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T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, June 6, 2025, Vol. 26, No. 113
Headlines
C Y P R U S
KLPP INSURANCE: S&P Affirms 'BB+' LongTerm ICR, Outlook Stable
F R A N C E
IQERA: S&P Upgrades Issuer Credit Rating to 'CCC+', Outlook Stable
MEDIAWAN HOLDING: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
OPMOBILITY SE: S&P Affirms 'BB+' ICR & Alters Outlook to Negative
G E O R G I A
GEORGIA: Fitch Affirms 'BB' Foreign Currency IDR, Outlook Negative
G E R M A N Y
TUI CRUISES: S&P Affirms 'BB-' LongTerm ICR, Outlook Stable
I R E L A N D
ACCUNIA EUROPEAN III: Fitch Affirms B+sf Rating on Class F Debt
BILBAO CLO III: Fitch Affirms 'Bsf' Rating on Class E-R Notes
BLACKROCK EUROPEAN VII: Fitch Affirms 'Bsf' Rating on Class F Notes
CARLYLE EURO 2019-1: Fitch Affirms Bsf Rating on Class E Debt
CVC CORDATUS XXVII: Fitch Assigns 'B-sf' Final Rating on F-R Notes
CVC CORDATUS XXVII: S&P Assigns B-(sf) Rating on Class F-R Notes
MIRAVET 2025-1: S&P Assigns B-(sf) Rating on Class F-Dfrd Notes
SOUND POINT I: Fitch Hikes Rating on Class F-R Notes to 'B+sf'
TORO EUROPEAN 7: Moody's Cuts Rating on EUR7.45MM F Notes to Caa1
I T A L Y
IMA SPA: S&P Affirms 'B' ICR on Sound Operating Performance
WEBUILD SPA: Fitch Hikes LongTerm IDR to BB+, Outlook Stable
N E T H E R L A N D S
E-MAC PROGRAM III: S&P Lowers Class B Notes Rating to 'B-(sf)'
PEARLS (NETHERLANDS): S&P Lowers ICR to 'B-', Outlook Stable
VINCENT TOPCO: S&P Affirms 'B' LongTerm ICR, Outlook Stable
R U S S I A
FERGANA REGION: S&P Affirms 'B+' ICRs & Alters Outlook to Positive
GROSS INSURANCE: Fitch Affirms 'B+' Insurer Fin. Strength Rating
IPOTEKA BANK: S&P Affirms 'BB-/B' ICR & Alters Outlook to Positive
NATIONAL BANK: S&P Affirms 'BB-' ICR, Outlook Positive
S W E D E N
AINAVDA PARENTCO: S&P Assigns 'B' LongTerm ICR, Outlook Stable
VOLVO CARS: S&P Affirms 'BB+' LT ICR & Alters Outlook to Negative
T U R K E Y
AKBANK TAS: Fitch Affirms BB- Foreign Currency IDRs, Outlook Stable
TURKIYE GARANTI: Fitch Affirms 'BB-' Foreign Currency IDR
TURKIYE IS BAKANSI: Fitch Affirms BB- LongTerm IDRs, Outlook Stable
U K R A I N E
UKRAINE: Moody's Affirms 'Ca' Issuer Ratings, Outlook Stable
U N I T E D K I N G D O M
AA BOND: S&P Affirms 'B+(sf)' Rating on Class B3-Dfrd Notes
AMP 75: Virtual Meeting to be Held on June 19
BISHOPS COURT: Leonard Curtis Named as Administrators
CARCO PRP: S&P Assigns 'B' LongTerm ICR on New Capital Structure
CHROME HOLDCO: S&P Lowers ICR to 'CCC+', Outlook Stable
JERROLD FINCO: Fitch Rates GBP500MM 7.5% Secured Notes 'BB'
NEW CINEWORLD: S&P Upgrades ICR to 'B', Outlook Stable
PIZZAEXPRESS: S&P Affirms 'CCC+' ICR on Completed Refinancing
RAC BOND: S&P Assigns B+(sf) Rating on Class B2-Dfrd Notes
X X X X X X X X
[] BOOK REVIEW: The Turnaround Manager's Handbook
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C Y P R U S
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KLPP INSURANCE: S&P Affirms 'BB+' LongTerm ICR, Outlook Stable
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S&P Global Ratings affirmed its 'BB+' long-term issuer credit and
financial strength ratings on Cyprus-based insurance company KLPP
Insurance and Reinsurance Co. Ltd. (KLPP). The outlook is stable.
The stable outlook on the ratings reflects that KLPP has
successfully concluded its corrective actions and subsequently
received an unqualified audit opinion for its financial statements
as of Dec. 31, 2024 after four years of audit qualifications.
Specifically, KLPP addressed issues relating to a loan to a
subsidiary in Germany, and an investment representing a
non-controlling interest in a company operating in Russia. EY only
identified some key audit matters, reflecting areas of increased
complexity and management judgement, without impacting the overall
unqualified audit opinion or S&P's view of the company's
governance.
S&P continues to assess governance as neutral, reflecting KLPP's
demonstrated ability to implement proactive measures to enhance
reporting transparency, its compliance with Solvency II
regulations, and the presence of adequate controls over
underwriting and investment risks.
In 2024, KLPP generated $25.4 million in insurance revenue, with
about 86% coming from credit and surety insurance. Despite a 28%
increase in the credit and surety business, overall insurance
revenue declined by 4.5% compared to 2023, primarily due to
business restructuring and a sharp reduction in fire and property
reinsurance revenue--from $7.4 million in 2023 to $1.8 million in
2024--reflecting a strategic move to limit exposure to historically
high property insurance losses.
This restructuring contributed to a notable improvement in
underwriting performance, with the insurance service result
pivoting from a $8 million loss in 2023 to a positive $9.9 million
in 2024. The strongly recovered underwriting result reflects
adequate pricing, risk selection, and favorable market dynamics
within the credit and surety insurance markets. As a result of this
strategic realignment, KLPP reported a significant increase in net
income for the 2024 financial year, reaching $20.9 million compared
to $2.4 million in 2023 and a loss of $13.6 million in 2022. KLPP's
net income in first-quarter (Q1) 2025 was $3.5 million, nearly
matching the $3.7 million reported in Q1 2024, indicating a stable
trend to date for 2025.
The combined ratio (under International Financial Report Standard
17) improved to 61.1% in 2024, down from 131.4% in 2023 and 117.9%
in 2022. With a greater focus on credit and surety insurance
business, S&P believes KLPP is better positioned to sustain its
improved technical performance.
Although KLPP posted an underwriting profit in 2024, the franchise
remains in its development phase, following the repositioning
toward credit and surety and three consecutive years of substantial
underwriting losses from 2021-2023. KLPP is yet to establish a
consistent track record of expanding its portfolio in a sustainably
profitable way over a longer period, particularly as it expands
into new markets and business lines.
S&P said, "Furthermore, the absence of reinsurance protection for
the credit and surety insurance business is a risk, which we will
monitor, as loss severity and loss correlation can be high. That
said, KLPP benefits from a very solid solvency position and has
embedded controls for accumulation risk within its underwriting
guidelines and utilizes counter-guarantees for bonds that exceed
defined thresholds. We will closely monitor how KLPP develops its
reinsurance program and other guarantees with adequate limits to
reduce exposure to large single claims and support the resilience
of its growth and underwriting performance.
"Although underwriting profitability may remain volatile in the
coming years, we forecast the average combined ratio will stay
below 100% over 2025-2027. Supported by solid investment income, we
expect that net income will consistently exceed $10 million
annually over the next three years.
"We believe KLPP's capital will remain a key rating strength over
2025-2027, based on its S&P Global Ratings capital adequacy and
regulatory solvency, with a Solvency II ratio of 541% at year-end
2024. Under our base case, we assume KLPP will remain committed to
maintaining sizable buffers even above the capital requirements
under our highest 99.99% confidence level, according to our capital
model in the next years. We already incorporate in this forecast
that KLPP may continue to pay dividends out of its accumulated
retained earnings in excess of its annual net income, as
demonstrated in 2024 and 2023."
As the credit and surety business continues to expand, the
increasing exposure could gradually reduce the solvency position
and elevate KLPP's risk exposure if reinsurance protection is not
appropriately scaled over time.
S&P said, "We believe KLPP's investment exposure is generally
conservative, with the vast majority being invested in
investment-grade, fixed-income securities. The company still has
some exposure to Russian-linked Eurobonds, accounting for 4.6% of
total assets, as well as promissory notes issued by a leasing
company based in Russia but operating across Asia, Russia, and the
Commonwealth of Independent States region, representing around 11%
of total assets. We view this exposure as manageable in light of
KLPP's capital base, though we will continue to monitor potential
defaults, payment reliability, and their impact on earnings and
capital adequacy.
"In 2023, KLPP borrowed about $120 million in Japanese yen from
banks, to improve its investment result and earn a margin against
the nominal interest rate of the loan by investing in highly rated
bonds. A material portion of this debt has been repaid in 2025,
with the remaining balance currently equivalent to $67 million. The
currency risk associated with borrowings in Japanese yen is
mitigated by a currency swap. We will continue to monitor the
permanence and efficiency of the foreign exchange hedge protection
and any potential adverse financial impact from currency
mismatches. We treat this loan as operational leverage under our
criteria, hence it does not affect our view on the company's
funding structure or financial leverage.
"The stable outlook reflects our view that KLPP will stabilize the
size and business mix of its insurance portfolio, while generating
sound investment returns and maintaining a conservative investment
base over the next 12 months. Furthermore, we expect KLPP to
maintain its strong financial risk profile, supported by a
sufficient capital buffer above the 99.99% confidence level,
according to our capital model."
Downside scenario
S&P could lower the ratings over the next 12 months if:
-- Significant unexpected governance-related issues emerge;
-- The company experiences significant earnings volatility
stemming, for example, from large losses in its insurance business,
currency-related losses, or volatility in its Russian-related
investment exposure; or
-- KLPP's business risk profile weakens materially, for instance,
because of a material expansion in high-risk insurance markets.
Upside scenario
S&P could consider a positive rating action over the next 12 months
if KLPP demonstrates a more sustainable track record of profitable
and diversified growth in its chosen (re)insurance markets, thereby
demonstrating a strengthening competitive position.
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F R A N C E
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IQERA: S&P Upgrades Issuer Credit Rating to 'CCC+', Outlook Stable
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S&P Global Ratings raised to 'CCC+' from 'D' its issuer credit
rating on iQera. At the same time, S&P assigned a 'CCC+' issue
rating to company's new senior secured notes, which replaced the
previous notes during the restructuring.
The stable outlook balances iQera's absence of maturities over the
next 12 months and limited ability to significantly reduce leverage
over the short term.
iQera has materially improved its debt maturity profile thanks to
the restructuring of its senior secured notes, alongside the
recently completed acquisition by funds managed by AGG Capital
Management Ltd.
iQera's financial leverage remains very high post restructuring,
with S&P Global Ratings-adjusted gross debt to EBITDA over 10x, and
there is lingering uncertainty over the long-term sustainability of
its capital structure.
The recent restructuring allowed iQera to improve its debt maturity
profile and liquidity. The transaction, completed on May 28, 2025,
gave way to a new majority and controlling shareholder, ACO 2, an
investment fund managed by AGG Capital Management Ltd. Under the
restructuring, iQera's debt outstanding decreased to EUR389
million, from nearly EUR600 million, through a partial
debt-to-equity exchange for about 35%. The remaining debt are
converted into a new note with a floating coupon of Euribor + 4.5%
(a decrease from 6.5% from a majority of its debt) and an extended
maturity to April 2030. The revolving credit facility (RCF) is also
extended to April 2029 at the same conditions. Additionally, iQera
received a EUR30 million senior "new money" credit facility,
available for the next two years, that ranks senior to the senior
secured notes with the same maturity in April 2030. The new
facility has a 1.0% cash interest and 9% payment-in-kind (PIK)
interest. S&P said, "As a result, iQera received EUR30 million of
available liquidity and does not have mandatory debt repayment
needs in the coming years. We also understand that both the new
senior secured note and the new credit facility include an option
to defer interest payment over the next two years through a PIK
mechanism, and that iQera expects to use in full during its
availability period. That said, we note that the PIK interest will
lead to increase of debt over time even though it provides more
immediate relief for iQera's liquidity position."
S&P said, "Furthermore, we think iQera's leverage remains
unsustainable despite the decrease in debt outstanding. In our
leverage calculations, we exclude iQera's co-investment scheme with
third-party investors. We estimate that, immediately after
recapitalization, S&P Global Ratings-adjusted gross debt to EBITDA
exceeded 10x and that the adjusted gross debt-to-attributable
expected recoverable cash (ERC) ratio stood above 100%." Such
elevated leverage, despite the decrease in gross debt, reflects
iQera's subdued collection revenue and profits. At end-2024, the
company's attributable cash collections had dropped 36%, and the
attributable S&P Global Ratings-adjusted cash EBITDA contracted by
about 20%. This decline is attributed to iQera's investments
alongside co-investors in special purpose vehicles (SPVs) in recent
years, where the generated cash flow is primarily allocated for
repaying co-investor debt. With 72% of ERCs consisting of debt
portfolios with co-investor debts and a total of EUR127 million of
co-investor debt at end-2024, iQera's attributable cash collections
will be constrained over the next two years. Also, to preserve its
liquidity, the company materially reduced its investments to about
EUR7 million in 2024, versus EUR169 million (partly financed with
EUR74 million of new co-investor debt) in 2023. iQera also
conducted an ABS transaction in early 2024, adding EUR93 million to
co-investor debt. This shrunk its attributable ERCs to EUR379
million (representing a 31% contraction year on year).
iQera's leverage improvement hinges on strategic initiatives and
supportive conditions. Over the coming three to five years, this
could look like restructured operations, favorable market
environments in France and Italy, as well as additional revenue
from new co-investment activities with its shareholder. iQera,
together with its shareholder, will finance a portfolio of assets
for which iQera will provide the servicing. This portfolio could
reach EUR537 million of assets under management by 2027, indicating
a slow growth trajectory over the next two years. This could
eventually support iQera's earning generation from higher volumes
of servicing and help the company pivot toward a capital-light
business model. However, the profitability of this activity remains
uncertain at this time. S&P said, "We anticipate that iQera will
hold a minority share in this co-investment scheme given its more
constrained liquidity position. At the same time, iQera will
continue to rely on its historical purchasing and servicing
activity. Considering the financial restructuring is finalized, we
expect iQera to resume its investment, of EUR30 million-EUR40
million per year, to support its attributable ERC level and future
collection revenues."
The stable outlook balances iQera's absence of debt maturities over
the next 12 months and limited ability to markedly reduce leverage
over the short term. S&P expects iQera will continue to sustain its
operating performance on its historical debt portfolio purchasing
and servicing activities, while gradually developing its
co-investment activity with its new shareholder.
S&P could lower its rating if the company's liquidity deteriorates
or if free operating cash flow turns negative, precipitating a new
debt restructuring.
Although S&P currently considers it to be a remote scenario, S&P
could raise its ratings if profits from co-investment activity with
its new shareholder, together with improved operating performance
on historical activities, allow iQera to meaningfully improve its
cash generation and to significantly deleverage.
MEDIAWAN HOLDING: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
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Fitch Ratings has affirmed French production and licencing studio
Mediawan Holding SAS's Long-Term Issuer Default Rating (IDR) at 'B'
with a Stable Outlook. Fitch has also affirmed Mediawan Financing
SAS's senior secured debt at 'B+' with a Recovery Rating of 'RR3'.
The ratings reflect Mediawan's leading position as a prominent
independent studio in Europe, focusing on mostly scripted content
production activity, and its developing licensing platform,
benefiting from long-term relationships with premium home
entertainment broadcasters and a relatively concentrated customer
base. Fitch expects revenue growth to be driven by sustained high
investment in Mediawan's production and licensing content, although
the EBITDA margin may be mildly affected by a dilutive mix effect.
The Stable Outlook reflects moderate leverage relative to its
sensitivities for the assigned 'B' rating. The high share of
production activities in the revenue mix translates into some
volatility in free cash flow (FCF) driven by content production
capex.
Key Rating Drivers
Independent Production and Licensing Platform: The rating reflects
Mediawan's leading independent content production platform, which
is benefiting from expanding licensing and distribution activities.
It acts as a one-stop shop for broadcasters, streamers and
distributors, covering all genres and distribution channels.
Mediawan is largely focuses on scripted content (70% of production
revenue) across TV, films, documentaries and more recently
animation following its investment in Miraculous IP.
Vertically Integrated Model: Mediawan creates and produces its own
content, retaining the associated intellectual property (IP)
rights. Most projects are funded by broadcasters, clients and tax
credits, covering roughly two-thirds of the initial costs in
France. Contractual revenues are agreed in advance and received
when content is delivered. After the initial broadcast period,
Mediawan monetises the content through licensing, which is highly
cash generative, although this segment can fluctuate depending on
the timing of production or distribution of popular hits.
Moderate but Improving Diversification: Mediawan strengthened its
leading production position in 2024 while expanding its geographic
reach by acquiring German-based Studio Leonine. About 90% of
Mediawan's business is European but Germany now contributes a
similar level to the top line as its French legacy revenue,
balancing its geographic footprint. Customer diversification
remains limited, with the top 10 clients accounting for about 60%
of revenue.
Investments Driving Revenue Growth: Mediawan is a fast-growing
company (revenue CAGR of 22% between 2021-2024) benefiting from
demand tailwinds on both its production and licensing business from
broadcasters and distributors as intense competition for viewers is
fueling their investment in content. Industry forecasts suggest
that spending on content in key European markets will see over 5%
CAGR through 2027. Fitch expects Mediawan's sustained high
investment in recognised high-quality content will help it grow
market share in key markets and deliver top line CAGR closer to 8%
over 2025-2028.
Portfolio Mix Affecting Margin: Fitch anticipates lower margin
production revenue will grow at a faster pace than the licensing
and distribution segment. Fitch assesses Mediawan's EBITDA
deducting licensing and distribution amortisation costs directly
associated with marketed IP, as is standard in the industry. Its
calculation also adjusts for the adoption of IFRS 16. Fitch
forecasts the Fitch-defined EBITDA margin will decrease slightly to
11.4% in 2025 from 11.5% in 2024, stabilising at 11.2% thereafter
due to a mix effect.
Volatile FCF: Mediawan's FCF will be strained by production capex
peaking in 2025 at 16% of sales, due to content pre-financing. It
will then stabilise at around 9% of sales over 2026-2028. This
effect will be somewhat mitigated by positive cash flow from
working capital, stemming from clients' advance payments for
production projects. Fitch anticipates that the company's FCF will
be positive by 2026, following negative FCF in 2025. Over the
medium term, Fitch expects Mediawan's FCF to stabilise as the
expansion of the IP library reduces the current heavy dependence on
production.
High Leverage, Adequate for Rating: Its leverage calculations
include EUR250-300 million of production facilities used to fund
shortfalls until associated tax credits are collected. These are
loans raised at the level of production studios and are secured by
IP rights and broadcasters' revenue, with no recourse to Mediawan.
Fitch expects leverage to drop to 5.6x by end-2025, the first full
year of trading for the combined entity, before slowly reducing to
5.0x by 2027. Mediawan's leverage is moderate for the sector,
considering some volatility in FCF generation and potential
fluctuations of IP-related film and television content.
M&A an Option: Fitch believes that Mediawan might adopt an
opportunistic stance on acquisitions, particularly as suitable
entities, like smaller production labels, emerge in a consolidating
industry. This is currently not factored into its base case
projections, as this is considered event risk, but will be reviewed
upon occurrence.
Peer Analysis
Following the acquisition of Leonine, Mediawan has established
itself as a prominent independent studio in Europe, specialising in
the production and distribution of original and acquired content.
It has significant market presence in France and Germany, making it
a top independent studio in Europe. Mediawan's peers include ITV
plc (BBB-/Stable), an integrated producer and broadcaster, and
Subcalidora 1 S.a.r.l. (Mediapro; B/Stable), a Spanish sports and
media rights manager. Mediawan generally holds its own against
other Fitch-rated non-investment-grade studios and content
producers, with Banijay S.A.S. (B+/Stable), its nearest European
counterpart.
Banijay is larger, has more geographic reach, and a focus on
non-scripted content that contributes to steadier cash flow and
less operational fluctuation. However, Mediawan's high-quality
scripted content also has the potential to ensure stable cash flow.
Banijay's IDR is influenced by Fitch's assessment of the robustness
of its parent company, Banijay Group N.V. (formerly FL
Entertainment N.V.), resulting in a one-notch increase from
Banijay's 'b' Standalone Credit Profile.
Key Assumptions
- 2025-2028 revenue GAGR of 8%
- EBITDA margin stabilising at 11.2%
- Fitch-defined capex peaking in 2025 at 16% of sales before
stabilising at about 9% over 2026-2028
- M&A earnout impact averaging EUR50 million annually
- Annual increase in recourse to production credits in line with
top-line growth
Recovery Analysis
Its recovery analysis assumes that Mediawan will be considered a
going concern (GC) in bankruptcy, and that it would be reorganised
rather than liquidated. This is because most of its value lies
within its production and rights management capabilities,
strengthened by long-dated client relationships and IP portfolio.
Fitch assesses GC EBITDA at EUR105 million, after corrective
measures and a restructuring of its capital structure would allow
Mediawan to retain a viable business model. Financial distress
leading to a restructuring may be driven by Mediawan losing some of
its customer contracts, paired with a progressively deteriorating
quality of its IP portfolio. These challenges could initially be
tackled by a more conservative capex programme. However, they may
lead to an untenable capital structure.
Fitch applies a recovery multiple of 5.0x, which is in the
mid-multiple range for media companies in EMEA.
Its estimates of creditor claims include a fully drawn EUR500
million term loan B and a EUR225 million revolving credit facility
ranking pari passu. Mediawan has access to incentive programmes and
tax credits to fund content production costs.
The company uses dedicated facilities to bridge the timing
variations between content creation outflows and associated
receipts. The use of these facilities fluctuates based on changes
in the content creation schedules and tax receipt timing. The
facilities are raised at the level of each production studio and
are secured by broadcaster receivables and tax credits associated
with the ongoing seasons. Fitch recognises the necessity of the
facilities as a funding source and includes them in its leverage
calculations. However, Fitch excludes them from its recovery
analysis, assuming they are likely to remain in place in distress.
After deducting 10% for administrative claims, this generates a
ranked recovery in the 'RR3' band, leading to a 'B+' instrument
rating for the term loan B and revolving credit facility, ranking
pari passu with each other.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Total debt/Fitch-calculated EBITDA deteriorating to above 6.0x
for EBITDA margin contraction or greater recourse to debt-funded
acquisitions
- Increasing capex requirements pressuring FCF to consistently
neutral levels
- EBITDA interest cover remaining below 2.8x
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- Revenue growth and EBITDA margins expansion resulting in total
debt/Fitch-calculated EBITDA sustainably below 5.0x with a
conservative funding mix of cash, debt or equity-funded M&A
- Lower reliance on scripted production revenue and consolidation
of the licensing business leading to lower capex requirements and
consistently positive FCF generation through the cycle
- EBITDA interest cover sustained above 3.5x
Liquidity and Debt Structure
Following its 2024 refinancing, Mediawan had EUR197 million in cash
at end-2024. Fitch expects it to be able to sustain most of its
cash on balance sheet despite sustained high investments and
acquisitions earn-outs to an average EUR160 million over the
period. Consequently, Fitch does not see any meaningful liquidity
risks. In addition, the company has access to a EUR225 million
fully undrawn committed revolving credit facility with no
significant debt maturing before 2031.
Issuer Profile
Mediawan is a prominent independent scripted and unscripted content
production platform with licensing and distribution activities.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
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Mediawan Financing
SAS
senior secured LT B+ Affirmed RR3 B+
Mediawan Holding SAS LT IDR B Affirmed B
OPMOBILITY SE: S&P Affirms 'BB+' ICR & Alters Outlook to Negative
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S&P Global Ratings revised its outlook on France-based global auto
supplier OPmobility S. E. to negative from stable and affirmed its
'BB+' long-term issuer rating and the 'BB+' issue rating on the
company's senior unsecured notes.
The negative outlook indicates the risk that OPmobility's cost
reduction efforts, along with any delays in emerging businesses
reaching breakeven, may prevent FFO to debt from improving to well
above 20% and FOCF to debt from reaching about 10% in 2026.
S&P said, "OPmobility's 2024 credit metrics were in line with our
previous forecast but below our rating thresholds. As we projected,
OPmobility's FFO to debt and FOCF to debt ratios reached 18.5% and
about 6% in 2024, respectively. This is despite a 1.1% decrease in
global LV production last year, which OPmobility managed to
compensate through strict cost control and investment discipline.
However, ongoing difficulties in the industry have constrained the
company's ability to reduce leverage since the debt-financed
acquisitions of Varroc Lighting Systems, AMLS, and an additional
33% stake in its former HBPO joint venture in 2022. As a result,
OPmobility's credit metrics were weak for the rating level in 2022,
falling below our thresholds of well above 20% for FFO to debt and
about 10% for FOCF to debt in both 2023 and 2024.
"We no longer expect OPmobility to restore credit metrics in line
with the rating in 2025. Our updated forecast for global LV
production has weakened meaningfully, and we now foresee a decline
of up to 3% in 2025 and up to 1% in 2026. Specifically for 2025,
this reflects the pressure on production levels in North America
linked to U.S. tariffs, which we expect will curb LV sales in the
U.S., and we also expect production to decline in Europe. Given
that Europe accounted for about half of OPmobility's sales in 2024,
and North America just under 30%, we expect LV production to
decline more rapidly in the company's key regional markets compared
with our global forecast. At the same time, demand for OPmobility's
hydrogen business is slower than we anticipated, and as the company
previously expected, the business will remain unprofitable this
year. The same applies to the company's lighting division, which
experienced low order intake prior to its acquisition by
OPmobility. These factors will limit EBITDA growth and improvements
in FFO to debt this year. We acknowledge the company is taking
decisive cost-cutting actions to mitigate the impact, particularly
in spending related to selling, general, and administrative and
research and development functions. Furthermore, we understand the
company has identified further spend control measures beyond these
initiatives. However, even with these measures, we project this
year's EBITDA and our adjusted FFO to debt ratio to remain roughly
at 2024 levels. In our prior base case, we expected the FFO to debt
ratio to reach 27% in 2025.
"We project OPmobility's cash generation to improve in 2025 and
further in 2026. In addition to cost measures, we expect OPmobility
to use all available strategies to preserve cash, including a
heightened focus on working capital optimization (excluding
factoring) and prudent management of capital expenditure (capex).
Combined with lower cash taxes, we think this will support some
improvement in our FOCF to debt ratio to about 8% in 2025. From
2026, we expect FOCF to recover further as the full effect of the
cost-saving measures enhances earnings while the company maintains
disciplined capex spending and working capital management. This
should increase our FOCF to debt to about 10%, and increased
profitability should move FFO to debt back above the 20% threshold.
We consider our FOCF projections as a strength relative to peers
such as Valeo, Gestamp, ZF Friedrichshafen, and FORVIA, and the
potential for improvements this year is crucial in our rating
affirmation. That said, rating headroom remains limited, and a
steeper decline in auto production due to a worsening tariff
situation or failures in executing cost control measures could lead
to a near-term downgrade.
"The negative outlook indicates the risk that OPmobility's cost
reduction efforts, and any further delays in emerging businesses
reaching breakeven, may prevent FFO to debt from improving to well
above 20% and FOCF to debt to about 10% in 2026.
"We could lower our rating on OPmobility in the next 6–12 months
if its decisive cost reduction measures fail to offset topline
pressure resulting from reduced LV vehicle production, potentially
exacerbated by any delays in reducing losses in its nascent
business fields, specifically lighting, hydrogen, and
electrification systems." This could lead to:
-- FFO to debt not improving to well above 20% by 2026; or
-- FOCF to debt not improving materially in 2025 and converging
toward 10% in 2026.
S&P could revise the outlook to stable if OPmobility posts FOCF to
debt of about 10% while maintaining FFO to debt comfortably above
20% on a sustained basis. This could be supported by successful
cost reduction and cash preservation measures, paired with robust
profitability in its established divisions and improving margins in
its nascent business fields.
=============
G E O R G I A
=============
GEORGIA: Fitch Affirms 'BB' Foreign Currency IDR, Outlook Negative
------------------------------------------------------------------
Fitch Ratings has affirmed Georgia's Long-Term Foreign-Currency
Issuer Default Rating (IDR) at 'BB' with a Negative Outlook.
Key Rating Drivers
Rating Strengths and Weaknesses: The 'BB' rating is supported by
Georgia's high level of economic development relative to 'BB'
peers, a credible macro-fiscal policy framework, moderate public
debt, and sound banking sector. These are balanced by relatively
high financial dollarisation, high exposure of public debt to
foreign-currency risks, and weaker external finances than peers,
including moderate international reserves, and relatively high net
external debt. The Negative Outlook reflects heightened political
risk and possible external liquidity pressures.
Weak International Reserves Position: International reserves were
USD4.52 billion (equivalent to 2.3 months of current account
payments) in April 2025, recovering from a 13% month-on-month drop
in October 2024, when the National Bank of Georgia (NBG) sold
reserves to support the currency. However, they are still 17% below
the August 2023 peak, while net international reserves are 33%
below September 2024 levels.
Immediate liquidity risks are low, but the reserve position is
vulnerable to a sharp drop in market sentiment, triggered for
example by a sharp increase in political risks in Georgia,
resulting in higher dollarisation or capital flight. Fitch expects
the NBG to continue FX purchases, notwithstanding its commitment to
a floating exchange rate, which could ease pressure on reserves.
