251003.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, October 3, 2025, Vol. 26, No. 198
Headlines
A U S T R I A
INNIO HOLDING: S&P Assigns 'B+' LongTerm ICR, Outlook Stable
F I N L A N D
PHM GROUP: EUR150MM Loan Add-on No Impact on Moody's 'B2' CFR
G E R M A N Y
NIDDA BONDCO: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable
I R E L A N D
ARES EUROPEAN XIV: Fitch Affirms BB- Rating on Class F Notes
BALLYFORLEA LIMITED: SCC Chartered Named as Administrators
OCP EURO 2025-14: Fitch Assigns 'B-sf' Final Rating on Cl. F Notes
I T A L Y
ALBA 14 SPV: Moody's Raises Rating on Class B Notes From Ba1
PIETRA NERA: Fitch Affirms 'Bsf' Rating on E Notes, Outlook Stable
K O S O V O
KOSOVO: Fitch Affirms 'BB-' LongTerm Foreign Currency IDR
L U X E M B O U R G
SUBCALIDORA 1: Fitch Lowers LongTerm IDR to 'B-' & Withdraws Rating
N E T H E R L A N D S
EAGLE INTERMEDIATE: Moody's Cuts CFR to 'Caa3, Outlook Negative
P O L A N D
MLP GROUP: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
P O R T U G A L
CONSUMER TOTTA 3: Moody's Assigns (P)B3 Rating to Class F Notes
S P A I N
MASORANGE HOLDCO: Moody's Withdraws 'Ba3' Corporate Family Rating
S W I T Z E R L A N D
TRANSOCEAN LTD: Plans 100M Public Share Offering for Debt Repayment
VIKING CRUISES: Moody's Raises CFR to 'Ba2', Outlook Stable
T U R K E Y
LIMAKPORT: Moody's Alters Outlook on 'B3' Notes Rating to Stable
U K R A I N E
CITY OF DNIPRO: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF KHARKOV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF KRYVYI: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF KYIV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF LVIV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF MYKOLAIV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF ODESA: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
CITY OF ZAPORIZHZHIA: Fitch Affirms 'CCC' Currency IDRs
U N I T E D K I N G D O M
CHATSWORTH HOMES: Moorfields Named as Administrators
DART CUBICLES: Begbies Traynor Named as Administrators
DERBY LABOUR: CG & Co Named as Administrators
FERROGLOBE PLC: Moody's Alters Outlook on 'B2' CFR to Negative
FLEET TOPCO: S&P Affirms 'B+' ICR on Planned Debt Raise
FRONTERA LONDON: R2 Advisory Named as Administrators
FRONTIER MORTGAGE 2025-1: Fitch Assigns BBsf Rating on Cl. F Notes
FYLDE FUNDING 2025-1: DBRS Gives Prov. BB(low) Rating on X2 Notes
HAYMAN HOSPITALITY: Quantuma Advisory Named as Administrators
M.R CONSULTANCY: Oury Clark Named as Administrators
NUVOLA DISTRIBUTION: Quantuma Advisory Named as Administrators
POLYNT GROUP: S&P Affirms BB- Issuer Credit Rating, Outlook Stable
POOLE BAY: Leonard Curtis Named as Administrators
THREE LEGGED TRANSPORT: Leonard Curtis Named as Administrators
TOGETHER ASSET 2025-1ST1: Fitch Assigns BBsf Rating on Cl. X1 Notes
VEDANTA RESOURCES II: Fitch Rates Up to $750MM New Unsec Notes 'B+'
VEDANTA RESOURCES: Moody's Rates New Senior Unsecured Bonds 'B2'
X X X X X X X X
[] BOOK REVIEW: Management Guide to Troubled Companies
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A U S T R I A
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INNIO HOLDING: S&P Assigns 'B+' LongTerm ICR, Outlook Stable
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S&P Global Ratings assigned its 'B+' long-term issuer credit rating
to new parent company and term loan B (TLB) issuer INNIO Holding
GmbH. S&P affirmed the 'B+' rating on INNIO Group Holding GmbH,
which it will withdraw once the transaction is complete. The
recovery rating on the group's senior secured debt, including the
new TLB, remains unchanged at '3' (50%-70%; rounded estimate:
60%).
