptiGroup is a distributor of everyday essentials across facility and safety, packaging, medical and paper& business supplies to 105,000 companies across 20+ countries. 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 ----------- ------ -------- ----- OptiGroup Bidco AB LT IDR B Affirmed B LT IDR WD Withdrawn senior secured LT B+ Affirmed RR3 B+ senior secured LT WD Withdrawn =========================== U N I T E D K I N G D O M =========================== ACTION ARTIFICIAL: Mercian Advisory Named as Administrators ----------------------------------------------------------- Action Artificial Intelligence Limited was placed into administration proceedings in the High Court of Justice Business and Property Courts of England and Wales, Insolvency & Companies List (ChD), Court Number: CR-2025-001038, and Mark Grahame Tailby and Craig Andrew Ridgley of Mercian Advisory Limited were appointed as administrators on March 3, 2025. Action Artificial, trading as Action.AI, specialized in conversational AI. Its registered office is at 124 City Road, London, EC1V 2NX. Its principal trading address is at 1 Preston Road, Brighton, BN1 4QU. The joint administrators can be reached at: Mark Grahame Tailby Craig Andrew Ridgley Mercian Advisory Limited Business Innovation Centre Harry Weston Road Coventry CV3 2TX For further details, contact: Emma Ward Email at EmmaW@mercianadvisory.co.uk. Tel No: 024 76430317 BESPOKE METERING: FRP Advisory Named as Administrators ------------------------------------------------------ Bespoke Metering Solutions Limited was placed into administration proceedings in the High Court of Justice Business and Property Courts in Newcastle-upon-Tyne, Court Number: CR-2025-NCL-000040, and Allan Kelly and Shaun Hudson of FRP Advisory Trading Limited, were appointed as administrators on March 4, 2025. Bespoke Metering engaged in the installation of industrial machinery and equipment. Its registered office is at The Arrow Fifth Avenue, Team Valley Trading Estate, Gateshead, NE11 0NG to be changed to F17 Evolve Business Centre, Cygnet Way, Houghton le Spring, DH4 5QY. Its principal trading address is at The Arrow Fifth Avenue, Team Valley Trading Estate, Gateshead, NE11 0NG. The joint administrators can be reached at: Allan Kelly Shaun Hudson FRP Advisory Trading Limited Suite 5, 2nd Floor, Bulman House Regent Centre Newcastle Upon Tyne NE3 3LS For further details, contact: Georgia Foster Email: cp.newcastle@frpadvisory.com DUNBAR EDUCATION: Path Business Named as Administrators ------------------------------------------------------- Dunbar Education Recruitment Limited was placed into administration proceedings in the High Court of Justice, Business and Property Courts in Manchester, No 000202 of 2025, and Gareth Howarth of Path Business Recovery Limited was appointed as administrators on February 28, 2025. Dunbar Education was into education recruitment. Its registered office and principal trading address is at Fourth Floor, Exchange House, 494 Midsummer Boulevard, Milton Keynes, MK9 2EA. The joint administrators can be reached at: Gareth Howarth Path Business Recovery Limited 2nd Floor, 9 Portland Street Manchester, M1 3BE Tel No: 0161 413 0999 For further details, contact: Phillip Lawrence Path Business Recovery Limited 2nd Floor, 9 Portland Street Manchester, M1 3BE Email: phil.lawrence@pathbr.co.uk Tel No: 0161 413 0999 ELSTREE FUNDING 4: DBRS Confirms BB(high) Rating on Class F Notes ----------------------------------------------------------------- DBRS Ratings Limited confirmed its credit ratings on the notes issued by Elstree Funding No. 4 PLC (the Issuer) as follows: -- Class A Notes at AAA (sf) -- Class B Notes at AA (high) (sf) -- Class C Notes at A (high) (sf) -- Class D Notes at BBB (high) (sf) -- Class E Notes at BBB (low) (sf) -- Class F Notes at BB (high) (sf) The credit rating on the Class A Notes addresses the timely payment of interest and ultimate repayment of principal by the legal final maturity date. The credit ratings on the Class B, Class C, Class D, Class E, and Class F Notes address the ultimate payment of interest and principal on or before the legal final maturity date while junior, and the timely payment of interest while the senior-most class outstanding. CREDIT RATING RATIONALE The confirmations follow an annual review of the transaction and are based on the following analytical considerations: -- Portfolio performance, in terms of delinquencies, defaults and losses, as of the December 2024 payment date. -- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables. -- Current available credit enhancement to the notes to cover the expected losses at their respective credit rating levels. The transaction is a securitization of first and second lien owner-occupied and buy-to-let residential mortgages originated in the UK by West One Secured Loans Limited and West One Loan Limited, part of ENRA Specialist Finance. West One Secured Loans Limited acts as servicer of the portfolio and CSC Capital Markets UK Limited is the back-up servicer facilitator. PORTFOLIO PERFORMANCE As of 30 November 2024, loans two to three months in arrears represented 0.1% of the outstanding portfolio balance, and loans more than three months in arrears represented 0.4%. The cumulative default ratio was 0.0%. PORTFOLIO ASSUMPTIONS AND KEY DRIVERS Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions at the B (sf) rating level to 5.6% and 18.9%, respectively. CREDIT ENHANCEMENT As of the December 2024 payment date, credit enhancement to the notes had increased as follows: -- Class A Notes: 17.2%, up from 14.3%; -- Class B Notes: 11.6%, up from 9.5%; -- Class C Notes: 7.7%, up from 6.3%; -- Class D Notes: 4.8%, up from 3.8%; and -- Class E Notes: 2.4%, up from 1.8%. The transaction benefits from a liquidity reserve fund (LRF) that is funded to 1.25% of the outstanding balance of the Class A and Class B Notes, which is available to cover shortfalls in senior fees and interest payments on the Class A and Class B Notes. The LRF is at its target level of GBP 3.3 million. The transaction also benefits from a general reserve fund (GRF) funded to 1.25% of the initial Class A to Class Z notes balance minus the LRF target amount. The GRF is available to cover shortfalls in senior fees and interest payments on the Class A to Class F Notes, as well as principal losses on the Class A to Class Z notes via the principal deficiency ledgers. The GRF is at its target level of GBP 1.0 million. Citibank N.A., London Branch acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating on Citibank N.A., London Branch, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology. Barclays Bank PLC acts as the swap counterparty for the transaction. Morningstar DBRS' public Long-Term Critical Obligations Rating on Barclays Bank PLC at AA (low) is consistent with the First Rating Threshold as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology. Notes: All figures are in British pound sterling unless otherwise noted. FEVERSHAM ARMS: PKF Littlejohn Named as Administrators ------------------------------------------------------ Feversham Arms Limited was placed into administration proceedings in the High Court of Justice, Business and Property Courts of Leeds, Insolvency and Companies List, Court Number: CR-2025-LDS-000234, and James Sleight and Oliver Collinge of PKF Littlejohn Advisory Limited were appointed as administrators on March 6, 2025. Feversham Arms was involved in hotel and similar accomodation. Its registered office is at The Company's registered office is 1-8 High Street, Helmsley, York, YO62 5AG. It will be changed to c/o PKF Littlejohn Advisory Limited, 3rd Floor, One Park Row, Leeds, LS1 5HN in due course. Its principal trading address is at 1-8 High Street, Helmsley, York, YO62 5AG. The joint administrators can be reached at: James Sleight Oliver Collinge PKF Littlejohn Advisoy Limited 3rd Floor, One Park Row Leeds, LS1 5HN For further details, contact: Jonathan Burke Tel No: 0113 323 8890 Email: Jburke@pkf-l.com GREENWICH BIDCO: S&P Assigns Preliminary 'B' ICR, Outlook Stable ---------------------------------------------------------------- S&P Global Ratings assigned its preliminary 'B' issuer credit rating to Greenwich BidCo Ltd., Kantar Media's new parent. S&P also assigned its preliminary 'B' issue rating and preliminary '3' recovery rating (reflecting S&P's rounded estimate of 60% recovery in the event of default) to the proposed $605 million-equivalent TLB. The stable outlook reflects S&P's view that Kantar Media will maintain robust organic revenue growth after the transaction's close, and that exceptional costs related to the separation will materially reduce in 2026 and thereafter, with the adjusted EBITDA margin improving above 20%, adjusted leverage decreasing comfortably below 7.0x, and free operating cash flow (FOCF) turning positive from 2026 and strengthening toward 5% thereafter. U.S.-based private equity firm H.I.G. Capital is acquiring from Kantar Global Holdings S.a r.l. the U.K.