Fitch forecasts reserves to average 2.2 months of current account
payments in 2025-26.
Weak External Finances: Georgia's large current account deficit
relative to peers is a consistent credit weakness, and is set to
continue, with Fitch projecting it will average 4.6% of GDP in
2025-26 (2024: 4.4%; current 'BB' median: 2.5%), primarily driven
by a large goods deficit. The tourism sector, with average annual
growth of 12% in 2023-24, will support a solid services surplus.
Georgia's net external debt, at 43% of GDP as of 2024, is nearly 3x
the 'BB' median. However, risks are mitigated by high inter-company
lending in the debt stock.
Sluggish FDI Inflows: Foreign direct investment (FDI) inflows (in
US dollar terms) fell by 34.5% yoy to 4% of GDP in 2024, likely
reflecting investor concerns about heightened political risks
following the passage of a controversial Transparency of Foreign
Influence Law, and disputed elections. Fitch forecasts net FDI to
recover in 2025-26 to an average of 3.8% of GDP (albeit still
insufficient to cover the current account deficit).
Heightened Political Risks: Georgia's domestic political and
societal fragmentation continues, with the opposition boycotting
parliament following the disputed parliamentary and presidential
elections in 4Q24. Parliament has since passed legislation that
tightens rules around disbursal of foreign grants to civil society
organisations, and is deliberating another law that could
effectively ban major opposition parties.
Georgia's EU accession negotiations remain effectively suspended
and the US Congress is currently considering legislation that if
passed raises risks of US sanctions on senior Georgian officials.
In Fitch's view, risks to institutional independence could widen if
political polarisation continues to worsen, also posing risks to
external donor flows or economic performance (although neither is
evident at present).
Strong Economic Growth: Real economic growth remains strong in
Georgia at 8.8% yoy in January-April 2025 (2022-24 annual average:
9.4%), owing to strong services sector performance. In Fitch's
view, potential growth (currently estimated at 4.8%) has been
boosted by investments in the information and communications
technology, hospitality, transport and construction sectors. Fitch
expects growth of 5.6% in 2025 and 5.2% in 2026, with upside from
productivity enhancements.
Inflation and Monetary Policy: Domestic demand is strong, but
inflation remained below the NBG's target of 3% in 2024, although
it exceeded it in March-April 2025, averaging 3.4% partly due to
base effects. Fitch expects inflation to average 3.2% in 2025-26.
The NBG has kept policy rates unchanged at 8% since May 2024, and
is unlikely to cut rates given the potential for looser monetary
conditions to boost FX demand. Monetary policy transmission is
somewhat constrained by high levels of dollarisation (end-1Q25:
53.5% of deposits and 43.1% of loans).
Stable Public Finances: Georgia has a record of overperforming
budget targets. Fitch expects the general government deficit to
average 2.3% of GDP in 2025-26 (2024: 2.3%, 'BB' median: 2.8%),
well below the 3% ceiling. Gross general government debt (GGGD)/GDP
fell to a 10-year low of 36.1% at end-2024 ('BB' median: 53.8%),
aided by strong nominal GDP growth. Fitch projects GGGD/GDP to
average 35.8% in 2025-2026 (well below the 60% debt ceiling), with
exchange rate depreciation a key risk. Fitch expects the
authorities to roll over a USD500 million Eurobond maturing in
April 2026.
Georgia has ESG Relevance Scores of '5' for Political Stability and
Rights, and '5[+]' for the Rule of Law, Institutional and
Regulatory Quality, and Control of Corruption. These scores reflect
the high weight that the World Bank Governance Indicators (WBGI)
have in its proprietary Sovereign Rating Model (SRM). Georgia has a
medium WBGI ranking at the 61st percentile, reflecting moderate
institutional capacity, established rule of law, a moderate level
of corruption, and political risks.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
External Finances: A sustained decline in international reserves,
e.g., due to large capital outflows or a sharp drop in FDI.
Structural: Substantial worsening of domestic political or
geopolitical risks with adverse consequences for economic
performance, governance, or access to external financing.
Macro: A weakening of Georgia's policy framework that creates risks
for macroeconomic and financial stability.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Macro/Public Finances: Continued strong economic performance
despite ongoing political uncertainty, alongside stabilisation of
the general government debt trajectory.
External Finances: A reduction in external vulnerability, for
example, from a stabilisation of international reserve levels.
Structural: A reduction in domestic political risks, resulting in
greater confidence in the policy framework.
Sovereign Rating Model (SRM) and Qualitative Overlay (QO)
Fitch's proprietary SRM assigns Georgia a score equivalent to a
rating of 'BBB-' on the Long-Term Foreign-Currency (LT FC) IDR
scale.
Fitch's sovereign rating committee adjusted the output from the SRM
to arrive at the final LT FC IDR by applying its QO, relative to
SRM data and output, as follows:
Structural: -1 notch as in Fitch's view, the sharp increase in
political and geopolitical risks since 2022 are not adequately
captured in the WBGI used in the SRM.
External Finances: -1 notch to reflect Georgia's high net external
debt and the country's vulnerability to external shocks as a small,
open, and highly dollarised economy with relatively weak external
buffers.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within its
criteria that are not fully quantifiable and/or not fully reflected
in the SRM.
Country Ceiling
The Country Ceiling for Georgia is 'BBB-', 2 notches above the LTFC
IDR. This reflects strong constraints and incentives, relative to
the IDR, against capital or exchange controls being imposed that
would prevent or significantly impede the private sector from
converting local currency into foreign currency and transferring
the proceeds to non-resident creditors to service debt payments.
Fitch's Country Ceiling Model produced a starting point uplift of
+2 notches above the IDR. Fitch's rating committee did not apply a
qualitative adjustment to the model result.
ESG Considerations
Georgia has an ESG Relevance Score of '5' for Political Stability
and Rights as WBGI have the highest weight in Fitch's SRM and are
therefore highly relevant to the rating and a key rating driver
with a high weight. As Georgia has a percentile rank below 50 for
the respective governance indicator, this has a negative impact on
the credit profile.
Georgia has an ESG Relevance Score of '5[+]' for Rule of Law,
Institutional, Regulatory Quality, and Control of Corruption as
WBGI have the highest weight in Fitch's SRM and are therefore
highly relevant to the rating and are a key rating driver with a
high weight. As Georgia has a percentile rank above 50 for the
respective governance indicators, this has a positive impact on the
credit profile.
Georgia has an ESG Relevance Score of '4' for Human Rights and
Political Freedoms as the voice and accountability pillar of the
WBGI is relevant to the rating and a rating driver. As Georgia has
a percentile rank below 50 for the respective governance indicator,
this has a negative impact on the credit profile.
Georgia has an ESG Relevance Score of '4' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Georgia, as for all sovereigns. As Georgia
had a restructuring of public debt in 2004, this has a negative
impact on the credit profile.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Georgia LT IDR BB Affirmed BB
ST IDR B Affirmed B
LC LT IDR BB Affirmed BB
LC ST IDR B Affirmed B
Country Ceiling BBB- Affirmed BBB-
senior
unsecured LT BB Affirmed BB
Senior
Unsecured-Local
currency LT BB Affirmed BB
Senior
Unsecured-Local
currency ST B Affirmed B
=============
G E R M A N Y
=============
TUI CRUISES: S&P Affirms 'BB-' LongTerm ICR, Outlook Stable
-----------------------------------------------------------
S&P Global Ratings affirmed its 'BB-' long-term issuer credit
rating and 'B+' issue rating on TUI Cruises GmbH and its senior
unsecured debt. The '5' recovery rating on the debt is unchanged,
but S&P revised upward its recovery expectations on the debt in a
default scenario to 25% from 15%.
S&P said, "The stable outlook reflects our expectation that TUI
Cruises will maintain its solid profitability as it increases
capacity and integrates ships into its fleet in 2025 and 2026,
reduce adjusted leverage to less than 4.0x, increase funds from
operations (FFO) to debt beyond 20% by 2025, and maintain a
financial policy commensurate with the stronger credit metrics.
"Our ratings on TUI Cruises' unsecured notes are unchanged
following RCF refinancing, one notch below the issuer credit rating
on the large amount of priority debt. On April 7, 2025, TUI Cruises
refinanced the previous second-lien secured term loan B-RCF
structure (EUR140 million outstanding at December 2024) with a
EUR600 million senior unsecured RCF due 2030. In May, the company
also repaid the remaining EUR98.5 million senior unsecured notes
due 2026. With the change in security with the new RCF, which ranks
pari passu with the remaining EUR725 million senior unsecured
notes, recovery prospects for unsecured lenders improve to 25% from
15% (the '5' recovery rating is unchanged). The issue rating on TUI
Cruises notes remain one notch below the issuer credit rating due
to the high share of senior secured debt claims of 71% expected at
our simulated default in 2029.
"TUI Cruises reported S&P Global Ratings-adjusted EBITDA Margin of
35.3% for fiscal 2024 improving from 32.4% in 2023, surpassing our
expectations. The company recorded revenue growth of 13.7% in 2024,
amounting to EUR2.12 billion and in line with our expectations.
This growth was attributed to price increases, higher occupancy
levels, and the addition of Mein Schiff 7 in June 2024, which
overall resulted in an about 6% higher capacity. Occupancy stood at
100% for fiscal 2024 vs 98% for fiscal 2023 for the Mein Schiff
brand, and 75% versus 74% for Hapag-Lloyd Cruises, while average
daily ticket rates for Mein Schiff increased to EUR198 in fiscal
2024, from EUR179 in 2023, and for Hapag-Lloyd Cruises to EUR748
from EUR737. Based on higher profitability and stronger operating
cash flow from customer deposit inflows, S&P Global
Ratings-adjusted leverage was 4.2x in 2024 compared to 4.9x in 2023
and 4.5x in our base-case expectations.
"We expect continued reduction of leverage to less than 4.0x in
2025, since the two new ships will increase capacity by at least
26%. Following the strong ticket price increases for the Mein
Schiff brand in 2024, we see less potential for continuous growth
in ticket prices this year, since the group needs to sell the
material increase in capacity from the full-year operation of Mein
Schiff 7, received in June 2024, and Mein Schiff Relax, which
joined the fleet in February 2025 and started operations in March.
High incoming booking volumes for 2025 despite a capacity increase
of more than 24% in 2025 support our revenue growth expectations of
23% in 2025. We expect S&P Global Ratings-adjusted EBITDA margins
of about 34% in 2025 and 2026, somewhat constrained by a recovery
in the dilutive Hapag Lloyd segment (17% margin in 2024). As a
result, we anticipate adjusted EBITDA to increase to EUR881 million
in 2025 and EUR998 million in 2026, reducing S&P Global
Ratings-adjusted leverage to 3.7x and 3.6x, respectively, despite
incremental debt related to Mein Schiff Relax and the planned
delivery of Mein Schiff Flow in second-quarter 2026."
Liquidity improved on RCF refinancing and remains adequate despite
sizable amortization of secured ship debt. The proactive management
of debt maturities, refinancing the RCF and repaying the EUR98.5
million senior unsecured notes due April 2026, leaves the group
with no further bond maturities until 2029. S&P said, "We expect
TUI to generate sizable FFO of about EUR736 million in 2025 and
EUR828 million in 2026. This should be more than sufficient to
cover limited maintenance capital expenditure (capex) for drydock
and the installments on ship debt, which we expect at about EUR330
million in 2025 and more than EUR350 million from 2026 onward, when
all new vessels have been delivered."
S&P said, "We expect dividend payments, which resumed in 2024, will
accelerate in line with the group's financial policy and limit a
more meaningful reduction of leverage. The company has defined a
net leverage ratio target of 3.5x-4.0x (3.1x actual for the 12
months to Dec. 31, 2024), which we think is commensurate with our
credit metrics for the 'BB-' rating. We think that TUI Cruises,
while keeping a minimum cash balance of about EUR100 million and
sizable available back-up facilities, will distribute excess cash
to its shareholders TUI AG (BB-/Stable/--) and Royal Caribbean
Cruises Ltd. (BBB-/Stable/--). For 2025, we expect dividend
payments of more than EUR200 million on strong operating cash flow.
The prioritization of shareholder distributions limits a swifter
reduction of financial debt and S&P Global Ratings-adjusted
leverage.
"The stable outlook reflects our expectation that TUI Cruises will
continue to increase its capacity through ship deliveries in 2025
and 2026 while retaining high occupancy levels. Because of our
expectation of meaningful increases in scale and at least stable
profitability, we expect S&P Global Ratings-adjusted leverage to
stay below 4.0x and FFO to debt to be sustainably above 20% from
2025 onward, despite increases in S&P Global Ratings-adjusted debt
due to incremental ship debt."
S&P could lower the rating if:
-- S&P Global Ratings-adjusted debt to EBITDA does not reduce to
below 4.0x; or
-- S&P Global Ratings-adjusted FFO to debt does not increase and
surpass 20%.
This could follow weaker earnings due to less meaningful
improvements in ship usage, higher-than-anticipated cost inflation,
difficulties in marketing new vessels, or unexpected external
factors such as environmental- or tax-regulation changes. It could
also stem from a more aggressive financial policy.
S&P said, "We could raise the ratings if TUI Cruises achieves a
track record in launching and integrating larger ships into its
fleet, thereby increasing scale and market share in Germany. We
would also expect to see that the group can attract and retain new
customers, while achieving consistent improvements in ticket yields
and fleet usage, resulting in sustainable revenue growth and
resilient margins."
Although unlikely given the group's financial policy, S&P could
also raise the rating if the group commits to a more conservative
financial policy that would allow for material financial debt
reduction and thereby achieve:
-- S&P Global Ratings-adjusted debt to EBITDA sustainably below
3.0x; and
-- S&P Global Ratings-adjusted FFO to debt sustainably above 30%.
=============
I R E L A N D
=============
ACCUNIA EUROPEAN III: Fitch Affirms B+sf Rating on Class F Debt
---------------------------------------------------------------
Fitch Ratings has upgraded Accunia European CLO III DAC's class B
and C notes and revised the class F notes' Outlook to Negative from
Stable.
Entity/Debt Rating Prior
----------- ------ -----
Accunia European
CLO III DAC
A XS1847612204 LT AAAsf Affirmed AAAsf
B-1 XS1847612972 LT AAAsf Upgrade AA+sf
B-2 XS1847613608 LT AAAsf Upgrade AA+sf
C XS1847614242 LT AA-sf Upgrade A+sf
D XS1847614911 LT BBB+sf Affirmed BBB+sf
E XS1847615132 LT BB+sf Affirmed BB+sf
F XS1847615561 LT B+sf Affirmed B+sf
Transaction Summary
Accunia European CLO III DAC is a cash flow CLO comprising mostly
senior secured obligations. The transaction is actively managed by
Accunia Fondsmaeglerselskab A/S and exited its reinvestment period
in August 2022.
KEY RATING DRIVERS
Amortisation Benefits Senior Notes: Since Fitch's last rating
review in June 2024, the class A notes have deleveraged by another
EUR66 million at 30 April 2025. The amortisation has increased
credit enhancement for the senior notes, outweighing further par
losses. This has resulted in the upgrade of the class B and C
notes.
Junior Notes Sensitive to Deterioration: The transaction has
experienced further par losses since the last review and is
currently 4.1% below par. The reported defaults accounted for
EUR5.4 million at 30 April 2025. This, together with further
deterioration of the portfolio's weighted average rating factor
(WARF), has resulted in a reduced default-rate cushion supporting
the class F notes rating. The reduced buffer to absorb further
deterioration in the credit quality of the portfolio, combined with
the increased macroeconomic risk due to the trade war escalation,
drives the Negative Outlook on the class F notes.
Average Asset Quality: The weighted average rating of the portfolio
is at 'B'/'B-'. The Fitch WARF is 28.4 for the current portfolio
and is at 30 for the Fitch-stressed portfolio where assets with a
Fitch equivalent rating on Negative Outlook have been downgraded by
one notch.
High Recovery Expectations: Senior secured obligations comprise
96.9% of the portfolio according to the 30 April 2025 trustee's
report. 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 of the current
portfolio under its latest criteria is 59.5%.
Diversified Portfolio: The portfolio remains reasonably diversified
across obligors, countries and industries. The top 10 obligors and
the largest obligor represented 23.8% and 2.7% of the portfolio
balance, respectively, according to the trustee report. Exposure to
the three largest Fitch-defined industries is 33.2% while
fixed-rate assets are at 5.5% of the portfolio balance, which is
below its limit of 7.5%. The portfolio has about EUR7.6million (or
3.5% of the balance of the performing assets excluding cash) beyond
the legal final maturity of the notes. Fitch has assumed this is
subject to fire sale at Fitch's recovery rate.
Transaction Outside Reinvestment Period: The transaction exited its
reinvestment period in August 2022, and the most senior notes are
deleveraging. After the reinvestment period, the manager can still
reinvest unscheduled principal proceeds and sale proceeds from
credit-improved and credit-impaired obligations, subject to
compliance with the reinvestment criteria. However, the transaction
cannot reinvest due to the failure of some tests, including the
weighted average life (WAL) test, the WARF tests and Fitch's 'CCC'
limit. The manager has not made any purchases since August 2023.
Given the manager's inability to reinvest, Fitch's analysis is
based on the current portfolio, which Fitch stressed by notching
down assets with a Fitch equivalent rating on Negative Outlook by
one notch and by flooring the weighted average life of the
portfolio at four years when testing for upgrades.
Deviation from MIR: The class C and D notes are rated one notch
below their model-implied rating (MIR). The deviation reflects the
insufficient default-rate cushion at the MIRs.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Based on the current portfolio, downgrades may occur if loss
expectations are 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 this transaction.
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 in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
BILBAO CLO III: Fitch Affirms 'Bsf' Rating on Class E-R Notes
-------------------------------------------------------------
Fitch Ratings has upgraded Bilbao CLO III DAC's A-2A-R, and A-2B-R
notes and affirmed the others.
Entity/Debt Rating Prior
----------- ------ -----
Bilbao CLO III DAC
A-1-R XS2332235733 LT AAAsf Affirmed AAAsf
A-2A-R XS2332236384 LT AA+sf Upgrade AAsf
A-2B-R XS2332236970 LT AA+sf Upgrade AAsf
B-R XS2332237788 LT A+sf Affirmed A+sf
C-R XS2332238323 LT BBB+sf Affirmed BBB+sf
D-R XS2332239131 LT BB+sf Affirmed BB+sf
E-R XS2332238919 LT Bsf Affirmed Bsf
Transaction Summary
Bilbao CLO III DAC is a cash flow CLO comprising mostly senior
secured obligations. The transaction is actively managed by
Guggenheim Partners Europe Limited and will exit its reinvestment
period in February 2026.
KEY RATING DRIVERS
Stable Performance; Low Refinancing Risk: The portfolio's
performance has been stable since its last rating action in August
2024. The transaction continues to pass all collateral-quality,
portfolio-profile and coverage tests, with EUR6.6 million reported
defaulted assets. Exposure to assets with a Fitch-derived rating of
'CCC+' and below is 4.3%, versus a 7.5% limit. The portfolio's
total par loss remains low at 1.4%. The notes have low near- and
medium-term refinancing risk, with no assets maturing in 2025, 0.3%
assets maturing in 2026 and 6.4% in 2027.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the underlying obligors at 'B'/'B-'. The weighted average rating
factor of the current portfolio is 25.3 as calculated by Fitch
under its latest criteria and 34.2 as reported by the trustee based
on old criteria.
High Recovery Expectations: Senior secured obligations comprise 99%
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 of the current portfolio is 62.4%.
Diversified 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 2% of the portfolio balance. Exposure to the
three largest Fitch-defined industries is 35.1% as reported by the
trustee. Fixed-rate assets as reported by the trustee are at 7.3%,
currently complying with the limit of 10%.
Transaction Within Reinvestment Period: Given the manager's ability
to reinvest, Fitch's analysis is based on a stressed portfolio and
tested the notes' achievable ratings across all Fitch test
matrices, since the portfolio can still migrate to different
collateral quality tests and the level of fixed-rate assets could
change.
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 occur on 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
Bilbao CLO III DAC
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
Recognized Statistical Rating Organizations 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 Bilbao CLO III
DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
BLACKROCK EUROPEAN VII: Fitch Affirms 'Bsf' Rating on Class F Notes
-------------------------------------------------------------------
Fitch Ratings has upgraded BlackRock European CLO VII DAC's class B
notes and affirmed the rest. The Outlooks are Stable.
Entity/Debt Rating Prior
----------- ------ -----
BlackRock European
CLO VII DAC
A-R XS2304369247 LT AAAsf Affirmed AAAsf
B-1-R XS2304370096 LT AAAsf Upgrade AA+sf
B-2-R XS2304370682 LT AAAsf Upgrade AA+sf
C-1-R XS2304371227 LT A+sf Affirmed A+sf
C-2-R XS2304371904 LT A+sf Affirmed A+sf
D-R XS2304372548 LT BBB+sf Affirmed BBB+sf
E XS1904675110 LT BB+sf Affirmed BB+sf
F XS1904675383 LT Bsf Affirmed Bsf
Transaction Summary
BlackRock European CLO VII DAC is a cash flow collateralised loan
obligation (CLO) actively managed by BlackRock Investment
Management (UK) Limited. The reinvestment period ended on 15 July
2023, but the manager is still able to reinvest, as allowed by
reinvestment criteria after the reinvestment period.
KEY RATING DRIVERS
Amortisation Benefits Senior Notes: The class A-R notes have been
38% paid down since the transaction closed and EUR90.3 million has
been repaid since the review in July 2024. This amortisation has
increased the credit enhancement of senior notes, outweighing
further par losses that have occurred since the previous review.
This has resulted in the upgrade of the class B-1-R and B-2-R
notes.
Performance Within Expectation: According to the 3 April 2025
trustee report, the transaction was failing the weighted average
life (WAL) test, top obligor exposure and another test of another
rating agency. The report also showed 7.49% of assets with a
Fitch-Derived Rating of 'CCC+' and below, just under the limit of
7.5%. The transaction is 2% below par and defaults comprise 1.72%
of the current portfolio, according to the trustee report.
Manageable Refinancing Risk: The transaction has a manageable
exposure to assets with near-term maturities, with approximately
6.4% of the portfolio maturing by end-2026. Comfortable default
rate cushions for each class of notes can absorb defaults of
vulnerable credits and downward migration of assets with near-term
maturities. This supports the Stable Outlook, but concentration is
increasing as the transaction deleverages and the portfolio
maturity profile is moving closer to the legal final maturity date
of the notes.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors at 'B'/'B-'. The Fitch-calculated weighted average
rating factor of the current portfolio is 25.1.
High Recovery Expectations: Senior secured obligations comprised
93.5% of the portfolio, as calculated by the trustee. 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 of the current portfolio is 60.6%.
Diversified Portfolio: The portfolio is reasonably diversified
across obligors, countries and industries. The top 10 obligor
concentration was 13.7%, and the largest obligor represented 2.1%
of the portfolio balance, as calculated by Fitch based on the 3
April 2025 trustee report. Exposure to the three-largest industries
was 27.1%, as reported by the trustee. Fixed-rate assets reported
by the trustee were at 10.8% of the portfolio balance.
Reinvesting Transaction: The manager can continue to reinvest
unscheduled principal proceeds and sale proceeds from
credit-impaired even after the transaction exited its reinvestment
period in July 2023, subject to compliance with the reinvestment
criteria. The cash balance as of 3 April 2025 was EUR34 million,
after a portion of the cash was used to amortise the class A notes
on the payment date in April 2025. However, given the manager's
ability to reinvest, its analysis of upgrade is based on a stressed
portfolio, using Fitch collateral quality matrices outlined in the
transaction documentation.
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 the transaction. 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 in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis. For more information on Fitch's ESG Relevance
Scores, visit the Fitch Ratings ESG Relevance Scores page.
CARLYLE EURO 2019-1: Fitch Affirms Bsf Rating on Class E Debt
-------------------------------------------------------------
Fitch Ratings has upgraded four tranches of Carlyle Euro CLO 2019-1
DAC and affirmed the others. Fitch has revised the Outlook on the
class E notes to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
Carlyle Euro
CLO 2019-1 DAC
A-1-R XS2320696433 LT AAAsf Affirmed AAAsf
A-2A-R XS2320697084 LT AA+sf Upgrade AAsf
A-2B-R XS2320697753 LT AA+sf Upgrade AAsf
B-R XS2320698306 LT A+sf Upgrade Asf
C-R XS2320698728 LT BBB+sf Upgrade BBBsf
D XS1936199758 LT BBsf Affirmed BBsf
E XS1936199675 LT Bsf Affirmed Bsf
Transaction Summary
Carlyle Euro CLO 2019-1 DAC is a cash flow CLO comprising mostly
senior secured obligations. The transaction is actively managed by
CELF Advisors LLP and exited its reinvestment period in September
2023.
KEY RATING DRIVERS
Transaction Deleveraging: Around EUR11.3 million of the A-1-R notes
has been repaid since its last review in September 2024. This
deleveraging has resulted in an increase in credit enhancement for
the class A-1-R notes. As of the latest trustee report dated 12 May
2025, there was EUR20.3 million cash in the principal account,
which Fitch expects will be used to further pay down the class
A-1-R notes. The upgrades of the class A-2A-R, A-2B-R, B-R and C-R
notes and their Stable Outlooks reflect sufficient default-rate
cushions at their model-implied ratings.
Portfolio Deterioration: As of the latest trustee report, the
transaction was around 3.4% below par (calculated as the current
par difference over the original target par), with around EUR2.6
million defaulted assets in the portfolio. The Negative Outlook on
the class E notes reflects a small default-rate cushion against
credit quality deterioration, with approximately 14.1% of the
portfolio being exposed to assets with an Issuer Default Rating
with a Negative Outlook.
Low Refinancing Risks: The transaction has manageable exposure to
near- and medium-term refinancing risk, with no portfolio assets
maturing in 2025 and 2.5% maturing in 2026.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the obligors at 'B'/'B-'. The Fitch-calculated weighted average
rating factor of the current portfolio was 26.2.
High Recovery Expectations: Senior secured obligations comprise
100% 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 of the current
portfolio as reported by the trustee was 64.7%.
Diversified Portfolio: The portfolio is well-diversified across
obligors, countries and industries. The top 10 obligor
concentration, as calculated by Fitch, is 13.5%, and the largest
obligor represents 1.5% of the portfolio balance. Exposure to the
three largest Fitch-defined industries is 35.8%, as calculated by
the trustee. Fixed-rate assets are reported by the trustee at 9.4%
of the portfolio balance, below the test limit of 10%.
Transaction Outside Reinvestment Period: The transaction exited its
reinvestment period in September 2023, and the most senior notes
are deleveraging. It is only failing the weighted average life
test, which is on a maintain or improve basis, allowing it to keep
reinvesting. Given the manager's ability to continue to reinvest,
Fitch's analysis is based on a stressed portfolio and tested the
notes' achievable ratings across the Fitch matrix, since the
portfolio can still migrate to different collateral quality tests.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades may occur if build-up of 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
Carlyle Euro CLO 2019-1 DAC
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
Recognized Statistical Rating Organizations 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 Carlyle Euro CLO
2019-1 DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
CVC CORDATUS XXVII: Fitch Assigns 'B-sf' Final Rating on F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned CVC Cordatus Loan Fund XXVII DAC reset
notes final ratings.
Entity/Debt Rating Prior
----------- ------ -----
CVC Cordatus Loan
Fund XXVII DAC
A XS2610237179 LT PIFsf Paid In Full AAAsf
A-R XS3076166456 LT AAAsf New Rating
B-1 XS2610237336 LT PIFsf Paid In Full AAsf
B-1-R XS3076166530 LT AAsf New Rating
B-2 XS2610237500 LT PIFsf Paid In Full AAsf
B-2-R XS3076166704 LT AAsf New Rating
C XS2610237765 LT PIFsf Paid In Full Asf
C-R XS3076166969 LT Asf New Rating
D-1 XS2610237922 LT PIFsf Paid In Full BBBsf
D-2 XS2610238144 LT PIFsf Paid In Full BBB-sf
D-R XS3076167181 LT BBB-sf New Rating
E XS2610238490 LT PIFsf Paid In Full BB-sf
E-R XS3076167348 LT BB-sf New Rating
F XS2610238656 LT PIFsf Paid In Full B-sf
F-R XS3076167694 LT B-sf New Rating
Transaction Summary
CVC Cordatus Loan Fund XXVII DAC is a securitisation of mainly
senior secured obligations (at least 90%) with a component of
senior unsecured, mezzanine, second-lien loans and high-yield
bonds. Note proceeds are being used to redeem the existing notes,
except the subordinated notes, and to fund the portfolio with a
target par of EUR500 million.
The portfolio is actively managed by CVC Credit Partners Investment
Management Limited. The CLO has a 4.5-year reinvestment period and
a 7.5-year weighted average life (WAL) test at closing, which can
be extended one year after closing, subject to conditions.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch-weighted
average rating factor of the identified portfolio is 25.4.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. The recovery
prospects for these assets are more favourable than for second
lien, unsecured and mezzanine assets. The Fitch-weighted average
recovery rate of the identified portfolio is 58.3%.
Diversified Portfolio (Positive): The transaction includes two
matrices that are effective at closing, corresponding to a 7.5-year
WAL and two different fixed-rate asset limits of 5% and 15%. The
deal also includes two forward matrices corresponding to the same
fixed-rate asset limits but a seven-year WAL, which can be selected
from six months after closing or 18 months after closing if the WAL
is extended by one year.
