250506.mbx

250506.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, May 6, 2025, Vol. 26, No. 90 Headlines G E R M A N Y MOTEL ONE: Moody's Affirms 'B3' CFR, Outlook Remains Positive I R E L A N D ADAGIO V-S: S&P Assigns B- (sf) Rating to Class F Notes BBAM EUROPEAN VI: S&P Assigns B- (sf) Rating to Class F Notes BLACKROCK EUROPEAN V: Fitch Affirms 'B+sf' Rating on Class F Notes HARVEST CLO IX: Fitch Lowers Rating on Class F-R Notes to 'B-sf' HARVEST CLO XII: Fitch Affirms 'B+sf' Rating on Class F-R Notes NGC EURO 5: S&P Assigns B- (sf) Rating to Class F Notes I T A L Y ENEL SPA: Egan-Jones Retains BB Senior Unsecured Ratings K A Z A K H S T A N KAZAKHSTAN ELECTRICITY: S&P Affirms 'BB+' LT ICR, Outlook Stable L U X E M B O U R G 4FINANCE HOLDING: Fitch Affirms 'B' Long-Term IDR, Outlook Stable 4FINANCE HOLDING: Moody's Affirms B2 CFR, Alters Outlook to Stable KLEOPATRA HOLDINGS: S&P Upgrades ICR to 'CCC-', Outlook Negative MATADOR BIDCO: Fitch Affirms 'BB' Long-Term IDR, Outlook Stable S W E D E N INTRUM AB: S&P Lowers ICR to 'D' on Criteria Misapplication U N I T E D K I N G D O M PLAYTECH PLC: S&P Cuts ICR to 'BB-' on Completed Snaitech Disposal RRE 12 LOAN: Fitch Affirms 'BB-sf' Rating on Class D-R Notes - - - - - ============= G E R M A N Y ============= MOTEL ONE: Moody's Affirms 'B3' CFR, Outlook Remains Positive ------------------------------------------------------------- Moody's Ratings has affirmed the B3 corporate family rating of Motel One GmbH ("Motel One") and its B3-PD probability of default rating. The B3 rating of the senior secured notes (the "notes") and B3 ratings of the senior secured bank facilities were also affirmed. At the same time Moody's assigned a B3 rating to the new EUR907 million senior secured term loan B (TLB) maturing 2032 and the EUR200 million senior secured revolving credit facility (RCF) due 2031. The outlook remains positive. RATINGS RATIONALE The rating affirmation with a positive outlook reflects ongoing solid operating performance and financial metrics with a potential to move into Moody's guidance for a B2 rating over the next quarters. The company will moderately increase debt and pay a special dividend of EUR250 million to support the funding of the acquisition of a 80% shareholding in Motel One by PAI. While Moody's formally do not consider the PIK instrument and an equity backed, deferred purchase price liability outside the restricted group in Moody's debt metrics, there is a higher potential for extra dividends in the future that may hinder deleveraging. The company has deleveraging potential which requires continued strong EBITDA and cash flow growth despite rising economic uncertainties in Motel One's core markets. Motel One benefits from a good market position with a growing markets share as a hotel operator with a strong brand perception, in particular in the German, Austrian and Swiss (DACH) markets. The company has a track record of strong growth in franchise size and room rates while growing RevPar, which Moody's expects to continue in the next years. The company is highly profitable compared to other operators. Offsetting these strength are the company's moderate free cash flow generation and high leverage. Moody's expects Moody's-adjusted debt/EBITDA to reduce to 7x in 2026 from an estimated 7.4x as of FY 2024. The upsized TLB will increase gross leverage by less than 0.1x given Moody's adjusted debt contains a sizeable adjustment for operating lease liabilities. Moody's-adjusted free cash flow generation will be negative in 2025 considering the special dividend and remain below 3% of Moody's-adjusted debt in 2025 and 2026 in the absence of further dividends. Moody's-adjusted EBITDA margin will remain in the 35-40% range. Under Moody's ESG framework, governance considerations were key factors to the rating action, including leverage and ownership considerations. RATIONALE FOR THE OUTLOOK The positive outlook reflects deleveraging potential through market outperformance in a highly uncertain economic environment. An upgrade would require the company to beat Moody's expectations on EBITDA and free cash flow generation through sustained mid single digit RevPar growth and timely ramp-up of new hotels in the next 12 to 18 months. LIQUIDITY Motel One's liquidity position is appropriate. The company's cash position will reduce to EUR40 million as of FY 2024 pro-forma for the transaction. Moody's expects Moody's-adjusted FFO of around EUR200 million for 2025 (including the effect of capitalised leases), which will allow the company to cover capital spending (both cash and capitalised lease depreciation) as well as seasonal working capital swings. Motel One has access to an upsized RCF of EUR200 million that Moody's do not expect to be drawn for regular business purposes. The company does not have any debt maturity until 2031, when the EUR500m notes and the RCF mature. The TLB matures 2032 but has a springing maturity in April 2031 if existing senior secured notes remain outstanding 6 months prior to April 2031. The RCF contains a springing covenant tested if net drawings are above 40% of commitments set at consolidated senior secured net leverage ratio of 8.5x. STRUCTURAL CONSIDERATIONS The entire financing package of the up to EUR907 million TLB, the EUR500 million notes and the EUR200 million RCF rank pari passu in Moody's loss given default analysis. Moody's have assumed a 50% recovery rate. The security package consists of a guarantor coverage expected to reach above 80% of EBITDA, and holding company collateral like share pledges, intercompany receivables and other customary security. Given there are no tangible other assets Moody's would consider the security a weak security package. Moody's did not include the outstanding EUR350 million PIK loan to Moonrise Bidco into Moody's calculations of financial debt or into Moody's LGD assessments. COVENANTS Moody's have reviewed the marketing draft terms for the new credit facilities. The draft covenants are aggressive with flexibility that could adversely affect creditors. Moody's have reviewed proposed terms, and the final terms may be materially different. Moody's notes that current bond terms are more restrictive. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's could upgrade the company if -- Moody's-adjusted debt/EBITDA moves well below 7x in 2025 and further deleveraging thereafter. -- RCF/net debt increases above 5% and Moody's-adjusted free cash flow well above 1% alongside a robust liquidity profile -- Moody's-adjusted EBITA margin remains in the high 30/low 40% range Moody's could downgrade the company if -- Failure to deliver ongoing operational success with solid RevPar growth -- Moody's-adjusted debt/EBITDA remains above 7.5x -- Negative free cash flow or liquidity concerns arising -- Aggressive dividend payouts The principal methodology used in these ratings was Business and Consumer Services published in November 2021. PROFILE Motel One operates 99 hotels with 27,928 rooms as of December 2024. The company focuses on in inner-city locations in large to mid-sized cities across Europe. The majority of its rooms, revenues and EBITDA stem from Germany, Austria and Switzerland (DACH). In the recent years, in line with an ongoing strong growth in Germany, Motel One expanded to gateway cities in Europe and more recently in the US. The hotel chain is privately held, now controlled by PAI with 20% retained by previous investors including founder Dieter Müller. ============= I R E L A N D ============= ADAGIO V-S: S&P Assigns B- (sf) Rating to Class F Notes ------------------------------------------------------- S&P Global Ratings assigned its credit ratings to Adagio V-S EUR CLO DAC's class X, A-1, A-2, B-1, B-2, C, D, E, and F notes. At closing, the issuer also issued unrated class S-1 and S-2 subordinated notes. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks S&P Global Ratings' weighted-average rating factor 2,822.25 Default rate dispersion 648.14 Weighted-average life (years) 4.50 Obligor diversity measure 132.76 Industry diversity measure 19.72 Regional diversity measure 1.17 Transaction key metrics Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 4.69 'AAA' weighted-average recovery (%) 35.74 Portfolio weighted-average spread (%) 3.88 Portfolio weighted-average coupon (%) 3.25 Rating rationale Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event (FSE) occurs. Following the FSE, the notes will switch to semiannual payments. The portfolio's reinvestment period will end approximately 4.50 years after closing. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, S&P has conducted our credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we used the EUR325 million target par amount, the portfolio's covenanted weighted-average spread (3.68%), and covenanted weighted-average coupon (3.20%). We have considered the actual weighted-average recovery rate at all rating levels, apart from at 'AAA' where a 1% haircut was applied. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Under our structured finance sovereign risk criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned ratings. "Until the end of the reinvestment period on Nov. 2, 2029, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and it compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, as long as the initial ratings are maintained. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "The transaction's legal structure and framework is bankruptcy remote, in line with our legal criteria. "Our credit and cash flow analysis indicate that the available credit enhancement for the class B-1 to D notes could withstand stresses commensurate with higher ratings than those we have assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our assigned ratings on these notes. The class X, A-1, A-2, and E notes can withstand stresses commensurate with the assigned ratings. "For the class F notes, our credit and cash flow analysis indicate that the available credit enhancement could withstand stresses commensurate with a lower rating. However, we have applied our 'CCC' rating criteria, resulting in a 'B- (sf)' rating on this class of notes." The ratings uplift (to 'B-') reflects several key factors, including: -- The available credit enhancement for this class of notes is in the same range as other recently issued European CLOs that S&P rates. -- The portfolio's average credit quality is similar to other recent CLOs. -- S&P's model generated break-even default rate at the 'B-' rating level of 22.20% (for a portfolio with a weighted-average life of 4.50 years), versus if it was to consider a long-term sustainable default rate of 3.1% for 4.50 years, which would result in a target default rate of 13.95%. -- The actual portfolio is generating higher spreads versus the covenanted thresholds modelled in S&P's cash flow analysis. S&P said, "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our ratings are commensurate with the available credit enhancement for the class X, A-1, A-2, B-1, B-2, C, D, E, and F notes. "In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class X to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." The transaction securitizes a portfolio of primarily senior-secured leveraged loans and bonds, and is managed by AXA Investment Managers US Inc. Environmental, social, and governance S&P said, "We regard the exposure to environmental, social, and governance (ESG) credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to certain activities. "Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, we have not made any specific adjustments in our rating analysis to account for any ESG-related risks or opportunities." Ratings Amount Credit Class Rating* (mil. EUR) Interest rate§ enhancement (%) X AAA (sf) 1.10 3mE + 0.80% N/A A-1 AAA (sf) 195.00 3mE + 1.23% 40.00 A-2 AAA (sf) 6.50 3mE + 1.45% 38.00 B-1 AA (sf) 25.80 3mE + 1.70% 27.20 B-2 AA (sf) 9.30 4.80% 27.20 C A (sf) 19.10 3mE + 2.60% 21.32 D BBB- (sf) 23.00 3mE + 3.80% 14.25 E BB- (sf) 14.60 3mE + 6.00% 9.75 F B- (sf) 10.60 3mE + 8.16% 6.49 S-1 NR 7.20 3mE + 9.85% N/A S-2 NR 11.40 N/A N/A *The ratings assigned to the class X, A-1, A-2, B-1, and B-2 notes address timely interest and ultimate principal payments. The ratings assigned to the class C, D, E, and F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to 6mE when a frequency switch event occurs. NR--Not rated. N/A--Not applicable. 3mE--Three-month Euro Interbank Offered Rate. 6mE--Six-month Euro Interbank Offered Rate. BBAM EUROPEAN VI: S&P Assigns B- (sf) Rating to Class F Notes ------------------------------------------------------------- S&P Global Ratings assigned its credit ratings to BBAM European CLO VI DAC's class A, B, C, D, E, and F notes. At closing, the issuer also issued unrated subordinated notes. The ratings assigned to BBAM European CLO VI DAC's notes reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks S&P weighted-average rating factor 2,734.00 Default rate dispersion 538.82 Weighted-average life (years) 4.84 Obligor diversity measure 147.53 Industry diversity measure 21.31 Regional diversity measure 1.11 Transaction key metrics Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 0.80 Actual 'AAA' weighted-average recovery (%) 37.14 Actual weighted-average spread (net of floors; %) 3.73 Actual weighted-average coupon (%) 5.35 Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will switch to semiannual payments. Rationale The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, S&P has conducted our credit and cash flow analysis by applying its criteria for corporate cash flow CDOs. S&P said, "In our cash flow analysis, we used the EUR400 million target par amount, the covenanted weighted-average spread (3.65%), the covenanted weighted-average coupon (4.50%), the covenanted weighted-average recovery rates calculated in line with our CLO criteria for the class A notes, and the actual weighted-average recovery rates for all other classes of notes. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Until the end of the reinvestment period on Nov. 26, 2029, the collateral manager may substitute assets in the portfolio as long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain--as established by the initial cash flows for each rating--and compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, if the initial ratings are maintained. "Under our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk sufficiently mitigated at the assigned ratings. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our counterparty criteria. The transaction's legal structure and framework is bankruptcy remote, in line with our legal criteria. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, the ratings are commensurate with the available credit enhancement for the class A notes. Our credit and cash flow analysis indicates that the available credit enhancement for the class B to F notes could withstand stresses commensurate with higher ratings than those assigned. However, as the CLO will be in its reinvestment phase starting from closing--during which the transaction's credit risk profile could deteriorate--we have capped our ratings on the notes. "Given our analysis of the credit, cash flow, counterparty, operational, and legal risks, our ratings are commensurate with the available credit enhancement for all the rated classes of debt. "In addition to our standard analysis, to indicate how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we also included the sensitivity of the ratings on the class A to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance S&P said, "We regard the exposure to environmental, social, and governance (ESG) credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit or limit assets from being related to certain industries. Since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." BBAM European CLO VI is a European cash flow CLO securitization of a revolving pool, comprising mainly euro-denominated leveraged loans and bonds. It is managed by RBC Global Asset Management (UK) Ltd. Ratings list Amount Credit Class Rating* (mil. EUR) Interest rate§ enhancement (%) A AAA (sf) 248.00 3M EURIBOR plus 1.20% 38.00 B AA (sf) 46.00 3M EURIBOR plus 1.70% 26.50 C A (sf) 23.00 3M EURIBOR plus 2.20% 20.75 D BBB- (sf) 27.00 3M EURIBOR plus 3.05% 14.00 E BB- (sf) 18.00 3M EURIBOR plus 5.00% 9.50 F B- (sf) 12.00 3M EURIBOR plus 8.20% 6.50 Sub. NR 30.79 N/A N/A *The ratings assigned to the class A and B notes address timely interest and ultimate principal payments. The ratings assigned to the class C, D, E, and F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. 3M--three month. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. BLACKROCK EUROPEAN V: Fitch Affirms 'B+sf' Rating on Class F Notes ------------------------------------------------------------------ Fitch Ratings has upgraded Blackrock European CLO V DAC's class C, D and E notes and affirmed the rest. Entity/Debt Rating Prior ----------- ------ ----- BlackRock European CLO V DAC A-1 XS1785483790 LT AAAsf Affirmed AAAsf A-2 XS1793326718 LT AAAsf Affirmed AAAsf B XS1785484335 LT AAAsf Affirmed AAAsf C XS1785485654 LT AAAsf Upgrade AA+sf D XS1785486207 LT AAsf Upgrade Asf E XS1785486546 LT BBB-sf Upgrade BB+sf F XS1785486462 LT B+sf Affirmed B+sf Transaction Summary BlackRock European CLO V DAC is a securitisation of mainly senior secured obligations (at least 90%) with a component of corporate-rescue loans, senior unsecured, mezzanine, second-lien loans and high-yield bonds. Net proceeds from the notes have been used to fund a portfolio with a target par of EUR400 million, which is actively managed by Blackrock Investment Managers (UK) Ltd. The transaction closed in May 2018 and exited its reinvestment period in October 2022. KEY RATING DRIVERS Amortisation Increases Credit Enhancement: The transaction continues to deleverage with class A notes further amortising by EUR121.1 million since the last review in June 2024, leading to an increase in credit enhancement across the structure. This has resulted in the upgrade and affirmation of the notes. The par loss at 2.7% of the original target par is well below its rating case expectations. The comfortable break-even default rate cushion for each notes' rating supports the Stable Outlook. Transaction Outside Reinvestment Period: The transaction is currently failing several tests, which is limiting the manager's ability to reinvest. The manager has not made any purchases since October 2024, resulting in the transaction becoming static. Fitch's analysis is based on the current portfolio, for which Fitch has notched down any obligor with a Negative Outlook by one level but floored at 'CCC-' when testing for downgrades. Fitch applies a floor to the portfolio's weighted average life (WAL) at four years when testing for upgrades. Portfolio Diversification: The top 10 obligor concentration as calculated by the trustee is 21.4%, which is above the test limit of 18%, and an increase from 17.2% since the last review. However, the portfolio is well-diversified across, countries and industries. No obligor represents more than 2.9% of the portfolio balance and exposure to the three largest Fitch-defined industries is 31% as calculated by the trustee, lower than the test limit of 40%. Fixed-rate assets are reported by the trustee at 13% of the portfolio balance, above the test limit of 12.5%. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the obligors at 'B'/'B-'. The Fitch-calculated weighted average rating factor (WARF) of the current portfolio is 27.4, and for the Fitch-stressed portfolio is 28.3. High Recovery Expectations: Senior secured obligations comprise 90.7% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate (WARR) of the current portfolio is 58.7% (based on the most recent criteria). Model-Implied Rating Deviation: The class D and F notes ratings are one notch below their model-implied ratings (MIR) while the class E notes rating is two notches below the MIR. The rating deviation reflects insufficient default rate cushion at the MIR and increased macroeconomic risk due to the trade war. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Based on the current portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations Fitch does not provide ESG relevance scores for BlackRock European CLO V 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. HARVEST CLO IX: Fitch Lowers Rating on Class F-R Notes to 'B-sf' ---------------------------------------------------------------- Fitch Ratings has upgraded Harvest CLO IX DAC class C-R and D-R notes, while downgrading the class F-R notes. