/raid1/www/Hosts/bankrupt/TCREUR_Public/250418.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, April 18, 2025, Vol. 26, No. 78
Headlines
D E N M A R K
LIQTECH INTL: Reports $10.3M Loss, 19% Revenue Drop in 2024
F R A N C E
CASINO GUICHARD-PERRACHON: Fitch Affirms 'CCC+' Long-Term IDR
GINKGO SALES 2022: DBRS Confirms B Rating on Class F Notes
SNF GROUP: Moody's Affirms 'Ba1' CFR, Alters Outlook to Positive
I R E L A N D
ANCHORAGE CAPITAL 2021-4: Moody's Ups Rating on Cl. E Notes to Ba2
ARCANO EURO I: S&P Assigns Prelim B- (sf) Rating to Cl. F Notes
MULCAIR SECURITIES NO. 4: S&P Puts 'B-' Prelim Rating to F Notes
I T A L Y
EVOCA SPA: Fitch Affirms 'B' Long-Term IDR, Outlook Stable
GOLDEN GOOSE: Fitch Affirms Then Withdraws 'B+' IDR, Outlook Stable
N E T H E R L A N D S
TMF SAPPHIRE: Moody's Affirms 'B2' CFR, Outlook Remains Stable
S P A I N
GRUPO ANTOLIN-IRAUSA: Moody's Alters Outlook on B3 CFR to Negative
TDA CAM 7: S&P Raises Class B Notes Rating to 'BB (sf)'
TDA CAM 9: S&P Affirms 'D (sf)' Rating on Class D Notes
T U R K E Y
VESTEL ELEKTRONIK: Moody's Cuts CFR to Caa1, Alters Outlook to Neg.
U N I T E D K I N G D O M
ALBA 2006-2: Fitch Affirms 'CCCsf' Rating on Class F Notes
ASIMI FUNDING 2025-1: DBRS Gives Prov. B (low) Rating to F Notes
ATLAS FUNDING 2025-1: DBRS Confirms BB(high) Rating on E Notes
AUBURN 15: Fitch Affirms B+sf Rating on Cl. F Notes
CONSTELLATION AUTOMOTIVE: Fitch Affirms Then Withdraws 'CCC+' IDR
PETROFAC LTD: Plan Meetings Scheduled for April 23
X X X X X X X X
[] BOOK REVIEW: The Turnaround Manager's Handbook
- - - - -
=============
D E N M A R K
=============
LIQTECH INTL: Reports $10.3M Loss, 19% Revenue Drop in 2024
-----------------------------------------------------------
LiqTech International, Inc. filed with the U.S. Securities and
Exchange Commission its Annual Report on Form 10-K reporting a net
loss of $10,345,258 for the year ended December 31, 2024, compared
to $8,571,145 for the comparable period in 2023, representing an
increase in net loss of $1,774,113, or 20.7%.
Revenue for the year ended December 31, 2024, was $14,604,618
compared to $18,001,652 for the same period in 2023, representing a
decrease of $3,397,034, or 18.9%.
As of December 31, 2024, the Company had $32,427,479 in total
assets, $15,773,387 in total liabilities, and a total stockholders'
equity of $16,654,092.
A full-text copy of the Company's Form 10-K is available at:
https://tinyurl.com/mw4njpnb
About LiqTech International
Ballerup, Denmark-based LiqTech International, Inc. is a clean
technology company that provides state-of-the-art gas and liquid
purification products by manufacturing ceramic silicon carbide
filters and membranes as well as developing industry-leading and
fully automated filtration solutions and systems.
===========
F R A N C E
===========
CASINO GUICHARD-PERRACHON: Fitch Affirms 'CCC+' Long-Term IDR
-------------------------------------------------------------
Fitch Ratings has affirmed Casino, Guichard-Perrachon S.A.'s
Long-Term IDR at 'CCC+'. Fitch has also affirmed the reinstated
senior secured notes issued by subsidiary Quatrim S.A.S. at 'B+'
with a Recovery Rating of 'RR1' and the reinstated EUR1,410 million
senior secured term loan issued by Casino at 'CCC-'/RR6.
The affirmation of the IDR reflects Fitch's view that a year after
restructuring, the execution risk of turning around Casino's
business performance remains high. These weaknesses, together with
the ensuing cash flow absorption, prevail over the company's lower
debt burden after restructuring, improved liquidity and receipt of
cash proceeds from divestments.
Fitch believes the French food retail market remains competitive
and Casino's market position, trading relations and organisational
profile have been affected by prolonged uncertainty. Fitch
therefore expects Casino to still face material challenges in 2025
and consider there is limited visibility on the amount of cash
needed to relaunch the business.
Key Rating Drivers
Slower Turnaround Expected: 2024 results demonstrated that revenue
and profitability turnaround will be slower than anticipated by its
previous rating case, with both French retail environment and
business model restructuring challenges. Fitch now expects the
reversal to be slower and more uncertain, with revenues down 5.4%
in 2024, and the EBITDA margin down to just 1.3%. The revised Fitch
case assumes flat revenues in 2025, and growth of 0.8%-1%
thereafter.
Lower Forecast EBITDA Margin: The 2024 EBITDA margin of 1.3%
includes dis-synergies of around EUR65 million resulting from
disposals, elimination of which Fitch assumes to have lower
execution risk in 2025. Fitch assumes EUR100 million a year of
further management-identified cost-efficiency improvements should
have relatively low execution risk. However, Fitch now expects the
EBITDA margin to reach 2023 levels of 3.4% only in 2026, improving
further to 4.5% by 2028 but based on delivering identified cost
improvements and synergies. Its forecast 2028 EBITDA is around
EUR400 million, below the EUR500 million targeted by company in its
Renouveau 2028 programme.
Consistently Negative FCF Forecast: Pressure on profitability from
investments in regaining market share, plus high capex aimed at
renovating stores, put significant pressure on cash flow
generation. Fitch forecasts Casino to remain free cash flow (FCF)
negative over at least 2025-2028, with a negative FCF margin of
4.7% in 2025. This should gradually improve towards negative 0.9%
in 2028. Slower margin improvement and higher capex would further
weigh on the FCF margin and Casino's credit profile. The company
has sufficient liquidity to cover its assumed projected outflows
over 2025-2026.
Healthier Continuing Operations, Leverage: Casino's new operational
perimeter consists of its strongest operations in France, focused
on the attractive convenience channel, after divestment of the
loss-making hypermarket and supermarket format, which would have
required large turnaround investment. Its rating case projects
lower debt and the positive but low EBITDA margin of its existing
business should help Casino maintain EBITDAR leverage at around
6.0x in 2025, followed by gradual improvement towards 4.0x in
2027-2028. This is under its assumption of a successful turnaround
plan. However, fixed charge cover remains weak, at 0.7x in 2024,
moving towards 1.0x in 2025.
Refinancing Risk: Fitch believes that even with lower leverage,
refinancing risk remains high due to the prospects of negative FCF
generation, which management could mitigate with a potential capex
slowdown. The reinstated term loan is only due in March 2027, but
lack of visibility on a decisive EBITDA recovery in early 2026
could open the risk of market options not being available for its
refinancing. This could force lenders into accepting an adverse
change in terms to avoid a default by the company, which Fitch
could view as a distressed debt exchange.
Divestitures Reducing Quatrim Debt: Casino actively disposed part
of its owned real estate in 2024, reducing the outstanding Quatrim
bonds to EUR300 million. Further real estate disposals, mostly
completed by the end of 1Q25, should reduce the outstanding Quatrim
debt further to EUR150 million-160 million before it becomes
current in 2026.
Changes to Business Profile Assessment: Fitch applies its
Food-Retail Navigator framework to assess Casino's business
profile. After the restructuring the company has smaller scale,
with a reduction in diversification by both format and geography
that is commensurate with the 'B' rating category, compared with
its business profile assessment of 'BB' before the company's
difficulties started in 2023. Casino's store portfolio still has
strong and well-recognised banners dedicated to proximity
(convenience and premium) across France and commands a strong share
of the food retail market in the Paris region.
Peer Analysis
Casino is smaller and has more limited geographic diversification
than international food retail chains such as Tesco PLC
(BBB-/Stable).
Casino's business risk profile is positioned weakly relative to
food retailers in the 'B' category such as Bellis Finco plc (ASDA,
B+/Stable), Market Holdco 3 Limited (Morrisons, B/Positive), WD FF
Limited (Iceland, B/Stable) and Picard Bondco S.A. (B/Stable), due
to comparable EBITDAR but higher execution risks in its business
turnaround and deleveraging. Casino also has weaker profitability,
FCF margin, financial leverage and coverage metrics. These
differences in business profile and leverage result in a two- to
three-notch differential in its IDR relative to peers.
Key Assumptions
- Flat sales evolution in 2025, followed by 0.8%-1% growth in
2026-2028
- Very slow recovery in profitability, with EBITDA margin improving
to 1.9% in 2025 and gradually improving to 4.5% by 2028
- Annual operating restructuring costs and other non-recurring cash
outflows for 2025-2027 averaging EUR30 million a year
- Working-capital outflows of 0.2-0.3% of revenues in 2025-2026
followed by some reversal in 2027 and neutral cash flow impact
thereafter
- Average annual capex of EUR300 million
- Disposals of assets available for sale as of end-2024 throughout
2025-2027 with proceeds of around EUR230 in 2025-2026 used for
reduction of outstanding Quatrim debt
Recovery Analysis
The recovery analysis assumes that Casino would be considered a
going concern (GC) in bankruptcy and that it would be reorganised
rather than liquidated in a default. Fitch has assumed a 10%
administrative claim in the recovery analysis.
Fitch has applied a distressed enterprise value (EV)/EBITDA of
4.5x, in line with comparable businesses and reflecting the
maturity and characteristics of Casino's businesses under the
restricted group.
In its bespoke GC recovery analysis Fitch considers an estimated
post-restructuring EBITDA available to creditors of EUR290 million,
which is broadly aligned with its forecast EBITDA for the
continuing business in 2026, once the Renouveau 2028 strategy gains
traction.
Fitch has assumed that Casino's debtholders would get an additional
value of about EUR103 million in connection with assets available
for sale, including real estate and a minority equity stake in
Companhia Brasileira de Distribuicao S.A. and accounting for
confirmed disposals as of 1Q25.
Its GC assumptions would result in an outstanding recovery rate for
Casino's Quatrim debt leading to a Recovery Rating of 'RR1',
indicating a B+' instrument rating. Following the payment
waterfall, its assumptions result in no recoveries for the
reinstated EUR1.4 billion senior secured term loan issued by
Casino, leading to an 'RR6' and 'CCC-' instrument rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Failure to turn around business profitability resulting in EBITDA
margins consistently below 3%
- EBITDAR fixed charge cover below 1.1x
- Consistently negative FCF with limited prospects for improvement
- Liquidity deterioration as underlined by permanently low
availability in its revolving credit facility
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Visibility of sustainable revenue growth in low single digits
- Clear deleveraging trend leading to EBITDAR leverage consistently
below 5.0x and mitigating refinancing risk
- EBITDAR fixed charge cover trending above 1.3x
- FCF margin trending to neutral levels
Liquidity and Debt Structure
Casino's liquidity at end-2024 remained sufficient to cover sharply
negative FCF, with a cash balance of around EUR0.8 billion (of
which EUR0.5 billion is considered available according to
reinstated debt documentation), supported by EUR0.7 billion of
undrawn reinstated revolving credit facility and EUR0.3 billion of
undrawn bilateral facilities at opco level. Current maturities at
end-1Q25 are represented by opco debt maturing in March 2026.
The debt maturity profile remains concentrated in 2027, with the
extension of March 2026 maturities to 2027 subject to compliance
with covenants. Given the consistently negative FCF forecast under
the Fitch case, there is a high risk of Casino needing to refinance
or extend the all the reinstated debt, adjusted for Quatrim notes
prepayment, from asset disposals.
Issuer Profile
Casino is a major French food retailer operating in convenience
stores and wholesale e-commerce retail.
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
----------- ------ -------- -----
Quatrim S.A.S.
senior secured LT B+ Affirmed RR1 B+
Casino, Guichard-
Perrachon S.A. LT IDR CCC+ Affirmed CCC+
senior secured LT CCC- Affirmed RR6 CCC-
GINKGO SALES 2022: DBRS Confirms B Rating on Class F Notes
----------------------------------------------------------
DBRS Ratings GmbH upgraded and confirmed its credit ratings on the
bonds issued by Ginkgo Sales Finance 2022 (the Issuer), as
follows:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AA (high) (sf) from AA (sf)
-- Class C Notes upgraded to AA (low) (sf) from A (high) (sf)
-- Class D Notes confirmed at BBB (high) (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (sf)
The credit ratings of the Class A and Class B Notes address the
timely payment of scheduled interest and the ultimate repayment of
principal by the legal final maturity date in November 2049. The
credit ratings of the Class C, Class D, Class E, and Class F Notes
address the ultimate payment of scheduled interest while the class
is subordinated and the timely payment of scheduled interest while
the senior-most class outstanding, and the ultimate repayment of
principal by the legal final maturity date.
CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the
transaction and are based on the following analytical
considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and
losses as of the February 2025 payment date.
-- Probability of default (PD), loss given default (LGD), and
expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the rated Notes to
cover the expected losses at their respective credit rating level.
The transaction is a securitization of fixed-rate, unsecured,
amortizing consumer loans granted to individuals domiciled in
France for the purchase of home equipment and recreational
vehicles, and the transaction is serviced by Credit Agricole
Consumer Finance SA (CACF).