The transaction also has various concentration limits, including a
top 10 obligor concentration limit of 20% and maximum exposure to
the three-largest Fitch-defined industries of 40%. These covenants
ensure the asset portfolio will not be exposed to excessive
concentration.
WAL Step-Up Feature (Neutral): The transaction can extend the WAL
test by one year from 12 months after closing. The WAL extension is
at the discretion of the manager, but subject to conditions,
including passing the Fitch collateral quality tests and the
aggregate collateral balance with defaulted assets at their
collateral value being equal to or greater than the reinvestment
target par.
Portfolio Management (Neutral): The transaction has a 4.5-year
reinvestment period and includes reinvestment criteria similar to
those of other European transactions. Fitch's analysis is based on
a stressed case portfolio with the aim of testing the robustness of
the transaction structure against its covenants and portfolio
guidelines.
Cash Flow Modelling (Positive): The WAL for the transaction's
Fitch-stressed portfolio analysis and matrices analysis is 12
months less than the WAL covenant. This is to account for the
strict reinvestment conditions envisaged by the deal after its
reinvestment period, which include passing the coverage tests and
the Fitch 'CCC' bucket limitation test after reinvestment, as well
as a WAL covenant that gradually steps down, before and after the
end of the reinvestment. These conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A-R and B-R notes and
would lead to downgrades of one notch for the class C-R and D-R
notes, two notches for the class E-R notes and to below 'B-sf' for
the class F-2-R notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the class B-R, D-R, E-R and F-2-R
notes each have a rating cushion of two notches and the class C-R
notes have a cushion of one notch.
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to no impact on the class A-R
and B-R notes, lead to downgrades of up to two notches each for the
class C-R, D-R and E-R notes and to below 'B-sf' for the class F-R
notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR across and a 25% increase in the
RRR across all ratings of the Fitch-stressed portfolio would lead
to upgrades of up to two notches each for the notes, except the
'AAAsf' notes.
During the reinvestment period, upgrades, which are based on the
Fitch-stressed portfolio, may occur on better-than-expected
portfolio credit quality and a shorter remaining WAL test, allowing
the notes to withstand larger-than-expected losses for the
remaining life of the transaction. After the end of the
reinvestment period, upgrades may result from stable portfolio
credit quality and deleveraging, leading to higher credit
enhancement and excess spread available to cover losses in the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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 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 CVC Cordatus Loan
Fund XXVII 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.
CVC CORDATUS XXVII: S&P Assigns B-(sf) Rating on Class F-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to CVC Cordatus Loan
Fund XXVII DAC's class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R
notes. The issuer has unrated subordinated notes outstanding from
the existing transaction.
This transaction is a reset of the already existing transaction.
The existing classes of notes--class A-1, B-1, B-2, C, D-1, D-2, E,
and F-- were fully redeemed with the proceeds from the issuance of
the replacement notes on the reset date. The ratings on the
original notes have been withdrawn.
The ratings assigned to the reset notes reflect S&P's assessment
of:
-- The diversified collateral pool, which consists primarily of
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 2,913.04
Default rate dispersion 504.21
Weighted-average life (years) 4.15
Weighted-average life extended to cover
the length of the reinvestment period (years) 4.50
Obligor diversity measure 147.66
Industry diversity measure 21.63
Regional diversity measure 1.19
Transaction key metrics
Portfolio weighted-average rating derived
from S&P's CDO evaluator B
'CCC' category rated assets (%) 2.80
Target 'AAA' weighted-average recovery (%) 35.69
Target weighted-average spread (%) 3.84
Target weighted-average coupon (%) 4.86
Rating rationale
Under the transaction documents, the rated notes pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments. The portfolio's
reinvestment period will end approximately 4.51 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 its 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 EUR500 million
target par amount, the covenanted weighted-average spread (3.74%),
the covenanted weighted-average coupon (4.25%), and the covenanted
weighted-average recovery rates for all rating levels. 100% of the
target portfolio was identified at closing. 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, the
transaction's exposure to country risk is sufficiently mitigated at
the assigned ratings.
"Until the end of the reinvestment period on Nov. 30, 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, if 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.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe the rating assigned to the
class A-R notes is commensurate with the available credit
enhancement. Our credit and cash flow analysis indicates that the
available credit enhancement for the class B-1-R to D-R notes could
withstand stresses commensurate with higher rating levels than
those we have 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 assigned to the notes.
"For the class F-R 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 for the class F-R notes reflects several key
factors, including:
-- The class F-R notes' available credit enhancement, which is in
the same range as that of other CLOs S&P has rated and that has
recently been issued in Europe.
-- The portfolio's average credit quality, which is similar to
other recent CLOs.
-- S&P's model generated break-even default rate at the 'B-'
rating level of 22.69% (for a portfolio with an adjusted
weighted-average life of 4.51 years), versus if it was to consider
a long-term sustainable default rate of 3.1% for 4.51 years, which
would result in a target default rate of 13.98%.
-- S&P does not believe that there is a one-in-two chance of this
note defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
S&P said, "Following this analysis, we consider that the available
credit enhancement for the class F-R notes is commensurate with the
assigned 'B-(sf)' rating.
"Taking the above factors into account and following our analysis
of the credit, cash flow, counterparty, operational, and legal
risks, we believe that the assigned ratings are commensurate with
the available credit enhancement for all the rated classes of
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 A-R to E-R
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-R 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 list
Amount Credit
Class Rating* (mil. EUR) Interest rate (%) enhancement (%)
A-R AAA (sf) 305.00 3/6-month EURIBOR + 1.38 39.00
B-1-R AA (sf) 38.50 3/6-month EURIBOR + 2.00 28.30
B-2-R AA (sf) 15.00 4.90 28.30
C-R A (sf) 30.00 3/6-month EURIBOR + 2.55 22.30
D-R BBB- (sf) 36.00 3/6-month EURIBOR + 3.70 15.10
E-R BB- (sf) 25.50 3/6-month EURIBOR + 6.10 10.00
F-R B- (sf) 17.00 3/6-month EURIBOR + 8.50 6.60
Sub NR 34.20 N/A N/A
*The ratings assigned to the class A-R, B-1-R, and B-2-R notes
address timely interest and ultimate principal payments. The
ratings assigned to the class C-R, D-R, E-R, and F-R notes address
ultimate interest and principal payments. The payment frequency
switches to semiannual and the index switches to six-month EURIBOR
when a frequency switch event occurs.
NR--Not rated.
N/A--Not applicable.
EURIBOR--Euro Interbank Offered Rate.
MIRAVET 2025-1: S&P Assigns B-(sf) Rating on Class F-Dfrd Notes
---------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Miravet 2025-1
DAC's class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd notes. At
closing, Miravet 2025-1 DAC also issued unrated RFN and class Z1,
Z2, S, and X notes.
S&P said, "Our ratings address the timely payment of interest and
the ultimate payment of principal on the class A notes. Our ratings
on the class B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, and F-Dfrd notes
address the ultimate payment of interest and principal on these
notes, even when they become the most senior class of notes
outstanding." Unpaid interest will not accrue additional interest
and will be due at the notes' legal final maturity.
Credit enhancement for the rated notes comprises mainly
subordination. A reserve fund was fully funded at closing and
provides mainly liquidity support for the payment of senior fees
and interest due on the class A notes. Any excess of the cash
reserve over its required amount provides credit support.
The pool of EUR308 million originated by multiple lenders, with the
main ones being Bankia, S.A. and Caixabank, S.A. The assets are
first-ranking reperforming mortgages secured primarily on
residential properties.
Miravet 2025-1, the issuer of the RMBS notes, is an Irish
special-purpose entity (SPE). The issuer purchase fondo de
titulizacion (FT) bonds issued by FT Encina, a Spanish SPE. The FT
bonds are backed by mortgage certificates pledged in favor of the
RMBS noteholders.
Additionally, Caixabank acts as primary servicer on these assets
and Anticipa Real Estate, S.L.U will act as special servicer for
loans that become in arrears for more than 180 days.
The application of S&P's structured finance sovereign risk criteria
does not constrain the ratings.
Ratings
Class Rating Class size (%)
A AAA (sf) 77.00
B-Dfrd* AA (sf) 3.00
C-Dfrd* A (sf) 2.75
D-Dfrd* BBB (sf 2.00
E-Dfrd* BB+ (sf) 1.50
F-Dfrd* B- (sf) 3.00
RFN NR 1.55
Z1 NR 3.50
Z2 NR 7.25
Class S NR N/A
Class X NR N/A
*S&P's rating on this class considers the potential deferral of
interest payments.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
SOUND POINT I: Fitch Hikes Rating on Class F-R Notes to 'B+sf'
--------------------------------------------------------------
Fitch Ratings has upgraded Sound Point Euro CLO I Funding DAC's
class F-R notes, while affirming the rest. The Outlook is Stable on
all notes.
Entity/Debt Rating Prior
----------- ------ -----
Sound Point Euro
CLO I Funding DAC
A-R Loan LT AAAsf Affirmed AAAsf
A-R Note XS2339924701 LT AAAsf Affirmed AAAsf
B-1-R XS2339925005 LT AA+sf Affirmed AA+sf
B-2-R XS2339925344 LT AA+sf Affirmed AA+sf
C-R XS2339925773 LT A+sf Affirmed A+sf
D-R XS2339926078 LT A-sf Affirmed A-sf
E-R XS2339926318 LT BB+sf Affirmed BB+sf
F-R XS2339926235 LT B+sf Upgrade Bsf
Transaction Summary
Sound Point Euro CLO I Funding DAC is a cash flow collateralised
loan obligation (CLO) actively managed by Sound Point CLO C-MOA,
LLC. It closed on 8 May 2019, was reset in April 2021 and will exit
its reinvestment period on 25 November 2025.
KEY RATING DRIVERS
Stable Performance: The portfolio's credit quality has remained
stable over the last 12 months. Exposure to assets with a
Fitch-Derived Rating of 'CCC+' and below remains low at 3.1%,
versus a limit of 7.5%, according to the latest trustee report
dated May 2025. The transaction is 0.05% above par (calculated as
the current par difference over the original target par) and
defaults comprise 0.9% of the portfolio's outstanding principal
balance. The transaction is also passing all its
collateral-quality, portfolio-profile and coverage tests. The
stable performance of the transaction, combined with a shortened
weighted average life (WAL) test covenant, resulted in today's
rating action.
Low Refinancing Risk: The notes have no near- and medium-term
refinancing risk, with no assets in the portfolio maturing in 2025,
and only 1% maturing in 2026.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the underlying obligors at 'B'/'B-'. The Fitch-calculated weighted
average rating factor of the current portfolio is 33.3, as reported
by the trustee based on Fitch's old criteria, and 25.3, as
calculated by Fitch under its latest criteria.
High Recovery Expectations: Senior secured obligations comprise
99.5% 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 of the current portfolio as reported by the trustee is 63%.
Diversified Portfolio: The top 10 obligor concentration, as
calculated by Fitch, is 10.1%, which is below the lower of the two
limits in the Fitch test matrices (15% and 20%), and no obligor
represents more than 1.5% of the portfolio balance.
Transaction Within Reinvestment Period: Fitch's analysis is based
on a stressed portfolio, given the manager's ability to reinvest.
Fitch tested the notes' achievable ratings across all Fitch test
matrices, since the portfolio can still migrate to different
collateral quality tests and the level of fixed-rate assets could
change. Fitch has modelled the target par balance, as the
transaction allows up to 1% of the target par amount to be
transferred from the principal account as trading gains.
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 Sound Point Euro
CLO I Funding 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.
TORO EUROPEAN 7: Moody's Cuts Rating on EUR7.45MM F Notes to Caa1
-----------------------------------------------------------------
Moody's Ratings has downgraded the rating on the following notes
issued by Toro European CLO 7 DAC:
EUR7,450,000 Class F Secured Deferrable Floating Rate Notes due
2034, Downgraded to Caa1 (sf); previously on Dec 12, 2023 Affirmed
B3 (sf)
Moody's have also affirmed the ratings on the following notes:
EUR192,000,000 (Current outstanding amount EUR189,363,194) Class A
Secured Floating Rate Notes due 2034, Affirmed Aaa (sf); previously
on Dec 12, 2023 Affirmed Aaa (sf)
EUR16,000,000 Class B-1 Secured Floating Rate Notes due 2034,
Affirmed Aa1 (sf); previously on Dec 12, 2023 Upgraded to Aa1 (sf)
EUR14,950,000 Class B-2 Secured Fixed Rate Notes due 2034,
Affirmed Aa1 (sf); previously on Dec 12, 2023 Upgraded to Aa1 (sf)
EUR21,300,000 Class C Secured Deferrable Floating Rate Notes due
2034, Affirmed A1 (sf); previously on Dec 12, 2023 Upgraded to A1
(sf)
EUR21,350,000 Class D Secured Deferrable Floating Rate Notes due
2034, Affirmed Baa2 (sf); previously on Dec 12, 2023 Upgraded to
Baa2 (sf)
EUR22,400,000 Class E Secured Deferrable Floating Rate Notes due
2034, Affirmed Ba3 (sf); previously on Dec 12, 2023 Affirmed Ba3
(sf)
Toro European CLO 7 DAC, originally issued in December 2020 and
later refinanced in December 2021, is a collateralised loan
obligation (CLO) backed by a portfolio of mostly high-yield senior
secured European loans. The portfolio is managed by Chenavari
Credit Partners LLP. The transaction's reinvestment period ended in
February 2024.
RATINGS RATIONALE
The rating downgrade on the Class F notes is primarily a result of
deterioration in i) over-collateralisation ratios from Credit
Impaired sales or defaults and ii) key credit metrics of the
underlying pool over the last year.
The affirmations on the ratings on the Class A, B-1, B-2, C, D and
E notes are primarily a result of the expected losses on the notes
remaining consistent with their current rating levels, after taking
into account the CLO's latest portfolio, its relevant structural
features and its actual over-collateralisation ratios.
The over-collateralisation ratios of the rated notes have
deteriorated in the last year. According to the trustee report
dated May 2025[1] the Class A/B, Class C, Class D, Class E and
Class F OC ratios are reported at 139.45%, 127.27%, 117.03%,
107.92% and 105.19% compared to May 2024[2] levels of 141.35%,
129.03%, 118.65%, 109.43% and 106.67%, respectively. Moody's notes
that the May 2025 principal payments are not reflected in the
reported OC ratios.
There has also been some deterioration in key credit metrics.
According to the trustee report dated May 2025[1] the Weighted
Average Spread (WAS) decreased to 3.77% from 4.13% in May 2024[2].
Furthermore, over the same period the credit quality has further
deteriorated as reflected by an increase in the proportion of
securities rated Caa1 or lower. Securities with ratings of Caa1 or
lower currently make up approximately 9.1%[1] of the underlying
portfolio, versus 6.3%[2] a year ago.
The key model inputs Moody's use in Moody's analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on Moody's published methodology
and could differ from the trustee's reported numbers.
In Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: EUR309.8m
Defaulted Securities: EUR3.15m
Diversity Score: 50
Weighted Average Rating Factor (WARF): 3045
Weighted Average Life (WAL): 3.74 years
Weighted Average Spread (WAS): 3.81%
Weighted Average Coupon (WAC): 3.59%
Weighted Average Recovery Rate (WARR): 43.36%
Par haircut in OC tests: 0.12%
The default probability derives from the credit quality of the
collateral pool and Moody's expectations of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into Moody's cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, such as the account bank, using the
methodology "Structured Finance Counterparty Risks" published in
May 2025. Moody's concluded the ratings of the notes are not
constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
-- Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Recoveries higher
than Moody's expectations would have a positive impact on the
notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
Moody's other analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
=========
I T A L Y
=========
IMA SPA: S&P Affirms 'B' ICR on Sound Operating Performance
-----------------------------------------------------------
S&P Global Ratings affirmed its 'B' ratings on Italian manufacturer
of automated machinery for packaging and processing IMA SpA and its
senior secured note, with the recovery rating on the senior notes
remaining at '3', indicating its estimate of about 55% recovery in
the event of a default.
S&P said, "The stable outlook reflects our view that IMA's S&P
Global Ratings-adjusted debt to EBITDA will improve to about 6.0x
in 2025 and its FOCF will strengthen, while the cash interest
coverage ratio stays above 2.5x.
"Despite a challenging macroeconomic backdrop, we expect IMA's
exposure to fairly resilient end markets will help it continue to
expand its revenue base, further supported by bolt-on acquisitions.
Economic growth prospects in Europe and North America, IMA's key
operating regions, have slowed, mainly owing to
trade-tariff-related uncertainty and still soft consumer spending;
Europe represented 54% of IMA's revenue in 2024, and North America
19%. However, thanks to the nondiscretionary nature of most of
IMA's end markets, mainly in the pharmaceutical and food and
beverage segments, we anticipate that IMA's revenue will increase
by about 4% in 2025. This improvement will be supported by an order
backlog of EUR1.6 billion as of March 31, 2025 (up 4% compared to
the same period in 2024) and strong aftermarket sales, which
increased to 35% of total revenue in 2024 from 33% in 2023. In
terms of end markets, we expect the majority of growth to come from
the pharmaceutical segment (43% of 2024 revenue), where large
players will likely increase investments to scale up production
capacity and to mitigate supply chain risks by expanding local
productions. We expect revenue in the consumer business (40% of
revenue) to increase by only low single digits, indirectly partly
affected by still subdued consumer sentiment. We expect the
Automation business unit, which generates 17% of revenue, could
face some headwinds due to its partial exposure to the weak
automotive end market, offset by demand for medical-technology
solutions. In addition, we anticipate potential delays in
customers' investment decisions amid uncertainty regarding trade
policy and the geopolitical landscape.
"We expect the S&P Global Ratings-adjusted EBITDA margin to improve
to 16.9% in 2025-2026 from 16.3% in 2024, mainly due to positive
product mix effects and increasing aftermarket sales. We project
the pharmaceutical segment, historically IMA's most profitable,
with a reported EBITDA margin of 21.2% in 2024, to expand faster
than other business units, therefore we expect this segment to
drive positive product mix effects. This compares to 16.2% in the
consumer segment and 16.0% in the automation segment. In addition,
the share of aftermarket and services activities, which typically
carry higher margins than equipment, has gradually increased in
recent years, reaching 34% in 2024 from 30% in 2021. We anticipate
a further increase in their contribution, driven by generally more
resilient demand for services relative to new equipment and the
company's strategic focus on expanding these operations. In
addition, we foresee a slightly positive contribution from
economies of scale, driven by higher volumes.
"We expect FOCF to rise to more than EUR100 million per year from
2025 from EUR14 million in 2024, owing to EBITDA expansion and
improved working capital management. Over recent years, increasing
working capital needs weighed on cash flows. This was mainly due to
rising receivables for more complex projects with longer delivery
times, and the expansion of the automation business, where payment
cycles, especially with automakers, are longer than the group
average. Receivables thus gradually increased to 42% of revenue in
2024 from 26% in 2021, exceeding our previous forecasts. In
addition, higher-than-anticipated capex over 2024 resulted in lower
FOCF than expected, which only modestly improved to EUR14 million
from EUR4 million in 2023, translating into less than 1% of debt in
both years. However, we understand working capital management is
among IMA's strategic priorities for 2025, and management is
working on introducing additional instalment payments through the
delivery cycle, which should help accelerate receivables
collection. We thus estimate only moderate working capital cash
outflow of about EUR20 million-EUR30 million in 2025 and 2026 after
a cash outflow of EUR76 million in 2024 and EUR195 million in 2023.
Coupled with EBITDA expansion, and slightly lower capex of 2.8% of
revenue on an S&P Global Ratings-adjusted basis in 2025 and 2.3% in
2026 (3.5% in 2024 and 2.3% in 2023), this should translate into
FOCF of about EUR137 million in 2025 and about EUR149 million in
2026. We anticipate the company will continue to not use factoring
but will participate in reverse factoring programs, with terms
broadly in line with those of 2024.
"We expect S&P Global Ratings-adjusted leverage to gradually
decrease from 6.2x in 2024 to slightly below 6.0x in 2025, which is
still in line with the current 'B' rating. The deleveraging we
envisage will be driven by EBITDA expansion only. We believe this
leaves the company with ample headroom to pursue bolt-on inorganic
growth opportunities, which will likely remain integral to IMA's
expansion strategy.
"We see IMA's two ultimate shareholders as strategically aligned in
our view. IMA is controlled by SOFIMA SpA, which is in turn
controlled by Alps Holding SpA. These two holding companies'
activity consists of managing the participation in IMA, and they do
not hold any further significant financial liabilities that could
materially alter IMA's leverage ratios. Alps Holding's share
capital is held by two main shareholders, the Vacchi family, which
has 51% of the voting rights, and the U.S.-based private equity
company BDT & MSD, which has the remaining 49% of the voting
rights. We believe there are indicators of strategic alignment
between the two shareholders, supported by an existing shareholder
agreement, an agreed-upon business plan, and a detailed list of
board-reserved matters requiring at least one affirmative vote from
both a family appointed director and a BDT & MSD-appointed director
for approval. We treat the preference shares provided by BDT & MSD
as equity under our criteria.
"The stable outlook reflects our view that IMA's S&P Global
Ratings-adjusted debt to EBITDA will improve to about 6.0x in 2025,
while its cash interest coverage will stay above 2.5x. We also
expect the group's FOCF will strengthen from 2025 onward."
S&P could downgrade IMA if prolonged weak demand weighs on its
operating performance or if it embarks on material debt-funded
acquisitions. Under such scenarios S&P foresees:
-- S&P Global Ratings-adjusted debt to EBITDA deteriorating to
about 8x;
-- S&P Global Ratings-adjusted funds from operations (FFO) cash
interest coverage decreasing to less than 2.0x; or
-- FOCF turning negative.
S&P could consider upgrading IMA if a better-than-expected
operating performance and improved working capital management led
to S&P Global Ratings-adjusted debt to EBITDA staying sustainably
below 5.5x, supported by a financial policy commensurate with a
higher rating, and FOCF to debt remains above 5%.
WEBUILD SPA: Fitch Hikes LongTerm IDR to BB+, Outlook Stable
------------------------------------------------------------
Fitch Ratings has upgraded Webuild S.p.A.'s Long-Term Issuer
Default Ratings (IDR) to 'BB+', from 'BB'. The Outlook is Stable.
The upgrade reflects its expectation that Webuild's improved
business profile will remain solid with strong revenue visibility,
and improved contract structures with the ability to pass on
incremental costs, supporting margins. It further takes into
account better geographical diversification with higher revenue
from lower-risk economies and reduced working capital volatility.
The upgrade also reflects Webuild's improved financial structure
with EBITDA net leverage likely to remain at less than 1.5x for
2025-2028 and EBITDA gross leverage at less than 2.5x for
2026-2028. This will be mainly driven by strong EBITDA growth from
high-margin contracts, especially in Italy and Australia.
Key Rating Drivers
Deleveraging Trajectory: Fitch forecasts Webuild's EBITDA net
leverage to remain at 0.5x-0.7x, well below the previous positive
sensitivity of 1.5x, driven by improved profitability from
high-margin contracts, primarily in Italy and Australia. Fitch
anticipates gross leverage at above 2.5x at end-2025, as the
company maintains Fitch-calculated gross debt at EUR2.8 billion
through 2025-2028 for capex needs. However, from 2026, gross
leverage is anticipated to fall below 2.5x due to significant
improvements in EBITDA margins.
Robust Business Profile: Webuild's business profile is supported by
leading market positions across various sub-sectors, a robust order
backlog, and solid geographical diversification. Revenue visibility
remains strong, with an order backlog of EUR53.4 billion at
end-2024, driven by EUR13 billion in new orders from diverse
regions. The company is well-positioned to capitalise on rising
government infrastructure investments in major markets, such as
central and northern Europe, Australia, the US and the Middle
East.
Webuild's business profile benefits from enhanced contract
structures, with nearly 90% of contracts incorporating pass-through
mechanisms or cost-plus agreements. Its geographical mix has
strengthened over the past two years, with over 90% of revenue for
2025-2026 coming from low-risk countries. This improvement is
largely attributed to an increased presence in Australia following
the acquisition of Clough, where around 25%-30% of revenues are
projected for 2025-2028, along with its strong market position in
Italy.
EBITDA Margins to Improve: Fitch forecasts that Webuild's EBITDA
margins will stabilise at 8% in 2025, before rising to 9.8%-10.3%
for 2026-2028. This increase will be driven by cost-reduction
initiatives (with up to EUR150 million run-rate improvement),
alongside high-margin contracts secured over the past 12 to 15
months, particularly in Italy, where the company is the largest
engineering and construction (E&C) company. Improved profitability
is further supported by its expanding presence in Australia, where
it executes various complex, high-margin projects as one of the
leading E&C companies.
Reduced Working Capital Volatility: Fitch expects Webuild's working
capital volatility to decrease during 2025- 2028, leading to a
cumulative inflow of around EUR150 million, a big improvement on
the previously forecast outflow of EUR555 million for 2024-2027.
This improvement is driven by anticipated higher orders with
associated advance mobilisation payments, which offset the
unwinding of negative working capital through increased execution.
Management's enhanced focus on claims collection and optimised
working capital management will also contribute to a better working
capital position.
Higher Capex; Negative FCF: Fitch expects Webuild to have a higher
capex of around EUR2.4 billion for 2025-2026, with 65% allocated to
Italy for new equipment to support high-margin projects. This will
be funded by operational cash flow and existing cash reserves.
Capex intensity should normalise after 2026 as the equipment will
be used for five to 10 years. Fitch forecasts cumulative negative
free cash flow (FCF) of EUR827 million for 2025-2028, but this is
mitigated by Webuild's strong Fitch calculated cash balances of
EUR2.9 billion at end-2024 and no major M&A plans across
2025-2028.
Peer Analysis
Webuild's business profile is slightly better than Kier Group Plc's
(BB+/Stable), due to improvements in its working capital position.
However, Kier's working capital volatility is lower than Webuild's
because of its lower levels of advance payments, resulting in
minimal potential for the unwinding of working capital. This is
balanced by the latter's larger scale of operations and superior
geographic diversification.
Webuild's business profile remains weaker than Ferrovial SE's
(BBB/Stable) due to the former's limited presence in mature
concessions, which have low volatility and low-risk cash flows.
Webuild's strategy focuses on large, complex, value-added
infrastructure projects with high engineering content. It has an
established strong domestic market position across its different
businesses, coupled with healthy revenue visibility and good
contract risk management, in line with other investment grade, E&C
companies.
Webuild's financial profile is comparatively weaker than Kier's and
Ferrovial's, as both have positive FCF margins, while Webuild has
more volatile FCF through the cycle and higher leverage.
Key Assumptions
- Revenue of about EUR12 billion in 2025, before increasing by
5%-6% in 2026-2028 on a strong order backlog.
- EBITDA margins to stabilise at 8% in 2025, before improving to
9.8%-10.3% in 2026-2028, driven by the execution of high margin
orders, especially in Italy and Australia.
- Working capital inflow at 1.5%-1.8% of revenue in 2025-2026 and
then working capital outflow of 1% in 2027-2028.
- Capex to remain high at 9%-11% of revenue in 2025-2026, before
stabilising at 5.5% in 2027-2028.
- Annual dividend of around EUR80 million-90 million during
2025-2028.
- Restricted cash of around EUR400 million in 2025, increasing to
EUR600 million to 2028 primarily for Fitch- adjusted working
capital swings though out the year.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- EBITDA gross leverage above 2.5x on a sustained basis
- EBITDA net leverage above 1.5x on a sustained basis
- Increase in working capital volatility or accelerating WC
outflows, leading to neutral FCF on a sustained basis
- Increased concentration of 10 largest contracts to above 40% of
the order book
- Increasing EBITDA share of high-risk countries
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Improvement of the quality/diversification of dividend income
streams
- EBITDA gross leverage below 1.5x on a sustained basis
- EBITDA net leverage below 0.5x on a sustained basis
- Positive three-year average FCF
Liquidity and Debt Structure
At end- 2024, Webuild's liquidity was bolstered by around EUR2.9
billion in readily available cash (excluding about EUR0.3 billion
of restricted cash by Fitch mainly for working capital purposes).
Additionally, it has access to fully undrawn revolving credit
facilities. This liquidity is sufficient to cover the forecast
negative FCF of about EUR550 million in 2025 and short-term
maturities.
Webuild's debt structure at end-2024 mainly comprised bonds
amounting to EUR2.1 billion, corporate loans of EUR206 million,
construction loans of EUR100 million and other financing loans of
EUR296.5 million. At end-March 2025, it had a revolving credit
facility limit of EUR900 million (EUR70 million expired in February
2025), of which EUR850 million matures in November 2026 and the
balance of EUR50 million in April 2027. Webuild's strong
performance, good relationship with lenders and access to capital
markets are positive for its credit profile.
Issuer Profile
Webuild is an Italian E&C group with operations spread across
various geographies. It is mainly focused on complex infrastructure
civil projects with a strong leading market position in the water
sector.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Webuild S.p.A. LT IDR BB+ Upgrade BB
senior unsecured LT BB+ Upgrade BB
=====================
N E T H E R L A N D S
=====================
E-MAC PROGRAM III: S&P Lowers Class B Notes Rating to 'B-(sf)'
--------------------------------------------------------------
S&P Global Ratings lowered to 'B- (sf)' from 'BB+ (sf)', 'CCC (sf)'
from 'B- (sf)', and to 'CC (sf)' from 'CCC (sf)' its credit ratings
on E-MAC Program III B.V. Compartment NL 2008-II's class B, C, and
D notes, respectively. At the same time, S&P affirmed its 'A+ (sf)'
rating on the class A2 notes.