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO IX DAC A-RR XS2339366184 LT AAAsf Affirmed AAAsf B-1-R XS1653044039 LT AAAsf Affirmed AAAsf B-2-RR XS2339366424 LT AAAsf Affirmed AAAsf C-R XS1653044385 LT AAAsf Upgrade AAsf D-R XS1653044625 LT A+sf Upgrade A-sf E-R XS1653045192 LT BB+sf Affirmed BB+sf F-R XS1653045432 LT B-sf Downgrade B+sf Transaction Summary Harvest CLO IX DAC is a cash flow CLO comprising mostly senior secured obligations. The transaction is actively managed by Investcorp Credit Management EU Limited and exited its reinvestment period in August 2021. KEY RATING DRIVERS Amortisation Benefits Senior Notes: The transaction is continuing to deleverage with the class A-RR notes having paid down by about EUR172.5 million since the last review in May 2024. The amortisation has resulted in an increase in credit enhancement for senior notes and therefore the upgrade of the class C-R and D-R notes. Junior Notes Sensitive to Deterioration: Since the May 2024 review, the portfolio has seen further par erosion to 4.3% below par from 3.11%. The notional amount of defaults has increased to EUR5.1 million from EUR3.5 million and the exposure to assets with a Fitch-Derived Rating of 'CCC+' and below has risen to 5.1% from 2.5%, but under the limit of 7.5%. The downgrade of the class F-R notes reflects the deteriorating par position and portfolio credit quality. The Stable Outlook reflects sufficient credit enhancement to support the class F-R notes rating. Transaction Outside Reinvestment Period: The transaction exited its reinvestment period in August 2021, and the most senior notes are deleveraging. The transaction is failing another credit rating agency's 'CCC' test, thereby constraining reinvestment. It is also failing the weighted average life (WAL) test, weighted-average rating factor, weighted average recovery rate and fixed-rate limit tests. Given the manager's inability to reinvest and the short WAL, Fitch's analysis is based on a Fitch-stressed portfolio, where assets with Negative Outlook are notched down by one level, with a 'CCC-' floor when testing for downgrades. Fitch applies a floor the portfolio's WAL at four years when testing for upgrades. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the transaction's underlying obligors at 'B'/'B-'. The weighted-average rating factor, as calculated by Fitch under its latest criteria, is 26.1. High Recovery Expectations: 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 weighted average recovery rate, as calculated by Fitch, is 62.2%. Diversified Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration, as calculated by Fitch, is 23.8%, and the largest obligor represents 2.7% of the portfolio balance. Exposure to the three largest Fitch-defined industries is 21.5% as calculated by the trustee. Fixed-rate assets are reported by the trustee at 5.5% of the portfolio balance, versus a limit of 5%. Cash Flow Analysis: Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par-value and interest-coverage tests. Deviation from MIR: The class D-R notes are two notches below their model-implied ratings (MIR) and the class F-R notes are one notch below their MIR. The deviation reflects limited default-rate cushion at the MIR. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Based on the current portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority- registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations Fitch does not provide ESG relevance scores for Harvest CLO IX DAC. In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose any ESG factor that is a key rating driver in the key rating drivers section of the relevant rating action commentary. HARVEST CLO XII: Fitch Affirms 'B+sf' Rating on Class F-R Notes --------------------------------------------------------------- Fitch Ratings has taken multiple rating actions on Harvest CLO XII DAC notes, including upgrades of the class B-R, C-R and D-R notes, and the Outlook revision on the class E-R notes to Stable from Negative. Entity/Debt Rating Prior ----------- ------ ----- Harvest CLO XII DAC A-1R XS1692039206 LT AAAsf Affirmed AAAsf B-1R XS1692040980 LT AAAsf Upgrade AA+sf B-2R XS1692041525 LT AAAsf Upgrade AA+sf C-R XS1692042259 LT AAsf Upgrade A+sf D-R XS1692043067 LT A-sf Upgrade BBB+sf E-R XS1692043737 LT BB+sf Affirmed BB+sf F-R XS1692044388 LT B+sf Affirmed B+sf KEY RATING DRIVERS Transaction Deleveraging: Since the last review in May 2024, around EUR75.9 million of the A-R notes have been repaid. This deleveraging has resulted in increases in credit enhancement across the class A-R to E-R notes. As of the latest trustee report dated 31 March 2025, there was EUR12.1 million cash in the principal account, which Fitch expects will be used to further pay down the class A-R notes. The upgrade of the class B-R, C-R and D-R notes reflects the current and expected increases in the credit enhancement of the notes. Portfolio Deterioration: As of the latest trustee report dated 31 March 2025, the transaction was around 3.5% below par, with around EUR6.3 million defaulted assets in the portfolio. The transaction is failing its obligor and industry concentration tests. The Negative Outlook on the class F-R notes reflects a small default-rate cushion against credit quality deterioration, in view of the refinancing risk in the near-and-medium term, with approximately 11.1% of the portfolio maturing in the next 24 months. In Fitch's opinion, this may lead to further deterioration of the portfolio with an increase in defaults. Further deterioration in the credit quality of the portfolio may therefore lead to a downgrade of the class F-R notes to 'Bsf'. Sufficient Cushion for Senior Notes: The senior class notes have sufficient cushion to support their current ratings and should be capable of withstanding further defaults in the portfolio. This supports the Stable Outlooks on the class A-1R to E-R notes. 'B'/'B-' Portfolio: Fitch assesses the average credit quality of the obligors at 'B'/'B-'. The Fitch-calculated weighted average rating factor (WARF) of the current portfolio was 24.6 and for the Fitch-stressed portfolio was 25.5 as of 31 March 2025. The transaction is marginally failing its WARF test. High Recovery Expectations: Senior secured obligations comprise 98.9% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The weighted average recovery rate (WARR) of the current portfolio as reported by the trustee was 58.1%. The transaction is marginally failing its WARR test. Increasingly Concentrated Portfolio: The transaction has a top-10 obligor concentration limit of 20%. Concentration as calculated by Fitch is 23.5%, which is above the limit, and the largest issuer represents 3.2% of the portfolio balance. Static Transaction: Following the CLO's exit from its reinvestment period, the manager is unlikely to reinvest unscheduled principal proceeds and sale proceeds from credit-risk and credit-improved obligations. This is due to the breach of the Fitch WARF test, the Fitch WARR test and its obligor and industry concentration tests, which must be maintained or improved to reinvest. The manager has not been actively reinvesting since October 2024 and since the manager is unlikely to reinvest, Fitch has assessed the transaction based on the current portfolio, which it stressed by notching down by one level all assets with a Negative Outlook on Fitch-Derived Ratings. The transaction WAL has also been extended to four years, in line with its criteria, to account for refinancing risk Deviation from MIR: The class C-R notes and D-R notes are, respectively, a notch and two notches below their model-implied ratings (MIR), reflecting limited default-rate cushion at the MIR. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Downgrades may occur if the build-up of the notes' credit enhancement following amortisation does not compensate for a larger loss expectation than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may occur if the portfolio quality remains stable and the notes continue amortising, leading to higher credit enhancement across the structure. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations Fitch does not provide ESG relevance scores for Harvest CLO XII 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. NGC EURO 5: S&P Assigns B- (sf) Rating to Class F Notes ------------------------------------------------------- S&P Global Ratings assigned its credit ratings to NGC Euro CLO 5 DAC's class A to F European cash flow CLO notes. The issuer has unrated subordinated notes outstanding from the existing transaction. Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs. Following this, the notes will permanently switch to semiannual payments. The portfolio's reinvestment period will end 4.5 years after closing, while the non-call period will end 1.7 years after closing. The ratings reflect S&P's assessment of: -- The diversified collateral pool, which primarily comprises broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is bankruptcy remote. -- The transaction's counterparty risks, which are in line with S&P's counterparty rating framework. Portfolio benchmarks S&P Global Ratings' weighted-average rating factor 2,800.81 Default rate dispersion 455.22 Weighted-average life(years) 4.63 Weighted-average life (years) extended to match reinvestment period 4.63 Obligor diversity measure 164.20 Industry diversity measure 25.89 Regional diversity measure 1.23 Transaction key metrics Portfolio weighted-average rating derived from S&P's CDO evaluator B 'CCC' category rated assets (%) 0.50 Actual 'AAA' weighted-average recovery (%) 36.85 Actual weighted-average spread (net of floors; %) 3.82 Actual weighted-average coupon (%) 4.95 S&P said, "Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average rating of 'B'. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow CDOs. "In our cash flow analysis, we used the EUR400 million target par amount, the covenanted weighted-average spread (3.75%), the covenanted weighted-average coupon (4.50%), and the actual portfolio weighted-average recovery rates for all rated notes. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. "Until the end of the reinvestment period on Nov. 15, 2029, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating and compares that with the current portfolio's default potential plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager may through trading deteriorate the transaction's current risk profile, if the initial ratings are maintained. "Under our structured finance sovereign risk criteria, the transaction's exposure to country risk is sufficiently mitigated at the assigned ratings. "The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria. "The transaction's legal structure and framework is bankruptcy remote. The issuer is a special-purpose entity that meets our criteria for bankruptcy remoteness. "Our credit and cash flow analysis show that the class B, C, D, and E notes benefit from break-even default rate and scenario default rate cushions that we would typically consider to be in line with higher ratings than those assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our ratings on the notes. The class A and F notes can withstand stresses commensurate with the assigned rating. "Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for the class A to F notes. "In addition to our standard analysis, to indicate how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A to E notes based on four hypothetical scenarios. "As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category--and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met--we have not included the above scenario analysis results for the class F notes." Environmental, social, and governance S&P said, "We regard the exposure to environmental, social, and governance (ESG) credit factors in the transaction as being broadly in line with our benchmark for the sector. Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit or limit assets from being related to certain industries. Since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities." Ratings Amount Credit Class Rating* (mil. EUR) enhancement (%) Interest rate§ A AAA (sf) 248.00 38.00 Three/six-month EURIBOR plus 1.22% B AA (sf) 45.00 26.75 Three/six-month EURIBOR plus 2.00% C A (sf) 23.00 21.00 Three/six-month EURIBOR plus 2.40% D BBB- (sf) 29.00 13.75 Three/six-month EURIBOR plus 3.55% E BB- (sf) 17.00 9.50 Three/six-month EURIBOR plus 5.75% F B- (sf) 12.00 6.50 Three/six-month EURIBOR plus 8.32% Sub. Notes NR 32.00 N/A N/A *The ratings assigned to the class A and B notes address timely interest and ultimate principal payments. The ratings assigned to the class C, D, E, and F notes address ultimate interest and principal payments. §The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. ========= I T A L Y ========= ENEL SPA: Egan-Jones Retains BB Senior Unsecured Ratings -------------------------------------------------------- Egan-Jones Ratings Company on April 29, 2025, maintained its 'BB' foreign currency and local currency senior unsecured ratings on debt issued by Enel SpA. EJR also withdrew the rating on commercial paper issued by the Company. Headquartered in Rome, Italy, Enel SpA operates as a multinational power company and an integrated player in the global power, gas, and renewables markets. =================== K A Z A K H S T A N =================== KAZAKHSTAN ELECTRICITY: S&P Affirms 'BB+' LT ICR, Outlook Stable ---------------------------------------------------------------- S&P Global Ratings affirmed its long-term issuer credit rating on Kazakhstan Electricity Grid Operating Co. (JSC; KEGOC) at 'BB+', accounting for extraordinary government support, which translates into one notch of uplift from the SACP to derive the issuer credit rating. S&P said, "The stable outlook reflects our view that KEGOC will keep FFO to debt close to or above 30% even at the peak of the investment cycle, supported by improved EBITDA generation on the back of the regulatory changes, and KEGOC will benefit from sustained government support and no material distributions. "We consider the new regulatory framework to be more supportive, but we are mindful of the limited track record of capex pass-through and the potential of government interference. We factor in that, according to the updated tariff methodology, KEGOC is protected from volume risk and can pass through rises in power costs to its customers. We understand that the company can apply for the tariff revision annually and the respective costs will be included in the next year's tariffs. In our view, this adds visibility to cash flow generation and supports profitability. "We view positively that KEGOC's tariffs will increase twice this year, starting from April 2025 and from October 2025, to cover grid losses, increased salary costs, and near-term investment needs. As a result, we have revised upward our assessment of KEGOC's competitive position and its business risk profile to fair from weak. That said, we are mindful that the tariff methodology has not yet been tested against the pressure of KEGOC's historically high capex planned for 2026-2027. We also factor in that the Kazakh power sector regulator, the Committee for Regulation of Natural Monopolies, is not independent from the government. We factor in these risks in our negative comparable rating modifier. "The affirmation reflects our view that the recently changed regulatory framework would support KEGOC's EBITDA generation, largely balancing the impact of debt accumulation to fund its significant investment program peaking in 2026-2027 at about KZT200 billion annually (equivalent to US$0.4 billion). We updated our base case following the tariff increase for KEGOC stipulated under recently enacted more favorable new regulation. We now assume a gradual increase of EBITDA to about KZT150 billion in 2025 from KZT130 billion in 2024 (a rise of 18% year-on-year), followed by KZT165 billion in 2026, and KZT175 billion in 2027. This translates into an S&P Global Ratings-adjusted EBITDA margin of around 40% for 2025-2027 (versus 40.6% in 2024). "We forecast that the operating cash flow during this period should cover the significant share of KEGOC's capital investment program, involving the construction of power grids in Western and Southern Kazakhstan, which should improve the interflows of electricity between different geographic zones. We expect KEGOC's capex to increase to KZT85 billion-KZT90 billion in 2025 from approximately KZT46 billion in 2024 (on a reported basis), and to close to KZT200 billion annually in 2026-2027. We understand that KEGOC will finance about 30% of capex with own funds and 70% with new debt. "Our base case assumes relatively flat debt in 2025 at close to KZT160 billion-KZT165 billion (compared to KZT162 billion at year-end 2024) increasing to approximately KZT290 billion in 2026 and KZT400 billion in 2027. As a result, we expect credit metrics to tighten, with FFO to debt of close to 30% in 2027 (compared with 49.7% in 2024) and S&P Global Ratings-adjusted debt to EBITDA increasing to close to 2.0x (versus 1.2x in 2024). That said, even at the peak of the investment program, KEGOC's metrics are expected to remain at a level commensurate with the current rating. "We continue to assess KEGOC's liquidity as adequate, supported by availability of cash and undrawn facility to finance capex, and lack of near-term maturities. We factor in that at the end of financial year 2024 (FY2024; ending Dec. 31, 2024), KEGOC had about KZT98 billion of cash and near-term investments (primarily the liquid sovereign bonds and the bonds of state-controlled Sovereign Wealth Fund Samruk-Kazyna JSC, KEGOC's shareholder). This compares with KZT162 billion of debt, which primarily consisted of local currency denominated bonds maturing between 2031 and 2035. We understand that KEGOC has prudent treasury management practices, including the capped exposure (33%) on a single bank and diversification between cash and liquid financial assets. We factor in that in December 2024, the company signed a KZT141 billion long-term facility available for capex financing, and the drawdown on this facility is planned in 2026. We note that most of debt bears a floating rate, but the interest rate is mitigated by the pass-through of interest expenses on loans raised to finance investment projects. "We continue to assess government support as very high, which leads us to apply one notch of uplift to the SACP to derive our issuer credit rating on KEGOC. We understand that KEGOC's investment projects are included in the list of strategic government initiatives. We factor in that KEGOC can receive state guarantees for loans supporting the implementation of its capex program. We understand that the shareholding of the state in KEGOC (via Samruk-Kazyna) cannot decrease below 85% as KEGOC owns and operates the strategically important infrastructure. We also view positively the moderate and stable dividend distribution of about KZT45 billion annually, and our base case does not assume any increase of dividends. "The stable outlook reflects our view that KEGOC will keep FFO to debt close to or above 30% even at the peak of the investment cycle, underpinned by improved EBITDA generation on the back of the regulatory changes. We further expect sustained government support to the company and no material distributions above our base-case level." S&P could raise the rating if: -- KEGOC executes its capex program smoothly; -- Recent changes in the regulatory framework support investments through tariff revisions are sustained in the absence of significant dividend distributions during periods of heavy capex and negative interventions in tariff regulation, and -- If S&P was to project FFO to debt comfortably above 40% through the investment cycle alongside adequate liquidity. An upgrade of Kazakhstan could also lead us to upgrade KEGOC, if coupled with KEGOC's sustained creditworthiness, although S&P does not expect this in our base case. S&P said, "A downgrade, taking into account our view of government support, would require a very significant deterioration in KEGOC'S metrics, keeping FFO to debt below 20% without short-term prospects for recovery, or a material deterioration in liquidity, which we don't expect given the company's liquidity buffers." Although not our base case, these changes could be triggered by large shareholder distributions during the investment cycle and tariff revisions that do not fully compensate for higher energy costs and the capex program. =================== L U X E M B O U R G =================== 4FINANCE HOLDING: Fitch Affirms 'B' Long-Term IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed 4finance Holding S.A.'s Long- and Short-Term Issuer Default Ratings (IDRs) at 'B'. The Outlook on the Long-Term IDR is Stable. Fitch has also affirmed the long-term debt rating of 4finance S.A.'s senior unsecured bonds, which are unconditionally and irrevocably guaranteed by 4finance Holding S.A. and