PORTFOLIO PERFORMANCE
As of February 2025 payment date, loans that were two to three
months in arrears represented 0.2% of the outstanding portfolio
balance, down from 0.3% at last annual review one year ago. The
90-plus-day delinquency ratio was 0.7%, slightly down from 0.8% and
the cumulative default ratio increased to 1.4% from 0.8% in the
same period.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining
pool of receivables and updated its base-case PD and LGD
assumptions at the B (low) (sf) credit rating level at 4.8% and
60.3%, respectively, based on the current portfolio composition and
updated historical information received in the context of a more
recent transaction from the same originator.
CREDIT ENHANCEMENT
The credit enhancement to the rated notes consists of the
subordination of their respective junior class of notes. As of the
February 2025 payment date, credit enhancement to the Class A,
Class B, Class C, Class D, Class E, and Class F notes were 25.6%,
18.5%, 12.4%, 7.6%, 4.7%, and 3.6%, respectively, up from 18.3%,
13.2%, 8.9%, 5.4%, 3.4%, and 2.6%, respectively, at closing.
The transaction includes Class A and Class B liquidity reserve
funds that are available to the Issuer in restricted scenarios
where the interest and principal collections are not sufficient to
cover the shortfalls in senior expenses, swap payments, and
interests on the Class A Notes (available from both the Class A and
Class B liquidity reserves) and the Class B Notes (only available
from the Class B liquidity reserve). The Class A and Class B
liquidity reserve funds were both at their target levels of EUR 2.0
million and EUR 4.6 million, respectively, as of the February 2025
payment date.
CACF acts as the account bank for the transaction. Based on
Morningstar DBRS' private credit rating on CACF, the downgrade
provisions outlined in the transaction documents, and other
mitigating factors inherent in the transaction structure,
Morningstar DBRS considers the risk arising from the exposure to
the account bank to be consistent with the AAA (sf) credit rating
on the Class A Notes, as described in Morningstar DBRS' "Legal and
Derivative Criteria for European Structured Finance Transactions"
methodology.
CACF acts also as the swap counterparty for the transaction.
Morningstar DBRS' private credit rating on CACF is consistent with
the first rating threshold as described in Morningstar DBRS' "Legal
and Derivative Criteria for European Structured Finance
Transactions" methodology.
Notes: All figures are in euros unless otherwise noted.
SNF GROUP: Moody's Affirms 'Ba1' CFR, Alters Outlook to Positive
----------------------------------------------------------------
Moody's Ratings affirmed SNF Group's (SNF) Ba1 long term corporate
family rating and Ba1-PD probability of default rating.
Concurrently, Moody's affirmed the Ba1 ratings of the company's
senior unsecured notes. The outlook was changed to positive from
stable.
RATINGS RATIONALE
The positive outlook on SNF's rating reflects the company's track
record of conservative financial policies, including maintaining
Moody's adjusted gross debt/EBITDA below 3x since 2022 and the
historical absence of dividends, and Moody's expectations for this
conservative policy to continue. Furthermore, the company has
demonstrated stability through economic cycles and grown to almost
EUR5 billion of revenue while maintaining EBITDA margins in the mid
to high teens. Due to the recent decline in oil prices, Moody's
expects SNF's oil and gas end markets to weaken, but for credit
metrics and the fundamental stability and growth trajectory to
remain sound. The positive outlook also reflects the expectation
that SNF will maintain its Moody's adjusted FCF around break-even
levels in keeping with its historical pattern.
The affirmation of SNF's ratings reflects its leading position in
polyacrylamide (PAM) used in the water treatment processes, mineral
extraction, paper process, and the oil and gas industry, with
market share estimated to be around 57%. The defensive water
treatment markets for municipalities and industrial waste-water
treatment combined account for around 42% of revenues in 2024.
SPCM's balanced global footprint with close relationships with
customers and its strong track record of organic growth and good
credit metrics also support the rating.
The ratings however are constrained by the company's exposure to
raw material price fluctuations, particularly propylene and
acrylonitrile, both of which are oil based; the competition from
substantially larger and financially more flexible companies, such
as BASF (SE) (BASF, A3 stable) and Ecolab Inc. (A3 stable); its
exposure to the cyclical oil and gas production end market (around
24% of 2024 sales); and a capital spending program aimed at
expanding capacity, which can lead to periods of negative FCF.
For the twelve months ended December 2024, Moody's estimates SNF's
Moody's adjusted debt/EBITDA was around 2.5x and EBITDA/Interest
coverage over 10x. These metrics incorporate Moody's standard
adjustments for pensions and leases. Over recent years the
adjustments have translated to around 0.75x of additional leverage
on a Moody's adjusted basis compared to the company defined
target.
Moody's expects SNF's EBITDA to decline in 2025 as the company
passes through lower raw material costs to customers and also has
higher core SG&A costs compared to 2024. It also assumes some
weakness in oil and gas markets. Moody's nevertheless expect the
company to remain well positioned for its current rating category.
A prolonged weakening of the oil and gas end-market could represent
some downside risk to the forecast.
LIQUIDITY ANALYSIS
SNF has very good liquidity. As of December 2024, the company had
roughly EUR495 million cash on balance sheet. Proforma for its
March 2025 bond issuance, SNF had full access to its committed
EUR750 million revolving credit facility (RCF) due in June 2029.
Moody's expects these sources, in combination with expected FFO
generation of around EUR600 million, will be sufficient to
accommodate swings in working capital, upcoming debt maturities and
capital spending, which Moody's estimates to also be around EUR525
million in 2024. Moreover, more than half of SNF's capital spending
is dedicated toward expansion, giving the company flexibility to
reduce spending if needed, and each individual project tends to be
fairly small in the context of the overall budget.
The company's maturity profile is reasonably spread with the next
major maturities are in October 2026 and March 2027 when its EUR180
million EIB loan and $350 million senior unsecured bonds come due.
Moody's expects the company to address these maturities at least 12
months prior to their due dates.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure would likely result from: (i) continued
conservative financial policies which includes the absence of
dividends, (ii) Moody's adjusted debt/EBITDA at or below 3.0x,
(iii) RCF/net debt consistently in mid-20% range or better.
Continued diversification of the company's geographic presence,
product offerings and end-markets would also be supportive of the
company's business profile and a higher rating.
Negative rating pressure would likely result from: (i) deviation
from the company's conservative financial policies, (ii) Moody's
adjusted debt/EBITDA consistently above 3.75x, (ii) strongly
negative FCF for a prolonged period or RCF/net debt below 20%,
(iii) a weakening of the company's liquidity, or (iv) structural
decline in the company's EBITDA margin, reflecting a decrease in
its ability to adjust pricing or increasing competitive pressure.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Chemicals
published in October 2023.
COMPANY PROFILE
SNF Group, headquartered in Andrezieux, France, is the world's
largest producer of PAM. PAM is a water-soluble chemical used as a
flocculant to separate suspended solids from liquids, as a
viscosity modifier to alter the thickness of liquids and as a drag
reducer to decrease the pressure drop in segments of pipes. The
group generated sales of around EUR4.7 billion in 2024.
=============
I R E L A N D
=============
ANCHORAGE CAPITAL 2021-4: Moody's Ups Rating on Cl. E Notes to Ba2
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Anchorage Capital Europe CLO 2021-4 DAC:
EUR20,200,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Upgraded to Aaa (sf); previously on Mar 25, 2021 Definitive
Rating Assigned Aa2 (sf)
EUR28,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Upgraded to Aaa (sf); previously on Mar 25, 2021 Definitive Rating
Assigned Aa2 (sf)
EUR26,600,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2034, Upgraded to Aa3 (sf); previously on Mar 25, 2021
Definitive Rating Assigned A2 (sf)
EUR34,700,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2034, Upgraded to Baa2 (sf); previously on Mar 25, 2021
Definitive Rating Assigned Baa3 (sf)
EUR28,800,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2034, Upgraded to Ba2 (sf); previously on Mar 25, 2021
Definitive Rating Assigned Ba3 (sf)
Moody's have also affirmed the ratings on the following notes:
EUR265,500,000 Class A Senior Secured Floating Rate Notes due
2034, Affirmed Aaa (sf); previously on Mar 25, 2021 Definitive
Rating Assigned Aaa (sf)
EUR12,600,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2034, Affirmed B3 (sf); previously on Mar 25, 2021
Definitive Rating Assigned B3 (sf)
Anchorage Capital Europe CLO 2021-4 DAC, issued in March 2021, is a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured European loans. The portfolio is
managed by Anchorage CLO ECM, L.L.C. The transaction's reinvestment
will end in April 2025.
RATINGS RATIONALE
The rating upgrades on the Class B-1, B-2, C, D and E notes are
primarily a result of the benefit of the shorter period of time
remaining before the end of the reinvestment period in April 2025.
The affirmations on the ratings on the Class A and Class F 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: EUR438.6m
Defaulted Securities: EUR6.4m
Diversity Score: 57
Weighted Average Rating Factor (WARF): 2933
Weighted Average Life (WAL): 4.8 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.8%
Weighted Average Coupon (WAC): 5.6%
Weighted Average Recovery Rate (WARR): 43.4%
Par haircut in OC tests and interest diversion test: none
The default probability derives from the credit quality of the
collateral pool and Moody's expectations of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into Moody's cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, 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 April 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 by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
-- Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which could
lengthen as a result of the manager's decision to reinvest in new
issue loans or other loans with longer maturities, or participate
in amend-to-extend offerings. 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. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
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.
ARCANO EURO I: S&P Assigns Prelim B- (sf) Rating to Cl. F Notes
---------------------------------------------------------------
S&P Global Ratings assigned preliminary ratings to Arcano Euro CLO
I DAC's class A, B, C, D, E, and F notes. At closing, the issuer
will also issue unrated subordinated notes.
The preliminary ratings assigned to Arcano Euro CLO I DAC's notes
reflect our assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio benchmarks
S&P weighted-average rating factor 2,810.50
Default rate dispersion 407.25
Weighted-average life (years) 5.19
Weighted-average life (years) extended
to cover the length of the reinvestment period 5.19
Obligor diversity measure 105.84
Industry diversity measure 21.53
Regional diversity measure 1.11
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.50
Target 'AAA' weighted-average recovery (%) 37.62
Target weighted-average spread (net of floors; %) 3.80
Target weighted-average coupon (%) 3.78
Rationale
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments. The portfolio's
reinvestment period will end approximately 5.01 years after
closing.
S&P said, "At closing, we expect the portfolio to be
well-diversified, primarily comprising broadly syndicated
speculative-grade senior-secured term loans and senior-secured
bonds. Therefore, we have conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR435 million target par
amount, the actual weighted-average spread (3.80%), the actual
weighted-average coupon (3.78%), and the target weighted-average
recovery rates calculated in line with our CLO criteria for all
classes of notes. We applied various cash flow stress scenarios,
using four different default patterns, in conjunction with
different interest rate stress scenarios for each liability rating
category."
Until the end of the reinvestment period on April 25, 2030, the
collateral manager may substitute assets in the portfolio as long
as S&P's CDO Monitor test is maintained or improved in relation to
the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain--as established
by the initial cash flows for each rating--and compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, if the initial ratings are
maintained.
S&P said, "Under our structured finance sovereign risk criteria, we
consider the transaction's exposure to country risk sufficiently
mitigated at the assigned preliminary ratings.
"At closing, we expect the transaction's documented counterparty
replacement and remedy mechanisms to adequately mitigate its
exposure to counterparty risk under our counterparty criteria.
"We expect the transaction's legal structure and framework to be
bankruptcy remote, in line with our legal criteria.
"The CLO will be managed by Arcano Loan Advisors S.L., and the
maximum potential rating on the liabilities is 'AAA' under our
operational risk criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe the preliminary ratings
are commensurate with the available credit enhancement for the
class A to F notes. Our credit and cash flow analysis indicates
that the available credit enhancement for the class B to E notes
could withstand stresses commensurate with higher ratings than
those assigned. However, as the CLO will be in its reinvestment
phase starting from closing--during which the transaction's credit
risk profile could deteriorate--we have capped our preliminary
ratings on the notes.
"Given our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our preliminary ratings
are commensurate with the available credit enhancement for all the
rated classes of notes.
"In addition to our standard analysis, to indicate how rising
pressures among speculative-grade corporates could affect our
ratings on European CLO transactions, we also included the
sensitivity of the ratings on the class A to E notes based on four
hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance
S&P said, "We regard the transaction's exposure to environmental,
social, and governance (ESG) credit factors as broadly in line with
our benchmark for the sector. Primarily due to the diversity of the
assets within CLOs, the exposure to environmental and social credit
factors is viewed as below average, while governance credit factors
are average. For this transaction, the documents prohibit or limit
certain assets from being related to certain activities.
Accordingly, since the exclusion of assets from these activities
does not result in material differences between the transaction and
our ESG benchmark for the sector, no specific adjustments have been
made in our rating analysis to account for any ESG-related risks or
opportunities."
