/raid1/www/Hosts/bankrupt/TCREUR_Public/250415.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
Tuesday, April 15, 2025, Vol. 26, No. 75
Headlines
F R A N C E
DIOT - SIACI: Fitch Affirms 'B' Long-Term IDR, Outlook Stable
EDUCATION GROUP: Moody's Affirms 'B2' CFR, Alters Outlook to Neg.
G E O R G I A
CREDO BANK: Fitch Affirms 'B' LT IDR, Alters Outlook to Positive
LIBERTY BANK: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable
TERABANK JSC: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable
I R E L A N D
BAIN CAPITAL 2025-1: Fitch Assigns B-(EXP)sf Rating to Cl. F Notes
BLACKROCK EUROPEAN II: Moody's Cuts Rating on Cl. F-R Notes to Caa1
RAVENSDALE PARK: Fitch Assigns 'B-sf' Final Rating to Class F Notes
I T A L Y
BANCA IFIS: Fitch Affirms 'BB+' Long-Term IDR, Outlook Stable
ILLIMITY BANK: Fitch Puts 'BB-' Long-Term IDR on Watch Positive
N E T H E R L A N D S
DARLING GLOBAL: Fitch Affirms BB+ LongTerm IDR, Outlook Stable
S P A I N
TDA CAM 9: Moody's Hikes Rating on EUR48MM Class B Notes from Ba1
S W E D E N
STRAX AB: Files For Bankruptcy in Stockholm District Court
T U R K E Y
TURK P&I: Fitch Affirms 'BB-' IFS Rating, Outlook Stable
U N I T E D K I N G D O M
CONVATEC GROUP: Moody's Affirms 'Ba1' CFR, Alters Outlook to Pos.
JACKSON JACKPOT: Begbies Traynor Named as Administrators
MCLAREN HOLDINGS: Fitch Affirms Then Withdraws 'CCC+' Long-Term IDR
SAVOY ESTATES: RSM UK Named as Joint Administrators
STEPHENSON HOTEL: PwC Named as Joint Administrators
UKS DISTRIBUTION: RSM UK Named as Administrators
VERY GROUP: Fitch Hikes Long-Term IDR to 'B-', Outlook Negative
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F R A N C E
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DIOT - SIACI: Fitch Affirms 'B' Long-Term IDR, Outlook Stable
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Fitch Ratings has affirmed Diot - Siaci TopCo SAS's (Diot - Siaci)
Long-Term Issuer Default Rating (IDR) at 'B' with a Stable Outlook.
It has also upgraded Acropole Holding SAS's term loan B rating to
'B+' from 'B'. The Recovery Rating has been revised to 'RR3' from
RR4'.
The IDR reflects its expectations that Diot - Siaci will remain
within its leverage sensitivities for a 'B' rating, supported by
continued organic growth and strategic M&As. Fitch estimates
Fitch-defined EBITDA leverage to have increased to 7.1x in 2024
(6.0x pro-forma for acquisitions), before it declines to 6.5x in
2025, as EBITDA growth is offset by further debt-funded
acquisitions and buyouts of minority interests. Fitch believes the
company will remain opportunistic with debt-funded M&A, as it seeks
to build scale and the breadth of its capabilities. Fitch considers
leverage metrics on a reported and pro-forma basis.
Key Rating Drivers
Debt Funded Acquisitions Drive Leverage: Fitch estimates reported
Fitch-defined EBITDA leverage to have risen to 7.1x (pro-forma
6.0x) in 2024, from 6.7x (pro-forma 6.2x) in 2023, as debt raised
to fund M&A, such as Nasco and Oasys, and acquire minority
interests offset EBITDA growth. Fitch includes an estimated EUR159
million committed for the buyout of minority interests in
Fitch-defined debt for 2024, down from EUR232 million in 2023.
Fitch forecasts leverage in 2025 at 6.5x (pro-forma 6.3x),
including its assumptions for further debt-funded M&A. However,
Fitch expects leverage to remain within 5.5x-7.0x sensitivities on
a pro-forma basis. Diot-Siaci is owned by a combination of
strategic and financial investors. Despite the long-term investment
approach of some consortium members, Fitch expects its
opportunistic attitude towards M&A to prevail.
Solid Organic Growth, Stable Margin: Organic revenue growth was
close to 6% in 2024, driven by market share gains, notably in the
middle market in property and casualty (P&C). Additional coverage
for clients, sometimes required by regulators, increasing premiums
due to inflation and higher war risk, as well as the development of
new products also contributed to growth. The company has been
expanding revenue faster than the market and Fitch expects it to
continue growing at mid-single digits to 2028. Including M&A, Fitch
expects revenue to rise at an average of 9.4% for 2026-2028. Fitch
expects a Fitch-defined EBITDA margin of 25.6% in 2025, down from
26.7% in 2024, and remaining at 26%-27% for 2025-2028.
Stable FCF, Improving Interest Coverage: Fitch forecasts that
Fitch-defined free cash flow (FCF) margin will remain stable, at
low single-digits, across 2025-2028, supported by earnings growth.
Diot-Siaci benefits from highly recurring revenues and stable
EBITDA margins for most of its business lines, but these are offset
by cash interest payments and IT investments. Fitch also expects
non-recurring cash outflows associated with restructuring and
transformation activities to weigh on near-term cash generation.
Due to hedging for 89% of its term loan B in 2025 and 70% in 2026,
Fitch anticipates EBITDA interest coverage to average 3.1x between
2025 and 2028, up from 2.8x in 2024.
Improved Diversification and Scale: Following the acquisition of
Nasco, Fitch anticipates Diot-Siaci to generate 53% of its revenues
in France, down from 68% in 2022. Diversification is likely to
continue as it targets acquisitions of complementary business
lines, such as consulting and reinsurance, and entry into markets
with higher growth potential, such as the Middle East. In their
first full year of trading, Fitch expects Nasco and Oasys to
generate a combined EBITDA of around EUR50 million. Oasys is likely
to be dilutive to the overall EBITDA margin, given its lower-margin
consulting activities, but it should improve the breadth of
services under its health & protection/pension & savings division.
Resilient Business Model: Insurance brokers have demonstrated their
resilience to shocks, such as the Covid-19 pandemic. Economic
challenges stemming from the trade war among countries where
Diot-Siaci operates could affect its customers, notably in the
shipping industry, while the property & casualty and international
private medical insurance (IPMI) lines should be more insulated,
thus leading to a limited impact on the company from slower growth.
In contrast, brokers like Diot-Siaci may benefit from an
environment where risk increases the need for tailored insurance
cover.
Underperforming Lines, Execution Risk: Diot-Siaci faced unexpected
costs on one large IPMI contract due to significantly higher
volumes than anticipated, while the acquisition of Urios generated
immaterial losses due to an unforeseen exposure to credit risk. The
IPMI contract became profitable after Diot-Siaci renegotiated it in
December 2024 and settled all overdue payments in January 2025.
However, this highlight the execution risk in acquisitions and from
expansion in new territories.
Neutral Outlook in French Market: Diot-Siaci mainly intermediates
risks in certain B2B niches of the French corporate insurance
market. Fitch sees low disintermediation risks in France, with
brokers adding value in specialised insurance. In non-life, Fitch
expects improving profitability, driven by reinvestment income,
better pricing and underwriting actions to mitigate claims
inflation. Fitch expects profitability in health and life to remain
under pressure from muted premiums income growth and regulatory and
demographic changes.
Peer Analysis
Diot - Siaci is slightly larger than Andromeda Investissements SAS
(April). However, its B2B business model contrasts with April's
more diversified consumer-oriented proposition. April's offering is
aimed at retail clients, mainly in health and protection. April
also benefits from a larger distribution platform.
UK-based Ardonagh Midco 2 Ltd (B-/Positive) has greater scale and
broader geographical diversification, as it relies on its home
country for only 24% of its revenues, while Diot - Siaci has close
to 53% of its activity concentrated in France. However, Ardonagh
maintains a higher leverage profile driven by debt-funded
acquisitions. Both Diot - Siaci and Ardonagh have made considerable
acquisitions and expanded to new countries in recent years. This
has led to Ardonagh's weaker credit metrics than Diot - Siaci's. In
both cases, margin improvements through cost savings and revenue
enhancement are key to supporting operating performance and
deleveraging.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue growth of 9.1% in 2024 and CAGR of 13.8% across
2024-2028, including M&A.
- Fitch-defined EBITDA margin of 26% for 2024-2028.
- Minority dividends to average EUR16 million a year in 2025-2028.
- Working capital outflow at 2% of revenue across 2024-2028.
- Capex at 6.4% of revenue across 2024-2028.
- Bolt-on M&A and minority and annual earnout payments totalling
EUR250 million per year between 2025 and 2028, down from EUR365
million in 2024. Bolt-on M&A from 2025 at a conservative valuation
of 11x EBITDA.
- Minority debt, which is included in Fitch-defined debt, to fall
by EUR73 million in 2025.
Recovery Analysis
The recovery analysis assumes that Diot -Siaci would be reorganised
rather than liquidated in a bankruptcy and remain a going concern
in restructuring. This is because most of the value it has hinges
on its brand, client portfolio and the goodwill of its
relationships. Fitch have assumed a 10% administrative claim in the
recovery analysis.
A restructuring may arise from structural market changes in France
and abroad, including declines in the technical profitability of
some business lines for insurers. This may affect commission
pricing, jeopardising Diot-Siaci's profitability.
Post-restructuring, it may be acquired by a larger company that can
transition its clients to an existing platform, or see the
discontinuation of certain business lines, reducing scale. Its
analysis assumes a going concern EBITDA of EUR200 million,
increased from EUR165 million in its last review. This GC EBITDA
assumes corrective measures have been taken. Fitch uses an
enterprise value multiple of 5.5x to calculate a post-restructuring
valuation.
Its waterfall analysis generated a ranked recovery in the 'RR3'
band, after deducting 10% for administrative claims, indicating a
'B+'/'RR3' instrument rating for senior secured debt: Fitch
included Diot-Siaci's EUR53 million super senior ranking local
facilities that are mainly borrowed within the restricted group,
according to management. Fitch also considered a fully drawn
EUR231.5 million revolving credit facility (RCF).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Poor delivery of synergies and additional debt-funded
acquisitions, resulting in EBITDA leverage above 7.0x on a
sustained basis.
- EBITDA interest coverage below 2.5x.
- EBITDA margin declining towards 20%, due to stiff competition or
more difficult operating conditions, including the slow integration
of acquired companies.
- Sustained neutral-to-volatile FCF margin
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA leverage consistently below 5.5x.
- EBITDA interest coverage trending to or above 3.5x.
- EBITDA margins at 25% or higher through the cycle.
- Successful integration and delivery of synergies, in line with
management's plan, leading to improvements in leverage and
profitability, including FCF margins at 5% or higher.
Liquidity and Debt Structure
At end-2024, Diot Siaci had EUR190 million of cash available and
EUR231.5 million of its RCF, after a EUR35 million drawn down. The
draw down was fully repaid in January 2025 and the RCF is fully
available. Fitch expects cash on balance sheet to remain around
EUR200 million, as liquidity will be supported by improving FCF and
regular debt add-ons. Refinancing risk is manageable, due to
improving performance and underlying deleveraging capacity, and
falling interest rates. Diot-Siaci's TLB matures in 2028.
Issuer Profile
Diot - Siaci is a leading medium-sized independent French B2B
insurance brokerage group active in health, protection,
international mobility, marine and P&C. While close to half of its
revenues are still generated in France, it has exposure to
international markets.
Summary of Financial Adjustments
Fitch includes liabilities created from the commitment to buy out
minority interest stakes for existing acquisitions in Fitch-defined
gross debt.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
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Acropole Holding SAS
senior secured LT B+ Upgrade RR3 B
DIOT-SIACI BidCo SAS
senior secured LT B+ Upgrade RR3 B
DIOT - SIACI TopCo SAS LT IDR B Affirmed B
EDUCATION GROUP: Moody's Affirms 'B2' CFR, Alters Outlook to Neg.
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Moody's Ratings has changed to negative from stable the outlook of
The Education Group SAS (Grandir), a France-based international
provider of childcare and early education. Concurrently, Moody's
have affirmed the company's B2 long term corporate family rating,
the B2-PD probability of default rating and the B2 ratings on the
EUR525 million senior secured term loan B (TLB) due September 2028
and the EUR90 million senior secured revolving credit facility
(RCF) due March 2028, both borrowed by Grandir.
"The outlook change to negative reflects the company's
deteriorating key credit metrics due to its debt funded inorganic
growth strategy, weak free cash flow generation, and structural
staffing challenges in the French market, resulting in weaker than
expected operating performance," says Víctor García Capdevila, a
Moody's Ratings Vice President-Senior Analyst and lead analyst for
Grandir.
RATINGS RATIONALE
The rating action reflects the deterioration in the company's key
credit metrics over the past 12 months and Moody's expectations of
further deterioration over the next 12-18 months to weak levels for
the current B2 rating. A combination of debt funded inorganic
growth and weaker than expected operating performance amid
structural staffing challenges in France, resulted in a
deterioration of the company's key credit metrics.
Grandir's Moody's-adjusted gross leverage, before lease
adjustments, increased to 5.9x in 2024 on a pro-forma basis for
acquisitions, up from 5.2x in 2023. Interest coverage, measured as
EBITA over interest expense, decreased to 1.4x in 2024 from 1.5x in
2023. Moody's base case scenario for 2025 and 2026 anticipates
further deterioration in these metrics to 6.4x and 6.7x and 1.2x
and 1.1x, respectively.
In 2024, Grandir closed 10 deals in the UK and the US, adding 20
new sites and approximately 200 seats. These acquisitions
contributed around EUR28 million in revenue and EUR6 million in
EBITDA to the group. The acquisitions were funded through drawings
under the revolving credit facility (RCF). In March 2025, the
company raised EUR50 million through a fungible add-on to the
existing TLB to repay outstanding debt under the RCF. Moody's base
case scenario assumes that in both 2025 and 2026, the company will
utilize its RCF, ranging from EUR40 million to EUR45 million each
year, to support its inorganic growth strategy.