its major operating subsidiaries (excluding TBI Bank EAD), at 'B' with a Recovery Rating of 'RR4'. Key Rating Drivers 4finance Holding's ratings are driven by its standalone credit profile (SCP) and reflect inherently high regulatory and credit risks of its monoline business model in a higher-risk subsector of consumer lending. It also reflects an increasing exposure to weaker operating environments that heightens foreign-currency risk. Rating strengths are its long record of stable operations in sub- and near-prime unsecured consumer lending, its satisfactory profitability, granular and short-dated loan portfolio, tested access to bond markets and manageable refinancing risk. Fitch treats 4finance Holding's 100%-owned bank subsidiary (TBI Bank) as an investment asset due to limited integration and synergies. Subprime Online Consumer Lender: Luxembourg-domiciled 4finance Holding is the holding company of a Latvia-headquartered online lender operating in the high-yield consumer lending subsector in nine countries, mainly Spain and other European countries, but increasingly in lower-rated non-European markets, such as the Philippines and Mexico. Its business model is monoline and inherently exposed to regulatory risks, according to Fitch. Good Track Record: 4finance Holding has demonstrated adequate financial performance through economic cycles and in different countries by developing well-established underwriting practices. High margins, sufficient scale, small ticket loans, short tenors and effective use of extensive client data have allowed the company to build a profitable online lending business ahead of some peers and roll out its model in additional markets. Restricted Capital: 4finance Holding has sufficient scale to maintain a profitable online lending business, but most of its equity is represented by the net asset value (EUR282 million at end-2024) of its largest subsidiary, TBI Bank, which is not fungible and might not be immediately available for loss-absorption in a timely manner. This constrains its business profile score at 'b'. Further, the modest size of the company's (net loan portfolio of EUR139 million at end-2024) exposes it to competition from larger financial institutions. Announced Sale of TBI Bank: The sale of TBI Bank, announced on 18 April 2025, and the corresponding increased availability of capital would be credit positive for its assessment, but execution risks and potential use of proceeds in higher-risk jurisdictions could offset this. Sanctions imposed in Poland in December 2024 restricting 4finance Holding's re-entry into that market have had no impact on operations so far. High Credit Risk: 4finance Holding's business model results in large credit losses with an impaired (Stage 3)/gross loans ratio of 12% at end-2024 (end-2023: 14%). The cost of risk (loan impairment charges/average gross loans) was 55%, while impairment charges consumed 79% of pre-impairment operating profit in 2024. Positively, impaired loans were 1.7x covered by loan loss provisions. Portfolio seasoning risks are modest as about 65% of loans matured within 12 months and the average maturity of the loan portfolio was nine months at end-2024. Single-name concentration is low, with the 20 largest exposures representing 0.2% of the loan book at end-2024. Adequate Profitability: 4finance Holding's business model assumes high margins on loans, which are subsequently consumed by high impairment charges and marketing expenses. However, efficient online-based operations (over 90% of loans are issued through mobile phone apps) and a high number of repeat customers resulted in a sound cost/income ratio of 39% in 2024 (2023: 41%). However, expansion to new markets and targeting different market subsectors can lead to earnings volatility. The pre-tax income/average assets ratio was 2.7% in 2024, but it was adversely affected by the expanding share of TBI Bank's net asset value in its calculation of assets. Refinancing Plans: 4finance Holding has an adequate liquidity profile, supported by short-term assets and longer-term funding comprising two bonds that mature in 2026 and 2028. The company has tested access to bond markets, but its funding profile remains sensitive to investor confidence, with a history of bond extension rather than conventional refinancing. The company has several refinancing plans that are independent of the sale of the TBI Bank, expected to be completed in 4Q25. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A weakening of the funding profile, such as constrained funding access or marked increase in refinancing risks, including an inability to refinance the upcoming 2026 bond by end-2025 or shorter average debt maturities. - A material deterioration in profitability, e.g. pre-tax income/average assets ratio worsening to below 2%. - A sharp increase in credit risk or leverage, for instance, due to rapid lending growth in a lower-rated jurisdiction. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Successful refinancing of the 2026 bond, increased availability of restricted capital at TBI Bank and prudent use of most of the proceeds from the sale of that bank towards strengthening its franchise. - Sustained franchise growth, coupled with maintenance of key profitability and asset quality metrics at current levels. DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS The senior unsecured debt rating is equalised with the Long-Term IDR, reflecting Fitch's expectation of average recovery prospects given its largely unsecured funding profile. DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES The senior unsecured debt rating is primarily sensitive to changes to the Long-Term IDR. Changes to its assessment of recovery prospects for the senior unsecured debt could result in the senior unsecured debt rating being notched down from the Long-Term IDR. ADJUSTMENTS The 'bb' sector risk operating environment score is below the 'bbb' implied score due to the following adjustment reason(s): regulatory and legal framework (negative), regional, industry or subsector focus (negative). The 'b' business profile score is below the 'bb' implied score due to the following adjustment reason: business model (negative). The 'b+' earnings and profitability score is below the 'bb' implied score due to the following adjustment reason: portfolio risk (negative). The 'b+' capitalisation and leverage score is below the 'bb' implied score due to the following adjustment reasons: risk profile and business model (negative), capital flexibility and ordinary support (negative). The 'b' funding, liquidity and coverage score is below the 'bbb' implied score due to the following adjustment reasons: business model/funding market convention (negative) and funding flexibility (negative). Summary of Financial Adjustments Fitch treats TBI Bank as an investment asset due to limited integration and synergies with 4finance Holding. ESG Considerations 4finance Holding has an ESG Relevance Score of '4' for Exposure to Social Impacts due to regulatory risks to the business model development (including the potential tightening of lending rate caps), which have a negative impact on the credit profile, and are relevant to the ratings in conjunction with other factors. 4finance Holding has an ESG Relevance Score of '4' for Customer Welfare - Fair Messaging, Privacy and Data Security due to the risks in the context of fair lending practices and pricing transparency, which have a negative impact on the credit profile, and are relevant to the ratings in conjunction with other factors. 4finance Holding has an ESG Relevance Score of '4' for Group Structure as fungibility of capital is, in its view, restricted between its regulated bank and the rest of the group, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. 4finance Holding has an ESG Relevance Score of '4' for Governance Structure due to the developing nature of its corporate governance structure with limited independent oversight including the absence of a supervisory board, 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 ----------- ------ -------- ----- 4finance Holding S.A. LT IDR B Affirmed B ST IDR B Affirmed B 4Finance S.A. senior unsecured LT B Affirmed RR4 B 4FINANCE HOLDING: Moody's Affirms B2 CFR, Alters Outlook to Stable ------------------------------------------------------------------ Moody's Ratings has changed the outlook on 4Finance, S.A. and 4Finance Holding S.A. to stable from negative. At the same time, Moody's have affirmed 4Finance, S.A.'s long-term backed senior unsecured debt ratings at B2 and 4Finance Holding S.A. (4Finance)'s long-term corporate family rating at B2. The rating action follows 4Finance's announcement that it has entered a definitive agreement for the sale of its fully owned subsidiary TBI Bank EAD (TBI Bank). The transaction is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2025. RATINGS RATIONALE -- RATIONALE FOR CHANGING THE OUTLOOK TO STABLE The outlook change to stable from negative reflects Moody's views that the announced sale, if approved under current terms, will provide 4Finance with sufficient financial resources to allow the repayment of 4Finance, S.A.'s outstanding Euro bonds maturing in October 2026 and May 2028. 4Finance group grew very rapidly since 2014 partly through the acquisition of TBI Financial Services B.V. and its subsidiary TBI Bank in 2016. Since its acquisition, the weight of TBI Bank within 4Finance group increased very significantly. At end-December 2024, TBI Bank accounted for 84% of the group's total assets, up from 33% by year-end 2016. The total value of the sale exceeds TBI Bank's 2024 year-end book value, with more than 75% of this cash consideration paid at closing and the balance covered by an earnout over the following 18 months. This strategic decision alleviates Moody's concerns on the limited cash availability at 4Finance's online business that, together with the absence of backup credit lines, signaled a lack of preparedness for stress events or unexpected circumstances and could challenge the repayment of the outstanding bonds. Notwithstanding this, Moody's notes that rating action is predicated on the assumption of a very high likelihood of the transaction going ahead before year end. If this was not the case and there is not sufficient visibility on a clear refinancing plan ahead of the maturity of the first Euro bond in October 2026, Moody's could revise Moody's ratings downwards. -- RATIONALE FOR THE AFFIRMATIONS The affirmation of 4Finance's ratings at B2 reflects the group's high credit risk as a sub-prime and near-prime consumer lender, its historically strong underlying profitability and its moderate cash-flows in relation to the inherent riskiness of its loan portfolio. The sale of TBI Bank will be positive for the group's financial flexibility in the short-term. Notwithstanding this, Moody's expects future updates to 4Finance's strategy and other investment opportunities that the company may pursue to provide more visibility about the deployment of funds from the sale and longer term implications for the group's profitability and cash flows and more broadly its financial flexibility. 