S&P said, "The stable outlook reflects our expectation that INNIO's
debt to EBITDA will remain below 5.5x on a sustained basis and that
the company will continue to deleverage toward 4.5x. We expect S&P
Global Ratings-adjusted funds from operations (FFO) cash interest
coverage will be more than 3x and the S&P Global Ratings-adjusted
EBITDA margin will be more than 20%."
Austria-based distributed power provider INNIO plans to issue a new
U.S dollar-denominated EUR644 million equivalent term loan B (TLB),
issued by newly incorporated INNIO Holding GmbH, to fund a EUR642
million dividend payment to its shareholders.
As part of the transaction, INNIO Holding GmbH becomes the ultimate
parent company and the rated entity for the INNIO Group.
S&P expects robust topline growth exceeding 15% and a gradual
EBITDA margin improvement to 22% in the next 12 months, resulting
in debt to EBITDA of about 5.2x in 2025 and 4.4x in 2026, and solid
positive free operating cash flow (FOCF) for both years.
The proposed term loan issuance and dividend payment to
shareholders will delay INNIO's deleveraging. INNIO plans to issue
a EUR644 million equivalent U.S dollar TLB to fund a EUR642 million
dividend payment to its shareholders and EUR2 million in
transaction fees. Whereas the existing TLBs are issued by INNIO
Group Holding GmbH (TLB EUR) and INNIO North America Holding Inc.
(TLB USD), the new TLB will be issued by two newly incorporated
German holding companies, INNIO Beteiligungs GmbH and INNIO Holding
GmbH. S&P said, "We now view INNIO Holding GmbH as the parent
company in the structure. The new TLB is being established as a
standalone additional facility and to not be fungible with the
existing TLBs. Nonetheless, the new TLB will benefit from the same
security package and guarantor coverage as the existing EUR and USD
TLB. We now expect debt to EBITDA to be 5.0x-5.2X in 2025 and
4.2x-4.5x in 2026, compared with our previous forecast of 4.4x in
2025 and 4.1x in 2026. Furthermore, we estimate the FFO cash
interest coverage ratio will remain above 3x in the next two years.
Our S&P Global Ratings-adjusted debt figure in 2025 includes the
existing EUR1.1 billion TLB andEUR509 million equivalent USD TLB,
the new EUR644 million equivalent TLB, about EUR165 million in
trade receivables, EUR164 million in operating and financial
leases, and about EUR47 million in pension obligations. We do not
net cash and short-term investments against debt, given the
financial sponsor ownership."
S&P said, "We expect INNIO to exhibit robust organic operating
performance in 2025 and 2026, supported by strong demand momentum
in the data center sector. INNIO reported a record-high
last-12-month order intake of about EUR4.0 billion as of August 31,
2025, with more than 50% attributable to the data center end
market, compared with 24% in 2024 and 3% in fiscal 2023. These
orders are well diversified, with numerous small projects helping
reduce cancellation risk. We estimate that data centers will
account for nearly half of electricity demand growth in the U.S.
between 2024 and 2030, and we believe INNIO's products are well
positioned to meet the power demand from data centers. We therefore
forecast INNIO's revenue will increase by about 17% in 2025 to
EUR2.4 billion and by 12% in 2026, underpinned by strong momentum
in data centre growth, as well as decarbonization requirements and
the energy transition.
"We expect the S&P Global Ratings-adjusted EBITDA margin will reach
21.5%-22.5% in 2025-2026. The group has posted 14 consecutive
quarters of increasing EBITDA. We anticipate the group will
continue to benefit from higher volumes in both the equipment and
services segments, with demand for data centers increasing in North
America and Europe. As a result of operational efficiency measures
taken by the management, we anticipate INNIO will continue to
generate FOCF of more than EUR200 million in 2025 and 2026,
compared with about EUR265 million in 2024 and EUR40 million in
2023.
