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250502.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, May 2, 2025, Vol. 26, No. 88 Headlines F I N L A N D AHLSTROM HOLDING: S&P Lowers Long-Term ICR to 'B-', Outlook Stable F R A N C E EXPLEO SERVICES: Moody's Affirms 'B3' CFR, Alters Outlook to Neg. G E R M A N Y CUSTOMCELLS HOLDING: Files for Insolvency Proceedings MOTEL ONE: Fitch Affirms 'B+' LT IDR, Alters Outlook to Negative PROGROUP AG: S&P Downgrades ICR to 'BB-' on Elevated Leverage H U N G A R Y MBH BANK: Moody's Assigns First Time 'B1' Subordinated Debt Rating I R E L A N D AB CARVAL III-C: Fitch Assigns 'B-sf' Final Rating to Class F Notes DILOSK RMBS 6: DBRS Confirms BB(high) Rating on Class E Notes EIRCOM HOLDINGS: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable HARVEST CLO XVII: Moody's Affirms B3 Rating on EUR12.9MM F-R Notes MADISON PARK VII: Moody's Lowers Rating on EUR13.5MM F Notes to B3 I T A L Y LEVITICUS SPV: DBRS Cuts Class A Notes Rating to CCC(high) S P A I N PROSIL ACQUISITION: DBRS Puts 'BB' Rating on A Notes Under Review S W E D E N POLESTAR AUTOMOTIVE: Q1 2025 Retail Sales Up 76% U N I T E D K I N G D O M BELLIS FINCO: S&P Alters Outlook to Negative, Affirms 'B+' LT ICR BTCMINING LIMITED: Crypto Business Shut Down Due to Complaints CABLE & WIRELESS: Fitch Affirms 'BB-' Long-Term IDR, Outlook Stable CASTELL 2025-1: S&P Assigns Prelim B- (sf) Rating on Cl. X1 Notes DRAX GROUP: S&P Affirms 'BB+' Long-Term ICR, Outlook Stable INTELITRACK LTD: Leonard Curtis Named as Joint Administrators LONDON CARDS 1: DBRS Confirms CCC Rating on Class F Notes LONDON COUNCILS: Fear Bankruptcy Amid Homelessness Crisis OCADO GROUP: Fitch Rates GBP300MM Notes 'B-(EXP)', Outlook Stable SMALL BUSINESS 2025-1: DBRS Gives Prov. BB Rating to C Notes UK LOGISTICS 2025-1: DBRS Finalizes BB Rating on Class F Notes WINTERSHALL DEA: Moody's Rates New Hybrid Notes 'Ba1' - - - - - ============= F I N L A N D ============= AHLSTROM HOLDING: S&P Lowers Long-Term ICR to 'B-', Outlook Stable ------------------------------------------------------------------ S&P Global Ratings lowered its long-term issuer credit rating on Ahlstrom Holding 3 Oy (Ahlstrom) to 'B-' from 'B'. S&P lowered the rating on the senior secured debt to 'B-' from 'B'. The recovery rating on the debt is '4' with the rounded estimate of expected recovery revised to 40%, from 45% previously. S&P said, "The stable outlook reflects our expectation that Ahlstrom completes the acquisition of Stevens Point by June 2025. We anticipate S&P Global Ratings-adjusted debt to EBITDA above 8.0x in 2025, and at 7.2x-7.8x in 2026. We estimate S&P Global Ratings-adjusted free operating cash flow (FOCF) at EUR50 million-EUR90 million annually in 2025 and 2026." Ahlstrom underperformed our expectations in 2024 with S&P Global Ratings-adjusted EBITDA of EUR315 million. In 2024 Ahlstrom reported nearly stable revenue of EUR2.9 billion, as volumes remained subdued due to weakening economic conditions in the second half of the year and the divestments of its plants in Stenay and Aspa. S&P said, "At EUR315 million, S&P Global Ratings-adjusted EBITDA was well below our expected EUR373 million, primarily due to higher restructuring and transformation costs (EUR120 million versus EUR66 million expected) due the closure of an underperforming plant (Bousbecque), divestment of the Aspa plant, and losses from financial hedges. S&P Global Ratings-adjusted debt remained broadly stable. As a result, adjusted leverage increased to 9.7x compared with 8.8x in 2023 and our expectation of 7.9x at the time of our previous publication (August 2024). The recurring, but volatile, nature of the restructuring and transaction costs add an element of uncertainty to our base case, especially as these costs have been sizable in the past years. However, we expect them to be substantially lower from 2025 onwards, as the business transformation phase has been completed, according to management." On April 3, 2025, Ahlstrom announced that the acquisition of Stevens Point would be funded by $600 million of new debt underwritten by a group of banks. Ahlstrom is acquiring Stevens Point, a North American provider of high-end solutions for food, consumer packaging, and e-commerce applications, from Pixelle Specialty Solutions. This will be funded via $600 million of new debt. This acquisition aligns itself with Ahlstrom's focus on sustainability-driven packaging and is expected to strengthen its product offering and footprint in North America. Stevens Point brings advanced coating and finishing capabilities, and its high-margin, cost-efficient operations are expected to enhance Ahlstrom's profitability and cash conversion. While the transaction will increase S&P Global Ratings-adjusted debt, S&P anticipates the leverage will hover at 8.0x-8.5x in 2025 (7.6x on a pro forma basis) and 7.2x-7.8x in 2026, supported by Stevens Point's earnings contribution and lower restructuring costs. S&P said, "Although the acquisition will bolster EBITDA, we expect FOCF will remain meagre compared with the debt quantum. We expect Ahlstrom's S&P Global Ratings-adjusted EBITDA to increase to EUR410 million–EUR430 million in 2025, up from EUR315 million in 2024. This improvement will be driven by a EUR80 million-EUR90 million decline in transformation costs, a six-month EBITDA contribution from Stevens Point (around EUR35 million), and better fixed-cost absorption from volume recovery. Transformation and restructuring costs and losses from energy hedges have materially weighed on adjusted EBITDA since the company's acquisition by Bain Capital in 2021. These costs peaked at EUR120 million in 2024. We assume these costs will decline to around EUR30 million-EUR40 million in 2025 and possibly lower in 2026 onwards. "Despite this, we view the group's S&P Global Ratings-adjusted FOCF generation (EUR50 million-EUR90 million per year in 2025-2026) as relatively low and insufficient for S&P Global Ratings-adjusted debt of EUR3.6 billion (after the acquisition). In our view, the company will need to tighten its financial policy to meet our metrics for a 'B' rating. "The stable outlook reflects our expectation that Ahlstrom will successfully close the acquisition of Stevens Point by June 2025. We also expect adjusted debt to EBITDA will remain above 8x in 2025 and at around 7.2x-7.8x in 2026 with annual adjusted FOCF of EUR50 million-EUR90 million in 2025 and 2026. "We could lower our rating if we came to view Ahlstrom's capital structure as unsustainable. This could be illustrated by a failure to materially improve FOCF, while adjusted debt remained elevated." This could result from an aggressive financial policy such as no deleveraging plan or making debt-funded acquisitions or substantial dividend payments. It could be aggravated by a lack of material improvement in its operating performance. S&P said, "We see an upgrade as unlikely in the next 12 months. Later, an upgrade would hinge on the company articulating a financial policy, particularly a deleveraging plan, as well as a material improvement in FOCF. We would view adjusted debt to EBITDA declining towards 7x as supportive of a potential outlook revision." =========== F R A N C E =========== EXPLEO SERVICES: Moody's Affirms 'B3' CFR, Alters Outlook to Neg. ----------------------------------------------------------------- Moody's Ratings has affirmed Expleo Services SAS' ("Expleo" or the "company") B3 long term corporate family rating, B3-PD probability of default rating and B3 rating on the backed senior secured bank credit facilities. The outlook has changed to negative from stable. RATINGS RATIONALE The rating action reflects the company's operating performance in 2024, which was weaker than Moody's expectations. In 2024, weak demand for Expleo's services resulted in the company's revenue growing by 1% compared to 2023, which was below management's budget by 6%. The main reason for the weak demand is the ongoing economic challenges faced by Expleo's key clients in the automotive sector which accounts for around 24% of the company's revenue. This has resulted in project delays, price re-negotiations and some projects being put on hold. As a result, management- adjusted EBITDA was down by 1% compared to 2023 and missed management's budget by 10%. The weak performance also resulted in higher than expected non-recurring cash charges of EUR32 million in 2024, significantly higher than Moody's forecasts of EUR10 million. These costs are mostly related to employee layoffs. This has resulted in an increase in Moody's adjusted debt/EBITDA (leverage) to 7.7x in 2024 from 6.6x in 2023 and weak EBITA/interest of 1.3x in 2024 compared to 1.4x in 2023. Free cash flow (FCF) to debt was also negative at 1% due to the high level of exceptional cash costs among others. Moody's expects 2025 to also remain challenging for Expleo with a slight decline in (Moody's expected) revenue and EBITDA as the automotive sector continues to face headwinds and higher spending from defense companies could take time to meaningfully benefit Expleo. Moody's assumes a gradual recovery in revenues at around 3%-5% in 2026 and 2027 driven by price increases and volumes, and improvement in EBITDA of around 15% driven by Expleo's cost savings initiatives, better invoicing rate, more employee layoffs and increased use of junior staff. Moody's notes that the success of these initiatives to grow earnings remains subject to a high degree of uncertainty in the context of a weakening global macroeconomic environment. Moody's thus expects Moody's adjusted leverage to remain highly elevated at around 7.7x in 2025, before declining to 6.6x in 2026 which is towards the triggers set for the B3 CFR, still positioning Expleo weakly in this rating category. Moody's forecasts FCF/debt to remain negative at 3% in 2025 before breaking even in 2026 negatively impacted in both years by Moody's assumptions that exceptional costs will be around EUR20-EUR25 million per year. RATING OUTLOOK The negative outlook reflects Moody's expectations that Expleo's operating performance and credit metrics will remain weak in 2025 with a gradual recovery expected only from 2026 onwards. The negative outlook also highlights the relatively limited time for the company to meaningfully improve its credit metrics well in advance of the maturity of its revolving credit facility (RCF) expiring in March 2027 and term loan due in September 2027. At the same time, Moody's assumes that Expleo will maintain sufficient cash and availability under the RCF despite the cash usage projected over the next 12 months. LIQUIDITY Expleo's liquidity is adequate with cash balance of EUR92 million as of December 31, 2024 and EUR50 million availability under the RCF out of the total EUR115 million. The company does have seasonality due to intra-quarter working capital movements. The nearest debt maturity will be in March 2027 when the RCF matures. STRUCTURAL CONSIDERATIONS The backed senior secured bank credit facilities are rated at the same level as the CFR reflecting their pari passu ranking and upstream guarantees from operating companies. They benefit from first ranking transaction security over shares, bank accounts and intragroup receivables of material subsidiaries. Moody's typically views debt with this type of security package to be akin to unsecured debt. However, they benefit from upstream guarantees from operating companies accounting for at least 80% of consolidated EBITDA. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if operating performance improves, leading to Moody's-adjusted debt/EBITDA sustainably below 5.5x, Moody's-adjusted free cash flow/debt of 3%-5% and a refinancing of the company's debt facilities well in advance of their maturity, with the company maintaining a solid liquidity profile. The ratings could be downgraded if operating performance remains weak reflected by a Moody's-adjusted debt/EBITDA well above 6.5x, EBITA/interest expense below 1.5x or negative Moody's-adjusted free cash flow all on a sustained basis, or if liquidity concerns arise. Moody's believes a lack of meaningful improvement in credit metrics could jeopardize Expleo's ability to refinance its debt well in advance of maturity and potentially increase the probability of default. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Business and Consumer Services published in November 2021. COMPANY PROFILE Expleo Services SAS, headquartered in Paris, France, is a leading European engineering, technology and consulting service provider specializing in developing complex products, optimizing manufacturing processes, and ensuring the quality of information systems. Expleo offers services in a wide range of fields including AI engineering, digitalization, hyper-automation, cybersecurity and data science. It has a global footprint, with 17,500 highly-skilled experts across 30 countries in the aerospace, automotive, transportation, and financial services sectors. It generated revenue of EUR1.4 billion and Moody's adjusted EBITDA of EUR119 million in 2024. ============= G E R M A N Y ============= CUSTOMCELLS HOLDING: Files for Insolvency Proceedings ----------------------------------------------------- German battery pioneer CustomCells Holding GmbH has filed for insolvency proceedings for the group's key operating entities located in Itzehoe and Tubingen. The competent court in Kiel has appointed attorney Dr. Malte Koster, a partner at the law firm WILLMERKOSTER, as the preliminary insolvency administrator of the operating companies. WILLMERKOSTER is one of the leading insolvency law firms in Germany. The holding company of the CustomCells Group is not affected by the insolvency filing at this time. The financial difficulties at CustomCells stem primarily from the insolvency and payment default of its largest customer, aerospace company Lilium. Outstanding receivables in the tens of millions of euros remained unpaid and could no longer be absorbed. Despite promising business developments, no new investors with sufficient capital were secured in time to offset these losses, due in part to the current challenging macroeconomic environment. The strained situation affecting other battery industry players added further pressure. Efforts to avoid insolvency through support from regional, federal, and EU institutions ultimately proved unsuccessful. Dr. Koster and his team have already begun their work as preliminary insolvency administrators. Employees were informed of the insolvency filing and the next steps in the preliminary proceedings during an all-hands meeting. Business operations at CustomCells will continue for the time being. Employee wages and salaries are secured through June 2025. In parallel with stabilizing ongoing operations, preparations are underway to restart the investor search process. "This decision was not made lightly," said Dr. Dirk Abendroth, CEO of CustomCells. "Despite our best efforts, outstanding products, and strong business development, we are forced to take this step due to external factors beyond our control. Our focus is now on maintaining operations as best as possible and creating a viable path forward for the company. We are grateful to our employees, customers, investors, and partners for their trust and support during this challenging time." In an initial statement, preliminary insolvency administrator Dr. Malte Koster commented: "CustomCells is a premium battery manufacturer and one of the pioneers in cutting-edge battery cell technology, with a strong focus on research. The environment for startups in Germany is currently difficult, particularly in the battery sector. Ultimately, the developments at Lilium have significantly impacted CustomCells. We are now working to gain a full understanding of the situation and, over the coming days and weeks, will evaluate what restructuring options are available under insolvency protection. At the same time, we will launch a new investor process together with the management team." About CustomCells CustomCells is one of the few European players specializing in high-performance, tailor-made battery cells, and one of the very few battery manufacturers based in Germany. The company recently announced the construction of a state-of-the-art pilot facility for innovative cylindrical cells in TUbingen, as part of a large-scale funding initiative aimed at bridging the gap between research and industrial-scale production. Just weeks ago, CustomCells' battery cells underwent independent testing and ranked highly in competitive comparisons. Founded in 2012 as a spin-off of the German Fraunhofer Society, CustomCells established sites in Itzehoe and Tubingen, where more than 200 dedicated professionals are currently employed. The company supports customers throughout the entire value chain - from initial concept development to the delivery of cells for serial production. CustomCells develops and industrializes customized premium battery technology and contributes to the global energy transition with innovation and comprehensive battery expertise - for a better future. MOTEL ONE: Fitch Affirms 'B+' LT IDR, Alters Outlook to Negative ---------------------------------------------------------------- Fitch Ratings has revised Motel One GmbH's Outlook to Negative from Stable, while affirming the Long-Term Issuer Default Rating (IDR) at 'B+'. Fitch has also assigned its new EUR907 million senior secured term loan B (TLB) an expected rating of 'BB-(EXP)' with a Recovery Rating of 'RR3' and affirmed existing senior secured debt rating at 'BB-'/ 'RR3'. Proceeds will be used to refinance its existing EUR800 million TLB. The Negative Outlook reflects that leverage metrics will remain outside its rating sensitivities for at least the next 18 months, amid a soft trading environment and modest re-leveraging of the balance sheet as part of the envisaged acquisition of the business by PAI Partners. Fitch assumes smooth execution of Motel One's growth strategy, with capacity to deleverage to below its negative rating sensitivity by 2027. Fitch would downgrades the rating to 'B' if the deleveraging path is disrupted by weaker performance of existing hotels or issues with new hotel openings. Key Rating Drivers Leverage Metrics Outside Sensitivities: The Negative Outlook reflects that Fitch projects leverage metrics will be above the 6.0x negative rating sensitivity until at least end-2026. The high leverage follows softer anticipated earnings over 2024-2026 as Motel One's core markets, including Germany, remain challenging. Alongside the soft earnings, the envisaged acquisition of the group by PAI Partners is expected to add EUR107 million of debt (through the larger TLB), with Fitch projecting EBITDAR leverage will be 6.4x at end-2025 against its previous forecast of 5.9x. Deleveraging Capacity: The 'B+' rating continues to reflect the company's deleveraging potential over the next three years. Fitch expects rating headroom under the leverage metrics to increase over 2026-2027 as high single-digit sales and EBITDAR growth aid organic deleveraging. Its leverage expectations are based on non-debt treatment of a EUR350 million payment-in-kind (PIK) facility and a EUR250 million vendor loan note (VLN), which will be at holding companies outside the restricted group as a part of Motel One's planned acquisition by PAI Partners. Moderate Scale and Diversification: Fitch assesses Motel One's business profile as in line with a low 'BB' category rating due to its