-based audience measurement provider, currently operating under the Kantar Media brand, which will be carved out as a stand-alone entity. The proposed capital structure will comprise a $605 million-equivalent senior secured term loan B (TLB) and $128 million-equivalent multi-currency revolving credit facility (RCF). Kantar Media is the leading audience measurement provider outside the U.S. It offers data and insights into viewership, attitudes, and behaviors of audiences across platforms, as well as consumer research surveys and advertising tracking. The preliminary 'B' rating reflects Kantar Media's strong market positions and resilient business model but is constrained by its small scale of operations and material exceptional costs, which weigh on credit metrics in 2025-2026. Kantar Media is the No.1 media tracking provider globally outside the U.S. and having leading positions in the U.K., France, Spain, the Netherlands, the Nordic and Baltic countries, Switzerland, Turkey, and Brazil and other Latin American countries. Kantar Media's status as an independent currency data provider in most of operating markets ensures very strong market shares of 60%-80%, on average. It also has high contract renewal rates, thanks to the mission-critical nature of the data it provides, which makes its revenue and earnings resilient even through periods of macroeconomic downturns. However, S&P notes that the company's scale of operations is materially smaller than that of its rated peers--including Neptune Bidco US Inc. (parent company for The Nielsen Company (US), LLC.), the largest media tracking company globally and the leader in the largest global market, the U.S. High exceptional costs--related to the carve-out and setting up of Kantar Media's operations as a stand-alone entity--will lead to subdued profitability, high initial leverage of 8.0x, and negative FOCF in 2025. S&P said, "However, we note that at least $50 million of separation costs will be prefunded at the transaction's close. If the setup completes successfully and without material cost overruns, we expect debt to EBITDA to improve to less than 7.0x in 2026, underpinned by organic revenue and earnings growth and a material decline in exceptional costs." Kantar Media is well positioned to address the shift from linear-TV tracking to cross-media tracking. The company benefits from its incumbent position as the established provider of independently validated currency data in core markets, with linear and digital viewing measurement coverage, and from the industry's barriers to entry. It is essential for media companies, advertisers, and advertising agencies to receive accurate, validated, and calibrated audience measurement data from an independent provider. Kantar Media has a strong product offering in audience measurement, which includes linear-TV tracking, cross-media tracking solutions, return path data services, radio audience measurement, and licensing services. It provides audience measurement data to joint industry committees (JICs), not-for-profit entities underwritten by a market's media companies (including BARB and ISBA in the U.K., Mediapulse in Switzerland, NMO in the Netherlands, and TIAK in Turkey), buy-side clients (advertisers and advertising agencies), and sell-side clients (hybrid broadcasters and video platforms). The media ecosystem is undergoing a significant transformation with the shift from linear-TV viewing toward streaming, social platforms, and multi-device viewership. This increases the importance of cross-media measurement (CMM) and data verification and calibration by combining data collected by consumer panels with big data provide by tech companies. The company is working closely with Origin in the U.K. and Aquila in the U.S., industry bodies founded and governed by advertisers and advertising companies on development of data calibration framework for CMM solutions. S&P also believes that increased complexity in audience tracking should support demand for independent audience measurement products. S&P said, "We expect 4%-5% organic revenue growth over 2025-2026, supported by strong contract renewals and the rollout of cross-media solutions. Kantar Media's revenue base is stable and predictable, with a 98% share of recurring revenue and average net revenue retention of 102% across the group. Contracts with JICs (about 30%-40% of media tracking revenue) are long-term (around five to seven years, on average) and benefit from inflation-linked pricing. We note that the company has relatively high client concentration compared with other data and software providers, with the top 10 clients accounting for about a third of Kantar Media's revenue. However, we believe the risk of contracts with the largest clients, especially JICs, not being renewed is limited. Contracts with clients in syndicated markets (about 60%-70% of media tracking revenue) are naturally shorter, but usually bear value-based pricing models, giving Kantar Media sufficient pricing power at the renewals. Kantar Media's clients have very high switching costs, given the need to maintain data continuity and historical data comparison." Data visualization and analysis solutions (TechEdge) is the fastest growing revenue segment, which complements audience measurement products and has strong cross-sales opportunities to media-tracking clients. The Advertising Intel (Ad Intel) and Target Group Index (TGI) divisions, which are responsible for measurement of advertising activities and consumer media consumption and attitudes respectively, operate in highly competitive markets and are more exposed to macroeconomic volatility and potential pullbacks in client spending, and S&P expects they will deliver the lowest revenue growth in the forecast period. S&P said, "We expect Kantar Media's profitability and credit metrics to materially improve from 2026 and onwards as it completes the operational separation from Kantar Global, and associated one-off costs reduce. In the first 12-18 months following the transaction closing, exceptional costs will significantly depress Kantar Media's adjusted EBITDA and cash flows. Kantar Media has been operationally independent from Kantar Group since 2023, but Kantar Group was initially still providing some function support to Kantar Media. Exceptional costs relate to the technological separation from the former parent and mainly include setting up separate enterprise resource planning, HR systems, hosting services, and network and telephony systems. While we include these costs in our calculation of adjusted EBITDA, we acknowledge that as part of the transaction, the majority of these will be prefunded and the debt documentation will benefit from a covenant that restricts the use of cash specifically toward funding the separation. While we think there are risks of exceptional cost overruns and the separation taking longer than initially planned, we understand the group is not planning to undertake any material operational cost transformation at the same time, limiting execution risks, and expect the group's profitability to swiftly recover from 2026 onwards. "We estimate Kantar Media's S&P Global Ratings-adjusted EBITDA margin at about 17% in 2025, improving to 21% in 2026 and to around 25% thereafter. This leads to our expectation of S&P Global Ratings-adjusted debt to EBITDA of 8.0x in 2025, recovering toward 6.5x in 2026 on the back of organic growth and reducing separation costs. Also, thanks to its asset-light nature and low working capital and capital expenditure (capex) needs, we believe FOCF will become sustainably positive from 2026 and thereafter, supported by a material reduction in exceptional costs. "The preliminary ratings are subject to the successful issuance of the proposed debt, and our satisfactory review of the final documentation. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. If we do not receive the final documentation within a reasonable time frame, or if the final documentation departs from the materials we have already reviewed, we reserve the right to withdraw or revise our ratings. Potential changes include, but are not limited to, the key terms and conditions of Kantar Media's capital structure, including, but not limited to, interest rate, maturity, size, financial and other covenants, the security, and ranking of debt--as well as the use of proceeds. "The stable outlook reflects our view that, after Kantar Media is carved-out from its former parent Kantar Global, it will maintain robust organic revenue growth and that exceptional costs related to the separation will materially reduce in 2026 and thereafter, leading to an improved adjusted EBITDA margin above 20%. The outlook also assumes that S&P Global Ratings-adjusted leverage will decrease comfortably below 7.0x and FOCF will turn positive from 2026 and strengthen toward 5% thereafter." Downside scenario S&P said, "We could downgrade Kantar Media if subdued revenue growth due to intensified market competition, loss of large contracts, or higher exceptional costs than we incorporate in our base case lead to persistently weak EBITDA margins and adjusted leverage above 7.0x. Persistently negative FOCF and EBITDA interest coverage falling below 2.0x could also lead to a downgrade." Upside scenario S&P sees the upside potential for the rating as limited. We could raise the rating if: -- Business rapidly gains scale and revenue and earnings growth materially exceeds our base case; and -- Adjusted leverage substantially decreases to below 5.0x and FOCF to debt approaches 10%, and the company's financial policy supports such stronger metrics on a sustained basis. J B STAINLESS: Begbies Traynor Named as Administrators ------------------------------------------------------ J B Stainless & Alloys Limited was placed into administration proceedings in the High Court of Justice, Business and Property Courts in Leeds, Insolvency and Companies List (ChD), Court Number: 000170 of 2025, and Joanne Louise Hammond and Robert Dymond of Begbies Traynor (Central) LLP, were appointed as administrators on March 5, 2025. J B Stainless engaged in wholesale trade. Its registered office is at Suite 500, Unit 2, 94A Wycliffe Road, Northampton, NN1 5JF. The joint administrators can be reached at: Robert Dymond Joanne Louise Hammond Begbies Traynor (Central) LLP 3rd Floor, Westfield House 60 Charter Row Sheffield S1 3FZ For further details, contact: Connor Roberts Tel No: 0114 2755033 Email: Connor.Roberts@btguk.com