Fixed fees in the transaction continue to be high year-on-year. The
fees at each interest payment date (IPD) have large variations such
as EUR38,843.28 and EUR91,582.22 in January 2025 and April 2025,
respectively. Over the past few years, S&P has not received any
clarity on the reason for the rising fees and whether this trend is
likely to continue. As outlined previously, the notes remain
especially vulnerable to higher fees as the transaction has been
relying on the liquidity facility to pay these. As of April 2025,
the liquidity facility has EUR66,338.21 outstanding and is expected
to be fully exhausted on the July 2025 IPD.
Furthermore, the pool factor has continued to reduce, to 12% (100
loans) in April 2025, from 14% (115 loans) in April 2024 and 16%
(128 loans) in April 2023. Lower pool granularity can affect
interest collections, which the transaction will be fully reliant
upon once the liquidity facility is fully used. Total loan-level
arrears for the pool at these times were 5.9%, 9.7%, and 3.7%,
respectively, with fewer than 10 loans causing the change in
arrears.
S&P said, "Given the volatility in fees and the increasing trend,
we have completed various cash flow sensitivities and our ratings
on the class B, C, and D notes cannot withstand the stresses at our
'B' rating level.
"Given the sensitivity of the class B, C, and class D notes to
stresses at our 'B' rating level, we applied our 'CCC' criteria, to
assess if either a rating in the 'B–', 'CCC', or below category
would be appropriate. We performed a qualitative assessment of the
key variables, along with simulating a steady-state scenario in our
cash flow analysis. The class B notes can pass such a scenario.
"We do not consider the class B notes' repayment to be dependent
upon favorable business, financial, and economic conditions, and
therefore lowered our rating on the notes to 'B- (sf)' from 'BB+
(sf)'. We view the class C notes' repayment to be dependent upon
favorable business, financial, and economic conditions, and lowered
our rating on the notes to 'CCC (sf)' from 'B- (sf)'. The liquidity
facility currently has EUR66,338.21 outstanding and should be
exhausted on the July 2025 IPD. Once the liquidity facility is no
longer available and if the fees and receivables observed in the
April 2025 IPD occur, an interest shortfall on the class C notes
will likely occur. This could be anytime from the October 2025 IPD.
The class D notes are highly vulnerable to nonpayment of timely
interest. Based on the current fees and receivables, it means an
interest shortfall is likely to occur in the next IPD. We have
therefore lowered our rating on the class D notes to 'CC (sf)' from
'CCC (sf)'.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class A2 notes can support a higher
rating than currently assigned. Although the rating is robust to
our stressed fee assumptions, we affirmed our 'A+ (sf)' rating,
considering the lack of clarity around the increased transaction
fees, the resultant liquidity facility drawings, and the continued
reduction in pool granularity."
The swap counterparty in the transaction is NatWest Markets PLC.
Based on the combination of the replacement commitment and the
collateral posting framework, the maximum potential rating
supported by the swap counterparty in this transaction is 'AA'. All
other rating-dependent counterparties do not constrain S&P's
ratings on the notes.
E-MAC Program III Compartment NL 2008-II is a Dutch RMBS
transaction backed by Dutch residential mortgages originated by
CMIS Nederland (previously GMAC-RFC Nederland).
PEARLS (NETHERLANDS): S&P Lowers ICR to 'B-', Outlook Stable
------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit and issue
ratings to 'B-' from 'B' on Caldic Group's parent company Pearls
(Netherlands) Bidco B.V.; its outstanding EUR1.5 billion-equivalent
term loan B (TLB); and its EUR155 million revolving credit facility
(RCF). The recovery rating remains at '3'.
S&P said, "The stable outlook reflects our view that Caldic's S&P
Global Ratings-adjusted debt to EBITDA will start to decline to
approximately 8.5x-9.0x in 2025 and 8.0x-8.5x in 2026, from 9.9x in
2024, mostly thanks to gradually recovering volumes and improving
profitability driven by ramping-up synergies and lower
restructuring costs from second half of 2025.
"The downgrade reflects our base-case expectation that S&P Global
Ratings-adjusted debt to EBITDA will remain above our downside
trigger of 7.0x. Lower-than-projected profitability and higher S&P
Global Ratings-adjusted debt in 2024, led to adjusted leverage
reaching 9.9x at year-end 2024, from 9.2x in 2023, which is higher
that our previous expectation of leverage approaching 8.0x in 2024.
We believe that market conditions will remain challenging in 2025
and that Caldic will continue to incur some costs related to the
integration of GTM and Connell, leading to slower-than-expected
deleveraging, with forecast S&P Global Ratings-adjusted leverage of
8.5x-9.0x in 2025 and 8.0x-8.5x in 2026, which is above our
downside trigger of 7.0x. Moreover, the downgrade reflects that
Caldic generated negative FOCF of about EUR71 million in 2024,
worse than our previous expectation of negative EUR20 million-EUR30
million, due to higher than projected restructuring costs. We
forecast that FOCF generation will remain limited in 2025, at EUR15
million-EUR20 million, before improving in 2026 thanks to lower
restructuring costs and improving profitability.
"We believe that difficult and volatile macroeconomic environment,
further worsened by uncertainty around tariffs implementation,
could further delay market recovery for chemical distributors. We
believe the challenging business environment, with high economic
and political uncertainty, will persist in 2025 and could further
delay market recovery for the chemical distribution industry. While
the direct impact of tariffs implementation is rather limited,
considering that Caldic, similarly to other chemical distributors,
is pursuing a local for local strategy (serving local clients with
local products), we believe that volatility and uncertainty could
further pressure consumer confidence and underlying demand for
chemical products. We also note that Caldic's is significantly
exposed to industrial end-markets, which account for about half of
total sales, and are generally less resilient than life sciences
end-markets and could be negatively impacted during an economic
downturn. As such, we have revised downward our base-case scenario
for 2025-2026 and we now project stable sales in 2025, factoring
improving pricing environment and volumes recovery accelerating in
late 2025, and moderate sales increase of 2%-3% in 2026.
"The integration of Connel and GTM in one global platform is taking
longer than we initially projected, and one-off costs will continue
to weigh on profitability in 2025 and 2026. As of 2024, Caldic
incurred about EUR42 million of restructuring costs, most of which
related to IT investments to harmonize regional enterprise resource
planning and implement global platform for key corporate functions,
as well as severance costs to deliver organization synergies. This,
combined with lower volumes having a negative impact on operating
leverage, led to S&P Global Ratings-adjusted EBITDA standing at
EUR193 million and our adjusted EBITDA margin of 8.7% in 2024,
slightly up from 8.4% in 2023.
"We note that Caldic's profitability still lags that of peers
operating in the distribution of specialty chemicals and, in our
forecast, it will still take several years for the gap to narrow.
Specifically, while Caldic's S&P Global Ratings-adjusted EBITDA
margin compares similarly to that of Brenntag (at 8.5% in 2024), it
is significantly lower than other chemical distributors focused on
specialties such as Azelis and IMCD that both reported EBITDA
margin above 11% in 2024. The gap with Azelis and IMCD is also
remarkable when looking at the conversion margin (which we
calculate as EBITDA on gross profit), with Caldic reporting 36% for
2024, compared with 50% and 44% for Azelis and IMCD respectively
over the same period. We believe that such difference is mostly due
to the current integration on GTM and Connell, and the related
restructuring costs, and we project that the gap will narrow
following the completion of the integration, with synergies being
realized. Specifically, we project that restructuring costs of
about EUR25 million will continue to weight on profitability in
2025, before decreasing to EUR8 million in 2026. The company
projects a positive contribution to EBITDA of about EUR42 million
of synergies and initiatives to materialize over the next 24
months. While, in our view, such synergies could take longer than
projected to reflect fully in profitability improvements, our
base-case scenario factors some improvements coming from better
operating leverage considering gradually recovering volumes,
progressively declining one-off costs and synergies ramp-up. This
leads to our forecast that S&P Global Ratings-adjusted EBITDA
margin will improve to 9.5%-10% in 2025-2026.
"We forecast that FOCF will remain constrained in 2025 before
increasing from 2026, driven by profitability improvements, ramp-up
synergies, and lower one-off costs. In 2024, FOCF generation was
constrained by high working capital cash outflow to support
inventory, as well as restructuring costs and capex investments
related to the integration of GTM and Connell, and we believe that
such investment will partially affect cash flow generation also in
2025. We project that capital expenditure (capex) will remain
elevated at about EUR30 million-EUR35 million in 2025, still
capturing about EUR20 million of IT investments, before normalizing
to about EUR15 million-EUR16 million from 2026 onwards. For 2025,
we project neutral working capital cash outflow, considering lower
volumes in the first half of the year and gradual recovery in the
second half, which compares with a cash outflow of EUR31 million in
2024, before increasing to a cash outflow of EUR25 million-EUR35
million in 2026, in line with forecast market recovery. This leads
to our expectation that FOCF will remain constrained at EUR15
million-EUR20 million in 2025, before improving to EUR25
million-EUR35 million in 2026.
"Negative cash flow generation has lowered the cash balance for
Caldic in 2024, but the company still benefits from a solid
liquidity buffer with no significant debt maturities before 2029.
Caldic's cash and cash equivalents have declined by 43% in 2024,
standing at EUR129 million as of Dec. 31, 2024, compared with
EUR227 million in the previous year. Nevertheless, we continue to
view Caldic's liquidity as adequate, considering sources of
liquidity covering current cash needs by more than 1.5x as of March
31, 2025. We think that the cash buffer of EUR100 million and
availability of EUR125 million under the EUR155 million RCF,
combined with ample covenant headroom, provides the necessary
cushion to face further market challenges while executing its
strategy aimed at optimizing the cost base and integrating acquired
companies. We also note Caldic not having significant debt
maturities until its TLB comes due in 2029 as positive.
"The stable outlook reflects our view that Caldic's S&P Global
Ratings-adjusted debt to EBITDA will start to decline to
approximately 8.5x-9.0x in 2025 and 8.0x-8.5x in 2026, from 9.9x in
2024, mostly thanks to gradually recovering volumes and improving
profitability driven by ramping-up synergies, and lower
restructuring costs from the second half of 2025. The stable
outlook also reflects our projection that Caldic will generate
limited FOCF of about EUR15 million-EUR20 million in 2025, before
improving in 2026, and we anticipate that Caldic will maintain a
solid liquidity buffer.
"We could lower the rating if Caldic experiences a prolonged
weakening of profitability and cash flow generation due to
deteriorating market conditions or difficulties in realizing
synergies from its acquisitions. We could also lower the rating if
the company adopts more aggressive financial policies--including
debt-financed dividend recapitalizations or acquisitions. This
would lead to negative FOCF without swift prospects of improvements
and deteriorating liquidity, which could point to an unsustainable
capital structure."
S&P could raise its rating on Caldic if:
-- S&P Global Ratings-adjusted debt to EBITDA improves to below
7.0x on a sustained basis, supported by shareholders' strong
commitment to maintaining this level;
-- EBITDA interest coverage improves to clearly above 2x.
VINCENT TOPCO: S&P Affirms 'B' LongTerm ICR, Outlook Stable
-----------------------------------------------------------
S&P Global Ratings affirmed at 'B' its long-term issuer credit
ratings on Vincent Topco and Vincent Bidco B.V., as well as its
issuer credit rating on the group's first-lien debt. The '3'
recovery rating on Vermaat's term loan B will be unchanged despite
the increase in size, but S&P sees lower recovery prospects of 50%,
rather than 55%, given the higher amount of first-lien debt in the
capital structure.
The stable outlook indicates S&P's expectation that Vermaat's
EBITDA growth in 2025-2026 will reduce leverage toward 5.5x, and
that it will maintain positive free operating cash flow (FOCF) of
EUR25 million-EUR35 million per year (excluding transaction costs)
and FFO cash interest coverage above 2.0x.
The proposed transaction will improve Vermaat's debt maturity
profile and lower its interest burden. The company intends to
extend the maturity of its EUR110 million RCF to December 2029 from
June 2026. At the same time, it will extend the maturity of its
EUR320 million first-lien term loan to June 2030 from December
2026, while also increasing it to EUR477 million. The proceeds will
be used to repay EUR65 million drawn under the RCF and the EUR92
million second-lien term loan due December 2027.
The transaction replaces more-expensive second-lien debt, priced at
Euro Interbank Offered Rate (EURIBOR) plus 7.5%, with first-lien
debt. Therefore, S&P predicts that FFO cash interest coverage will
improve to 2.2x-2.5x in 2025 and 2026, from 1.8x in 2024.
S&P's forecasts indicate solid operating performance in 2025 and
2026. Specifically, total revenue growth is estimated at 11%-12% in
2025 and 6%-7% in 2026, based on organic revenue growth of 4%-5% in
2025 and 6%-7% in 2026, complemented by bolt-on acquisitions.
Organic growth will be underpinned by:
-- A further gain in market share in the Netherlands thanks to its
premium offering; for example, Vermaat recently won a contract with
the Fenix Museum of Migration in Rotterdam and expanded its
contract with Schiphol Airport;
-- Business development in France, after exiting unprofitable
contracts and turning around the business;
-- New clients in the German corporate segment, where companies
are increasing outsourcing of catering services, and from expansion
into the health care (Helios contract) and leisure segments (Jochen
Schweitzer Arena).
-- The expansion of Vermaat's Join Program, which offers flexible
catering services through a central kitchen; this is being rolled
out in Berlin in 2025 and there are plans to launch it in Paris in
2026. Since its launch in 2021, revenue from the Join Program has
increased to EUR33 million by 2024.
-- Additionally, 2025 will benefit from the full consolidation of
L&D GmbH, which was acquired in July 2024.
S&P said, "Over the next three years, we forecast that adjusted
EBITDA margins will improve by 20 to 30 basis points a year, from
14.1% in 2024. The 2024 margins were depressed by one-off
acquisition and restructuring-related costs. Going forward, lower
exceptional costs and operating leverage should support
improvements, despite full consolidation of the L&D business (which
generates lower margins) and start-up costs for new locations.
"The projected earnings growth should enable Vermaat to reduce
leverage while generating positive FOCF. We forecast that leverage
will drop to 5.8x in 2025 and 5.4x in 2026, from 6.5x in 2024 and
consider the proposed amend-and-extend transaction to be leverage
neutral. At the same time, adjusted FOCF is predicted to be
positive in 2025, at EUR15 million-EUR20 million (EUR25
million-EUR30 million excluding transaction costs), strengthening
to EUR30 million-EUR35 million in 2026. FOCF will be supported by
lower interest costs, minimal working capital requirements, and
capital expenditure (capex) comprising 2.5%-3.0% of sales
(including maintenance capex of 1.0%-1.5% of sales). Although we
have not factored in any additional acquisitions, Vermaat could
pursue bolt-ons to build scale and expand more rapidly in France
and Germany, financed by internally generated cash or additional
debt.
"The stable outlook indicates our expectation that Vermaat's EBITDA
growth in 2025-2026 will reduce leverage toward 5.5x, and that it
will maintain positive FOCF of EUR25 million-EUR35 million per year
(excluding transaction costs) and FFO cash interest coverage above
2.0x.
"We could lower the rating if the company's reported revenue or
EBITDA is weaker than we currently expect; for example, because it
loses contracts or its ability to pass on cost increases is
constrained." S&P could also take a negative rating action if
Vermaat adopts a more-aggressive financial policy, undertaking
material debt-funded acquisitions or shareholder distributions such
that:
-- Debt to EBITDA rises above 7.5x;
-- FFO cash interest coverage remains persistently below 2x; or
-- FOCF is persistently weak or negative and we see limited growth
prospects.
Although S&P considers an upgrade unlikely over the next 12 months,
it could consider raising the rating if:
-- Vermaat increased its revenue and EBITDA base faster than we
anticipate, while maintaining stable profitability and materially
positive FOCF; and
-- The shareholders committed to and maintained a prudent
financial policy, so that adjusted debt to EBITDA was comfortably
below 5x.
===========
R U S S I A
===========
FERGANA REGION: S&P Affirms 'B+' ICRs & Alters Outlook to Positive
------------------------------------------------------------------
S&P Global Ratings, on May 30, 2025, revised the outlook on its
'B+' local and foreign currency long-term issuer credit ratings on
Uzbekistan's Fergana Region to positive from stable and affirmed
the ratings.
Outlook
The positive outlook for Fergana reflects S&P's view that there is
potential for the region's growth and average income levels to
strengthen further.
Fergana currently has no debt; S&P assume that the region will not
incur debt to commercial lenders in the near future because doing
so would require a change in the national regulations. These
prohibit Uzbekistani local governments from undertaking commercial
borrowing.
Downside scenario
S&P could revise the outlook to stable or lower the ratings if a
change in the relationship between Fergana and Uzbekistan's central
government caused support to the region to weaken, allowing a
deterioration in the region's budgetary performance or debt
position.
Upside scenario
S&P could raise its ratings on Fergana over the next 12 months if
the region's economic performance remained resilient; it continued
its efforts to increase economic diversification, international
investment, and average incomes; and its debt metrics remained
strong.
Rationale
S&P said, "Uzbekistan has been implementing economic reforms since
2017 and we expect this momentum to continue over the next few
years. The ongoing reforms should bolster the resilience of
Uzbekistan's economy while enabling it to maintain comparatively
strong growth rates. We forecast that national GDP growth will
average 5.6% over 2025-2028."
Fergana Region is likely to benefit, given that the central
government plays a key role in providing it with financing. The
central government not only provides transfers but also directly
finances most public sector local investment taking place in the
region--over 80%, as of 2024.
S&P said, "Over the next two to three years, we anticipate that
Fergana's economic growth will endure, supporting a rise in average
incomes from the currently very low levels. The region has already
seen its average GDP per capita rise to $1,800 in 2024 from about
$1,200 in 2019. Its growth prospects are supported by ongoing
investments, including projects to boost tourism, expand
agricultural exports, and encourage the production of vehicles and
agricultural machinery. Our forecasts indicate that Fergana's
economic growth will broadly mirror that of Uzbekistan, and will
average 5.5%-6.0% in real terms through 2027."
Fergana has a strong debt position, after repaying all its
outstanding debt earlier in 2025. Under Uzbekistani law, local
governments are only allowed to borrow from the central government.
Accordingly, the loans that have been repaid were all extended by
the central government and were linked to various infrastructure
and energy projects in the region. S&P's baseline scenario assumes
that Fergana will maintain a balanced budget in compliance with
national regulations and will not resort to borrowing over the next
one to two years.
S&P said, "Our ratings on Fergana are still constrained by the very
volatile and centralized nature of Uzbekistan's institutional
framework for local and regional governments (LRGs). Key decisions
are taken at the central government level, and are difficult to
predict. Central government controls limit the region's ability to
influence its budgetary performance and we consider Fergana's
broader financial management to be weak, with limited planning
beyond the current year's budget."
Uzbekistan's local governments operate in a highly centralized and
volatile institutional environment and income levels in Fergana
remain low, despite recent improvements
In S&P's view, Uzbekistan's local governments have limited ability
to collectively influence the policies adopted by the central
government. This exposes them to the risk of unexpected policy
shifts.
Some decentralization of power has taken place since 2016, when
former president Islam Karimov died after 25 years in power. For
example, a higher proportion of taxes are now allocated to local
budgets and local governments have more discretion over how to
spend revenue collected in excess of the budgeted amounts (for
instance, revenue from value-added tax).
However, the effect has been somewhat offset by several decisions
that shift responsibilities and expenditure to the central
government level from the local level. Some of these decisions
appear to have been made with limited advance planning. For
example, in 2024, the central government took over making benefit
payments to families with children and those in poverty. It also
took charge of investing in the construction of new schools and
kindergartens.
S&P said, In our view, Fergana's financial management team has
limited ability to reliably plan spending and make policy decisions
because of the system's highly centralized nature and the frequent
changes of direction imposed by central government. The region's
management started to implement medium-term planning in 2018, but
discrepancies between its forecasts at the beginning of the year
and actual financial outcomes remain frequent. In our view, debt
and liquidity management practices remain at an early stage of
development. These factors constrain the region's
creditworthiness.
"Fergana's economy is still relatively weak by international
standards. Despite improvements, per capita income remains low
($1,800 in 2024). That said, we expect it to strengthen further
over the next two to three years. The regional economy still
concentrates on less-productive areas of agriculture and, although
Fergana accounted for 11% of Uzbekistan's population in 2024, it
constituted just 6.3% of Uzbekistan's GDP."
Fergana's local government plans to attract additional
international investments into the region. According to the
authorities, the region attracted foreign investments worth $1.8
billion in 2024 and expects to see further growth in 2025. The aim
is to expand production in key sectors such as agriculture,
textiles, construction materials, and chemicals. The regional
government also plans to expand its manufacturing sector and has
attracted foreign investment to support the production of passenger
cars and agricultural vehicles. Uzbekistan's laws allow foreign
investors that operate in Fergana to receive multiple tax breaks
based on the total size of their investment, while also getting
help connecting to regional infrastructure. Overall, S&P
anticipates that the region's economy will show resilient growth in
real terms, averaging 5.5%-6.0% through 2027, in line with the
national growth rate.
S&P said, "We see a risk that the U.S. and EU could apply secondary
sanctions to Uzbekistani companies that do business with Russia.
Several Uzbekistani companies involved in trading electronic and
telecommunications equipment and goods in the defense industry have
already been sanctioned since 2022. We also note that, according to
assertions by independent public investigative reports, some cotton
cellulose produced in Fergana is supplied to the Russian military
sector.
"We forecast that Fergana will maintain a balanced budgetary
performance and will have no direct debt through 2027
Fergana complies with Uzbekistani legislation that prohibits it
from running any deficits (based on local definitions). Our
adjusted figures may diverge from those published by Fergana
because we don't consider budget surpluses from the previous years
and loans from the central government to be new revenue sources,
nor do we consider debt repayments to be expenditure."
Based on S&P Global Ratings' definitions, Fergana reported a
surplus after capital accounts of close to 1% in 2024, bolstered by
strong intake of personal and corporate income taxes. Previously,
it ran an average deficit after capital accounts of 0.8% over
2022-2023. The region predominantly used available cash and
advances from the central government to cover these deficits. The
advances amounted to Uzbek sum (UZS) 51 billion (equivalent to $4
million) in 2022 and UZS65 billion ($5 million) in 2023.
S&P said, "We project Fergana's average balance after capital
accounts through 2026 to be marginally positive. That said, revenue
sources are likely to be volatile, given the central government's
record of frequently revising tax rates, expenditure
responsibilities, and transfer amounts.
"In our view, Fergana has substantial infrastructure needs, which
constrain its economic development prospects and somewhat limit its
budget flexibility. However, the funding backlog is unlikely to
lead to a material accumulation of debt, given that the region is
prohibited from commercial borrowings. Currently, Fergana does not
have any direct debt and we do not expect this to change within the
next two years.
"We understand that Fergana oversees some enterprises that are
owned by the central government but operate in the region. Fergana
itself does not have a stake in these regional enterprises, and the
region has not historically provided subsidies, capital injections,
or extraordinary support to companies owned by the central
government.
"We assume Fergana's liquidity position will remain solid, given
the absence of direct debt. However, the region's debt service
coverage ratio could weaken in the long term if it were to attract
debt, contrary to our base-case scenario."
Fergana is currently eligible to receive central government budget
loans to cover liquidity shortages. Over 2021-2024, it received
loans totaling UZS198 billion for this purpose, but it repaid these
loans in full in 2025, ahead of schedule. The loans were at
favorable interest rates with cumulative interest payments of just
UZS3.7 billion on UZS198 billion of debt. In S&P's view, the region
has limited access to external funding, given that it has no
history of borrowing from nongovernment institutions and
Uzbekistan's capital market and banking sector are underdeveloped.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed; Outlook Action
To From
Fergana Region
Issuer Credit Rating B+/Positive/-- B+/Stable/--
GROSS INSURANCE: Fitch Affirms 'B+' Insurer Fin. Strength Rating
----------------------------------------------------------------
Fitch Ratings has affirmed Uzbekistan-based Gross Insurance Company
JSC's Insurer Financial Strength (IFS) Rating at 'B+'. The Outlook
is Stable.
The rating reflects the company's good competitive position, weak
capitalisation, adequate, but strengthening financial performance,
and lower investment risk relative to peers.
Key Rating Drivers
Leading Domestic Insurer: Gross is a leading domestic insurer, with
good diversification, competitive positioning, and a moderate
business risk profile. In 2024 it was among the top four insurers
by gross premiums, with established operations in property and
motor damage insurance. It also offers financial risk, marine,
aviation, transport (MAT), liability, and various other insurance
products.
The moderate business risk profile reflects a diversified risk
appetite, highlighted by increased inward reinsurance and exposure
to financial risk insurance. Fitch views Gross's operating scale as
limited compared with international peers', with gross written
premiums (GWP) in 2024 totalling UZS600 billion (around USD47
million).
Weak Capital Position: Gross's capital position, as assessed by
Fitch's Prism Global model, was 'Weak' at both end-2024 and
end-2023, due to high asset risks stemming from its investment
portfolio and growth strategy. At end-1Q25, the regulatory solvency
margin decreased to 111%, from 115% at end-2024 and 118% at
end-2023, due to pressure from growing business volumes.
Good Financial Performance: Gross continued strong financial
performance in 2024, after the divestment of its life insurance
subsidiary. Net income return on equity was 32% in 2024, up from
24% in 2023 and 6% in 2022, driven by robust investment income.
However, underwriting results remain limited due to high
acquisition and operating expenses that largely offset the premiums
generated.
Investment Risks Commensurate with Rating: Gross primarily invests
in fixed-income instruments, mainly through bank deposits placed
with state-owned and large private local banks, which are rated in
the 'B' and 'BB' categories. The proportion of equity and bond
investments, including those in affiliated entities, is decreasing.
Consequently, Gross's risky assets-to-capital ratio fell to 30% at
end-2024, from 56% at end-2023.
Catastrophe Risk Not Being Modelled: Gross has a large exposure to
catastrophic events, similar to its regional peers. It lacks
special catastrophe insurance and does not conduct internal
evaluations to estimate the maximum potential impact on its
business portfolio. The company's capital is at risk of substantial
unforeseen losses due to the lack of measures to mitigate the
effects of catastrophes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A weakened business profile on a sustained basis, manifested, for
example, in a higher business risk profile or a lower market share
- Consistently negative return on equity signalling a weakening of
financial performance
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Capital strengthening as demonstrated by a Prism score of
'Adequate' on a sustained basis and a regulatory solvency margin
with substantial buffers above the regulatory requirement
- Major strengthening of the company profile
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Gross Insurance
Company JSC LT IFS B+ Affirmed B+
IPOTEKA BANK: S&P Affirms 'BB-/B' ICR & Alters Outlook to Positive
------------------------------------------------------------------
S&P Global Ratings, on May 28, 2025, revised its rating outlook on
Uzbekistan-based Ipoteka Bank JSCM to positive from stable and
affirmed its 'BB-/B' long- and short-term issuer credit ratings on
the bank.
S&P said, "We expect the bank's RAC ratio could improve to about
11.0% by year-end 2025 and remain potentially at about 10%. The
ratio increased to 9.5% at year-end 2024 from 7.6% a year earlier,
supported by earnings recovery, full earnings retention, and no
growth in lending. We expect the planned capital injection of $33
million into Ipoteka Bank from International Finance Corp. (IFC) in
line with the privatization agreement, planned moderate loan growth
of about 15%, OTP's focus on restoring profitability, and moderate
cost of risk in unsecured consumer lending are likely to further
boost the RAC ratio to about 11% by year-end 2025. However, because
Ipoteka Bank's medium-term strategic target is to be the top bank
in retail lending, we expect loan growth will accelerate after 2025
to at least the system average, which we forecast at 20%-25% over
the next 24 months. We also assume the bank will retain almost all
its earnings or pay limited dividends. Thus, we expect that our RAC
ratio could gradually decline to about 10% in 2026-2027."
Ipoteka Bank has largely completed its integration with OTP group.
It therefore now benefits from the group's expertise in retail
lending and risk management. The OTP group is an established
banking group in Europe with a wide presence in various markets,
including emerging ones. The parent has strengthened Ipoteka's
corporate governance standards, which differentiates it positively
from other banks in Uzbekistan. Since OTP acquired Ipoteka Bank, it
has substantially increased staff and upgraded policies and
procedures in key functions of risk management and compliance,
collections, cyber security, and IT. This should put Ipoteka Bank
at the forefront of best practices among Uzbek banks.
S&P said, "We expect Ipoteka Bank will gradually work out its
legacy problem loans with the support of OTP Group. We expect the
bank will be able to reduce its stage 3 loans to 10%-15% of the
loan book by year-end 2027 from 20.5% at year-end 2024, although
they will still exceed the sector average." Provisions covered
stage 3 loans by 85% at year-end 2024. The bank has started active
workout of corporate problem loans through sales to other banks and
investors, court cases, and restructuring. Stage 3 loans in the
corporate and small and midsize enterprise portfolio represented
49% of the loan book at year-end 2024.
Ipoteka Bank's strategic goal is to develop into a self-funded
expanding business. In 2024, the bank's customer deposits increased
46%, mainly from legal entities, and in line with its self-funding
goal. Its stable funding ratio improved to 127% by year-end 2024
from 103% a year earlier. Nevertheless, deposits and credit lines
from Uzbekistan's government comprised about 36% of Ipoteka Bank's
funding at year-end 2024. In our view, Ipoteka Bank could benefit
from OTP's support in getting access to both the domestic and
external funding markets to ensure the development of retail
unsecured lending.
S&P said, "The positive outlook reflects our expectation that, over
the next 12-18 months, Ipoteka Bank will continue strengthening its
capitalization and cleaning its legacy loan portfolio, benefitting
from its ownership by OTP Bank.