business scale and diversification. It primarily operates under one brand, with some diversification across western Europe, although the main German market accounted for around 65% of sales in 2024. It had 27,929 rooms in 2024, more in line with the 'B' category median, but it has a superior EBITDAR margin, which translates into EBITDAR of more than EUR400 million, close to the 'BB' category median. Business Growth Remains Steady: Despite a tough operating environment in the group's key markets, Fitch continues to project high single digit sales growth over 2025-2028, supported by steady growth in the organic hotel portfolio combined with five to six new hotels opened each year, ramping up within one to two years towards target capacity. This growth is slower than historical rates, but stronger than western European peers. Manageable Strategy Execution Risks: Motel One's strategy relies on the expansion of its hotel portfolio through leasing new properties, which does not require upfront capex, unlike asset-heavy operators that invest in hotel construction. Its rating case assumes an increase in the number of hotels to 115 by 2027 (2024: 99), in line with the company's secured pipeline, which has manageable execution risks as contracts with property owners are already signed. Motel One has a record of new hotels quickly reaching profitability, and the pipeline does not consider any large assets in new markets. Fitch also assumes that hotels will be opened without material delays. Superior Profitability: Motel One's EBITDAR margin of around 50% is the highest in Fitch's global lodging portfolio, with the exception of Wyndham Hotels & Resorts Inc., for which fully franchised operations lead to EBITDAR margins of around 80%. Motel One's superior profitability than asset-heavy peers results from its prime locations, standardised rooms and strong operating efficiencies. Fitch expects high profit margins to translate into positive pre-dividend free cash flow (FCF), despite high interest payments. Gradual EBITDA Margin Improvement: Its rating case assumes a gradual improvement in the EBITDA margin toward 28% over 2025-2028 due to pricing actions and an increase in the number of fully ramped-up hotels relative to new openings. Fitch also expects margins to benefit from portfolio composition changes towards markets with higher rates and occupancies, such as London and Paris. These strong and slightly growing operating margins are critical to the company's deleveraging trajectory, underpinning the 'B+' IDR. Positive FCF, Self-Funded Growth: The 'B+' IDR reflects Motel One's sustained positive FCF, supported by strong operating margins, and its ability to self-fund its medium-term expansion. The FCF generating capacity balances its limited scale and diversification, and differentiates it from lower-rated peers. Its FCF forecast does not assume dividends or any other form of cash upstream that may happen within two years in relation to the repayment of the VLN, which represents a deferred consideration for the transaction. Deteriorating FCF would signal structural weaknesses of operating risk or a more aggressive financial policy and would put pressure on the rating. Peer Analysis Motel One is significantly smaller than higher-rated globally diversified peers such as Accor SA (BBB-/Positive), Hyatt Hotels Corporation (BBB-/Stable), and Wyndham Hotels & Resorts Inc. (BB+/Stable) by number of rooms and business size. It also has a weaker financial structure, with higher leverage and more limited financial flexibility. This results in significant rating differential with these peers. Fitch views Minor Hotels Europe & Americas, S.A. (MHEA BB-/Positive) as Motel One's closest peer, due to its predominantly European operations and similar EBITDAR, despite having more rooms. Motel One is rated one notch lower than MHEA, which reflects MHEA's lower financial leverage and stronger pre-dividend FCF generation. Motel One is rated two notches above Greek hotel operator Sani/Ikos Group Newco S.C.A. (B-/Stable) due to its larger scale, better diversification, stronger FCF profile and lower leverage. Motel One has the same rating as Dubai-based operator FIVE Holdings (BVI) Limited (B+/Stable), despite being larger, more profitable and better diversified. This is because Fitch expects stronger deleveraging for FIVE. Key Assumptions - Sales growth CAGR of around 10% for 2025-2028; - Organic growth supported by a steady improvement in occupancy rates, alongside above-inflation growth in the room daily rate, supported by introduction of dynamic pricing; - EBITDAR margins steadily improving towards 51% in 2027 (2023: around 50%), supported by a focus on cost management, fast turnaround of new hotels to profitability, and improving occupancy rates at existing sites; - No significant working-capital outflows to 2028; - Capex at 6%-7.5% of revenue a year, for maintenance of existing sites including redesign and new openings; - Treatment of EUR350 million PIK facility and EUR250 million VLN as non-debt; - No dividends or any other cash upstream above the restricted group. Recovery Analysis Fitch assumes that the company would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated. In its bespoke recovery analysis, Fitch estimates GC EBITDA available to creditors of around EUR180 million. This reflects Fitch's view of a sustainable, post-reorganisation EBITDA level on which it bases the enterprise valuation (EV). Distress would likely arise from an erosion of the brand value, leading to a loss of market share in an inflationary cost environment. At the GC EBITDA, the company will generate reduced operating cash flow that would provide limited room for investments in growth capex. Fitch has applied a 6.0x EV/EBITDA multiple to the GC EBITDA to calculate a post-reorganisation EV. This multiple reflects the company's strong brand and business model concept, prime inner-city locations and high profitability. Motel One's existing senior secured debt of EUR1.3 billion consists of EUR800 million TLB and EUR500 million notes, which rank equally among themselves and with EUR100 million revolving credit facility (RCF), which Fitch assumes to be fully drawn in a default. Its waterfall analysis generates a ranked recovery for Motel One's senior secured debt in the 'RR3' band, indicating a 'BB-' instrument rating, one notch above the IDR. Following the planned EUR907 million TLB, which will refinance the existing EUR800 million TLB, and the new EUR200 million RCF, Fitch expects the recovery percentage to fall but stay within the 'RR3' band, leading to unchanged senior secured debt ratings. Fitch has therefore assigned an expected 'BB-(EXP) senior secured rating to the new TLB. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Material slowdown in revenue growth, with lower-than-expected EBITDAR margin improvements; - EBITDAR leverage above 6x on a sustained basis; - EBITDAR fixed-charge coverage below 1.5x on a sustained basis; - Neutral to negative FCF; - Aggressive financial policy leading to reduced liquidity. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Successful growth strategy translating into double-digit revenue growth and EBITDAR expansion; - EBITDAR leverage below 5.5x on a sustained basis; - EBITDAR fixed-charge coverage above 1.8x on a sustained basis; - Consistently positive FCF. Liquidity and Debt Structure Pro forma for the envisaged transaction, Fitch estimates the group's cash balance to reduce from around EUR173 million at end-2024 (adjusted for EUR20 million the minimum cash required for day-to-day operations, and to cover the group's intra-year swings in working capital) to around EUR40 million to support the financing of the group's acquisition. Fitch projects cash balances will gradually build up over 2025-2026 due to positive FCF. Liquidity will be also supported by an upsized undrawn RCF of EUR200 million. Fitch judges this liquidity position, combined with the group's cash-generative business model, as sufficient to support the group's expansion plans and cover financing costs without the need for external funding. Issuer Profile Motel One is a hotel operator with a growing market position within its niche "affordable design" segment in western Europe. It operates 99 hotels in 47 cities across 13 countries. Summary of Financial Adjustments Fitch computes Motel One's lease liability by multiplying Fitch-defined lease costs by 8x, reflecting the long-term nature of rent contracts in the hotel sector. 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 ----------- ------ -------- ----- Motel One GmbH LT IDR B+ Affirmed B+ senior secured LT BB-(EXP)Expected Rating RR3 senior secured LT BB- Affirmed RR3 BB- PROGROUP AG: S&P Downgrades ICR to 'BB-' on Elevated Leverage ------------------------------------------------------------- S&P Global Ratings lowered its long-term issuer credit rating on Progroup AG to 'BB-' from 'BB'. S&P also lowered its issue rating on the EUR750 million senior secured notes due 2029 to 'BB-' from 'BB'. The recovery rating is unchanged at '3'. S&P said, "The stable outlook reflects our expectation that Progroup will post debt to EBITDA of 4.7x-5.0x in 2025 (6.6x in 2024) and 3.5x-3.7x in 2026, assuming EBITDA growth and lower expansionary investments. "The downgrade reflects weaker 2024 results and our view that leverage will remain elevated in the next two years. Progroup generated weaker-than-expected EBITDA in 2024 largely due to significantly higher recovered paper prices. We anticipate recovered paper prices will remain elevated in 2025 and see some cost increases. Although we project S&P Global Ratings-adjusted EBITDA to improve to EUR180 million-EUR190 million in 2025 (driven by higher selling prices and lower recovered paper and energy costs), this is below our previous estimate of EUR220 million-EUR230 million. We anticipate debt to EBITDA to remain at about 4.7x-5.0x in 2025 (6.6x in 2024), compared with our previous assumption of 3.5x. In 2026, we assume that EBITDA will rise to EUR220 million-EUR230 million (as volume growth improves fixed cost absorption). This, combined with a halt in expansionary capex, is forecast to reduce debt to EBITDA to 3.5x-3.7x by 2026. Given the lower-than-expected profitability and higher leverage, we now apply a one-notch negative comparative adjustment to our issuer credit rating on Progroup. We note that economic slowdown in the broader European economy brings downside risks to our forecast. "Growth capex will constrain adjusted free operating cash flow (FOCF) in 2025. Progroup's greenfield expansion strategy results in weak FOCF cycles every few years. We expect total capex at about EUR133 million in 2025, from a peak of EUR236 million in 2024, mostly due to capacity expansions in corrugators (PW16) and investments in a waste-to-energy plant (PPO2). We expect negative FOCF of EUR25 million for 2025, up from negative EUR209 million in 2024. The improvement in FOCF mainly reflects lower capex and higher EBITDA. We expect FOCF will turn positive to EUR90 million-EUR100 million in 2026 as capex declines to about EUR40 million-EUR50 million. We assume that Progroup will incur limited expansionary capex in 2026, as the group postpones new growth projects, as long as reported debt to EBITDA continues to exceed 3.0x (versus 6.4x in 2024). "Our rating on Progroup remains supported by the company's track record of successfully implementing greenfield expansion projects, well-invested asset base, and long-term industry growth prospects. The rating benefits from long-term industry growth prospects that are bolstered by e-commerce and sustainability trends, as well as relatively stable end-markets. Moreover, Progroup's relatively new machinery, compared with the industry average, supports its cost efficiency over the medium term. "The stable outlook reflects our expectation that EBITDA growth and a reduction in expansionary capex in 2025 and 2026 will help reduce leverage. We forecast debt to EBITDA at 4.7x-5.0x in 2025 and 3.5x-3.7x in 2026. "We could downgrade Progroup if the company's leverage exceeds 4.5x with funds from operations (FFO) to debt below 16% over an extended period. This could be the result of failure to recover adjusted EBITDA margins, led by continued adverse pricing pressure in containerboard or corrugated board, or rises in recovered paper and energy costs. It could also result from unexpected outages at the company's facilities or cost overruns. "We could raise the ratings if leverage improves above our current expectations, such that debt to EBITDA declines to about 3.0x-3.5x on a sustainable basis and FFO to debt exceeds 25%. An upgrade would also require a meaningful and sustainable recovery in Progroup's EBITDA margins." ============= H U N G A R Y ============= MBH BANK: Moody's Assigns First Time 'B1' Subordinated Debt Rating ------------------------------------------------------------------ Moody's Ratings has assigned a first-time foreign-currency rating of B1 to the subordinated debt to be issued by MBH Bank Nyrt. (MBH). The subordinated debt - referred to as Tier 2 notes by the issuer - is explicitly designated as a subordinated obligation of the issuer, ranking pari passu with all other subordinated obligations, and senior to the bank's share capital in both resolution and insolvency. All other ratings and assessments remain unaffected by the rating action. RATINGS RATIONALE The B1 rating assigned to the subordinated debt to be issued by MBH reflects the bank's ba3 Baseline Credit Assessment (BCA) and Adjusted BCA; as well as the results of Moody's Advanced Loss Given Failure (LGF) analysis, taking into account the proposed bond volume and limited loss protection from subordination in the form of residual equity and Additional Tier 1 instruments. For MBH's subordinated debt, this indicates a high loss severity in the event of the bank's failure, leading to a B1 debt rating, one notch below the bank's ba3 Adjusted BCA. The rating of this debt class does not benefit from any government support uplift, in line with Moody's assumptions of a low probability of government support to be forthcoming to instruments specifically designated as loss-absorbing in resolution. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING MBH's subordinated debt rating could be upgraded in case of an upgrade of its BCA or following an improved result from Moody's Advanced LGF analysis, in particular if caused by a meaningful issuance of instruments ranking junior to Tier 2 instruments, thereby leading to a lower loss given failure for the bank's subordinated debt. MBH's BCA could be upgraded following a joint improvement of solvency indicators, namely a further reduction in asset risk, combined with a strengthening in capital and profitability, while maintaining its current liquidity and funding profile. The BCA could also be upgraded once MBH has successfully executed on its M&A transactions, including building a track record of sustained financial performance. MBH's subordinated debt rating could be downgraded in case of a downgrade of the bank's BCA, in particular if the bank's financial performance weakens significantly, particularly if caused by a lower solvency, for example, as result of additional sizeable acquisitions, combined by a significant deterioration of its liquidity and funding profile. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks published in November 2024. ============= I R E L A N D ============= AB CARVAL III-C: Fitch Assigns 'B-sf' Final Rating to Class F Notes ------------------------------------------------------------------- Fitch Ratings has assigned AB Carval Euro CLO III-C DAC Final ratings, as detailed below. Entity/Debt Rating ----------- ------ AB CARVAL EURO CLO III-C DAC Class A XS3019298549 LT AAAsf New Rating Class A-1 LT AAAsf New Rating Class A-2 LT AAAsf New Rating Class B XS3019298895 LT AAsf New Rating Class C XS3019299356 LT Asf New Rating Class D XS3019299513 LT BBB-sf New Rating Class E XS3019299786 LT BB-sf New Rating Class F XS3019299943 LT B-sf New Rating Class X XS3019298382 LT AAAsf New Rating Subordinated Notes XS3019300113 LT NRsf New Rating Transaction Summary AB CARVAL EURO CLO III-C DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. Note proceeds have been used to purchase a portfolio with a target par of EUR400 million. The portfolio is actively managed by CarVal CLO Management, LLC. The CLO has a 4.5-year reinvestment period and an 8.5-year weighted average life test (WAL). KEY RATING DRIVERS Average Portfolio Credit Quality (Neutral): Fitch assesses the average credit quality of obligors to be in the 'B' category. The Fitch weighted average rating factor of the identified portfolio is 24.5. High Recovery Expectations (Positive): At least 90% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate of the identified portfolio is 63.5%. Diversified Portfolio (Positive): The transaction has two Fitch matrix sets, one effective at closing and one effective a year later. The matrices within each set correspond to a top 10 obligor concentration limit at 20%, a fixed-rate asset limit at 12.5% or 5%, and an 8.5-year WAL test at closing and a 7.5-year WAL test for the forward matrices. The transaction includes various concentration limits in the portfolio, including a maximum exposure to the three-largest Fitch-defined industries at 40%. These covenants ensure the asset portfolio will not be exposed to excessive concentration. Portfolio Management (Neutral): The transaction has a 4.5-year reinvestment period and includes reinvestment criteria similar to those of other European transactions. Fitch's analysis is based on a stressed-case portfolio with the aim of testing the robustness of the transaction structure against its covenants and portfolio guidelines. Cash Flow Modelling (Positive): The WAL used for the transaction's Fitch-stressed portfolio is reduced by 12 months from the WAL covenant. This is to account for the strict reinvestment conditions envisaged by the transaction after its reinvestment period. These include passing both the coverage tests and the Fitch 'CCC' test post reinvestment as well as a WAL covenant that progressively steps down over time. Fitch believes these conditions would reduce the effective risk horizon of the portfolio during stress periods. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A 25% increase of the mean default rate (RDR) and a 25% decrease of the recovery rate (RRR) across all ratings of the identified portfolio would lead to a downgrade of one notch each for the class D, E and F notes. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A 25% reduction of the mean RDR and a 25% increase in the RRR across all ratings of the Fitch-stressed portfolio would lead to upgrades of up to five notches, except for the 'AAAsf' rated 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 The majority of the underlying assets or risk presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority- registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations Fitch does not provide ESG relevance scores for AB CARVAL EURO CLO III-C DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose any ESG factor that is a key rating driver in the key rating drivers section of the relevant rating action commentary. DILOSK RMBS 6: DBRS Confirms BB(high) Rating on Class E Notes ------------------------------------------------------------- DBRS Ratings GmbH confirmed the following credit ratings on the notes issued by Dilosk RMBS No. 6 (STS) DAC (the Issuer): -- Class A notes at AAA (sf) -- Class B notes at AA (sf) -- Class C notes at A (sf) -- Class D notes at BBB (low) (sf) -- Class E notes at BB (high) (sf) The credit rating on the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in July 2061. The credit rating on the Class B notes addresses the ultimate payment of interest and principal, and timely payment of interest while the senior-most class outstanding. The credit ratings on the Class C, Class D, and Class E notes address the ultimate payment of interest and principal on or before 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. -- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables. -- Current available credit enhancement to the notes to cover the expected losses at their respective credit rating levels. The transaction is a securitization of prime owner-occupied mortgage loans secured over properties in the Republic of Ireland and originated by Dilosk DAC as well as the Governor and Company of the Bank of Ireland. The portfolio is serviced by Dilosk DAC, with BCMGlobal ASI Limited acting as the delegated servicer. PORTFOLIO PERFORMANCE As of January 2025, loans more than three months in arrears represented 0.1% of the outstanding portfolio balance. 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 (sf) credit rating level to 1.3% and 10.5%, respectively. CREDIT ENHANCEMENT As of the January 2025 payment date, the credit enhancement available to the Class A, Class B, Class C, Class D, and Class E notes was 13.9%, 8.4%, 5.1%, 3.4%, and 2.8%, respectively, up from 12.6%, 7.5%, 4.6%, 3.0%, and 2.5%, respectively, at the previous annual review. Credit enhancement to the notes is provided by subordination of junior classes and the general reserve fund. The general reserve fund is currently at its target level of EUR 3.3 million, equal to 1.4% of the original principal balance of the rated notes and Class Z1 notes, minus the liquidity reserve target amount. The general reserve fund is available to cover senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes. The liquidity reserve fund is currently at its target level of EUR 4.1 million, equal to 1.0% of the outstanding principal balance of the Class A notes, and is available to cover senior fees and interest on the Class A notes. BNP Paribas, Dublin Branch (BNP Paribas Dublin) acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating on BNP Paribas Dublin, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology. Natixis S.A. acts as the swap counterparty for the transaction. Morningstar DBRS' private credit rating on Natixis S.A. is above 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. EIRCOM HOLDINGS: Fitch Affirms 'B+' Long-Term IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed eircom Holdings (Ireland) Limited's (eir) Long-Term Issuer Default (IDR) at 'B+' with a Stable Outlook. Fitch has also affirmed the senior secured instrument rating at 'BB-' with a Recovery Rating of 'RR3'. eir's ratings reflect its market-leading position as Ireland's incumbent fixed-line operator with a fully converged product base and partial ownership of the largest fibre-to-the-home (FTTH) network in the country. eir has been managing increased competition well, with initial signs of revenue stability in 2024. Investments in infrastructure will begin to decrease, potentially benefitting free cash flow (FCF), although the extent of improvements on leverage will depend on shareholder distributions. Minority dividend payments from Fibre Networks Ireland Limited (FNI) are expected soon, which will increase Fitch-defined leverage but still within the sensitivities for the 'B+' rating. eir's improved FCF generation prospects will provide more rating headroom, but a higher rating would be contingent on the company's financial policy aligning with upgrade leverage sensitivities, including the impact from FNI minority dividends. Key Rating Drivers Leverage Headroom: Fitch expects consolidated Fitch-defined EBITDA net leverage to remain stable at 4.6x at end-2025, providing headroom relative to its 5.0x downgrade sensitivity. Fitch forecasts leverage to decline to 4.4x for 2025-2027, due to modest EBITDA growth, decreasing capex and moderate dividend payments, assuming no dividends are paid by FNI. eir has good deleveraging capacity following the completion of the fibre roll-out. The extent of the deleveraging will depend on the company's allocation of increasing pre-dividend FCF, whether it be for deleveraging or increased shareholder remuneration. Minority Dividends Impact: Leverage may decrease below the positive rating sensitivity of 4.5x as early as 2026, assuming no dividend distribution from FNI. Dividends paid by FNI to its minority shareholders will increase Fitch-defined leverage metrics. EBITDA net leverage will be 4.7x-4.8x in 2025-2027, assuming FNI yearly dividends of EUR20 million-30 million in 2025 increasing to EUR80 million in 2027, but still within the sensitivities for the 'B+' rating. Leading Fibre Network: eir has rolled out to around 1.35 million homes as of 4Q24, or over 70% of its target by 2027. These are out of eir's total 2.2 million lines in high-speed network, which include DSL lines. eir's progress has outpaced competing rival urban and suburban builds by Virgin Media Ireland (VMI) and Vodafone-backed SIRO, each with around 335,000 and 600,000 homes passed, respectively. VMI is planning to reach 1 million homes by 2025 and SIRO 700,000 by 2026. Competition for Wholesale: eir's fast fibre roll-out is alleviating competitive pressure from overlapping networks as its first-mover advantage bolsters its larger market share on new connections and should reduce network churn. However, as other networks expand, competition intensifies in overlapping areas for retail and wholesale revenues. eir's wholesale subscriptions fell 3.7% in 4Q24 but its broadband base on fibre was up 3% yoy to 94%, which supports a stabilisation of wholesale losses in the medium term. EBITDA Margin Increasing: EBITDA margins recovered to 44.2% in 2024 from the trough of 43% in 2023 (46.7% in 2022). Margins have benefitted from price increases and profitability improvements in 2024, following successful commercial investments in 2023. Fitch expects these to increase further to 45.5% by 2027, driven by increased fibre take-up. The positive impact on margins from fibre penetration on Eircom's network will be partly offset by retail wins on National Broadband Ireland's (NBI) network. Offnet Customers on NBI: eir has signed a wholesale agreement with NBI, which gives it access to the latter's network. NBI is subsidised by the government and covers non-commercial, rural areas. As a result, eir's current DSL customers who are located within NBI's coverage area will migrate from eir's network to NBI's if they decide to switch to fibre. This will support eir's revenues and market share as it maintains the commercial relationship with the customer. These revenues will have lower margins, offsetting some expected overall margin growth at eir. Decreasing Capex Aids FCF Generation: Pre-dividend FCF margins increased to 7% in 2024 from 0% in 2023. Fitch expects this to increase further to 10% in 2025 and up to 14% in 2027. Capex will reduce sharply as eir nears the completion of its fibre roll-out, although it will continue to upgrade and densify the mobile network. Growing FCF increases eir's deleveraging capacity, subject to shareholder distributions and minority dividends payments from FNI. Fitch's base case assumes shareholder dividends lead to neutral FCF margins of -2.5% to +3.5% in 2025-2027. This will constrain deleveraging but remain within the rating thresholds. Retail Market Share Momentum: Commercial investments lifted eir's retail market share in 2023 and 4Q24. In 4Q24, retail fixed-line and mobile subscriber market shares grew 0.1pp and 1.4pp, respectively, from a year ago, driven by strong revenue growth. Growth in the pay-TV segment through eir Vision means the proportion of customers taking three products or more was 56% at end-4Q24. Greater convergence in the subscriber base increases customer loyalty due to higher switching costs. This should support good revenue visibility for 2025. Peer Analysis eir's ratings reflect its position as the leading fixed-line operator in a competitive Irish market. Compared to its European telecom incumbent peers, Royal KPN N.V (BBB/Stable) and BT Group plc (BBB/Stable) eir has higher leverage, is smaller in size, has a largely domestic focus, and a lack of leadership in the mobile segment. Its EBITDA margin is similar to peers', but its pre-dividend FCF margin has historically been lower due to higher capex as a share of revenue. eir is more tightly rated than 'BB-' rated European telecom peers like Telenet Group Holding N.V (BB-/Stable) and 'B+' rated peers like competitor Virgin Media Ireland Limited (B+/Stable). This reflects the sale of a 49% stake in its fixed-line network, competitive pressures in the retail and wholesale markets, smaller scale, structural revenue declines from legacy voice and high capex commitments from its fibre build. eir's 49% stake sale in FNI to InfraVia Capital Partners in 2022 has weakened its operating profile compared with fully integrated telecom operator peers, leading to tighter EBITDA net leverage thresholds for its rating. This is because FNI is a critical local-access network infrastructure that provides stable cash flows. Key Assumptions - Revenue growth up to 1.7% between 2025 and 2027 - Fitch-defined EBITDA margin of 44.8% in 2025, gradually rising to 45.5% by 2027 - Working-capital cash outflows at 1.5% of revenue every year between 2025 and 2027 - Capex (excluding spectrum) at 18.9% of revenue in 2025, before decreasing to 13.6% by 2027 - Dividend payments of EUR150 million a year in 2025 and 2026, increasing to EUR220 million in 2027 and 2028 Recovery Analysis Key Recovery Rating Assumptions - The recovery analysis assumes that eir would be a going concern in a bankruptcy and that it would be reorganised rather than liquidated - A 10% administrative claim - Post-reorganisation EBITDA of EUR285 million, which excludes EBITDA from FNI - A distressed enterprise value at 4.5x EBITDA - Total senior debt assumed of EUR2.35 billion, including the company's new EUR550 million issuance launched on 28 April 2025 The Recovery Ratings for senior secured debt at the holding company assume the sale of the 50.01% equity stake in FNI for EUR290 million proceeds included in its recovery analysis. The calculated recovery implies a one-notch uplift to the ratings from the IDR, leading to a senior secured debt rating of 'BB-'/'RR3'. This is consistent with the current senior secured debt rating. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Fitch-defined EBITDA net leverage above 5.0x on a sustained basis. Fitch will also be guided by calculations of these metrics on a proportionate consolidation basis - Cash flows from operations (CFO) less capex/total debt remaining below 3% on a sustained basis, driven by lower EBITDA or higher capex - Deterioration in the regulatory or competitive environment leading to a material adverse change in operating trends Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - A strengthened operating profile and competitive capability demonstrated by a stable fixed broadband market share with increasing fibre penetration, and a return to broadly stable underlying revenue and EBITDA - Fitch-defined EBITDA net leverage at or below 4.5x on a sustained basis. Fitch will also be guided by calculations of these metrics on a proportionate consolidation basis - CFO less capex/total debt consistently above 6% Liquidity and Debt Structure As of end-2024, eir had EUR151 million in cash and equivalents. Its liquidity position is supported by a EUR50 million revolving credit facility (RCF) and at the FNI level, by a EUR35 million RCF and EUR200 million capex facility, of which EUR62 million was drawn as of December 2024. Following the repricing of its EUR600 million term loan B5 in 1Q25, its next big maturity relates to its EUR300 million term loan and EUR552 million notes, both due in May 2026. eir has issued EUR550 million senior secured notes in April 2025 to address the refinancing of its EUR300 million term loan and partial repayment of the EUR552 million notes. Further debt maturities are spread across 2027, 2029 and 2031. Issuer Profile eir is the incumbent telecom operator in Ireland, its sole market. It is the third-largest mobile operator but the leading fixed-line operator and is rolling out its FTTH network across Ireland. 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 ----------- ------ -------- ----- Eircom Finco S.a r. l. senior secured LT BB- Affirmed RR3 BB- eircom Holdings (Ireland) Limited LT IDR B+ Affirmed B+ eircom Finance Designated Activity Company senior secured LT BB- Affirmed RR3 BB- HARVEST CLO XVII: Moody's Affirms B3 Rating on EUR12.9MM F-R Notes ------------------------------------------------------------------ Moody's Ratings has upgraded the ratings on the following notes issued by Harvest CLO XVII Designated Activity Company: EUR30,500,000 Class B-1-R Senior Secured Floating Rate Notes due 2032, Upgraded to Aaa (sf); previously on Mar 14, 2024 Upgraded to Aa1 (sf) EUR13,500,000 Class B-2-R Senior Secured Fixed Rate Notes due 2032, Upgraded to Aaa (sf); previously on Mar 14, 2024 Upgraded to Aa1 (sf) EUR26,500,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to Aa3 (sf); previously on Mar 14, 2024 Upgraded to A1 (sf) EUR32,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to Baa2 (sf); previously on Mar 14, 2024 Affirmed Baa3 (sf) Moody's have also affirmed the ratings on the following notes: EUR279,000,000 (Current outstanding amount EUR222,742,319) Class A-R Senior Secured Floating Rate Notes due 2032, Affirmed Aaa (sf); previously on Mar 14, 2024 Affirmed Aaa (sf) EUR25,750,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Ba3 (sf); previously on Mar 14, 2024 Affirmed Ba3 (sf) EUR12,900,000 Class F-R Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed B3 (sf); previously on Mar 14, 2024 Affirmed B3 (sf) Harvest CLO XVII Designated Activity Company, originally issued in May 2017 and refinanced in November 2019, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Investcorp Credit Management EU Limited. The transaction's reinvestment period ended in May 2024. RATINGS RATIONALE The rating upgrades on the Class B-1-R, Class B-2-R, Class C-R and Class D-R notes are primarily a result of the deleveraging of the senior notes following amortisation of the underlying portfolio since the payment date in May 2024. The affirmations on the ratings on the Class A-R and Class E-R notes are primarily a result of the expected losses on the notes remaining consistent with their current rating levels, after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralisation ratios. The affirmation on the rating on the Class F-R notes is primarily a result of the key attributes of the portfolio remaining commensurate with their level at the time the rating was assigned. The Class A-R notes have paid down by approximately EUR56.3 million (20.2%) since the payment date in May 2024. As a result of the deleveraging, over-collateralisation (OC) has increased across the capital structure. According to the trustee report dated February 2025 [1] the Class A/B, Class C, Class D, Class E and Class F OC ratios are reported at 144.57%, 131.51%, 118.57%, 109.87% and 105.98% compared to May 2024 [2] levels of 137.34%, 126.93%, 116.28%, 108.93% and 105.58% respectively. 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: EUR384.5m Defaulted Securities: EUR3.0m Diversity Score: 49 Weighted Average Rating Factor (WARF): 3067 Weighted Average Life (WAL): 3.7 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.8% Weighted Average Coupon (WAC): 4.6% Weighted Average Recovery Rate (WARR): 43.9% Par haircut in OC tests and interest diversion test: None The default probability derives from the credit quality of the collateral pool and Moody's expectations of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into Moody's cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in May 2024. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as account bank, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in October 2024. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. -- Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from 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. MADISON PARK VII: Moody's Lowers Rating on EUR13.5MM F Notes to B3 ------------------------------------------------------------------ Moody's Ratings has downgraded the rating on the following notes issued by Madison Park Euro Funding VII DAC: EUR13,500,000 Class F Senior Secured Deferrable Floating Rate Notes due 2031, Downgraded to B3 (sf); previously on Mar 8, 2024 Affirmed B2 (sf) Moody's have also affirmed the ratings on the following notes: EUR272,000,000 (Current outstanding amount EUR265,588,934) Class A Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Mar 8, 2024 Affirmed Aaa (sf) EUR14,500,000 Class B-1 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Mar 8, 2024 Affirmed Aaa (sf) EUR15,000,000 Class B-2 Senior Secured Floating Rate Notes due 2031, Affirmed Aaa (sf); previously on Mar 8, 2024 Affirmed Aaa (sf) EUR20,000,000 Class B-3 Senior Secured Fixed Rate Notes due 2031, Affirmed Aaa (sf); previously on Mar 8, 2024 Affirmed Aaa (sf) EUR20,500,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Aa3 (sf); previously on Mar 8, 2024 Upgraded to Aa3 (sf) EUR10,000,000 Class C-2 Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Aa3 (sf); previously on Mar 8, 2024 Upgraded to Aa3 (sf) EUR25,500,000 Class D Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Baa1 (sf); previously on Mar 8, 2024 Upgraded to Baa1 (sf) EUR27,500,000 Class E Senior Secured Deferrable Floating Rate Notes due 2031, Affirmed Ba2 (sf); previously on Mar 8, 2024 Affirmed Ba2 (sf) Madison Park Euro Funding VII DAC, issued in May 2016 and refinanced in May 2018, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European and US loans. The portfolio is managed by Credit Suisse Asset Management Limited. The transaction's reinvestment period ended in August 2022. RATINGS RATIONALE The rating downgrade on the Class F notes is primarily a result of the deterioration in over-collateralisation (OC) ratios since the last rating action in March 2024. The affirmations on the ratings on the Class A, B-1, B-2, B-3, C-1, C-2, D and E notes are primarily a result of the expected losses on the notes remaining consistent with their current rating levels, after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralisation ratios. The over-collateralisation ratios of the rated notes have deteriorated across the capital structure since the rating action in March 2024. According to the trustee report dated March 2025 [1] the Class A/B, Class C, Class D and Class E OC ratios are reported at 135.37%, 123.42%, 114.94% and 107.01% compared to January 2024 [2] levels of 138.81%, 126.73%, 118.13% and 110.08%, respectively. Similarly, the Moody's calculated Class F OC level decreased to 103.6% as of March 2025 from 106.5% in January 2024. 