"Liquidity remains solid, with about EUR544 million in cash on hand
post transaction. We note that INNIO does not face short-term
maturities, and its EUR1,100 million first-lien TLB and EUR509
million equivalent USD TLB mature in November 2028. Furthermore,
after the EUR642 million dividend distribution in 2025, we do not
expect any further distributions in 2025 and 2026.
"We expect relatively little impact from the uncertainty around the
new U.S. administration's tariff policies. INNIO generates about
27% of revenue from North America (EUR537 million in 2024). We
understand that contracts include tariff clauses that allow a
pass-through of these costs. Furthermore, we understand that the
group has a local production set-up in the U.S., which will be
further optimized to balance the growing U.S. exposure. Hence, we
view tariff risks as manageable for the company. S&P Global Ratings
believes there is a high degree of unpredictability around policy
implementation by the U.S. administration and possible
responses--specifically with regard to tariffs--and the potential
effect on economies, supply chains, and credit conditions around
the world. As a result, our base-line forecasts carry a notable
amount of uncertainty. As situations evolve, we will gauge the
macro and credit materiality of potential and actual policy shifts
and reassess our guidance accordingly.
"The stable outlook reflects our expectations of stabilizing
financial and operational performance, stemming from INNIO's solid
order book, the cost-saving measures it has implemented, and the
large share of high-margin service revenue over the next 12 months.
We also incorporate our expectations of positive FOCF generation
and an FFO cash interest coverage ratio of about 2.5x over the next
12 months, as well as a more conservative financial policy that
will reduce leverage below 5.5x on a sustained basis.
"We could lower the rating if INNIO does not increase its revenue
or EBITDA margin as we expect, resulting in debt to EBITDA of more
than 5.5x, without any prospect of a short-term recovery or an FFO
cash interest ratio of less than about 2.5x." S&P could also lower
the rating if the group:
-- Is unable to generate meaningful FOCF over the next 12-18
months;
-- Fails to post EBITDA margins of more than 18%, and;
-- Distributes debt-financed shareholder returns.
Rating upside is limited over the next 12 months, owing to INNIO's
high leverage and financial-sponsor ownership. Over the long term,
an upgrade could materialize if the group deleverages
significantly, leading to FFO to debt above 20% and adjusted debt
to EBITDA below 4x on a continuous basis, supported by a more
conservative financial policy.
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F I N L A N D
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PHM GROUP: EUR150MM Loan Add-on No Impact on Moody's 'B2' CFR
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Moody's Ratings announced that PHM Group Holding Oyj's (PHM or the
company) EUR150 million add-on issuance to the company's EUR1,000
million backed senior secured term loan B does not impact the B2
rating. Moody's understands that PHM will use proceeds from the
add-on to repay the company's revolving credit facility (RCF)
drawings and to maintain cash on balance sheet for general
corporate purposes, including acquisitions. PHM has also increased
the size of its EUR150 million RCF to EUR180 million as a part of
the transaction.
The company's B2 corporate family rating (CFR) and negative outlook
remains weakly positioned and reflects PHM's highly leveraged
capital structure, with Moody's adjusted leverage at 7.2x for the
last twelve months ending June 2025 (pro-forma for the full-year
impact of acquisitions). Moody's expects that PHM's credit metrics
will improve over the next quarters, reflecting the integration of
its recent acquisitions and continued growth of its underlying
business. Maintenance of the B2 rating would require the company to
reduce leverage well below 7x by year-end 2025 and improve towards
6x thereafter. This requires tempering of acquisition speed as the
company currently prioritizes growth over leverage reduction.
PHM has seen revenues declining 2% during the first six months of
2025 (on a like-for-like basis). The decline in revenues has been
driven by lower than expected revenues from snow clearance, low
demand for other add-on sales and some discontinued contracts. High
integration costs from acquisitions have also lowered the company's
reported like-for-like EBITDA, which declined by 8% year-on-year.