LGC SCIENCE: Term Loan Add-on No Impact on Moody's 'B3' CFR ----------------------------------------------------------- Moody's Ratings says that LGC Science Group Holdings Limited's (LGC or the company) B3 long term corporate family rating, B3-PD probability of default rating and the B3 ratings on the backed senior secured bank credit facilities borrowed by Loire Finco Luxembourg S.a.r.l. are unaffected by the company's planned amend and extend (A&E). The outlook is stable. On March 04, 2025, LGC launched an A&E and add-on on its existing EUR and USD term loan B facilities extending the maturities to January 2030 from April 2027. The add-on will be used to repay drawings in the revolving credit facility (RCF) which will also be extended out by three years to October 2029. The A&E is credit positive as it strengthens the company's liquidity position. RATINGS RATIONALE LGC's B3 CFR is constrained by the company's weak credit metrics with Moody's adjusted debt/ EBITDA of 8.6x as of December 2024. Moody's expects the company will remain free cash flow (FCF) negative over the next 12 months because of its extensive expansionary capital spending programme, coupled with its higher interest cash outflow, although Moody's expects earnings growth to see leverage reduce towards 7x in the next 12-18 months. The CFR also captures the competitive and fragmented nature of the company's end markets; a degree of customer concentration and a shorter sales cycle in its Genomics division; some exposure to macroeconomic conditions in its Assurance division; and the presence of a large PIK debt balance outside the restricted group and a debt-funded shareholder distribution in April 2021. LGC also has a track record of acquisitive growth, which could keep leverage high in case of large bolt-on deals requiring debt funding. Conversely, LGC's B3 CFR is supported by the company's strong niche market positions benefiting from high barriers to entry and a large proportion of recurring revenue; large customer base with an average relationship length of more than 10 years; sustainable underlying revenue growth in the high-single-digit rates in most markets; and solid, although declining, profitability, as measured by Moody's-adjusted EBITDA margin of around 26%. While LGC's business profile and the strong market dynamics support its rating, the company's stretched credit metrics means the rating remains weakly positioned. RATIONALE FOR STABLE OUTLOOK The stable outlook captures Moody's assumption that organic revenue and EBITDA will grow in the base business; leverage will trend below 7.5x in next 12-18 months; there will be no debt-funded shareholder distributions or acquisitions; and at least adequate liquidity will be maintained. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on the ratings could develop if leverage, as measured by Moody's-adjusted debt/EBITDA, were to reduce and be sustained below 6.5x and FCF/debt increased toward 5% sustainably. An upgrade would also require the absence of any re-leveraging transaction. Downward pressure on the rating could occur if (1) there is a loss of major accreditations or clients leading to revenue declines, (2) Moody's-adjusted free cash flow remains meaningfully negative beyond the next 12-18 months or (3) Moody's-adjusted debt/EBITDA does not remain on path to decrease to below 7.5x within the next 12-18 months or (4) if liquidity deteriorates materially. CORPORATE PROFILE LGC, headquartered in Teddington, UK, was acquired by Astorg and Cinven in 2020 and provides analytical testing products and services to a wide range of end markets including molecular and clinical diagnostics, pharma and biotech, food, agricultural biotech and environmental industries. The company also fulfils crucial roles for the UK government. LGC has operations globally, with products and services sold in over 180 countries and generates approximately 90% of revenue via its own channels, rather than distributors. The company reported revenue of GBP759 million and management adjusted EBITDA of GBP235 million for the last twelve months to December 31, 2024. POLLOCK FARM: BDO LLP Named as Administrators --------------------------------------------- Pollock Farm Equipment Limited was placed into administration proceedings in the Hamilton Sheriff, Court No HAM-L7 of 2025, and James Stephen and Lee Causer of BDO LLP, were appointed as administrators on Feb. 28, 2025. Pollock Farm is manufacturer of agricultural and forest machinery. Its registered office is at 33 Kittoch Street, East Kilbride, Glasgow, G74 4JW to be changed to c/o BDO LLP, at 2 Atlantic Square, 31 York Street, Glasgow, G2 8NJ Its principal trading address is at Unit 1, Imex Business Centre, Lugar, KA18 3JG The joint administrators can be reached at: James Stephen BDO LLP 2 Atlantic Square 31 York Street Glasgow, G2 8NJ -- and -- Lee Causer BDO LLP Two Snowhill Snow Hill Queensway Birmingham, B4 6GA For further details, contact: The Joint Administrators Email: BRCMTNorthandScotland@bdo.co.uk Tel No: +44(0)744-2798412 Alternative contact: Alex Convery PROPYORK LTD: Rushtons Insolvency Named as Administrators --------------------------------------------------------- Propyork Ltd was placed into administration proceedings in the High Court of Justice Business and Property Courts in Leeds Insolvency and Companies List (ChD), Court Number: CR-2025-000059, and Nicola Baker of Rushtons Insolvency Limited was appointed as administrators on Feb. 14, 2025. Propyork Ltd was into real estate. Its registered office is at 6 Festival Building, Ashley Lane, Saltaire, BD17 7DQ. Its principal trading address is at 106 High Street, Knaresborough, HG5 0HN. The joint administrators can be reached at: Nicola Baker Rushtons Insolvency Limited 6 Festival Building Ashley Lane Saltaire, BD17 7DQ For further details, contact: Nicola Baker Tel: 01274 598 585 Alternative contact: Dominic Wolski Email: dwolski@rushtonsifs.co.uk SONA FIOS IV: S&P Assigns B-(sf) Rating on Class F Notes -------------------------------------------------------- S&P Global Ratings assigned its credit ratings to Sona Fios CLO IV DAC's class X-notes, X-loan, A-notes, A-loan, and B to F notes. At closing, the issuer also issued unrated subordinated notes. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises mainly 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 loans and notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with our counterparty rating framework. Portfolio benchmarks S&P Global Ratings weighted-average rating factor 2,798.38 Default rate dispersion 538.28 Weighted-average life (years) 4.84 Obligor diversity measure 116.93 Industry diversity measure 22.87 Regional diversity measure 1.14 Transaction key metrics Total par amount (mil. EUR) 450.00 Defaulted assets (mil. EUR) 0 Number of performing obligors 129 Portfolio weighted-average rating derived from S&P's CDO evaluator 'B' 'CCC' category rated assets (%) 2.44 Targeted 'AAA' weighted-average recovery (%) 36.99 Covenanted weighted-average spread net of floors (%) 4.00 This is a European cash flow CLO transaction, securitizing a pool of mainly primarily syndicated senior secured loans or bonds. The portfolio's reinvestment period ends approximately 4.63 years after closing, and the portfolio's non-call period is 1.5 years after closing. Under the transaction documents, the rated loans and notes pay quarterly interest unless there is a frequency switch event. Following this, the loans and notes will switch to semiannual payment. The portfolio is well-diversified, primarily comprising mainly broadly syndicated speculative-grade senior-secured term loans and senior-secured bonds. Therefore, S&P has conducted its credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we modeled the EUR450 million target par amount, the covenanted weighted-average spread of 4.00%, and the covenanted weighted-average recovery rates. 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. "Following the application of our structured finance sovereign risk criteria, the transaction's exposure to country risk is limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "The transaction's legal structure is bankruptcy remote, in line with our legal criteria. "Our credit and cash flow analysis indicates that the available credit enhancement for the class B, C, D, and E notes is commensurate with higher ratings than those we have assigned. However, as the CLO will have a reinvestment period, during which the transaction's credit risk profile could deteriorate, we have capped the assigned ratings. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our ratings are commensurate with the available credit enhancement for each class of 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 X debt 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." Sona Fios CLO IV DAC is a European cash flow CLO securitization of a revolving pool, comprising mainly senior secured loans and bonds issued mainly by sub-investment grade borrowers. Sona Asset Management (UK) LLP manages the transaction. Environmental, social, and governance factors S&P said, "We regard the transaction's exposure to environmental, social, and governance (ESG) credit factors 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. For this transaction, the documents prohibit assets from being related to certain activities. Accordingly, since the exclusion of assets related to these activities does not result in material differences between the transaction and our ESG benchmark for the sector, we have not made any specific adjustments in our rating analysis to account for any ESG-related risks or opportunities." Ratings list Amount Credit Class Rating* (mil. EUR) enhancement (%) Interest rate§ X-notes AAA (sf) 0.25 N/A Three/six-month EURIBOR plus 0.85% X-loan AAA (sf) 4.75 N/A Three/six-month EURIBOR plus 0.85% A-notes AAA (sf) 179.00 38.00 Three/six-month EURIBOR plus 1.27% A-loan AAA (sf) 100.00 38.00 Three/six-month EURIBOR plus 1.27% B AA (sf) 48.10 27.31 Three/six-month EURIBOR plus 1.90% C A (sf) 26.40 21.44 Three/six-month EURIBOR plus 2.25% D BBB- (sf) 33.50 14.00 Three/six-month EURIBOR plus 3.10% E BB- (sf) 20.25 9.50 Three/six-month EURIBOR plus 5.60% F B- (sf) 13.50 6.50 Three/six-month EURIBOR plus 8.42% Sub NR 29.70 N/A N/A *The ratings assigned to the class X (notes and loan), A (notes and loan), and B notes address timely interest and ultimate principal payments. The 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. SOUTHERN WATER: Moody's Ba1 CFR Remains Under Review for Downgrade ------------------------------------------------------------------ Moody's Ratings has extended the review for downgrade on the Ba1 corporate family rating and Ba1-PD probability of default rating of Southern Water Services Limited (Southern Water). Concurrently, Moody's also extended the review for downgrade on the Ba1 backed and underlying senior secured ratings of SW (Finance) I PLC, the guaranteed finance subsidiary of Southern Water. The rating review was originally initiated on July 30, 2024, following a challenging draft determination for the regulatory period running from April 01, 2025 to March 31, 2030 (known as AMP8). On November 13, 2024, Moody's downgraded ratings to their current levels, reflecting a deterioration in the UK Water sector's business risk profile and kept them on review for further downgrade. The A1 backed senior secured ratings of those bonds that are subject to a financial guarantee by Assured Guaranty UK Limited (A1 stable) of timely payments of scheduled interest and principal will continue to reflect the insurance financial strength rating of the guarantor and remain unaffected. The announcement follows publication of the final determination of tariffs, cost allowances and returns for the regulatory period running from April 01, 2025 to March 31, 2030 (known as AMP8), by UK water regulator Ofwat on December 19, 2024.[1] On February 18, 2025, Southern Water appealed Ofwat's final determination and announced its intention to raise additional equity of GBP900 million to support the growth under its ongoing investment programme, irrespective of its appeal.[2] RATINGS RATIONALE The extension of the review for downgrade recognises that while Southern Water's final determination was improved from the draft, the company continues to face the risk of cost overruns and performance penalties. The proposed GBP900 million equity injection could act as sufficient mitigant to maintain credit quality, but there remains execution risk associated with the equity raise, which is expected to complete in June 2025, and a tightening liquidity runway. Moody's currently estimate that – with the benefit of the additional equity – the company would be able to maintain operating company gearing, measured as net debt to regulatory capital value (RCV) broadly around 70%. However, ongoing performance penalties will likely continue to depress the adjusted interest coverage ratio (AICR), which Moody's estimates could average around 1.1x over AMP8. A further strengthening would depend on (1) a successful CMA redetermination that provided for additional costs, increased returns and/or reduced penalty risks; or (2) the company's ability to continue its operational improvement without sizeable overspend on operating costs, defer future performance penalties into an RCV adjustment rather than receiving it through revenue, and achieve funding costs more closely aligned with regulatory allowances. Under Ofwat's December determination, Southern Water's overall total expenditure (totex) allowance for AMP8 is GBP8.5 billion (after adjustments for frontier shift efficiency and real price effects), a GBP1.1 billion or 11.3% cut compared with its GBP9.6 billion ask. Base cost allowances are just under GBP4 billion, GBP327 million or 7.6% below the company's request. Base allowances are 23% above cost allowances for the current period, but 12% below actual base costs spent over the last five years. Some of the shortfall is linked to higher requests for energy cost and business rates where an end-of-period adjustment will allow recovery of 90% of any overspend. Enhancement allowances are GBP4.5 billion, around GBP757 million or 14.3% below the amount requested, and split GBP1.9 billion and GBP2.6 billion between water and wastewater (including bioresources) activities. The largest adjustments relate to supply and demand schemes, including leakage reduction, as well as wastewater investment to reduce storm overflow or deal with growth in sewage treatment works, where Ofwat assessed unit costs as too high or wanted to protect customers from paying twice for the same service. The overall GBP4.5 billion enhancement allowances include GBP654 billion of contingent allowances related to large schemes under a gated approval process, and GBP538 million under a special delivery mechanism. These will only be funded by customers once proceeded through the approval gates or the company can ensure delivery, respectively. Under Ofwat's final determination, and while the company has been allowed less than it asked for, Southern Water's totex programme will grow the RCV by almost 45% in real terms over AMP8 (excluding contingent allowances), the largest increase in the sector. Based on the revised targets and incentive rates at final determinations, Moody's estimates that Southern Water could incur around GBP20-30 million of annual penalties (including service measures) on average over AMP8. While this is materially improved from the draft determination, it will still weaken operating cash flows over the last three years on the period, when the penalties would start to become cash effective, unless the company received approval from Ofwat to defer the impact through an adjustment of RCV rather than revenue. The regulator indicated that it would consider companies' requests to take performance penalties as an RCV adjustment, but only if doing so would be in customers interest. Decisions would be made on a case by case basis, and, while it is management's view that outcome delivery incentives (ODIs) can be reflected through RCV, Moody's current base case assumes that a deferral of penalties may not be approved for Southern Water. The largest penalties would be incurred for pollution incidents, storm overflows and mains bursts, albeit partially offset by expected rewards on leakage and external sewer flooding incidents. While Southern Water's pollution performance has improved significantly amid an ongoing turn-around programme, a further step up will be required over AMP8 to avoid higher penalties. The final determination allowed appointee return is 4.03% (CPIH-deflated, compared with 3.72% at draft determinations and 2.96% in the current period). The draft determination had assessed Southern Water's business plan as inadequate, but the associated penalty was removed at final determination and the company will now also be subject to standard cost sharing rates. Nevertheless, the company will likely continue to face more elevated funding cost than peers or regulatory assumptions. The proposed new equity contribution would support the sizeable RCV growth as well as provide a mitigant to the risk of ongoing operational and financial underperformance. It would be a continuation of previous shareholder contributions of, in aggregate, GBP905 million to Southern Water and GBP718 million to its holding companies since September 2021. However, a firm commitment will not be provided until the formal equity raise has concluded, which is expected by June 30, 2025. Southern Water remains in trigger under its finance documentation because of its breach of financial trigger ratios as well as minimum rating requirements. The company obtained a waiver from its lenders to permit continued access to financial indebtedness, and to finance the business in a credit rating trigger event or a financial ratio trigger event to March 2035. However, this waiver does not affect the distribution block effected by these trigger events. The company is also subject to a distribution block under the minimum rating requirement of its licence. In addition, under Southern Water's finance documentation, if its senior secured debt rating by any two credit rating agencies fell below investment-grade, this would – unless waived – constitute an event of default. Such default would not be considered a default under Moody's definitions, but a subsequent payment acceleration and resulting non-payment would constitute a Moody's default. Ratings also remain constrained by a sizeable derivative exposure. Southern Water reported a credit value-adjusted net mark-to-market (MTM) value under its inflation-linked derivatives of around GBP1.6 billion as of March 2024 (equivalent to 23% of RCV), which remained broadly unchanged at September 2024. In a default scenario where senior creditors demand payment acceleration, Southern Water would be required to make a termination payment based on swap counterparties' assessment of their total losses, which is likely to be close to the MTM at that time. This payment would rank ahead of principal and interest on senior debt under the post-enforcement payment waterfall. LIQUIDITY Southern Water has sufficient liquidity to cover the next 12 months of expected cash outflows at the end of February 2025. However, the company faces material debt and derivative payments in March 2026, which are currently not fully funded. As of September 2024, the company had cash