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: EUR418,195,676 Defaulted Securities: EUR24,063,753 Diversity Score: 53 Weighted Average Rating Factor (WARF): 2809 Weighted Average Life (WAL): 3.55 years Weighted Average Spread (WAS) (before accounting for Euribor floors): 3.82% Weighted Average Coupon (WAC): 3.79% Weighted Average Recovery Rate (WARR): 43.02% Par haircut in OC tests and interest diversion test: not applied The default probability derives from the credit quality of the collateral pool and Moody's expectations of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into Moody's cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in May 2024. Counterparty Exposure: The rating action took into consideration the notes' exposure to relevant counterparties, such as the account bank, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in October 2024. Moody's concluded the ratings of the notes are not constrained by these risks. Factors that would lead to an upgrade or downgrade of the ratings: The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance. Additional uncertainty about performance is due to the following: -- Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority. -- Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings. -- Long-dated assets: The presence of assets that mature beyond the CLO's legal maturity date exposes the deal to liquidation risk on those assets. Moody's assumes that, at transaction maturity, the liquidation value of such an asset will depend on the nature of the asset as well as the extent to which the asset's maturity lags that of the liabilities. Liquidation values 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. ========= I T A L Y ========= LEVITICUS SPV: DBRS Cuts Class A Notes Rating to CCC(high) ---------------------------------------------------------- DBRS Ratings GmbH downgraded its credit rating on the Class A notes issued by Leviticus SPV S.r.l. (the Issuer) to CCC (high) (sf) from B (sf). The trend remains Negative. The transaction represents the issuance of Class A, Class B, and Class J notes (collectively, the Notes). The credit rating on the Class A notes addresses the timely payment of interest and the ultimate payment of principal on or before its final maturity date. Morningstar DBRS does not rate the Class B notes or the Class J notes. At issuance, the Notes were backed by a EUR 7.4 billion portfolio by gross book value, consisting of secured and unsecured Italian nonperforming loans originated by Banco BPM SpA. Gardant Liberty Servicing S.p.A. (Gardant or the servicer) services the receivables while Zenith Service S.p.A. operates as the backup servicer. CREDIT RATING RATIONALE The credit rating downgrade follows Morningstar DBRS' review of the transaction and is based on the following analytical considerations: -- Transaction performance: An assessment of portfolio recoveries as of December 2024, focusing on (1) a comparison between actual collections and the servicer's initial business plan forecast; (2) the collection performance observed over recent months; and (3) a comparison between the current performance and Morningstar DBRS' expectations. -- Updated business plan: The servicer's updated business plan as of December 2024, received in March 2025, and the comparison with the initial collection expectations. -- Transaction liquidating structure: The order of priority, which entails a fully sequential amortization of the Notes (i.e., the Class B notes will begin to amortize following the full repayment of the Class A notes and the Class J notes will amortize following the repayment of the Class B notes). Additionally, interest payments on the Class B notes become subordinated to principal payments on the Class A notes if the cumulative net collection ratio (CCR) or net present value cumulative profitability ratio (NPV ratio) is lower than 70%. These triggers were not breached on the January 2025 interest payment date (IPD). The actual figures for the CCR and NPV ratio were at 70.7% and 94.5% as of the January 2025 IPD, respectively, according to the servicer. -- Liquidity support: The transaction benefits from an amortizing cash reserve providing liquidity to the structure and covering potential interest shortfall on the Class A notes and senior fees. The cash reserve target amount is equal to 4.0% of the sum of the Class A and Class B notes' principal outstanding balance and the recovery expenses cash reserve target amounts to EUR 500,000, both fully funded. TRANSACTION AND PERFORMANCE According to the latest investor report from January 2025, the outstanding principal amounts of the Notes were EUR 378.6 million, EUR 221.5 million, and EUR 248.8 million, respectively. As of January 2025, the balance of the Class A notes had amortized by 73.7% since issuance, and the current aggregated transaction balance was EUR 849.0 million. As of December 2024, the transaction was performing below the servicer's business plan expectations. The actual cumulative gross collections equaled EUR 1,493.8 million, whereas the servicer's initial business plan estimated cumulative gross collections of EUR 2,157.6 million for the same period. Therefore, as of December 2024, the transaction was underperforming by EUR 663.8 million (-30.8%) compared with the initial business plan expectations. At issuance, Morningstar DBRS estimated cumulative gross collections for the same period of EUR 1,503.1 million at the BBB (sf) stressed scenario. Therefore, as of December 2024, the transaction was performing below Morningstar DBRS' initial stressed scenarios. Pursuant to the requirements set out in the receivable servicing agreement, in March 2025, the servicer delivered an updated portfolio business plan. The updated portfolio business plan, combined with the actual cumulative gross collections of EUR 1,493.8 million as of December 2024, resulted in a total of EUR 1,997.8 million. This is 18.3% lower than the total gross disposition proceeds of EUR 2,446.4 million estimated in the initial business plan and collections are expected to be realized over a longer period of. Excluding actual collections, the servicer's expected future collections from January 2025 equaled EUR 504.0 million. The updated Morningstar DBRS CCC (high) (sf) credit rating stress assumes a haircut of 4.5% to the servicer's updated business plan, considering future expected collections. Considering the persistent underperformance and the continual Class B interest payments, the rated bonds now face a much higher credit risk to fulfil their financial obligations. If the Class B interest subordination event cannot be triggered, it is likely that the Class A notes will not be redeemed in full. Therefore, Morningstar DBRS downgraded the credit rating on the Class A notes to CCC (high) (sf) with a Negative trend. The transaction's final maturity date is July 31, 2040. Notes: All figures are in euros unless otherwise noted. ========= S P A I N ========= PROSIL ACQUISITION: DBRS Puts 'BB' Rating on A Notes Under Review ----------------------------------------------------------------- DBRS Ratings GmbH placed its BB (sf) credit rating on the Class A notes issued by ProSil Acquisition S.A. (the Issuer) Under Review With Negative Implications. The transaction represents the issuance of the Class A, Class B, Class J, and Class Z notes (collectively, the notes). The credit rating on the Class A notes addresses the timely payment of interest and the ultimate payment of principal on or before the final legal maturity date. Morningstar DBRS does not rate the Class B, Class J, or Class Z notes. The notes are collateralized by a pool of mostly secured Spanish nonperforming loans (NPLs) originated by Abanca Corporación Bancaria, S.A. and Abanca Corporacion Division Immobilaria S.L. ProSil Acquisition S.A., Cell Number 1, Cell Number 2, and Cell Number 3 (the transferor) sold the receivables to ProSil Acquisition S.A., Cell Number 5 (the Issuer). As of the closing date in March 2019, the gross book value of the loan pool was approximately EUR 494.7 million. Cortland Investors II S.a r.l. operates as sponsor and retention holder in the transaction and, over time, acquired the three portfolios that are part of the pool (Avia, Lor, and Sil). HipoGes Iberia S.L. (the Servicer) services the loans and manages the following Spanish property companies as at the closing date: Beautmoon Spain, S.L.; Osgood Invest, S.L.; Butepala Servicios y Gestiones S.L.; and Vetapana Servicios y Gestiones S.L. CREDIT RATING RATIONALE The credit rating action follows a review of the transaction and is based on the following analytical considerations: -- Transaction performance: An assessment of portfolio recoveries as of December 2024 focusing on (1) a comparison of actual collections with the Servicer's initial business plan forecast, (2) the collections performance observed over recent months, and (3) a comparison of the current performance with Morningstar DBRS' expectations. -- Updated business plan: The Servicer's updated business plan as of August 2024, received in April 2025, and the comparison with the initial collection expectations. -- Portfolio characteristics: Loan pool composition as of December 2024 and the evolution of its core features since issuance. -- Transaction liquidating structure: The order of priority entails a fully sequential amortization of the notes (i.e., the Class B notes will begin to amortize following the full repayment of the Class A notes and the Class J notes will amortize following the full repayment of the Class B notes). Additionally, interest payments on the Class B notes become subordinated to principal payments on the Class A notes if the cumulative collection ratio or the net present value (NPV) cumulative profitability ratio are lower than 90%. This trigger has been breached since the April 2020 interest payment date. As per the December 2024 servicing report, the cumulative collection ratio was 47.7% and the NPV cumulative profitability ratio was 85.2%. -- Liquidity support: The transaction benefits from an amortizing cash reserve providing liquidity to the structure covering potential interest shortfalls on the Class A notes and senior fees. The cash reserve target amount is equal to 4.5% of the Class A notes' principal outstanding and is currently fully funded. TRANSACTION AND PERFORMANCE According to the latest investor report from January 2025, the outstanding principal amounts of the Class A, Class B, Class J, and Class Z notes were EUR 70.3 million, EUR 30.0 million, EUR 15.0 million, and EUR 16.0 million respectively. As of the January 2025 payment date, the balance of the Class A notes had amortized by 58.6% since issuance and the current aggregated transaction balance was EUR 131.3 million. As of December 2024, the transaction was performing below the Servicer's initial business plan expectations. The actual cumulative gross collections equaled EUR 166.5 million, whereas the Servicer's initial business plan estimated cumulative gross collections of EUR 310.8 million for the same period. Therefore, as of December 2024, the transaction was underperforming by EUR 144.3 million (46.4%) compared with the initial business plan expectations. At issuance, Morningstar DBRS estimated cumulative gross collections for the same period of EUR 155.5 million at the BBB (low) (sf) stressed scenario. Therefore, as of December 2024, the transaction was performing above Morningstar DBRS' initial stressed expectations. Pursuant to the requirements set out in the receivable servicing agreement, in April 2025, the Servicer delivered an updated portfolio business plan as of August 2024. The updated portfolio business plan, combined with the actual cumulative gross collections of EUR 156.6 million as of August 2024, results in a total of EUR 284.9 million, which is 12.4% lower than the total gross collections of EUR 325.3 million estimated in the initial business plan. According to the provisions set out in the servicing agreement, a new updated business plan will be delivered by the end of April 2025. The final maturity date of the transaction is October 31, 2039. Notes: All figures are in euros unless otherwise noted. =========== S W E D E N =========== POLESTAR AUTOMOTIVE: Q1 2025 Retail Sales Up 76% ------------------------------------------------ Polestar Automotive Holding UK, PLC announced that retail sales volumes amounted to an estimated 12,304 cars in Q1 2025, up 76% versus Q1 2024 and were stable versus Q4 2024, against a challenging economic environment. Sales are supported by a growing uptake of newer models and the ongoing transition to an active selling model. Michael Lohscheller, Polestar CEO, says: "We are on the right track and doing the right things. I'm pleased with the progress we are making in transforming our commercial operations. With a more active selling model, more retail partners and attractive cars, we are delivering results. At the same time, we are monitoring closely and assessing the volatile geopolitical environment and will adapt as needed." Retail sales for Q1 2025 reached 12,304 units, compared to 6,975 units in Q1 2024, marking a 76% increase. Polestar expects to publish its full year results for 2024 and file its annual report on Form 20-F, by the end of April 2025. About Polestar Automotive Polestar (Nasdaq: PSNY) is the Swedish electric performance car brand with a focus on uncompromised design and innovation, and the ambition to accelerate the change towards a sustainable future. Headquartered in Gothenburg, Sweden, its cars are available in 27 markets globally across North America, Europe and Asia Pacific. As of December 31, 2023, the Company had $4.1 billion in total assets, $5.4 billion in total liabilities, and $1.3 billion in total deficit. Gothenburg, Sweden-based Deloitte AB, the Company's auditor since 2021, issued a 'going concern' qualification in its report dated August 14, 2024, citing that the Company requires additional financing to support operating and development activities that raise substantial doubt about its ability to continue as a going concern. =========================== U N I T E D K I N G D O M =========================== BELLIS FINCO: S&P Alters Outlook to Negative, Affirms 'B+' LT ICR ----------------------------------------------------------------- S&P Global Ratings revised its outlook on its long-term issuer credit rating on Bellis Finco PLC (Asda) from stable to negative and affirmed the long-term issuer credit ratings and the issue credit ratings on the senior secured debt at 'B+' and senior unsecured debt at 'B-'. Asda has reported 2024 results below our expectations with revenues at GBP26.8 billion and S&P Global Ratings-adjusted EBITDA of 4.3%, leading to S&P Global Ratings-adjusted leverage of 9.1x (7.7x excluding PIK instruments). S&P said, "Our negative outlook reflects the risk of a potential downgrade if in the upcoming months the group is unable to navigate the current competitive environment and successfully execute on their strategic initiatives such that the earnings growth, cash generation, and deleveraging fall behind our base case, potentially resulting in difficulties addressing the refinancing of 2027 and 2028 maturities in a timely manner or to maintain adequate liquidity. "Asda's 2024 results were significantly below our expectations with S&P Global Ratings-adjusted EBITDA at GBP1.1 billion compared with GBP1.3 billion previously expected as trading remained challenged in the fourth quarter. The group's performance continued to be challenged through the Christmas period despite management's efforts to improve footfall in stores, pricing, and product availability. Revenue (excluding fuel) fell by 0.8% to GBP21.7 billion during 2024, while fuel operations remained challenged due to lower volumes and lower fuel margins. Despite the negative like-for-like growth in sales, S&P Global Ratings-adjusted EBITDA improved from GBP1 billion in 2023 to GBP1.14 billion in 2024, supported by the contribution of acquisitions. However, this remained below our expectations of EBITDA of GBP1.3 billion in 2024 as the decline in profit from the food operations was not fully offset by the full year contribution from the EG Group's acquisition, and the cost base continued to be affected by investment in Project Future (which we include in our EBITDA metrics)." Management has established an assertive strategy to regain volume growth and market share, but it will come at a cost in the short term. The group has announced several initiatives that aim to reestablish its position in the market as the third largest U.K. food retailer and regain the market share that it lost over the last years (currently standing at 12.3% as of the 12 weeks ending on Apr. 20 2025, according to Kantar Worldwide, from 13.3% a year ago). The aim is to improve its competitive position compared with traditional retailers as well as discounters, resulting in increasing volumes across its offering, with a focus on food. As such, the group has launched its plan to rollback prices and increase the price gap with the market, by permanent lower prices (rather than promotions) as well as an increase in product availability through improving the supply chain and in-store restocking process. S&P said, "We expect this strategy will come at a cost in the short term with food gross margins decreasing following the investment in pricing as well as from an increase in labor costs as the group invests in hours in store to improve brand perception, customer experience, and product availability. We also think that there are some execution risks attached to the rollout of these measures as well as the competitive pressures from the response from other retailers." S&P said, "Therefore, we expect 2025 operating performance to remain challenged with limited revenue growth and S&P Global Ratings margins of about 4% before recovering in 2026. The market remains very competitive, and, despite management's initiatives to improve volumes and market share, we expect lower prices would lead to flat revenue growth in food in 2025 while clothing and general merchandise (GM), we forecast approximately 1%-2% revenue growth, and a continual decline fuel revenue growth. Overall, we expect revenue to remain at about GBP26.8 billion in 2025 and 2026. We anticipate that cost pressures resulting from the large investments required under the new strategy as well as higher staff costs resulting from the National Insurance and Minimum Living Wage increase will lead to S&P Global Ratings-adjusted EBITDA margin decreasing toward 4%. The additional costs related to the delay in the delivery of Project Future in 2025 will exacerbate this. We expect Project Future to be completed by the end of 2025 (compared with end-2024 previously expected) and that there will be an additional cost of about GBP160 million, adding to the margin pressures. "Lower margins and increasing capital expenditure (capex) will lead to lower FOCF after leases than initially expected. Asda benefitted from working capital inflows from extending payment terms, especially on its fuel operations. We expect these efforts to improve working capital dynamics but to a lower extent from 2026 when the benefits on the working capital initiatives would have been absorbed and the group will be able to ramp up capex after three years of lower investment. We still expect FOCF after leases to be positive at about GBP180 million in 2025, supported by lower capex, working capital inflows, and low tax payments. We expect annual capex from 2026 to reach close to GBP500 million as the group invests in the existing estate after a few years of lower investment, while managing