Moody's considers the weaker operating performance to be temporary
and expect PHM to return to organic revenue growth in the low
single digits, complemented by margin growth from successful
integration of acquisitions and cost savings initiatives. Moody's
expects PHM's Moody's-adjusted EBITA margin to grow above 10% in
the next 12-18 months from the current 8.9% as of LTM June 2025.
Failure to improve profitability could add negative pressure to the
rating.
PHM has continued to execute under its buy and build strategy and
the company has spent EUR86 million on bolt-on acquisitions during
the first six months of 2025. Moody's acknowledges that PHM's
business profile has improved since 2021 thanks to increased size
and geographical diversity. The company has also entered the UK and
Dutch markets during the second quarter. Moody's forecasts the
company to spend around EUR200 million for the full year 2025.
Given PHM's entry to new markets, Moody's then expect acquisition
spending to stay around EUR150 million per annum, in order for the
company to build its presence in these geographies. This level of
acquisitions would restrain deleveraging towards levels
commensurate with the B2 rating. PHM's acquisition spending has
been exceeding Moody's prior forecasts. However, Moody's expects
the company to generate modest Moody's adjusted free cash flow at
around EUR20-40 million per annum over the coming two years, on the
back of lower interest costs following the refinancing transaction
in February.
More generally, PHM's credit profile is supported by the company's
leading market position in the Nordics and Switzerland with
additional operations in Germany, UK and the Netherlands in a
property maintenance market that continues to be highly fragmented.
A large part of the company's revenues are recurring or
re-occurring, with low customer churn and sustainable revenue
growth. Furthermore, PHM operates with relatively high operating
profitability in a business with lower volatility. The rating is
constrained by PHM's M&A-driven growth strategy which has resulted
in a leveraged capital structure. The event risks and leverage
tolerance stemming from the company's private equity ownership is
also a rating constraint.
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G E R M A N Y
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NIDDA BONDCO: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable
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S&P Global Ratings affirmed its 'B' ratings on Nidda BondCo GmbH
(Nidda) and the group's debt, and assigned a 'B' issue rating to
the proposed floating-rate notes EUR550 million maturing 2032.
The stable outlook reflects our expectation that STADA's operating
performance will remain resilient, supported by strong product
diversification, favorable demand trends, and consistent management
execution, with adjusted EBITDA margins improving to 22.5% in 2026
from 21.4% in 2025, leverage (including the PIK instrument)
declining toward 7.0x in 2027, and cash interest coverage staying
at 2.2x–2.5x, supported by a lower expected interest burden
through the proposed refinancing, alongside free operating cash
flow (FOCF) higher than EUR100 million per year supporting to
group's growth strategy.
S&P said, "CapVest Partners' proposed purchase of a majority stake
in German pharmaceuticals company Stada Arzneimittel AG (STADA)
from Bain Capital and Cinven does not affect our view of the
creditworthiness of Stada's ultimate parent Nidda BondCo GmbH
(Nidda), since we forecast the group's credit profile to remain
broadly stable after the transaction."
STADA plans to issue EUR550 million of new floating-rate notes to
refinance its EUR400 million notes due 2030 and partially repay
drawings on its revolving credit facility (RCF) while increasing it
to EUR700 million; the group is also issuing up to EUR1.4 billion
of payment-in-kind (PIK) debt at the holding company, to be close
in first-quarter 2026.
S&P said, "We expect to treat the proposed PIK instrument as debt
under our methodology, and we forecast STADA's total debt at EUR7.7
billion after the transaction, with S&P Global Ratings-adjusted
debt to EBITDA at about 7.5x in 2026 (including the PIK instrument)
after 7.3x in 2024.