of GBP342.2 million and deposits with a holding period of over three months of GBP200 million, while its finance subsidiary, SW (Finance) I PLC held additional cash in designated debt service reserve accounts of around GBP90 million. By September, Southern Water had fully drawn its GBP350 million revolving credit facilities, which will mature in October 2027. In October 2024, SW (Finance) I PLC issued GBP300 million of new bonds for cash proceeds of GBP272.5 million, further extending its liquidity runway. The company has limited cash requirements in FY2024/25, but these increase in FY2025/26 when a swap accretion payment of around GBP450-500 million will be due in March 2026, in addition to a GBP350 million bond maturity. With the October 2024 bond issuance, the company has increased its liquidity buffer, and Moody's estimates that current funds will last beyond the end of February 2026. However, to fully mitigate the expected sizeable outflow at the end of March 2026, Southern Water will have to rely on the proposed equity issuance, additional debt financing and/or a renegotiation of the derivative payments. Liquidity is further supported by GBP190 million of unused super-senior standstill liquidity facilities, with a GBP27.5 million standby drawing included in the above cash position. These are 364-day facilities but would be available to the company to service debt in the event of a standstill being declared following a breach of covenants. The rating review will focus on the company's ability to successfully execute the equity raise and improve its liquidity runway. Moody's could confirm the ratings, once there is a firm equity commitment in place and the immediate refinancing pressure in March 2026 has been addressed. Moody's will also assess progress on any renegotiation, refinancing or repayment of near-term holding company maturities, to avoid any impediment to equity injections reaching the operating company. A rating upgrade could be considered in the medium term upon a sustained improvement in operational performance, which could be evidenced by, for example, achieving a three star rating under the Environment Agency's environmental performance assessment, as well as financial metrics that provides sufficient flexibility to deal with short term shocks. The latter includes gearing, measured as net debt to RCV, around 70% as guided to by Ofwat as well as an AICR above 1.2x, albeit achieved through a better CMA redetermination or operational improvement rather than via financial engineering. Conversely, the ratings could be downgraded if Southern Water incurred difficulties in attracting debt, and potentially further equity, capital in order to deliver its business plan at a cost consistent with regulatory allowances, including if funding difficulties at Southern Water's parent companies reduced the likelihood of further shareholder support or the company failed to maintain a sustained forward-looking liquidity runway of at least 12 months. Further downward pressure could also arise if it appeared likely that Southern Water will face significant additional environmental fines or operational challenges, absent further balance sheet strengthening measures. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Regulated Water Utilities published in August 2023. Southern Water is the seventh largest of the water and sewerage companies in England and Wales, with an RCV of GBP6.8 billion as of March 2024. The company provides essential services to 2.7 million water customers and 4.7 million wastewater customers in the southeast of England across Sussex, Kent, Hampshire and the Isle of Wight. STAR UK MIDCO: S&P Puts 'B-' ICR on Watch Pos. Amid Honeywell Deal ------------------------------------------------------------------ On March 4, 2025, Honeywell International Inc. announced it had entered into an agreement to acquire 100% of Star UK Midco Ltd. (Sundyne) for $2.2 billion in an all-cash transaction. S&P Global Ratings expects Sundyne will be fully integrated with Honeywell's existing operations. Consequently, S&P placed its 'B-' issuer credit rating and its 'B-' issue-level rating on the company's first-lien term loan and revolving credit facility on CreditWatch with positive implications. The CreditWatch placement reflects S&P's view that it would raise its ratings on Sundyne potentially by multiple notches following the closing of the acquisition by Honeywell. S&P anticipates resolving the CreditWatch placement at transaction close, which it expects in the second quarter of 2025, subject to regulatory approvals. S&P said, "We believe Sundyne's operating trends should remain favorable in 2025. This is because demand for new energy infrastructure has been decent and supports the utilization of existing energy assets globally. Demand for liquefied natural gas (LNG), in particular, should drive infrastructure investment. Given the favorable trends, we expect the company will increase its new equipment and aftermarket revenue in 2025. "The CreditWatch placement reflects our view that we would likely raise our rating on Sundyne to that of Honeywell and subsequently withdraw the ratings. We also expect to concurrently raise and withdraw the issue-level ratings after the debt is fully repaid when the transaction closes." SURREY HIRE: Begbies Traynor Named as Administrators ---------------------------------------------------- Surrey Hire and Sales Limited was placed into administration proceedings in the High Court of Justice, Business and Property Courts of England & Wales, Insolvency & Companies List, Court Number: CR-2025-001347, and Gary Paul Shankland and Huw Morgan Powell of Begbies Traynor (London) LLP were appointed as administrators on Feb. 28, 2025. Surrey Hire is involved in the renting and leasing of construction and civil engineering machinery and equipment. Its registered office is at Cambrian Park, Isaac Way, Pembroke Dock, Pembrokeshire, SA72 4RW The joint administrators can be reached at: Gary Paul Shankland Huw Morgan Powell Begbies Traynor (London) LLP 31st Floor, 40 Bank Street London, E14 5NR For further details, contact: Nadine Romanick Email: Nadine.Romanick@btguk.com Tel No: 029 2089 4270 TAURUS 2021-1: DBRS Confirms BB(high) Rating on Class E Notes ------------------------------------------------------------- DBRS Ratings Limited confirmed its credit ratings on the bonds issued by Taurus 2021-1 UK DAC (the Issuer) as follows: -- Class A at AAA (sf) -- Class B at AA (high) (sf) -- Class C at A (high) (sf) -- Class D at BBB (sf) -- Class E at BB (high) (sf) The trend on all credit ratings remains Stable. CREDIT RATING RATIONALE The credit rating confirmations reflect the collateral's stable performance in terms of rental income since the last annual review. The transaction is the securitization of a GBP 340.1 million senior commercial real estate loan secured by 45 light-industrial and logistics assets located across the United Kingdom with a large concentration in London and the South East. The transaction is arranged by BofA Securities and jointly managed by Barclays Bank PLC for the benefit of funds managed by Blackstone Group Inc. (Blackstone). At issuance, the Issuer purchased the senior loan from the loan seller, Bank of America Europe DAC, using the proceeds from the note issuance and the issuer loan provided by the loan seller. The issuer loan was sized at 5% of the senior loan amount in order to satisfy risk retention requirements. The senior loan margin directly mirrors the weighted-average coupon on the notes; therefore, there is no excess spread in the transaction. However, the senior loan margin is capped at 2.29%. The senior loan has refinanced Blackstone's acquisitions since the first quarter of 2020. In particular, it refinanced the original portfolio of 38 assets that were acquired before October 2020 (the United IV subportfolio) and seven assets that were acquired between November 2020 and December 2020 (the add-on portfolio). The entire 45-asset pool is known as the United V portfolio and is integrated into Blackstone's logistics platform Mileway. In conjunction with the senior loan, Australian Super Pty Ltd advanced a GBP 85.0 million mezzanine facility, which was subordinated to the securitized senior facility. The mezzanine facility was redeemed in full during the first quarter of 2022. In September 2021, part of one of the properties, Sheffield Business Park, was sold, and the disposal proceeds were applied in partial prepayment of the senior and mezzanine loans. GBP 2.5 million was then applied pro rata against the notes (95%) and against the issuer loan (5%) on the February 2022 interest payment date. Since then, no further sale has occurred. The senior loan balance stands at GBP 337,656,000. Income metrics for the portfolio showed a further slight improvement over the last 12 months. Adjusted net rental income increased to GBP 31.8 million as of the November 2024 interest payment date (IPD) from GBP 31.1 million as of the November 2023 IPD (an increase of 2.3%). As a result of the increase in income, debt yield (DY) increased to 9.4% as of the November 2024 IPD, up from 9.2% as of the November 2023 IPD and 7.44% at issuance. The most recent valuation, dated October 31, 2023, was conducted by Jones Lang LaSalle Limited (JLL) and concluded to a value of GBP 602.2 million for the sum of the assets in the portfolio. This figure represents a 12.1% increase over the assets' previous market value (GBP 537.2 million) as of 28 October 2022 indicated by Knight Frank LLP (Knight Frank). JLL concluded to a portfolio value of GBP 617.2 million, inclusive of a 2.5% portfolio premium. This represents a loan-to-value (LTV) ratio of 54.7% on the current loan balance of GBP 337.7 