its capital allocation strategy to ensure healthy FOCF generation. We anticipate FOCF after leases of approximately GBP150 million from 2026, which is below our previous expectation of about GBP270 million-GBP300 million. Nevertheless, we anticipate the group to maintain adequate liquidity to cover its organic growth requirements as well as meeting its guidance of management-defined free cash flow (pre-interest, pre-tax) of at least GBP600 million annually. "An underperformance to our base case could escalate the refinancing risk of 2027 and 2028 maturities as leverage remains elevated at up to 9.3x in 2025 and 7.6x in 2026. Excluding payment-in-kind (PIK) instruments, leverage would remain at about 7.6x in 2025 and 6.2x in 2026, above our previous expectations of 5.8x in 2025 and 5.4x in 2026. We expect pressures in EBITDA to translate into higher leverage than previously expected, with S&P Global Ratings-adjusted debt (including leases) remaining elevated above GBP10 billion (GBP8.2 billion excluding PIK). The group holds GBP500 million senior unsecured notes maturing in February 2027, which we expect the group to address before they become current and put pressure on liquidity. Our adjusted debt also includes about GBP1.8 billion of PIK instruments, including the Walmart vendor loan which matures in 2028. Given the relationship with Walmart Inc., as previous owners of the group and holders of 10% of equity stake, we would expect the group to be able to renegotiate terms rather than pay the full amount at maturity but there remains a refinancing risk regarding this instrument. We forecast the group to prioritize cash flow generation and ensure enough cash reserves as it faces the maturities of these two instruments, as well as the GBP793 million revolving credit facility (RCF) maturing in October 2028, ahead of the rest of the senior secured debt. Deviations from our assumptions of earnings growth or the timeliness or terms of debt refinancing could put pressure on the group's liquidity and the existing ratings. "Our negative outlook reflects the risk of a potential downgrade in the upcoming months if the group is unable to successfully navigate the current competitive environment or execute on its strategic initiatives, raising concerns around the sustainability of its structural earnings growth and organic cash flow generation or its commitment to deleverage. In our base case, we forecast a further weakening in the credit metrics in 2025 as the group invests heavily and completes Project Future on schedule. We forecast strong recovery in 2026, with positive revenue growth of about 1% and an S&P Global Ratings EBITDA margin at around 5%, while delivering FOCF after leases above GBP150 million annually and accumulating cash buffer underpinning adequate liquidity and timely resolution of the refinancing risk of the upcoming debt maturities in 2027 and 2028." S&P could lower the rating if, in the upcoming months, the group's operating performance or financial policy deviated from its forecast or liquidity weakened, including evidence of the following: -- FOCF after leases were subdued, failing to deliver on the management-defined free cash flow of at least GBP600 million annually or its capital allocation priorities; -- Escalating risk to the group's sustainable recovery of its structural earnings growth and profitability so that S&P no longer consider S&P Global Ratings-adjusted EBITDA margin of 5% achievable by 2026; -- Higher risk of S&P Global Ratings-adjusted leverage to remain above 7.5x by 2026 (6.0x-6.5x excluding PIK instruments); or -- The group fails to resolve the refinancing risk of the 2027 and 2028 debt maturities in a timely manner. This could happen if the group failed to recover its competitive position or manage it cost base efficiently, including Project Future exceeding its expected budget or running over schedule, or if the group pursues a more aggressive financial policy than expected. S&P could revise its outlook to stable if the group were to successfully deliver on its business plan and achieve the credit measures in line with its base case, such that: -- S&P Global Ratings-adjusted EBITDA margins sustainably recovered to levels above 5%; -- S&P Global Ratings-adjusted leverage fell below 7.5x along with the financial policy commitment of further deleveraging; -- FOCF after leases were to increase sustainably as the company delivers on its structural earnings growth plans and working capital initiatives while investing in the current estate; and -- The company resolved the refinancing risk of its debt maturing in 2027 and presented a credible plan to address its 2028 maturities in a timely manner. BTCMINING LIMITED: Crypto Business Shut Down Due to Complaints -------------------------------------------------------------- A cryptoasset business registered in the UK has been shut down after people from multiple countries said they paid for crypto mining services but did not receive the promised financial returns and were unable to withdraw their assets. BTCMining Limited claimed to operate a cryptoasset mining business, where customers would pay the company to mine crypto and receive any resulting income. However, Action Fraud received complaints from people in Estonia, Mauritania, Iran, New Zealand, Poland and Romania claiming they did not receive the 'mining' service or their assets and had been subject to further payment demands. The investigation also found that the company did not have a legitimate registered address anywhere in the UK. BTCMining Limited was shut down following a hearing at the High Court in Manchester on April 28, 2025. Insolvency Service Chief Investigator, David Usher said: "The fact that BTCMining Limited was attracting customers globally makes our intervention particularly important. "We acted on the complaints before their reach could have affected countless more individuals. "It's vital that the public, both here in the UK and abroad, are protected from companies acting in this way." Investigators were unable to reach BTCMining Limited using known email addresses and telephone numbers, and websites linked to the company were either inactive or gave no new contact details. BTCMining Limited's director, Stibich Martins Yhaicha Luzia, was the sole director of the company since its incorporation in January 2024, and payment for the company's registration came from an account in China. The 25-year-old, who is believed to be from Germany, could not be contacted by the Insolvency Service and did not cooperate with the investigation. His contact address recorded at Companies House was also a residential address, whose occupiers had no knowledge of BTCMining Limited and had not given their permission to use it. A review of the six complaints lodged with Action Fraud indicated that customers collectively lost more than GBP15,000 although investigators fear the actual amount could be much higher. BTCMining Limited is not linked to any other company with a similar name or trading style. All enquiries concerning the affairs of the company should be made to: Official Receiver of the Public Interest Unit 16th Floor, 1 Westfield Avenue, Stratford, London, E20 1HZ E-mail: piu.or@insolvency.gov.uk CABLE & WIRELESS: Fitch Affirms 'BB-' Long-Term IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Cable & Wireless Communications Limited's (C&W) Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) at 'BB-'. Fitch has also affirmed C&W Senior Finance Limited's unsecured notes, Coral-US Co-Borrower LLC's secured credit facilities, and Sable International Finance Limited's secured notes and revolver at 'BB-'with a Recovery Rating of 'RR4'. The Rating Outlook for the Corporate Ratings is Stable. The ratings reflect the company's leading market positions across diverse operating geographies and service offerings, underpinned by solid network competitiveness and leading business-to-consumer (B2C) and business-to-business (B2B) offerings. The ratings also consider the company's successful refinancing in 2025, which supports financial flexibility. However, the ratings are tempered by the company's moderate net leverage. Key Rating Drivers Declining Net Leverage: Fitch forecasts C&W will reduce net leverage from 4.5x to below 4.0x in the medium term driven by better sales mix and moderate margin expansion. C&W's controller, Liberty Latin America (LLA), targets net leverage of about 3.5x at the group level. However, investments or operating weakness in core markets could temporarily increase leverage metrics at the subsidiary level. Fitch expects capex to be around 9% of sales. (10% in 2024). Moderately Improving Operating Prospects: Fitch forecasts C&W's EBITDA to rise above USD1.1 billion by 2026, up from USD1 billion in 2024, driven by modest top-line growth, digitization, and cost-cutting efforts in Panama and the Caribbean. The subsea cable business should grow in the low-single digits as data demand increases. Near-term mobile average revenue per user (ARPU) pressures are expected to be offset by the migration of pre-paid subscribers to post-paid plans, while residential fixed revenues should grow slightly as fixed broadband penetration opportunities offset the decline in video. Diversified Operator: The group's business diversification contributes to revenue resilience compared to other regional speculative-grade issuers, which generally rely more heavily on mobile revenues that are less sticky than other telecom services. In fiscal 2024, mobile service comprised 30% of C&W's revenue, fixed service, including residential broadband, accounted for 25%, and B2B made up 45%. During this period, businesses in the Caribbean and in Panama generated about 55% and 24% of EBITDA, respectively, through B2C and B2B services. The subsea cable business and B2B offerings in Colombia and other Latin American countries contributed the remaining 21%. Strong Market Position: C&W's strong market share in duopoly markets reduces new entrant risks and helps maintain relatively stable ARPUs. It holds the No. 1 or 2 position in its major markets, often sharing duopolies with Digicel in the Caribbean and Millicom (Tigo) in Panama. The risk of new entrants in any given market is low given their relatively small size. Panama, C&W's largest mobile market, consolidated to two players after Digicel's exit. Despite legislation requiring three operators, the economic viability of a new entrant remains uncertain, keeping competition relatively stable. LLA Linkage: Fitch analyzes C&W on a standalone basis and monitors the parent's credit quality. The credit pools are legally separate, but LLA has a history of moving cash around the group for investments and acquisitions. Deterioration of the financial profile of one of the credit pools, or the group more broadly, could potentially place more financial burdens on C&W. Instrument Ratings and Recovery Prospects: Most of C&W's debt is secured by pledges at various subsidiaries. Per Fitch's Corporates Recovery Ratings and Instrument Ratings Criteria, Category 2 secured debt can be notched up to 'RR2', up to two notches above the IDR. However, the instrument ratings have been capped at 'RR4' due to Fitch's Country-Specific Treatment of Recovery Ratings Criteria. The C&W Senior Finance Limited unsecured notes are rated 'BB-'/'RR4', which is the same as the IDR. Peer Analysis Compared with its sister entity, Liberty Communications of Puerto Rico LLC (LCPR; B/Stable), C&W has larger scale and better geographical diversification, although C&W also operates in weaker economic environments. C&W operates in slightly more balanced markets compared with Millicom International Cellular S.A.'s (BB+/Stable) subsidiaries CT Trust (Comcel; BB+/Stable) and Telefonica Celular del Paraguay S.A.E. (Telecel; BB+/Stable), which have more dominant market positions and far lower net leverage. Comcel's and Telecel's ratings reflect strong linkage with their parent, as Millicom heavily relies on these wholly owned subsidiaries' dividend upstreams to service its debt. Millicom's subsidiary in Panama and key competitor to C&W, Telecomunicaciones Digitales, S.A. (BB+/Stable), has somewhat weaker scale and diversification relative to C&W, but benefits from a stronger financial profile, while its ratings reflect strong linkages with Millicom, similar to its sister companies. Key Assumptions - Mobile subscribers recovering modestly in the rating horizon as continued strong growth in post-paid offsets slowing growth in prepaid. - Mobile service ARPUs of about USD14/month. - Net fixed customer additions of about 20,000 a year following decline in 2024 due to Hurricane Beryl, driven by growth in broadband. - Fixed-line customer ARPUs of about $47/month. - B2B revenues growing in the low-single digits, driven by growth in in the subsea cable business. - Fitch-defined EBITDA margins expanding to about 44% by 2027 from 39.5% in 2024, driven by an improved revenue mix and cost savings. - Capital intensity of around 9% over the medium term. - Excess cash flow returned to shareholders or kept for acquisitions or investments. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Total debt-to-EBITDA and net debt/EBITDA sustained above 5.25x and 5.0x, respectively. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Total debt/EBITDA and net debt/EBITDA sustained below 3.8x and 3.6x, respectively; - (CFO-capex)/debt ratio trending towards 7.5% or above. Liquidity and Debt Structure Liquidity is sound due to projected positive pre-dividend FCF. In 2025, C&W refinanced its USD735 million 2027 Senior Unsecured Note and its USD1.51 billion Term Loan through a USD755 million Senior Unsecured Note due 2033 and a USD1.53 billion Term Loan due 2032. The company has no major debt maturities until 2028 when the USD435 million Term Loan is due. As of Dec. 31, 2024, C&W had USD523 million of cash and cash equivalents. Liquidity is reinforced by the recently renewed USD616 million revolver and USD80 million under regional facilities that are committed and undrawn. Issuer Profile C&W, a U.K.-domiciled telecommunications provider, owned by Bermuda-based LLA, offers B2C mobile, B2C fixed and B2B services in the Caribbean and Panama. It operates a subsea and terrestrial fiber optic cable network that connects over 30 markets in the region. 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 Cable & Wireless Communications Limited has an ESG Relevance Score of '4' for Exposure to Environmental Impacts due to its operations in a hurricane-prone region, 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 ----------- ------ -------- ----- Cable & Wireless Communications Limited LT IDR BB- Affirmed BB- LC LT IDR BB- Affirmed BB- Coral-US Co-Borrower LLC senior secured LT BB- Affirmed RR4 BB- Sable International Finance Limited senior secured LT BB- Affirmed RR4 BB- C&W Senior Finance Limited senior unsecured LT BB- Affirmed RR4 BB- CASTELL 2025-1: S&P Assigns Prelim B- (sf) Rating on Cl. X1 Notes ----------------------------------------------------------------- S&P Global Ratings assigned its preliminary ratings to Castell 2025-1 PLC's class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd, and X1-Dfrd notes. At closing, Castell 2025-1 will also issue unrated class G, H, and X2 notes, as well as RC1 and RC2 residual certificates. Of the loans in the pool, 99.9% were originated in the past two years by UK Mortgage Lending Ltd., which is wholly owned by Pepper Money (PMB) Ltd. Prefunding of loans of up to 15% of the collateralized notes balance will take place up to the second interest payment date (IPD) using prefunding reserves plus up to GBP5 million of principal collections received on the first IPD. If these loans are not purchased, any unused prefunding amount will pay down the collateralized notes pro rata, while the unused principal collections will pay the class A notes. The assets backing the notes are U.K. second-lien mortgage loans. S&P said, "Although 13.0% of the loans are advanced to near-prime borrowers on the "Optimum +" product, we consider the mortgage portfolio to be prime in nature. We have also analyzed the nature of the first-lien holders and consider most to be advances by lenders operating in the prime mortgage market." A reserve provides liquidity to the class A and B-Dfrd notes, with principal proceeds applied sequentially down the capital structure. The transaction incorporates a swap with a fixed schedule to hedge the mismatch between the notes, which pay a coupon based on the compounded daily Sterling Overnight Index Average, and the loans, which pay fixed-rate interest before reversion. At closing, the issuer will use the issuance proceeds to purchase the full beneficial interest in the mortgage loans from the seller. The issuer grants security over all of its assets in the security trustee's favor. There are no rating constraints in the transaction under S&P's counterparty, operational risk, or structured finance sovereign risk criteria. It considers the issuer to be bankruptcy remote. Pepper (UK) Ltd. is the servicer in this transaction. In S&P's view, it is an experienced servicer in the U.K. market with well-established and fully integrated servicing systems and policies. It has our ABOVE AVERAGE ranking as a primary and special servicer of residential mortgages in the U.K. In S&P's analysis, it considered our current macroeconomic forecasts and forward-looking view of the U.K. residential mortgage market through additional cash flow sensitivities. Preliminary ratings Class Prelim. Rating Class size (%) A AAA (sf) 75.40 B-Dfrd* AA (sf) 8.30 C-Dfrd* A (sf) 4.40 D-Dfrd* BBB (sf) 4.25 E-Dfrd* BB (sf) 3.60 F-Dfrd* B (sf) 1.05 G NR 1.00 H NR 2.00 X1-Dfrd B- (sf) 4.00 X2 NR 1.50 RC1 Certs NR N/A RC2 Certs NR N/A *S&P's preliminary rating on this class considers the potential deferral of interest payments. NR--Not rated. N/A--Not applicable. DRAX GROUP: S&P Affirms 'BB+' Long-Term ICR, Outlook Stable ----------------------------------------------------------- S&P Global Ratings affirmed all ratings, including its 'BB+' long-term issuer credit rating on Drax Group Holdings Ltd. S&P also affirmed its 'BB+' issue-level rating, with a '3' recovery rating, on the senior secured instruments issued by Drax Finco PLC. The stable outlook reflects S&P's expectation that Drax's weighted-average funds from operations (FFO) to debt will remain well above 30% for the next 24 months, signaling its expectation that cash conversion will remain solid over this period. S&P Global Ratings believes that the U.K. government's extension of subsidies to Drax's biomass generation to 2031 for up to 6 terawatt-hours (TWh) of generation on all four units of the Drax Power Station will provide a longer view of generation earnings. Yet, we expect generation to reduce from 2027 onwards, with potential upside based on merchant power prices and availability of biomass. Drax's subsidies for biomass generation have been extended to 2031, prolonging the relative visibility and stability of cash flows. On Feb. 10, 2025, the U.K. government announced that it would extend the subsidies on Drax's biomass power generation through a Low-Carbon Dispatchable Contract for Difference (CfD) running from April 2027 until March 2031. The CfD will apply to all four units of Drax Power Station at a strike price of GBP113 per megawatt-hour (MWh) (2012 prices). The CfD will also apply a cap at 6 TWh, which, according to the government statement, would mean a load factor of 