Grandir's operating performance in 2024 was slightly below Moody's
expectations: although revenue reached EUR824 million, 1.0% more
than Moody's base case scenario of EUR816 million, EBITDA
underperformed Moody's base case by 4.9%, delivering EUR175 million
compared with Moody's expectations of EUR184 million.
This underperformance was mainly driven by the French market, where
the company recorded an EBITDA reduction of 8% to EUR47 million
from EUR51 million a year earlier, despite revenue growth of 4.4%
to EUR476 million. This was due to lower occupancy rates and higher
use of temporary personnel caused by ongoing staffing challenges.
On the other hand, the international segment recorded a solid
operating performance with year-on-year organic revenue growth of
12% to EUR320 million. Including M&A contributions, total revenue
reached EUR348 million (2023: EUR286 million). Like-for-like
EBITDA grew by 24% to EUR43 million, and including M&A, total
EBITDA was EUR48 million. However, this was not enough to fully
offset the weakness in the French market. Overall, Moody's-adjusted
EBITDA margin decreased to 21.3% in 2024 from 22.7% in 2023.
Moody's base case scenario for 2025 anticipates revenue growth of
7%, reaching approximately EUR880 million driven by strong growth
in the international markets partially offset by weak French
operations. Moody's forecasts an increase in Moody's-adjusted
EBITDA of about 2%, reaching EUR180 million in 2025.
Grandir's rating reflects the robust industry dynamics within the
childcare and early education segment; the company's solid business
model with revenue visibility from long-term contracts with
companies and municipalities; a favorable regulatory environment in
France; increased international diversification; and limited
customer concentration.
The rating also factors in the company's high leverage and weak
interest coverage metrics; the risk of adverse regulatory changes,
particularly in France; lower profitability margins compared to
peers; pricing pressures in the highly competitive B2B segment;
execution risks associated with its rapid and ambitious growth
strategy (both organic and inorganic); and limited free cash flow
(FCF) generation.
LIQUIDITY
Grandir has adequate liquidity. As of December 2024, the company
had a cash balance of EUR53 million and EUR37 million available
under its EUR90 million committed RCF. The RCF is subject to a
consolidated senior secured net leverage springing covenant of 9.1x
when drawings exceed 40%.
Moody's base case scenario assumes adequate capacity under this
covenant over the next 12-18 months. Moody's forecasts a slightly
negative free cash flow generation of approximately EUR5 million in
2025 and EUR6 million in 2026. The company has a long-dated debt
maturity profile, with the RCF maturing in March 2028 and the TLB
in September 2028.
STRUCTURAL CONSIDERATIONS
Grandir's probability of default rating of B2-PD reflects the use
of an expected family recovery rate of 50%, as is consistent with
all first-lien covenant-lite capital structures.
The EUR525 million TLB and the EUR90 million RCF are rated B2, in
line with the company's CFR. All facilities are guaranteed by the
company's subsidiaries and benefit from a guarantor coverage of not
less than 80% of the group's consolidated EBITDA. The security
package includes shares, bank accounts and intercompany receivables
of material subsidiaries.
The shareholder loan provided by InfraVia Capital Partners
(InfraVia) and due after the final debt maturity of the TLB is
treated as equity under Moody's methodologies.
RATIONALE FOR NEGATIVE OUTLOOK
The negative outlook reflects the company's weakening key credit
metrics due to its debt funded inorganic growth strategy and
operating underperformance in the French market amid structural
staffing challenges.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the weak credit metrics, upward pressure on the rating in the
next 12-18 months is unlikely but could develop if Grandir's
Moody's-adjusted gross debt/EBITDA declines below 4.5x before lease
adjustments or 3.5x after lease adjustments, and the company
demonstrates a track record of generating significant positive FCF,
leading to FCF/debt of more than 10%.
Downward pressure on the rating could arise if Grandir's earnings
deteriorate or the company engages in further debt-financed
acquisitions, causing Moody's-adjusted gross debt/EBITDA to remain
above 6.0x on a sustained basis before lease adjustments or 4.5x
after lease adjustments. Additionally, a lack of material
strengthening in the interest coverage metrics, failure to generate
positive free cash flow, or a deterioration in the company's
liquidity profile could also contribute to downward pressure.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
The Education Group SAS (Grandir) is a leading international
provider of childcare and early education for infants and children
under the age of six years, with around 47,000 seats and 1,100
nurseries in six countries. In 2024, the group had operations in
France (58% of revenue), Canada (15%), the UK (13%), the US (9%),
Germany (5%).
The business model is predominantly focused on business-to-consumer
(B2C) (49% of revenue in 2024), B2B (32%) and B2G (19%). In 2024,
the group reported revenue of EUR824 million and Moody's-adjusted
EBITDA of EUR175 million (before lease adjustments).
Grandir is owned by funds managed by InfraVia Capital Partners
(InfraVia, 61%), Sodexo SA (20%), the founder and CEO (18%), and
the management team (1%).
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G E O R G I A
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CREDO BANK: Fitch Affirms 'B' LT IDR, Alters Outlook to Positive
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Fitch Ratings has revised JSC Credo Bank's (Credo) Outlook to
Positive from Stable, while affirming the Long-Term Issuer Default
Rating (IDR) at 'B'. The Viability Rating (VR) has been affirmed at
'b'.
The revision of the Outlook reflects the continued strengthening of
the bank's business profile, highlighted by franchise growth and
incremental improvements in financial metrics, particularly
profitability, over the past two to three years. These positive
trends are supported by strong economic growth in Georgia and
stable customer and investor confidence, despite recent political
unrest.
Key Rating Drivers
Credo's IDR is driven by its standalone profile, as captured by its
VR. The ratings reflect the bank's focus on volatile and mostly
unsecured micro lending, a high reliance on wholesale funding and
only moderate solvency metrics, which are offset by good asset
quality metrics and an absence of capital encumbrance. The VR also
considers the bank's low impaired loans ratio relative to that of
local peers and its healthy profitability. The VR is below the
implied VR of 'b+' due to its business profile.
Banks Resilient to Political Unrest: Increased political tensions
in Georgia, marked by large protests since 2024, have not
materially affected customer confidence or the performance of the
banking system. Banks may be vulnerable if the political crisis
becomes protracted and undermines investor confidence, exerting
pressure on the country's external liquidity and the exchange rate.
This is due to the country's high dollarisation (43% of sector
loans at end-2024) and a considerable reliance on external
borrowings (15%-20% of sector liabilities).
Focus on Micro and Retail: Credo is a medium-sized Georgian bank,
with a 4% share of the sector's loans at end-2024. The bank's
business activities focus on unsecured micro and retail lending.
Credo obtained a banking licence in 2017 after operating as a
microfinance organisation for 10 years. This has enabled it to
develop a deposits franchise, which, however, remains limited at 2%
of the sector's customer accounts at end-2024.
Low Dollarisation, Mainly Unsecured Lending: Balance-sheet
dollarisation is low compared with most Georgian peers. At
end-2024, 10% of the bank's gross loans were denominated in foreign
currencies versus the sector average of 43%. These foreign
currency-denominated loans were mostly attributable to the SME
segment, which makes up about a third of the bank's gross loans.
Unsecured loans, which account for half of the bank's gross loans,
are mainly in the micro lending and retail subsectors.
High Write-Offs, Strong Reserves Coverage: Impaired loans remained
at 0.8% of the bank's gross loans at end-2024, below the sector
average of 2.9%. The low share of impaired loans is driven by
sizeable write-offs, amounting to 3% of average gross loans in 2024
(2023: 4%). Coverage of impaired loans by total loan loss
allowances was high, at 2.6x at end-2024.
Improved Performance: Credo's high-yield lending, with a yield of
23% in 2024, translates into a wide net interest margin (2024:
13%). However, operating performance is weighed down by high
operational costs, due to its labour-intensive business model and a
high cost of risk (3% of average loans in 2024). Operating
profitability improved to 3.2% of risk-weighted assets (RWAs) in
2024 (2023: 2.3%), due mainly to the lower cost of funding and
improved scale efficiency.
Below-Average Capital Buffer: The bank's common equity Tier 1
(CET1) and Tier 1 capital ratios were both 13.3% at end-2024, which
are below those of peers and should be viewed in light of the
bank's inherently high-risk micro lending. Headroom above the Tier
1 minimum requirement was a limited 47bp. However, it is supported
by reasonable internal capital generation in the absence of
dividend distribution.
Wholesale Funding, Good Refinancing Record: Borrowings from
international financial institutions (IFIs) were a large 46% of
liabilities at end-2024. Liquid assets (11% of total assets)
covered 73% of repayments scheduled within the next 12 months,
which is low, compared with that of peers. However, risks are
mitigated by a good record of external funding refinancing and a
rapidly expanding customer deposit base (2024: 42% growth). The
loans/deposits ratio (end-2024: 210%) is one of the highest in the
sector, but Fitch expects it to continue to decline gradually.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch will likely revise the Outlook to Stable if the bank's
capitalisation materially weakens from considerable asset-quality
deterioration that leads to losses for several consecutive
quarters. A depletion of the liquidity buffer from a sharp
deterioration of customer and investor confidence could also be
credit-negative.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
An upgrade of the ratings would require a stronger business
profile, which could be justified by a longer record of strong
profitability that is in line with the recent annual results and a
material improvement in the deposit franchise. A strengthening of
capitalisation with a CET1 ratio closer to 15% would also be
credit-positive.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The Government Support Rating of 'ns' (no support) reflects its
view that resolution legislation in Georgia, combined with the
authorities' constrained ability to provide support — especially
in foreign currencies — means that government support, although
possible, cannot be relied on. Fitch believes that extraordinary
support from Credo's shareholders (IFIs), in times of systemic
stress in the country, cannot be relied on.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Fitch sees limited upside for the GSR, unless the sovereign's
financial flexibility improves substantially, coupled with an
extended record of timely and sufficient capital support for local
banks.
VR ADJUSTMENTS
The asset quality score of 'b+' is below the implied score of 'bb'
due to the following adjustment: impaired loan formation
(negative).
The capitalisation and leverage score of 'b' is below the implied
score of 'bb' due to the following adjustments: business model and
risk profile (negative).
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 Prior
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JSC Credo Bank LT IDR B Affirmed B
ST IDR B Affirmed B
Viability b Affirmed b
Government Support ns Affirmed ns
LIBERTY BANK: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable
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Fitch Ratings has affirmed Georgia-based JSC Liberty Bank's (LB)
Long-Term Issuer Default Rating (IDR) at 'B+' with a Stable Outlook
and Viability Rating (VR) at 'b+'.
Key Rating Drivers
LB's Long-Term IDR is driven by the bank's standalone profile, as
captured by its 'b+' VR, which reflects the bank's good asset
quality, strong profitability and reasonable funding profile. This
is counterbalanced by LB's modest franchise in the concentrated
Georgian banking sector, which results in limited pricing power
compared with larger peers, and only moderate capitalisation.
Banks Resilient to Political Unrest: Increased political tensions
in Georgia, marked by large protests since 2024, have not
materially affected customer confidence or the performance of the
banking system to date. Banks could be vulnerable in a stress
scenario if the political crisis becomes protracted and undermines
investor confidence, exerting pressure on the country's external
liquidity and the exchange rate. This is due to high dollarisation
(43% of sector loans at end-2024), and considerable reliance on
external borrowings (15%-20% of sector liabilities).
Modest Franchise, Good Retail Footprint: LB is the third-largest
bank in Georgia, accounting for 5% of loans and deposits in the
concentrated local banking sector at end-2024. Despite recent
efforts to develop SME lending, LB remains primarily focused on
retail lending. Its branch network is the largest in the country as
the bank has long been the government's exclusive agent for
distributing state pensions and other welfare payments.
Below-Sector Dollarisation, Moderated Growth: Thanks to a high
exposure to retail, LB has one of the lowest loan dollarisation
levels among Fitch-rated Georgian banks (25% at end-2024, compared
with the sector average of 44%). Gross loans grew by 23% in 2024
(2023: 17%), which is moderately above the sector average (18%).
Fitch expects loan growth to moderate at 10%-15% in 2025-2026.
Stable Loan Quality: The impaired (Stage 3) loans ratio continued
to reduce in 2024, reaching a low 3.6% at end-2024 (end-2023:
4.1%). Problem exposures were fully covered by total loan loss
allowances. Fitch expects LB to maintain stable asset quality over
2025-2026 on the back of a favourable economic environment and
reasonably conservative underwriting standards.
Improved Performance: LB's profitability has materially improved in
recent years, due to better operating efficiency, stronger
non-interest income generation and a limited cost of risk. Fitch
forecasts the bank will maintain healthy profitability over the
next two years, with the operating profit/risk-weighted assets
ratio exceeding 3% in 2025-2026 in its baseline scenario.
Adequate Capitalisation: LB's regulatory CET1 ratio was 13.8% at
end-2024 (end-2023: 13.2%), comfortably above the prudential
minimum of 10.9%. Fitch expects the bank's capital ratios to
gradually increase on continued internal capital accretion and full
profit retention, while LB has also recently issued USD25 million
subordinated bonds to bolster its Tier 2 capital.
Mainly Customer Funded: LB is primarily funded by customer deposits
(75% total liabilities at end-2024), mostly from retail depositors.
Wholesale debt is limited and mostly comprises short-term
borrowings from the National Bank of Georgia. Fitch assesses the
bank's liquidity position as reasonable, with total liquid assets
covering about 30% of total deposits at end-2024.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
LB's IDR and VR could be downgraded on a material weakening of
asset quality, resulting in sustained poor performance. Weaker
capitalisation, for example, due to rapid credit growth or large
dividend payments, could also result in a downgrade.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Any positive action on LB's ratings would primarily require a
revision of the Outlook on Georgia's sovereign rating to Stable and
an improvement in the operating environment for domestic banks.