million. Morningstar DBRS' net cash flow (NCF) and capitalization rate assumptions remained unchanged at GBP 27.8 million and 6.5%, respectively. Hence, the Morningstar DBRS value is GBP 427.1 million, equivalent to a 29.1% haircut on the most recent market value. The November 2024 IPD vacancy rate stands at 9.7%, slightly lower than 11.2% in November 2023. This is still in line with Morningstar DBRS' vacancy assumptions. Similar to other Blackstone loans, there are no financial default covenants applicable prior to a permitted change of control. As of November 2024, the senior loan was fully compliant with its cash trap covenants, which are set at 71.6% for LTV and 6.1% for DY, and Morningstar DBRS does not foresee any breach in the upcoming quarters. The senior loan is fully hedged with a cap agreement, which has a cap strike rate of 1.5%. For each note interest period occurring on or after the expected note maturity date, the Sterling Overnight Index Average (Sonia) component of the rate of interest payable on the notes will be capped at 4% per annum, subject to a floor of zero. To cover potential interest payment shortfalls, Bank of America, N.A., London Branch provided the Issuer with a liquidity facility of GBP 11.4 million at issuance. The liquidity facility covers the Class A, Class B, and Class C notes as well as the corresponding portion of the issuer loan. The current liquidity facility balance stands at GBP 11.3 million. The coverage provided by the liquidity facility is for 20.5 months based on a 1.5% cap strike rate and for 11 months based on the 4% Sonia cap. The coverage provided by the liquidity facility is deemed to be commensurate with the credit ratings of the respective covered notes. The two-year senior loan had its initial maturity on 15 May 2023 and three-one year extension options to May 15, 2026. The second extension option was exercised, extending expected loan maturity to 15 May 2025. The final legal maturity of the notes is in May 2031, five years after the fully extended loan maturity date. Morningstar DBRS believes that this provides sufficient time to eventually enforce the senior loan collateral and repay the noteholders, given the security structure and the jurisdiction of the underlying loan and properties. Notes: All figures are in British pound sterling unless otherwise noted. TRAFFORD CENTRE: Fitch Hikes Rating on Class D1 Notes to 'BB+sf' ---------------------------------------------------------------- Fitch Ratings has upgraded The Trafford Centre Finance Limited's notes and assigned them Positive Outlooks. Entity/Debt Rating Prior ----------- ------ ----- The Trafford Centre Finance Ltd Class A2 6.50% Secured Notes due 2033 XS0108039776 LT Asf Upgrade BBBsf Class A3 Floating Rate Secured Notes Due 2038 XS0222488396 LT Asf Upgrade BBBsf Class B 7.03% Secured Notes due 2029 XS0108043968 LT BBB+sf Upgrade BB+sf Class B2 Floating Rate Secured Notes Due 2038 XS0222489014 LT BBB+sf Upgrade BB+sf Class D1(N) Floating Rate Secured Notes Due 2035 XS0222489873 LT BB+sf Upgrade B+sf Transaction Summary The transaction is a securitisation of a fixed-rate commercial mortgage loan secured on the Trafford Centre, a super-regional shopping centre in the north-west of England, four miles west of Manchester city centre. The long-dated loan financing is tranched into three series, with a combination of bullet and scheduled amortisation arranged non-sequentially and mirrored by the CMBS. The issuer has a liquidity facility to cover interest and some principal obligations across the capital structure. The class A3, B2 and D1(N) notes are floating rate, swapped at the issuer level. KEY RATING DRIVERS Improving Asset Performance: The Trafford Centre's asset performance has shown marked improvement over the past year, aligning with trends observed in other prime UK shopping centres. As of 1H24, the reported vacancy rate stood at 8%, with both footfall and turnover increasing since early 2024. Contracted income rose to GBP70.1 million by 31 December 2024, with turnover rents comprising 16.7% of the total rental income. Additionally, non-recoverable costs have decreased as energy prices have normalised following last year's spike and occupancy at the centre has improved, reducing service charge deficits to approximately GBP900,000 for 2024 (from GBP3.2 million in 2023). Consequently, net income from the centre increased to GBP59.0 million in 2024, up from GBP47.4 million in 2023. Reduced Reliance on Liquidity: The repayment of the class B3 and D3 notes in April 2024 has lowered total debt service, with the centre's net income fully covering debt service for the last two quarters of 2024 (previously the sponsor had been topping up debt service out of pocket). Based on the remaining amortisation profile, modelled income in the 'BBB' rating case is sufficient to avoid liquidity drawings for class A debt service. Consequently, the class A notes are no longer constrained by the rating of the liquidity facility provider, Lloyds Bank Corporate Markets Plc (AA-/Stable/F1+). Amortisation Supports Positive Outlooks: Scheduled amortisation through July 2035 remains under GBP9 million per quarter, which would be fully covered by the centre's latest net operating income performance. The stabilisation of the centre's income and manageable amortisation levels are expected to drive deleveraging over time, supporting the Positive Outlooks on the notes. Prime shopping centre rents and yields have generally stabilised over the past 12 months, with several recent transactions reflecting renewed investor confidence in the sector. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A reduction in property value driven by rising shopping centre yields due to dampened investor demand. The change in model output that would apply with 1pp higher cap rate assumptions produces the following ratings: 'BBBsf' / 'BBBsf' / 'BBsf' / 'BBsf' / 'B-sf' Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Increased occupier demand resulting in higher rents being achieved. The change in model output that would apply with 1pp lower cap rate assumptions produces the following ratings: 'AA-sf' / 'AA-sf' / 'A+sf' / 'A+sf'/ 'A-sf' Key Property Assumptions (weighted by market value) Net estimated rental value: GBP58.6million 'Bsf' cap rate: 8.0% 'Bsf' structural vacancy: 14.0% 'Bsf' rental value decline: 2.0% 'BBsf' cap rate: 8.1% 'BBsf' structural vacancy: 15.0% 'BBsf' rental value decline: 4.0% 'BBBsf' cap rate: 8.3% 'BBBsf' structural vacancy: 17.0% 'BBBsf' rental value decline: 6.0% 'Asf' cap rate: 8.4% 'Asf' structural vacancy: 18.0% 'Asf' rental value decline: 9.3% 'AAsf' cap rate: 8.8% 'AAsf' structural vacancy: 19.0% 'AAsf' rental value decline: 17.2% USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY The Trafford Centre Finance Ltd 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. Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. TY MAWR: Begbies Traynor Named as Administrators ------------------------------------------------ TY Mawr Limited was placed into administration proceedings in in the High Court of Justice Business and Property Courts at Bristol, Court Number: CR-2025-BRS-000014, and Huw Morgan Powell and Katrina Jane Orum of Begbies Traynor (Central) LLP were appointed as administrators on March 4, 2025. TY Mawr operates care homes. Its registered office is at 104 Walter Road, Swansea, SA1 5QF. The joint administrators can be reached at: Huw Morgan Powell Katrina Jane Orum Begbies Traynor (Central) LLP Ground Floor, 16 Columbus Walk Brigantine Place, Cardiff CF10 4BY For further details, contact: Nadine Romanick Tel No: 029 2089 4270 Email: nadine.romanick@btguk.com VIALTO PARTNERS: Fitch Hikes LongTerm IDR to 'CCC+' --------------------------------------------------- Fitch Ratings has downgraded the Long-Term Issuer Default Ratings (IDR) of Galaxy US Opco Inc., CD&R Galaxy Luxembourg Finance S.a.r.l. and CD&R Galaxy UK Intermediate 3 Limited (collectively Vialto Partners) to 'RD' from 'C'. Fitch has subsequently upgraded the IDRs to 'CCC+'. Additionally, Fitch has affirmed Vialto's first-lien term loan at 'CC' with a Recovery Rating of 'RR3' and subsequently upgraded it to 'B-'/'RR3'. The downgrade reflects Fitch's view that Vialto has executed a distressed debt exchange (DDE). The subsequent upgrade reflects the company's new capital structure along with relatively weak but improving profitability and Fitch's expectations of negative (CFO-capex)/ debt in FY25 and to a lesser extent in FY26. Key Rating Drivers DDE Completed: Fitch views Vialto's completed debt restructuring as a DDE because the amendments to its debt significantly reduced the original financing terms and helped the company avoid a probable default. The deal terms included a reduction in principal that Vialto's sponsors fully absorbed, a maturity extension and the introduction of a pay-in-kind (PIK) interest option. The restructuring reduced outstanding debt by approximately $700 million. It included a $550 million debt reduction via a 1L/2L debt for equity exchange and a 1L RCF pay-down of $160 million, funded by the sponsors' $225 million new capital. The agreement with Clayton, Dubilier & Rice (CD&R) and HPS Investment Partners (HPS) made HPS an equity owner, while CD&R retained control. Weak but Improving Profitability: Vialto's cost structure should continue to normalize because the company has implemented cost initiatives and transition costs have fallen. Following its 2022 acquisition from PricewaterhouseCoopers, by CD&R, Vialto Partners experienced a costly and complex separation, leading to weaker-than-expected financial performance due to high stand-up costs, poor business information, a working capital surge, and margin pressures. Neutral to