27% and a minimum annual contract floor of 22% load. While this provides a longer view of Drax's cash flows, S&P expects cash flows from biomass generation to be less stable from 2027 onward. Currently, one of the four units of Drax Power Station operates under the CfD, with the other three operating under another subsidized scheme of renewables obligation certificates (ROCs), which will end in 2027. All in all, this translated into a total contracted capacity under subsidized schemes of 14.4 TWh as of December 2024. The ROC regime carries more market risk than the CfDs; however, it still provides an attractive and relatively stable return. After 2027, S&P believes the company will operate the plant at peak load and will likely be more exposed to merchant generation for the remaining capacity above the CfD cap. Drax expects to generate between GBP100 million and GBP200 million of EBITDA yearly from biomass generation, excluding any upside from merchant generation. The company also has a portfolio of assets of pumped storage, hydro, open cycle gas turbine (OCGT), and Industrial & Commercial (I&C) sales that it expects to take a more prominent role in the group's EBITDA, targeting GBP250 million annually. This will allow Drax to continue playing an important role in the security of supply of the U.K., providing balancing and ancillary services amid the rising share of intermittent renewable energy generation in the U.K. energy mix. However, S&P believes this to be more volatile given its exposure to energy prices and renewable generation in the system. Strong free cash flow generation and rapid deleveraging will continue to provide comfortable headroom for the current rating. High baseload prices between 2022 and 2023, coupled with the company's two-year hedging strategy, benefitted free cash flow generation, which accelerated deleveraging, with FFO to debt reaching 55% in 2024. Contracted power sales will continue to support earnings until the beginning of 2027. As of February 2025, 10.6 TWh is already contracted at an average price of GBP108.8/MWh for 2025, together with the 3.1 TWh of CfD volumes at a strike price c. GBP140/MWh for 2025; this is 94% of the output generated in 2024. The group has about GBP1.9 billion of contracted forward power sales until the first quarter of 2027 on its ROC, pumped storage, and hydro generation assets; this is 20.2 TWh at an average price of GBP93.7/MWh. S&P said, "We also expect other business segments within the group--flexible generation and energy solutions and pellet production--to support free cash flow generation, diversifying earnings sources and reducing the link between financial performance and commodity price shifts. We note that Drax currently has two 15-year capacity market agreements for pumped storage (2027-2042) and OCGTs (2025-2039), with total a value of GBP509 million. Pellet production reached a record of 4 million tonnes in 2024, contributing GBP143 million to the group's EBITDA, thanks to the continued focus on operational efficiency through the supply chain. We expect pellet production to increasingly represent a larger share of EBITDA as earnings from biomass generation decline, particularly from 2027 onward. We project FFO to debt to be about 65% on average in 2025 and 2026." Key uncertainties remain regarding the group's long-term future investments, with increasing exposure to merchant prices in 2027 and the use of free cash flows. For Drax to implement its strategic goal to be a global leader in carbon removal, the company is planning to build two bioenergy carbon capture and storage (BECCS) facilities, as part of the U.K. government's ambitions to reach net zero by 2050, and has launched a new business called Elimini in North America to explore further BECCS opportunities globally, particularly in the U.S. S&P said, "While we see these as long-term net zero opportunities, further expanding the group's integration across the biomass value chain, we currently have a limited view of the remuneration framework and profitability level for this technology, along with investment requirements, leaving these projects to be contingent on further announcements from the government. We do not factor any of these investments into our base case at this stage, since Drax's degree of involvement will depend, among others, on the market outlook for Elimini and the remuneration framework for the U.K.'s BECCS. While not part of our current base case, if these investments were to be made, it would weigh heavily on the financial risk profile and on the current headroom on the FFO to debt. We will therefore have to update our base case scenario should BECCS be announced. We also acknowledge that those projects would bear both construction and operational risks that could delay the profitability stage on top of a potential significant hike in capex. We see all these factors as a constraint on the rating on Drax given the size of the investments and the material impact it would have on the company's cash flows and future earnings profile." S&P said, "The stable outlook reflects our expectation that Drax's weighted-average FFO to debt will average 67% for the next 24 months. This signals our expectation that cash conversion will remain solid over this period. Our current base case does not factor in any large credit-dilutive acquisitions (nor does it factor in any significant proceeds from divestments), because we expect Drax will adhere to its current financial policy of debt to EBITDA of about 2.0x. "In addition, our current base case does not incorporate the impact on the rating of the potential implementation of Drax's U.K. or U.S. BECCS projects, given the uncertainty around these projects, including timelines, costs, and business models. Once we have more clarity on these points, we would likely reconsider our base case. "We could lower the rating if the group's future strategy were to involve large debt-funded acquisitions or a significantly higher than anticipated capex program, absent the implementation of any mitigating factors. "We could also lower the rating if Drax's credit metrics were consistently below a level that we saw as commensurate with the current rating. That is, FFO to debt of about 30% over the next 24 months. This could result, for instance, from a significant underperformance of Drax's generation assets, notably with substantial unplanned outages. It could also result from markedly lower power prices and ROC revenue than we anticipated. Yet, we consider this scenario as unlikely for the next 12-18 months, given the level of free cash flows and contracted power sales for the group over this period. "Although remote at this stage, a retroactive change in biomass subsidies for Drax's biomass CfD and ROC units could also prompt us to lower the rating. "We could raise the rating once we have greater clarity on the group's future strategy and operating performance and the additional medium- to long-term investments necessary for Drax to implement its carbon removal strategy." INTELITRACK LTD: Leonard Curtis Named as Joint Administrators ------------------------------------------------------------- Intelitrack Ltd was placed into administration proceedings in the High Court of Justice Business and Property Courts in Manchester, Insolvency & Companies List (ChD) Court Number: CR-2025-000480, and Mike Dillon and Hilary Pascoe of Leonard Curtis, were appointed as joint administrators on April 2, 2025. Intelitrack Ltd operated as a tracking and telematics solutions company. Its registered office is at Within Body Matters Gym, Bamford Road, Heywood, OL10 4AG. The joint administrators can be reached at: Mike Dillon Hilary Pascoe Leonard Curtis Riverside House Irwell Street, Manchester M3 5EN Further details contact: The Joint Administrators Tel: 0161 831 9999 Email: recovery@leonardcurtis.co.uk Alternative contact: Joe Thompson LONDON CARDS 1: DBRS Confirms CCC Rating on Class F Notes --------------------------------------------------------- DBRS Ratings Limited took credit rating actions on the following classes of notes (the Rated Notes) issued by London Cards No. 1 plc and London Cards No. 2 plc: London Cards No. 1 plc -- Class A Loan Note confirmed at AAA (sf) -- Class B Notes confirmed at AA (sf) -- Class C Notes confirmed at A (low) (sf) -- Class D Notes confirmed at BBB (low) (sf) -- Class E Notes upgraded to B (high) (sf) from B (low) (sf) -- Class F Notes confirmed at CCC (sf) -- Class X Notes confirmed at BB (high) (sf) London Cards No. 2 plc -- Class A Notes confirmed at AAA (sf) -- Class B Notes confirmed at AA (sf) -- Class C Notes confirmed at A (low) (sf) -- Class D Notes confirmed at BBB (low) (sf) -- Class E Notes confirmed at BB (low) (sf) -- Class F Notes confirmed at CCC (sf) -- Class X Notes confirmed at BB (high) (sf) Morningstar DBRS did not rate the Class G Notes or the Class Z VFN also issued in the transactions. The credit ratings of the Class A Loan Note, Class A Notes, Class B Notes and Class C Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. The credit ratings of the Class D, Class E, Class F and Class X Notes address the ultimate payment of scheduled interest but timely once they are the most senior class outstanding, and the ultimate repayment of principal by the legal final maturity date. The upgrade of London Cards No. 1 plc Class E Notes is because of the increase in excess spread as a result of continued repayment of the Class X Notes which is senior to the transaction's lowest-ranked Class G loss makeup and the Bank of England interest rate cuts since the last review in June 2024. The Rated Notes together with Class G Notes of each transaction are backed by a respective portfolio of credit card receivables granted by New Wave Capital Limited trading as Capital on Tap (the originator) to small and medium-size enterprises (SMEs) domiciled in the United Kingdom of Great Britain and Northern Ireland (UK). The originator is also the servicer with Lenvi Servicing Limited (Lenvi) in place as the back-up servicer. CREDIT RATING RATIONALE Morningstar DBRS based the credit rating actions on a review of the following analytical considerations: -- The transactions' capital structure, including form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the issuers' financial obligations according to the terms under which the Rated Notes are issued -- The credit quality and the characteristics of the collateral, its historical performance and Morningstar DBRS' expectation of charge-offs, monthly principal payment rate (MPPR) and yield rates under various stress scenarios. -- The originator's capabilities with respect to originations, underwriting and servicing and Lenvi's capacity with respect to servicing -- The transaction parties' financial strength regarding their respective roles -- Morningstar DBRS' long-term sovereign rating on the UK, which is currently AA with a Stable trend -- The consistency of the transactions' legal structure with the Legal and Derivative Criteria for European Structured Finance Transactions methodology TRANSACTION STRUCTURE Each transaction is the only note series of the respective Issuer, as there are covenants and restrictions limiting further financial indebtedness such as any future issuance. Both transactions have a scheduled 36-month revolving period with 14 and 24 months remaining for London Cards No. 1 plc and London Cards No. 2 plc, respectively. During this period, additional receivables may be purchased and transferred to the securitized pool, provided that the eligibility criteria set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of a performance trigger or servicer termination. The servicer may extend the scheduled revolving period by up to 12 months. If the Rated Notes (excluding Class X Notes) and Class G Notes are not fully redeemed at the end of the scheduled revolving period, the transaction will enter into an amortization period where the Rated Notes (excluding the Class X Notes) and Class G Notes will be redeemed sequentially. Both transactions also include a liquidity reserve that is currently maintained at the respective target amount of 2% and 1% of the outstanding principal balances of the Rated Notes (excluding the Class X Notes) and Class G Notes for London Cards No. 1 plc and London Cards No. 2 plc. Both reserves are replenished in the transaction's interest waterfalls and are available to cover the respective shortfalls in senior expenses, interest payments on the Class A, Class B and Class C Notes, and Class A and Class B loss makeup. Both reserves would amortize to the target amount without a floor during the amortization period. As the Rated Notes carry floating-rate coupons based on the daily compounded Sterling Overnight Index Average (Sonia), there is an interest rate mismatch between the fixed-rate collateral and the Sonia-based floating-rate Rated Notes. While the potential risk is to a certain degree mitigated by excess spread and the ability of the originator or relevant entity to increase the credit card contractual rates, the transactions are exposed to the risk of further interest rate hikes. Morningstar DBRS analyzed such risk and sensitivity to further rapid interest rate hikes in its analysis with commensurate credit ratings. COUNTERPARTIES Barclays Bank PLC (Barclays) is the account bank for both transactions. Based on Morningstar DBRS Long-Term Issuer Rating of 'A' on Barclays and the downgrade provisions outlined in the transaction documentation, Morningstar DBRS considers the risk arising from the exposure to the account bank to be commensurate with the credit ratings of the Rated Notes. PORTFOLIO ASSUMPTIONS The MPPRs of the originator's total managed portfolio averaged around 40% in 2017 with a gradual decline to approximately 30% until April 2020. Since then, MPPRs have been increasing and reached a record high of more than 70% in November 2023, reflecting an increasing percentage of customers that pay off the balances in full each month over the same period. This is consistent with the originator's strategy to focus on the transactors and the SME nature of this portfolio where the borrowers may elect to pay off the balances more frequently to have the credit limit available for working capital. The most recent March 2025 investor reports continue to show total payment rates (60.6% and 86.5% for London Cards No. 1 plc and London Cards No. 2 plc, respectively) higher than the historical levels before April 2020 and remain stable in light of the current macroeconomic challenges of inflationary pressures and higher interest rates. After considering historical data and trends, Morningstar DBRS maintained the expected portfolio MPPR at 28% for both transactions based on the expected compositions of transactor and non-transactor (revolver) and respective MPPRs (100% for the transactors). Portfolio yield includes interest income, fees and interchange. Due to the corporate nature of the borrowers, there is no regulatory constraint of the maximum permissible rate or interchange on the cards and the card interest rates vary substantially based on the perceived credit risk by the originator. While the yields of the originator's total managed portfolio have been relatively stable between 35% and 40%, the interchange component has been increasing since December 2021 because of the originator's strategy pivot to transactors with a corresponding decline in interest income. On the other hand, the investor reports showed stable interchange yields as of March 2025. Recognizing the trend and the expected composition percentages of transactors and revolvers and respective yields, Morningstar DBRS maintained the expected portfolio yield at 35.5% for both transactions. The historical total managed portfolio charge-offs averaged around 15% before plummeting during the initial COVID-19 pandemic outbreak in 2020. They have since gradually increased but remained below the pre-pandemic levels in part because of increased transactor amounts in the portfolio. Charge-offs of London Cards No. 2 plc fluctuated between 8% and 10% post-closing, most recently at 8.5% as of March 2025. The charge-offs of London Cards No. 1 plc are around 7.5% as of March 2025 after some volatility between May 2024 and December 2024. Based on the historical trends of the portfolio and the expected composition percentages of transactors and revolvers and respective charge-offs (nil for the transactors), Morningstar DBRS maintained the expected portfolio charge-off rate at 14.5% for both transactions. Morningstar DBRS also maintained the asset performance stress over a longer period for below investment grade levels. Notes: All figures are in British pound sterling unless otherwise noted. LONDON COUNCILS: Fear Bankruptcy Amid Homelessness Crisis --------------------------------------------------------- The BBC reports that homelessness represents the "single biggest risk" to council finances and may cause effective bankruptcy, according to the organization that represents London boroughs. London Councils, a cross party group that represents all 32 boroughs and the City of London, estimated that councils in the capital had been forced to overspend on their homelessness budgets by at least GBP330 million in 2024-25, says the report. Local authorities have a legal duty to provide temporary accommodation to anyone who qualifies as homeless - the number of which has risen in recent years, notes BBC. The government said it was tackling the root causes of homelessness by building homes and abolishing section 21 no fault evictions, the report relates. Emergency support According to the report, councils in London said the subsidy they receive for temporary accommodation costs from the government did not compare with the actual financial burden. In 2023-2024, the gap was about GBP96 million, but London Councils estimated the gap for 2024-2025 reached GBP140 million - a 45% increase, the report says. The group said if the trend continued, more boroughs would need emergency support from the government and face effective bankruptcy. The number of homeless Londoners has reached the highest level ever recorded with about 183,000, or one in 50 residents, London Councils said, BBC relays. Collectively, the boroughs spend GBP4 million daily on temporary accommodation because costs have spiked due to fewer rental properties available and an increased use of hotels. London Councils has called for urgent national policy action in the government's Spending Review to reduce homelessness pressures and to help councils, notes BBC. The government is set to conclude its review, which will determine levels of investment in public services for the coming years, in June, states the report. It is also preparing a new national strategy on homelessness. London Councils' executive member for housing and regeneration, Grace Williams, said any potential bankruptcy of local councils could bring "massive uncertainty" to the future of communities' local services, BBC says. "It could ultimately mean more costs to the government when emergency interventions are required," the report quotes Williams as saying. "We need urgent action from ministers." A spokesman at the Department for Levelling Up, Housing and Communities, said: "We inherited a serious housing crisis which is why we are taking urgent and decisive action to end homelessness, fix the foundations of local government and drive forward our Plan for Change. "This government is providing GBP1 billion for crucial