"We could revise the outlook to stable over that period, if the
bank's growth rates exceed our expectations or the bank starts
paying large dividends that deplete its capital. Stalled progress
in the recovery of problem loans and/or deterioration of asset
quality in the retail segment could also prompt a negative rating
action."
An upgrade of Ipoteka Bank over the next 12-18 months would hinge
on an upgrade of the sovereign, provided that the bank can maintain
a RAC ratio higher than 10%, on a sustainable basis, and continue
improving its asset quality; or we see increased prospects of
support from OTP Bank.
NATIONAL BANK: S&P Affirms 'BB-' ICR, Outlook Positive
------------------------------------------------------
S&P Global Ratings revised to positive from stable its outlook on
two Uzbekistan-based financial institutions:
-- National Bank For Foreign Economic Activity Of The Republic of
Uzbekistan JSC (NBU); and
-- KDB Bank Uzbekistan JSC (KDB Uzbekistan).
At the same time, S&P affirmed its 'BB-/B' long- and short-term
issuer ratings on the two banks.
S&P said, "The rating actions follow our revision of the outlook on
Uzbekistan on May 23, 2025. In our view, positive economic
momentum, combined with government reforms in support of its
modernization agenda, will lead to a gradual improvement in the
efficiency and corporate governance of Uzbekistan's banking
sector." This will help sustain the sector's business growth and
profitability.
Uzbekistan's ongoing economic reforms, combined with government
investments and remittance inflows, support the country's strong
growth outlook. S&P forecasts that real GDP will expand by 5.6% on
average over 2025-2028. In recent years, the authorities have
consistently endeavored to liberalize and improve the resilience of
Uzbekistan's economy, while enhancing governance and macroeconomic
management.
Continued implementation of energy reforms remains high on the
government's priority list. To address issues related to energy
security, the high fiscal cost of subsidies, and rising gas
imports, the government started raising electricity and gas tariffs
in October 2023. The authorities aim to ensure that energy pricing
reflects costs by 2027. Lower subsidies and favorable gold prices
should help Uzbekistan slowly reduce its fiscal deficit to 3.0% of
GDP, on average, over 2025-2028, from 4.9% in 2023 and 3.3% in
2024.
The government's development plans require sizable debt-financed
investments. S&P said, "We therefore anticipate that Uzbekistan's
net general government and external leverage will continue to
increase, although at a slower pace than before. The current
account deficit moderated to 5.0% of GDP in 2024, and we predict a
slight widening of deficits--to 5.7% of GDP, on average, over
2025-2028--assuming a decline in gold prices and elevated import
growth to support public investment projects. Net general
government debt remains moderate, and we forecast it will reach 34%
of GDP by the end of 2028."
At the same time, economic wealth, measured by GDP per capita, is
among the lowest in the region and the country has relatively
limited monetary policy flexibility. Despite the recent reforms,
S&P considers policy responses difficult to predict, given the
highly centralized decision-making process, still-developing
accountability mechanisms, and limited checks and balances between
institutions. As a result, banks operating in Uzbekistan are
exposed to a high level of risk.
Banking sector performance is likely to remain resilient over the
next 12 months. S&P anticipates that measures introduced by the
regulator to limit aggressive retail lending will result in more
modest overall lending growth of 18%-20% in nominal terms during
2025 (compared with an average of 30% a year over 2020-2023). That
said, the growth in retail and small and midsize enterprise
business remains key to bank profitability.
S&P said, "We anticipate that the level of nonperforming loans
(NPLs) in the system will remain elevated, but relatively stable.
Loans generated during the period of aggressive lending growth are
becoming seasoned, contributing to the persistently high level of
problem loans in the system. The volatile performance of banks'
large corporate exposures, including loans to government-related
entities, the presence of loans issued under government influence,
and only gradually improving underwriting standards also affect the
banking system's asset quality dynamics. We estimate that NPLs will
represent 6.5%-7.0% of total loans in 2025 and that credit costs,
at 1.8%-2.0%, will be close to the levels seen in 2024."
The government aims to make progress in privatizing state assets,
including state-owned banks. Ipoteka Bank was sold in 2023 and the
authorities now aim to privatize SQB and Asaka Bank, two large
state-owned banks. Subsequently, a few of the smaller state-owned
banks could also face privatization. S&P said, "However, we
consider the privatization of state-owned banks is a challenge and
will take time. Transforming state-owned banks, changing their
strategy to be more dynamic and market-oriented, and improving
their profitability and efficiency is required if they are to be
attractive to investors. Therefore, we anticipate that the
structure of the sector will remain relatively stable over the next
one to two years; state-owned banks will continue to dominate the
sector and incumbent banks that have established market positions
will be able to maintain them."
S&P said, "Our banking industry country risk assessment for
Uzbekistan's banking sector is unchanged at '8' (on a scale of 1 to
10, with '10' being the riskiest). Our anchor for banks operating
in Uzbekistan remains at 'b+'. This has no impact on our rated
banks' stand-alone credit profiles. We do not rate financial
institutions in Uzbekistan above the foreign currency sovereign
ratings, given the direct and indirect impact that sovereign
distress would have on domestic banks' operations."
National Bank for Foreign Economic Activity of the Republic of
Uzbekistan JSC
Primary credit analyst: Natalia Yalovskaya
Outlook
The positive outlook on NBU mirrors that on the sovereign. It also
reflects our expectation that NBU will maintain its leading
position in the Uzbekistani banking sector, and that its strong
links with the government will continue to support its diversified
business profile, adequate capital buffers, and the stability and
diversification of its funding base over the next 12 months.
Upside scenario: S&P would raise the ratings on the bank if it
takes a similar action on the sovereign.
Downside scenario: S&P would revise the outlook back to stable if
it takes a similar action on the sovereign.
To From
Issuer credit rating BB-/Positive/B BB-/Stable/B
SACP bb bb
Anchor b+ b+
Business position Strong (+1) Strong (+1)
Capital and earnings Adequate (+1) Adequate (+1)
Risk position Adequate (0) Adequate (0)
Funding and liquidity Adequate and Adequate and
adequate (0) adequate (0)
Comparable ratings analysis 0 0
Support 0 0
ALAC support 0 0
GRE support 0 0
Group support 0 0
Sovereign support 0 0
Additional factors -1 -1
ALAC--Additional loss-absorbing capacity.
GRE--Government-related entity.
SACP--Stand-alone credit profile.
KDB Bank Uzbekistan JSC
Primary credit analyst: Annette Ess
Outlook
The positive outlook on KDB Uzbekistan mirrors that on the
sovereign and reflects S&P's view that, over the next 12 months,
the bank will adhere to its business model and maintain a limited
risk appetite, while continuing to display solid profitability and
very strong capitalization.
Upside scenario: An upgrade would depend on a sovereign upgrade,
assuming that KDB Uzbekistan's parent, Korea Development Bank,
maintains its commitment to provide extraordinary support to its
Uzbekistani subsidiary if needed, and that KDB Uzbekistan maintains
its current stand-alone creditworthiness.
Downside scenario: S&P would revise the outlook back to stable if
it takes a similar action on the sovereign.
To From
Issuer credit rating BB-/Positive/B BB-/Stable/B
SACP bb bb
Anchor bb- bb-
Business position Moderate (-1) Moderate (-1)
Capital and earnings Very Strong (+2) Very Strong (+2)
Risk position Adequate (0) Adequate (0)
Funding and liquidity Adequate and Adequate and
adequate (0) adequate (0)
Comparable ratings analysis 0 0
Support 0 0
ALAC support 0 0
GRE support 0 0
Group support 0 0
Sovereign support 0 0
Additional factors -1 -1
ALAC--Additional loss-absorbing capacity.
GRE--Government-related entity.
SACP--Stand-alone credit profile.
Ratings list
JSC National Bank For Foreign Economic Activity Of The Republic
Of Uzbekistan
Ratings Affirmed; Outlook Action
To From
JSC National Bank For Foreign Economic Activity Of The Republic
Of Uzbekistan
Issuer Credit Rating BB-/Positive/B BB-/Stable/B
Ratings Affirmed
JSC National Bank For Foreign Economic Activity Of The Republic
Of Uzbekistan
Senior Unsecured BB-
KDB Bank Uzbekistan JSC
Ratings Affirmed; Outlook Action
To From
KDB Bank Uzbekistan JSC
Issuer Credit Rating BB-/Positive/B BB-/Stable/B
===========
S W E D E N
===========
AINAVDA PARENTCO: S&P Assigns 'B' LongTerm ICR, Outlook Stable
--------------------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term issuer credit rating
on end-to-end mission-critical IT solutions provider Ainavda Bidco
AB (Advania) and the 'B' issue rating and '3' recovery rating on
the term loans. S&P also assigned its 'B' long-term issuer credit
rating on Ainavda Parentco AB.
The stable outlook reflects S&P's expectation that Advania's debt
to EBITDA will decline to about 6.4x by the end of 2025, from 8.4x
on a pro forma basis as of year-end 2024; FOCF will also turn
sustainably positive, supported by revenue and EBITDA growth,
including a sharp decline in exceptional expenses, and an absence
of large debt-financed acquisitions.
Advania acquired U.K.-based CCS Media and Servium Ltd., as well as
the remaining minority share in its subsidiary Solv AS (Norway) in
2024. The acquired companies contribute combined sales of
approximately Swedish krona (SEK) 4.1 billion (SEK3.8 billion from
CCS Media).
Credit ratios for 2024 were weaker than S&P's previous base case
and beyond what S&P deems appropriate for the current rating
because of the debt issued for the CCS Media acquisition and
exceptionally high nonrecurring costs related to refinancing,
integrations, and restructurings.
S&P said, "We expect Advania to deleverage in 2025 after reaching
8.4x pro forma adjusted leverage peak in 2024. The company's
adjusted debt increased by about SEK2 billion in 2024 mainly
because of the SEK1.2 billion debt raised to finance the SEK2.6
billion CCS Media acquisition (with as SEK1.4 billion equity). The
adjusted debt also increased due to revolving credit facility (RCF)
drawings of about SEK700 million to finance other bolt-on
acquisitions and for general corporate purposes, and to a lesser
extent negative currency effects and higher lease liabilities.
This, coupled with exceptionally high nonrecurring expenses of
about SEK515 million (mainly related to recent acquisitions and
integrations, full-time equivalent (FTE) reductions, migration of
internal IT systems, and the refinancing), resulted in an increase
in S&P Global Ratings-adjusted debt to EBITDA to 8.4x on a pro
forma basis, from 7.4x in 2023, and above our previous expectation
of 6.1x. This surpasses our leverage threshold of 7.0x for the
current rating, however, absent any additional large debt-financed
acquisitions, we expect a deleveraging to about 6.4x at year-end
2025, which is commensurate with the rating. This will primarily be
driven by a material reduction in nonrecurring costs to SEK130
million in 2025; a recovery in the VAR segment (resale of software
products and vendor-agnostic hardware) after an organic revenue
decline of about 8% in 2024; and a continued solid performance in
the two other segments, managed services and IT infrastructure. We
also note that the company successfully completed a repricing of
its existing term loan B (TLB), in all currency tranches in
February 2025, reducing the interest rate by 50 basis points
(bps)-75 (bps). In conjunction with the repricing, Advania
completed a EUR50 million add-on to its TLB to repay outstanding
RCF drawings. We do not anticipate dividend distributions or large
debt-funded acquisitions in the next two-to-three years."
Advania's position in the U.K. is strengthened through its
acquisition of CCS Media. Advania has expanded rapidly through
acquisitions since 2021, when it was acquired by sponsors,
including four transformational and 13 bolt-on acquisitions, and an
expansion into the U.K. As a result, Advania saw its revenue
increase by more than 3.0x since 2021 to SEK18 billion on a pro
forma basis in 2024. Advania acquired U.K.-based VARs CCS Media and
Servium, as well as the remaining minority share in its subsidiary
Solv AS (Norway) in 2024. The acquisition has strengthened
Advania's position in the U.K market through increased scale,
breadth and depth of offering, cross-selling opportunities, and
expanded partnerships with vendors. S&P thinks that Advania overall
has a good foundation to gradually strengthen revenue,
profitability, and FOCF in the coming years.
Advania benefits from a resilient business model through economic
cycles with low capital expenditure (capex) needs. The large and
expanding IT market, tailwinds from digitalization, a trend toward
outsourcing, and the mission-critical nature of the company's
software and services, supports our revenue growth scenario. S&P
said, "That said, we are yet to see a track record of sustainably
solid organic growth following all the recent acquisitions. Organic
revenue was flat in 2024, compared to our previous expectation of
about 7% growth, primarily driven by a 8% decline in the VAR
segment especially among clients from the private sector, partially
offset by growth in the managed services segment. We expect the VAR
segment to recover in 2025 and contribute to a consolidated organic
growth of about 7%-8% in 2025."
Advania generates modest profitability and cash flow. Advania's
EBITDA margin of about 10% is lower than global IT companies like
International Business Machines Corp (IBM)., Capgemini SE, and
Accenture PLC, which generate higher margins on average (10%-15%).
Advania is focused on the mid-market segment (companies between 500
and 3,000 employees) in Northern Europe, and therefore faces
limited competition from these large IT players, however, due to
its scale and the high exceptional costs in recent years, its
profitability is below the range for average profitability for
peers in the same industry. S&P said, "Furthermore, we think the
large portion of revenues from the VAR segment (reseller of
hardware and software products), and an exposure to the public
sector (about half of total revenues) also dilutes the overall
margin. However, as we expect exceptional costs will gradually
decrease in 2025 and beyond, profitability should increase
gradually and exceed 10% from 2025 and beyond. We also forecast
that FOCF will turn positive in 2025, from negative in 2024, but
will remain modest at about SEK400 million."
S&P said, "The stable outlook reflects our expectation that
leverage will decrease to about 6.4x by the end of 2025, and that
FOCF will turn positive at about 3%-4% of debt, supported by
revenues and EBITDA growth, including a sharp decline in
exceptional expenses, and no debt-funded acquisitions. We also
expect the company to comfortably service its debt, with EBITDA
cash interest coverage of at least 2.0x.
"We could lower the rating if FOCF to debt remains below 2%-3%,
debt to EBITDA remains above 7.0x, or if EBITDA cash interest
coverage is below 2.0x. This could occur if Advania incurred
additional large debt-funded acquisitions, or if exceptional costs
remain elevated -- for instance to integrate CCS. The weaker credit
metrics could also stem from operational issues that impede its
organic revenue growth.
"Rating upside is unlikely in the next 12 months. However, we could
raise the rating if FOCF to adjusted debt increases toward 10%
together with adjusted debt to EBITDA declining below 5.0x.
Additionally, an upgrade would hinge on Advania's adherence to a
financial policy that sustainably supports those metrics."
VOLVO CARS: S&P Affirms 'BB+' LT ICR & Alters Outlook to Negative
-----------------------------------------------------------------
S&P Global Ratings revised its outlook on Volvo Cars to negative
from stable. At the same time, S&P affirmed its 'BB+' long-term
issuer credit rating and our 'BB+' issue rating on the company's
unsecured debt. The recovery rating is unchanged at '3'.
The negative outlook indicates S&P's view that Volvo Cars will face
many challenges in the next two years, threatening its recovery to
a sustainable growth path. In this context, the seamless delivery
of the cost reduction program may not be sufficient, particularly
if the 2027 U.S. sales ban is not lifted.
U.S. import tariffs, a potential revision of the electric vehicle
(EV) tax credits, a 2027 sales ban on cars by Chinese controlled
automakers, and heightened competition in China will impair Volvo
Cars' growth prospects for 2025-2027.
As a result, S&P expects Volvo Cars' profitability and cash
generation after investments to come under pressure in 2025-2026,
partly alleviated by a substantial cost reduction program expected
to impact group EBIT from 2026.
Among EMEA-based original equipment manufacturers, Volvo Cars would
be the worst affected by U.S. trade tariffs. Sales in the U.S.
represented a considerable 16% of Volvo Cars' global sales in 2024,
and except for one model (the EX90 produced in Charleston), the
remainder is imported and thus subject to import tariffs. If U.S.
import tariffs are set at 25%, S&P estimates Volvo Cars' reported
EBIT to be hit by Swedish krona (SEK) 6 billion-SEK7 billion in
2025 or SEK 10 billion on an annual basis before considering any
mitigating actions. This represents approximately 40% on average of
our pre-tariff adjusted EBITDA for 2025 and 2026.
In the short term, Volvo could mitigate the impact through selected
price increases and some benefits from the management of used cars.
Even after mitigation, however, profitability and cash flow
generation would materially deviate from our earlier projections,
with adjusted EBITDA down to 5.1% from 6.4% in 2025 down from 7.8%
in 2024. In this scenario free operating cash flow (FOCF) would
swing back into the negative territory in both 2025 (negative SEK10
billion versus positive SEK1.2 billion previously) and 2026
(negative SEK4 billion, versus previously SEK 3.5 billion) as
investments remain high. S&P said, "The indirect impact of import
tariffs on U.S. sales is more difficult to assess, and we have
reflected our concerns on affordability on the assumed growth of
sales in the U.S. within our base-case scenario. Volvo's sales in
the U.S. largely focus on its SUV models (XC40, XC60, and XC90) and
are in direct competition with comparable models by BMW and
Mercedes (also impacted by the tariffs but to a lesser extent)."
Volvo's announced SEK18 billion plan should help to protect
mid-term profitability and cash flow. Volvo is pioneering an
ambitious cost reduction plan that aims to reduce its variable cost
(for SEK3 billion) and indirect spending (SEK 5billion). As part of
the plan, the group unveiled 3,000 redundancies (including
consultants) across the group, or 15% of the total office-based
workforce globally. This will result in a one-time charge of up
SEK1.5 billion on the second-quarter 2025 financials and effects
starting form the end of this year into 2026.
In addition, the plan includes measures worth SEK10 billion from
the reprioritization of capital expenditure (capex) and optimized
inventory management, which, however, would not interfere with the
ambition to fill the capacity of the Charleston plant (150,000 per
year) with another model, likely a conventional plug-in hybrid
electric vehicle (PHEV), on top of the EX90 and Polestar 3 produced
for the U.S. and for Europe. Using Charleston for exports could
support importing with the drawback system. In our base-case
scenario, the plan should allow the group to recover credit metrics
in line with 2024 only by 2027, provided that by that time, the
U.S. ban against cars manufactured by automakers controlled by
Chinese stakeholders will have been diluted.
Volvo Cars shares the pain of international premium brands in
China. Volvo's sales in China were down 8.1% in 2024 and 12% in the
first quarter 2025. Like other legacy premium brands, Volvo Cars is
penalized by the offensive of Chinese competitors entering the
premium segment to escape the fierce price war in the world's
largest market. Volvo's local battery electric vehicle (BEV)
offering--mainly comprising the SUV B EX30, the EM90, the ES90
sedan and the EX90--lacks momentum, especially compared to its
parent Geely Group's multi-brand offering, based on preliminary
stats for 2025 year-to-date (source: EV Volumes). The group's
PHEVs, particularly the XC60, enjoy better fortunes thanks to a
more supportive market trend. This has led Volvo to launch another
long-range PHEV this year, before the arrival of the all-new full
battery EX60 scheduled to hit the market next year.
The negative outlook on Volvo Cars reflects its large exposure to
U.S. import tariffs and the increasing marginalization in the
Chinese market, which together will bring profitability and cash
flow generation under pressure in 2025 and 2026, despite the
mitigating action plan the group already announced to the market.
S&P said, "We could lower our rating on Volvo Cars if we lowered
our 'BBB-' long-term issuer credit rating on its parent Zhejiang
Geely Holding Group Co. (Geely). As Volvo Cars represents a
material share of the enlarged group's adjusted EBITDA, this could
happen if the trade war exacerbated or a material erosion of
Volvo's market position in Europe and the U.S beyond our current
base-case assumptions. We could also lower the rating if the group
had no headroom to mitigate the risk of a proposed 2027 U.S. ban on
automakers controlled by a Chinese entity, as this would lead to a
loss of access to the U.S. market, which accounted for 16% of
Volvo's sales in 2024.
"We could revise the outlook to stable if Volvo Cars successfully
delivered on its cost reduction and cash protection plan, reverting
the drag on profitability and cash flow generation we anticipate
for 2025 and 2026. We would expect to observe a trajectory toward
stronger profitability and FOCF generation swinging back to
positive territory."
===========
T U R K E Y
===========
AKBANK TAS: Fitch Affirms BB- Foreign Currency IDRs, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Akbank T.A.S.'s Long-Term
Foreign-Currency (LT FC) and Long-Term Local-Currency (LT LC)
Issuer Default Ratings (IDRs) at 'BB-'. The Outlooks are Stable.
Fitch has also affirmed the bank's Viability Rating (VR) at 'bb-'.
Key Rating Drivers
Standalone Creditworthiness Drives Ratings: Akbank's IDRs are
driven by its standalone creditworthiness, as expressed by its VR
of 'bb-'. The VR is one notch above the operating environment score
for Turkish banks and reflects the bank's good financial metrics,
solid domestic franchise, and comfortable FC liquidity and capital
buffers. The VR also reflects the concentration of operations in
Turkiye. The Stable Outlooks on the IDRs mirror those on the
sovereign.
Improving but Challenging Operating Environment: The normalisation
of monetary policy in Turkiye has reduced macrofinancial stability
risks and external financing pressures. However, political
developments have led to increased financial market volatility,
which, if sustained, could disrupt disinflation and economic
rebalancing. Banks remain exposed to high inflation, potential
further Turkish lira depreciation, slowing economic expansion and
multiple macroprudential regulations, despite simplification
efforts.
Solid Domestic Franchise: Akbank is a domestic systemically
important bank (end-1Q25: 8% of sector assets), serving large local
and multi-national companies, mid-sized companies and SMEs, and is
also an important lender in the retail subsector. The bank's
well-established franchise, underpinned by its strong brand
recognition and customer base, supports its business generation
prospects and earnings.
Turkish Operating Environment Risks: Akbank's risk management
framework is well-developed, supported by appropriate underwriting
standards and adequate risk controls. However, the bank's risk
profile remains sensitive to the Turkish operating environment,
given the concentration of its operations in the domestic market.
Asset Quality Risks: Akbank's Stage 3 loans ratio increased to 3.2%
at end-1Q25, from 2.7% at end-2024, reflecting non-performing loans
(NPL) inflows from credit cards and unsecured consumer lending,
despite strong collections. Reserve coverage of impaired loans was
113%. Fitch expects asset quality to continue to deteriorate
moderately in 2025 as NPL inflows continue to rise across the
board. Fitch forecasts Akbank's NPL ratio to approach 4% over
2025-2028.
Resilient Profitability: Akbank's operating profit improved to 4.2%
of risk-weighted assets (RWAs) in 1Q25 (2024: 3.4%), which was
higher than the peer average, on slightly higher net interest
margin (swap cost adjusted), strong fee income generation and
trading income. Fitch expects Akbank's operating profit to be about
4.5% of RWAs in 2025 and improve to above 5% in 2026, following
further policy rate cuts. Earnings remain sensitive to Turkiye's
regulatory environment.
Capitalisation Stronger than Peers': Akbank's lower common equity
Tier 1 (CET1) ratio of 13.9% at end-1Q25 and, net of forbearance,
of 12.5% (end-2024: 15.9%) largely reflected operational risk
weight increase, dividend and tightened forbearance, although it
remained higher than peers'. Fitch expects Akbank's CET1 ratio to
be around 14% in 2025, including forbearance, on stronger internal
capital generation.
The bank's total capital ratio was 19% at end-1Q25 (net of
forbearance:17.4%), supported by FC Tier 2 and additional Tier 1
(AT1) debt. Capitalisation is supported by pre-impairment operating
profit of an annualised 8% of gross loans and full total reserve
coverage of NPLs, but it remains sensitive to the macro-outlook,
lira depreciation and a weakening of asset quality.
High Wholesale Funding: Akbank is largely deposit-funded (end-1Q25:
68% of non-equity funding). Deposit dollarisation (34% of customer
deposits) remains high but is in line with the sector, creating
risks to FC liquidity. Akbank is exposed to refinancing risk from
its fairly high FC wholesale funding (end-1Q25: 15% of non-equity
funding), but this is mitigated by its good access to international
markets and a reasonably diversified maturity profile and healthy
available FC liquidity. At end-1Q25, available FC liquidity assets
fully covered maturing FC debt due within 12 months and a
reasonable share of FC customer deposits.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
-- Akbank's IDRs would be downgraded following a downgrade of the
sovereign ratings or the VR. The VR could be downgraded due to a
material erosion of the bank's capital and FC liquidity buffers,
most likely from a weakening in the bank's financial performance
and asset quality.
-- An increase in government intervention risk would likely lead to
a downgrade of the bank's LTFC IDR, although this is not its base
case.
-- The bank's Short-Term IDRs are sensitive to multi-notch
downgrades of the respective LT IDRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
-- Akbank's IDRs would be upgraded if the bank's VR is upgraded,
which would require an upgrade of the sovereign rating, likely to
be accompanied by an upward revision of the operating environment
score, while maintaining a healthy financial profile and ample
capital and FC liquidity buffers.
-- The Short-Term IDRs are sensitive to multi-notch upgrades of the
respective LT IDRs.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Akbank's senior debt ratings are aligned with its IDRs, in line
with Fitch's Bank Rating Criteria, reflecting average recovery
prospects in a default.
Akbank's Tier 2 notes' rating is notched down twice from its VR
anchor rating for loss severity, reflecting its expectation of poor
recoveries in a default, in line with Fitch criteria's baseline
approach.
Akbank's AT1 notes' rating is three notches below its VR anchor
rating, comprising two notches for loss severity, given the notes'
deep subordination, and one notch for incremental non-performance
risk, given their full discretionary, non-cumulative coupons. In
accordance with the Bank Rating Criteria, Fitch has applied three
notches from the bank's VR, instead of the baseline four notches,
as Akbank's VR is at the 'BB-' threshold.
Akbank's 'AA-(tur)' National Rating reflects its creditworthiness
relative to other Turkish issuers' and is in line with that of
large privately owned peers.
Akbank's Government Support Rating (GSR) of 'b-', notwithstanding
its systemic importance, remains three notches below the sovereign
LTFC IDR due to Turkiye's still modest reserves and the bank's
private ownership.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Akbank's senior unsecured debt ratings are sensitive to changes in
its IDRs.
Akbank's Tier 2 notes' rating is primarily sensitive to a change in
its VR anchor rating. It is also sensitive to a revision in Fitch's
assessment of potential loss severity in the event of
non-performance.
The AT1 notes' rating is sensitive to changes in the Akbank's VR
anchor rating. The notes' rating is also sensitive to an
unfavourable revision in Fitch's assessment of incremental
non-performance risk.
The National Rating is sensitive to changes in Akbank's LT LC IDR
and its creditworthiness relative to that of other Turkish
issuers.
Akbank's GSR is sensitive to Fitch's view of the government's
ability to support the bank in FC.
VR ADJUSTMENTS
The 'b+' operating environment score for Turkish banks is lower
than the category implied score of 'bbb' due to the following
adjustment reason: macroeconomic stability (negative). The latter
adjustment reflects heightened market volatility, high
dollarisation and the high risk of FX movements in Turkiye.
Funding and liquidity score of 'bb-' is above the category implied
score of 'b and below' due to the following adjustment reason:
liquidity coverage (positive).
ESG Considerations
Akbank has an ESG Relevance Score for Management Strategy of '4',
reflecting the high regulatory burden on most Turkish banks.
Management ability across the sector to determine their own
strategy and price risk is constrained by increased regulatory
interventions and also by the operational challenges of
implementing regulations at the bank level. This has a moderately
negative impact on the credit profile and is relevant to the rating
in combination 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 Prior
----------- ------ -----
AKBANK T.A.S. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA-(tur) Affirmed AA-(tur)
Viability bb- Affirmed bb-
Government Support b- Affirmed b-
senior
unsecured LT BB- Affirmed BB-
subordinated LT B Affirmed B
subordinated LT B- Affirmed B-
TURKIYE GARANTI: Fitch Affirms 'BB-' Foreign Currency IDR
---------------------------------------------------------
Fitch Ratings has affirmed Turkiye Garanti Bankasi A.S.'s (Garanti
BBVA) Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR)
and Long-Term Local-Currency (LTLC) IDR at 'BB-'. The Outlooks on
the IDRs are Stable. At the same time, Fitch has affirmed Garanti
BBVA's Viability Rating (VR) at 'bb-'.
Key Rating Drivers
Driven By VR; Underpinned by Support: Garanti BBVA's LT FC and LT
LC IDRs are driven by its VR and underpinned by its Shareholder
Support Rating (SSR). The Stable Outlooks on the IDRs mirror those
on the sovereign.
Garanti BBVA's 'bb-' VR, one notch above the 'b+' operating
environment score for Turkish banks, reflects its good financial
metrics, solid domestic franchise and comfortable FC liquidity and
capital buffers. The VR also reflects its concentration of
operations in Turkiye.
Country Ceiling Constrains Shareholder Support: Garanti BBVA's SSR
considers potential support from Banco Bilbao Vizcaya Argentaria,
S.A. (BBVA; BBB+/Rating Watch Positive), which has its 86% stake,
mainly reflecting the former's strategic importance to, and
integration with, BBVA. Garanti BBVA's SSR and LT FC IDR are
constrained by Turkiye's Country Ceiling of 'BB-', which captures
Fitch's view of transfer and convertibility risk in Turkiye, while
the bank's LT LC IDR also considers country risks.