Negative FCF: Fitch expects Vialto's FCF to be neutral to slightly negative over the next 12-24 months due to various costs to increase profitability, one-off expenses and capex. In its base case, Fitch assumes that the company executes its option to pay interest in kind under the amended credit documents. Fitch projects Vialto's cash flow leverage, measured as (CFO-capex) / debt, to be negative in FY25 due to significant transaction and restructuring costs, and slightly negative to neutral in FY26. This level is consistent with business services issuers rated in the 'CCC' category. Stable Revenue Base: Fitch views Vialto's business as highly recurring. It generates most of its revenue from multi-year, cross-border tax services contracts with a client base of more than 2,000 customers across numerous industries (technology, energy, manufacturing, and others). Average tenure of its top 100 clients is 11 years, and there is significant stickiness inherent in the business because annual tax return filling requirements. Limited Scale & Diversification: Vialto lacks scale relative to similar business services peers despite having a strong market presence in its core mobile tax solutions end market. It also has limited business mix diversification, with around 90% of its revenue from workforce tax solutions and immigration-related services (e.g., compliance and consulting services for work permits, visas). Revenue is reasonably geographically diversified, with the largest exposure in the U.S. and Mexico accounting for under 30% of revenue. Solid Market Position: Vialto maintains strong customer retention, and its multi-year contracts offer revenue visibility over time. Workforce tax solutions make up a large portion of the company's revenue and profitability, but it is growing in adjacent areas including immigration services, cross-border payroll/compensation-related services and other HR compliance related services. Vialto has significant market share in its core end market and competes with the Big-4 accounting firms. It also competes with law firms, relocation management companies and other services businesses. Peer Analysis Vialto is a leading provider of tax-related global mobility solutions for corporate employees working across borders and immigration services. The company has a strong global market presence and is one of the leading providers for cross-border corporate tax services. Fitch reviews the issuer versus other business service companies and considers a range of qualitative and financial factors in deriving the rating. Relative to Fitch-rated peers, Vialto is well positioned in terms of its market presence, and stability of its business. However, it has relatively smaller scale and lower margins versus certain Fitch-rated business services peers. Vialto has lower cash flow profile and weaker profitability. The company is meaningfully smaller than most Fitch-rated business services firms. Vialto operates in a niche compared with rated issuers in the accounting industry such as Eisner Advisory Group (B/Stable), which operates in a much larger market with faster growth opportunities through consolidation. Fitch projects, Vialto will operate with neutral to slightly negative FCF at least over the next 18-24 months, which results in higher cash flow leverage when compared with rated business services peers in the 'B' category. Key Assumptions - Annual revenue grows by low to mid-single digits over the rating horizon; - EBITDA margins benefit from incremental flow-through from higher revenue and savings realized from various cost saving initiatives; - Capex around 2% of revenue per year; - Company exercises PIK interest option; - Benchmark interest rates of around 4.5% in fiscal 2025 and 4.0% in FY 2026. Recovery Analysis For entities rated 'B+' and below, where default is closer and recovery prospects are more meaningful to investors, Fitch undertakes a tailored, or bespoke, analysis of recovery upon default for each issuance. The resulting debt instrument rating includes a Recovery Rating on a scale from 'RR1' to 'RR6' and is notched from the IDR accordingly. In this analysis, there are three steps: (i) estimating the distressed enterprise value (EV); (ii) estimating creditor claims; and (iii) distribution of value. Fitch assumes Vialto would emerge from a default scenario under the going concern (GC) approach versus liquidation. Fitch's GC EBITDA is about $100 million. This forecast EBITDA assumes mis-execution and/or revenue loss from some of Vialto's largest customers. An EV multiple of 6.5x EBITDA is applied to the GC EBITDA to calculate a post-reorganization enterprise value. This is in-line with recovery assumptions used for certain other business services companies rated by Fitch. The accounts receivable facility is maintained. Fitch assumes a fully drawn revolver and a 10% administrative claim. The recovery analysis results in a 'B-'/'RR3' issue and Recovery Ratings for the first-lien credit facilities. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Meaningful liquidity deterioration; - Projected sustained negative FCF margins in the low to mid-single digits. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - (CFO-capex)/debt sustained above 0%; - Margin expansion leading to sustained positive FCF margins; - Vialto increases scale and/or further diversifies its mix of services; - EBITDA interest coverage sustained above 1.5x. Liquidity and Debt Structure Vialto's liquidity is primarily supported by availability under its revolver facility as Fitch projects neutral to negative FCF in FY25 and FY26. The company had cash of around $30 million pro forma with the debt restructuring transaction and $160 million available to be drawn under the revolver. Vialto's post transaction financial debt includes approximately $800 million first lien term loan B maturing in 2030, and $40 million drawn on its $200 million first lien secured revolver maturing in 2029. The company executed a revolving accounts receivable financing arrangement of $40 million with an affiliate of the company's ultimate parent of which most of it has been drawn. Fitch treats drawn amounts as debt for ratio calculations. Issuer Profile CD&R Galaxy UK Intermediate 3 Limited (dba Vialto Partners) provides tax-related global mobility solutions, immigration services, and ancillary HR services. Vialto Partners became a new-branded entity in April 2022 after CD&R acquired it from PricewaterhouseCoopers. 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 CD&R Galaxy UK Intermediate 3 Limited has an ESG Relevance Score of '4' for Financial Transparency due to the limited disclosure regarding its financial position and business strategy leading up to the restructuring, which has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Galaxy US Opco Inc. LT IDR RD Downgrade C LT IDR CCC+ Upgrade senior secured LT CC Affirmed RR3 CC senior secured LT B- Upgrade RR3 CD&R Galaxy Luxembourg Finance S.a.r.l. LT IDR RD Downgrade C LT IDR CCC+ Upgrade senior secured LT CC Affirmed RR3 CC senior secured LT B- Upgrade RR3 CD&R Galaxy UK Intermediate 3 Limited LT IDR RD Downgrade C LT IDR CCC+ Upgrade WAGAMAMA (HOLDINGS): S&P Assigns 'B' LongTerm ICR, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings assigned its 'B' long-term issuer credit rating to Wagamama (Holdings) Ltd. and its 'B' issue rating and '3' recovery rating to the GBP330 million senior secured notes with rounded recovery prospects of 55%. S&P said, "The stable outlook reflects our view that Wagamama will likely post top-line growth thanks to positive underlying demand and new site expansion over 2024-2025. Under our base case, in 2025 the group should successfully manage wage inflation, resulting in an adjusted EBITDA margin of approximately 18.5%-19.0%, which would lead to adjusted debt to EBITDA of 5.3x-5.8x. "We assigned Wagamama a 'B' rating based on its debt refinancing and separation from TRG. Wagamama, through Waga BondCo Ltd., has issued GBP330 million in senior secured notes, alongside a multi-currency GBP55 million-equivalent super senior RCF, as part of the refinancing transaction. The new debt will repay Wagamama's intragroup loans, which will ultimately refinance TRG's existing unitranche debt facility, as well as pay down the outstanding RCF and support general corporate purposes. Apollo Global Management acquired TRG in 2023 for a total enterprise value of about GBP700 million and has since split the group into three different businesses. The ultimate parent company, Rock Bidco Ltd, now operates three standalone businesses: Wagamama, TRG (under the concessions and Barburrito banner), and the pubs operations. We understand TRG Holdings has agreed to provide Wagamama with certain services, such as group executive, finance, payroll, risk management, IT, and legal by the concessions/head office division. Our rating assessment underpins our view that Wagamama sits separately from the other entities in the TRG structure, with no cash pooling and no cross-default or guarantees in the capital structure across the entities. Private equity sponsor Apollo will drive financial policy and strategic decisions, which underpins our financial sponsor ownership assessment." Wagamama is a leading U.K. brand in the fast-growing pan-Asian casual dining segment of the full-service restaurant market. According to Euromonitor, chained Asian full-service restaurants in U.K. are expected to grow total units by 2.3% from 2023-2028, higher than the 0.2% growth expected for the entire full-service restaurant sector in the country. Wagamama is a well-established brand in the U.K., with a leading 10.7% market share by value in the chained full-service restaurants segment, according to Euromonitor. S&P