homelessness services and tackling the root causes of homelessness by building 1.5 million new homes, boosting social and affordable housing and abolishing section 21 no fault evictions," BBC relates. OCADO GROUP: Fitch Rates GBP300MM Notes 'B-(EXP)', Outlook Stable ----------------------------------------------------------------- Fitch Ratings has assigned Ocado Group PLC's (B-/Stable) prospective GBP300 million 2030 notes an expected senior unsecured instrument rating of 'B-(EXP)' with a Recovery Rating of 'RR4'. This is aligned with Ocado's Long-Term Issuer Default Rating (IDR) and existing unsecured instrument rating, which Fitch has affirmed. Ocado's rating reflect Fitch's view that execution risk on reaching scale and profitability remains high due to the slow deployment of the company's infrastructure by its partners, while its liquidity position is being eroded by high capex. This is balanced by a record of satisfactory liquidity management, supporting growth investment. Based on its estimates and assuming refinancing of 2025-2027 maturities, Ocado is in a position to maintain adequate cash to fund capex in FY25-FY28 (financial year ending November). The Stable Outlook reflects reducing refinancing risks following completion of the refinancing in 2024 and the trend of consecutive reduction of cash losses. Key Rating Drivers Reducing Refinancing Risk: With its plans to address its GBP400 million 2025 and 2026 maturities, Ocado is tackling a material part of its remaining refinancing needs, potentially leaving only the January 2027 GBP350 million convertible note to be dealt with in the near term. Refinancing risk has already significantly decreased through the successful GBP700 million refinancing in 2024. Continued timely refinancing of near-term maturities is key to the rating and to support liquidity. Ocado's revolving credit facility (RCF) availability until August 2027 depends on both 2026 and 2027 debt being refinanced by July 2026. Slower EBITDA Improvement: The rating is supported by the record and expectation of slower but sustainably improving EBITDA generation. FY24 Fitch-adjusted EBITDA at GBP84 million was slightly above its projection of GBP73 million. However, Fitch now forecasts a slower increase in EBITDA following a further delay in the Kroger customer fulfilment centre (CFC) opening to 2026. Its forecast includes only seven CFC openings compared with eight previously and a slightly slower module roll-out. This translates to FY25 and FY26 EBITDA reaching GBP103 and GBP186 million, respectively, compared with previously anticipated GBP146 and GBP201 million. Better Liquidity, Tight Cash Control: Ocado's FY24 end cash position of GBP730 million was around GBP160 million above its forecast, following higher than anticipated reduction of capex, support and technology cost as well as net working capital management improvement. Fitch views the slower EBITDA growth from the delayed CFC rollout as mitigated by the company's expectation of lower capex and further cost-cutting efforts. These should translate into a clear reduction in the pace of cash burn, with an anticipated FY27 cash position near GBP250 million, excluding any need to draw on the RCF to fund the continuation of the business plan execution. High but Decreasing Negative FCF: Ocado's free cash flow (FCF) outflow at GBP250 million in FY24 was GBP85 million better than Fitch expected, supported by cost-cutting and fewer CFC openings. Fitch projects FCF in FY25-FY28 will remain strongly negative, albeit gradually reducing by nearly GBP100 million by FY27 from FY24 due to cost and capex reductions. Management indicates further potential to reduce technology and support costs and plans to limit technology R&D capex to 20% of recurring revenue by FY27, which would enable it to limit excessive cash outflows. Cash Position Supports Investment Plans: The group does not plan to increase debt beyond refinancing needs. Its projections indicate the group will be able to support its medium-term capex programme with on-balance-sheet cash, without drawing on the RCF. In its view, this is an adequate liquidity buffer for the business, supporting the Stable Outlook. However, this liquidity cushion is contingent on the group's rigorous cost reduction and EBITDA expansion in combination with moderated capex. High Execution Risk: Fitch sees high execution risk in Ocado's business plan to ramp up existing CFCs, roll out new CFCs and deliver efficiencies to drive earnings growth. Profit growth plans rest on the addition of seven new international CFCs over the next three years and on reaching full CFC capacity by the fifth or sixth year of going live. CFCs have demonstrated slower-than-anticipated ramp-up, due to weaker online grocery demand, alternative less capital-intensive solutions being available to grocers and in some cases, operational challenges. Ocado is helping its clients via its "partner success" programme, but the results of these efforts are not fully within its control. Its forecasts do not include new CFC projects coming on-stream in FY25 in the US, which reduces under-delivery risk given weakened consumer and retailing sentiment there. Scale and Cost Control: Fitch believes the business should generate adequate profit margins once it reaches scale, with EBITDA margins improving towards 14% by FY26. Its forecast incorporates decreasing direct operating costs, including technology and support costs. Ocado has stated it targets to reduce by FY27 its annual technology costs to GBP60 million (from GBP93 million in FY24) and its cash support costs to GBP150 million (GBP174 million in FY24). Peer Analysis Fitch analyses Ocado under its Business Service Navigator framework. This reflects that the UK retail operations under 50%-owned Ocado Retail Ltd (ORL) are ring-fenced with no direct recourse from Ocado's lenders. Fitch views the solutions business as the driver of Ocado's long-term credit quality, due to its accelerating growth and investments. Compared with Irel Bidco S.a.r.l (IFCO, B+/Stable), which provides reusable packaging container solutions, Ocado is less established and faces higher execution risk. IFCO is a global leader in a niche market and benefits from scale, geographic diversification, and long-standing customer relationships. Ocado will have similar characteristics once it reaches its targeted scale, with a contracted revenue base, low customer churn, and high switching costs due to its bespoke technology. This helps offset some reliance on Kroger as a key customer. At scale, Ocado should demonstrate solid profitability for the rating, with an EBITDA margin rising towards 18%, below IFCO's of above 20%. Leverage metrics are currently not a key rating driver for Ocado during the current growth phase but its expectation of a reduction to around 5.4x by FY27 supports the rating, slightly above expected leverage for IFCO at around 5.0x by FY24. Fitch also compares Ocado with Polygon Group AB (B/Negative), a leader in the European property damage restoration industry. Both have leading market positions and similar scale. Ocado has better geographical diversification and expected revenue visibility than Polygon, which has shorter contracts. Ocado faces higher execution risk. Fitch expects Polygon's EBITDA leverage to reduce to 6.5x by 2026, nearly one turn below Ocado. Key Assumptions Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue for the technology solutions segment to grow to GBP633million in FY26 as CFCs are ramped up and rolled out. - Revenues for UK logistics increasing towards GBP769million by FY26 - EBITDAR for the technology solutions segment to rise to GBP242 million in FY27 from around GBP100 million in FY25 - EBITDAR for the UK logistics segment to gradually grow to around GBP40 million in FY27 from around GBP34 million in FY25 - Lease cost on average GBP30 million per year in FY25-FY27 - Gross capex (excluding ORL) averaging GBP318 million a year in FY25-FY28 - Cash inflows of GBP58 million from Autostore Settlement in FY25, - No dividends from ORL - No M&A, no common dividend payment Recovery Analysis Fitch's Key Recovery Rating Assumptions: The recovery analysis assumes that Ocado would be reorganised as a going concern (GC) in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim and the value available to creditors to consist of the sum of Ocado restricted group's enterprise value (EV) and 50% of ORL. Ocado's GC EBITDA is based on FY25 EBITDA for the restricted group capturing CFCs that are under construction now and opening shortly. Fitch expects GBP95 million (unchanged) of this would be available to creditors post-restructuring, due to execution risks in the international technology segment while also recognising a more established UK business. Fitch has used an unchanged 6.0x EV/EBITDA multiple, which is in line with the distressed multiple for business services companies, but it also reflects the strong growth of Ocado's business and its market position Additionally, Fitch attributes half of its estimated GBP0.6 billion GC valuation of ORL business to Ocado's cash flow waterfall. Fitch believes that a default of ORL would not be simultaneous and consequently base the JV valuation on an expected sustainable medium-term EBITDA of GBP75 million and an 8x multiple, which is not a distressed valuation. The multiple is based on trading multiples for grocers and higher multiples for pure online retailers and technology companies. Any additional debt at the JV above the assumed GBP30 million RCF will affect the value attributed to it. Ocado's GBP300 million secured RCF ranks ahead of its other existing debt. The currently outstanding senior unsecured notes (GBP450 million due 2029 and GBP224 million due 2026) rank equally with its GBP773 million of new and existing convertibles. The outcome of the recovery analysis for senior unsecured notes is 'B-'/'RR4', aligned with Ocado's Long-Term IDR. Should additional debt ranking ahead or equally with unsecured notes be added to Ocado's capital structure, it would lower the Recovery Rating of the notes to 'RR5'. Upon completion of the planned refinancing transaction, which includes an expected reduction of debt through senior unsecured note issuance of GBP300 million and the use of own cash to repay the December 2025 and October 2026 senior unsecured notes, Fitch expects that the senior unsecured debt rating will be unchanged at 'B-'/RR4. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Insufficient liquidity to fund at least two years of capex - Continued execution challenges, such as further delays in the roll-out of new CFCs, inability to scale up existing CFCs, or deliver technology or support cost efficiencies, preventing EBITDA from reaching at least GBP100 million in FY25 and at least GBP150 million by FY26, and a faster cash burn than captured in its rating case - Readily available cash materially below GBP500 million at FYE25 Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Fitch does not envisage positive rating action during FY25-FY28, due to execution risks associated with its transformation into a solutions and business service provider. However, over the long term, evidence of greater maturity of the business, with increasing scale and diversification and lower upfront capex would indicate successful execution of Ocado's growth strategy and be positive for the rating, together with: - EBITDA rising towards GBP200 million - Sufficient positive FCF generation to fund growth capex - EBITDA interest coverage recovering towards 1.5x - Visibility of EBITDA gross leverage falling below 6.5x on a sustained basis Liquidity and Debt Structure The restricted group (excluding ORL) had an adequate but declining cash position, with around GBP730 million in cash and a fully undrawn GBP300 million RCF at FYE24. Together with cash generated from operations and receipts from the Autostore settlement, Fitch expects this to support high capex from FY25 to FY28. Fitch estimates available liquidity of around GBP879million at FYE25. Its GBP300 million RCF has been extended to 2027, but benefits from springing maturity if notes maturing in 2026 and 2027 are not refinanced by July 2026. Issuer Profile Ocado is a technology company that develops end-to-end operating solutions for online grocery retail. It also has its own grocery retail operations, which are ring-fenced in a JV with Marks and Spencer Group Plc. Summary of Financial Adjustments The ratings reference Ocado Plc's restricted group only (as defined by its bond documentation) and exclude ORL. 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 ----------- ------ -------- ----- Ocado Group PLC LT IDR B- Affirmed B- senior unsecured LT B-(EXP) Expected Rating RR4 senior unsecured LT B- Affirmed RR4 B- SMALL BUSINESS 2025-1: DBRS Gives Prov. BB Rating to C Notes ------------------------------------------------------------ DBRS Ratings Limited assigned provisional credit ratings to the notes to be issued by Small Business Origination Loan Trust 2025-1 DAC (the Issuer) as follows: -- Class B Notes at (P) BBB (sf) -- Class C Notes at (P) BB (sf) The provisional credit ratings on the Class B and Class C Notes (together, the Rated Notes) address ultimate payment of interest, but the timely payment of scheduled interest when they are the most senior class of notes and ultimate repayment of principal on or before the legal final maturity date (expected to be in December 2036). The Issuer will also issue the Class A Loan Note, the Class Z Notes, and the Class R Notes, which Morningstar DBRS does not rate. The transaction is a cash flow securitization of a portfolio of largely unsecured loans originated through the Funding Circle Ltd. (Funding Circle) lending platform to UK-based small and medium sized enterprises (SMEs) and sole traders. All loans follow a French amortization schedule, have a fixed interest rate, and pay monthly instalments. CREDIT RATING RATIONALE Morningstar DBRS determined its provisional credit ratings based on the principal methodology and the following considerations: -- The nature of the portfolio, which will be static and consists of unsecured loans with a maximum maturity of six years. All loans are amortizing on a monthly basis following a French amortization profile, contributing to a short weighted-average life (WAL) of 2.35 years. -- The transaction capital structure's features, that provides for a pro-rata amortization until certain sequential switch events occur. -- The transaction benefits from an interest rate swap which limits the interest rate risk between the floating-rate notes and the portfolio comprised solely of fixed-rate loans. -- The transaction benefit from a back-up servicer which reduces servicer continuity risk. -- The portfolio benefits from significant excess spread which can be used to cure any principal shortfalls via a principal deficiency ledger mechanism. The provisional portfolio's weighted average interest rate stood at 15.35%. TRANSACTION STRUCTURE The transaction is static and there is no requirement for the Issuer to purchase new assets or to replace any asset comprised in the securitized portfolio. The transaction will amortize pro rata until certain sequential switch events occur. Thereafter the amortization will be sequential. Before the occurrence of an enforcement event, the transaction allocates collections in separate interest and principal priorities of payments. Upon the occurrence of an enforcement event, there will be one priority of payments for both principal and interest. The transaction incorporates two reserves funded at closing. The cash reserve provides both liquidity and credit support in accordance with the applicable priority of payments and will amortize in line with the outstanding principal balance of the Notes. The liquidity reserve will be available to cover any interest shortfalls on the most senior class of Notes outstanding from time to time. Morningstar DBRS considers the interest rate risk for the transaction to be limited as an interest rate swap is in place to reduce the mismatch between the fixed-rate collateral and the Rated Notes. PORTFOLIO ASSUMPTIONS The provisional portfolio consists of 5,244 loans granted to 5,169 borrowers. The average outstanding principal balance is GBP 73,352 and the maximum individual borrower concentration is 0.16% of the portfolio. The top 5 and 10 obligors represent 0.72% and 1.37% of the portfolio balance, respectively. The top three regions for borrower concentration are South-East, London and Midlands, representing 24.5%, 15.4% and 15.2% of the portfolio balance, respectively. The historical data provided by Funding Circle reflects the portfolio composition which includes unsecured loans for which Funding Circle internally categorizes borrowers into seven risk bands (A+, A, A2, B, B2, C and D). For the purpose of its analysis, Morningstar DBRS calculated the Probability of Defaults (PDs) for each risk band in order to capture any negative or positive pool selection. The assumed PDs for A+, A (including A2), B (including B2), C and D risk bands are 1.49%, 2.70%, 4.80%, 7.08% and 9.34%. A small subset of loans in the provisional portfolio (52 loans, representing 0.95% of the outstanding portfolio balance) were subject to forbearance measures which included payment grace periods with loan term extensions. In our analysis we considered these loans to have a 1 year PD of 22.3% (equivalent to a CCC rating) to reflect the higher risk associated with these borrowers. Morningstar DBRS' credit rating on the Rated Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts and the related class balances. Notes: All figures are in British pound sterling unless otherwise noted. UK LOGISTICS 2025-1: DBRS Finalizes BB Rating on Class F Notes -------------------------------------------------------------- DBRS Ratings Limited finalized its provisional credit ratings to the following bonds issued by UK Logistics 2025-1 DAC (the Issuer): -- Class A at AAA (sf) -- Class B at AA (sf) -- Class C at A (low) (sf) -- Class D at BBB (low) (sf) -- Class E at BB (high) (sf) -- Class F at BB (sf) All trends are Stable. CREDIT RATING RATIONALE The issuance is a securitization of three senior commercial real estate (CRE) loans originated by Citibank N.A., London Branch (Citibank). Citibank advanced the Nevis Loan of GBP 360.0 million, the Fawr Loan of GBP 300.0 million, and the Pike Loan of GBP 180.0 million to borrowers ultimately owned by funds managed by Blackstone Real Estate Partners (Blackstone or the Sponsor) in connection with refinancing the acquisition of three logistics portfolios comprising 8.8 million square feet (sf) of standing logistics assets and 1.3 million sf of industrial outdoor storage (IOS) in the UK, largely concentrated in the South East and London. The Nevis Loan The GBP 360.0 million loan relates to a term loan advanced by the Issuer to six borrowers (the Nevis Borrowers), who are ultimately owned by Blackstone. The purpose of the loan is to refinance existing indebtedness of the Nevis Borrowers (and other members of the group) for general corporate purposes and financing or refinancing financing costs. The Borrower group comprises three Jersey limited liability companies and three Luxembourg entities. The collateral securing the loan comprises 59 logistics assets in the UK with 45% of the portfolio value concentrated in London and the Southeast. Valuations prepared by Jones Lang LaSalle (JLL) in January 2025 concluded an aggregate