Improving but Challenging Operating Environment: The normalisation
of monetary policy in Turkiye has reduced near-term macrofinancial
stability risks and external financing pressures. However, recent
political developments have led to increased financial market
volatility, which, if sustained, could disrupt the disinflation and
economic rebalancing. Banks remain exposed to high inflation,
potential further Turkish lira depreciation, slowing economic
growth and multiple macroprudential regulations, despite
simplification efforts.
Solid Domestic Franchise: Garanti BBVA is a domestic systemically
important bank, accounting for 8% of sector assets on an
unconsolidated basis at end-1Q25. The bank has an entrenched
domestic banking franchise across all customer segments, which
underpins its solid business generation prospects and consistent
earnings performance.
Turkish Operating Environment Risks: Garanti BBVA's risk profile
factors in its integration with BBVA in risk-management policies
and practices that are fully aligned with, and overseen by, the
parent. However, the bank's risk profile remains is sensitive to
the operating environment in Turkiye, given the concentration of
its operations in the domestic market.
Asset-Quality Risks: The impaired loans (Stage 3) ratio increased
to 2.4% at end-1Q25 (end-2024: 2.1%), reflecting rising net
non-performing loans (NPLs) inflows, mainly from unsecured retail
lending, despite sustained collections, NPL sales and limited
write-downs. Reserves covered 135% of impaired loans at end-1Q25.
Fitch expects the impaired loans ratio to rise to around 3.5% on
slower GDP growth and still-high lira interest rates. Asset quality
risks also stem from FC lending (end-1Q25: 37% of gross loans),
given lira weakness, Stage 2 loans (10.5%; average reserves
coverage: 11.4%), loan concentration and loan seasoning.
Sustained Above Peers Profitability: Garanti BBVA's operating
profit/risk-weighted assets (RWAs) ratio decreased to a still-high
5.7% in 1Q25 (2024: 6.1%; sector: 4.7%). This reflected
inflation-led pressure on operating costs and increased loan
impairment charges, but it remained supported by strong net
interest margins and fee income. Fitch expects operating profit to
be around 6.5% of RWAs in 2025 on net interest margin expansion, as
lira interest rates fall, and to increase further, to over 7%, in
2026, on possible further rate cuts. Profitability remains
sensitive to the regulatory environment.
Comfortable Capital Buffers: Garanti BBVA's common equity Tier 1
ratio decreased to 13.7% at end-1Q25 (13% net of forbearance;
sector average: 13.8%), from 16.1% at end-2024 (14.7% net of
forbearance) due to dividend payment, higher operational risk
charge and tightened forbearance. Fitch expects the CET1 ratio to
improve slightly by end-2025, supported by internal capital
generation. The total capital ratio of 17% (16.2% net of
forbearance) is supported by FC subordinated Tier 2 debt, which
provides a partial hedge against lira depreciation.
Capitalisation is underpinned by solid pre-impairment profit (1Q25:
9% of average loans, annualised) and full total reserves coverage
of impaired loans, but is sensitive to lira depreciation,
asset-quality risks and growth.
Largely Deposit-Funded: Garanti BBVA is largely funded by customer
deposits (end-1Q25: 88% of non-equity funding). FC deposits (39% of
customer deposits) create risks to FC liquidity. The share of FC
wholesale funding is moderate (10% of non-equity funding) but
Garanti BBVA has proven good access to international funding
markets. At end-1Q25, available FC liquidity assets fully covered
maturing FC debt due within 12 months and a reasonable share of FC
customer deposits.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The bank's LT IDRs would only be downgraded if its VR and SSR are
simultaneously downgraded.
A downgrade of Turkiye's sovereign rating or an increase in
government intervention risk would lead to a downgrade of the
bank's SSR and, therefore, its LT IDRs. The SSR is also sensitive
to Fitch's view of the shareholder's ability and propensity to
provide support.
Garanti BBVA's VR is sensitive to a sovereign rating downgrade and
a weakening in the operating environment. Fitch would also
downgrade the bank's VR on a material erosion of its capital and FC
liquidity buffers.
The ST IDRs are sensitive to multi-notch downgrades of their
respective LT IDRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Positive change in Turkiye's LT IDRs or an upward revision of
Turkiye's Country Ceiling would likely lead to similar actions on
Garanti BBVA's SSR and LT IDRs.
A VR upgrade for Garanti BBVA would require an upgrade of the
sovereign rating, likely leading to an upward revision of the
operating environment score, while maintaining a healthy financial
profile.
An upgrade of the ST IDRs would require a multi-notch upgrade of
their respective LT IDRs.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Garanti BBVA's senior unsecured debt ratings are aligned with its
IDRs, reflecting average recovery prospects in a default.
The bank's Tier 2 notes are rated one notch below its LTFC IDR. The
notching for the subordinated notes' rating includes one notch for
loss severity and zero notches for non-performance risk relative to
the LTFC IDR anchor rating. The one notch for loss severity
reflects its view of below-average recovery prospects for the notes
in a non-viability event. The one notch, rather than the baseline
two notches, reflects its view that shareholder support could help
mitigate losses. The LTFC IDR is the anchor rating for the notes as
Fitch believes that potential extraordinary shareholder support is
likely to flow through to the bank's subordinated noteholders.
The 'AA(tur)' National Rating is driven by shareholder support and
in line with foreign-owned peers'.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The bank's senior unsecured debt ratings are sensitive to changes
in the bank's IDRs.
Garanti BBVA's Tier 2 notes' rating is primarily sensitive to a
change in the LTFC IDR anchor rating. It is also sensitive to a
revision in Fitch's assessment of loss severity and non-performance
risk.
The National Rating is sensitive to changes in Garanti BBVA's LTLC
IDR and its creditworthiness relative to other Turkish issuers'.
VR ADJUSTMENTS
The operating environment score of 'b+' for Turkish banks is below
the 'bbb' category implied score due to the following adjustment
reason: macroeconomic volatility (negative), which reflects market
volatility, high dollarisation and high risk of FX movements in
Turkiye.
Garanti BBVA's funding and liquidity score of 'bb-' is above the
'b' category implied score due to the following adjustment reason:
liquidity access and ordinary support (positive).
Public Ratings with Credit Linkage to other ratings
Garanti BBVA's ratings are linked to BBVA's.
ESG Considerations
Garanti BBVA's ESG Relevance Score for Management Strategy of '4'
reflects an increased regulatory burden on all Turkish banks.
Management ability across the sector to determine their own
strategy and price risk is constrained by regulatory burden and
also by the operational challenges of implementing regulations at
the bank level. This has a moderately negative impact on Garanti
BBVA's credit profile and is relevant to the ratings in combination
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 Prior
----------- ------ -----
Turkiye Garanti
Bankasi A.S. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA(tur) Affirmed AA(tur)
Viability bb- Affirmed bb-
Shareholder Support bb- Affirmed bb-
senior
unsecured LT BB- Affirmed BB-
subordinated LT B+ Affirmed B+
senior
unsecured ST B Affirmed B
TURKIYE IS BAKANSI: Fitch Affirms BB- LongTerm IDRs, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Turkiye Is Bankasi A.S.'s (Isbank)
Long-Term Foreign-Currency (LTFC) and Local-Currency (LTLC) Issuer
Default Ratings (IDRs) at 'BB-'. The Outlooks on the IDRs are
Stable. Fitch has also affirmed the bank's Viability Rating (VR) at
'bb-'.
Key Rating Drivers
VR Drives IDRs: Isbank's IDRs are driven by its standalone
strength, as captured by its 'bb-' VR. The VR is one notch above
the operating environment score for Turkish banks and reflects the
bank's good financial metrics, solid domestic franchise, and stable
FC liquidity and capital buffers. The VR also reflects
concentration of operations in Turkiye. The Stable Outlooks on the
IDRs mirror those on the sovereign.
Improving but Challenging Operating Environment: The normalisation
of monetary policy in Turkiye has reduced near-term macrofinancial
stability risks and external financing pressures. However, recent
political developments have led to increased financial market
volatility, which, if sustained, could disrupt disinflation and
economic rebalancing. Banks remain exposed to high inflation,
potential further Turkish lira depreciation, slowing economic
growth and multiple macroprudential regulations, despite
simplification efforts.
Solid Domestic Franchise: Isbank is the largest private bank in
Turkiye, and the third-largest bank overall, by assets. It is a
domestic systemically important bank, with about 10% of sector
assets at end-1Q25 on an unconsolidated basis. The bank's
well-established franchise, underpinned by its strong brand and
loyal customer base, supports its solid business generation
prospects.
Exposure to Turkish Operating Environment Risks: Isbank's risk
management framework is well-developed, supported by appropriate
underwriting standards and adequate risk controls. However, the
bank's risk profile remains sensitive to the Turkish operating
environment due to the concentration of its operations in the
domestic market.
Asset Quality Risks: Isbank's Stage 3 loans ratio has remained
broadly stable (end-1Q25: 2.3%; end-2024: 2.1%), reflecting nominal
loan book expansion, the sale of impaired loans and write-offs.
Total reserve coverage of impaired loans was 140%. Fitch forecasts
Isbank's impaired loans ratio to increase to around 3.5% in 2025,
driven by unsecured retail and SME loans amid sill high interest
rates and weaker GDP growth. In 2024, Isbank reversed all the free
provisions it had booked over recent years.
Good Profitability: Isbank's operating profit/risk-weighted assets
(RWAs) ratio fell to a still-sound 3% in 1Q25 (2024: 3.4%), largely
reflecting the increase in RWAs following a tightening of
forbearance measures. The bank's net interest margins (NIM) were
about 100bp higher in 1Q25, as funding costs stabilised, but were
offset by a higher cost of risk compared with 2024, reflecting
higher impairment generation. Fitch expects the bank's operating
profit to be around 3% of RWAs in 2025, on NIM expansion as rates
decline, and to improve to 4% in 2026, in line with its
expectations for further rate cuts. Earnings remains sensitive to
national regulation.
Reasonable Capitalisation: Isbank's common equity Tier 1 (CET1)
ratio declined to 12.5% at end-1Q25 (net of forbearance: 10.9%),
from 14.4% at end-2024, reflecting tightening forbearance, and the
increase in operational RWAs. The bank's total capital ratio was
higher, at 15.7% (net of forbearance 14%), supported by FC
subordinated Tier 2 and Additional Tier 1 (AT1) debt, providing a
partial hedge against lira depreciation. Fitch expects its CET1
ratio to be about 13% in 2025, including forbearance, on stronger
internal capital generation.
High Wholesale Funding, Stable Liquidity: Isbank is largely
deposit-funded (end-1Q25: 71% of non-equity funding), with
significant FC deposits (42% of customer deposits) create risks to
FC liquidity. FC wholesale funding is fairly high (end-1Q25: 18% of
total non-equity funding), but the bank has proven good access to
international funding markets. At end-1Q25, available FC liquidity
assets fully covered maturing FC debt due within 12 months, and a
reasonable share of FC customer deposits.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Isbank's IDRs would be downgraded following a downgrade of the
sovereign or the VR. The VR could be downgraded due to a material
erosion in the bank's capital and FC liquidity buffers, most likely
stemming from a weakening in the bank's financial performance and
asset quality.
An increase of government intervention risk would likely lead to a
downgrade of the bank's LTFC IDR, although this is not its base
case.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Isbank's IDRs would be upgraded following an upgrade of the bank's
VR. An upgrade of the VR would require an upgrade of the sovereign
rating, likely accompanied by an upward revision of the operating
environment score, while maintaining a healthy financial profile,
alongside sufficient capital and FC liquidity buffers.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Isbank's senior debt ratings are aligned with its IDRs, in line
with Fitch's Bank Rating Criteria, reflecting average recovery
prospects in a default.
The bank's Tier 2 debt is notched down twice for loss severity from
its 'bb-' VR anchor rating, in line with Fitch's Bank Rating
Criteria baseline approach, reflecting its expectation of poor
recoveries in a default.
The bank's AT1 capital notes are rated three notches below Isbank's
VR, comprising two notches for loss severity and one notch for
incremental non-performance risk. Fitch has only applied three
notches, instead of the baseline four notches, due to rating
compression, as its VR is at the 'bb-' threshold under its
criteria.
Isbank's 'AA-(tur)' National Rating reflects its LC
creditworthiness relative to other Turkish issuers' and is in line
with those of large privately owned peers.
Isbank's Government Support Rating (GSR) of 'b-', notwithstanding
its systemic importance, remains three notches below the sovereign
LTFC IDR, given Turkiye's still modest reserves and the bank's
private ownership.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Isbank's senior unsecured debt rating is sensitive to changes in
its IDRs.
The Tier 2 notes' rating is primarily sensitive to a change in its
VR anchor rating. It is also sensitive to a revision in Fitch's
assessment of potential loss severity in the event of
non-performance.
The AT1 notes' ratings are sensitive to changes in the VR anchor
rating. The notes rating is also sensitive to revision in Fitch's
assessment of the notes' incremental non-performance risk.
The National Rating is sensitive to changes in Isbank's LTLC IDR
and its creditworthiness in LC relative to other Turkish issuers'.
Isbank's GSR is sensitive to Fitch's view of the government's
ability to support the bank in FC.
VR ADJUSTMENTS
The operating-environment score of 'b+' for Turkish banks is below
the 'bbb' category implied score due to the following adjustment
reason: macroeconomic volatility (negative), which reflects market
volatility, high dollarisation and high risk of FX movements in
Turkiye.
The funding and liquidity score of 'bb-' for Isbank is above the
'b' category implied score, due to the following adjustment reason:
liquidity coverage (positive).
ESG Considerations
Turkiye Is Bankasi A.S. has an ESG Relevance Score of '4' for
Management Strategy, reflecting an increased regulatory burden on
all Turkish banks. Management's ability across the sector to
determine their own strategy and price risk is constrained by the
regulatory burden and also by the operational challenges of
implementing regulations at the bank level. This has a moderately
negative impact on the banks' credit profiles and is relevant to
the banks' ratings in combination 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 Prior
----------- ------ -----
Turkiye Is
Bankasi A.S. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA-(tur) Affirmed AA-(tur)
Viability bb- Affirmed bb-
Government Support b- Affirmed b-
senior
unsecured LT BB- Affirmed BB-
subordinated LT B Affirmed B
junior
subordinated LT B- Affirmed B-
senior
unsecured ST B Affirmed B
=============
U K R A I N E
=============
UKRAINE: Moody's Affirms 'Ca' Issuer Ratings, Outlook Stable
------------------------------------------------------------
Moody's Ratings has affirmed the Government of Ukraine's foreign-
and local-currency long-term issuer ratings at Ca and maintained
the stable outlook.
The affirmation of the ratings at Ca is driven by Moody's
expectations that the impact of the war with Russia will continue
to pose long-lasting challenges to Ukraine's economy and public
finances. Even after last year's eurobond restructuring, the public
debt burden remains elevated and increasing. Meanwhile, liquidity
pressure are still significant.
The stable outlook reflects Moody's expectations that the issuer
ratings will remain at Ca for the foreseeable future, as
challenging economic environment and elevated fiscal pressures will
persist amid uncertain prospects for a negotiated settlement of the
Russia-Ukraine war.
Ukraine's local- and foreign-currency country ceilings remain
unaffected at Caa3. The one-notch gap between the local-currency
country ceiling and the sovereign rating reflects considerable
policy uncertainty and unpredictability amid very high geopolitical
risks, and the presence of large pressures on the external
position, albeit alleviated by external support. The
foreign-currency country ceiling is aligned to the local-currency
country ceiling reflecting constrained policy effectiveness and
elevated indebtedness but also the gradual easing of restrictions
on foreign exchange transactions after the moratorium introduced on
most cross-border payments at the start of the war.
RATINGS RATIONALE
RATIONALE FOR AFFIRMING THE RATINGS TO Ca
The affirmation of the issuer ratings at Ca is driven by Moody's
expectations that the impact of the war with Russia will continue
to pose long-lasting challenges to Ukraine's economy and public
finances. The war-related macroeconomic and liquidity challenges,
risks to durable international support in light of early signs of
US disengagement, and the potential for further restructuring to
ensure debt sustainability by the end of the IMF programme in March
2027 are consistent with a Ca rating. A Ca rating reflects the
expectation of a loss of 35% to 65% of the affected debt
instruments' nominal value.
Growth prospects remain subdued as challenging security conditions,
labour shortages and attacks on energy infrastructure continue.
Despite the resilience to the war conditions shown so far by the
Ukrainian economy, labour shortages and continuing Russian military
attacks to critical energy infrastructure contributed to a slowdown
in the second half of 2024.
Moody's expects that the economy will decelerate further in 2025,
with real GDP growth slowing to 2.5% from 2.9% in 2024. Economic
growth will remain subdued in 2026 and 2027, based on Moody's
assumptions that the war will continue for the foreseeable future.
While some form of ceasefire could be agreed by the end of the
year, a significant economic rebound is unlikely without the
provision of credible security guarantees.
Despite the large financial support from international partners,
Moody's expects that the war will continue to keep Ukraine's public
finances and the external position under severe pressure. Moody's
projects the government fiscal deficit, which includes grants, to
widen to 19% in 2025 from about 17% of GDP in 2024 as public
finances remain under considerable pressure mainly driven by
defense spending. Moody's expects the deficit this year to be
mainly financed by external donor support, including G7
Extraordinary Revenue Acceleration (ERA) financing generated from
future proceeds on frozen Russian assets. Moody's projects the
deficit to narrow to around 15% in 2026 and 10% in 2027, reflecting
expenditure cuts amid constrained funding availability.
Meanwhile, the current account deficit will remain wide as import
needs far exceed export capacity. Liquidity pressures will remain
very high given very large financing needs, which are expected to
be mainly covered through external donor support and the remaining
by issuances on the domestic market.
Despite the eurobond debt restructuring in August 2024 which
provided debt relief amid very large fiscal pressures, Ukraine's
government debt burden is rapidly rising. Debt-to-GDP increased to
close to 90% of GDP at end-2024 from 81% at end-2023 and Moody's
projects it will exceed 110% of GDP at the end of 2025, and
gradually increase further in the medium term.
The exposure of government finances to a potential sharp
depreciation of the currency is high given the large share of
foreign currency-denominated debt. As a result, risks to the
sustainability of public debt remain elevated, pointing to the
likelihood of a new debt restructuring resulting in additional
losses being imposed on commercial creditors.
The completion of the restructuring of the remaining external
commercial debt beyond the eurobond - including the GDP warrants, a
government-guaranteed bond issued by the National Power Company
Ukrenergo (Ukrenergo, Ca stable), and further external commercial
claims - remains also key to debt sustainability. Ukrenergo reached
an agreement in principle on its USD825 million eurobond and the
liability management exercise is expected to be completed in July
2025. An agreement on the restructuring of the GDP warrants has not
been reached yet, and the payment is due at the end of May. Moody's
would consider a missed payment as a follow-on default under
Moody's definitions.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectations that the rating
will remain at Ca for the foreseeable future, as challenging
economic environment and elevated fiscal pressures will persist,
even if a negotiated settlement to resolve the war between Russia
and Ukraine is agreed.
Moody's do not anticipate significant progress in the negotiations
in the short term. Even if some form of agreement is reached, the
credit implications of a ceasefire or negotiated settlement will
depend on the credibility of Europe's security guarantees,
Ukrainian military's defensive capabilities, and the country's
ability to maintain independence amid Russian attempts at political
interference.
Lower financial support for Ukraine or domestic reform fatigue
would increase the risks to government debt sustainability that
could lead to further debt restructuring, with potentially
significant losses for private-sector creditors.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Ukraine's ESG Credit Impact Score CIS-5 mainly reflects its
elevated exposure to social risks due to the war with Russia, and a
weak governance profile. The latter, together with moderate wealth
levels, explains Ukraine's relatively low resilience to Economic
and Social risks.
Exposure to environmental risk is equal to E-3 issuer profile
score, driven by physical climate risks, waste and pollution, and
natural capital. Its exposure to physical climate risk and natural
capital risk is exacerbated by the importance of the agricultural
sector (both in terms of economic contribution and employment),
which makes the country's exports vulnerable to climate change and
adverse weather events.
Exposure to social risk is equal to S-5 issuer profile score,
reflecting the challenges posed by the ongoing war and the
resulting displacement of significant parts of the population. The
war has increased health and safety risks and constrained access to
basic services and housing. The economic disruption caused by the
war has also led to a substantial increase in unemployment and
poverty. Furthermore, large emigration exacerbates already
challenging demographic trends and weigh on longer-term growth
potential.
Ukraine has a very weak governance profile score (G-5 issuer
profile), reflecting weaknesses in the rule of law and corruption,
which weigh on the business environment, as well as a track record
of sovereign defaults.
GDP per capita (PPP basis, US$): 18,270 (2023) (also known as Per
Capita Income)
Real GDP growth (% change): 5.5% (2023) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 5.1% (2023)
Gen. Gov. Financial Balance/GDP: -19.4% (2023) (also known as
Fiscal Balance)
Current Account Balance/GDP: -5.3% (2023) (also known as External
Balance)
External debt/GDP: 89.1% (2023)
Economic resiliency: caa1
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On May 27, 2025, a rating committee was called to discuss the
rating of the Ukraine, Government of. Other views raised included:
The issuer's economic fundamentals, including its economic
strength, have not materially changed. The issuer's institutions
and governance strength, have not materially changed. The issuer's
fiscal or financial strength, including its debt profile, has not
materially changed. The issuer's susceptibility to event risks has
not materially changed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Indications that the recovery for commercial creditors in the event
of default is likely to be higher than what implied by a Ca rating
could lead to upward pressure on the rating. This could be in the
context of a negotiated settlement leading to a normalization of
economic conditions, helping to contain Ukraine's financing needs,
and reducing risks to the sustainability of Ukraine's government
debt. Moody's sees a low probability of such a scenario
materializing in the foreseeable future.
Ukraine's ratings could be downgraded if the military conflict were
to lead to an increase in liquidity and external pressures and
threaten further debt sustainability. This would increase the
likelihood of a new debt restructuring that could result in losses
in excess of 65%. Indications that the IMF programme is no longer
on track could also put downward pressure on the rating. A change
in Ukraine's domestic political landscape leading to Russian
influence on its institutions could lead to a lower rating as it
could jeopardize the IMF programme and official external support.
The principal methodology used in these ratings was Sovereigns
published in November 2022.
The weighting of all rating factors is described in the methodology
used in this credit rating action, if applicable.
Ukraine's "caa1" economic strength score is set five notches below
the initial score of "ba2" to reflect the significant damage to
productive capacity and infrastructure and losses to human capital
caused by the war with Russia that durably impair Ukraine's growth
potential. The "caa1" institutions and governance strength score is
set three notches below the initial score of "b1" to reflect the
government default history. The "caa1" fiscal strength score is set
two notches below the initial score of "b2" to reflect Moody's
forward-looking views of the government's debt metrics, which will
lead to a lower initial score. Collectively, these adjustments lead
to a final scorecard-indicated outcome of Caa2-C, which is below
the initial scorecard-indicated outcome of B3-Caa2. Ukraine's
long-term issuer rating of Ca is within the final
scorecard-indicated outcome.
===========================
U N I T E D K I N G D O M
===========================
AA BOND: S&P Affirms 'B+(sf)' Rating on Class B3-Dfrd Notes
-----------------------------------------------------------
S&P Global Ratings affirmed its 'BBB (sf)' credit ratings on AA
Bond Co. Ltd.'s class A8, A9, A10, A11, and A12 notes, and its 'B+
(sf)' rating on the class B3-Dfrd notes.
S&P's ratings are primarily based on its ongoing assessment of the
borrowing group's underlying BRP; the integrity of the
transaction's legal and tax structure; and the robustness of its
operating cash flows, supported by structural enhancements.
Executive summary
AA Bond Co.'s financing structure blends a corporate securitization
of the operating business of the Automobile Association (the AA)
group in the U.K. with a subordinated high-yield issuance.
AA Bond Co.'s primary sources of funds for principal and interest
payments on the class A notes are the loan interest and principal
payments from the borrower and amounts available from the liquidity
facility, which is shared with the borrower to service the senior
term loan (when the latter is drawn).
Principal and interest payments under the loan are supported by the
operating cash flows generated by the borrowing group's two main
lines of business: roadside assistance and insurance brokering.
The transaction features two classes of notes (A and B), the
proceeds of which have been on-lent by the issuer to the borrower,
via issuer-borrower loans. The operating cash flows generated by
the borrowing group are available to repay its borrowings from the
issuer which, in turn, uses those proceeds to service the notes.
The transaction will likely qualify for the appointment of an
administrative receiver under the U.K. insolvency regime. An
obligor default would allow the noteholders to gain substantial
control over the charged assets prior to an administrator's
appointment, without necessarily accelerating the secured debt,
both at the issuer and at the borrower level.
AA Bond Co. in March 2025 refinanced the existing borrower level
2021 STF and WCF, with 2025 STF (GBP165 million) and WCF (GBP55.7
million) both maturing in March 2030.
The 2025 STF comprises:
-- Term loan: GBP95 million
-- U.S. private placement: GBP70 million.
In May 2025, AA Bond Co. redeemed a further GBP61.8 million of its
class B3-Dfrd notes, leaving a total amount of GBP48.5 million
outstanding.
Following S&P's review of the AA's performance, it has affirmed its
ratings on the class A and B notes.
Senior term facility
The only interest rate swaps are at the borrower level and are used
to hedge the drawings on the STF.
S&P said, "Under our ratings scenario, we assume that the STF is
fully utilized and it will remain fully drawn until its legal final
maturity date. Thereafter, our analysis assumes that the STF will
take a pro rata share of a 100% excess cash sweep, along with all
other class A debt that has passed its respective expected maturity
date (EMD)."
Liquidity facility
The liquidity facility has a balance of GBP200 million, which
represents about 9.8% of the current outstanding senior debt. S&P
said, "Our threshold for liquidity support to be assessed as
significant is 10%. Therefore, we do not apply any uplift to the
resilience-adjusted anchor for liquidity support. The current
liquidity facility providers are Banco Santander S.A., London
branch; Barclays Bank PLC; BNP Paribas S.A., London branch;
Standard Chartered PLC; and Goldman Sachs International Bank."
Recent performance
In fiscal year (FY) 2025, the AA's revenue increased by about 7%
year-on-year. This was driven by increasing income paid per member
in both B2C and B2B, continued expansion of the driving school,
service, maintenance, and repair businesses, and the acquisition of
Keycare Ltd. Meanwhile, the borrower's S&P Global Ratings-adjusted
EBITDA was maintained at about 30%, broadly in line with historical
levels. The stable profitability reflects growth in the roadside
segment due to increased holdings, price increases, improved
operational efficiencies, and the introduction of risk-based
pricing for new business. This was partly offset by a reduction in
insurance arising from lower retention and some marketing spend on
new customer acquisition. Supported by consistent earnings growth
and modest working capital needs, the borrower continues to
demonstrate solid free operating cash flow.
Business risk profile
S&P said, "We have not seen material changes to the business
fundamentals for the borrowing group's holding company, AA
Intermediate Co., so we continue to view the group's BRP as
satisfactory. Our BRP assessment is based on the factors outlined
below."
Table 1
Key credit considerations
Leading market position
-- With a market share of about 40% in the B2C and 60% in the B2B
roadside segments, the AA is the market leader in the U.K.'s
roadside breakdown services industry.
Membership-based business model
-- In FY2025, the AA had about 3.3 million paid members in the
B2C roadside segment, reflecting 1% member growth year-on-year.
Within B2C, average income per customer was up 9%, thanks to
pricing action and benefits from upselling. Meanwhile, the borrower
had 11 million paid members in the B2B roadside segment, reflecting
3% member growth year-on-year. Within B2B, average income per
business was up 4%, thanks to continued commercial strategies
around customer relationship management and deepening scope of
services for specific customers. Although the AA has potential
exposure to some churn in membership base and potential renewal
risk for the longer-term B2B contracts, we believe this
membership-based business model provides good earnings and cash
flow visibility.
Relatively high barriers to entry
-- The AA's long-standing brand name, strong customer loyalty,
and retention rates, as well as its national roadside assistance
fleet, create relatively high barriers to entry.
Strong profitability
-- The BRP is underpinned by above-average S&P Global
Ratings-adjusted EBITDA margins of about 30%. We expect margins to
be 31%-33%, going forward, because of the AA's lower exceptional
costs, better efficiency, and higher volumes. Absent major
operational issues related to the program's implementation and
given its ability to largely pass on cost increases to its
customers (especially in the roadside segment), adjusted EBITDA
margins should remain comfortably above the 25% threshold we would
expect from the group, and so will support the group's satisfactory
BRP.
Limited scale
-- Despite the significant advantage in terms of size relative to
its direct competitors, we view its base as relatively small
compared with peers from across other business services sectors.
Limited service diversification and weak geographic
diversification
-- The AA's roadside segment accounted for about 89% of the
group's revenue base and about 98% of company-reported EBITDA in
FY2025. The AA derives its revenue solely in the U.K.
Moderate customer concentration
-- Top 10 B2B clients account for about 15% of the group's
revenue in that segment.
Rating Rationale for the Class A Notes
AA Bond Co.'s primary sources of funds for principal and interest
payments on the class A notes are the loan interest and principal
payments from the borrower and amounts available from the liquidity
facility, which is shared with the borrower to service the senior
term loan (if the latter is drawn).
S&P said, "Our ratings on the class A notes address the timely
payment of interest and the ultimate payment of principal due on
these notes. Our ratings are based primarily on our ongoing
assessment of the borrowing group's underlying BRP; the integrity
of the transaction's legal and tax structure; and the robustness of
operating cash flow, supported by structural enhancements.