Ratings list
Prelim. Prelim. Amount Credit
Class rating* (mil. EUR) Interest rate§ enhancement (%)
A AAA (sf) 261.00 Three/six-month EURIBOR 40.00%
plus 1.26%
B AA (sf) 56.50 Three/six-month EURIBOR 27.01%
plus 1.85%
C A (sf) 26.10 Three/six-month EURIBOR 21.01%
plus 2.60%
D BBB- (sf) 30.50 Three/six-month EURIBOR 14.00%
plus 3.40%
E BB- (sf) 19.58 Three/six-month EURIBOR 9.50%
plus 5.36% 9.50%
F B- (sf) 13.00 Three/six-month EURIBOR 6.51%
plus 8.15%
Sub notes NR 36.40 N/A N/A
*The preliminary ratings assigned to the class A and B notes
address timely interest and ultimate principal payments. The
preliminary ratings assigned to the class C, D, E, and F notes
address ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
MULCAIR SECURITIES NO. 4: S&P Puts 'B-' Prelim Rating to F Notes
----------------------------------------------------------------
S&P Global Ratings has assigned its preliminary credit ratings to
Mulcair Securities No. 4 DAC's class A, B-Dfrd, C-Dfrd, D-Dfrd,
E-Dfrd, and F-Dfrd notes. At closing, Mulcair will also issue
unrated class Z and X notes.
The pool contains EUR213.7 million first-lien residential mortgage
loans located in Ireland. The loans were originated by The Governor
and Company of the Bank of Ireland, Bank of Ireland Mortgage Bank,
and ICS Building Society. The pool comprises 74.1% buy-to-let loans
and 25.9% owner-occupied properties. The assets were previously
securitized in the Mulcair Securities No. 3 DAC transaction that
closed in April 2022.
S&P said, "Our preliminary ratings address the timely payment of
interest and the ultimate payment of principal on the class A
notes. Our preliminary ratings on the class B-Dfrd to F-Dfrd
interest-deferrable notes address the ultimate payment of interest
and principal. Our ratings do not address the payment of additional
note payment amounts on the class D-Dfrd, E-Dfrd, and F-Dfrd
notes.
"At closing, the issuer will use the issuance proceeds to purchase
the beneficial interest in the mortgage loans from the seller. The
issuer grants security over all its assets in favor of the security
trustee. We consider the issuer to be a bankruptcy-remote entity,
and we have received preliminary legal opinions that indicate that
the sale of the assets would survive the seller's insolvency. We
expect to receive confirmation of the legal opinions before
closing."
A fully funded senior reserve fund is available to meet senior
fees, class X payments, and revenue shortfalls on the class A
notes. A fully funded general reserve fund is available to meet
revenue shortfalls on the class B-Dfrd to F-Dfrd notes. The funds
will provide credit enhancement to the rated notes.
An interest rate cap hedges exposure to liquidity risks in a rising
interest rate scenario.
Almost all of the borrowers (98%) have had their loans restructured
in the past. In a stressed economic environment, there is increased
probability of these borrowers going back into arrears.
Additionally, 20.5% of the loans are currently at least one month
in arrears, with 11.8% of these borrowers being more than three
months in arrears.
Bank of Ireland will act as servicer for all of the loans in the
transaction from the closing date. S&P has considered this in light
of our operational risk criteria, and it does not constrain our
ratings.
There are no rating constraints in the transaction under S&P's
structured finance sovereign risk criteria.
Preliminary ratings
Class Prelim. Rating Class size (%)
A AAA (sf) 85.00
B-Dfrd* AA (sf) 4.00
C-Dfrd* A- (sf) 2.50
D-Dfrd* BBB-(sf) 2.00
E-Dfrd* BB (sf) 1.00
F-Dfrd* B- (sf) 1.00
Z NR 4.50
X NR 4.00
*S&P's preliminary rating on this class considers the potential
deferral of interest payments.
NR--Not rated.
=========
I T A L Y
=========
EVOCA SPA: Fitch Affirms 'B' Long-Term IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed Italian-based EVOCA S.p.A.'s Long-Term
Issuer Default Rating (IDR) at 'B' with a Stable Outlook. Fitch has
also affirmed its EUR550 million senior secured notes at 'B' with a
Recovery Rating of 'RR4'.
The affirmation reflects a broadly stable financial profile with
slower-than-anticipated deleveraging in its updated rating case
offset by better-than-anticipated free cash flow (FCF) generation
in 2024, which Fitch expects to remain broadly stable over its
forecast horizon of 2025-2028, as well as margin improvement due to
the company's ongoing optimisation programme. Deleveraging has been
delayed in 2024 by lower-than-expected revenue growth, fuelled by
higher green coffee prices affecting the investment decision of
Evoca's customers, which now leaves little rating headroom.
Evoca has a solid position in its niche industry, a
well-diversified customer base and long-term relationships,
moderate service revenue that supports EBITDA generation during
downturns, and good geographical diversification by country, but
concentrated in Europe, which helps support the Stable Outlook.
Key Rating Drivers
Constrained Deleveraging: Leverage continued to decrease to 6.1x at
end-2024 from 6.5x at end-2023, but this was higher than the
forecast of 5.6x due to lower revenue in the year reducing EBITDA.
Fitch still expects leverage to fall in 2025-2028, although at a
slower pace, as Fitch has lowered its revenue growth assumption due
to uncertain macroeconomic conditions. Fitch expects EBITDA
leverage to remain outside the negative leverage sensitivity of
5.5x in 2025 and be on the cusp in 2026. Any further delays in
deleveraging would put pressure on the rating.
Weaker Performance: Revenue decreased in 2024 by 4.6% yoy due to a
sharp rise in green coffee prices, which constrained Evoca's
customers' capex from 2H24. Evoca believes this is only causing a
postponement in investment, and it has not seen any order
cancellations so far. However, this has continued into 1Q25 as
green coffee prices have remained relatively high, which, on top of
other current macroeconomic challenges, has led Fitch to forecast a
small reduction in revenue in 2025 before returning to low
single-digit growth in 2026.
FCF Margin to Remain Solid: Evoca's FCF margin was 4.2% in 2024 as
positive working capital inflow from changing supplier terms
offsets higher capex for the company's optimisation programme. In
2025, Fitch forecasts a one-off higher working capital outflow
driven by specific inventory-related projects, causing the FCF
margin to drop to 1.8%, which is still adequate for the rating.
From 2026, Fitch expects the group to start generating a
sustainable solid FCF margin of over 4%, underpinned by lower capex
(reflecting an asset-light business model), a better EBITDA margin
and no dividend payments.
Ongoing Growth in Profitability: Evoca's EBITDA margin reached
21.4% in 2024, underpinned by the company's optimisation programme
that started in September 2023 as well as by price revisions made
at the beginning of 2024. Fitch expects the EBITDA margin to reach
22.6% in 2025 and 23.7% in 2026 through the continued
implementation of the programme, which has achieved higher benefits
in 2024 than anticipated, and further cost revisions. The group's
deleveraging capacity is now reliant on profitability improvement,
as forecast revenue growth is lower; otherwise, it could lead to a
negative rating action.
Adequate Business Stability: Business risk is high, as the majority
of contracts with customers are short-term, limiting revenue
visibility. This is mitigated by moderate spare parts and service
revenue (22% of total revenue in 2024), which is typically more
profitable and supports the group's cash flow generation during a
downturn.
Solid Market Position: Evoca is a leading global manufacturer of
professional coffee machines and vending machines in a fragmented
market. Technology content is less meaningful in comparison with
large industrial manufacturers, but the group's solid market
position and well-known brands act as a barrier to entry and
provide it with a low customer churn rate.
Solid Diversification: The group's business profile is
characterised by solid geographical diversification across Europe
as well as good customer diversification. About 70% of revenue in
2024 was exposed to Europe, but this was well-diversified by
country. In addition, 23% of revenue is derived from the Americas
and the remainder from Asia-Pacific and other regions. The group
benefits from a well-diversified customer base, with the top 10
customers contributing 33% of total revenue in 2024. Still, Evoca
has narrow product diversification.
Peer Analysis
Evoca has leading market positions in the niche professional coffee
machine market, supported by its diversified geographical footprint
and good customer diversification. Similar to Flender International
GmbH (B/Stable) and Ammega Group B.V. (B-/Stable), Evoca's business
profile is limited, with a less-diversified product range than at
large industrial peers. Still, Evoca's business profile is
supported by moderate exposure to spare parts and service revenue,
which is comparable to Flender's and Ahlstrom Holdings 3 Oy's
(B+/Stable), but lower than TK Elevator Holdco GmbH's (B/Stable).
Similar to Ahlstrom and Ammega, the group has a well-diversified
customer base.
Evoca's financial profile is characterised by a healthy EBITDA
margin, which is higher than that of some Fitch-rated diversified
industrial peers, such as Flender, TK Elevator and Ahlstrom.
Evoca's FCF margin was over 4% in 2023-2024, and Fitch forecasts it
to remain relatively stable, unlike peers ams-OSRAM AG (B+/Stable),
Flender, TK Elevator and Ahlstrom, which have recently seen
volatile FCF margins.
Evoca's expected high EBITDA leverage of 5.9x at end-2025 is
commensurate with that of Flender, but higher than that of
higher-rated peers Ahlstrom and ams-OSRAM.
Key Assumptions
- Revenue to grow by an average of 1% during 2025-2028
- Optimisation programme and product shift to drive the EBITDA
margin to almost 23% in 2025 and over 24% by 2027
- Capex at EUR21 million a year in 2025-2028
- No M&A activity until 2028
- No dividend payments until 2028
Recovery Analysis
- The recovery analysis assumes that Evoca would be considered a
going-concern (GC) in bankruptcy and reorganised rather than
liquidated. This is driven by its leading position in a niche
market, long record of sound operating performance, sustainable
relationships with customers and historically healthy EBITDA
generation.
- Fitch estimates the GC value available for creditor claims at
about EUR375 million, based on a GC EBITDA of EUR75 million. The GC
EBITDA reflects the loss of a number of its largest customers,
increased competition and the postponed replacement cycle of
Evoca's products used by its customers. The assumption also
reflects corrective measures taken in the reorganisation to offset
the adverse conditions that trigger default.
- Fitch assumes a 10% administrative claim.
- Fitch uses a 5.0x EBITDA enterprise value (EV) multiple to
calculate a post-reorganisation valuation, which is comparable with
multiples applied to some diversified industrials peers. This
multiple reflects Evoca's limited product diversification, despite
geographic and customer diversification supporting its market
leadership.
- Fitch deducts about EUR3 million from the EV relating to the
group's factoring usage.
- Fitch estimates the total amount of senior debt for creditor
claims at EUR630 million, which includes a super senior secured
revolving credit facility (RCF) of EUR80 million and EUR550 million
in senior secured notes
- These assumptions result in a recovery rate for the senior
secured notes within the 'RR4' Recovery Rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA leverage above 5.5x
- EBITDA interest coverage below 2.5x
- Volatile FCF margins
- Failure to deliver EBITDA margin growth with strategic
optimisation initiatives and a structurally weaker business
profile
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- EBITDA leverage below 4.5x
- EBITDA interest coverage above 3.0x
- FCF margins consistently above 2%
- Successful implementation of strategic optimisation initiatives
that leads to EBITDA margin growth and a structurally stronger
business profile
Liquidity and Debt Structure
Evoca has sufficient liquidity with readily available cash (net of
Fitch-restricted cash of EUR8 million) totalling EUR64 million at
end-December 2024. The EUR80 million RCF is currently undrawn and
matures in 2028. Expected positive FCF generation provides an
additional cushion to Evoca's liquidity position.
At end-2024, the majority of Evoca's debt consisted of the EUR550
million senior secured notes due in 2029. Outside the restricted
group, there are EUR210 million payment-in kind notes with a
maturity of six months after the senior secured notes. According to
Fitch's Corporate Rating Criteria, this type of instrument is
considered equity-like.
Issuer Profile
Evoca is a global leader in professional coffee machines
(Ho.Re.Ca), other hot and cold beverage and snack & food vending
machines (Impulse), with a particular focus on espresso coffee. It
has a fast-developing presence in professional coffee machines for
the offices and food service environments
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
----------- ------ -------- -----
EVOCA S.p.A. LT IDR B Affirmed B
senior secured LT B Affirmed RR4 B
GOLDEN GOOSE: Fitch Affirms Then Withdraws 'B+' IDR, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Golden Goose S.p.A's Long-Term Issuer
Default Rating (IDR) at 'B+' and senior secured rating at 'BB-'
with a Recovery Rating of 'RR3'. The Outlook is Stable. Fitch has
subsequently withdrawn all ratings.
The affirmation reflects the company's strong brand development,
with an increasingly effective distribution network and
diversification across geographies and sales channels, good
pre-dividend free cash flow (FCF) and reasonable credit metrics.
The ratings are constrained by niche scale operations that are
reliant on one single brand with a certain fashion angle and focus
on one category of products. The Stable Outlook is predicated on
scope for resumption of profitable brand development and a
consistent financial policy.
Fitch assumes that despite a potential contraction in profits in
2025 as a result of weaker consumer demand in the important US
market, the company should maintain credit metrics consistent with
its rating.
Fitch has withdrawn the ratings for commercial reasons.
Key Rating Drivers
Challenging 2025: Fitch believes there is a high risk of
contraction of spending on discretionary items in the US, a market
that represents approximately one-third of the company's sales, as
a result of potential price increases for imported goods. Asian
countries in which Golden Goose operates, including China and South
Korea, which export to the US, could also see an adverse effect on
consumer spending.
It is too early to anticipate the extent to which Golden Goose
would absorb or pass on the impact of import duties in the US or
how it would be adversely affected in other countries. However,
Fitch has assumed an overall contraction of sales of approximately
7% in 2025and a mild reduction in EBITDA margin, with growth
returning in 2026.