"We don't expect CapVest's proposed purchase of a majority stake in
STADA from Bain and Cinven will affect our current ratings on
STADA's parent, Nidda BondCo. We expect the transaction to close in
the first quarter of 2026, with Bain Capital and Cinven retaining a
minority stake in STADA. With the new ownership structure, CapVest
Partners will own 68%, Bain Capital and Civen 31%, and management
1%. Under the co-ownership of Bain Capital and Cinven, STADA was
successfully transformed into a leading, diversified global health
care platform operating in the generic, consumer health, and
specialty pharma space. Our credit rating takes into account the
strong expertise and continuity of the management team, which
should facilitate continuing profitable growth and enterprise value
creation. Our assessment of STADA's quality of earnings is further
supported by the group's established and efficient manufacturing
base, as well as a track record of commercial execution across its
three strategic divisions of generic pharmaceuticals,
over-the-counter (OTC; consumer) medication, and specialty
prescription pharma. Independent of the transaction's closing, the
company aims to raise EUR550 million in floating-rate notes to
refinance its outstanding EUR400 million nonportable floating-rate
notes maturing in 2030, partially repay its drawn RCF, and issue up
to EUR1.4 billion from the holding company's PIK facility. We
project a decline in STADA's S&P Global Ratings-adjusted debt to
EBITDA to 6.6x in 2025, from 7.3x in 2024, before rising to about
7.5x in 2026 (including the PIK instrument), reflecting the
transaction closing in 2026.
"In 2025, we expect revenue to expand by about 7.0% to EUR4.2
billion-EUR4.4 billion, in line with our previous base case,
supported by solid growth across all segments. Nidda's first-half
2025 results met our forecast, with revenue up 6% year on year to
EUR2.1 billion, consistent with full-year expectations. Growth was
driven by strong performance in specialty and generic
pharmaceuticals, supported by demand for biosimilars, expansion of
innovative therapies, and new product launches offsetting
cyclically weaker sales in cough, cold, and allergy medication.
Positive pricing, volume offtakes, and new launches, alongside
portfolio diversification and geographic expansion, underpin our
expectations of annual revenue growth of around 5% in 2026.
Additionally, untapped regions offer further significant growth
potential. We expect S&P Global Ratings-adjusted EBITDA margins to
improve to about 21.4% in 2025 and to 22.5% in 2026 reflecting a
favorable product mix, improvement in supply-chain productivity,
and growth in high-margin specialty pharma business. That said, we
expect S&P Global Ratings-adjusted FOCF to increase by EUR160
million-EUR170 million per year over the next two years,
outperforming historical years. However, volume uncertainty for new
specialty drug launches, as well as exposure to consumer sentiment
in driving volume and product mix gains in the OTC segment
constitute challenges. We also recognize underlying input cost
volatility, partly mitigated by STADA's dual sourcing arrangements
for active pharmaceutical ingredients and the coverage of about
half of its manufacturing needs by its own plant. The company
benefits from a pan-European and diversified sales and
manufacturing footprint but is not exposed to the U.S. pharma
market.
"We anticipate that the group's future direction, with CapVest's
involvement, will largely maintain the integrity of its core
strategy and ensure continuity in management. The group remains
focused on organic growth across its three segments: consumer
health care, generics, and specialty medicines. This strategy is
underpinned by a strong track record in executing on licensing and
acquisitions, coupled with robust integration of bolt-on
acquisitions, particularly in consumer health care. We expect the
group to maintain its prudent policy, focusing on expanding
consumer health care to address therapy gaps, unmet needs, and
treatment barriers, through small bolt-on acquisitions, alongside
consistent engagement with consumers at the pharmacy level.
Additionally, we view as positive the company's derisked approach
in the specialty segment, particularly in biosimilars, where it
outsources research and development, following a milestone-based
royalty payment model.
"We consider Nidda's prudent financial policy, combined with its
limited near-term debt maturities, as supporting its credit
profile, liquidity strength, and overall financial stability. We
think the group's commitment to deleveraging, despite the upcoming
new ownership supports our rating. In our view, the group will
continue its focus on deleveraging in line with its financial
policy. We believe the group has delivered a track record of
improving credit headroom, reflected in our forecast of debt to
EBITDA of 6.6x in 2025 (before the transaction). This is
underpinned by our projections of improved profitability. Although
capital expenditure (capex) will increase over 2025–2026 to
support specialty drug growth and capacity expansion, the group's
selective capital allocation and absence of debt-funded
acquisitions or dividend commitments should aid deleveraging. That
said, the group's available cash balance of EUR195 million,
alongside an undrawn RCF of EUR700 million (after the transaction)
should further provide financial flexibility.