This should be coupled with an extended record of maintaining
stable asset quality and healthy performance so that the CET1 ratio
exceeds 15% on a sustained basis.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The Government Support Rating (GSR) of 'ns' (no support) reflects
its view that resolution legislation in Georgia, combined with a
constrained ability by authorities to provide support - especially
in foreign currency - means that government support, although still
possible, cannot be relied upon.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
There is limited positive rating potential for the GSR. It would
require a substantial improvement of sovereign financial
flexibility, as well as an extended record of timely and sufficient
capital support being provided to local banks.
VR ADJUSTMENTS
The asset quality score of 'b+' is below the implied score of 'bb'
due to following adjustment reason: underwriting standards and
growth (negative).
The capitalisation and leverage score of 'b+' is below the implied
score of 'bb' due to following adjustment reason: regulatory
capitalisation (negative).
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 Prior
----------- ------ -----
JSC Liberty Bank LT IDR B+ Affirmed B+
ST IDR B Affirmed B
Viability b+ Affirmed b+
Government Support ns Affirmed ns
TERABANK JSC: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable
--------------------------------------------------------------
Fitch Rating has affirmed JSC Terabank's (Tera) Long-Term Issuer
Default Rating (IDR) at 'B+' and its Viability Rating (VR) at 'b+'.
The Outlook is Stable.
Key Rating Drivers
Tera's IDR is driven by its standalone profile, as captured by its
VR. The VR reflects the bank's highly dollarised balance sheet and
narrow franchise in SME and microlending, which are balanced by
reasonable financial metrics and adequate capital buffers.
Banks Resilient to Political Unrest: Increased political tensions
in Georgia, marked by large protests since 2024, have not
materially affected customer confidence or the performance of the
banking system. Banks may be vulnerable if the political crisis
becomes protracted and undermines investor confidence, exerting
pressure on the country's external liquidity and the exchange rate.
This is due to the country's high dollarisation (43% of sector
loans at end-2024) and its considerable reliance on external
borrowings (15%-20% of sector liabilities).
Small Size, Niche Franchise: Tera is focussed on lending to SMEs,
micro enterprises and retail borrowers. Its franchise and pricing
power are limited, translating into a small 2.3% share in the
concentrated Georgian banking sector at end-2024. Its market share
in the niche SME and microlending was higher at 5.5%.
Focus on Higher-Risk SMEs: SME loans and microlending, which Tera
views as a strategic growth area, represented 67% of gross loans at
end-2024. Dollarisation is high (end-2024: 46%), although broadly
in line with the sector average.
Reasonable Asset Quality Metrics: Impaired loans (Stage 3 loans
under IFRS 9) increased to 4% of gross loans at end-2024 (end-2023:
3%), while the Stage 2 ratio remained broadly stable, at 5%.
Impaired loans were moderately covered by loan-loss allowances at
55%. Fitch expects asset quality to remain broadly stable in 2025
and 2026.
Moderate Profitability: Operating profit slightly decreased to 2.3%
of risk-weighted assets in 2024 (2023: 2.5%), as broadly stable net
interest margins and a cost/income ratio of 54% were offset by
slightly higher loan impairment charges. Fitch expects operating
profit to risk-weighted assets to remain moderate at 2%-2.5% in
2025 and 2026 due to continued, although contained, provisioning
needs with loan impairment charges at below 0.5% of average gross
loans.
Healthy Capitalisation: Tera's common equity Tier 1 (CET1) capital
ratio was flat, at 16%, at end-2024, as risk-weighted assets
expansion kept pace with internal capital generation. Fitch expects
the bank's capital ratios to decrease slightly due to planned
dividend distribution in 2025-2026.
Concentrated Funding: Tera is primarily funded by customer deposits
(end-2024: 71% of liabilities), of which a material 49% was in
foreign currencies. This amplifies foreign currency liquidity risk,
particularly given the bank's high depositor concentration, with
its 20 largest depositors accounting for 45% of customer accounts
at end-2024. Refinancing risk is manageable, given sufficient
liquidity coverage of upcoming wholesale funding maturities and
ample liquid assets, which were equal to 18% of assets or 29% of
customer accounts at end-2024.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Tera's ratings are primarily sensitive to a material deterioration
in the operating environment or a severe setback to the economic
outlook. The ratings could be downgraded on a sharp deterioration
of asset quality leading to weak performance. The VR could also be
downgraded due to an erosion of capital buffers to below 100bp over
regulatory minimums, or a large increase in capital encumbrance by
unreserved impaired loans.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
An upgrade of Tera's ratings would require a considerably stronger,
more diversified franchise and a lower risk appetite, for instance
reduced dollarisation of the loan book and a lower exposure to
cyclical sectors. This should be combined with a CET1 ratio above
15% and healthy operating profit, both on a sustained basis.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The Government Support Rating of 'ns' (no support) reflects its
view that resolution legislation in Georgia, combined with the
authorities' constrained ability to provide support — especially
in foreign currencies — means that support, while possible,
cannot be relied on.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Fitch sees limited upside for the GSR, unless the sovereign's
financial flexibility improves substantially, coupled with an
extended record of timely and sufficient capital support for local
banks.
VR ADJUSTMENTS
The asset quality score of 'b+' is below the implied score of 'bb'
due to the following adjustment reasons: underwriting standards and
growth (negative).
The capitalisation and leverage score of 'b+' is below the implied
score of 'bb' due to the following adjustment reason: size of
capital base (negative).
The funding and liquidity score of 'b+' is below the implied score
of 'bb' due to the following adjustment reason: deposit structure
(negative).
ESG Considerations
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity. Fitch's ESG Relevance Scores are not inputs
in the rating process; they are an observation of the materiality
and relevance of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
JSC Terabank LT IDR B+ Affirmed B+
ST IDR B Affirmed B
Viability b+ Affirmed b+
Government Support ns Affirmed ns
=============
I R E L A N D
=============
BAIN CAPITAL 2025-1: Fitch Assigns B-(EXP)sf Rating to Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has assigned Bain Capital Euro CLO 2025-1 DAC
expected ratings. The assignment of final ratings is contingent on
the receipt of final documents conforming to information already
reviewed.
Entity/Debt Rating
----------- ------
Bain Capital Euro
CLO 2025-1 DAC
A XS3006152105 LT AAA(EXP)sf Expected Rating
B XS3006152360 LT AA(EXP)sf Expected Rating
C XS3006152956 LT A(EXP)sf Expected Rating
D XS3006153095 LT BBB-(EXP)sf Expected Rating
E XS3006152873 LT BB-(EXP)sf Expected Rating
F XS3006153509 LT B-(EXP)sf Expected Rating
M XS3006153681 LT NR(EXP)sf Expected Rating
Subordinated Notes
XS3006153418 LT NR(EXP)sf Expected Rating
Transaction Summary
Bain Capital Euro CLO 2025-1 DAC is a securitisation of mainly
senior secured loans and secured senior bonds (at least 90%) with a
component of senior unsecured, mezzanine, and second-lien loans.
Note proceeds will be used to fund a portfolio with a target par of
EUR400 million. The portfolio is actively managed by Bain Capital
Credit U.S. CLO Manager II, LP. The collateralised loan obligation
(CLO) will have an approximately 4.6-year reinvestment period and a
8.5-year weighted average life (WAL).
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch weighted
average rating factor of the identified portfolio is 24.3
High Recovery Expectations (Positive): At least 90% of the
portfolio will comprise senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the identified portfolio is 62.3%.
Diversified Portfolio (Positive): The transaction will include
various concentration limits for the portfolio, including a
fixed-rate obligation limit at 12.5%, a top 10 obligor
concentration limit of 20% and a maximum exposure to the
three-largest Fitch-defined industries of 40%. These covenants
ensure the asset portfolio will not be exposed to excessive
concentration.
Portfolio Management (Neutral): The transaction will have an
approximately 4.6-year reinvestment period and included
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL for the transaction's
Fitch-stressed portfolio analysis is 12 months less than the WAL
covenant. This is to account for the strict reinvestment conditions
envisaged by the transaction after its reinvestment period. These
conditions include passing the coverage tests and the Fitch 'CCC'
bucket limitation test after reinvestment, as well as a WAL
covenant that gradually steps down, before and after the end of the
reinvestment period. Fitch believes these conditions would reduce
the effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A notes, but would lead
to downgrades of no more than one notch each for the class B to E
notes, and to below 'B-sf' for the class F notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of defaults and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B to F notes each have a
cushion of two notches. There is no cushion for the class A notes,
as they are at the highest achievable rating.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to downgrades of up to four
notches.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to
upgrades of up to three notches each for the rated notes, except
for the 'AAAsf' rated notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
remaining life of the transaction.
After the end of the reinvestment period, upgrades may result from
stable portfolio credit quality and deleveraging, leading to higher
credit enhancement and excess spread to cover losses in the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Bain Capital Euro
CLO 2025-1 DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
BLACKROCK EUROPEAN II: Moody's Cuts Rating on Cl. F-R Notes to Caa1
-------------------------------------------------------------------
Moody's Ratings has taken a variety of rating actions on the
following notes issued by BlackRock European CLO II Designated
Activity Company:
EUR39,000,000 Class B-R Senior Secured Floating Rate Notes due
2034, Upgraded to Aa1 (sf); previously on Apr 15, 2021 Definitive
Rating Assigned Aa2 (sf)
EUR27,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2034, Upgraded to A2 (sf); previously on Apr 15, 2021
Definitive Rating Assigned A3 (sf)
EUR10,000,000 Class F-R Senior Secured Deferrable Floating Rate
Notes due 2034, Downgraded to Caa1 (sf); previously on Apr 15, 2021
Definitive Rating Assigned B3 (sf)
Moody's have also affirmed the ratings on the following notes:
EUR73,000,000 Class A-R Senior Secured Floating Rate Notes due
2034, Affirmed Aaa (sf); previously on Apr 15, 2021 Definitive
Rating Assigned Aaa (sf)
EUR175,000,000 Class A Senior Secured Floating Rate Loan due 2034,
Affirmed Aaa (sf); previously on Apr 15, 2021 Definitive Rating
Assigned Aaa (sf)
EUR24,000,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2034, Affirmed Baa3 (sf); previously on Apr 15, 2021
Definitive Rating Assigned Baa3 (sf)
EUR24,000,000 Class E-R Senior Secured Deferrable Floating Rate
Notes due 2034, Affirmed Ba3 (sf); previously on Apr 15, 2021
Definitive Rating Assigned Ba3 (sf)
BlackRock European CLO II Designated Activity Company, issued in
December 2016 and refinanced twice: in July 2019 and 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 Blackrock Investment Management (UK) Limited. The
transaction's reinvestment period will end in July 2025.
RATINGS RATIONALE
The rating upgrades on the Class B-R and Class C-R notes are
primarily a result of the benefit of the shorter period of time
remaining before the end of the reinvestment period in July 2025.
The rating downgrade on the Class F-R notes is primarily a result
of loss of par paired with continued deterioration of the WAC and
WAS of the underlying pool since the payment date in October 2024.
The affirmations on the ratings on the Class A loan, Class A-R,
Class D-R and Class E-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.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements.
The 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: EUR387.7m
Defaulted Securities: EUR7.5m
Diversity Score: 66
Weighted Average Rating Factor (WARF): 2915
Weighted Average Life (WAL): 4.67 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.80%
Weighted Average Coupon (WAC): 2.83%
Weighted Average Recovery Rate (WARR): 43.63%
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, 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: Once reaching the end of the
reinvestment period in July 2025, 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.
-- Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which could
lengthen as a result of the manager's decision to reinvest in new
issue loans or other loans with longer maturities, or participate
in amend-to-extend offerings. The effect on the ratings of
extending the portfolio's weighted average life can be positive or
negative depending on the notes' seniority.
-- 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.
RAVENSDALE PARK: Fitch Assigns 'B-sf' Final Rating to Class F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Ravensdale Park CLO DAC final ratings,
as detailed below.
Entity/Debt Rating
----------- ------
Ravensdale Park
CLO DAC
Class A Senior
Secured Notes
XS3006390622 LT AAAsf New Rating
Class B-1 Senior
Secured Notes
XS3006390978 LT AAsf New Rating
Class B-2 Senior
Secured Notes
XS3006391273 LT AAsf New Rating
Class C Senior
Secured Deferrable
Notes XS3006391430 LT Asf New Rating
Class D Senior
Secured Deferrable
Notes XS3006391604 LT BBB-sf New Rating
Class E Senior
Secured Deferrable
Notes XS3006391869 LT BB-sf New Rating
Class F Senior Secured
Deferrable Notes
XS3006392081 LT B-sf New Rating
Subordinated Notes
XS3006392248 LT NRsf New Rating
Transaction Summary
Ravensdale Park CLO DAC is a securitisation of mainly senior
secured obligations (at least 90%) with a component of senior
unsecured, mezzanine, second-lien loans and high-yield bonds. The
transaction has a target par of EUR500 million. The portfolio is
actively managed by Blackstone Ireland Limited. The CLO has an
approximately 4.5-year reinvestment period and an eight-year
weighted average life test (WAL).
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch weighted
average rating factor (WARF) of the identified portfolio is 25.5.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the identified portfolio is 61.9%.
Diversified Portfolio (Positive): The transaction includes four
Fitch test matrices, of which two are effective at closing. The
closing matrices correspond to an eight-year WAL, a top 10 obligor
concentration limit at 20% and fixed-rate obligation limits at 5%
and 12.5%. It has two forward matrices with the same top 10
obligors and fixed-rate asset limits and a WAL of seven years,
which will be effective 12 months after closing, provided that the
collateral principal amount (defaults at Fitch-calculated
collateral value) is at least at the target par. However, if the
step-up condition is satisfied, the matrix switch date will be
eighteen months from closing.
The transaction also includes various concentration limits,
including a maximum exposure to the three-largest Fitch-defined
industries at 40%. These covenants ensure the asset portfolio will
not be exposed to excessive concentration.