4Finance's Environmental, Social and Governance (ESG) credit impact score remains at CIS-4, reflecting Moody's prevailing concerns on the group's corporate governance due to its complex, private ownership structure and challenges in its liquidity management subject to the closing of the TBI Bank sale as well as its high exposure to social risks. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS 4Finance's CFR could be upgraded if the company significantly improves its financial flexibility in a sustained manner, while maintaining strong recurring profitability, adequate capitalization and contained asset quality. An upgrade in 4Finance's CFR would likely result in a corresponding upgrade to 4Finance, S.A.'s backed senior unsecured debt ratings. 4Finance's CFR could be downgraded if there are any signs of deterioration in its financial flexibility or inability to repay its outstanding bonds. The CFR could also be downgraded if asset quality was to deteriorate substantially; the company's recurring return on assets was to decline; or the company's capitalisation would significantly deteriorate. A downgrade in 4Finance's CFR would likely result in a corresponding downgrade to 4Finance, S.A.'s backed senior unsecured debt ratings. 4Finance, S.A.'s debt ratings could also be downgraded because of adverse changes to their debt capital structure, which would lower the recovery rate for senior unsecured debt classes. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Finance Companies published in July 2024. KLEOPATRA HOLDINGS: S&P Upgrades ICR to 'CCC-', Outlook Negative ---------------------------------------------------------------- S&P Global Ratings raised the long-term issuer credit rating on Kleopatra Holdings 2 S.C.A. (KH2) to 'CCC-' from 'SD' (selected default). The long-term issuer credit ratings on its subsidiaries Kloeckner Pentaplast of America Inc. and Kleopatra Finco S.a.r.l. and the issue rating on the senior secured facilities were affirmed at 'CCC-'. S&P discontinued the issue rating on the senior unsecured notes because they are no longer outstanding after being exchanged for new second-lien notes. S&P said, "The negative outlook reflects the risk of a conventional default on the secured debt or a debt restructuring within the next six months that we would view as tantamount to a default according to our criteria. "We raised our issuer credit rating on KH2 to 'CCC-' from 'SD' after the completed exchange of the senior unsecured notes, reflecting our expectation that the refinancing risk for the senior secured debt remains high. Although KH2 has completed the exchange of the unsecured notes for new second lien notes, it still faces significant debt maturities. The group's senior secured debt (about EUR1.7 billion) is due in 2026 and comprises $725 million and EUR600 million senior secured term loans due in "February 2026, as well as EUR400 million senior secured notes due in March 2026. We think KH2's leverage is elevated compared to its EBITDA and FOCF generation. Consequently, we think the refinancing risk for these instruments is substantial, and that a conventional default or distressed exchange is likely. "The negative outlook reflects the risk of a conventional default on the secured debt or a debt restructuring within the next six months that we would view as tantamount to a default according to our criteria. "We could lower our rating if the group fails to avert a default on the 2026 maturities or announces a transaction that we would classify as a default according to our criteria. "We could take a positive rating action if we think there is a lower likelihood of a default in the subsequent six months. This could occur if KH2 successfully refinances its upcoming debt maturities on satisfactory terms while improving its liquidity profile. This could happen if, for example, it obtains a sizable equity injection from its financial sponsor and successfully refinances its capital structure without a distressed transaction." MATADOR BIDCO: Fitch Affirms 'BB' Long-Term IDR, Outlook Stable --------------------------------------------------------------- Fitch Ratings has affirmed Compania Espanola de Petroleos, S.A.'s (Moeve) Long-Term Issuer Default Rating (IDR) at 'BBB-' and Matador Bidco S.a.r.l's Long-Term IDR at 'BB'. The Outlooks for both companies are Stable. Moeve's rating is supported by a diversified business profile and a strong market position in Iberia. The rating is constrained by the company's smaller size and less diversified upstream and downstream divisions than some peers, considerable exposure to the downstream sector in Europe and volatile refining margins. Matador's 'BB' rating reflects good credit quality supported by dividends from an investment-grade credit (38.41% stake in Moeve), but is constrained by its reliance on a single investment. Key Rating Drivers Leverage Decreases: A recovery in Moeve's EBITDA and lower-than-anticipated dividend payments reduced EBITDA net leverage to 1.7x in 2024, from 3.2x in 2023. Fitch expects this ratio will fall below its negative sensitivity, of 1.5x, from 2026. Fitch forecastd positive post-dividend free cash flow (FCF) for 2025-2028, along with partial debt repayments. Declining Refining Margins: Moeve experienced a 30% contraction in refining margins to USD7/barrel (bbl) in 2024, compared with 2023, with margins bottoming out at USD4.6/bbl in 4Q24. The sharp decline in 2H24 was driven by economic slowdown, increased imports and the higher adoption of electric vehicles, while the supply of refining products remained robust. Fitch anticipates continued pressure on margins in 2025 on subdued demand, alongside planned refinery closures in Europe that may not fully counterbalance the effect of new production from Nigeria's Dangote refinery. Fitch assumes Moeve will undertake efficiency programmes and hedging to mitigate weak refining margins. Expansion of Retail Operations: The acquisition of Ballenoil in 2024 augmented Moeve's network, with over 250 low-cost service stations at the time of the transaction, expanding its network to over 2,000 units in Iberia This acquisition enhances market penetration and provides a foundation for further expansion in the commercial subsector, which has generated stable revenue. Fitch expects a further increase in service stations, along with investments focused on enhancing its electric vehicle charging infrastructure and a broadening of supplemental services. Downsized Upstream, Stable Chemicals: Moeve's upstream divestments continued in 2024, resulting in a reduction of its working-interest production to 34.4 thousand (kboed) in 2024 from 42.1kboed in 2023. Fitch does not foresee further disposals. The chemicals subsector maintained stable EBITDA in 2024, as subdued demand and low margins were offset by a 13% rise in volumes. Fitch does not anticipate a major recovery, given an oversupplied phenol market, while greater earnings stability is expected for linear alkylbenzene, a chemical compound linked to the detergent and hygiene markets. Reduced Dividends and Taxation: Windfall taxes of EUR243 million and EUR323 million paid by Moeve in 2024 and 2023, respectively, are expected to cease from 2025. Moeve has reduced shareholder distributions to EUR185 million, from EUR869 million, over the same period. Fitch expects the reduced dividend level will be maintained as the company advances on its investment programme, unless market conditions improve far more than forecast. Continued High Capex: Fitch projects annual capex will average about EUR0.9 billion in 2025-2028, as Moeve progresses with partner Bio-Oils in building a second-generation biofuels facility with a production capacity of 500,000 tons. It also plans to gradually invest in new infrastructure at the port of Huelva and develop its green hydrogen initiatives with a target capacity by 2030 of two gigawatts of electrolysis, supporting the production of up to 300,000 tons of green hydrogen a year. In 2024, Moeve secured a EUR304 million state subsidy for the Onuba project, which has a 400 megawatts of electrolysis capacity as the inaugural phase of its green hydrogen venture. Financial Resilience: Moeve has curtailed dividends and maintains a flexible capex strategy to counteract potential volatility in refining margins or broader macroeconomic conditions. The company has publicly committed to preserving its investment-grade rating, by ensuring a resilient financial profile amid market fluctuations. Focus on Low-Emission Business: Moeve's strategic focus encompasses biofuel, green hydrogen, sustainable aviation fuels and the expansion of its retail network. Major low-emission projects constituted 43% of capex in 2024, with investments in green technologies increasing annually. While EBITDA generation from new projects is expected to be modest over the short-to-medium term, more pronounced expansion is anticipated from 2027. Fitch views this strategy positively, in light of the overarching trend of energy transition, although the increase in cash flow from sustainable activities is subject to execution risk. Matador's 'BB' Rating: The rating of Matador, the Carlyle Group's vehicle holding a 38.41% stake in Moeve, is supported by the solid investment-grade profile of the asset, favourable access to capital, and robust financial structure and flexibility under Fitch's Corporate Rating Criteria (Rating Investment Holding Companies section). However, the rating is constrained by reduced interest coverage based on its assumptions of dividends from Moeve and its single-asset exposure, heightening vulnerability to sector-specific risks. Peer Analysis MOL Hungarian Oil and Gas Company Plc (BBB-/Stable) is Moeve's closest European peer, with a comparable profile in refining capacity and the level of vertical integration. After the divestment of UAE upstream assets, Moeve has a shorter reserve life and lower upstream production, about 34.4kboed, compared with MOL's 93.8kboed. However, Moeve has a slightly higher refining capacity of 489kbbl/d versus MOL's 380kbbl/d. Moeve has a greater reliance on the refining sector, which has been traditionally more cyclical. HF Sinclair Corporation's (HFC; BBB-/Stable) EBITDA is primarily derived from downstream operations, which consistently account for about 80%, with the rest from the chemical sector. HFC's credit ratings are supported by its efficient refining operations, large scale and diversification. It has also enhanced its renewable identification number profile, and oversees seven refineries with a collective capacity of 678kbbl/d, and its fuel retail network is similar in size to that of Moeve. Fitch expects HFC's debt/EBITDA to be 1.0x-2.0x between 2025 and 2027. Key Assumptions - Oil prices in line with Fitch's price deck; - Upstream production to decline by 3% a year to 2028; - Refining margin of USD6.2/bbl for 2025, USD6.8/bbl in 2026 and USD7/bbl thereafter; - Contribution from new green projects from 2027; - Capex averaging EUR0.9 billion a year between 2025 and 2028 - No M&A and assets disposals. RATING SENSITIVITIES Moeve Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - EBITDA net leverage consistently above 1.5x. - Consistently negative FCF after dividends. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Material improvement in the business profile through diversification, coupled with low leverage. Matador Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Negative rating action on Moeve. - An increase in gross and net loan-to-value to above 45% and 40%, respectively, on a sustained basis. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Positive rating action on Moeve. - A decline in gross and net loan-to-value to below 30% and 25%, respectively, on a sustained basis. Liquidity and Debt Structure At end-2024, Moeve had EUR1.9 billion of cash and cash equivalents plus undrawn committed borrowing facilities of around EUR3.9 billion, including revolving credit lines of EUR2.7 billion that mature in 2029. Available liquidity comfortably covers Fitch-adjusted short-term debt of EUR925 million. Issuer Profile CEPSA is a Spanish multinational in the oil and gas industry and is involved the exploration, production, refining, distribution and marketing of petroleum products. 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 ----------- ------ -------- ----- Compania Espanola de Petroleos, S.A. LT IDR BBB- Affirmed BBB- senior unsecured LT BBB- Affirmed BBB- CEPSA Finance, S.A.U. senior unsecured LT BBB- Affirmed BBB- Matador Bidco S.a.r.l LT IDR BB Affirmed BB senior secured LT BB Affirmed RR4 BB =========== S W E D E N =========== INTRUM AB: S&P Lowers ICR to 'D' on Criteria Misapplication ----------------------------------------------------------- On May. 2, 2025, S&P Global Ratings corrected a previous misapplication of its criteria "Principles Of Credit Ratings" by lowering its long- and short-term issuer credit ratings on Swedish distressed debt purchaser Intrum AB (publ) to 'D' from 'SD' (selective default), in accordance with paragraph 2 of this criteria. The ratings on Intrum remain subject to its emergence from its recapitalization procedures, which S&P expects to conclude by July 2025. These procedures will constitute the exchange of its existing notes with new obligations and issuance of additional equity to bondholders, in accordance with the conditions set out in its prepackaged Chapter 11 plan. S&P will re-evaluate the company's creditworthiness and its revised capital structure once it has executed its recapitalization procedures. S&P said, "The correction lowers our ratings on Intrum to 'D' from 'SD' in accordance with paragraph 2 of our "Principles of Credit Ratings Criteria". This paragraph refers to how we apply definitional concepts and attributes as described in our rating definitions, when appropriate. "We understand that Intrum filed for Chapter 11 protection on Nov. 15, 2024, and, after receiving the U.S. Bankruptcy Court approval on Dec. 31, 2024, it subsequently filed for a Swedish company reorganization process on Jan. 8, 2025. The filing of these proceedings is consistent with our ratings definitions of a default--rather than a selective default--as a company needs court approval to make payments and they are no longer solely at Intrum's discretion. "Under our ratings definitions, we assign 'D' issue credit ratings when an entity files a bankruptcy petition or takes a similar action, and where a default on the obligation is therefore a virtual certainty, for example, due to automatic stay provisions. We then assign the issuer credit rating (ICR) in line with our ICR definitions to reflect the impact of that filing." In April, the Stockholm District Court held a plan meeting in which Intrum's creditors unanimously approved Intrum's recapitalization transaction under the conditions previously confirmed in its Chapter 11 plan and lock-up agreement with its creditors. S&P said, "The ratings on Intrum remain subject to its emergence from its recapitalization procedures, which we expect to conclude by July 2025. These procedures constitute the exchange of its existing notes with new obligations and issuance of additional equity to bondholders, in accordance with the conditions set out in its recapitalization plan. After emergence, we will re-evaluate the company's creditworthiness and its revised capital structure." =========================== U N I T E D K I N G D O M =========================== PLAYTECH PLC: S&P Cuts ICR to 'BB-' on Completed Snaitech Disposal ------------------------------------------------------------------ S&P Global Ratings lowered its long-term issuer credit and issue ratings on U.K.-based software company Playtech PLC and its senior secured notes to 'BB-' from 'BB'. The stable outlook on the issuer credit rating reflects our expectation of adjusted debt to EBITDA decreasing to below 3.0x in 2026 from about 4.0x in 2025. It also reflects free operating cash flow (FOCF) after leases of about EUR25 million in 2025 and EUR45 million in 2026, which will primarily depend on the evolution of dividends received from Caliente. Playtech's disposal of Snaitech will reduce the group's scale of operations and diversity, leading us to revise down the group's business risk profile assessment. Following the disposal, which closed April 30 for a total consideration of EUR2.3 billion, Playtech's scale of operations dropped to revenue of EUR848 million in 2024 (pro forma the Snaitech disposal) compared with EUR1.7 billion in 2023. The group will now be predominantly exposed to B2B operations, with only less than 15% of revenue related to operations in the business-to-consumer segment (B2C). In the B2B segment, the group enjoys a global footprint providing technology solutions to more than 200 gambling operators in more than 45 regulated jurisdictions. The group retains good geographic diversity with the U.K. (20% of total revenue), Europe (30%), and Latin America (20%). Other markets including the U.S. and Canada and nonregulated markets account for the remaining portion of sales. Growth prospects for the B2B operations are positive and have support from rising digitalization and incr+easing adoption of online gambling, as well as expanding regulated markets. S&P said, "As such, we expect underlying top line to grow 2% in 2025 (before accounting for the negative impact of less favorable terms of the agreement with the major client Caliplay) and 3% in 2026. Our business risk profile also considers the customer concentration risk as its top 3 customers account for less than 30% of total sales. We also believe the business faces some disintermediation risk as gaming operators could in-source some of the activities, such as betting terminals." Playtech's profitability will structurally decline on the back of less-profitable B2B business and its revised agreement with Caliplay. S&P said, "We now forecast S&P Global Ratings-adjusted EBITDA margin of about 12% for 2025 and about 17% in 2026, compared to 20.7% in 2023 (which we view as a year in the absence of the impact from legal dispute with Caliente). This profitability is below the 25%-30% that we view as average for companies in the technology software and services sector. Note that our adjusted EBITDA metrics include Caliente dividends and are after capitalized development costs." Playtech's new profitability profile reflects concentration around the B2B segment and a revised agreement with its major client Caliplay (about 10% of sales), the subsidiary of Mexican casino operator Caliente. S&P said, "We expect S&P Global Ratings-adjusted EBITDA margin of about 12% in 2025 compared to 15.8% in 2024 (which excludes Snaitech), largely due to a revised contract with Caliplay. In fact, under the new eight-year agreement (approved by the Mexican antitrust body in March), Playtech can still charge license fees but will no longer receive the additional services fees. We note that the absence of additional B2B services fees under the revised contract, will be only partly compensated by cash dividends received per Playtech's 30.8% minority equity interest in Caliente. While Caliente will enjoy larger flexibility to migrate away from Playtech's software products in the future, and Playtech will benefit from some revenue protections for a five-year period in the event of migration, we do not assume such event risk in our analysis." S&P said, "We expect margin to improve to about 17% in 2026, primarily thanks to an increase in Caliente's cash dividends to above EUR50 million, alongside the group's tighter cost control in its B2B operations, offsetting input cost inflation and investments in Live Casino and automation in its product verticals. "We expect S&P Global Ratings-adjusted gross debt to EBITDA to reduce to slightly below 3x in 2026 from about 4x in 2025 thanks to debt repayment and expanding EBITDA. The group will use the proceeds of the Snaitech disposal to fund an extraordinary dividend payment of EUR1.8 billion and pay EUR150 million outstanding under the remaining EUR350 million bond due March 2026. After