"The stable outlook reflects our view that STADA will maintain a
solid market position across its three divisions of consumer health
care, generics, and specialty pharma, with successful rollouts of
new products. We believe STADA's performance can remain resilient,
supported by strong product diversification in largely noncyclical
markets and effective management. We forecast the S&P Global
Ratings–adjusted EBITDA margin to increase to 22.5% in 2026 from
21.4% in 2025, with adjusted leverage at about 6.6x in 2025 before
a temporary uptick to about 7.5x (including the PIK instrument).
Over the next two years, funds from operations (FFO) cash interest
coverage is expected to remain between 2.2x and 2.5x, supported by
a lower expected interest burden through the proposed refinancing.
"We could take a negative rating action if Nidda's financial
leverage remained elevated. This could happen in case of an
unexpected competitive setback negatively affecting volumes and
pricing. Under this scenario, the company's EBITDA cash interest
coverage reduces could deteriorate materially below 2.0x and no
longer be commensurate with the current rating. We could also
downgrade STADA if the company does not generate healthy and
recurring FOCF, leading to a material weakening of credit metrics
that would hamper expected deleveraging.
"We could take a positive rating action if Nidda maintains an
adjusted debt-to-EBITDA ratio below 5x while generating comfortable
FOCF, such that it remains able to self-fund future growth. Rating
upside is also dependent on the company's future financial
policy."
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I R E L A N D
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ARES EUROPEAN XIV: Fitch Affirms BB- Rating on Class F Notes
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Fitch Ratings has upgraded Ares European CLO XIV DAC's class B, C
and D notes and affirmed the others. The Outlook on the class F has
been revised to Positive from Stable.
Entity/Debt Rating Prior
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Ares European CLO XIV DAC
Class A XS2920478356 LT AAAsf Affirmed AAAsf
Class B XS2920478513 LT AA+sf Upgrade AAsf
Class C XS2920478869 LT A+sf Upgrade Asf
Class D XS2920478943 LT BBB+sf Upgrade BBBsf
Class E XS2920479081 LT BB+sf Affirmed BB+sf
Class F XS2920479248 LT BB-sf Affirmed BB-sf
Transaction Summary
Ares European CLO XIV DAC is a securitisation of mainly senior
secured obligations with a component of senior unsecured bonds. The
transaction is static and managed by Ares European Loan Management
LLP
KEY RATING DRIVERS
Amortisation Benefits Senior Notes: The transaction continues to
deleverage, with the class A notes having paid down by about EUR
46.6 million since closing. The amortisation has resulted in
increased credit enhancement (CE) for the senior notes, which has
driven the upgrades of the class B, C and D notes. The Stable
Outlooks on these notes reflect the comfortable default rate
cushion at their ratings. The Positive Outlook on the class F notes
reflects the higher CE.
Static Portfolio: The transaction does not have a reinvestment
period and discretionary sales are not permitted unless there is
consent from the controlling class of noteholders. Credit risk
obligations, defaulted obligations or loss mitigation loans may be
sold at any time provided no event of default has occurred.
'B'/'B-' Portfolio: Fitch assesses the average credit quality of
the transaction's underlying obligors at 'B'/'B-'. The
weighted-average rating factor, as calculated by Fitch, is 28.2.
High Recovery Expectations: The majority of the portfolio comprises
senior secured obligations. Fitch views the recovery prospects for
these assets as more favourable than for second-lien, unsecured and
mezzanine assets. The weighted average recovery rate, as calculated
by Fitch, is 60.0%.
Diversified Portfolio: The portfolio is well diversified across
obligors, countries and industries. The top 10 obligor
concentration, as calculated by Fitch, is 18.6%, and the largest
obligor represents 2.3% of the portfolio balance.