WAL Step-Up Feature (Neutral): The transaction can extend the WAL
by six months on the step-up date, which is six months after
closing. The WAL extension is subject to conditions, including
passing the collateral quality and coverage tests and the
collateral principal amount (defaults at Fitch-calculated
collateral value) being at least equal to the reinvestment target
par balance.
Portfolio Management (Neutral): The transaction has a 4.5-year
reinvestment period and includes reinvestment criteria similar to
those of other European transactions. Fitch's analysis is based on
a stressed-case portfolio with the aim of testing the robustness of
the transaction structure against its covenants and portfolio
guidelines.
Cash Flow Modelling (Positive): The WAL used for the transaction's
matrices and the Fitch-stressed portfolio analysis is 12 months
less than the WAL covenant. This is to account for the strict
reinvestment conditions envisaged by the transaction after its
reinvestment period. These include passing both the coverage tests
and the Fitch 'CCC' bucket limitation test post reinvestment as
well a WAL covenant that progressively steps down over time, both
before and after the end of the reinvestment period. Fitch believes
these conditions would reduce the effective risk horizon of the
portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A and F notes and would
lead to downgrades of one notch each for the class B1 to E notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B to E notes each have a
rating cushion of two notches and the class F notes have a cushion
of four notches.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to downgrades of up to four
notches for the notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to
upgrades of up to five notches each for the notes, except for the
'AAAsf' rated notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than- expected losses for the
remaining life of the transaction. After the end of the
reinvestment period, upgrades may result from stable portfolio
credit quality and deleveraging, leading to higher credit
enhancement and excess spread available to cover losses in the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Ravensdale Park CLO
DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
=========
I T A L Y
=========
BANCA IFIS: Fitch Affirms 'BB+' Long-Term IDR, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed Banca IFIS S.p.A.'s (IFIS) Long-Term
Issuer Default Rating (IDR) at 'BB+' and Viability Rating (VR) at
'bb+'. The Outlook on the Long-Term IDR is Stable.
The affirmation and Stable Outlook consider the potential impact of
the bank's takeover bid for illimity Bank S.p.A. (BB-/RWP). IFIS's
ratings would not be immediately affected on completion of the
takeover as its strengthened business model would mitigate the
short-term risks from capital erosion and execution and integration
risks resulting from an acquisition of illimity, which represents
about 40% of IFIS's assets and less than 30% of revenue. Over the
medium term, the ratings could benefit from a swift integration,
realisation of planned synergies through the turnaround of the
acquired bank, and efficient management of the combined entity's
risk appetite and funding.
Key Rating Drivers
Specialised Domestic Bank: IFIS's ratings primarily reflect its
specialised business model, with an established niche franchise and
adequate through the cycle profitability. The ratings also reflect
its prudent capital management, a moderately higher impaired loan
ratio, excluding purchased non-performing loans (NPLs), than the
domestic average, and an adequately diversified but price-sensitive
funding that benefits from prudent liquidity management.
Well-Established Niche Franchises: IFIS's business profile is
underpinned by its established domestic franchise in factoring and
high-risk, high-return NPL business, which generate over two-thirds
of its operating income. These have higher barriers to entry than
traditional banking and IFIS has been consistently profitable. It
is adequately positioned to pursue its diversification strategy
while achieving benefits of scale, potentially through the
acquisition of illimity. The strengthening of IFIS's management
team in recent years should support continued good execution, and
its scale and diversification strategy could benefit its credit
profile over the long term.
Above-Average Risk Profile: IFIS's focus on smaller enterprises and
its granular NPL business result in an above-average risk profile.
Collections of NPLs are consistently above the bank's expected
recoveries, underscoring the effectiveness of its underwriting
standards and risk controls, including conservative pricing on
purchased NPLs.
IFIS tightened its interest rate risk management in 2024 and nearly
halved its revenue sensitivity to falling rates, through
investments into longer duration securities and higher origination
of fixed-rate leases. However, it remains sensitive to movements in
rates mainly due to its price-sensitive deposit base and its
short-term factoring business.
Above-Average Impaired Loans: Fitch forecasts IFIS's gross impaired
loans ratio, excluding purchased NPLs, to modestly rise in 2025, to
a level comprised between 5.5%-6% (5.4% at end-2024) given IFIS'
focus on granular smaller sized firms and Italy's muted economic
environment. Purchased NPLs have a very low book value relative to
their residual outstanding, with a recoverable amount that IFIS
estimates at just under two times that value. Fitch forecasts that
collections will remain above the expected recoverable amount in
2025. However, weaker economic conditions are a key downside.
Asset Margins Support Profitability: IFIS's operating profitability
has benefited from higher interest rates in corporate and
commercial banking, and resilient collections in the NPL segment.
These have mitigated the impact of higher funding costs and
operating expenses in 2023-2024. Fitch expects IFIS to maintain a
broadly stable operating profitability in 2025, within 2%-2.5% of
risk-weighted assets (RWA) and a return on equity slightly below
10%, which is below average.
Adequate Capitalisation Provides Headroom: IFIS maintains adequate
RWA and leverage-based capital metrics considering its risk
appetite. Its 16.1% common equity Tier 1 (CET1) ratio at end-2024,
100bp higher than at end-2023, provides sufficient cushion over
requirements and make the bank resilient to some adverse shocks.
IFIS's consistent internal capital generation and prudent capital
management support Fitch's expectation that the bank will maintain
a CET1 ratio above its 14% target by end-2026, even in case of a
successful acquisition of illimity as its ratios would in that case
benefit from badwill recognition.
Price Sensitive Deposits, Prudent Liquidity: Customer deposits are
a growing funding source, although from a lower base than peers, at
just above 50% of funding. IFIS's online-based deposit franchise
remains more price-sensitive than traditional banks', and its cost
of funding rose more in 2023-2024. However, IFIS manages its
liquidity prudently and has well-matched assets and liabilities by
maturity, providing headroom in case of deposit erosion, which
would however constrain its capacity to grow its business. Access
to wholesale debt markets is more established than for small
Italian banks' but remains vulnerable to market sentiment.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
IFIS's ratings have sufficient headroom at their current levels to
sustain a moderately weaker than expected macro-economic
environment potentially affecting its business in the short-term
given the bank's execution track record and prudent capital
management.
Fitch could downgrade IFIS if the bank materially increases its
risk appetite, for example due to a loosening of underwriting
standards to pursue business growth, leading to a material
deterioration in its asset quality and risk-adjusted earnings. A
significant deterioration of the bank's funding and liquidity, for
example by means of reduced liquidity headroom, undue increase in
the cost of funding, weaker capacity to access to wholesale
markets, could also put pressure on IFIS's ratings.
In particular, the ratings could be downgraded if IFIS's organic
impaired loans ratio structurally increases towards 10%, and the
CET1 ratio falls below 14% without prospects of reversing in the
short term. An operating profitability falling towards 1.5% of RWAs
on a sustained basis would also put pressure on the ratings,
especially if this results from heightened pressure on funding
costs.
Although not its baseline expectation, negative rating pressure
could also arise from the acquisition of illimity if IFIS fails to
manage integration risks. This could be the case, for example, if
IFIS fails to execute on synergies, and capital and earnings weaken
relative to IFIS' current standalone trajectory, notably
considering illimity's large size and weaker credit profile
relative to IFIS.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Rating upside is contingent upon evidence of successful progress in
IFIS's diversification strategy, ultimately strengthening its
business profile, without an increase in its risk appetite. For
this to be rating positive, IFIS would have to sustain higher
earnings generation compared to its long-term average (e.g. an
operating profit/RWAs at least around 2.5%). This would have to be
accompanied by continued prudent capital management, with a CET1
ratio kept comfortably above the bank's 14% CET1 ratio target, and
asset quality kept close to current levels (e.g. organic impaired
loans ratio of 5%, when excluding the portfolio from the NPL
business).
A successful acquisition of illimity, provided integration risks
are well-managed, evidenced by execution of announced synergies,
alignment of risk cultures and tangible benefits from a larger
scale in key operating segments in a reasonable timeframe could
ultimately be positive for the sustainability of IFIS's business
profile and earnings, and ultimately its ratings.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Deposits and Senior Debt
IFIS's long-term deposit rating of 'BBB-' is one notch above the
bank's Long-Term IDR given full depositor preference is in force in
Italy and the protection offered from large buffers of
lower-ranking senior preferred and Tier 2 debt. The uplift also
reflects its expectation that the bank will maintain these buffers
over the medium term given the need to comply with minimum
requirements for own funds and eligible liabilities (MREL). The
short-term deposit rating of 'F3' is mapped to IFIS's 'BBB-'
long-term deposit rating.
Senior preferred debt is rated in line with the Long-Term IDR. This
reflects its expectation that IFIS's resolution buffers under MREL
will comprise both senior preferred and junior debt instruments, as
well as equity. The rating also reflects its expectation that the
buffer of more junior instruments is unlikely to sustainably exceed
10% of the bank's RWAs.
Subordinated Debt
The Tier 2 debt is rated two notches below IFIS's VR for loss
severity to reflect poor recovery prospects. No notching is applied
for incremental non-performance risk because write-down of the
notes will only occur once the point of non-viability is reached
and there is no coupon flexibility before non-viability.
No Government Support
IFIS's Government Support Rating (GSR) of 'no support' reflects
Fitch's view that senior creditors cannot rely on receiving full
extraordinary support from the sovereign in the event that the bank
becomes nonviable. The EU's Bank Recovery and Resolution Directive
and the Single Resolution Mechanism for eurozone banks provide a
framework for resolving banks that requires senior creditors
participating in losses ahead of a bank receiving sovereign
support.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Deposits and Senior Debt
The long-term deposit and senior preferred ratings are primarily
sensitive to changes in the bank's Long-Term IDR, from which they
are notched.
In addition, the long-term deposit rating is also sensitive to a
reduction in the buffers of senior and junior debt, for example if
the bank fails to comply with its MREL.
The senior preferred debt could be upgraded if IFIS is expected to
meet the resolution buffer requirements exclusively with more
junior instruments, or if Fitch expects resolution buffers
represented by more junior instruments to be at least 10% of RWAs
on a sustained basis, neither of which is currently the case.
Subordinated Debt
The subordinated debt rating is primarily sensitive to changes in
the VR, from which it is notched. The rating is also sensitive to a
change in the notes' notching, which could arise if Fitch changes
its assessment of their non-performance relative to the risk
captured in the VR.
An upgrade of the GSR would be contingent on a positive change in
the sovereign's propensity to support the bank. Fitch believes this
is highly unlikely, although not impossible.
VR ADJUSTMENTS
The operating environment score of 'bbb' is below the 'a' implied
category score due to the following adjustment reason: sovereign
rating (negative).
The asset quality score of 'bb' is above the 'b and below' implied
category score due to the following adjustment reason: loan
classification policies (positive).
The earnings and profitability score of 'bb+' is below the 'bbb'
implied category score due to the following adjustment reason:
revenue diversification (negative).
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 Prior
----------- ------ -----
Banca IFIS S.p.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Viability bb+ Affirmed bb+
Government Support ns Affirmed ns
Subordinated LT BB- Affirmed BB-
long-term
deposits LT BBB- Affirmed BBB-
Senior
preferred LT BB+ Affirmed BB+
short-term
deposits ST F3 Affirmed F3
ILLIMITY BANK: Fitch Puts 'BB-' Long-Term IDR on Watch Positive
---------------------------------------------------------------
Fitch Ratings has placed illimity Bank S.p.A.'s Long-Term Issuer
Default Rating (IDR) of 'BB-' and deposit, long-term senior
preferred debt and Tier 2 ratings on Rating Watch Positive (RWP).
The rating action reflects Fitch's view of a higher likelihood of a
takeover by Banca IFIS S.p.A.'s (IFIS, BB+/Stable), in the context
of illimity's unexpected weaker performance in 2024 and execution
risks from its strategic refocus and asset valuation risks. The RWP
reflects Fitch's view that, if acquired by IFIS, illimity would
very likely benefit from a moderate probability of support from its
higher-rated owner. If the acquisition is completed, Fitch would
likely base the bank's IDRs on shareholder support and assign a
Shareholder Support Rating (SSR).
The RWP would be resolved on completion of the exchange offer,
which could take longer than six months.
Fitch has affirmed illimity's Viability Rating (VR) at 'bb-' as it
is not affected by IFIS's exchange offer.
Key Rating Drivers
Strategic Turnaround in Progress: The ratings of illimity reflect
its specialised business model and small franchise in SME and
asset-based financing, which result in above-average risk appetite.
The ratings also reflect the bank's operating challenges and its
capitalisation remaining vulnerable to execution risks on its exit
from non-performing loans (NPL) debt purchasing, which should
reduce business instability. The ratings also reflect an organic
impaired loans ratio that is above the domestic sector average,
variable profitability and highly price-sensitive funding.
Restructuring, Execution Risks: illimity is making progress with
its strategic reorganisation after its decision to exit from NPL
purchasing, tighten its focus on SME corporate and investment
banking (CIB) services and try to monetise some of its tech
ventures. However, this strategy refocus is likely to weigh on
medium-term performance and expose the bank to execution risk,
including from additional unexpected valuation losses or failure to
progress with cost or deleveraging targets.
Above-Average Risk Profile: illimity faced extraordinary
impairments in purchased distressed assets, highlight valuation and
execution risks from its restructuring. Increased inflows from
state-guaranteed lending exceeding expectations also hint to
opportunistic underwriting. The bank remains exposed to lending
niches that Fitch views as higher-risk than traditional commercial
lending, and to some single-name risk concentration.
Above-Average Impaired Loans, Concentrations: The organic impaired
loans ratio (i.e. excluding purchased NPL and legacy exposures)
increased to about 7% of gross loans at end-2024 (end-2023: 5%).
The ratio reduces to about 1% when excluding state guaranteed
lending, which remains the main source of deterioration. Fitch
expects this trend to continue in 2025 as the portfolio seasons,
and the organic impaired loans ratio to stabilise at 7%-8% between
2025 and 2026, supported also by moderate loan growth. Asset
quality also remains vulnerable to single-name concentrations in
CIB and real-estate sector risk in asset-based finance.