Temporary Leverage Setback: Fitch expects that as a result of the
potential contraction of consumer spending in the US and Asia in
2025, Golden Goose's EBITDAR gross leverage could increase to up to
3.4x (2024: 3.1x), which remains consistent with its 'B+' IDR. This
increase is mitigated by its expectation that Golden Goose
maintains its growth capability and a subsequent resumption of
growth provides scope for deleveraging and improvement for leverage
headroom within the 'B+' IDR.
Fitch has recalculated Golden Goose's 2023 EBITDAR leverage at 3.3x
(previously 4.1x) following the change to its criteria for the
capitalisation of lease liabilities. Fixed charge cover should
remain above 2.0x (2024: 2.5x), aligned with the IDR.
Niche Scale Constrains Rating: Golden Goose's rating remains
constrained by its niche scale, with EUR177 million in 2024
Fitch-adjusted EBITDA and a small market position in the luxury
sneakers category. Its core sneaker model accounts for about 40% of
sales. This is somewhat mitigated by it not being over-reliant on a
particular season, generation or gender and supported by a good mix
of sales channels and geographic diversification. Fitch also
considers it well-established in the luxury sneakers category with
scope to continue expanding more quickly than the market
Resilient 2024 Performance: Golden Goose delivered strong growth in
2024, despite the global market for personal luxury goods suffering
from demand contraction in the important markets of China and the
US. This contrasts with the performance of several large industry
players, which reported declining sales and profits. The company
successfully prioritised the supply of stock to its own stores,
reducing emphasis on department stores, which in the US were
affected by weak spending propension. It also benefited from a
presence weighed towards EMEA and other Asian countries.
Successful Business Plan Execution: The company's 2021-2024
performance was supported by a cautious but steady roll out of an
average 20 new stores a year. Combined with the shift of growth
volumes from wholesale to the more profitable online channel since
2021, this has allowed sales and profits to more than double. The
EBITDAR margin recovered to close to 35% in 2024, after temporarily
falling slightly to 33.4% in 2023 (2019-2020 average 36%).
Increasing control of its supply chain following the
internalisation of part of its production in 2023 has strengthened
its profile. Performance was resilient even during the pandemic,
with 1% revenue growth, despite forced store closures.
Casualisation Trends Support Demand: Golden Goose has benefited
from an acceleration in casualisation and digitalisation trends
since 2020 as consumers prioritise comfort in their clothing
choices. Fitch expects these trends to persist over the rating
horizon to 2028, supporting sales growth. Customers appreciate the
combination of high comfort, quality and manufacturing, as well as
the affordable luxury pricing and casual characteristics of Golden
Goose's products. The company has successfully increased customer
loyalty and repeat purchases.
Retail and Digital Channel Expansion: Fitch projects that store
openings and rising online penetration will lead to further revenue
growth over 2025-2028 with a 3%-4% CAGR. Fitch views execution
risks as manageable from Golden Goose's plan to open up to 80
stores by end-2028 across Asia, the Americas and Europe. This is
because its store formats are small and not in the highest cost
locations, and new openings will mostly be in countries where the
company's brand is widely recognised. Online growth will be
supported by adequate existing infrastructure, mitigating execution
risks from rapid growth.
Peer Analysis
Golden Goose shares traits with consumer goods and non-food retail
companies. Fitch uses its Non-Food Retail Navigator to assess
Golden Goose's rating, as the company's strategy is predominantly
based on the expansion of its leasehold store network. Fitch
therefore considers lease-adjusted credit metrics for Golden Goose.
However, Fitch also compares it with companies in the consumer
goods sector.
Golden Goose is rated two notches below its closest peer,
Birkenstock Holdings plc (BB/Positive), which also operates in the
shoe sector. It has similar profitability and is concentrated on
one product. Unlike Golden Goose, Birkenstock is not developing its
own retail store network and therefore Fitch does not adjust its
leverage for leases.
The two-notch rating differential reflects Birkenstock's 3x larger
scale and a product offering that due to a lower price point and
unique orthopaedic construction, has historically been less subject
to fashion risk. It also reflects Birkenstock's lower 2024
projected leverage of 2.2x and materially stronger pre-dividend FCF
generation of around EUR250-320 million from 2025.
Golden Goose's credit profile is weaker than that of Levi Strauss &
Co. (BBB-/Stable). Levi Strauss also has high concentration on a
single brand but is much larger in scale and more diversified by
product and geography. It also benefits from lower lease-adjusted
leverage projected below 2x.
Golden Goose is smaller and has greater concentration risks than
Italian furniture producer Flos B&B Italia S.p.A.(B/Stable), but
benefits from lower expected leverage. Flos has made several
acquisitions that constrain its deleveraging trajectory.
Key Assumptions
Fitch's Key Assumptions within Its Rating Case for the Issuer
- Retail revenue contracting by 7% in 2025, followed by CAGR of
around 7% over 2026-2028, driven by about 10 new store openings a
year
- EBITDAR margin (EBITDA before operating leases) contracting to
34% from 2025
- Working capital outflows of around high to mid-single digit over
the rating horizon
- Capex at around EUR50 million a year to 2028
- No M&A
Recovery Analysis
The recovery analysis assumes that Golden Goose would be
reorganised as a going concern (GC) in bankruptcy rather than
liquidated. Fitch has assumed a 10% administrative claim.
Fitch estimates Golden Goose's GC EBITDA at EUR85 million,
reflecting its view of a sustainable, post-reorganisation EBITDA on
which Fitch bases the enterprise valuation (EV). It is based on
average EBITDA for 2022-2025 under its stress assumption of the
company's main product losing consumer appeal and new stores
substantially underperforming existing stores.
An EV multiple of 5.5x EBITDA is applied to the GC EBITDA to
calculate a post-reorganisation EV. The multiple reflects the
company's strong growth prospects relative to peers as well as its
small size.
Fitch assumes the EUR75 million revolving credit facility (RCF) to
be fully drawn on default. The RCF ranks supersenior, ahead of the
EUR480 million senior secured notes (SSN).
Its assumptions result in a ranked recovery in the 'RR3' band for
the SSN, indicating a 'BB-' rating, one notch above the IDR. The
waterfall analysis output percentage on metrics and assumptions was
higher, but the SSN ratings is capped at +1 notch by the Italian
jurisdiction, in accordance with Fitch's Country Specific Treatment
of Recovery Ratings Criteria.
RATING SENSITIVITIES
Not applicable as the ratings have been withdrawn.
Liquidity and Debt Structure
At end-2024, Golden Goose had comfortable liquidity given EUR154
million cash and EUR64 million available under its committed RCF.
Refinancing risk is manageable for the approaching debt maturities.
Golden Goose main debt maturity is in May 2027, when its EUR480
million senior secured notes fall due. The RCF matures in December
2026.
Issuer Profile
Golden Goose is a fast-growing luxury footwear brand. It has
operations in Europe, the US and Asia through a network of directly
operated stores, wholesalers and online.
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
----------- ------ -------- -----
Golden Goose S.p.A LT IDR B+ Affirmed B+
LT IDR WD Withdrawn
senior secured LT BB- Affirmed RR3 BB-
senior secured LT WD Withdrawn
=====================
N E T H E R L A N D S
=====================
TMF SAPPHIRE: Moody's Affirms 'B2' CFR, Outlook Remains Stable
--------------------------------------------------------------
Moody's Ratings affirmed the B2 corporate family rating and the
B2-PD probability of default rating of TMF Sapphire Bidco B.V.
(TMF). Concurrently, Moody's affirmed the B2 instrument ratings to
both the EUR1,055 million and USD496 million backed senior secured
first lien term loan Bs (TLB) as well as to the EUR181 million
backed senior secured revolving credit facility (RCF) all issued by
TMF Sapphire Bidco B.V. The outlook remains stable.
RATINGS RATIONALE
The rating affirmation reflects TMF's solid operating performance
in 2024 that Moody's expects to continue in 2025 with improved free
cash flow (FCF) generation. Moody's also expects a measured growth
pace and balanced M&A funding mix in line with Moody's expectations
for the B2 rating category.
TMF's revenues increased by 12% in 2024 (9% organic), despite
regulatory-driven revenue outflows in the Netherlands. The company
maintained Moody's-adjusted EBITDA margins around 30%, translating
into Moody's-adjusted gross leverage (excluding overdrafts) of
6.0x. FCF turned negative, around - EUR30 million, burdened by the
implementation of a new ERP system and resulting delayed
receivables collection (-EUR20 million effect), increased capital
spending on digitalization and higher interest costs. Moody's
expects TMF to continue its strong organic growth in 2025 while
maintaining solid margins. This will result in leverage between
5.5x-6.0x and positive FCF generation, supported by repricing
initiatives over the last two years.
Moody's also expects TMF to continue expanding its geographical
exposure and product offering with bolt-on acquisitions. For
example, in February 2025, TMF acquired EMW Global, a Swiss
provider of administration services to the fund industry, with a
$100 million TLB add-on, increasing leverage by 0.5x. This followed
eight bolt-on acquisitions in 2024. These acquisitions often
increase leverage due to a limited initial EBITDA impact and often
double-digit EV/EBITDA multiples, especially in the funds
administration industry. However, Moody's recognizes TMF's average
historical acquisition multiple of around 6.0x and the company's
track record of swift deleveraging and limited re-leveraging
following recent acquisitions. Moody's expects continued measured
growth pace and a balanced M&A funding mix in line with Moody's
expectations for the B2 rating category.
The B2 CFR continues to be supported by TMF's strong position as a
corporate services provider complemented by a global network in 87
jurisdictions; its resilient business with long-standing customer
relationships and high switching costs, resulting in around 92%
recurring revenue and high organic growth; a stable market with
good growth prospects and limited cyclicality as well as good
liquidity profile and long-dated maturity profile.
TMF's B2 CFR is constrained by its high Moody's-adjusted
debt/EBITDA (excluding overdrafts) of around 6.0x in 2024, low FCF
generation (FCF / Debt expected in low single digits percentages);
the legal and regulatory risks inherent to the industry and the
event risk of debt-funded transformative acquisitions and/or
dividends associated with its private equity ownership. The current
more uncertain economic environment also constrains TMF's ratings,
although the company benefits from its service business model and
end market diversification with no single jurisdiction above 7% of
revenue.
OUTLOOK
The stable outlook reflects Moody's expectations that organic
earnings growth together with contribution from bolt-on
acquisitions will result in Moody's adjusted Debt/EBITDA (excluding
overdraft) between 5.5x-6.0x in the next 12-18 months, also
supported by positive FCF generation.
The stable outlook also assumes that TMF does not undertake
material debt-funded acquisitions, return capital to shareholders,
or otherwise change its current financial policy. Finally, it
incorporates Moody's expectations that TMF will retain its good
liquidity profile.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if strong earnings growth or a shift
to a more conservative financial policy results in adjusted
Debt/EBITDA (excluding overdrafts) sustainably below 5.0x, and
EBITA/Interest sustainably above 2.5x, and Moody's adjusted
FCF/Debt sustainably above 5%.
The ratings could be downgraded if Moody's-adjusted debt/EBITDA
(excluding overdrafts) increases significantly above 6.0x on a
sustained basis, or EBITA/ Interest remains sustainably well below
2.0x, or FCF reduces towards zero for a sustained period of time,
or if liquidity deteriorates.
LIQUIDITY
TMF's liquidity is good. It is supported by a cash balance (net of
bank overdrafts) of around EUR78 million as of December 2024 and
its fully undrawn EUR181 million RCF. Moody's expects positive FCF
generation in 2025. The company's liquidity benefits from its
long-dated maturity profile, with TLBs due in May 2028 and RCF due
in February 2028.
The RCF has one springing covenant that is tested when the facility
is drawn by more than 40%. Moody's expects TMF to be in compliance
with the covenant at all times (covenant test level at 9.5x senior
secured net leverage).
STRUCTURAL CONSIDERATIONS
The EUR1,055 million and $496 million TLBs due 2028 as well as the
EUR181 million RCF due 2028, issued at TMF Sapphire Bidco B.V. rank
pari passu and share the same security interest, including mainly
share pledges and intercompany receivables. They are guaranteed by
certain subsidiaries of the group, accounting for at least 80% of
consolidated EBITDA. The instruments are rated in line with the CFR
at B2.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
TMF Sapphire Bidco B.V. (TMF) is a global provider of business
process services including accounting, tax, payroll and
administrative services for companies (70% of 2024 total revenue)
and financial institutions, including funds, capital markets and
private clients and family offices (30%). The company is present in
87 countries and employes 12,000 people. TMF reported revenue of
EUR907 million and a company-adjusted EBITDA of EUR285 million in
2024. It is majority owned by CVC Strategic Opportunities Fund II,
with the Abu Dhabi Investment Authority acquiring a 34% stake in
March 2023.
=========
S P A I N
=========
GRUPO ANTOLIN-IRAUSA: Moody's Alters Outlook on B3 CFR to Negative
------------------------------------------------------------------
Moody's Ratings has changed the outlook on Spanish automotive parts
supplier Grupo Antolin-Irausa, S.A.U. ("Grupo Antolin" or "the
group") to negative from stable. At the same time, Moody's affirmed
the group's B3 corporate family rating and B3-PD probability of
default rating (PDR), as well as the B3 instrument ratings on its
EUR390 million guaranteed senior secured notes due 2028 and EUR250
million backed senior secured notes due 2030.