Cash Flow Analysis: Fitch used a customised proprietary cash flow
model to replicate the principal and interest waterfalls and the
various structural features of the transaction, and to assess their
effectiveness, including the structural protection provided by
excess spread diverted through the par-value and interest-coverage
tests.
Deviation from MIR: The model-implied ratings for classes B and F
notes are one notch below their ratings. Better credits are being
repriced and the manager seems to decline the repricing and is
therefore paying out as an unscheduled prepayment. However, the
deviation reflects the proportional increase in exposure to
obligations rated by Fitch at 'CCC+' and below that are not being
repriced and will need some restructuring, which will likely
reflect a default in Fitch's opinion.
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 CE 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
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 Ares European CLO
XIV 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.
BALLYFORLEA LIMITED: SCC Chartered Named as Administrators
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Ballyforlea Limited was placed into administration proceedings in
The High Court Of Justice in Northern Ireland Chancery Division
(Company Insolvency), No 29778 of 2025, and Rory Moynagh of SCC
Chartered Accountants Limited was appointed as administrators on
September 12, 2025.
Ballyforlea Limited, trading as Corner Bakery, is a manufacturer of
bread, fresh pastry goods and cakes.
Its registered office is at 4 Oldtown Street, Cookstown, Co Tyrone,
BT80 8EF
The joint administrators can be reached at:
Rory Moynagh
SCC Chartered Accountants Limited
1 The Square, Moy
Co. Tyrone, BT61 9BT
OCP EURO 2025-14: Fitch Assigns 'B-sf' Final Rating on Cl. F Notes
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Fitch Ratings has assigned OCP Euro CLO 2025-14 DAC final ratings.
Entity/Debt Rating Prior
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OCP Euro CLO 2025-14 DAC
Class A-1 XS3141252661 LT AAAsf New Rating AAA(EXP)sf
Class A-2 XS3141255417 LT AAAsf New Rating AAA(EXP)sf
Class B XS3141253396 LT AAsf New Rating AA(EXP)sf
Class C XS3141253636 LT Asf New Rating A(EXP)sf
Class D XS3141253800 LT BBB-sf New Rating BBB-(EXP)sf
Class E XS3141254105 LT BB-sf New Rating BB-(EXP)sf
Class F XS3141254444 LT B-sf New Rating B-(EXP)sf
Subordinated Notes
XS3141255094 LT NRsf New Rating NR(EXP)sf
Transaction Summary
OCP EURO CLO 2025-14 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 fund the portfolio with a target par of
EUR400 million.
The portfolio is actively managed by Onex Credit Partners Europe
LLP. The collateralised loan obligation (CLO) has an approximately
4.6-year reinvestment period and a 7.5-year weighted average life
(WAL) test at closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'. The Fitch-weighted
average rating factor (WARF) of the identified portfolio is 23.7.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch-weighted
average recovery rate of the identified portfolio is 62.6%.
Diversified Asset Portfolio (Positive): The transaction also
includes various concentration limits, including a top 10 obligor
concentration limit of 17.5% and a maximum exposure to the
three-largest Fitch-defined industries at 40%. These covenants
ensure that the asset portfolio will not be exposed to excessive
concentration.
Portfolio Management (Neutral): The transaction has four matrices:
two effective at closing with fixed-rate limits of 5% and 10%; and
two at 18 months after closing with the same fixed-rate limits,
provided the collateral principal amount (defaults at
Fitch-calculated collateral value) is above the reinvestment target
par balance. All four matrices are based on a top 10 obligor
concentration limit of 17.5%. The closing matrices correspond to a
7.5-year WAL covenant, while the forward matrices correspond to a
seven-year WAL covenant.
The transaction has an approximately 4.6-year reinvestment period,
which is governed by reinvestment criteria that are 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.
WAL Step-Up Feature (Neutral): The transaction can extend the WAL
by 12 months on the step-up date, which is one year after closing.
The WAL extension is subject to conditions, including passing the
collateral-quality, portfolio-profile and coverage tests and the
collateral principal amount (defaulted obligations at their
Fitch-calculated collateral value) being at least at the
reinvestment target par balance.