said, "We think this position offers the group the opportunity to selectively expand its operations in the U.K. It currently operates 165 sites, alongside eight sites in the U.S., previously through a joint venture and now fully owned, and 54 franchise sites globally. It is one of the few chains that has successfully expanded its site presence by 11% since pre-pandemic levels, with 28 sites opened in the last three years. We expect this prudent expansion to continue at a rate of five to eight sites per year in the U.K." Innovation, a focus on health-conscious consumers, and affordable and accessible pricing enable the group to partly mitigate pressures on discretionary spending. The full-restaurant market is subject to discretionary spending, and as a result, in a relatively high inflationary environment, consumers often reduce their number of restaurant visits. Despite the recent macroeconomic challenges, the group managed to achieve resilient performance, posting a 9.5% increase in revenues in 2023 and an 8% increase in the nine months leading to 2024, mainly driven by prices and some new site openings. S&P said, "We think this is attributable to the group's focus on innovation and menu refreshes as it tries to appeal to a diverse range of consumer preferences, such as vegetarian and vegan options, as well as a diverse demographic, from low-income students to more affluent consumers. We also understand innovating its menu allows the group to quickly adapt prices in response to higher cost inflation. However, we acknowledge the group aims to retain affordable and accessible pricing, meaning there is a limit to further price increases." Wagamama operates with a single brand, predominantly in the highly competitive U.K. market. Despite expectations of robust growth for the pan-Asian casual dining market in the U.K. over the next few years, about 90%-95% of Wagamama's revenues are generated solely in that country, making it vulnerable to potential headwinds. For example, a weaker consumer sentiment, lower discretionary spending, and shifts in demand and preference patterns in the U.K. could quickly harm Wagamama's operational performance. Positively, the group is well-diversified across locations, including shopping centers, central London, and towns throughout the country. Its offerings are complemented by a partnership with Deliveroo, its exclusive delivery provider, which actively promotes the Wagamama brand. This tends to account for about 18%-20% of revenues. Further, Wagamama is constrained by its relatively limited size. Although it is the largest pan-Asian full-service casual dining chain in the U.K., Wagamama is much smaller than some competitors in the broader sector, such as Nando's and Pizza Express, which have 486 and 363 sites in the U.K., respectively. Additionally, being a single brand has limitations--any disruptions, such as supply chains for ingredients or health and safety violations, could have a materially adverse effect on the group. Substitution risk is prevalent since many options in the restaurant sector operate at a similar average spend per cover as Wagamama. Wagamama's top line should grow through its planned site expansion strategy, as well as continuing pricing actions. S&P said, "Given the positive underlying market trends for pan-Asian restaurants, we think the group has some organic growth potential over the next few years, while price adjustments should also compensate for inflationary impacts in the U.K. Our base case also considers Wagamama's ongoing cautious approach to site openings, which should lead to 15 new openings by the end of 2025, compared to 2023 levels, with a balanced distribution between 2024 and 2025. Site expansion is likely to focus on shopping centers and commuter towns in the U.K. since these locations operate at higher margins relative to major towns or in central London. We estimate contributions from new sites will account for 2.0%-3.5% of the group's annual growth rate, totaling about 6.0% in 2024." By 2025, the group should post about GBP540 million-GBP550 million in revenues, a marked increase compared with 2024's growth rate. This will be driven by organic growth and site expansion, along with a 4%-5% contribution from the acquired joint venture business in the U.S. Challenges on profitability will persist due to rising costs, though Wagamama's profitability is forecast to remain steady. In 2025, labor costs are expected to rise by 15% compared with 2024, influenced by new site openings as well as the implementation of U.K. budget announcements. These include an increase in the National Living Wage by 6.7% for employees aged 21 and over, and by 16% for those aged 18 to 20. S&P said, "The government also announced a higher rate of employer Class 1 National Insurance contributions, to 15.0% from 13.8%, along with a lower employer payment threshold, which we expect will weigh on the group's profitability. Furthermore, we anticipate the costs of operating standalone businesses will be included in our profitability measure from 2025, leading to an adjusted EBITDA margin decline to about 19% in 2024, with similar levels expected in 2025 compared to 20.4% in 2023. We think cost pressures in 2025 will be partly mitigated as Wagamama's value creation program is implemented, which has identified areas for cost reduction. Positively, we understand there is no requirement for significant restructuring activities in the business because the majority of its sites are profitable in the U.K., with the ramp-up period for new sites to become profitable being usually less than one year." Expansion plans will weigh on Wagamama's FOCF generation after lease payments. S&P said, "As a result of the planned growth strategy, we expect to see lease payments increase gradually. However, we do expect Wagamama will be able to generate positive adjusted FOCF after lease payments of about GBP10 million-GBP20 million in 2025. Alongside the higher lease impact, we expect free cash flow generation will be constrained by continued capital expenditure (capex) requirements to enact the expansion plans, estimated at about 5%-6% of sales, split fairly evenly between growth capex and maintenance capex. Working capital impacts may slightly support free cash flow, with inflows in the range of GBP5 million-GBP10 million expected in 2025. Wagamama operates a structurally negative working capital profile characterized by high inventory turnover, which supports our forecast. In 2022-2023, adjusted working capital saw outflows of GBP10 million-GBP27 million, though we note these figures are influenced by intercompany payables and receivables with TRG since cash sweeps occur daily back to the group. As a result of the separation and refinancing, we anticipate these balances will be eliminated." EBITDA expansion supports a gradual deleveraging to 5.3x-5.8x in 2025. S&P said, "Post-separation, we expect adjusted gross debt to be about GBP570 million, comprising the GBP330 million senior secured notes and lease liabilities of about GBP240 million from GBP220 million in 2024. By the end of 2025, we assume the GBP55 million RCF will remain undrawn and that there will be no debt at Rock Bidco Ltd, and no shareholder loans or other preferred equity instruments at or above Wagamama's parent company. We also consider our adjusted EBITDAR interest coverage ratio, projected to be about 1.5x-1.8x in 2025, to be consistent with our 'B' rating assessment." S&P said, "Following a corporate reorganization, we understand Wagamama will operate as a standalone entity relative to the rest of the group. As part of the reorganization, Wagamama, the concessions, and the pubs businesses of TRG have been divided into three separate silos under Rock BidCo, each operating independently. Wagamama will have a services agreement with TRG for the provision of certain services by TRG Holdings. Additionally, a recharge agreement will ensure that the benefits of specific third-party agreements entered into by TRG and/or TRG Holdings are passed on to the group on an arm's-length basis. "The stable outlook reflects our view that Wagamama will likely post top-line growth thanks to positive underlying demand and new site expansion over 2024-2025. Under our base case, in 2025 the group should successfully manage wage inflation, resulting in an adjusted EBITDA margin of approximately 18.5%-19.0%, which would lead to adjusted debt to EBITDA of 5.3x-5.8x. "We could lower the ratings if we observe a deterioration in operating performance due to an adverse shift in consumer demand in U.K., if the group is unable to successfully pass through cost increases, or if we view ineffective working capital management. A negative rating action could also occur if we observe S&P Global Ratings-adjusted leverage increasing due to a significant acceleration in the expansion plan or a more aggressive financial policy regarding shareholder remuneration." Under these scenarios S&P would see deteriorations in credit metrics, such as: -- Adjusted debt to EBITDA increasing above 6.5x; -- FOCF after lease payments becomes sustainably negative; and -- Pressures on the liquidity profile. S&P could raise the ratings on Wagamama if improved operating performance leads to adjusted debt to EBITDA consistently falling well below 5x, with FOCF after leases being sustainably and materially positive. It would also depend on the group's financial policy aligning with a higher rating level, without expectations of significant spikes in leverage, possibly to fund expansion or shareholder distributions. ********* 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 2025. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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