RATINGS RATIONALE
The change in the outlook to negative reflects a continued
challenging and increasingly volatile automotive market
environment, with sustained sluggish car production and
intensifying trade tensions that could further drag on volumes,
increase costs and disrupt global supply chains. Against this
backdrop, it might be difficult for Grupo Antolin to increase its
earnings and cash generation to facilitate a de-leveraging to more
appropriate levels for its B3 rating over the next 12-18 months.
The negative outlook also indicates further downward pressure on
the ratings if the group's liquidity weakened on persistent
negative free cash flow (FCF), while various debt maturities need
to be addressed in the upcoming quarters. A weakening of the
operating performance over the next quarters could add additional
negative pressure on the ratings.
Based on preliminary 2024 figures, Moody's estimates that Grupo
Antolin's leverage remained high at just above 7.0x Moody's
adjusted gross debt to EBITDA at the end of 2024. The ratio was
largely stable versus 2023 due to some debt repayments and expected
lower capitalized development costs that Moody's views as operating
expense, while the group's reported EBITDA dropped to EUR315
million from EUR328 million in 2023. For 2025, Moody's expects the
leverage to reach Moody's defined 6.5x maximum guidance for a B3
rating. However, the current depressed market conditions and
production volatility significantly limit Moody's forecasts
certainty around volumes and earnings growth, which should mainly
be driven by the group's ongoing efficiency and cost saving
measures under its "Gear up Our Ambition" (GOA) Transformation
Plan, besides assumed further reduced restructuring and capitalized
development costs. While restructuring should yield additional
margin improvements in 2025 and 2026 (Moody's adjusted EBIT margin
improved to around 1.4% in 2024 from 1.2% in 2023), the group's
topline and earnings growth will likely suffer from a continued
production weakness in most regions, at least this year.
Following its loan and bond refinancing at higher interest rates
last year, Moody's also expects Grupo Antolin's interest coverage
to remain below Moody's defined minimum of 1.0x (Moody's adjusted
EBIT to interest expense) and its Moody's adjusted FCF negative in
2025, and possibly also next year. Notable performance improvements
appear unlikely in case of longer lasting or potentially escalating
trade tensions, while Grupo Antolin's ability to pass on
tariff-related cost increases remains uncertain and negotiations
with its customers might take some time. If Moody's believes a
prolonged market weakness and increased tariffs will likely result
in a deterioration of Grupo Antolin's financial performance or
liquidity, further negative pressure on its rating would build over
the next few months.
The affirmed B3 ratings remain supported by Grupo Antolin's strong
position in the market for automotive interior products, its size
and scale as a tier 1 automotive supplier, balanced geographic
presence in North America (33% of net sales in the three quarters
ended September 2024), Asia (19%) and Europe and the rest of the
world (49%), its long-standing customer relationships and product
offering that is agnostic to any type of propulsion technology used
in cars, limiting its exposure to carbon transition risks.
Other factors constraining the ratings include the group's exposure
to the cyclicality of the automotive industry; a highly competitive
market environment for interior products, with relatively little
growth prospects and high pricing pressure, illustrated by an
average 0.8% Moody's-adjusted EBIT margin over the last four years;
and execution risks related to its ongoing GOA Transformation Plan,
aimed at improving its competitive position, profitability and
returning to sustainable positive FCF.
LIQUIDITY
Moody's regard Grupo Antolin's liquidity as just adequate. At the
end of 2024, the group's liquidity sources included EUR270 million
of cash and cash equivalents (of which Moody's considers around
EUR45 million as restricted), EUR137 million available under its
EUR194 million committed revolving credit facilities (RCF, maturing
mostly in 2029) and EUR10 million of cash receipts from asset
disposals in January 2025. Moody's understands that the group is
working on additional non-core asset divestments worth EUR20
million this year, which, however, are not included in Moody's
assessments given the current bleak market conditions.
The group's cash sources are sufficient to cover its basic cash
needs over the next 12-18 months, including Moody's forecasts of
negative Moody's adjusted FCF in the low to mid double-digit
million euro range in 2025 and contractual debt maturities of
around EUR80 million in 2025 and some EUR40 million in the first
half of 2026.
At the end of 2024, Grupo Antolin has sold EUR201 million of trade
receivables under available factoring lines and in January 2025
signed a non-recourse syndicated factoring facility in an amount of
EUR220 million. Moody's expects the group to maintain access to
this facility and to renew it well ahead of the maturity in January
2026.
Moody's also expects Grupo Antolin to remain in compliance with its
maintenance covenants (reported net leverage not higher than 3.5x
and interest coverage of at least 3.0x), while headroom will likely
be very narrow in Q1 2025 due to seasonal significant working
capital cash needs.
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook indicates a likely downgrade of Grupo
Antolin's ratings in the next few months or quarters, if its credit
metrics or liquidity were to weaken further, due to a potentially
more material production slowdown, if increased costs from newly
imposed tariffs could not be passed on to customers in a timely
manner, or if the risk of non-compliance with financial covenants
increases.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could downgrade the ratings, if Grupo Antolin's (1)
Moody's-adjusted EBIT margin reduced to below 1.0%; (2) leverage
remained above 6.5x Moody's-adjusted gross debt to EBITDA; (3)
interest cover remained below 2.5x Moody's-adjusted EBITDA to
interest expense; (4) Moody's-adjusted FCF remained materially
negative; or (5) liquidity weakened.
Moody's could upgrade Grupo Antolin's ratings, if its (1) leverage
reduced sustainably below 5.5x Moody's-adjusted gross debt to
EBITDA; (2) Moody's-adjusted EBIT margin improved towards 2.5%; (3)
interest cover (Moody's-adjusted EBITDA to interest expense)
clearly exceeded 3.0x; and (4) Moody's-adjusted FCF turned
sustainably positive.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Automotive
Suppliers published in December 2024.
COMPANY PROFILE
Headquartered in Burgos, Spain, Grupo Antolin-Irausa, S.A.U. is a
family-owned tier 1 supplier to the automotive industry. It focuses
on the design, development, manufacturing and supply of components
for vehicle interiors, which include central consoles and
instrument panels, overheads (headliners), door trims, and interior
lighting and electronic components. Based on preliminary results,
Grupo Antolin generated revenue of around EUR4.2 billion and EUR315
million EBITDA (7.5% margin) in 2024.
TDA CAM 7: S&P Raises Class B Notes Rating to 'BB (sf)'
-------------------------------------------------------
S&P Global Ratings raised to 'BB (sf)' from 'CCC- (sf)' its credit
rating on TDA CAM 7, Fondo de Titulizacion de Activos' class B
notes. At the same time, S&P affirmed its 'AAA (sf)' ratings on the
class A2 and A3 notes.
The rating actions follow S&P's full analysis of the most recent
information that it has received and the transactions' current
structural features.
S&P said, "After applying our global RMBS criteria, expected losses
decreased due to a decline in our weighted-average foreclosure
frequency (WAFF) and weighted-average loss severity (WALS)
assumptions. Our WAFF assumptions decreased due to the lower
effective loan-to-value (LTV) ratio. In addition, our WALS
assumptions have decreased, due to a lower current LTV ratio."
WAFF and WALS levels
Rating level WAFF (%) WALS (%) CC (%)
AAA 16.07 2.00 0.32
AA 10.98 2.00 0.22
A 8.53 2.00 0.17
BBB 5.99 2.00 0.12
BB 3.44 2.00 0.07
B 2.83 2.00 0.06
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CC--Credit coverage.
S&P said, "Loan-level arrears currently stand at 1.6%, and are
stable after increasing in April 2020. Overall delinquencies remain
well below our Spanish RMBS index. The transaction has a high
number of loans that defaulted during the financial crisis, and a
portion of these still need to be worked out. In our model, the
WAFF is calculated based on the performing pool, while we assumed
50% on the defaulted assets."
The class A notes are repaying pro rata among themselves due to the
breach of performance triggers.
S&P said, "The class A2 and A3 notes' credit enhancement has
increased to 50.2% from 41.4% since our previous review, with an
increase to 5.3% from 4.2% for the class B notes.
"Our operational, sovereign, and legal risk analysis remains
unchanged since our previous review, and those rating pillars do
not constrain the ratings on the notes. There are no rating caps
due to counterparty risk.
"The application of our criteria and related credit and cash flow
analysis indicates that the available credit enhancement for the
class A2 and A3 notes is still commensurate with a 'AAA (sf)'
rating. We have therefore affirmed our 'AAA (sf)' ratings on the
class A2 and A3 notes."
The class B notes experienced interest shortfalls following their
interest deferral trigger breaches. Consequently, interest payments
on the class B notes became subordinated in the priority of
payments and defaulted between the November 2013 and May 2016
payment dates. Due to recoveries and the negative interest rate
environment, interest amounts due on these classes of notes have
since fully repaid. Since then, interest payments on these classes
of notes have continued, and will continue to be subordinated in
the priority of payments until the amortization of the class A
notes, but will remain senior to the reserve fund, which has been
fully topped up.
S&P said, "Given the transaction's stable performance, with
incoming recoveries that have repaid all due amounts on the class B
notes in 2016, and a replenishment of the reserve fund, we do not
expect these tranches to default again in the short term. Since our
previous review, the reserve fund remains at its floor value,
providing liquidity for the class A and B notes.
"The upgrade of the class B notes to 'BB (sf)' follows the
implementation of our criteria and assumptions for assessing pools
of Spanish residential loans.
"Under our cash flow analysis, the class B notes could withstand
stresses at a higher rating than that currently assigned. However,
we have limited our upgrade based on the position of timely
interest payments in the waterfall, which are subordinated to the
principal payments of the class A notes until the class B notes
become the most senior. Increased defaults may result in reserve
fund draws exposing the class B notes to liquidity risks.
"We consider the transaction's resilience in case of additional
stresses to some key variables, in particular defaults and loss
severity, to determine our forward-looking view.
"In our view, the ability of the borrowers to repay their mortgage
loans will be highly correlated to macroeconomic conditions,
particularly the unemployment rate, consumer price inflation and
interest rates. Our forecast for unemployment in Spain for 2025 and
2026 is 11.4% and 11.3%, respectively.
"Furthermore, a decline in house prices typically affects the level
of realized recoveries. For Spain in 2025 and 2026, we expect house
prices to increase by 4.5% and 3.5%, respectively.
"We ran additional scenarios with increased defaults of 1.1x and
1.3x. Additionally, as a general downturn of the housing market may
delay recoveries, we have also run extended recovery timings to
understand the transaction's sensitivity to liquidity risk. The
results of the above sensitivity analysis indicate no deterioration
on the notes compared with the ratings assigned."
TDA CAM 7 is a Spanish RMBS transaction, which closed in November
2006. Caja de Ahorros del Mediterráneo (CAM), now merged with
Banco de Sabadell, originated the pool, which comprises loans
granted to borrowers secured over vacation homes and owner-occupied
residential properties in CAM's home market of Valencia.
TDA CAM 9: S&P Affirms 'D (sf)' Rating on Class D Notes
-------------------------------------------------------
S&P Global Ratings raised its credit rating on TDA CAM 9, Fondo de
Titulizacion de Activos' class A1, A2, and A3 notes to 'AAA (sf)'
from 'AA+ (sf)', B notes to 'BB (sf)' from 'D (sf)', and C notes to
'B- (sf)' from 'D (sf)'. At the same time, S&P affirmed its 'D
(sf)' rating on the class D notes.
The rating actions follow S&P's full analysis of the most recent
information that we have received and the transactions' current
structural features.
S&P said, "After applying our global RMBS criteria, expected losses
decreased due to a decline in our weighted-average foreclosure
frequency (WAFF) and weighted-average loss severity (WALS)
assumptions. Our WAFF assumptions decreased due to the lower
effective loan-to-value (LTV) ratio. In addition, our WALS
assumptions have decreased, due to a lower current LTV ratio."
WAFF and WALS levels
Rating level WAFF (%) WALS (%) CC (%)
AAA 14.38 2.00 0.29
AA 9.65 2.00 0.19
A 7.38 2.00 0.15
BBB 5.02 2.00 0.10
BB 2.65 2.00 0.05
B 2.08 2.00 0.04
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
CC--Credit coverage.
The cumulative balance of defaulted credit rights represents 16.2%
of the closing pool. The interest deferral trigger was breached for
the class B and C notes and interest was not paid in the past as
the reserve fund was depleted to cover defaulted assets.
Loan-level arrears currently stand at 1.0%, and are stable after
increasing in April 2020. Overall delinquencies remain well below
our Spanish RMBS index. The transaction has a high number of loans
that defaulted during the financial crisis, and a portion of these
still need to be worked out. In S&P's model, the WAFF is calculated
based on the performing pool, while it assumed 50% on the defaulted
assets.
The class A notes are repaying pro rata among themselves due to the
breach of performance triggers.
The reserve fund is at 85.0% of its target, building up after being
fully depleted from September 2012 to November 2019. The reserve's
build-up is due to the transaction's good performance recently,
given the improved macroeconomic environment.
The class A1, A2, and A3 notes' credit enhancement has increased to
44.8% from 22.8% since our previous review, with an increase to
20.7% from 8.8% for the class B notes and to 6.4 from 0.6% for the
class C notes over the same period. The class D notes are not
asset-backed as they were used at closing to fund the reserve
fund.
S&P said, "Our operational, sovereign, and legal risk analysis
remains unchanged since our previous review, and those rating
pillars do not constrain the ratings on the notes. There are no
rating caps due to counterparty risk.