Extraordinary Valuation Impairments: Direct distressed credit
investments reduced as the bank converted most of the purchased NPL
into securitised senior notes or equity interests in larger and
more diversified funds. However, the large, extraordinary
impairments reported in 2024 (EUR113 million, equal to 300bp of
gross loans) on notes and the fund highlight valuation risks.
Challenging Rebound in Profitability: illimity's operating profit,
excluding non-recurring items, fell to about 0.5% of risk-weighted
assets (RWAs) in 2024, (2023: 1.9%) due to its exit from the
lucrative NPL purchasing business, higher cost of funding and large
repayments in corporate banking. Fitch believes that a full
turnaround in illimity's profitability is vulnerable to uncertain
economic prospects and contingent on the bank's ability to grow
sustainably in core businesses and keep reducing its funding costs
as interest rates fall.
Vulnerable Capitalisation: illimity's common equity Tier 1 (CET1)
ratio of 13.9% at end-2024 maintains adequate buffers over
regulatory requirements despite the negative effect of
non-recurring items in 2024. Fitch expects illimity to actively
manage its capitalisation to prevent its CET1 ratio from falling
materially below 13% on a sustained basis. However, capitalisation
remains under pressure from Illimity's weak internal capital
generation, growth appetite, asset valuation risks and execution
risks from its strategic refocus.
Price-Sensitive, Deposit-Based Funding: Funding is primarily based
on deposits collected online by offering above-average interest
rates, which, unlike most domestic traditional commercial banks,
has prevented the bank from benefiting from higher interest rates.
Fitch expects deposits to continue rising, but more slowly than
loans, leading to a gradual increase in the loans/deposits ratio.
However, illimity's liquidity should remain adequate, supported by
increased diversification towards wholesale funding sources.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch would remove the RWP on Illimity's Long-Term IDR, senior
debt, deposit and tier 2 debt ratings and affirm them at the
current level if the exchange offer does not proceed.
Regardless of the outcome of the takeover, the ratings could be
downgraded if the bank fails to reorganise its business model and
expand healthily without assuming higher risks to make it more
sustainable over time, which would translate into an operating
profit stagnating around or below 0.25% of RWAs on a sustained
basis.
The ratings could also be downgraded if pressures on asset quality
materialise, resulting in an organic impaired loans ratio
structurally heading towards 10%, or if Fitch believes that
business growth is compromising underwriting discipline or eroding
solvency and liquidity. This could, for instance, translate into
the CET1 ratio falling below 13% without being accompanied by
sufficient internal capital generation. Rating pressure could also
emerge if illimity's funding profile becomes unstable, as it is
sensitive to depositors' sentiment given these are largely driven
by price considerations.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A successful completion of the exchange offer would likely result
in an upgrade of the bank's Long-Term IDR, senior debt, deposit and
Tier 2 debt ratings, which would then be based on a newly assigned
SSR. At that point, Fitch expects the Long-Term IDR to be rated at
the same level as IFIS's Long-Term IDR, or one notch below it,
depending on the expected role of illimity within IFIS following
the acquisition and on the speed of integration.
Other than an action related to the RWP, rating upside to
illimity's VR is limited, given the execution risks on the bank's
restructuring. An upgrade would be contingent on the execution of
illimity's strategic shift, which would be reflected in a
structural strengthening of its business profile by means of
continued growth in core CIB activities, resulting in more
predictable and sustained profitability (operating profit of at
least 1% of RWAs) without a significant increase in its risk
profile.
An upgrade would also require the CET1 ratio being sustained at
least around 14% supported by improved internal capital generation
and good control over organic impaired loans inflows. Continued
access to institutional debt markets and evidence of the bank's
ability to grow its deposit base at a lower cost could also benefit
the ratings.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The RWP on illimity's deposit and long-term senior preferred debt
ratings reflect Fitch's view that the bank would become part of a
stronger group and, therefore, benefit from shareholder support
from its higher-rated owner.
The 'BB' long-term deposit rating is one notch above the Long-Term
IDR to reflect the protection provided by a large buffer of senior
and subordinated debt, which exceed the 10% of RWAs required by its
criteria to assign an uplift for banks not subject to resolution
buffer requirements in jurisdictions with full depositor
preference. Fitch expects buffers to be maintained despite expected
growth in RWAs through additional senior preferred issuance. The
short-term deposit rating of 'B' maps to the bank's 'BB' long-term
deposit rating.
illimity's senior preferred debt is rated in line with the bank's
Long-Term IDR to reflect the large buffer of total debt and the
expectation that this buffer will be maintained under the bank's
funding plan.
The RWP on Tier 2 debt reflects Fitch's view that the bank's
subordinated debt would likely be notched off its IDR, instead of
the VR, as Fitch would expect support from IFIS to extend to its
subordinated debt.
illimity's subordinated debt is rated two notches below the VR for
loss severity to reflect poor recovery prospects. No notching is
applied for incremental non-performance risk because write-down of
the notes will only occur once the point of non-viability is
reached, and there is no coupon flexibility before non-viability.
GOVERNMENT SUPPORT RATING (GSR)
illimity's GSR of 'no support' reflects Fitch's view that senior
creditors cannot rely on receiving full extraordinary support from
the sovereign in the event that the bank becomes nonviable. The
EU's Bank Recovery and Resolution Directive and the Single
Resolution Mechanism for eurozone banks provide a framework for
resolving banks that requires senior creditors participating in
losses instead of, or ahead of, sovereign support. In addition, its
assessment of support reflects the bank's still limited domestic
retail deposit market share and specialised lending franchises.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Fitch could remove the RWP and affirm illimity's deposit, long-term
senior preferred debt and Tier 2 debt ratings if the exchange offer
does not proceed.
A completion of the exchange offer would likely result in an
upgrade of the senior debt, deposit and Tier 2 debt ratings.
The senior preferred debt and deposit ratings are also sensitive to
changes in illimity's Long-Term IDR, from which they are notched.
The senior preferred debt and long-term deposit ratings could be
downgraded by one notch if the buffer of unsecured debt falls below
10% of RWAs without prospects of recovering in the medium term.
The subordinated debt rating is also sensitive to changes in the
bank's VR, from which it is notched. It is also sensitive to a
change in the notes' notching, which could result from a change in
Fitch's assessment of their non-performance relative to the risk
captured in the VR.
An upgrade of the GSR would be contingent on a positive change in
the sovereign's propensity to support the bank. In ts view, this is
highly unlikely, although not impossible.
VR ADJUSTMENTS
The operating environment score of 'bbb' is below the 'a' implied
category score due to the following adjustment reason: sovereign
rating (negative).
The asset quality score of 'bb-' is above the 'b and below' implied
category score due to the following adjustment reasons: collateral
and reserves (positive), loan classification policies (positive).
The capitalisation and leverage score of 'bb-' is below the 'bbb'
implied category score due to the following adjustment reason: risk
profile and business model (negative).
The funding and liquidity score of 'bb-' is below the 'bbb' implied
category score due to the following adjustment reason: deposit
structure (negative).
Public Ratings with Credit Linkage to other ratings
The RWP on illimity's Long-Term IDR is linked to the Long-Term IDR
of IFIS.
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 Prior
----------- ------ -----
illimity Bank
S.p.A. LT IDR BB- Rating Watch On BB-
ST IDR B Affirmed B
Viability bb- Affirmed bb-
Government Support ns Affirmed ns
Subordinated LT B Rating Watch On B
long-term
deposits LT BB Rating Watch On BB
Senior
preferred LT BB- Rating Watch On BB-
short-term
deposits ST B Rating Watch On B
=====================
N E T H E R L A N D S
=====================
DARLING GLOBAL: Fitch Affirms BB+ LongTerm IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed Darling Ingredients, Inc.'s (Darling)
and its subsidiaries ratings, including its Long-Term Issuer
Default Rating (IDR) at 'BB+'. The Rating Outlook is Stable.
Darling's 'BB+' rating reflects the company's leading market
position as a globally diversified ingredient processor that has
benefited from increasing demand for low-carbon fuels, which
supports profitability. Fitch's forecast assumes solid demand for
renewable diesel, along with favorable biofuel policy, will support
structurally higher margins. Fitch projects Darling's mid-term
leverage could trend to around 3x from around mid-3x in 2025. This
is through a combination of EBITDA growth, increased Diamond Green
Diesel (DGD) cash distribution and debt reduction.
Key Rating Drivers
Sustainable EBITDA Over $800 Million: Fitch believes the increased
demand for low-carbon fuels underpins structurally higher fat
prices over the cycle. This also includes the increased mix of
higher-margin specialty collagen and recent acquisitions support
Darling's EBITDA of over $800 million. Fitch-adjusted EBITDA was
$807 million in 2024 primarily due to lower fat prices from lower
demand from renewable diesel production, biofuel policy uncertainty
and higher animal fat supplies. Lower prices in its food
ingredients and fuel ingredients segments also pressured EBITDA.
This compares to EBITDA of $1.1 billion 2023, which was driven by
higher sales from Food Ingredients and Fuel.
Acquiring Valley Proteins, FASA Group in 2022, Gelnex in March
2023, and two smaller bolt-on acquisitions are expected to support
EBITDA. This will enhance profitability as well as provide
increased diversification with revenue streams, operations, and
geographic footprint. Darling's animal feed contracts transfer
significant commodity risk to suppliers, though it retains some
exposure, leading to muted earnings when commodity prices are low.
There is, however, a potential upside as prices normalize.
2025 EBITDA Expectations: Fitch projects Darling's core EBITDA to
be in the low-to-mid $800 million range for 2025, due to improving
fat and collagen prices and biofuel policy clarity. Fitch expects
commodity prices from biofuel policy certainty to improve over the
forecast period. This could result in a core EBITDA around the
mid-to-upper $800 million range, with potential upside if prices
show greater momentum.
Biofuel policies and tax credit eligibility are likely to limit
imports of used cooking oils and renewable diesel, enhancing the
value of renewable fuel credits (e.g. RIN prices) and boosting
demand and production capacity. Global biofuel policies, including
Brazil and the EU, are expected to further increase demand, and
support prices and industry margins.
Increasing Contribution from DGD: Fitch expects DGD distributions
will continue to increase in 2025 following the Q4 2022 expansion
of renewable diesel capacity to 1.2 billion gallons annually from
750 million gallons. This would boost Darling's cash flows over the
forecast horizon. The completion of the SAF project at DGD3 in Q4
2024 will allow it to upgrade about 50% of its 470 million gallon
capacity to SAF. Darling received a $180 million cash dividend from
DGD in 2024 and Darling anticipates receiving a higher cash
distribution in 2025, having already received $86 million in
January. Previously, Darling received $164 million in 2023 and $91
million in 2022.
DGD Competitive Advantage: Fitch believes DGD has a low-cost
position due to feedstock integration, scale, and location. It has
superior logistics and significantly greater operating experience
including better access to lower-carbon intensity feedstocks
relative to peers. Fitch projects a higher cash distribution from
DGD around $300 million for 2025, up from $180 million in 2024,
with Darling having already received $86 million in January 2025.
Leverage Trending Around 3x: Leverage increased to 4.1x in 2024
from 3.4x in 2023 on lower EBITDA from soft prices. Fitch's
forecast assumes FCF to average around $300 million annually over
the forecast period, which could be used to pay down debt. Fitch
projects Darling's leverage could trend to the around 3.0x through
a combination of EBITDA growth, increased DGD cash distribution and
debt reduction. Darling demonstrated commitment toward debt
reduction following past acquisitions, including a $350 million
debt repayment in 2024. Fitch's forecast assumes Darling could
engage in acquisitions through tuck-ins or geographic expansion
opportunities starting as early as 2026/27.
Shifting Capital Allocation: Fitch expects Darling to shift its
capital allocation policy after completing approximately $3.0
billion in acquisitions since 2022, in an effort for Darling to
enhance its global supply chain and access low-carbon-intensity
feedstocks. In 2025, Fitch anticipates Darling will focus on debt
repayment, capital investments to support its base business, and
share repurchases to offset stock-based compensation dilution.
Darling repurchased $34 million shares in 2024. Fitch's forecast
assumes capital spending around low-$400 million in 2025 and 2026
with modest allocation for growth initiatives.
Strategic Acquisitions: Fitch considers Darling's recent
acquisitions as strategically beneficial, enhancing feedstock
capacity in the U.S., establishing a presence in Brazil, and
expanding its collagen business. Darling acquired Valley Protein's
U.S. rendering and used cooking oil plants in May 2022 for $1.2
billion, FASA in Brazil for $560 million in August 2022, Gelnex, a
global collagen producer, for $1.2 billion in March 2023, and
Miropasz, a Polish rendering company, for $120 million in January
2024.
Parent-Subsidiary Linkage: Fitch's analysis includes a strong
parent/weak subsidiary approach between the parent, Darling, and
its subsidiaries. Fitch assesses the quality of the overall linkage
as high, which results in an equalization of IDRs across the
corporate structure.
Peer Analysis
Darling's 'BB+'/Stable IDR reflects its global market position as a
diversified ingredient processor, benefiting from increased demand
for low-carbon fuels, which supports profitability. Fitch forecasts
that renewable diesel demand and favorable biofuel policies will
support structurally higher margins. Fitch projects leverage could
trend to around 3x from mid-3x in 2025 through EBITDA growth,
increased Diamond Green Diesel (DGD) cash distribution and debt
reduction.
Darling's IDR is tempered by commodity volatility, regulatory
changes and foreign exchange risks. Darling has significant
exposure to renewable diesel through its 50% interest in DGD, North
America's largest producer.
Darling maintains higher profitability compared with peers in
Fitch's agribusiness coverage, except for Ingredion Incorporated
(BBB/Stable). Darling's capital intensity is higher than
agribusiness peers due to the corrosive nature of animal by-product
processing.