"Our cash flow analysis serves to both assess whether cash flows
will be sufficient to service debt through the transaction's life
and to project minimum debt service coverage ratios (DSCRs) in
base-case and downside scenarios. In our analysis, we have excluded
any projected cash flows from the underwriting part of the AA's
insurance business, which is not part of the restricted borrowing
group (only the insurance brokerage part is included)."
Under S&P's criteria, S&P typically expect liquidity facilities and
cash trapped by a breach of a financial covenant or following an
expected repayment date to be kept in the structure if:
-- The funds are held in accounts or may be accessed from
liquidity facilities; and
-- S&P views it as dedicated to service the borrower's
debts--specifically, that the funds are exclusively available to
service the issuer/borrower loans and any super senior or pari
passu debt, which may include bank loans.
In this transaction, although the borrower and the issuer share the
liquidity facility, the borrower's ability to draw on it is limited
to liquidity shortfalls related to the STF and does not cover the
issuer/borrower loans. Therefore, S&P does not give credit to the
liquidity facility in our base-case DSCR analysis.
Currently, as per AA Limited annual report, about GBP117 million of
cash is trapped in the whole business securitization (WBS)
structure, given the breach of the restricted payment condition
(RPC). The RPC permits the upstreaming of unrestricted surplus cash
if the class A net debt-to-EBITDA ratio is less than or equal to
5.5x. Since the unrestricted cash is not dedicated for debt service
and may be upstreamed at any point the RPC is satisfied, we do not
account for it in our DSCR analysis.
Base-case scenario
S&P said, "Our base-case EBITDA, short-term operating cash flow
projections, and the company's satisfactory BRP rely on our
corporate methodology. We discussed and received confirmation on
the company's performance as well as expectations from its
management. Considering the updates provided, we have revised our
forecasts upward, primarily based on the higher contribution from
the roadside segment, fueled by new business wins, pricing, and
volume. We gave credit to growth through the end of FY2027. Beyond
FY2027, our base-case projections are based on our methodology and
assumptions for corporate securitizations, from which we then apply
assumptions for capital expenditure (capex), finance leases,
pension contributions, and taxes to arrive at our projections for
the cash flow available for debt service."
For AA Intermediate Co., S&P's assumptions were:
-- Maintenance capex (including net finance leases): GBP84 million
for FY2026 and about GBP85 million for FY2027. Thereafter, S&P
assumes GBP44 million, in line with the transaction documents'
minimum requirements.
-- Development capex: GBP25 million for FY2026, and GBP24 million
for FY2027. Thereafter, because S&P assumes no growth, it
considered no investment capex, in line with our corporate
securitization criteria.
-- Working capital: A net inflow of GBP2 million in FY2026.
Thereafter, we assume that the change in working capital is nil.
-- Pension contributions: S&P considered the plan agreed by the
company with the trustee in February 2023, accordingly S&P assumes
GBP24 million in FY2026, thereafter GBP19 million until FY2030.
-- Tax: S&P's updated tax assumptions are GBP27 million for
FY2026, and GBP31 million for FY2027. Thereafter, S&P considered
GBP31 million tax exposure.
-- Asset disposals: S&P assumes inflow of GBP1 million in FY2026,
and nil thereafter. Cash from asset disposals can only be utilized
toward debt repayment for the WBS.
S&P said, "The transaction structure includes a cash sweep
mechanism for the repayment of principal following an EMD on each
class of class A notes. Therefore, in line with our corporate
securitization criteria, we assumed a benchmark principal
amortization profile where the class A notes are repaid over 15
years following the EMD based on an annuity payment that we include
in our calculated DSCRs.
"Based on our assessment of AA Intermediate Co.'s BRP as
satisfactory, which we associate with a business volatility score
of 3, and the minimum DSCR achieved in our base-case analysis, we
established a 'bbb-' anchor for the class A notes."
Downside DSCR analysis
S&P said, "Our downside DSCR analysis tests whether the
issuer-level structural enhancements improve the transaction's
resilience under a stress scenario. AA Intermediate Co. falls
within the business and consumer services industry, for which we
apply a 30% decline in EBITDA relative to the base case at the
point where we believe the stress on debt service would be
greatest.
"Our downside DSCR analysis resulted in a strong resilience score
for the class A notes' issuance. The combination of a strong
resilience score and the 'bbb-' anchor derived in the base-case
results in a resilience-adjusted anchor of 'bbb+'.
"The GBP200 million balance in the liquidity facility represents
liquidity support of about 9.8% of the current outstanding senior
debt, which is below the 10% level we typically assess as offering
significant liquidity support. Therefore, we have not considered
any further uplift adjustment to the resilience-adjusted anchor for
liquidity."
Modifiers analysis
S&P has not applied any adjustments under our modifier analysis.
Comparable rating analysis
Due to its cash sweep amortization mechanism, the transaction
relies significantly on future excess cash. S&P said, "In our view,
the uncertainty related to this feature is increased by the
execution risks related to the company's investment plan and the
returns it will effectively generate. The company may need to
invest periodically to maintain its cash flow generation potential
over the long term, which could erode future excess cash. To
account for this combination of factors, we applied a one-notch
decrease to the senior class A notes' resilience-adjusted anchor."
Counterparty risk
S&P's 'BBB (sf)' ratings on the class A notes are not constrained
by the ratings on any of the counterparties, including the
liquidity facility, derivative, and bank account providers.
Eligible investments
S&P said, "Following amendments to the transaction documents, the
counterparties can invest cash in short-term investments with a
minimum required rating of 'BBB+'. Given the substantial reliance
on excess cash flow as part of our analysis and the possibility
that this could be invested in short-term investments, full
reliance can be placed on excess cash flows only in rating
scenarios up to 'BBB+'."
After considering the base-case analysis, resilience adjusted
anchor, and modifiers, S&P affirmed its 'BBB (sf)' ratings on the
class A notes.
Table 2
Credit rating steps for class A notes
Ratings
Business risk profile Satisfactory
Business volatility score 3
Base case minimum DSCR range Lower end of 1.40x-3.25x
Anchor bbb-
Downside case EBITDA decline 30%
Downside minimum DSCR range 1.8x-4.0x
Resilience score Strong
Resilience-adjusted anchor bbb+
Liquidity adjustment None
Modifier analysis adjustment None
Comparable rating analysis adjustment -1 notch
Maximum potential rating BBB
Counterparty cap A
Eligible investment cap BBB+
Rating BBB (sf)
DSCR--Debt service coverage ratio.
Rating Rationale For The Class B3-Dfrd Notes
S&P said, "Our rating on the class B3-Dfrd notes addresses the
ultimate payment of interest and ultimate payment of principal on
or before its legal final maturity date in July 2050. The class
B3-Dfrd notes are structured as soft-bullet notes due in July 2050,
but with interest and principal due and payable to the extent
received under the class B3 loan. Under the terms and conditions of
the class B3 loan, if the loan is not repaid on its EMD (January
2026), interest and principal will no longer be due and will be
deferred. The deferred interest, and the interest accrued
thereafter, becomes due and payable on the final maturity date of
the class B3-Dfrd notes in 2050.
"Our analysis focuses on the scenarios in which the underlying loan
is not repaid on the EMD and the corresponding notes are not
redeemed. We understand that the obligors will not be permitted to
make interest and principal payments under the class B3
issuer/borrower facility agreement. Therefore, in our cash flow
analysis, we assume that the class B3-Dfrd notes do not receive
interest following the class A8 EMD, and receive no further
payments until the class A notes are fully repaid.
"Moreover, under the terms of the class B issuer/borrower loan
agreement, further issuances of class A notes, for the purpose of
refinancing, are permitted without consideration given to any
potential effect on the then-current rating on the outstanding
class B notes. Both the extension risk, which we view as highly
sensitive to the future performance of the borrowing group, given
its deferability, and the ability to issue more-senior debt without
consideration given to the class B3-Dfrd notes, may adversely
affect the issuer's ability to repay the class B3-Dfrd notes. As a
result, our rating on the class B3-Dfrd notes has limited uplift
above the borrowing group's creditworthiness.
"Our view of the borrowing group's stand-alone creditworthiness has
not changed. Therefore, we affirmed our 'B+ (sf)' rating on the
class B3-Dfrd notes.
"We believe the transaction will qualify for the appointment of an
administrative receiver under the U.K. insolvency regime. When the
events of default allow security to be enforced before the
company's insolvency, an obligor event of default would allow the
then senior-most noteholders to gain substantial control over the
charged assets before an administrator's appointment, without
necessarily accelerating the secured debt.
"However, under certain circumstances, particularly when the class
A notes have been repaid, removal of the class B free cash flow
DSCR financial covenant would, in our opinion, prevent the borrower
security trustee, on the class B3-Dfrd noteholders' behalf, from
gaining control over the borrowers' assets as their operating
performance deteriorates. A borrower event of default would no
longer be triggered under the class B3 loan before the operating
company's insolvency or restructuring. This may lead us to conclude
that we are unable to rate through an insolvency of the obligors,
which is an eligibility condition under our corporate
securitizations criteria. Our criteria state that noteholders
should be able to enforce their interest on the assets of the
business before the insolvency and/or restructuring of the
operating company.
"If the class B3-Dfrd noteholders lose their ability to enforce by
proxy the security package we may revise our analysis, and may
consider that the class B3-Dfrd notes' security package resembles
covenant-light corporate debt, rather than secured, structured
debt."
Outlook
S&P said, "A change in our assessment of the company's BRP would
likely prompt a rating action on the notes. To achieve the same
anchor, we would expect higher DSCRs for a weaker BRP and lower
DSCRs for a stronger BRP."
Upside scenario
S&P said, "We do not expect to revise upward our assessment of the
borrowing group's BRP because it is constrained by the group's weak
geographic and service diversification, as well as its exposure to
the insurance broker business. We may consider raising our ratings
on the class A notes if our minimum projected DSCR reaches the
middle of the 1.4x-3.25x range, under our base-case scenario."
Downside scenario
S&P said, "We could lower our anchor or the resilience-adjusted
anchor for the class A notes if we were to revise the borrowing
group's BRP to fair from satisfactory. This could occur if the
group faced significant operational difficulties in relation to its
investment plan or if trading conditions in its core roadside
service market were to deteriorate, so that it saw a significant
loss of customers or lower revenue per customer. Under these
scenarios, we would likely observe margins falling below 25% with
little prospect for rapid improvement, or an increase in the
volatility of the group's profitability.
"We may also consider lowering our ratings on the class A notes if
our minimum projected DSCR falls below 1.4x in our base-case
scenario or 1.8x in our downside scenario. This could happen if the
cash flow available for debt service declines beyond our expected
base-case level."
Surveillance
S&P Said, "We will maintain active surveillance on the rated notes
until the notes mature or are retired. The purpose of surveillance
is to assess whether the notes are performing within the initial
parameters and assumptions applied to each rating category. The
transaction terms require the issuer to supply periodic reports and
notices to S&P Global Ratings to enable it to maintain continuous
surveillance on the rated notes.
"We view the AA's performance as an important part of analyzing and
monitoring the performance and risks associated with the
transaction. Although company performance will likely affect the
transaction, we believe other factors, such as cash flow, debt
reduction, and legal framework, also contribute to the overall
analytical opinion."
AMP 75: Virtual Meeting to be Held on June 19
---------------------------------------------
The administrators of AMP 75 Limited is seeking a decision from
creditors on the approval of their proposals by way of a virtual
meeting. The virtual meeting will be held by telephone conference
call on June 19, 2025 at 12:00 noon.
Proxies may be delivered to 7 St Petersgate, Stockport, SK1 1EB or
by email to insolvency@bvllp.com
In order to be counted, a creditor's vote must be accompanied by a
proof in respect of the creditor's claim (unless it has already
been given). A vote will be disregarded if a creditor's proof in
respect of their claim is not received by 4.00 pm on June 18, 2025
A creditor who has opted out from receiving notices may
nevertheless vote if the creditor provides a proof of debt in the
requisite time frame. Proofs may be delivered to 7 St Petersgate,
Stockport, SK1 1EB or by email to insolvency@bvllp.com
AMP 75 Limited was placed into administration proceedings in the
The High Court of Justice, Business and Property Courts in
Manchester, Insolvency & Companies List (ChD), Court Number:
CR-2025-MAN-000494.
Office Holder Details:
Vincent A Simmons
BV Corporate Recovery & Insolvency Services Limited
7 St Petersgate, Stockport
Cheshire, SK1 1EB
For further details, contact:
Vincent A Simmons
Tel No: 0161 476 9000
Email: insolvency@bvllp.com
Alternative contact:
Julie Bridgett
BISHOPS COURT: Leonard Curtis Named as Administrators
-----------------------------------------------------
Bishops Court (Torquay) Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Insolvency & Companies List (ChD),
Court Number: CR-2025-003021, and Nick Myers and Alex Cadwallader
of Leonard Curtis were appointed as administrators on May 1, 2025.
Bishops Court (Torquay) engaged in the development of building
projects.
Its registered office is at Bishops Court, Lower Warberry Road,
Torquay, TQ1 1QS
Its principal trading address is at Bishops Court Hotel, Lower
Warberry Road, Torquay, TQ1 1QS
The joint administrators can be reached at:
Nick Myers
Alex Cadwallader
Leonard Curtis
5th Floor, Grove House
248a Marylebone Road
London, NW1 6BB
For further details, contact:
The Joint Administrators
Tel: 020 7535 7000
Email: recovery@leonardcurtis.co.uk
Alternative contact: Amber Walker
CARCO PRP: S&P Assigns 'B' LongTerm ICR on New Capital Structure
----------------------------------------------------------------
S&P Global Ratings assigned its 'B' long-term issuer credit rating
to U.K.-incorporated Carco PRP Ltd. and its 'B' issue rating to the
EUR365 million senior secured term loan B (TLB), with a '3'
recovery rating.
S&P said, "The stable outlook reflects our expectation that Carco's
debt to EBITDA will decrease to below 5x in 2026 on EBITDA
expansion, its free operating cash flow (FOCF) will remain
consistently positive, and its funds from operations (FFO) cash
interest coverage will remain sustainably above 2.0x.
"The 'B' rating reflects our expectation that Carco's leverage will
decrease to below 5.0x in 2026 thanks to a resilient margin
profile. Pro forma the transaction, the company's capital structure
will be composed of the EUR365 million senior secured TLB, and
about EUR17 million of other debt not anticipated when we assigned
our preliminary rating, for an estimated total gross debt of about
EUR382 million at closing (versus our previous estimate of EUR365
million.) Incorporating a full 12-month pro forma contribution from
KRS for 2025, we forecast Carco's revenue will reach EUR294 million
in 2025 (59% annual growth, 3 percentage points of which is
organic), and an S&P Global Ratings-adjusted EBITDA margin of 24.1%
(26.2% excluding about EUR6 million in one-off transaction costs
allocated to EBITDA). This will translate into S&P Global
Ratings-adjusted gross leverage of 5.6x at year-end 2025 (5.2x
excluding transaction costs and versus our previous forecast of
5.3x and 4.8x, respectively). We expect this metric to decrease to
4.8x in 2026 on business expansion and improving profitability at
KRS."
Following the transaction, Carco will significantly increase its
presence in the growing A&D industry. KRS, a U.S.-based carve-out
from the Swedish industrial company AB SKF (not rated), specializes
in manufacturing rings and seals primarily for aerospace engine
manufacturers (81% of September 2024 last-12-month sales) and
energy applications (14%). S&P said, "It generated about EUR71
million revenue in 2024 based on due diligence data, and we
estimate S&P Global Ratings-reported EBITDA of EUR12.4 million,
implying a 17.5% EBITDA margin. We think this acquisition will
strengthen Carco's diversification by expanding its product
portfolio -- adding carbon seals and metal rings -- and improve its
end-market balance." Carco will increase its position in the
growing A&D sector, which will become one of Carco's largest
revenue contributors (23% of pro forma September 2024 last-12-month
sales), along with industrial (26%) and energy (23%), followed by
semiconductors (13%), and auto (6%). Like other A&D suppliers,
about 85% of KRS' revenue is backed by long-term agreements (LTAs).
This should significantly enhance Carco's revenue visibility, which
lacks a substantial backlog due to its short-cycle business model.
At the same time, KRS relies mainly on one commercial aviation
platform and one defence platform, which are both developed by a
primary manufacturer of aerospace engines, accounting for more than
65% of its revenue.
S&P said, "We anticipate strong underlying market conditions for
the A&D industry. Airbus and Boeing are ramping up production rates
as fast as their supply chain allows, with large commercial
aircraft engine demand following suit, and we think KRS stands to
benefit, given its exposure to narrow-body engine platforms. In
addition, global risks and regional conflicts may motivate stronger
military and defense spending, boosting Carco's defense business.
We also understand that at the beginning of 2024, the company
renegotiated one of its most important contracts in the A&D
business to include higher prices and automatic pass-through
clauses for inflation, which is expected to have a full run-rate
impact on both KRS' revenue and profitability in 2025.
"The acquisition of KRS entails execution risk, but we anticipate
the company will focus on integration and synergies, while pausing
mergers and acquisitions (M&A) for the next couple of years . The
acquisition marks Carco's 10th M&A transaction since Andrea Chalp,
CEO, and Bruno Lorenzi, managing director, became majority and
minority shareholders, respectively, in 2015, when Carco's revenue
was just EUR15 million. The acquisition of KRS, completed April 11,
stands out in terms of size, as it's the largest M&A transaction in
Carco's history. Carco aims to establish KRS as a fully independent
entity from SKF within 12 months of closing. The acquisition is
subject to execution risks or potential setbacks related to IT
integration, operational continuity, and unforeseen complexities in
disentangling legacy processes from its former parent company,
which ultimately can alter base-case forecasts. However, we
understand that the IT separation is nearing completion.
"In addition to inorganic growth, we anticipate Carco's organic
evolution will be supported by growth in the semiconductor sector
and renewable energy applications, offsetting lackluster industrial
demand. In the semiconductor end market, where Carco specializes in
ultra-high purity sealing systems, we anticipate modest growth
supported by AI infrastructure expansion, while rising electricity
consumption should power investments in energy infrastructure and
renewables, supporting Carco's elastomeric and high-performance
plastic seals business. These growing markets, along with expansion
into the A&D industry, should offset the subdued demand from
industrial clients, where we still see a generally weak market.
Overall, this should translate into revenue expanding to about
EUR294 million in 2025 (59.3% year over year versus EUR184 million
in 2024), when accounting for the 12-month pro forma effect of KRS,
which we estimate at about EUR90 million for 2025. We also forecast
revenue reaching EUR302 million in 2026 (up 2.9%). Our forecast
include potential headwinds from the depreciation of the U.S.
dollar against the euro."
Carco's small size and narrow product offer is balanced by its high
profitability of 26%-28% for 2024-2026 (excluding one-off costs for
2025) on an S&P Global Ratings-adjusted basis. S&P said, "With
estimated revenue of about EUR294 million in 2025, the company has
a limited scale compared with that of other capital goods companies
we rate. In addition, we think the commoditization of its products
and its presence in a highly fragmented industry could make the
company vulnerable to long-term substitution risk."
S&P said, "At the same time, we positively note Carco retains a
strong relationship with its key clients and benefits from an
efficient cost pass-through mechanism, supported by the
mission-critical nature of its components and its portfolio of
proprietary patents and designs. In addition, the company's ability
to execute customized solutions, even in small batches, provides
differentiation from less agile players and smaller competitors
with limited capacity. These factors contribute to its
above-average profitability, with an estimated S&P Global
Ratings-adjusted EBITDA margin of 28.0% in 2024, compared with
28.6% in 2023 and 39% in 2022. The decrease in profitability from
2022-2024 resulted from the dilutive acquisitions in 2023 of Polis,
ROW, and Novotema.
"We expect Carco's profitability to remain high despite transaction
costs in 2025 and initial dilution from the KRS acquisition.
Carco's stand-alone reported EBITDA margin should stay resilient at
28.0%-28.5% in 2025-2026 (28.0% estimate for 2024), supported by
its efficient cost pass-through, the mission-critical nature of its
products, and a portfolio of proprietary patents and designs. KRS,
according to our estimate, recorded an International Financial
Reporting Standards-reported EBITDA margin averaging a relatively
low 10% from 2021-2023. This was due to cost inflation and the
company's inability to pass those costs through during this period,
given the fixed-term conditions in its LTAs. In 2024, thanks to
contract renegotiation, the company significantly improved its
reported EBITDA margin to 17.5%. However, the full run-rate effect
will only be visible in 2025, which, along with productivity gains
from new machinery installed in late 2024, should drive margin
recovery to 22.5%-23.5% in 2025-2026. All in all, under our base
case we anticipate an S&P Global Ratings-adjusted EBITDA margin of
24.1% in 2025 (28.0% in 2024), albeit impacted by one-off
transaction costs and separation costs and KRS' initial dilutive
effects. With temporary costs fading and KRS' profitability
improving, Carco's S&P Global Ratings-adjusted EBITDA margin based
on the new perimeter should recover to about 27.5% in 2026.
"We expect Carco's FOCF to stabilize at EUR30 million annually from
2026, although working capital management at KRS could present
unforeseen challenges. During 2022-2024, Carco's S&P Global
Ratings-adjusted FOCF ranged from 12%-18% of sales. FOCF was mostly
driven by Carco's high-margin profile, relatively low interest
expense, and stable capital expenditure (capex) needs at about 4%
of sales, although it peaked at 6% of revenue in 2024 due to
investments in increasing production capacity and the acquisition
of production facilities. Carco's stand-alone trade working capital
requirements are approximately 30% of sales, relatively higher than
peers, and historically resulting in annual working capital cash
needs of EUR2 million-EUR8 million. Post-acquisition, while we
expect profitability to remain strong and capex to be 3%-4% of
sales, we believe working capital dynamics will become a key
determinant of FOCF, because KRS operates with a higher working
capital-to-revenue ratio of about 60%. While we expect KRS to
normalize its inventory as safety stock levels decreases, business
expansion will drive a working capital cash outflow for both Carco
and KRS that we estimate will be a cumulative EUR20 million-EUR25
million in 2025 and 2026.
"For 2025-2026, we expect Carco to prioritize executing its
business plan, integrating KRS, harnessing the synergies it has
identified, and deleveraging. We understand the company intends to
deleverage until reaching company-adjusted net debt to EBITDA of
3.0x, and we therefore do not expect to see significant
transformative acquisitions. However, given its aggressive and
accelerated buy-and-build strategy over the past decade, we believe
Carco could still pursue opportunistic bolt-on acquisitions.
"The final transaction documentation is in line with our
expectations, with no meaningful changes in key terms. The key
terms of the executed documentation were in line with our
expectations, including use of the TLB proceeds, maturity, size and
conditions of the term loan, financial covenants, security, and
ranking. In addition, the company completed the acquisition of
US-based KRS.
"The stable outlook reflects our expectations that Carco's debt to
EBITDA will decrease to below 5x in 2026 on EBITDA expansion, FOCF
will remain consistently positive, and the company's FFO cash
interest coverage will remain sustainably above 2.0x."
S&P could lower the rating if:
-- Carco sustains debt to EBITDA above 5.5x due to
weaker-than-expected operating performance or it adopts aggressive
financial policy with unanticipated material debt-funded
acquisitions or dividend distributions;
-- It sustains negative FOCF; or
-- FFO cash interest coverage falls below 2.0x.
An upgrade appears unlikely due to Carco's limited scale compared
with that of higher-rated peers, as well as the execution risks
associated with its transformative acquisition. However, S&P could
consider raising the rating if the company establishes a consistent
track record of lower leverage translating into debt to EBITDA
remaining below 4.0x and its FFO cash interest coverage sustainably
exceeds 3.0x.
CHROME HOLDCO: S&P Lowers ICR to 'CCC+', Outlook Stable
-------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Chrome HoldCo, Cerba's parent, and its issue ratings on its senior
secured debt to 'CCC+' from 'B-'. The recovery rating on the debt
remains '3' (50%-70%; rounded estimate: 50%). S&P also lowered its
issue ratings on the company's senior unsecured notes to 'CCC-'
from 'CCC'; our recovery rating on the debt remains '6' (0%-30%;
rounded estimate: 0%).
S&P said, "The stable outlook reflects our view that Cerba will
maintain sufficient liquidity to fund its operations over the next
12 months, supported by its lack of significant near-term debt
maturities. Our base case assumes operating performance will
gradually improve from early 2025 as the company tightens control
of working capital and cuts costs.
"The rating action reflects a material deviation of Cerba's
operating performance in 2024 from our base-case scenario. This was
due to tariff cuts to French routine testing and a delay in the
rebound of the research segment, leading to significantly lower
profitability and weaker credit metrics. Cerba reported a 1.8%
decrease in its revenue base to about EUR1.9 billion in 2024,
mainly as a result of two tariff cuts to French routine testing
that came into effect in January 2024 and September 2024. Revenue
performance was also undermined by a delayed recovery in the
research segment and flattish performance by the specialty
business, owing to delays in the ramp-up of Cerba's new specialty
platform in Frepillon. These top-line headwinds added further to
the need for margin improvement in 2024 and 2025, given the
business' high operating leverage. Cerba introduced some
cost-saving initiatives in 2024, notably in the purchasing of raw
materials and in staffing. However, the effect of these initiatives
was offset by an increase in staffing and operational expenses that
put further pressure on the EBITDA margin.
"As a result, S&P Global Ratings-adjusted EBITDA for 2024 deviated
materially from our base case; it was EUR342 million with a margin
of 18.1%, compared with our estimate of EUR442 million and a margin
of 22.5%. The company's S&P Global Ratings-adjusted debt increased,
notably through an incremental EUR110 million RCF drawing in 2024;
this translated into S&P Global Ratings-adjusted debt to EBITDA
spiking to 14.1x and FOCF after leases of negative EUR143 million.
This was significantly weaker than our expectation of 10.5x-11.0x
and negative EUR19 million, respectively. Our fixed-charge coverage
ratio was below 1.0x, which we view as unsustainable compared with
our expectation of 1.0x-1.5x for 2024.
"Given the challenging operating environment, we assess the
company's capital structure to be unsustainable. We see further
challenges to the company increasing revenue, which will constrain
its recovery path over the next 12-18 months. Although the routine
testing business, which currently accounts for half of Cerba's
revenue, gained more clarity in December when the CNAM (Caisse
Nationale Assurance Maladie) announced there will be no tariff cuts
until the end of 2026 and restated tariffs for certain tests, we
see volatility in the rest of the company's revenue. 2025 began
with a 10% tariff cut to routine testing in Luxembourg, coupled
with another 5% tariff cut in the routine business in Italy, which,
in our view, will constrain both revenue generation and margin
improvement, despite ongoing cost-saving initiatives.
"In addition, we foresee more uncertainty around the recovery of
the research segment, which we had expected to begin in the second
half of 2025. This uncertainty mostly stems from the recent health
care spending cuts announced in the U.S., which has jeopardized one
of Cerba's main contracts and could hamper research revenue in 2025
if it is officially canceled. We also regard the research and
clinical trial environment as remaining very challenging market, as
biotech funding is still facing difficult conditions, potentially
hindering the research segment's recovery. In our view, these
top-line headwinds, coupled with the high operating leverage of the
business, will result in a slower-than-expected deleveraging path.
We anticipate that leverage will remain above 10.5x; the company
faces several debt maturities over the next few years, which we
view as unsustainable.
"We need to reexamine the company's overall business assessment due
to the underperformance of its diversification efforts in the
biology sector, which has hit profitability in recent years. The
previous mergers and acquisitions (M&A) strategy, aimed at
transitioning away from the routine and specialty segments through
acquisitions in research and clinical trials, has not delivered the
expected results. The research and clinical trials division has
struggled with growth, particularly as the biotech industry faced
significant challenges in 2023 and 2024. Additionally, the concerns
surrounding research in the U. S. under the new Trump
administration are likely to hinder any near-term recovery in
profitability. Furthermore, the recently acquired Italian test,
inspection and certification (TIC) business unit has lagged
expectations and will require a comprehensive turnaround strategy
to align with the company's goals. We understand the advanced
biology segment (combining specialty and research) has a higher
fixed cost base than the routine testing business and needs to be
turned around in order to achieve the profitable growth the company
had anticipated.
“We expect a profitability rebound in 2025 thanks to cost-saving
initiatives, but credit metrics will remain weak. Under our revised
base case for the full year 2025, we expect revenue to decline by
about 0%-1% and forecast S&P Global Ratings-adjusted EBITDA to rise
to about EUR380 million-EUR400 million from EUR342 million in 2024.
Higher EBITDA generation should stem from the cost-saving plan
established by management at the end of 2024. This plan will mostly
deliver additional efficiency gains through closer monitoring of
labor costs, as well as purchasing and other operational expenses
that are currently pressuring the cost base. We estimate that
adjusted debt to EBITDA will decrease to 12.5x-13.0x at year-end
2025 from 14.1x in 2024; this is well above the 9.5x-10.0x we
forecast for 2025 in our previous base case. Moreover, we forecast
the fixed-charge coverage ratio will increase to 1.0x–1.5x over
the next 12-18 months.
"The company is not self-funding; we expect its annual FOCF after
leases to remain negative. Based on annual FOCF, after leases, we
estimate that cash flow generation in 2025 will be negative EUR50
million-EUR60 million, assuming annual capital expenditure (capex)
of about EUR60 million (EUR73 million in 2024). Capex was
relatively high in 2023-2024 while the company was investing in the
building of the new specialty platform in Frépillon, and we expect
it to moderate in 2025.
"Cerba's liquidity position is increasingly strained. Available
liquidity as of March 31, 2025, included EUR54.7 million in cash on
balance sheet and the undrawn EUR84 million of the EUR450 million
RCF. Although our forecast indicates that cash flow generation will
be negative, we believe Cerba's liquidity should still be
sufficient to service its financial commitments this year, assuming
the group curbs its growth investments and acquisitions. However,
the company will become increasingly reliant on its RCF and will
have very limited ability to absorb any further underperformance.