market value (MV) of the properties at GBP 515.035 million and a portfolio valuation of GBP 580.78 million, based on the final valuation report. Assuming a corporate portfolio sale representing 0% stamp duty land tax (SDLT) and an agreed portfolio premium cap of 5%, the final portfolio value is GBP 567.3 million. The loan-to-value ratio (LTV) based on the values equal 69.9% and 63.5% (including the 5% portfolio premium), respectively. The portfolio income comprises rental payments from typical standing logistics assets. The borrowers indicated a budget of GBP 34 million of refurb capital expenditures (capex), which includes capex for identified environmental, social, and governance (ESG) measures to achieve at least an Energy Performance Certificate (EPC) B rating for all assets, including capex such as window upgrades, LED lighting upgrades, installation of solar photovoltaics (PVs), modernization of building insulation, and roofing. Most of the units within the portfolio, approximately 70% of total portfolio area, are rated within the C-F rating category. The portfolio has a weighted-average (WA) lease term to break (WALTb) and a WA lease term to expiry (WALTe) of 3.3 years and 5.2 years, respectively. In aggregate, the portfolio tenant base is granular, with the top 10 tenants accounting for 22% of the rental income. As at the Cut-Off Date, 30 September 2024, the portfolio had an occupancy rate of 88%, and generated GBP 27.0 million of gross rental income GRI and a Net Operating Income (NOI) of GBP 25.2 million which reflects a day-one debt yield (DY) of 7.0%. Morningstar DBRS' long-term sustainable net cash flow (NCF) assumption for the portfolio is GBP 24.3 million, representing a haircut of 3.4% to in-place NOI. The corresponding Morningstar DBRS value of GBP 373.8 million represents a haircut of 27.4% to the JLL property valuation. There are no loan financial covenants applicable prior to a permitted change of control (PCOC), but cash trap covenants are applicable both prior to and post-PCOC. More precisely, the cash trap levels are set as follows: the LTV is greater than 77.5%, and the DY is less than 6%. After a PCOC, the financial default covenants on the LTV and the DY will be applicable; they are set, respectively, at the LTV being greater than the PCOC LTV +15% and at 85% of the DY as at the PCOC date. The senior loan is interest-only prior to a PCOC and carries a floating rate, which is referenced to the Sterling Overnight Index Average (Sonia) (floored at 0%) plus a margin that is the WA of the aggregate interest amounts applicable to the Nevis Loan note notional amount outstanding for each relevant class of notes. Morningstar DBRS understands that the borrowers will purchase an interest cap agreement to hedge against increases in the interest payable under the loan. This must be in place by the first interest payment date (IPD). The cap agreement will cover at least 95% of the outstanding loan balance with a strike rate of the higher of 3.5% and the rate that ensures that, as at the date on which the relevant hedging transaction is contracted, the hedged interest coverage ratio (ICR) is not less than 1.25 times (x) until the first hedging renewal date, being the first IPD falling after the second anniversary of the utilization date. At each subsequent hedging renewal date until loan maturity, the hedge must be the higher of (1) 3.5%, and (2) the rate that ensures that, as at the date on which the relevant hedging transaction is contracted, the hedged ICR is not less than 1.25x, provided that in respect of any hedging transaction in the form of a swap, the maximum hedging rate is the lower of (A) the higher of (1) and (2) and, (B) the market prevailing swap (fixed leg) rate on the date on which the relevant hedging transaction is contracted. The maturity date of the loan is in May 2030. The Fawr Loan The GBP 300 million loan relates to a term loan advanced by the Issuer to two borrowers (the Fawr Borrowers), who are ultimately owned by Blackstone. The purpose of the loan is to refinance existing indebtedness of the Fawr Borrowers (and other members of the group), refinancing the acquisition of the Fawr property portfolio, for general corporate purposes and financing or refinancing financing costs. The Fawr Borrowers are private limited liability companies incorporated under the laws of Jersey. The collateral securing the loan comprises 26 UK logistics and IOS assets within densely populated urban areas that have good highway connectivity. Of the portfolio value, 70% is in London and the Southeast, the Northwest accounts for 17%, and the remaining 13% of value is in the Midlands. Valuations prepared for the properties by JLL in January 2025 concluded an aggregate MV of the collateral at GBP 501.45 million and a portfolio valuation of GBP 565.72 million, based on the final valuation report. Assuming a corporate portfolio sale representing 0% SDLT, and an agreed portfolio premium cap of 5%, the final portfolio value is GBP 552.6 million. The LTV based on these values equals 59.8% and 54.3% (including the 5% portfolio premium), respectively. The portfolio income comprises rental payments from typical standing logistics assets and from leased IOS, which forms 19.2% of in-place income. The borrowers indicated a budget of GBP 16 million of refurb capex, which includes capex for identified ESG measures, such as LED lighting upgrades, installation of solar PVs, modernization of building insulation, and roofing, to achieve at least an EPC B rating for all assets. Most of the units within the Fawr portfolio, approximately 72% of total portfolio area, are rated within the C-E rating category. The portfolio has a WALTb and a WALTe of 3.7 years and 5.5 years, respectively. In aggregate, the portfolio tenant base is granular with the top 10 tenants accounting for 32% of the rental income and no single tenant accounting for more than 7.0% of the total Fawr portfolio rent. As at the Cut-Off Date, September 30, 2024, the portfolio occupancy rate was 82.5%, and the portfolio generated GBP 22.4 million of GRI and an in-place NOI of GBP 21.0 million, reflecting a day-one DY of 7.0 %. Morningstar DBRS' long-term sustainable NCF assumption for the portfolio is GBP 21.6 million which is broadly in line with the in-place NOI. The corresponding Morningstar DBRS value is GBP 324.2 million representing a haircut of 35.3% to the JLL property valuation. There are no loan financial covenants applicable prior to a PCOC, but cash trap covenants are applicable both prior to and post-PCOC. More precisely, the cash trap levels are set as follows: the LTV is greater than 69.3%, and the DY is less than 6%. After a PCOC, the financial default covenants on the LTV and the DY will be applicable; they are set, respectively, at the LTV being greater than the PCOC LTV +15% and at 85% of the DY as at the PCOC date. The senior loan is interest-only prior to a PCOC and carries a floating rate, which is referenced to the Sonia (floored at 0%) plus a margin that is the WA of the aggregate interest amounts applicable to the Fawr Loan note notional amount outstanding for each relevant class of notes. Morningstar DBRS understands that the borrowers will purchase an interest cap agreement to hedge against increases in the interest payable under the loan by the first IPD. The cap agreement will cover at least 95% of the outstanding loan balance with a strike rate of the higher of 3.5% and the rate that ensures that, as at the date on which the relevant hedging transaction is contracted, the hedged ICR is not less than 1.25x until the first hedging renewal date, being the first IPD falling after the second anniversary of the utilization date. At each subsequent hedging renewal date until loan maturity, the hedge must be the higher of (1) 3.5%, and (2) the rate that ensures that, as at the date on which the relevant hedging transaction is contracted, the hedged ICR is not less than 1.25x, provided that in respect of any hedging transaction in the form of a swap, the maximum hedging rate is the lower of (A) the higher of (1) and (2) and, (B) the market prevailing swap (fixed leg) rate on the date on which the relevant hedging transaction is contracted. The maturity date of the loan is in May 2030. THE PIKE LOAN The GBP 180.0 million loan relates to a term loan advanced by the Issuer to a single borrower (the Pike Borrower), who is ultimately owned by Blackstone. The purpose of the loan is to refinance existing indebtedness of the Pike Borrower (and other members of the group) for general corporate purposes and financing or refinancing transaction costs. The Pike Borrower is a private limited liability company incorporated under the laws of United Kingdom. Senior The collateral securing the loan comprises 23 logistics assets in the UK with 33% of the portfolio value concentrated in the Southeast. Valuations prepared for the properties by JLL in January 2025 concluded an aggregate MV of the collateral at GBP 265.005 million. There are also two land plots included in the portfolio and the valuation including these sites is GBP 265.355 million. Based on the final valuation report, the JLL portfolio valuation based on the special assumption of a corporate portfolio sale representing 0% SDLT and including a portfolio premium of 5% is GBP 292.28 million. The LTV based on these values equals 67.8% (including land plots) and 61.6%, respectively. The portfolio income comprises rental payments from typical standing logistics assets. The borrowers indicated a budget of GBP 24 million of refurb capex, which includes capex for identified ESG measures to achieve at least an EPC B rating for all assets including capex, such as window upgrades, LED lighting upgrades, installation of solar PVs, modernization of building insulation, and roofing. Most of the units within the portfolio (approximately 86% of the total portfolio area) fall within the C-F rating category. The portfolio has a WALTb and a WALTe of 2.7 years and 4.3 years, respectively. In aggregate, the portfolio tenant base is granular with the top 10 tenants accounting for 21% of the rental income. As at the Cut-Off Date 31 October 2024. The portfolio occupancy rate was 88.5%, and generated GBP 14.6 million of GRI and an in-place NOI of GBP 14.033 million which reflects a day-one DY of 7.8%. Morningstar DBRS' long-term sustainable NCF assumption for the portfolio is GBP 12.9 million, representing a haircut of 8.3% to in-place NOI. The corresponding Morningstar DBRS value of GBP 195.04 million represents a haircut of 26.4% to the JLL property valuation. There are no loan financial covenants applicable prior to a PCOC, but cash trap covenants are applicable both prior to and post-PCOC. More precisely, the cash trap levels are set as follows: the LTV is greater than 76.6% and the DY is less than 6.9%. After a PCOC, the financial default covenants on the LTV and the DY will be applicable; they are set, respectively, at the LTV being greater than the PCOC LTV +15% and at 85% of the DY as at the PCOC date. The senior loan is interest-only prior to a PCOC and carries a floating rate, which is referenced to the Sonia (floored at 0%) plus a margin that is the WA of the aggregate interest amounts applicable to the Pike Loan note notional amount outstanding for each relevant class of notes. Morningstar DBRS understands that the borrowers will purchase an interest cap agreement to hedge against increases in the interest payable under the loan. This must be in place by the first IPD. The cap agreement will cover at least 95% of the outstanding loan balance with a strike rate of the higher of 4.0% and the rate that ensures that, as at the date on which the relevant hedging transaction is contracted, the hedged ICR is not less than 1.25x until the first hedging renewal date, being the first IPD falling after the second anniversary of the utilization date. At each subsequent hedging renewal date until loan maturity, the hedge must be the higher of (1) 4.0%, and (2) the rate that ensures that, as at the date on which the relevant hedging transaction is contracted, the hedged ICR is not less than 1.25x, provided that in respect of any hedging transaction in the form of a swap, the maximum hedging rate is the lower of (A) the higher of (1) and (2) and, (B) the market prevailing swap (fixed leg) rate on the date on which the relevant hedging transaction is contracted. The maturity date of the loan is in May 2030. To satisfy the applicable risk retention requirements, Citibank, in its capacity as retaining sponsor will acquire a vertical interest in the transaction of GBP 42 million, by advancing the Issuer Loan to the Issuer, representing 5% of the total aggregated securitized loan balances of the Nevis loan, the Fawr loan, and the Pike loan as at the closing date. The transaction is expected to repay in full by May 2030. If the loans are not repaid by then, the transaction will have a five years' tail to allow the special servicer to work out the loan(s) by May 2035, or where the final note maturity date is automatically extended pursuant to an extension of the final loan maturity date, the date falling five years after the final loan maturity date, which in each case is the final note maturity date. On the closing date, Citibank N.A. London Branch provided a liquidity facility of GBP 40.0 million or 5% of the total outstanding balance of the aggregated notes. Morningstar DBRS understands that the liquidity facility will cover the interest payments to the Class A to Class C notes. No liquidity withdrawal can be made to cover shortfalls in funds available to the Issuer to pay any amounts in respect of the interest due on the Class D, Class E, and Class F notes. The Class E, and Class F notes are subjected to an available funds cap where the shortfall is attributable to an increase in the WA margin of the notes. Based on a blended cap strike rate of 3.6% and a Sonia cap of 5.0% for the three loans, Morningstar DBRS estimated that the liquidity facility will cover approximately 15 months of interest payments and 12 months of interest payments, respectively, assuming the Issuer does not receive any revenue. Morningstar DBRS' credit rating on the Class A, Class B, Class C, Class D, Class E, and Class F notes to be issued by the Issuer address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the initial principal amounts and the interest amounts. Notes: All figures are in British pound sterling unless otherwise noted. WINTERSHALL DEA: Moody's Rates New Hybrid Notes 'Ba1' ----------------------------------------------------- Moody's Ratings has assigned a Ba1 rating to the proposed benchmark-size euro-denominated backed subordinated fixed rate resettable notes (new hybrid notes) of Wintershall Dea Finance 2 B.V., a wholly owned subsidiary of Harbour Energy plc (Harbour, Baa2 stable). The rest of the ratings of Harbour and its subsidiaries, including the Baa2 long term issuer rating (LTIR) and stable outlook, are unchanged. Proceeds from the new hybrid notes' issuance will be used for refinancing purposes, including the redemption of a portion of Harbour's existing EUR650 million undated backed subordinated resettable 2.5% notes. Harbour concurrently launched a consent solicitation to holders of its existing EUR850 million undated backed subordinated resettable 3% notes (existing EUR850 million hybrid notes) to make certain technical changes, so as to harmonise the terms and condition of the existing EUR850 million hybrid notes with the new hybrid ones. RATINGS RATIONALE The Ba1 rating assigned to the new hybrid notes is two notches below Harbour's LTIR. This reflects the new hybrid notes' (i) deep subordination to the senior unsecured backed obligations of Harbour, (ii) pari passu ranking with any parity obligations, that is the group's existing subordinated notes rated Ba1 and (iii) senior ranking only to any class of Harbour's share capital (including preference shares). The new hybrid notes are perpetual securities with a non-call period of minimum five years from issue date and events of default are limited to non-payment (excluding deferral) and winding-up. Harbour may opt to defer coupon payments on a cumulative basis. The notes do not contain any step-ups in the first 10 years and contain no more than 100 basis points in total. The new hybrid notes will qualify for the "Basket M" and a 50% equity treatment of the borrowing for the calculation of the Moody's credit metrics, as per Moody's Hybrid Equity Credit methodology published in February 2024. The Ba1 rating of the existing EUR850 million hybrid notes remains unaffected by Harbour's proposed technical changes, because the latter would not have changed Moody's views had the new terms been in place at the original issuance date in 2021. Accordingly, Moody's continues to ascribe a 50% equity credit to Harbour's existing hybrid notes. Harbour's credit quality continues to reflects the company's large scale; diversified business profile; strong profitability and robust financial metrics under Moody's base case; commitment to conservative financial policies and track record of managing an acquisition-led growth strategy. Constraints to Harbour's credit quality are the company's smaller scale and larger decommissioning liabilities relative to peers, offshore activities prone to steep natural decline and exposure to an uncertain and challenging fiscal and regulatory environment in the UK. OUTLOOK The stable outlook reflects Moody's expectations that Harbour will continue to successfully integrate Wintershall Dea Global Holding GmbH, so that it benefits from larger scale, longer reserve life, broader geographic footprint and lower cost structure. The stable outlook also reflects Moody's expectations of continued adherence to conservative financial policies, so as to ensure the retention of credit metrics commensurate with a strong investment grade credit quality under a number of commodity price scenarios. Finally, the stable outlook incorporates no materially adverse impacts arising from potential changes to fiscal regimes of key countries of operations, namely Norway and the UK. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive rating pressure on Harbour's Baa2 ratings could arise from: Substantial growth in production and proven reserves Significant reduction in debt, and Moody's-adjusted retained cash flow to gross debt (RCF/Debt) sustainedly exceeding 70% at mid-cycle pricing conditions Conversely, negative rating pressure could arise if Harbour: Fails to replenish produced volumes, so that its average daily production drops sustainably below 400kboepd Fails to maintain good level of capital efficiency or Deviates from its conservative financial policies, including substantial shareholder remuneration or large debt-funded acquisition so that RCF/debt falls below 40% or FCF generation turns sustainedly negative PRINCIPAL METHODOLOGY The principal methodology used in this rating was Independent Exploration and Production published in December 2022. COMPANY PROFILE UK-based Harbour is one of Europe's largest independent oil and gas exploration and production companies. The company holds interests in several offshore and onshore hydrocarbon assets mainly across Norway, the United Kingdom, Argentina, Mexico and Germany. Altogether, these assets produced around 479 thousand barrels of oil equivalent per day in 2024 on a pro forma basis. ********* 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 * * *