"The application of our criteria and related credit and cash flow
analysis indicates that the available credit enhancement for the
class A1, A2, and A3 notes is commensurate with a 'AAA (sf)'
rating. We have therefore raised to 'AAA (sf)' from 'AA+ (sf)'our
ratings on the class A1, A2, and A3 notes."
The class B and C notes experienced interest shortfalls following
their interest deferral trigger breaches. Consequently, interest
payments on the class B and C notes became subordinated in the
priority of payments and defaulted between the January 2013 and
October 2012 and the January 2020 payment dates, respectively. Due
to recoveries and the negative interest rate environment, interest
amounts due on these classes of notes have since fully repaid.
Since then, interest payments on these classes of notes have
continued, and will continue to be subordinated in the priority of
payments until the amortization of their respective senior notes,
but will remain senior to the reserve fund, which is not yet fully
topped up.
S&P said, "We have therefore raised to 'BB (sf)' from 'D (sf)' our
rating on the class B notes. In addition, we believe the repayment
of the class C notes is not dependent on favorable economic
conditions, given that when we reduce our high prepayment and fees
stress, in line with a steady state scenario, the issuer is able to
meet its obligations under this class. We have therefore raised to
'B- (sf)' from 'D (sf)' our rating on the class C notes in line
with our criteria.
"Given the transaction's stable performance, with incoming
recoveries currently at 80%, we do not expect these tranches to
default again in the short term.
"Under our cash flow analysis, the class B and C notes could
withstand stresses at higher ratings than those currently assigned.
However, we have limited our upgrades based on the position of
timely interest payments in the waterfall, which are subordinated
to the principal payments of the class A1 to C notes until the
class B and C notes become the most senior, and as the reserve fund
is not yet fully topped up.
"The issuer used the class D notes at closing to fund the reserve
fund. The class D notes continue to miss timely payment of interest
as they are subordinated to the reserve fund and therefore do not
benefit from it. We have therefore affirmed our 'D (sf)' rating on
the class D notes.
"We consider the transaction's resilience in case of additional
stresses to some key variables, in particular defaults and loss
severity, to determine our forward-looking view.
"In our view, the ability of the borrowers to repay their mortgage
loans will be highly correlated to macroeconomic conditions,
particularly the unemployment rate, consumer price inflation, and
interest rates. Our forecast for unemployment in Spain for 2025 and
2026 is 11.4% and 11.3%, respectively.
"Furthermore, a decline in house prices typically affects the level
of realized recoveries. For Spain in 2025 and 2026, we expect house
prices to increase by 4.5% and 3.5%, respectively.
"We ran additional scenarios with increased defaults of 1.1x and
1.3x. Additionally, as a general downturn of the housing market may
delay recoveries, we have also run extended recovery timings to
understand the transaction's sensitivity to liquidity risk. We also
modelled the reserve fund at its floor level, i.e., EUR7.5 million,
as, once the reserve fund reaches its target level, it will
amortize to its floor level on the following interest payment date.
The results of the above sensitivity analysis indicate no
deterioration on the notes compared with the ratings assigned."
TDA CAM 9 is a Spanish RMBS transaction, which closed in October
2007. Caja de Ahorros del Mediterráneo (CAM), now merged with
Banco de Sabadell, originated the pool, which comprises loans
granted to borrowers secured over vacation homes and owner-occupied
residential properties in CAM's home market of Valencia.
===========
T U R K E Y
===========
VESTEL ELEKTRONIK: Moody's Cuts CFR to Caa1, Alters Outlook to Neg.
-------------------------------------------------------------------
Moody's Ratings has downgraded the long term corporate family
rating of Vestel Elektronik Sanayi Ve Ticaret A.S. (Vestel or the
company) to Caa1 from B3 and the probability of default rating to
Caa1-PD from B3-PD. Moody's have also downgraded to Caa1 from B3
the instrument rating on the $500 million guaranteed senior
unsecured notes due 2029 issued by Vestel. The outlook has changed
to negative from stable.
RATINGS RATIONALE
The rating action reflects Moody's concerns about the company's
weakening liquidity position. It also reflects Vestel's weak
operating performance in 2024 that has substantially weakened the
company's credit metrics and highlighted its vulnerability to
macroeconomic volatility and competition.
Vestel's liquidity has weakened based on Moody's assessments, which
evaluates a company's ability to meet its liquidity requirements -
including debt repayments and cash operating needs - over the next
12-18 months using liquidity sources such as cash, committed
credit facilities and expected cash flow generation.
In 2024, the company's negative free cash flow increased to TRY22.7
billion from TRY5.5 billion a year earlier, leading to an increase
in debt of TRY18.2 billion. Despite the company's $500 million
(TRY17.7 billion) international bond issuance in May 2024 that was
used to replace a significant portion of the company's short term
debt with long term debt, Vestel's short term debt balance
increased by the end of the year to TRY43.5 billion against TRY40.6
billion a year earlier. The large balance of short term debt
compares to a cash balance of only TRY2.7 billion and no committed
credit facilities.
Moody's also expects that free cash flow will remain negative over
the next 2-3 years. This makes the company dependent on the
continued roll-over of maturing debt. While banks have so far
remained supportive of rolling over maturing facilities, and
Moody's expects they will continue to remain supportive of domestic
Turkish exporters such as Vestel, the company's high dependence on
loan renewals heightens refinancing risk. Further liquidity risk
emanates from restrictions the company has under its bond
documentation on incurring additional indebtedness.
The company is subject to two incurrence-based covenants. The first
restricts the company from incurring additional debt if its
consolidated net debt to EBITDA ratio exceeds 3.5x. The second
restricts the debt at its non-guarantor subsidiaries, primarily
Vestel Beyaz Esya Sanayi Ve Ticaret A.S. (Vestel Beyaz), from
exceeding 0.75x consolidated EBITDA. As of December 2024, both
covenants were breached, with the company's reported net debt to
EBITDA reaching 6.8x and net debt at Vestel Beyaz to consolidated
EBITDA reaching 1.3x. The company aims to avoid further increases
in debt over the next year by reducing its working capital needs
and also has the ability to issue some additional debt under
permitted debt baskets. However, this may not be sufficient to
cover the company's additional financing needs if Vestel fails to
substantially reduce its cash outflows over the next 12 months.
Vestel's operating performance has substantially underperformed
Moody's expectations in 2024, recording a decline in revenue of 12%
and a decline in Moody's adjusted EBITDA of 72% to TRY3.6 billion
from TRY12.8 billion a year earlier. As a result of the weak
performance and increased indebtedness, debt to EBITDA increased to
17.9x from 3.6x a year earlier while EBIT interest coverage reduced
to -0.1x from 0.9x a year earlier. Moody's adjusted EBITDA differs
from the company's reported EBITDA of TRY 7.0 billion because it
includes gains and losses on foreign exchange related to trading
and operating activities, as well as interest income and gains and
losses from equity-accounted associates.
The weak performance was driven by lower sales in both Europe and
Turkiye, as well as compressed gross margins in the white goods
segment. Exports to Europe account for around 49% of Vestel's sales
and the company lost competitiveness there due to significant
appreciation of the Turkish lira against the euro in real terms,
meaning nominal depreciation of the lira remained significantly
below still very high domestic inflation. At the same time, Vestel
also faced intensifying competition from Chinese competitors in
Europe, which could increase further if US-China trade tensions
result in Chinese manufacturers diverting more products to Vestel's
core European markets.
In Turkiye, sales declined because the company had benefitted from
an increase in sales in the prior year as consumers brought large
purchases forward in a highly inflationary environment. Inflation
eased in 2024, but still remained high at around 40% on average. At
the same time, the government's continued efforts to reduce
inflation led to reduced spending power and lower purchases by
consumers.
Moody's expects some improvement in Vestel's operating performance
and a reduction in its cash outflow over the next 1-2 years, driven
by easing domestic inflation and continued nominal depreciation of
the lira, combined with potential opportunities to grow sales to
the US as Chinese manufacturers become less competitive there due
to higher tariffs. While this should lead to an improvement in debt
to EBITDA to around 7x and EBIT interest coverage to 0.5x by the
end of 2026, these ratios remain weak. At the same time, Moody's
expects the company will remain free cash flow negative for the
next 2-3 years at least, which will continue to strain its
liquidity.
Vestel's Caa1 CFR continues to reflect (1) the company's good
market position for televisions and household appliances in Turkiye
and Europe; (2) its strong diversification in terms of customers,
geographic reach, products and brands through a business model that
combines own brands, licensed brands and original design
manufacturing (ODM) for third party brands; (3) its high quality
production facilities in Turkiye that provide it with logistical
advantages over far Eastern producers to reach the European market
and put it in a good position to benefit from near-shoring and
supply chain diversification of manufacturing customers; and (4)
growing mobility electronics and energy storage business that could
benefit from the growth of electric vehicle (EV) usership and
renewable energies over the coming years.
The rating also reflects (1) the highly competitive nature of
Vestel's ODM business; (2) a structurally declining TV market in
Europe, combined with volatile input prices; (3) high leverage and
low profitability with Moody's adjusted debt to EBITDA of 17.9x as
of 2024, expected to gradually decline to around 7x over the next
18 to 24 months and EBIT margin of -0.7% as of 2024, expected to
improve to 3-5% over the next 2-3 years; (4) uncertainty over the
effect of US trade tariffs on Vestel's competitiveness in its core
European markets, which may face higher competition from Chinese
manufacturers going forward, albeit combined with the potential
opportunity to expand in the US; (5) free cash flow that has been
negative since 2021 and Moody's expectations that it will remain
negative for the next 2 to 3 years; (6) execution risk in building
up its mobility electronics business; and (7) weak liquidity due to
material reliance on short term debt and limitations on incurrence
of additional debt under its bond documentation.
NEGATIVE OUTLOOK
The negative outlook reflects Vestel's weak liquidity position and
in particular the risk that Vestel may not be able to reduce its
negative free cash flow to zero over the next 12 to 18 months and
will continue to require increased debt funding. This in turn would
further raise liquidity risk due to restrictions under the
company's bond documentation on the incurrence of additional
indebtedness.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the negative outlook, an upgrade of the rating is currently
unlikely. Moody's would consider stabilizing the outlook if Vestel
significantly improves its liquidity position by, for example,
reducing its reliance on short term debt or by obtaining repayment
of some or all of its long term receivables from related parties,
while improving its free cash flow generation.
Vestel's ratings could be downgraded if the company's liquidity
deteriorates further and requires to raise additional debt and is
prohibited from doing so under its bond documentation.
The principal methodology used in these ratings was Consumer
Durables published in September 2021.
===========================
U N I T E D K I N G D O M
===========================
ALBA 2006-2: Fitch Affirms 'CCCsf' Rating on Class F Notes
----------------------------------------------------------
Fitch Ratings has affirmed Alba 2006-2 plc's notes and revised the
Outlook on the class E notes to Negative from Stable. Fitch has
also affirmed Alba 2007-1 plc's notes.
Entity/Debt Rating Prior
----------- ------ -----
ALBA 2007-1 plc
Class A3 XS0301721832 LT A+sf Affirmed A+sf
Class B XS0301706288 LT A+sf Affirmed A+sf
Class C XS0301707096 LT A+sf Affirmed A+sf
Class D XS0301708060 LT A+sf Affirmed A+sf
Class E XS0301708573 LT A-sf Affirmed A-sf
Class F XS0301708813 LT CCCsf Affirmed CCCsf
ALBA 2006-2 plc
Class A3a XS0271529967 LT A+sf Affirmed A+sf
Class A3b XS0272876623 LT A+sf Affirmed A+sf
Class B XS0271530114 LT A+sf Affirmed A+sf
Class C XS0271530544 LT A+sf Affirmed A+sf
Class D XS0271530973 LT A+sf Affirmed A+sf
Class E XS0271531435 LT A-sf Affirmed A-sf
Class F XS0272877514 LT CCCsf Affirmed CCCsf
Transaction Summary
The transactions are backed by non-conforming and buy-to-let (BTL)
residential mortgages originated by Money Partners Holding Limited,
Kensington Group plc and Paratus AMC Limited.
KEY RATING DRIVERS
Insufficient Data Caps Rating: Fitch continues to cap the notes'
ratings at 'A+sf' as it does not consider the collateral
information it has received to be sufficiently detailed to support
high investment-grade ratings, as outlined in its Global Structured
Finance Rating Criteria and UK RMBS Rating Criteria. Fitch
generally applies assumptions in cases of missing collateral
information. However, in this instance a large volume of material
information was not available and therefore Fitch did not consider
the analysis significantly robust to support ratings in the high
investment-grade category.
Missing Collateral Information: Fitch has not received complete
loan level data for loans substituted into the pool after closing
or current information on certain key parameters of all the
mortgages in the pool. For loans submitted to the pool after
closing, key static data items were missing including original loan
balance, adverse credit history and borrower employment status. For
all loans in the pool, Fitch did not receive information for key
data items including annual rental income for BTL loans, the number
of months loans are in arrears and the current interest rate type
of loans. Fitch used information available at closing for certain
fields. Fitch assumed rental income of zero for all BTL loans.
High Loss Severity: The number of repossessions since closing is
429 in Alba 2006-2 and 774 in Alba 2007-1. The weighted average
loss severity to date has been 29.9% in Alba 2006-2 and 31.6% in
Alba 2007-1. Despite improving recently, this loss severity implies
a recovery rate (RR) below Fitch's base case RR assumption for the
transactions. Given the observed performance, Fitch stress-tested
the RR assumptions in its analysis, which showed that the
model-implied rating of Alba 2006-2's class E notes could be lower
in future reviews. This led to the revision of the Outlook to
Negative.