PPC's 'BBB-' rating reflects its resilient operating performance,
low net leverage and strong liquidity position. PPC's ratings are
supported by its resilient business profile as one of the world's
largest chicken processors with operations in the U.S., Europe and
Mexico, a diversified product portfolio and vertically integrated
operations.
Ingredion's 'BBB' rating benefits from its global product portfolio
and stable underlying business model focused on starches and
sweeteners, with increasing exposure to higher-value,
higher-margin, on-trend specialty ingredients. Ingredion has
implemented measures to address operating pressures in its core
businesses that Fitch expects should reduce earnings volatility and
support more predictable long-term earnings growth.
Fitch expects Ingredion to maintain good financial discipline
including consistent capital allocation policies that support
leverage below 2x over the forecast period.
Key Assumptions
- Darling's core EBITDA is up modestly from 2024 levels at around
low-to-mid $800 million and trends to mid-to-high $800 million over
the forecast horizon.
- Approximately $400 million of capital spending in 2025 and
increasing to low $400 million in 2026.
- The forecast assumes DGD EBITDA per gallon around mid-$0.50 for
2025, which results in dividend distributions from DGD of around
$300 million, which includes the monetization of 45Z credits earned
by DGD and remaining Blenders Tax Credits from 2024.
- FCF of over $300 million in 2025 and 2026.
- Darling could also remain acquisitive through tuck-ins or
geographical expansion opportunities. Fitch projects Darling's
leverage could trend from mid-3x in 2025 to around-3.0x through a
combination of EBITDA growth from increased DGD dividend
contribution and debt reduction.
- Interest Rate Assumptions: Fitch assumes a base rate between
4.3%-3.5% over the forecast horizon.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA leverage sustained above 3.5x as a result of weaker-than
expected core EBITDA or lack of a material dividend distribution
from DGD and/or capital allocation polices outside of Fitch's
expectations, such as large debt-funded M&A and increased
shareholder returns.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Publicly articulated financial framework or a demonstrated record
of maintaining a consistent credit profile, yielding increased
confidence in EBITDA leverage sustaining under 3x combined with
operating performance that is in line with Fitch's expectations for
sustained core EBITDA of $700 million and EBITDA after affiliates
dividends (dividend distribution from DGD joint venture [JV]) above
$1.0 billion.
Liquidity and Debt Structure
At Dec. 31, 2024, Darling had ample liquidity consisting of $76
million in cash and availability of $1,159 million under the $1.5
billion secured revolving credit facility, which had $267 million
in outstanding borrowings, $72.7 million in ancillary facilities
and $0.7 million of issued letters.
Darling amended and extended the revolving facility in December
2021 by increasing the amount to $1.5 billion from $1.0 billion and
extending the maturity to December 2026. The credit agreement also
features a fully drawn $400 million delayed-draw five-year term
loan A-1, A-2 $500 million, A-3 $300 million, and a A-4 $500
million, all maturing in December 2026.
The remainder of Darling's debt structure includes EUR515 million
senior notes due 2026, $500 million senior notes due 2027 and $1
billion senior notes due 2030. A portion of the availability under
the revolving credit facility, together with the Term A-3 and Term
A-4 facilities, was used to fund the Gelnex acquisition that closed
on March 31, 2023, and the Miropasz Group acquisition, which closed
in January 2024.
Covenants on the revolving facility require total leverage to not
exceed 5.5x and interest coverage of 3.0x or greater, for which
Darling has significant cushion. Terms for the revolving facility
include a collateral-release mechanism upon Darling achieving an
investment-grade credit rating.
Issuer Profile
Darling maintains a leading position as a globally diversified
collector and processor of food waste streams, transforming the
products into sustainable ingredients in the food, feed and fuel
sectors. Darling also has a 50% interest in the DGD JV, largest
producer of RD in North America.
Summary of Financial Adjustments
Fair value of debt adjusted to reflect debt amount payable on
maturity, stock-based compensation and adjusted for associate
dividends.
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
Darling has an ESG Relevance Score of '4' [+] for Exposure to
Social Impacts. Darling's base business focuses on the collection
of animal byproducts and repurposing into sustainable ingredients.
Fitch expects the company should benefit from market preferences
and healthy lifestyle trends toward collagen products. The
company's biomass-based diesel JV is also benefiting from social
and regulatory changes that are creating higher demand for
renewable products and consequently increasing renewable fuel
mandates for the JV. This has a positive impact on the credit
profile, and is relevant to the rating in conjunction with other
factors.
Darling has an ESG Relevance Score of '4' [+] for Energy
Management, as the company benefits from its strategic decision to
invest in the biomass-based diesel industry that is expected to
lead to higher stability and visibility of cash flows as a result
of the legislative mandates and consumer and corporates preference
for the consumption of renewable products that improve air quality.
This has a positive 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
----------- ------ -------- -----
Darling Ingredients
International
Holding BV LT IDR BB+ Affirmed BB+
senior secured LT BBB- Affirmed RR1 BBB-
Darling International
NL Holdings B.V. LT IDR BB+ Affirmed BB+
senior secured LT BBB- Affirmed RR1 BBB-
Darling International
Canada Inc. LT IDR BB+ Affirmed BB+
senior secured LT BBB- Affirmed RR1 BBB-
Darling Ingredients,
Inc. LT IDR BB+ Affirmed BB+
senior unsecured LT BB+ Affirmed RR4 BB+
senior secured LT BBB- Affirmed RR1 BBB-
Darling Ingredients
Belgium Holding BV LT IDR BB+ Affirmed BB+
senior secured LT BBB- Affirmed RR1 BBB-
Darling Ingredients
Germany Holding GmbH LT IDR BB+ Affirmed BB+
senior secured LT BBB- Affirmed RR1 BBB-
Darling Global
Finance B.V.
senior unsecured LT BB+ Affirmed RR4 BB+
=========
S P A I N
=========
TDA CAM 9: Moody's Hikes Rating on EUR48MM Class B Notes from Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of five Notes in four TDA
CAM Spanish RMBS transactions. The rating action reflects
better-than-expected collateral performance, increased levels of
credit enhancement for the affected Notes and Moody's assessment of
past interest shortfall and likelihood of future missed interests
in TDA CAM 7, FTA and TDA CAM 9, FTA.
Moody's affirmed the ratings of the Notes that had sufficient
credit enhancement to maintain their current ratings.
Maximum achievable rating is Aa1 (sf) for structured finance
transactions in Spain, driven by the corresponding local currency
country ceiling of the country.
Issuer: TDA CAM 5, FTA
EUR1944M Class A Notes, Affirmed Aa1 (sf); previously on Aug 26,
2024 Affirmed Aa1 (sf)
EUR56M Class B Notes, Upgraded to Aa3 (sf); previously on Aug 26,
2024 Upgraded to A2 (sf)
Issuer: TDA CAM 6, FTA
EUR752M Class A3 Notes, Affirmed Aa1 (sf); previously on Aug 26,
2024 Affirmed Aa1 (sf)
EUR50M Class B Notes, Upgraded to A1 (sf); previously on Aug 26,
2024 Upgraded to Baa2 (sf)
Issuer: TDA CAM 7, FTA
EUR1207.3M Class A2 Notes, Affirmed Aa1 (sf); previously on Aug
26, 2024 Affirmed Aa1 (sf)
EUR200M Class A3 Notes, Affirmed Aa1 (sf); previously on Aug 26,
2024 Affirmed Aa1 (sf)
EUR92.7M Class B Notes, Upgraded to A2 (sf); previously on Aug 26,
2024 Upgraded to Ba2 (sf)
Issuer: TDA CAM 9, FTA
EUR250M Class A1 Notes, Affirmed Aa1 (sf); previously on Aug 26,
2024 Affirmed Aa1 (sf)
EUR943.5M Class A2 Notes, Affirmed Aa1 (sf); previously on Aug 26,
2024 Affirmed Aa1 (sf)
EUR230M Class A3 Notes, Affirmed Aa1 (sf); previously on Aug 26,
2024 Affirmed Aa1 (sf)
EUR48M Class B Notes, Upgraded to Baa3 (sf); previously on Aug 26,
2024 Upgraded to Ba1 (sf)
EUR28.5M Class C Notes, Upgraded to Baa3 (sf); previously on Aug
26, 2024 Upgraded to B1 (sf)
EUR15M Class D Notes, Affirmed C (sf); previously on Aug 26, 2024
Affirmed C (sf)
RATINGS RATIONALE
The rating action is prompted by decreased key collateral
assumptions, namely the portfolio Expected Loss (EL) and a decrease
in the MILAN Stressed Loss assumptions for TDA CAM 5, FTA
("CAM-5"), TDA CAM 6, FTA ("CAM-6"), TDA CAM 7, FTA ("CAM-7") and
TDA CAM 9, FTA ("CAM-9") due to continued better-than-expected
collateral performance.
The rating action is also prompted by an increase in credit
enhancement for the affected tranches and Moody's assessments of
past interest shortfall and likelihood of future missed interests
in CAM-7 and CAM-9.
Revision of Key Collateral Assumptions
As part of the rating action, Moody's reassessed Moody's lifetime
loss expectation for the portfolio reflecting the collateral
performance to date.
The performance of the transactions has continued to be stable
since one year ago. Total delinquencies, as a percentage of current
pool balance, have slightly increased in the past year in part due
to pool deleveraging and low pool factors. The 90 days plus arrears
currently stand at 0.41%, 0.64%, 0.74% and 0.40% of current pool
balance for CAM-5, CAM-6, CAM-7 and CAM-9, respectively, and are
largely unchanged since a year ago. Similarly, cumulative defaults
currently stand at 7.51%, 13.46%, 13.24% and 16.18% of original
pool balance, almost unchanged from a year earlier.
Moody's decreased the expected loss assumption to 1.66%, 1.77%,
2.10% and 2.19%, as a percentage of current pool balance, from
2.43%, 3.06%, 2.69% and 3.53% for CAM-5, CAM-6, CAM-7 and CAM-9,
respectively, due to continued good performance and higher expected
future recoveries. The revised expected loss assumption corresponds
to 2.45%, 4.30%, 4.92% and 6.00% as a percentage of original pool
balance.
Moody's have also assessed loan-by-loan information as a part of
Moody's detailed transaction review to determine the credit support
consistent with target rating levels and the volatility of future
losses. As a result, Moody's have reduced the MILAN Stressed Loss
assumption for CAM-5, CAM-6, CAM-7 and CAM-9 to 6.00%, 6.20%, 7.10%
and 7.40% from 8.00%, 9.60%, 9.50% and 10.70%, respectively.
Increase in Available Credit Enhancement and Assessment of Interest
Shortfalls
A non-amortising reserve fund at floor for CAM-5, CAM-6 and CAM-7
and sequential amortization for CAM-5 since the last rating action
led to the increase in the credit enhancement available in these
transactions. CAM-6 is currently amortising the Notes' principal
pro-rata and is expected to switch to sequential as pool factor has
just fallen below 10%. Moody's also note that for CAM-7 and CAM-9
the Class A Notes are composed of series that rank and pay
pari-passu to each other.
For instance, the credit enhancement for the most senior tranche
affected by the rating action (in all instances the Class B Notes)
increased to 6.16% from 5.66% for CAM-5, to 5.60% from 5.16% for
CAM-6, to 5.30% from 4.73% for CAM-7 and to 20.72% from 18.95% for
CAM-9 since the last respective rating action.
For CAM-7 and CAM-9, the interest of the Class B Notes is and will
remain deferred to a position ranking junior to the Class A Notes
principal repayment in the priority of payments until the Class A
Notes have been repaid in full. In CAM-9, also the interest of the
Class C Notes will remain deferred to a position ranking junior in
the priority of payments until the Class A and B Notes have been
repaid in full. In both deals, interest payments on Class B and, in
CAM-9, on Class C Notes rank senior to reserve fund replenishment
and are currently being paid.
The upgrade of Class B Notes in CAM-7 and Class B and Class C Notes
in CAM-9 considers the permanent economic loss resulting from the
number of years over which interest was deferred without interest
on deferred interest being due. These were, respectively, 2.5, 7.25
and 7.25 years of deferred interest. Moody's analysis has also
considered the likelihood and length of potential future interest
deferrals that Moody's expects to be ultimately recouped. Moody's
have limited the CAM-7 Class B Notes' rating upgrade to A2 and
CAM-9 Class B and Class C Notes' ratings to Baa3 reflecting the
economic loss of past deferrals.
The principal methodology used in these ratings was "Residential
Mortgage-Backed Securitizations" published in October 2024.
The analysis undertaken by Moody's at the initial assignment of
ratings for RMBS securities may focus on aspects that become less
relevant or typically remain unchanged during the surveillance
stage.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include: (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement, (3) improvements in the credit quality of the
transaction counterparties, and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include: (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the Notes' available credit enhancement, and
(4) deterioration in the credit quality of the transaction
counterparties.
===========
S W E D E N
===========
STRAX AB: Files For Bankruptcy in Stockholm District Court
----------------------------------------------------------
The board of STRAX AB has decided on April 8, 2025, to file a
bankruptcy application with the Stockholm District Court. The
company has requested that Lars Wiking, lawyer at Advokatfirma DLA
Piper Sweden KB, be appointed bankruptcy trustee.
Since the beginning of Covid-19 in February 2020 the STRAX group
faced unprecedented challenges, including declining mobile
accessories market, significant channel shifts away from
traditional wholesale towards online direct, followed by
inflationary pressures, impacting demand and cost structure. These
factors coupled with increased interest costs have now proven to be
too large to steer through. Additionally, there was an ongoing
dispute with the majority shareholder of the German based
distribution platform, which ultimately caused that business unit
to file for insolvency in May 2024 and to a large extent caused a
domino effect by dragging down the other parts of the STRAX group.
Significant efforts for extended period have been made to solve the
situation, including securing financing. However, the disputes
burdening the company were eventually too extensive to overcome.