factoring in all the expenses related to the disposal into our base case, we expect the group will retain cash on balance sheet of around EUR480 million as of December 2025. Post-debt repayment, the group's capital structure will consist of less debt, with only EUR300 million senior secured bonds due 2028. "According to our criteria, we do not net the cash to our debt calculation. Therefore, we estimate S&P Global Ratings-adjusted debt to EBITDA will approach 4x in 2025 before structurally deleveraging to below 3.0x in 2026. Our deleveraging trend from 2026 will mostly come from improving S&P Global Ratings-adjusted EBITDA as dividends from Caliente normalize. "We do not expect the group's leverage tolerance to change, and its significant cash on the balance sheet provides some financial flexibility to fund debt-funded acquisitions or shareholder returns. We expect only EUR300 million senior secured notes due in June 2028 to remain in the capital structure. The group has not publicly stated a new leverage policy or communicated any changes to the management-adjusted net leverage target of 1x-2x from before the disposal of Snaitech or closing of the revised Caliente agreement. This compares with the group's reported leverage of 0.3x by year-end 2024, based on management calculations. We think the EUR364 million cash balance (pro forma Snaitech disposal and the EUR150 million intended debt repayment) would give the group some financial headroom to fund higher-than-expected acquisitions or shareholder distributions, without incurring additional debt. "Also, given the group's track record of leverage, we do not believe it will pursue debt-financed acquisitions or further shareholder returns that would cause credit metrics to deteriorate much from our base case. With a newly nominated board chairman in April 2025 and other board changes, we assume there is no change to the organization's strategy and financial discipline. "We expect the group will structurally generate lower FOCF, but liquidity has support from material cash balances and an undrawn revolver. We forecast FOCF after leases to be about EUR25 million in 2025 and about EUR45 million in 2026. This is structurally lower compared to EUR160 million in 2023 due to the loss of Snaitech, a decline in cash flow from Caliente under the revised agreement, and some management bonus accrued in previous periods, that offset the receipt of previously unpaid fees from Caliente in 2025. We expect cash flow to strengthen in 2026 and on due to growing cash dividends from Caliente and cost discipline in the B2B model. "We think the group's adequate liquidity is supported by material cash balances and an amended EUR225 million five-year revolving credit facility (RCF) effective on the completion of the Snaitech sale which helps buffer the weaker cash flow generation on the back of annual reported capital expenditure (capex) requirement of close to EUR100 million. We expect cash balances to grow to about EUR480 million by the end of 2025, supported by close to EUR200 million net Snaitech proceeds, repayment from Caliplay on previously unpaid fees, and an additional US$140 million (equivalent to over EUR120 million) payment from Caliplay for increased flexibility on use of Playtech's products phased over a four-year period (additional fees). "Our rating on Playtech considers an elevated risk of volatility in FOCF in case of a severe reduction in dividend inflows from its minority investment in Caliente. In our projections, while Caliente Interactive will account for only about 10% of total revenue compared to 20% in 2024, its cash flow contribution in aggregate will still be elevated as we expect it will contribute over EUR130 million cash to Playtech in 2025. This includes annual license fees, additional fees over the next four years, and annual cash dividends. We deem this material to Playtech's annual FOCF after leases of EUR25 million in 2025. "In addition, while we expect FOCF after leases to increase to EUR45 million in 2026, we anticipate that the improvement will primarily come from a more normalized and growing level of cash dividends received from Caliente. Our rating assessment therefore considers an elevated risk of volatility in FOCF generation if Playtech experiences a severe reduction in dividend inflows from its minority investment in Caliente. We understand that there are some protective measures to ensure a minimum cash dividend distribution on a quarterly basis, but we cannot rule out a worst-case scenario whereby Caliente fails to pay any dividends due to lower profits. "For our analysis, we assume the privately owned entity will continue to be profitable and cash generative while being financially disciplined in its expansion plans, under the oversight of its board, where Playtech is entitled to a seat. "The stable outlook reflects our view that Playtech will maintain a stable relationship with its major client, Caliente, which will sustain profitable and cash-generative growth to deliver dividends per our central assumption. It also reflects that Playtech will continue to advance its initiatives to raise efficiency and expand product offerings, as well as current B2B customer base. We expect S&P Global Ratings-adjusted debt to EBITDA of about 4.0x in 2025 and structurally below 3.0x from 2026 onwards, and its adjusted EBITDA margin will fall to about 12% in 2025 before improving to about 17% in 2026 driven by our assumption of increasing dividends from Caliente and ongoing operational expansion and cost discipline. We also expect FOCF after leases of EUR25 million in 2025 and about EUR45 million in 2026. "We could lower the rating if S&P Global Ratings-adjusted debt to EBITDA remains permanently above 3.0x or our forecast of free operating cash after leases deteriorates compared with our current base case. This could result from a loss of contracts with major customers, a contraction in the underlying gaming market in main geographies, higher-than-expected operating costs offsetting cost saving efforts or shortfalls in dividend contribution from Caliente under the revised agreement compared to our base case. "We could also consider a negative rating action if the company pursues higher-than-expected debt-funded mergers, acquisitions, or shareholder returns. "We could raise the rating if Playtech expands its scale and diversification in operations such that its reliance on Caliente becomes significantly less pronounced in terms of EBITDA and cash flow. Alternatively, we could consider a positive rating action if S&P Global Ratings-adjusted leverage sustains below 2x." RRE 12 LOAN: Fitch Affirms 'BB-sf' Rating on Class D-R Notes ------------------------------------------------------------ Fitch Ratings has upgraded RRE 12 Loan Management DAC class A-2A and A-2B notes to 'AA+sf' from 'AAsf'. The rest was affirmed, as detailed below. Entity/Debt Rating Prior ----------- ------ ----- RRE 12 Loan Management DAC A-1 XS2480045256 LT AAAsf Affirmed AAAsf A-2A XS2480045843 LT AA+sf Upgrade AAsf A-2B XS2480046577 LT AA+sf Upgrade AAsf B-R XS2835787396 LT Asf Affirmed Asf C-1-R XS2835803003 LT BBBsf Affirmed BBBsf C-2-R XS2835876900 LT BBB-sf Affirmed BBB-sf D-R XS2835877387 LT BB-sf Affirmed BB-sf Transaction Summary RRE 12 Loan Management DAC is a securitisation of mainly senior secured obligations (at least 92.5%) with a component of senior unsecured, mezzanine, second-lien loans and high-yield bonds. The portfolio is actively managed by Redding Ridge Asset Management (UK) LLP. The collateralised loan obligation (CLO) will exit its reinvestment period in July 2027. KEY RATING DRIVERS Good Asset Performance Drives Upgrades: According to the latest trustee report dated 8 April 2025, the transaction was passing all its collateral quality, coverage tests and profile tests. Exposure to assets with a Fitch-derived rating of 'CCC+' and below is low at 1.5%, within the transaction's 7.5% limit, according to the trustee. The portfolio has no defaults. The transaction is currently 0.5% above par. The good performance supports the upgrade and affirmation of the notes. The large default rate cushion supports the Stable Outlooks on all rated notes. Limited Refinancing Risk: The transaction has limited near- and medium-term refinancing risk with no portfolio assets maturing in 2025 or 2026, as calculated by Fitch. 'B' Portfolio Credit Quality: Fitch places the average credit quality of obligors in the 'B' category. The Fitch weighted average rating factor (WARF) of the current portfolio is 24 as calculated by Fitch. High Recovery Expectations: At least 92.5% of the portfolio comprises senior secured obligations. Fitch views the recovery prospects for these assets as more favorable than for second-lien, unsecured and mezzanine assets. The Fitch weighted average recovery rate (WARR) of the current portfolio as calculated by Fitch is 62.5%. Diversified Asset Portfolio: The portfolio is well-diversified across obligors, countries and industries. The top 10 obligor concentration, as calculated by Fitch, is 14.9%, and no obligor represents more than 1.7% of the portfolio balance, according to Fitch calculations. Exposure to the three largest Fitch-defined industries is 30% as calculated by the trustee. Fixed-rate assets as reported by the trustee are at 9.8%, versus a limit of 10%. Cash Flow Analysis: The WAL used for the transaction's stressed portfolio and matrix analysis is six months less than the WAL covenant due to its floor at six years. The shortened WAL reflects the structural and reinvestment conditions post-reinvestment period, including the satisfaction of the over-collateralisation and Fitch's 'CCC' limitation tests. 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 Based on the current portfolio, downgrades may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of default and portfolio deterioration. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Upgrades may result from stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from Fitch and/or other nationally recognised statistical rating organisations and/or European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. ESG Considerations Fitch does not provide ESG relevance scores for RRE 12 Loan Management 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. ********* 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. 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