Nonetheless, Cerba passed its covenant test at the end of 2024 and,
because the company's next debt maturity is in 2027 for the RCF and
2028 for the term loan B, it is not exposed to short-term
refinancing risks.
"The stable outlook indicates that we expect Cerba to maintain
sufficient liquidity to fund its operations over the next 12
months, supported by its lack of significant near-term debt
maturities. Our base case assumes that operating performance will
gradually improve in 2025, as the company tightens its control over
working capital and implements cost control measures.
"We project S&P Global Ratings-adjusted debt leverage will decrease
to 12.5x-13.0x in 2025 from 14.1x in 2024, but we expect FOCF after
leases to remain negative, at about EUR50 million-EUR60 million due
to capex requirements and elevated interest payments.
"We could lower the ratings in the next 12 months if we thought
Cerba's liquidity position had weakened, for example through a
financial covenant breach due to weaker-than-expected EBITDA
generation or substantially negative FOCF.
"We could also lower our rating if we see heightened risk of
default, including debt exchange offers or similar restructurings
that we consider to be distressed exchanges.
"We could raise the rating if we see a strong and sustained rebound
in cash flow generation over the next 12 months such that S&P
Global Ratings-adjusted debt leverage decreases to 8.0x-9.0x and
fixed-charge coverage approaches 1.5x. This would also help
strengthen the company's liquidity position and increase its
financial covenant headroom, enhancing its financial flexibility.
"This could happen if we see Cerba benefiting from a recovery in
its research division, with positive trends in the specialty and
routine testing segments, along with successfully implemented
cost-efficiency measures leading to a sustainably higher profit
margin across the business. This would translate into the company
being able to self-fund its operations and deleverage faster than
expected."
JERROLD FINCO: Fitch Rates GBP500MM 7.5% Secured Notes 'BB'
-----------------------------------------------------------
Fitch Ratings has assigned Jerrold Finco plc's (FinCo) GBP500
million issue of 7.5% senior secured notes due 2031 (ISINs:
XS3079594456, XS3079593649) a final rating of 'BB'.
The final rating is in line with the expected rating Fitch assigned
to the notes on 20 May 2025 (see "Fitch Rates Jerrold FinCo's 2031
Senior Secured Notes 'BB(EXP)".
FinCo is a subsidiary of Together Financial Services Limited
(Together; BB/Stable), a UK-based specialist mortgage lender. The
notes are being used to refinance FinCo's GBP500 million of 2027
senior secured notes.
Key Rating Drivers
IDR AND SENIOR DEBT
Equalised with Long-Term IDR: The notes will be guaranteed by
Together and all material subsidiaries and rank equally with other
senior secured obligations. This results in their rating being
aligned with Together's Long-Term Issuer Default Rating (IDR).
Niche Segments; Low LTVs: Together's IDR is underpinned by its
long-established franchise in UK specialised secured lending, its
low loan-to-value (LTV) underwriting and its increasingly
diversified, albeit secured, funding profile. The rating also takes
into account the inherent risks associated with lending to
non-standard UK borrowers and the group's increased leverage and
associated funding needs.
For further detail of the key rating drivers and sensitivities for
Together's IDR, see ' Fitch Affirms Together Financial Services at
'BB'; Outlook Stable, dated 30 September 2024)
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Evidence of material asset quality weakness via a sharp decline in
customer repayments or reduction in the value of collateral
relative to loan exposures could result in a downgrade. Weakened
profitability with a pre-tax profit/average total assets ratio
approaching 1% would also put pressure on ratings, as would an
increase in consolidated leverage to above 7x.
A large depletion of Together's immediately accessible liquidity
buffer, for example, via reduced funding access or a need for
Together to inject cash or eligible assets into its securitisation
vehicles to avoid covenant breaches driven by asset quality would
put pressure on ratings.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
An upgrade is unlikely in the near term. However, continued
franchise growth and diversification could lead to positive rating
action in the medium term, if achieved without deterioration in
leverage or the risk profile.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
The guarantee by Together means Fitch regards the probability of
default on the senior secured notes as consistent with that of
Together, and therefore rate the notes in line with Together's
Long-Term IDR, reflecting average recovery prospects.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
The senior secured notes' rating is principally sensitive to a
change in Together's Long-Term IDR, with which it is aligned.
Material increases in higher- (or lower-) ranking debt could also
lead to upward (or downward) notching of the senior secured notes'
rating, if it affects Fitch's assessment of likely recoveries in a
default.
Date of Relevant Committee
27 September 2024
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Jerrold Finco Plc
senior secured LT BB New Rating BB(EXP)
NEW CINEWORLD: S&P Upgrades ICR to 'B', Outlook Stable
------------------------------------------------------
S&P Global Ratings raised its rating on global cinema operator New
Cineworld Midco Ltd. (Regal Cineworld) and its senior secured debt
to 'B' from 'B-'.
S&P said, "The stable outlook reflects our expectations that box
office recovery, favorable ticket pricing, and control over
operating costs could further strengthen Regal Cineworld's S&P
Global Ratings-adjusted leverage to below 5.0x and raise EBITDAR
cash interest coverage to about 1.5x by the end of 2025.
"The upgrade reflects strong positive momentum in box office
performance, exceeding our previous forecast, and our expectation
that Regal Cineworld can maintain adjusted leverage below 6.0x and
improving FOCF. In 2024, the company's S&P Global Ratings-adjusted
leverage reduced to 5.2x, ahead of our expectations. The impact of
the actors' and writers' strikes on the 2024 box office and the
company's operating results was less negative than we previously
anticipated. This improvement was driven by extraordinary box
office success from titles such as "Inside Out 2", "Wolverine &
Deadpool", "Wicked" and "Moana 2", as well as strong growth in
average ticket prices and concession spending. Consequently, Regal
Cineworld's topline decreased by only 2.7%, rather than the 5.8% we
expected. This performance, along with a material reduction of
one-time costs, supported a more rapid recovery of the company's
adjusted EBITDA and free cash flow and leverage reduction than we
expected. We anticipate that the strong slate of film releases
planned for 2025-2026 will support a further recovery of global
cinema admissions, as well as Regal Cineworld's box office revenue
and EBITDA. This should allow its FOCF after leases to turn
sustainably positive and FOCF to debt to improve toward 10% in 2026
after it completes a significant capital investment in 2025, and
adjusted leverage will remain well below 6.0x.
"We expect operating performance to improve in 2025-2026 supported
by solid global box office revenue. We forecast cinema admissions
to increase in 2025 by about 5% on the back of a strong film
lineup, including the success of "A Minecraft Movie" in April,
"Lilo & Stitch" and "Mission Impossible: The Final Reckoning" in
May, as well as major titles due to be released in the second
quarter and through the end of the year, including "Jurassic World
Rebirth," "Tron Ares," "Avatar: Fire and Ash," and others. This is
despite a weak first quarter of 2025 when the company's revenue was
13% lower than in the same period the previous year. This was due
to an expected weak slate of releases, lack of big franchises such
as "Dune" or "Kung Fu Panda" in 2024, and the weaker-than-expected
performance of Disney's "Snow White," and "Captain America: Brave
New World". At the same time, thanks to several very strong
releases at the end of April and in early May, the global and U.S.
box office strongly recovered. As of May 27, 2025, North American
box office sales were up 23% versus the same period last year
according to Box Office Mojo. Ticket and concession price
indexations also support the group's revenue, so we forecast total
reported revenue will increase by 8.7% to $3.6 billion. In 2026, we
expect Regal Cineworld's admissions might rise by another 5%
reflecting planned releases such as "Avengers: Doomsday,"
"Spider-Man: Brand New Day," "Dune: Messiah," "Shrek 5," and
others. The company's admissions and average ticket prices should
also benefit from investments in recliner seats in the U.S. in
2024-2025. However, average ticket prices are at an all-time high
and we believe cinemas face high substitution risk from on-demand
streaming services and advanced consumer electronics. Therefore, if
the macroeconomic environment weakens, consumers may increasingly
spend less on cinemas and choose lower-cost, in-home viewing
options, prompting cinema operators to adjust pricing, thereby
slowing revenue growth.
"A sizeable investment program will lower Regal Cineworld's FOCF
after leases in 2025, but we expect it could turn sustainably
positive in 2026. We expect the company's FOCF after leases will be
moderately negative in 2025 at around minus $90 million. This is
mainly driven by the extensive capital investment program Regal
Cineworld started last year, primarily focused on recliner seats.
This will lead to elevated capital expenditure (capex) of about
$380 million in 2025, which was prefunded by a $250 million equity
injection from shareholders in 2024 and hence will be financed from
Regal Cineworld's cash on the balance rather than from operating
cash flows. We assume that, even if Regal Cineworld continues with
strategic investments beyond 2025, FOCF after leases should turn
consistently positive from 2026, supporting FOCF to debt of 5% or
higher and further deleveraging.
"The stable outlook reflects our expectations that box office
recovery, favorable ticket pricing, and tight control over
operating costs will help Regal Cineworld's adjusted EBITDA margin
approach 30% and support its FOCF, such that FOCF to debt after
leases will be breakeven in 2025 and turn sustainably positive from
2026.
"We could lower the rating over the next 12 months if cinema
admissions failed to recover in line with our expectations, causing
persistently negative FOCF after leases, or if Regal Cineworld
undertook material debt-funded acquisitions or shareholder returns,
leading to debt to EBITDA higher than 6.0x.
"We could raise the rating if Regal Cineworld's credit metrics
improves, leading to FOCF to debt at 10% and S&P-Global
Ratings-adjusted leverage materially and sustainably below 5.0x."
PIZZAEXPRESS: S&P Affirms 'CCC+' ICR on Completed Refinancing
-------------------------------------------------------------
S&P Global Ratings affirmed its 'CCC+' long-term credit ratings on
PizzaExpress (under the holding company Wheel Bidco Ltd.) and its
amended and extended senior secured notes, now due Sept. 15, 2029,
and its 'B' issue rating on its RCF. The recovery rating on the
notes is '4', indicating its expectation of average recovery
prospects (30%-50%; rounded estimate: 45%).
The outlook is stable reflecting PizzaExpress' adequate liquidity
and the resolution of the refinancing risk, while the near-term
trading may suffer from weak consumer sentiment and soft casual
dining demand amid persistent labor cost pressures. If the company
is unable to deliver on its business plan, improving its
profitability and cash flow generation and sustainably covering its
substantial fixed cash charges, its ability to comfortably sustain
the capital structure over the long term will continue to depend on
the economic and trading conditions turning more favorable.
PizzaExpress has completed its consent solicitation launched on
April 25, 2025, addressing the lenders of its existing GBP335
million senior secured notes originally due July 15, 2026, and
amended the notes' indenture extending the maturity of the
remaining GBP280 million senior secured notes to Sept. 15, 2029.
S&P said, "We view the transaction as proactive treasury management
for its offer of adequate compensation to the noteholders, in
exchange for maturity extension. Under the transaction, the group
used GBP20 million new equity from shareholders and GBP35 million
cash on balance sheet to repay GBP55 million of the GBP335 million
senior secured notes, reducing gross debt to GBP280 million
maturing in September 2029. The group also used a further GBP18
million cash on balance sheet to pay consent fees, transaction
costs, and accrued interest. The maturities of GBP24.75 million of
the commitments under the group's GBP30 million RCF due January
2026 were also extended to March 2029 with the interest rate uplift
by 75 basis points (bps). We view the compensation to the
noteholders as adequate due to the offer of higher coupon for the
senior secured notes holders at 9.875% compared to the original
6.75%, consent fees of 50 bps, and partial principal repayment of
the senior secured notes at par with shareholder support and own
cash."
In 2024, the group has outperformed our base case. S&P Global
Ratings-adjusted EBITDA in 2024 was GBP81 million, an improvement
in margin to 18.4% from 16.1% in 2023, and underpinning the
reduction in adjusted leverage to 6.3x from 6.9x in 2023. This
followed the step-up in promotional activities and other
initiatives driving volume as well as cost efficiency measures,
mostly benefitting the second half of 2024. For the full year, the
group's revenue declined by 2.7% year over year to GBP442 million
and like-for-like revenue declined by 3%, due to challenging volume
and spending trends as well as competitive pressure. The group also
saw like-for-like sales returning to growth at 1.3% for the first
eight weeks of 2025, outperforming the dining-in market according
to the Peach data tracker.
Cash flow generation and liquidity will be key for PizzaExpress'
creditworthiness. S&P said, "We will monitor the progress in
PizzaExpress' topline recovery amid intense competition in the
restaurant sector, soft discretionary spending among U.K.
customers, and escalating cost pressure in labor and other input
and operating costs. We expect the group's performance to remain
challenged over the next 12 months under continuous demand and cost
headwinds, which would be partly offset by the management's ongoing
effort in driving footfall through promotions, various efficiency
initiatives, and cutting costs. Notwithstanding the reduced amount
of debt after the amend-and-extend transaction, the higher interest
rate on the amended notes would add about GBP5 million to annual
cash interest payments compared to the previous capital structure.
Moreover, the significant reduction in cash after using GBP53
million for debt repayment and fees related to the transaction,
weakens the company's financial flexibility and liquidity cushion.
While in our forecast the company is not under pressure to draw on
the RCF to the extent the springing covenant would apply, we note
that usage of more than GBP10 million (40% of the extended
commitments) under the RCF may be constrained by a shortfall in
earnings resulting in a breach of the springing covenant."
The stable outlook reflects PizzaExpress' adequate liquidity and
the resolution of the refinancing risk, while the near-term trading
may suffer from weak consumer sentiment and soft casual dining
demand amid persistent labor cost pressures. If the company is
unable to deliver on its business plan, improving its profitability
and cash flow generation, and sustainably covering its substantial
fixed cash charges, its ability to comfortably sustain the capital
structure over the long term will continue to depend on the
economic and trading conditions turning more favorable.
S&P said, "We could lower our rating if we see a heightened
likelihood of a default within the next 12 months. This could occur
if the group's operating performance is persistently weak, or its
liquidity deteriorates such that we no longer expect the group has
sufficient cash to meet its obligations or sustain its capital
structure.
"We could take a positive rating action if the group gains traction
in sustainable earnings growth and cash generation, such that free
operating cash flow after leases is structurally positive and
demonstrates sustainable growth, ensuring its adequate liquidity
including ample headroom under the springing maintenance
covenant."
RAC BOND: S&P Assigns B+(sf) Rating on Class B2-Dfrd Notes
----------------------------------------------------------
S&P Global Ratings assigned its 'BBB (sf)' credit rating to RAC
Bond Co. PLC's class A4 notes. At the same time, S&P affirmed its
'BBB (sf)', 'BBB (sf)' and 'B+ (sf)' ratings on the existing class
A2, A3 and B2-Dfrd notes, respectively.
The class A4 notes' expected maturity date (EMD) is in November
2029. The GBP400 million proceeds from the A4 notes issuance along
with GBP85 million of RAC's own cash will be used to redeem the
class A2 notes no later than June 6, 2025. Until then, the proceeds
will be held in a segregated account with the existing borrower
transaction bank account provider.
Total debt leverage post the class A4 notes' issuance and
considering the 2025 senior term facility (2025 STF) and 2025
private placement (2025 PP) issuance due in June 2025 has reduced
to 5.74:1 from 6.4:1, based on financial year (FY) 2024 S&P Global
Ratings-adjusted EBITDA.
Under the refinancing, the senior debt's cost has increased. This
is due to increased interest and hedging costs, although the
increase to senior debt's cost was partially offset by debt
deleveraging using RAC's own cash.
RAC Bond Co. is a whole business securitization of RAC's operating
businesses. RAC Bond Co.'s financing structure blends a corporate
securitization of RAC's U.K. operating business with a subordinated
high-yield issuance. The transaction is backed by the operating
businesses' future cash flows, which include roadside and
insurance, but exclude RAC Insurance Ltd. and RACMS (Ireland) Ltd.
In S&P's opinion, the transaction will likely qualify for the
appointment of an administrative receiver under the U.K. insolvency
regime. An obligor default would allow the noteholders to gain
substantial control over the charged assets before an
administrator's appointment, without necessarily accelerating the
secured debt, both at the issuer and borrower level.
Refinancing activities since class A3 notes issuance
In January 2024, RAC executed and drew GBP205 million senior term
facility (2024 STF) to refinance the existing GBP141 million 2020
STF maturing in January 2025. The rest of the proceeds drawn on the
2024 STF together with the surplus cash from the class A3 notes'
issuance were used to partially redeem GBP115 million of the
existing class A2 notes. The class A2 notes balance was reduced to
GBP485 million at that time.
In January 2025, RAC executed a GBP50.0 million private placement
(2025 PP), which is expected to be issued in June 2025. The 2025 PP
notes will rank senior in the waterfall, pari passu with the class
A notes and with the STFs. The 2025 PP notes will be subject to a
fixed interest rate of 6.49% and will mature on June 2, 2030.
In February 2025, RAC also executed a GBP40.0 million STF, which is
expected to be fully drawn in June 2025 (2025 STF). This, along
with the 2025 PP notes, will be used to partially refinance the
GBP170.0 million 2021 STF (A) maturing in June 2025. The remaining
balance of GBP80.0 million will be funded using RAC's own funds.
Each of the 2024 STF and the 2025 STF is subject to a variable
interest rate of Sterling Overnight Index Average (SONIA) plus a
margin of 3.00% per year. Both facilities mature in May 2029. Given
the proximity of the class A4 notes issuance and refinancing of the
2021 STF(A), S&P factored 2025 STF and 2025 PP into our analysis.
Although GBP655 million of debt has been replaced with GBP490
million, the overall cost of the senior debt has increased. This is
due to the higher coupon and increased hedging costs. Total debt
leverage post refinancing in June 2025 is expected to have reduced
to 5.74:1 from 6.4:1 based on FY 2024 S&P Global Ratings-adjusted
EBITDA.
The long-term issuer credit ratings on the
counterparties--including the liquidity facility, derivatives, and
bank account providers--do not constrain our rating on the class A4
notes.
Under the transaction documents, the counterparties can invest cash
in short-term investments with a minimum required rating of 'BBB+'.
Given the substantial reliance on excess cash flow as part of our
analysis and the possibility this could be invested in short-term
investments, the transaction can only fully rely on excess cash
flows in rating scenarios up to 'BBB+'.
Rationale For The Class A Notes
RAC Bond Co.'s primary sources of funds for principal and interest
payments on the class A notes are the loan interest and principal
payments from the borrower and amounts available from the liquidity
facility, which is shared with the borrower to service the 2021,
2024, and 2025 STFs as well as to service the 2025 private
placement (PP) notes.
S&P said, "Our rating on the class A notes address the timely
payment of interest and the ultimate payment of principal due. They
are based primarily on our ongoing assessment of the borrowing
group's underlying business risk profile (BRP), the integrity of
the transaction's legal and tax structure, and the robustness of
operating cash flows supported by structural enhancements.
"Our cash flow analysis serves to both assess whether cash flows
will be sufficient to service debt through the transaction's life
and to project minimum debt service coverage ratios (DSCRs) in
base-case and downside scenarios. In our analysis, we excluded any
projected cash flows from the underwriting part of the RAC's
insurance business, which is not part of the restricted borrowing
group (only the insurance brokerage part is).
"As discussed in our criteria, we typically consider that liquidity
facilities and trapped cash (either due to a breach of a financial
covenant or following an expected repayment date) must be kept in
the structure if: (1) the funds are held in accounts or may be
accessed from liquidity facilities; and (2) we view it as dedicated
to service the borrower's debts, specifically that the funds are
exclusively available to service the issuer/borrower loans and any
senior or pari passu debt, which may include bank loans.
"In this transaction, we gave credit to trapped cash in our DSCR
calculations as we concluded it is required to be kept in the
structure and is dedicated to debt service.
"Although both the borrower and issuer may draw on the liquidity
facility, our treatment of the liquidity facility differs from
other transactions where the liquidity facility covers both
borrower and issuer shortfall amounts. In the case of RAC Bond Co.,
although the borrower and issuer share the liquidity facility, the
borrower's ability to draw is limited to liquidity shortfalls
related to the 2025 PP notes and STFs (2021, 2024, and 2025) and
does not cover the issuer/borrower loans. This is why we do not
give credit to the liquidity facility in our base-case DSCR
analysis for RAC Bond Co, while we do give credit to it in other
transactions where the borrower may draw on the liquidity facility
to service issuer/borrower loans as well."
DSCR analysis
S&P's cash flow analysis serves to both assess whether cash flows
will be sufficient to service debt through the transaction's life
and to project minimum DSCRs in our base-case and downside
scenarios.
Base-case forecast
S&P said, "Our base-case forecasts of cash flow available for debt
service (CFADS) reflect our higher revenue and EBITDA expectation.
We have assumed revenue growth of about 7% in FY2025. This will be
supported by continued member growth as part of the
subscription-based business model, benefiting from stable retention
rate, new member acquisition and pricings. We also forecast the
company will improve its S&P Global Ratings-adjusted margins toward
33%-34% over our forecast horizon, thanks to robust cost control,
pricing actions, and operational efficiencies.
"Our higher S&P Global Ratings-adjusted EBITDA expectations are
coupled with higher capital expenditure (capex) expectations
(excluding customer acquisition costs), increased investment in
working capital, and higher tax expectations. The net effect
improves our projected CFADS compared with our previous
projections.
"Consequently, our minimum DSCR in our base case has improved
slightly compared with previous projections and remains in the
middle of the 1.40x-3.25x range.
"Long term, our higher EBITDA expectation means marginally higher
average DSCRs in both the base-case and downside-case scenarios
when compared to our previous projections. That said, they remain
above middle range for a 'bbb' anchor in our base-case analysis,
and above the breakpoint between a strong and excellent resilience
score in our downside analysis. Our satisfactory BRP remains
unchanged."
Downside DSCR analysis
S&P said, "Our downside DSCR analysis tests whether the
issuer-level structural enhancements improve the transaction's
resilience under a moderate stress scenario. Considering RAC's
business and services' historical performance during the financial
crisis of 2007-2008, in our view a 30% decline in EBITDA from our
base case is appropriate for the borrower's particular business. We
applied this 30% decline to the base-case at the point where we
believe the stress on debt service would be greatest.
"Our downside DSCR analysis resulted in a strong resilience score
for the class A notes. This reflects the headroom above a 1.80:1
DSCR threshold that is required under our criteria to achieve a
strong resilience score after considering the level of liquidity
support available to each class."
Liquidity adjustment
S&P said, "The GBP100 million liquidity facility balance represents
about 9.6% of the total senior debt, including the STF, which is
below the 10% threshold we typically consider for significant
liquidity support. Therefore, we have not considered any further
uplift adjustment to the resilience-adjusted anchor for
liquidity."
Modifier analysis
S&P said, "Considering the proximity of the EMDs for the existing
notes and legal final maturity for the STFs, the issuer has a
near-term refinancing need. In our view, this could potentially
lower our base-case DSCR or result in senior debt with an EMD that
is more than seven years in the future. To account for this and
given that our current base-case DSCR is at the lower end of the
range for a 'bbb' anchor, we maintained a one-notch adjustment to
the resilience-adjusted anchor."
Comparable rating analysis
S&P said, "Under our corporate securitization criteria, we
considered comparable peers' credit characteristics in the business
sector and by structure type (cash-sweep transactions). RAC is the
second-largest U.K. car breakdown services provider in terms of
EBITDA, after its main competitor, the AA. Together they represent
about 75% of the market by revenue share while both transactions
have similar repayment structures. RAC generates 25% less EBITDA
than the AA and its adjusted EBITDA margin is about the same as the
AA. We considered the smaller EBITDA scale of the business for RAC
compared with market leader the AA. Overall, we decreased by one
notch our resilience-adjusted anchor on the rating on the class A
notes as part of the comparable rating analysis."
Counterparty Risk
S&P's ratings on the counterparties--including the liquidity
facility, derivatives, and bank account providers--do not constrain
its 'BBB (sf)' rating on the class A notes.
Eligible Investments
Under the transaction documents, the counterparties are allowed to
invest cash in short-term investments with a minimum required
rating of 'BBB+'. Given the substantial reliance on excess cash
flow as part of our analysis and the possibility that this could be
invested in short-term investments, full reliance can be placed on
excess cash flows only in rating scenarios up to 'BBB+'.
Rationale For The Class B2-Dfrd Notes
The class B2-Dfrd notes are structured as soft-bullet notes due in
2046. Under the transaction documents, if either the class B2 loan
or any class A loan is not repaid on its respective final maturity
date (aligned with the EMD of the corresponding class of notes),
interest due on the class B2-Dfrd notes will no longer be payable
and will be deferred. The deferred interest, and the interest
accrued thereon, becomes due and payable on the final maturity date
of the class B2-Dfrd notes in 2046. S&P said, "Our analysis focuses
on scenarios in which the loans underlying the transaction are not
refinanced at their EMDs. We therefore consider the class B2-Dfrd
notes as deferring accruing interest following the earliest class A
or class B term loan's EMD and receiving no further payments until
the class A debt is fully repaid."
Under the transaction documents, further issuances of class A notes
are permitted without considering the potential effect on the then
current rating on the outstanding class B2-Dfrd notes.
S&P said, "Both the extension risk stemming from the deferability
of the notes, which we view as highly sensitive to the borrowing
group's future performance, and the ability to issue more senior
debt without considering the class B2-Dfrd notes may adversely
affect the issuer's ability to repay the class B2-Dfrd notes. As a
result, the uplift above the borrowing group's creditworthiness
reflected in our rating is limited. Consequently, we affirmed our
'B+ (sf)' rating on the class B2-Dfrd notes."
Ratings list
Class Rating* Balance (mil. GBP)
Rating assigned
A4 BBB (sf) 400
Ratings affirmed
A2§ BBB (sf) 485
A3 BBB (sf) 250
B2-Dfrd B+ (sf) 345
*S&P's ratings on the class A notes address timely payment of
interest and ultimate payment of principal on the legal final
maturity date. Our rating on the class B2-Dfrd notes addresses
ultimate payment of interest and ultimate payment of principal by
the legal final maturity date.
§The proceeds from the issuance of the class A4 notes along with
RAC's own funds are used to fully repay the outstanding class A2
notes by June 6, 2025. S&P has therefore affirmed its 'BBB (sf)'
rating on the class A2 notes.
===============
X X X X X X X X
===============
[] BOOK REVIEW: The Turnaround Manager's Handbook
-------------------------------------------------
Author: Richard S. Sloma
Publisher: Beard Books
Soft cover: 226 pages
List Price: $34.95
Review by Gail Owens Hoelscher
In the introduction to this book, the author suggests that an
accurate subtitle could be "How to Become a Successful Company
Doctor." Using everyday medical analogies throughout, he targets
"corporate general practitioners" charged with the fiscal health of
their companies.
As with many human diseases, early detection of turnaround
situations is critical. The author describes turnaround situations
as a continuum differentiated by length of time to disaster: "Cash
Crunch," "Cash Shortfall," "Quantity of Profit," and "Quality of
Profit."
The book centers on 13 steps to a successful turnaround. The steps
are presented in a flowchart form that relates one to another.
Extensive data collection and analysis are required, including the
quantification of 28 symptoms, the use of 48 diagnostic and
analytical tools, and up to 31 remedial actions. (In case the
reader balks at the effort called for, the author points out that
companies that collect and analyze such data on a regular basis
generally don't find themselves in a turnaround situation to begin
with!)
The first step is to determine which of 28 symptoms are plaguing
the company. The symptoms generally pertain to manufacturing firms,
but can be applied to service or retail companies as well. Most of
the symptoms should be familiar to the reader, but the author lays
them out systematically, and relates them to the analytical tools
and remedial actions found in subsequent chapters. The first seven
involve the inability to make various payments, from debt service
to purchase commitments. Others include excessive debt/equity
ratio; eroding gross margin; increasing unit overhead expenses;
decreasing product line profitability; decreasing unit sales; and
decreasing customer profitability.
Step 2 employs 48 diagnostic and analytical tools to derive
inferences from the symptom data and to judge the effectiveness of
any proposed remedy. The author begins by saying ". . . if the
only tool you have is a hammer, you will view every problem only as
a nail!" He then proceeds to lay out all 48 tools in his medical
bag, which he sorts into two kinds, macro- and micro- tools.
Macro-tools require data from several symptoms or assess and
evaluate more than a single symptom, whereas micro-tools more
general-purpose in function. The 12 macro-tools run from "The Art
of Approximation" to "Forward-Aged Margin Dollar Content in Order
Backlog." The 36 micro-tools include "Product Line Gross Margin
Percent Profitability," Finance/Administration People-Related
Expenses As Percent Of Sales," and "Cumulative Gross $ by Region."
Next, managers are directed to 31 possible remedial actions,
categorized by the four stage turnaround continuum described above.
The first six actions are to be considered at the Cash Crunch
stage, and range from a fire-sale of inventory to factoring
accounts receivable. The next six deal with reducing
people-related expenses, followed by 13 actions aimed at reducing
product- and plant-related expenses. The subsequent five actions
include eliminating unprofitable products, customers, channels,
regions, and reps. Finally, managers are advised on increasing
sales and improving gross margin by cost reduction in various
ways.
The remaining steps involve devising the actual turnaround plan,
ensuring management and employee ownership of the plan, and
implementing and monitoring the plan. The advice is comprehensive,
sensible and encouraging, but doesn't stoop to clich, or empty
motivational babble. The author has clearly operated on patients
before and his therapeutics have no doubt restored many a firm's
financial health.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2025. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
* * * End of Transmission * * *