About STRAX
STRAX engages in accessories that empower mobile lifestyles. Our
portfolio of branded accessories covers the main mobile accessory
categories: Protection, Power, Connectivity, as well as Personal
Audio.
Own brands are Xqisit and Flavr. Our distribution business retains
a broad reach in the Americas and the Nordics. Our distribution
also services other mobile accessory brands.
STRAX has evolved since being founded as a trading company in 1995.
Today we have approximately 15 employees in 4 countries. STRAX is
listed on the Nasdaq Stockholm stock exchange.
Divested own brands consist of Urbanista, Gear4, Clckr and Planet
Buddies.
Discontinued operations include Health & Wellness, own brands
Dóttir and grell, and licenced brand portfolio of adidas and
Diesel.
===========
T U R K E Y
===========
TURK P&I: Fitch Affirms 'BB-' IFS Rating, Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed Turk P ve I Sigorta A.S.'s (Turk P&I)
Insurer Financial Strength (IFS) Rating at 'BB-' and National IFS
Rating at 'AA-(tur)'. The Outlooks are Stable.
The IFS Rating reflects Turk P&I's small size and scale compared
with other Turkish insurers and investment risks skewed towards the
Turkish banking sector, which is in line with the rest of the
market. The rating also reflects Turk P&I's adequate earnings and
scapitalisation pressure.
Key Rating Drivers
Turkish Marine Specialist: Fitch assesses Turk P&I based on the
insurer's standalone credit quality, but also considers its
ownership structure, which is equally divided between public and
private interests. The shareholders have provided capital support
on several occasions, and Fitch believes they will continue to do
so in case of further capital need. Fitch believes the company's
ownership and its strategic role in the Turkish economy are
supportive of its credit profile.
Turk P&I, which is Turkiye's first protection and indemnity (P&I)
insurance provider, also underwrites hull and machinery (H&M)
insurance, which accounted for 64% of net premiums in 2024.
Fitch´s assessment of Turk P&I´s company profile takes into
accounts its small size, increasing international diversification,
in addition to its ownership and strategic role in Turkiye. Its
business volumes continued to grow strongly in 2024, supported by
the strong development of its international business. However, Turk
P&I has taken a more cautious approach to growth in 2024 and 2025,
due to softer market conditions in international H&M insurance.
Pressured Capitalisation: The insurer's regulatory solvency ratio
improved to 118% at end-2024 from 65% at end-2023, following a
capital increase of TRY200 million provided by its shareholders in
September 2024 as well as stronger retained earnings. Turk P&I's
capital score on Fitch's Prism Global capital model also improved
to 'Somewhat Weak' at end-2024 from 'Weak' at end-2023. However,
Fitch believes its capitalisation will remain under pressure from
continued strong business volumes growth, which may exceed its
capacity for internal capital generation.
High Exposure to Banking System: Turk P&I's balance sheet comprises
deposits in Turkish banks as well as government bonds. At end-2024,
94% of invested assets were allocated to bank deposits. This
indicates a high exposure to the banking sector in Turkiye, in line
with the rest of the Turkish insurance market.
Adequate Financial Performance: Fitch views Turk P&I's earnings as
adequate. For 2024, Turk P&I reported a net income of TRY121
million (2023: TRY62 million), equivalent to a net income return on
equity of 33% (2023: 37%). Its profitability was highly influenced
by increased technical profits, as well as higher investment income
due to high interest rates and foreign-exchange (FX) gains. Turk
P&I receives most of its premium income and pays most of its claims
in foreign currencies. The insurer's earnings are subject to claims
volatility due to the nature of its business.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Turkiye's sovereign rating could lead to a
downgrade of the international scale rating
- Business risk profile deterioration due, for example, to a sharp
deterioration in the maritime trade environment could lead to a
downgrade of the national and international scale ratings
- A material deterioration in capital without prospects of a timely
recovery could lead to a downgrade of the national and
international scale ratings
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade of Turkiye' s sovereign rating could lead to an
upgrade of the international scale rating
- Improvement in the company profile assessment, for example, due
to sustained profitable growth while maintaining its regulatory
solvency ratio comfortably above 100% could lead to an upgrade of
the national and international scale ratings
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 Prior
----------- ------ -----
Turk P ve I
Sigorta A.S. LT IFS BB- Affirmed BB-
Natl LT IFS AA-(tur) Affirmed AA-(tur)
===========================
U N I T E D K I N G D O M
===========================
CONVATEC GROUP: Moody's Affirms 'Ba1' CFR, Alters Outlook to Pos.
-----------------------------------------------------------------
Moody's Ratings has affirmed the Ba1 long-term corporate family
rating of UK based global chronic care products provider Convatec
Group PLC (Convatec or the company) and its Ba1-PD probability of
default rating. Concurrently, Moody's affirmed the Ba1 backed
senior unsecured rating of the $500 million notes due 2029 issued
by 180 Medical Inc., a wholly-owned operating subsidiary of
Convatec. The outlook for both entities has been changed to
positive from stable.
The rating action reflects:
-- Solid organic revenue and margin growth supported by successful
transformation programme and product pipeline, outperforming the
company's 2024 guidance.
-- Convatec's focus in the chronic care market, which supports
recurring revenue and strong long-term market growth expectations.
-- Conservative financial policy, with company net leverage target
of around 2x, and Moody's expectations that Moody's adjusted gross
debt to EBITDA will be below 2.5x over the next 12-18 months.
RATINGS RATIONALE
Convatec successfully implemented its transformation programme,
focusing on addressing historical operational and performance
issues. This has resulted in good organic growth over the last few
years, with the expectation that margins will continue to improve
through the delivery of its productivity and simplification
initiatives. Convatec has made meaningful progress in innovation
and now has a strong pipeline of new product launches, which will
support future organic growth. This, together with its focus on
product mix, further supports expected margin expansion and results
in improved credit metrics, with Moody's adjusted debt/EBITDA below
2.5x over the next 12-18 months.
Convatec's Ba1 CFR is supported by its good scale and product
diversification across multiple subsegments within chronic care.
The company is also well diversified geographically, although it
has less exposure to Asia. Convatec is among the market leaders in
several product categories, which benefit from low demand
cyclicality and stable annual market growth in the mid-single-digit
percentage range. Convatec consistently generates positive free
cash flow (FCF), which improved substantially in 2024 to $167
million from $29 million in 2022, when it was hampered by higher
capital investments and working capital outflows.
Credit constraints mainly include: (1) social risks stemming from
downward pricing pressure as payors seek to rein in healthcare
costs, particularly in the more commoditised categories, as well as
potential product litigation risks; (2) relatively lower margins
compared to some competitors and similarly rated companies in the
medical devices sector and (3) an element of risk around the
execution of the company's product pipeline and expected efficiency
gains
LIQUIDITY
Convatec has good liquidity. It has a cash balance of $65 million
as of December 31, 2024 and $566.5 million equivalent availability
under its $950 million revolving credit facility (RCF), supporting
its liquidity position. Moody's anticipates that headroom under the
two maintenance covenants (net leverage and interest cover) on the
term loans and RCF will be sufficient at all times.
STRUCTURAL CONSIDERATIONS
Convatec's $500 million backed senior unsecured notes issued by 180
Medical Inc. rank pari passu with the loan facilities which are
also unsecured and benefit from equivalent guarantees across the
group and hence the notes are rated in line with Convatec's CFR at
Ba1.
RATING OUTLOOK
The positive outlook reflects Moody's expectations that Convatec
will continue to grow its revenue in the mid-single digit
percentage range and expand its margin while delivering on its
productivity and simplification initiatives. Moody's expects the
company will continue to adhere to its conservative and predictable
financial policy. The outlook also assumes that the company will
maintain good liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure could occur if Convatec continues to enhance
its scale and market positioning while growing its profit margins.
An upgrade would also require Convatec to maintaining conservative
financial policies. Quantitatively this would include maintaining
Moody's adjusted gross debt/EBITDA around 2.0x.
Downward pressure on the rating could develop if operating
performance deteriorates; Moody's adjusted gross debt/EBITDA
increases above 3.0x; or a more aggressive financial policy is
pursued including not adhering to its stated leverage policy .
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Medical
Products and Devices published in October 2023.
CORPORATE PROFILE
Convatec Group PLC, headquartered in London, UK, is a global
medical products and technologies company focused on solutions for
the management of chronic conditions. The company develops and
manufactures products in the areas of advanced wound, ostomy,
continence and infusion care. In 2024, Convatec reported revenue of
$2.3 billion and company adjusted EBITDA of $591 million. The
company has a listing on the London Stock Exchange and had a market
capitalisation of GBP5.3 billion as of April 02, 2025.
JACKSON JACKPOT: Begbies Traynor Named as Administrators
--------------------------------------------------------
Jackson Jackpot Limited, trading as Jackson Jackpot, was placed
into administration proceedings in the High Court of Justice
Business and Property Courts in Leeds, Insolvency & Companies List
(ChD) Court Number: CR-2025-LDS-304, and Nicholas Edward Reed,
Robert Alexander Henry Maxwell and Louise Longley of Begbies
Traynor (Central) LLP, were appointed as administrators on March
24, 2025.
Jackson Jackpot specialized in retail sale via mail order houses or
via Internet.
Its registered office is at Suite 3b Kings House, 1 King Street,
Leeds, LS1 2HH.
The administrators can be reached at:
Nicholas Edward Reed
Robert Alexander Henry Maxwell
Louise Longley
Begbies Traynor (Central) LLP
Floor 2, 10 Wellington Place
Leeds, LS1 4AP
Any person who requires further information may contact:
Begbies Traynor (Central) LLP
E-mail: jacksonjackpot@btguk.com
Tel: 0113 244 0044
MCLAREN HOLDINGS: Fitch Affirms Then Withdraws 'CCC+' Long-Term IDR
-------------------------------------------------------------------
Fitch Ratings has affirmed McLaren Holdings Limited's (McLaren)
'CCC+' Long-Term Issuer Default Rating (IDR) and McLaren Finance
plc's 'CCC+' senior secured notes rating. It has withdrawn both
ratings.
The rating action reflects McLaren's new ownership by CYVN Holdings
LLC, the advanced mobility investment vehicle owned by the
government of Abu Dhabi (AA/Stable), announced redemption of the
notes and its recent performance being broadly in line with its
expectations. Fitch does not have visibility on McLaren's updated
business plan or new capital structure.
Fitch has withdrawn all ratings due to commercial reasons. Fitch
will, therefore, no longer provide rating or analytical coverage on
McLaren.
Key Rating Drivers
Change of Ownership: CYVN Holdings LLC completed the acquisition of
McLaren's automotive business and a non-controlling stake in the
company's racing venture from Bahrain Mumtalakat Holding Company
B.S.C. (c) (Mumtalakat; B+/Negative), the sovereign wealth fund of
Bahrain (B+/Negative), on 3 April 2025. Mumtalakat had continued to
support McLaren until the transaction was completed as per its
prior expectations. Fitch does not have visibility on McLaren's
plans but expect the announced notes redemption due on 1 August
2025 to be funded in full by CYVN Holdings LLC.
Recent Performance as Expected: McLaren's performance for 9M24 was
in line with its expectations, with revenue increasing to GBP618
million, up 80% from the previous year, as volumes rose 55%,
supported by the full offering of the GTS, Artura and 750S models.
This had helped shrink the company's reported EBITDA loss for the
period by by GBP129 million to GBP19 million.
Peer Analysis
N/A
Key Assumptions
N/A
Recovery Analysis
N/A
RATING SENSITIVITIES
Not applicable as the ratings have been withdrawn.
Liquidity and Debt Structure
Fitch expects the announced notes redemption to be funded by the
company's new shareholders.
Issuer Profile
McLaren is the intermediate holding of McLaren Group Limited. It
owns 100% of McLaren Automotive, McLaren Services Limited and
McLaren Finance Plc. McLaren Automotive is a manufacturer of
luxury, high-performance sport cars and supercars.
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
----------- ------ -------- -----
McLaren Holdings
Limited LT IDR CCC+ Affirmed CCC+
LT IDR WD Withdrawn
Mclaren Finance plc
senior secured LT CCC+ Affirmed RR4 CCC+
senior secured LT WD Withdrawn RR4
SAVOY ESTATES: RSM UK Named as Joint Administrators
---------------------------------------------------
Savoy Estates 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-2025-0002102, and Lee Van Lockwood and James Miller of RSM UK
Restructuring Advisory LLP, were appointed as joint administrators
on March 26, 2025.
Savoy Projects specialized in property development.
Its registered office is at Central Square, 5th Floor, 29
Wellington Street, Leeds, LS1 4DL.
Its principal trading address is at 63 Dennis Lane, Stanmore, HA7
4JU.
The joint administrators can be reached at:
Lee Van Lockwood
James Miller
RSM UK Restructuring Advisory LLP
Central Square, 5th Floor
29 Wellington Street, Leeds
LS1 4DL
Correspondence address & contact details of case manager:
Ryan Marsh
RSM UK Restructuring Advisory LLP
Central Square, 5th Floor
29 Wellington Street,
Leeds, LS1 4DL
Tel: 0113 285 5000
Alternative contact:
The Joint Administrators
Tel: 0113 285 5000
STEPHENSON HOTEL: PwC Named as Joint Administrators
---------------------------------------------------
Stephenson Hotel Limited was placed into administration proceedings
in the High Court of Justice, Business and Property Courts in Leeds
Insolvency and Companies List (ChD) No CR-2025-LDS-000321, and
Alison Grant and Sarah O'Toole of PricewaterhouseCoopers LLP were
appointed as joint administrators on March 28, 2025.
Stephenson Hotel -- trading as The Crowne Plaza Newcastle,
Stephenson Quarter Hotel -- specialized in Development of building
projects.
Its registered office is at Boiler Shop, 20 South Street, Newcastle
Upon Tyne, England, NE1 3PE.
Its Principal trading address is at Hawthorn Sq, Forth St,
Newcastle upon Tyne NE1 3SA.