Stabilising Arrears, Increasing Repossessions: Total arrears have
stabilised in both transactions since the last review. As of March
2025, one-month plus arrears for Alba 2006-1 had decreased to
16.1%, from 17.8% a year earlier. Alba 2007-2 has seen a small
increase to 18.9% from 18.4%. However, there has been migration to
later stage arrears for both transactions, with three-months plus
arrears increasing to 10.9% and 12.2% (7.1% and 10.1% in March
2024) for Alba 2006-2 and Alba 2007-1, respectively. This has
resulted in increased foreclosure frequency (FF) assumptions.
There has also been an increase in repossessions, with
repossessions over the past two years at around GBP1.4 million for
Alba 2006-2 and GBP5.3 million for Alba 2007-1 (GBP0.5 million and
GBP2.5 million for March 2021 to March 2023) .
Increased CE: The notes have non-amortising reserves and are
amortising pro-rata. Unless a performance trigger is breached, this
will continue until the notes fall below 10% of their initial
balance. This has led to a gradual increase in credit enhancement
(CE), which supported the affirmations. CE has risen to 60.2% for
Alba 2007-1's class A3 notes and 49.3% for Alba 2006-2's class A3a
and A3b notes, from 55.0% and 48.9%, respectively.
ESG Factors - Data Transparency and Privacy: As key data items such
as annual rental income, the number of months in arrears and the
current interest rate type of loans were missing, the ratings have
been capped at 'A+sf'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transactions' performance may be affected by changes in market
conditions and economic environment. Weakening asset performance is
strongly correlated to increasing levels of delinquencies and
defaults that could reduce CE available to the notes.
Additionally, unanticipated declines in recoveries could also
result in lower net proceeds, which may make certain notes
susceptible to negative rating action depending on the extent of
the decline in recoveries. A 15% increase in the weighted average
(WA) FF and a 15% decrease in the WARR would imply downgrades of no
more than three notches for Alba 2006-2 and one notch for Alba
2007-1.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE and potentially upgrades.
A decrease in the WAFF of 15% and an increase in the WARR of 15%
would imply upgrades of no more than two notches for Alba 2006-2's
class E notes and 12 notches for the class F notes. For Alba
2007-1, the implied upgrade would be no more than two notches for
the class E notes, with no impact on the other notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
ALBA 2006-2 plc, ALBA 2007-1 plc
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. Fitch has not reviewed the results of
any third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Fitch did not undertake a review of the information provided about
the underlying asset pools ahead of the transactions' initial
closing. The subsequent performance of the transactions over the
years is consistent with the agency's expectations given the
operating environment and Fitch is therefore satisfied that the
asset pool information relied upon for its initial rating analysis
was adequately reliable.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
ALBA 2006-2 plc has an ESG Relevance Score of '5' for Data
Transparency & Privacy due to lack of or inconsistent data , which
has a negative impact on the credit profile, and is highly relevant
to the rating, resulting in a cap on the maximum achievable
ratings.
ALBA 2006-2 plc has an ESG Relevance Score of '4' for Customer
Welfare - Fair Messaging, Privacy & Data Security due to a material
concentration of interest-only loans, which has a negative impact
on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
ALBA 2006-2 plc has an ESG Relevance Score of '4' for Human Rights,
Community Relations, Access & Affordability due to mortgage pools
with limited affordability checks and self-certified income , which
has a negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
ALBA 2007-1 plc has an ESG Relevance Score of '5' for Data
Transparency & Privacy due to lack of or inconsistent data, which
has a negative impact on the credit profile, and is highly relevant
to the rating, resulting in a cap on the maximum achievable
ratings.
ALBA 2007-1 plc has an ESG Relevance Score of '4' for Customer
Welfare - Fair Messaging, Privacy & Data Security due to a material
concentration of interest-only loans, which has a negative impact
on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
ALBA 2007-1 plc has an ESG Relevance Score of '4' for Human Rights,
Community Relations, Access & Affordability due to mortgage pools
with limited affordability checks and self-certified income, 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.
ASIMI FUNDING 2025-1: DBRS Gives Prov. B (low) Rating to F Notes
----------------------------------------------------------------
DBRS Ratings Limited assigned provisional credit ratings to the
following classes of notes (collectively, the Rated Notes) to be
issued by Asimi Funding 2025-1 PLC (the Issuer):
-- Class A Notes at (P) AAA (sf)
-- Class B Notes at (P) AA (low) (sf)
-- Class C Notes at (P) A (low) (sf)
-- Class D Notes at (P) BBB (low) (sf)
-- Class E Notes at (P) B (sf)
-- Class F Notes at (P) B (low) (sf)
-- Class X Notes at (P) CCC (sf)
Morningstar DBRS does not rate the Class G Notes (together with the
Rated Notes, the Notes) also expected to be issued in the
transaction.
The credit ratings of the Class A and Class B Notes address the
timely payment of scheduled interest and the ultimate repayment of
principal by the final maturity date. The credit ratings of the
Class C, Class D, Class E, Class F and Class X Notes address the
ultimate payment of scheduled interest while the class is
subordinate but the timely payment of scheduled interest when it is
the most senior class, and the ultimate repayment of principal by
the final maturity date.
The transaction is a securitization of fixed-rate consumer loans
granted by Plata Finance Limited (Plata or the seller) to private
individuals residing in the United Kingdom. Plata is the initial
servicer with Lenvi Servicing Limited (Lenvi) in place as the
standby servicer for the transaction.
CREDIT RATING RATIONALE
Morningstar DBRS based its credit ratings on the following
analytical considerations:
-- The transaction's structure, including the form and sufficiency
of available credit enhancement to withstand stressed cash flow
assumptions and repay the Issuer's financial obligations according
to the terms under which the Rated Notes are issued
-- The credit quality and the diversification of the collateral
portfolio, its historical performance, and the projected
performance under various stress scenarios
-- Morningstar DBRS' operational risk review of Plata's
capabilities regarding originations, underwriting, servicing,
position in the market, and financial strength
-- The operational risk review of Lenvi regarding servicing
-- The transaction parties' financial strength relative to their
respective roles
-- The expected consistency of the transaction's structure with
Morningstar DBRS' "Legal and Derivative Criteria for European
Structured Finance Transactions" methodology
-- Morningstar DBRS' long-term sovereign credit rating on the
United Kingdom of Great Britain and Northern Ireland, currently AA
with a Stable trend
TRANSACTION STRUCTURE
The transaction is static and allocates collections in separate
interest and principal priorities of payments. The transaction
benefits from two reserves initially funded with the Notes
proceeds: (1) the Class A liquidity reserve fund equal to 2% of the
outstanding Class A notes balance, subject to a floor of 1% of the
initial Class A notes balance, which as part of interest available
funds can be used to cover senior expenses, servicing fees, senior
hedging payments, interest payments on the Class A Notes, and the
Class A principal deficiency ledger (PDL) and (2) the general
reserve fund equal to 1.5% of the outstanding Rated Notes balance
(excluding the Class X Notes), subject to a floor of 1% of the
initial Rated Notes balance (excluding the Class X Notes) minus the
Class A liquidity reserve fund target amount, which as part of
interest available funds can be used to cover senior expenses,
servicing fee, senior hedging payments, and interest payments on
the Rated Notes (excluding the Class X Notes).
In addition, there is a late delinquency loss reserve fund, which
will be funded in the transaction interest waterfalls for loans 90
or more days past due that are not defaulted. If the interest
collections and these three reserves are not sufficient, principal
funds can also be reallocated to cover senior expenses, servicing
fee, senior hedging payments, interest payments on the most senior
class of Notes (excluding the Class X Notes), and related Class
PDL.
Morningstar DBRS considers the interest rate risk for the
transaction to be somewhat limited as an interest rate swap is in
place to reduce the mismatch between the fixed-rate collateral and
the floating-rate Notes. However, only around 66% of the portfolio
at closing is expected to be hedged with a predefined notional
amount. Under the terms of the swap agreement, the Issuer pays a
gradually increasing swap rate over time, which further compress
excess spread during the later stages of the transaction.
TRANSACTION COUNTERPARTIES
Barclays Bank PLC (Barclays) is both the account bank and hedge
provider for the transaction. Morningstar DBRS has a Long-Term
Issuer Rating of "A" on Barclays, which meets the Morningstar DBRS
criteria to act in these capacities.
The transaction documents contain downgrade provisions consistent
with Morningstar DBRS' criteria.
PORTFOLIO ASSUMPTIONS
As the performance data of Plata's loans is limited, another proxy
dataset was provided to Morningstar DBRS for analysis. This dataset
consists of more seasoned loans originated by a related entity,
Bamboo Limited (Bamboo), under similar underwriting criteria but
with higher annual percentage rates (APRs) than those of Plata
loans. Considering the available historical data and benchmarking
of comparable European unsecured consumer loan portfolios,
Morningstar DBRS established a lifetime expected default of 14%.
Similarly, Morningstar DBRS set the expected recovery at 15% or a
loss given default (LGD) of 85%, comparable with other UK consumer
loan portfolios.
Morningstar DBRS' credit ratings on the Rated Notes address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are the related Interest Amounts and the
Class Balances.
Notes: All figures are in British pound sterling unless otherwise
noted.
ATLAS FUNDING 2025-1: DBRS Confirms BB(high) Rating on E Notes
--------------------------------------------------------------
DBRS Ratings Limited took the following credit rating actions on
the provisional credit ratings of the bonds to be issued by Atlas
Funding 2025-1 plc (the Issuer):
-- Class A notes confirmed at (P) AAA (sf)
-- Class B notes confirmed at (P) AA (high) (sf)
-- Class C notes confirmed at (P) A (high) (sf)
-- Class D notes confirmed at (P) BBB (high) (sf)
-- Class E notes confirmed at (P) BB (high) (sf)
-- Class X notes downgraded to (P) BBB (high) (sf) from (P) A
(high) (sf)
The provisional credit rating on the Class A notes addresses the
timely payment of interest and the ultimate repayment of principal
on or before the legal final maturity date in July 2062. The
provisional credit ratings on the Class B, Class C, Class D, and
Class E notes address the timely payment of interest once they are
the senior-most class of notes outstanding and until then the
ultimate payment of interest and the ultimate repayment of
principal on or before the legal final maturity date. The
provisional credit rating on the Class X notes addresses the
ultimate payment of interest and principal on or before the legal
final maturity date.
CREDIT RATING RATIONALE
Following the assignment of provisional credit ratings to the bonds
expected to be issued by the Issuer, Morningstar DBRS has received
updated information on the expected size of the Class X notes,
which has increased to 1.00% from 0.75% of the portfolio balance
(including prefunding loans). Furthermore, Morningstar DBRS also
received updated information on the hedging mechanism of the
transaction, which has reduced the excess spread expected to be
available in the early life of the transaction, as compared to the
hedging assumptions tested to initially assign the provisional
credit ratings. After testing the notes cash flows to incorporate
these structural changes, Morningstar DBRS has confirmed the
provisional credit ratings on the Class A, Class B, Class C, Class
D, and Class E notes and has downgraded the Class X notes to (P)
BBB (high) (sf) from (P) A (high) (sf).
The transaction represents the issuance of residential
mortgage-backed securities (RMBS) backed by first-lien, buy-to-let
(BTL) mortgage loans granted by Lendco Limited (Lendco; the seller
or the originator) in the UK.
The Issuer is a bankruptcy-remote special-purpose vehicle (SPV)
incorporated in the UK. Lendco is a UK specialist property finance
lender, which has been offering loans to customers in England and
Wales since 2018. Lendco's BTL business targets professional
portfolio landlords, often real estate companies or SPVs, which
they acquire through the broker marketplace.
This is Lendco's fifth securitization with the inaugural
transaction, Atlas Funding 2021-1, closing in January 2021,
followed by Atlas Funding 2022-1 in May 2022, Atlas Funding 2023-1
in May 2023, and Atlas Funding 2024-1 in May 2024.
Liquidity in the transaction is provided by the combination of a
liquidity facility (LF) available from closing and a liquidity
reserve fund (LRF) that will be funded through excess spread. The
LF shall cover senior costs and expenses, senior swap payments, and
interest shortfalls on the Class A notes only whereas the LRF shall
cover the same items plus interest shortfalls on the Class B notes.
In addition, principal borrowing is also envisaged under the
transaction documentation and can be used to cover senior costs and
expenses as well as interest shortfalls on the senior-most class of
notes outstanding but subject to some conditions for the Class B to
Class E notes.
Interest shortfalls on the Class B to Class E notes, as long as
they are not the senior-most class of notes outstanding, shall be
deferred and not be recorded as an event of default until the final
maturity date or such earlier date on which the notes are fully
redeemed.
The transaction also features two fixed-to-floating interest rate
swaps, given the presence of a large portion of fixed-rate loans
(with a compulsory reversion to floating in the future), while the
liabilities shall pay a coupon linked to Sonia.
Morningstar DBRS based its credit ratings on a review of the
following analytical considerations:
-- The transaction's capital structure, including the form and
sufficiency of available credit enhancement;
-- The credit quality of the mortgage portfolio and the ability of
the servicer to perform collection and resolution activities.
Morningstar DBRS estimated stress-level probability of default
(PD), loss given default (LGD), and expected losses (EL) on the
mortgage portfolio. Morningstar DBRS used the PD, LGD, and EL as
inputs into the cash flow engine. Morningstar DBRS analyzed the
mortgage portfolio in accordance with its "European RMBS Insight
Methodology";
-- The transaction's ability to withstand stressed cash flow
assumptions and repay the Class A, Class B, Class C, Class D, Class
E, and Class X notes according to the terms of the transaction
documents. Morningstar DBRS analyzed the transaction structure
using Intex DealMaker. Morningstar DBRS considered additional
sensitivity scenarios of 0% CPR;
-- The structural mitigants in place to avoid potential payment
disruptions caused by operational risk, such as a downgrade, and
replacement language in the transaction documents;
-- Morningstar DBRS' sovereign credit rating on the United Kingdom
of Great Britain and Northern Ireland of AA with a Stable trend as
of the date of this press release; and
-- The expected consistency of the transaction's legal structure
with Morningstar DBRS' "Legal and Derivative Criteria for European
Structured Finance Transactions" methodology and the presence of
legal opinions that are expected to address the assignment of the
assets to the Issuer.
Morningstar DBRS' credit ratings on the applicable classes address
the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
The associated financial obligations for each of the rated notes
are the related Interest Amounts and the related Class Balances.
Morningstar DBRS' credit rating on the rated notes also addresses
the credit risk associated with the increased rate of interest
applicable to each of the rated notes if the rated notes are not
redeemed on the Optional Redemption Date (as defined in and) in
accordance with the applicable transaction documents.
Notes: All figures are in British pound sterling unless otherwise
noted.
AUBURN 15: Fitch Affirms B+sf Rating on Cl. F Notes
---------------------------------------------------
Fitch Ratings has affirmed Auburn 15 plc notes, as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Auburn 15 plc
Class A1 NRR Loan Note LT AAAsf Affirmed AAAsf
Class A1 XS2813764540 LT AAAsf Affirmed AAAsf
Class A2 XS2813764979 LT AAAsf Affirmed AAAsf
Class B XS2813765190 LT AA+sf Affirmed AA+sf
Class C XS2813765356 LT A-sf Affirmed A-sf
Class D XS2813765513 LT BBB-sf Affirmed BBB-sf
Class E XS2813765786 LT BB+sf Affirmed BB+sf
Class F XS2813765869 LT B+sf Affirmed B+sf
Transaction Summary
Auburn 15 plc is a securitisation of predominantly buy-to-let (BTL)
residential mortgage assets originated by Capital Home Loans
Limited and secured against properties in the UK. The pool also
contains a small proportion of owner-occupied (OO) loans (GBP67
million).
The assets were previously securitised in the Towd Point Mortgage
Funding Auburn series of transactions, most recently Auburn 12, 13
and 14. The seller is Auburn Seller DAC, which is also the provider
of the representations and warranties, while Capital Home Loans
remains the legal title holder and servicer.
KEY RATING DRIVERS
Seasoned Loans: The portfolio consists of seasoned (18 years)
mortgage loans mainly originated between 2003 and 2009. It has
benefited from a considerable degree of indexation, with a weighted
average (WA) indexed current loan-to-value (LTV) of 47.9%, leading
to a WA sustainable LTV of 59.5%.
The pool consists almost entirely of Bank of England base rate
linked loans, as is typical for BTL assets with a high proportion
of interest-only (IO) loans. The OO loans constitute a small share
of the pool (5.4%) and are typical of non-conforming assets with
high proportions of self-certified and IO loans, and current
arrears.
Stable Asset Performance: Both 1m+ and 3m+ arrears have remained
relatively stable since closing. Early-stage arrears have
fluctuated between 8% and 9%, while late-stage arrears have
experienced a slight increase, shifting towards higher buckets,
with 6m+ arrears growing from 4.4% in July 2024 to 5.6% in February
2025. Auburn 15 is performing better than comparable transactions
and is outperforming Fitch's UK Non-Conforming Index. Repossessions
and losses have also remained stable, with a significant portion of
delinquent loans managed through the receiver of rent mechanism.
Increased CE: The affirmation is supported by increased credit
enhancement (CE), provided by the notes' subordination. CE is
adequate to withstand stresses at the current ratings despite the
arrears' levels and significant loss severity.
High Loss Severity: The model-implied ratings (MIRs) of the notes
might be sensitive to a lower recovery rate (RR) than those
estimated by Fitch's ResiGlobal: UK model. Recent instances of
lower-than-expected RR in certain legacy transactions, including
Auburn 15, have led to the class C-F notes rating being affirmed
below MIRs. This reflects the possibility of reduced recoveries,
which could affect the MIRs in future reviews.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transaction's performance may be affected by changes in market
conditions and the economic environment. Weakening economic
performance is strongly correlated to increasing levels of
delinquencies and defaults that could reduce credit enhancement
available to the notes.
In addition, unanticipated declines in recoveries could result in
lower net proceeds, which may make certain notes susceptible to
negative rating action depending on the extent of the decline in
recoveries. Fitch found that a 15% weighted average WA foreclosure
frequency (FF) increase and a 15% WARR decrease would lead to
downgrades of up to five notches.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing credit enhancement and,
potentially, upgrades. Fitch found that a decrease in the WAFF of
15% and an increase in the WARR of 15% would lead to upgrades of up
to four notches, except for the 'AAAsf' rated notes, which are at
the highest level on Fitch's scale and cannot be upgraded.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action
Prior to the transaction closing, Fitch sought to receive a third
party assessment conducted on the asset portfolio information, but
none was available for this transaction.
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
Auburn 15 plc has an ESG Relevance Score of '4' for Customer
Welfare - Fair Messaging, Privacy & Data Security due toa
proportion of interest-only loans in legacy owner-occupied
mortgages, 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.
CONSTELLATION AUTOMOTIVE: Fitch Affirms Then Withdraws 'CCC+' IDR
-----------------------------------------------------------------
Fitch Ratings has affirmed and subsequently withdrawn Constellation
Automotive Group Limited's (CAG) Long-Term Issuer Default Rating
(IDR) of 'CCC+' and Constellation Automotive Limited's 'CCC+'
senior secured debt and 'CCC-' second lien debt.
The rating action reflects the comprehensive refinancing of the
senior debt, including the redemption of the 2027 senior notes and
equity injection, along with the recent operating performance for
fiscal 2025 being ahead of its expectations. Fitch does not have
visibility on the new capital structure or terms of the new
facilities.
Fitch has withdrawn all ratings due for commercial reasons. Fitch
will therefore no longer provide rating or analytical coverage on
Constellation Automotive.
Key Rating Drivers
Refinancing Complete: The group's senior debt facilities now
comprise a committed GBP1.3 billion unitranche facility arranged by
KKR Capital Markets, which has replaced the previous senior debt
facilities. The shortfall has been covered by an equity injection
from the existing shareholders. Constellation has put in place a
GBP240 million super senior revolving credit facility to provide
increased liquidity and financial flexibility.
Recent Performance Ahead of Expectations: CAG's performance to
end-March 2025 was ahead of its expectations for the year, with
company-reported EBITDA reaching GBP219 million compared with
GBP165 million for the prior year. This was helped by the used car
market reverting to more normal monthly trends, supported by the
increased volumes and conversion rates in the UK remarketing
segment, and the growing automotive services business.
RATING SENSITIVITIES
Not applicable as the ratings have been withdrawn.
Issuer Profile
CAG operates the UK and Europe's largest digital used-vehicle
exchanges (both business-to-business and consumer-to-business) and
is a leading provider of automotive solutions in the UK, including
vehicle movement, logistics, storage, pre-delivery inspections,
fleet management, de-fleeting services and refurbishment.
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
Constellation Automotive Group Limited has an ESG Relevance Score
of '4' for Group Structure due to due to the complexity of the
group structure and a related-party loan provided to an entity
outside the restricted group and consolidation scope, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Constellation
Automotive Limited
senior secured LT CCC+ Affirmed RR4 CCC+
senior secured LT WD Withdrawn
Senior Secured
2nd Lien LT CCC- Affirmed RR6 CCC-
Senior Secured
2nd Lien LT WD Withdrawn
Constellation
Automotive
Group Limited LT IDR CCC+ Affirmed CCC+
LT IDR WD Withdrawn
PETROFAC LTD: Plan Meetings Scheduled for April 23
--------------------------------------------------
Petrofac Limited and Petrofac International (UAE) LLC are
undertaking financial restructurings by way of Restructuring Plans
under Part 26A of the UK Companies Act 2006.
A hearing took place in respect of the Restructuring Plans before
the English Court on March 20, 2025. The Court directed that the
Plan Companies hold 12 meetings with creditors specified in the
Restructuring Plans. Seven Plan Meetings will be convened by PL and
five Plan Meetings will be convened by PIUL for the purpose of
considering and, if thought fit, approving the Restructuring Plans
proposed by PL and PIUL (as applicable).
The Plan Meetings will be held at 10:00 a.m. on April 23, 2025, at
the offices of Linklaters LLP, 1 Silk Street, London EC2Y 8HQ,
United Kingdom and via video conference for Plan Creditors and
proxies. Further information on the Plan Meetings, including the
creditor classes for the meetings and information on how to vote is
included in the Explanatory Statement. The Explanatory Statement is
available on the Plan Website at:
https://deals.is.kroll.com/petrofac
and on the Shareholder Plan Website at:
https://deals.is.kroll.com/petrofac-fsma-shareholders
All Plan Creditors are encouraged to read the Explanatory Statement
in full.
A three-day Sanction Hearing is expected to take place from April
30, 2025 to May 2, 2025. Final confirmation of hearing dates, times
and locations will only be made available on the websites. Plan
Creditors are advised to regularly monitor the Plan Website and
Shareholder Plan Website (as applicable) for further updates.
Shareholder Claimants can also contact the Retail Investor Advocate
free of charge at ia@pl-plan.co.uk.
About Petrofac
Petrofac is an international service provider to the energy
industry, with a diverse client portfolio including many of the
world's leading energy companies. The company designs, builds,
manages and maintains oil, gas, refining, petrochemicals and
renewable energy infrastructure. Petrofac's core markets are in the
Middle East and North Africa (MENA) region and the UK North Sea. It
operates in several other significant markets, including India,
South East Asia and the United States. It has 8,000 employees based
across 31 offices globally.
===============
X X X X X X X X
===============
[] BOOK REVIEW: The Turnaround Manager's Handbook
-------------------------------------------------
Author: Richard S. Sloma
Publisher: Beard Books
Soft cover: 226 pages
List Price: $34.95
Review by Gail Owens Hoelscher
In the introduction to this book, the author suggests that an
accurate subtitle could be "How to Become a Successful Company
Doctor." Using everyday medical analogies throughout, he targets
"corporate general practitioners" charged with the fiscal health of
their companies.
As with many human diseases, early detection of turnaround
situations is critical. The author describes turnaround situations
as a continuum differentiated by length of time to disaster: "Cash
Crunch," "Cash Shortfall," "Quantity of Profit," and "Quality of
Profit."
The book centers on 13 steps to a successful turnaround. The steps
are presented in a flowchart form that relates one to another.
Extensive data collection and analysis are required, including the
quantification of 28 symptoms, the use of 48 diagnostic and
analytical tools, and up to 31 remedial actions. (In case the
reader balks at the effort called for, the author points out that
companies that collect and analyze such data on a regular basis
generally don't find themselves in a turnaround situation to begin
with!)
The first step is to determine which of 28 symptoms are plaguing
the company. The symptoms generally pertain to manufacturing firms,
but can be applied to service or retail companies as well. Most of
the symptoms should be familiar to the reader, but the author lays
them out systematically, and relates them to the analytical tools
and remedial actions found in subsequent chapters. The first seven
involve the inability to make various payments, from debt service
to purchase commitments. Others include excessive debt/equity
ratio; eroding gross margin; increasing unit overhead expenses;
decreasing product line profitability; decreasing unit sales; and
decreasing customer profitability.
Step 2 employs 48 diagnostic and analytical tools to derive
inferences from the symptom data and to judge the effectiveness of
any proposed remedy. The author begins by saying ". . . if the
only tool you have is a hammer, you will view every problem only as
a nail!" He then proceeds to lay out all 48 tools in his medical
bag, which he sorts into two kinds, macro- and micro- tools.
Macro-tools require data from several symptoms or assess and
evaluate more than a single symptom, whereas micro-tools more
general-purpose in function. The 12 macro-tools run from "The Art
of Approximation" to "Forward-Aged Margin Dollar Content in Order
Backlog." The 36 micro-tools include "Product Line Gross Margin
Percent Profitability," Finance/Administration People-Related
Expenses As Percent Of Sales," and "Cumulative Gross $ by Region."
Next, managers are directed to 31 possible remedial actions,
categorized by the four stage turnaround continuum described above.
The first six actions are to be considered at the Cash Crunch
stage, and range from a fire-sale of inventory to factoring
accounts receivable. The next six deal with reducing
people-related expenses, followed by 13 actions aimed at reducing
product- and plant-related expenses. The subsequent five actions
include eliminating unprofitable products, customers, channels,
regions, and reps. Finally, managers are advised on increasing
sales and improving gross margin by cost reduction in various
ways.
The remaining steps involve devising the actual turnaround plan,
ensuring management and employee ownership of the plan, and
implementing and monitoring the plan. The advice is comprehensive,
sensible and encouraging, but doesn't stoop to clich, or empty
motivational babble. The author has clearly operated on patients
before and his therapeutics have no doubt restored many a firm's
financial health.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2025. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
* * * End of Transmission * * *