The joint administrators can be reached at:
Alison Grant
PricewaterhouseCoopers LLP
Central Square, 29 Wellington Street
LS1 4DL
-- and --
Sarah O'Toole
1 Hardman Square
Manchester, M3 3EB
For further details, contact:
Tel No: 0113 289 4000
Email: uk_stephensonhotel_creditors@pwc.com
UKS DISTRIBUTION: RSM UK Named as Administrators
------------------------------------------------
UKS Distribution Limited was placed into administration proceedings
in the High Court of Justice, Business and Property Courts in
England and Wales, Insolvency and Companies List Court Number:
CR-2025-151, and Christopher Lewis and Damian Webb of RSM UK
Restructuring Advisory LLP, were appointed as administrators on
March 28, 2025.
UKS Distribution specialized in the wholesale trade of motors
vehicle parts and accessories.
Its registered office and its principal trading address is at Unit
12, Haywood Forge, Herward Rise, Prospect Road, Halesowen, B62
8AW.
The administrators can be reached at:
Christopher Lewis
RSM UK Restructuring Advisory LLP
10th Floor, 103 Colmore Row,
Birmingham B3 3AG
--and --
Damian Webb
RSM UK Restructuring Advisory LLP
25 Farringdon Street
London, EC4A 4AB
Correspondence address & contact details of case manager:
Katie Kent
RSM UK Restructuring Advisory LLP
Rivermead House
7 Lewis Court, Grove Park
Leicester, Leicestershire, LE19 1SD
Tel No: 0116 282 0550
Further details contact:
Christopher Lewis
Tel No: 0121 214 3100
-- or --
Damian Webb
Tel: 020 3201 8000
VERY GROUP: Fitch Hikes Long-Term IDR to 'B-', Outlook Negative
---------------------------------------------------------------
Fitch Ratings has upgraded The Very Group Limited's (TVG) Long-Term
Issuer Default Rating (IDR) to 'B-' from 'CCC+' and removed it from
Rating Watch Negative. The Outlook is Negative. Fitch has assigned
The Very Group Funding plc's new GBP598 million notes an expected
rating of 'B-(EXP)' with a Recovery Rating of RR4.
The new notes will refinance existing GBP575 million notes and fund
payment-in-kind (PIK) fees. As part of the refinancing, TVG's
GBP150 million revolving credit facility (RCF) will be extended by
one year and fully rank super senior to the new notes.
The upgrade reflects the one-year extension of debt thanks to the
announced refinancing and its expectations of deleveraging to below
8.0x upon the change of control (CoC), likely before end-2025. The
Negative Outlook captures tight liquidity, exacerbated by periods
of peak working-capital seasonality, and the highly utilised RCF
with further refinancing requirements before maturity in February
2027.
Key Rating Drivers
Refinancing To Accommodate Upcoming CoC: The proposed refinancing
transaction removes the imminent refinancing risk from the current
2026 maturities. In Fitch's view, it also establishes terms for
more permanent refinancing with a maturity extension to 2030, upon
a CoC in 2025. The document incorporates a deleveraging condition
upon CoC, with GBP150 million debt reduction for the restricted
group, which will improve credit metrics. It also sets pricing for
extended debt facilities for any buyer looking to acquire TVG.
Tight Liquidity: TVG's liquidity position has improved but remains
tight under the proposed refinancing with the RCF maturity extended
to February 2027. TVG has the support from its lenders, Carlyle
Finance L.L.C. (A-/Stable) and International Media Investments
(IMI), through the remaining about GBP40 million committed portion
of the GBP125 million facility. Fitch expects available resources,
including the GBP125 million undrawn RCF at end-2QFY25 (financial
year ending June 2025), to provide minimal liquidity headroom at
TVG, particularly in 3QFY25, the peak working-capital period when
suppliers are paid after the key Christmas trading period.
High Leverage: Leverage is initially slightly higher at 8.4x in
FY25 than under its previous rating case due to a PIK consent fee
leading to a higher initial notes amount by GBP23 million, with
some incremental debt from PIK interest for a short period. Based
on the terms of the transaction, Fitch expects EBITDAR leverage to
fall below 8.0x upon the deleveraging event in FY26, which is below
the rating sensitivity. Fitch sees some further scope for
deleveraging as strategic initiatives gain traction and UK consumer
spending recovers.
Mixed Trading: Its top-line forecast for FY25 follows a reported
4.5% revenue decline in 1HFY25. Fitch assumes an improving EBITDA
margin recognising an around 200bp increase yoy in 1HFY25 due to
various cost and revenue initiatives to strengthen the business.
Fitch assumes improving profitability through FY28, driven by a
better business mix and successful cost-cutting efforts, including
the renegotiated fulfilment contract with TVG's delivery service
provider, Yodel Delivery Network Limited. This improvement will be
partly offset by higher provisioning for the lending unit.
CoC to Progress: Fitch expects TVG's majority ownership to change
by end-2025, alleviating uncertainty around its current owner, the
Barclay family, and their financial difficulties. These include
large debt due in November 2025 at the entities that own TVG. The
company indicates that an agreement among shareholders and its
lenders outlines a timeline to settle the debt outside TVG's
perimeter and facilitate a consensual and orderly CoC ahead of its
current 2026 debt maturities.
Sustainable Business Model: TVG benefits from a multi-category
retail offering featuring low price points and flexible payment
solutions, with around 90% of sales on credit. Fitch expects its
lean cost structure and online-based model, supported by the
automated fulfilment centre, Skygate, to maintain distribution cost
efficiencies. However, it may face increased competition from other
omni-channel retailers and competitors offering flexible payment
solutions.
Negative FCF: Fitch expects free cash flow (FCF) to remain negative
over most of FY25-FY28, caused by an increased receivables
portfolio in working capital, to be funded by higher securitisation
debt. However, including the securitised receivables and FCF
funding, it turns positive, accounting for 1%-2% of FY26-FY28
sales. Its forecast assumes lower exceptional costs after TVG
terminates an onerous supplier contract and as transaction and
software service costs diminish. Fitch also expects the regular
GBP7.5 million annual management fee to the parent to cease after
the ownership change.
Stronger Financial Services Capitalisation: Fitch expects a modest
improvement in capitalisation for the financial services segment in
FY25, contingent on TVG maintaining asset quality and controlling
credit provisioning. Capitalisation at TVG's lending unit, Shop
Direct Finance Company Limited (SDFCL), measured by gross
debt/tangible equity, improved to 6.5x in FY24, from 8.2x in FY23,
on the accumulation of retained earnings.
Improved Governance and Group Structure: TVG's rating reflects the
group's complexity and its integrated reporting, which provides
less detail between the retail and financial services segments than
peers. TVG has improved its board composition by appointing a
non-executive chairman, alongside a new CEO and several members
with industry expertise. This has helped the company make strategic
progress, such as launching a media services offering to generate
additional income.
Peer Analysis
Fitch assesses TVG using its Ratings Navigator for Non-Food
Retailers. At the same time, Fitch consolidates its financial
services business and assess it in line with the relevant
parameters in its Non-Bank Financial Institutions Criteria, such as
asset quality and capitalisation. Non-food retail remains one of
the most disrupted sectors, even before the pandemic, due to
changing consumer preferences, technology, digitalisation and data
analytics, accelerating brand and product obsolescence,
environmental considerations and the changing face of UK high
streets.
TVG is one of the leading UK's pure digital retailers with a
complementary consumer finance proposition that is commensurate
with a 'BB' business profile. This is balanced by an aggressive
financial structure, with EBITDAR leverage at above 8.0x initially,
reducing below 8.0x following the expected deleveraging event upon
CoC.
Pure online beauty retailer THG PLC (B+/Stable) is rated two
notches above TVG, mainly due to its stronger business profile,
including its higher geographical diversification than TVG, which
is mainly exposed to the UK with a small proportion to Ireland. THG
also has a more conservative financial policy, with EBITDA leverage
projected to drop to 4.0x in 2025 thanks to a recovery in EBITDA
and debt reduction following the planned capital structure
refinancing, and a solid liquidity profile.
Key Assumptions
- Sales to decline by 4.5% in FY25, before rebounding to average
growth of 1.5% in FY26-FY28 as retail trading performance recovers
and consumer lending normalises.
- Group EBITDA margin to improve to 13.7% in FY25, from 12.1% in
FY24, trending towards 15.0% by FY28. This should be supported by
operating-efficiency initiatives and a better business mix.
- Group working capital outflow of around 1.7% of sales in FY25,
averaging 3.1% during FY26-FY28.
- Average annual capex of GBP44 million for FY25-FY26, rising to
around GBP50 million in FY27-FY28.
- Debtor book growth of 1.0% in FY25-FY26, followed by 1.2% a year
over FY27-FY28.
- Asset quality gradually normalising, with bad debt charges
returning to the pre-pandemic level of around 7.0% in FY27 (FY24:
4.8%).
Recovery Analysis
Fitch assumes that TVG would be considered a going concern in
bankruptcy and that it would be reorganised rather than liquidated.
Fitch estimates a post-restructuring EBITDA available to creditors
of GBP100 million (GBP90 million previously). This increase is due
to the structural improvement from better terms with its logistics
partners and cost saving programme.
Fitch expects the financial services segment to be restructured in
a default in tandem with the retail operations, given its strategic
integration with TVG. After the restructuring, Fitch expects cash
flow from financial services to first repay interest payments on
the GBP1.5 billion non-recourse securitisation financing, which
sits outside the restricted group. Consequently, Fitch deducts the
interest expense related to the financial services segment from
consolidated EBITDA to calculate going-concern EBITDA. The
financial services segment is part of the restricted group, but its
cash is fungible with TVG. Fitch therefore expects creditors of the
restricted group to have claims on the remaining profit after
securitisation interest payments.
Fitch applies a distressed enterprise value/EBITDA multiple of
4.5x. This reflects TVG's leading position in the UK and high brand
awareness, offset by exposure to online non-food retail sales and a
consumer lending business that is subject to regulatory risk and
below-average asset quality.
Under the terms of the announced transaction, the entire GBP150
million RCF will rank super senior. Fitch therefore ranks it ahead
of TVG's senior secured notes and other debt in its debt waterfall
analysis. However, until the new transaction is completed, only
GBP100 million of the RCF will be super senior, while GBP50 million
ranks pari passu with the secured notes. Fitch also assumes the
GBP98.2 million Carlyle/IMI facility ranks pari passu with the
senior secured notes.
Its principal waterfall analysis indicates a ranked recovery for
noteholders in the 'RR4' Recovery Rating band after deducting 10%
for administrative claims, aligning the senior secured instrument
rating with the IDR. This results in a waterfall-generated recovery
computation output of 41% for the current notes due in August 2026
and of 35% for the prospective notes.
These assumptions relate to the underlying business, excluding the
uncertain circumstances outside the restricted group.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Failure to complete the proposed refinancing and lack of credible
refinance solutions 12 months ahead of debt maturities
- Negative group consolidated FCF, excluding working capital
outflows relating to securitised debtor book growth, leading to a
permanently drawn RCF and diminishing liquidity headroom
- Group consolidated EBITDAR leverage remaining above 8.0x
- EBITDAR fixed charge coverage failing to recover from 1.4x on a
sustained basis
- Deterioration in SDFCL's capital position, with gross
debt/tangible equity above 15.0x on a sustained basis
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch could revise the Outlook to Stable on:
- Completed more permanent refinancing of capital structure (with
tenors beyond 2027)
- Visibility that group consolidated EBITDAR leverage is decreasing
below 8.0x in the next 12-18 months
- Projected positive group consolidated FCF, excluding working
capital outflows relating to securitised debtor book growth, so
that liquidity headroom is rebuilt
- Confidence that SDFCL's capital position is maintained, with
gross debt/tangible equity below 15.0x on a sustained basis
- Visibility of EBITDAR fixed charge coverage remaining above 1.4x
Fitch could upgrade the rating on:
- Completed more permanent refinancing of capital structure (with
tenors beyond 2027)
- Visibility that group consolidated EBITDAR leverage may remain
sustainably below 7.0x (6.5x net of cash) on a sustained basis
- EBITDAR fixed charge coverage remaining above 2.0x
- Sufficient liquidity for the company to comfortably operate
through its seasonal working capital peaks
- Positive group consolidated FCF margin in the low-to-mid single
digits
- SDFCL's capital position with gross debt/tangible equity below
10x on a sustained basis
Liquidity and Debt Structure
TVG had on-balance-sheet cash of around GBP33 million, after Fitch
restricted GBP20 million for operational requirements, with a fully
drawn RCF at FYE24. Higher interest costs and working capital needs
drove up liquidity consumption in FY24.
Fitch expects minimal liquidity headroom during periods of peak
working capital seasonality, particularly in 3Q25, supported by its
RCF and around GBP40 million undrawn portion of GBP125 million
Carlyle/IMI facility.
Over the rating horizon to FY28, Fitch expects on-balance-sheet
cash to build up on improved operating performance, leading to
higher available liquidity.
Upon completion of the refinancing transaction, TVG will have
extended the maturity of its RCF and senior secured notes by one
year. This will be followed by an extension to 2030 embedded in the
notes documentation following the deleveraging event upon CoC. The
company is reliant on the RCF, with remaining refinancing risk
ahead of maturity in February 2027.
Issuer Profile
TVG is the UK's leading pure digital retailer, as well as one of
the largest unsecured lenders in the UK with a complementary
consumer finance offering.
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 Very Group Limited has an ESG Relevance Score of '4' for Group
Structure due to group complexity and its integrated reporting
providing less detail between retail and financial services
segments than peers and a history of large related-party
transactions. This has a negative impact on the credit profile, and
is relevant to the rating[s] in conjunction with other factors.
The Very Group Limited has an ESG Relevance Score of '4' for
Governance Structure due to ownership concentration, which has a
negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
The Very Group
Funding plc
senior
secured LT B-(EXP) Expected Rating RR4
senior
secured LT B- Upgrade RR4 CCC+
The Very Group
Limited LT IDR B- Upgrade CCC+
*********
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