Cash-flow Modelling (Positive): The WAL Fitch modelled is 12 months
less than the WAL covenant. This is to account for the strict
reinvestment conditions envisaged after the reinvestment period.
These include passing both the coverage tests and the Fitch 'CCC'
limit after reinvestment and a WAL covenant that progressively
steps down over time, both before and after the end of the
reinvestment period. Fitch believes these conditions would reduce
the effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A-1, A-2, B and C notes
and would lead to downgrades of one notch each for the class D and
E notes and to below 'B-sf' for the class F notes.
Downgrades, which are based on the identified portfolio, may occur
if the loss expectation is larger than assumed, due to unexpectedly
high levels of default and portfolio deterioration. The class B, D,
E and F notes each have a rating cushion of two notches and the
class C notes have a cushion of three notches, due to the better
metrics and shorter life of the identified portfolio than the
Fitch-stressed portfolio,
Should the cushion between the identified portfolio and the
Fitch-stressed portfolio be eroded either due to manager trading or
negative portfolio credit migration, a 25% increase of the mean RDR
and a 25% decrease of the RRR across all ratings of the
Fitch-stressed portfolio would lead to downgrades of two notches
for the class A-1 notes, of four notches each for the class B and C
notes, three notches each for the class A-2 and D notes, and to
below 'B-sf' for the class E and F notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A 25% reduction of the mean RDR and a 25% increase in the RRR
across all ratings of the Fitch-stressed portfolio would lead to
upgrades of up to two notches each for the class B, C and D notes
and up to three notches each for the class E and F notes. The class
A-1/A-2 notes are already rated 'AAAsf' and cannot be upgraded.
Upgrades during the reinvestment period, 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.
Upgrades after the end of the reinvestment period may result from a
stable portfolio credit quality and deleveraging, leading to higher
credit enhancement and excess spread available to cover losses in
the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognised Statistical Rating Organisations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for OCP Euro CLO
2025-14 DAC.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
=========
I T A L Y
=========
ALBA 14 SPV: Moody's Raises Rating on Class B Notes From Ba1
------------------------------------------------------------
Moody's Ratings has upgraded the ratings of Class B Notes in two
Italian equipment lease transactions, namely Alba 13 SPV S.R.L.
("Alba 13") and Alba 14 SPV S.r.l. ("Alba 14"). The rating actions
reflect the increased levels of credit enhancement for the affected
notes.
Moody's affirmed the ratings of the notes that had sufficient
credit enhancement to maintain their current ratings.
Issuer: Alba 13 SPV S.R.L.
EUR263.1M Class A2 Notes (Current outstanding balance EUR204.6M),
Affirmed Aa3 (sf); previously on Dec 13, 2024 Affirmed Aa3 (sf)
EUR267.6M Class B Notes, Upgraded to Aa3 (sf); previously on Dec
13, 2024 Upgraded to A3 (sf)
Issuer: Alba 14 SPV S.r.l.
EUR550.3M Class A Notes (Current outstanding balance EUR344.1M),
Affirmed Aa3 (sf); previously on May 30, 2024 Definitive Rating
Assigned Aa3 (sf)
EUR175.1M Class B Notes, Upgraded to Baa1 (sf); previously on May
30, 2024 Definitive Rating Assigned Ba1 (sf)
Maximum achievable rating is Aa3(sf) for structured finance
transactions in Italy, driven by the corresponding local currency
country ceiling of Italy.
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement
for the affected tranches in both transactions.
Sequential amortization led to the increase in the credit
enhancement available in both, Alba 13 and Alba 14, transactions.
More specifically, the credit enhancement for the Class B Notes of
Alba 13 increased to 29.6% from 22.3% since the last rating action
in December 2024. Similarly, the credit enhancement for the Class B
Notes of Alba 14 increased to 18.4% from 13.9% since the closing
date in May 2024.
Revision of Key Collateral Assumptions
As part of the rating action, Moody's reassessed Moody's expected
default rate and recovery rate assumptions for the portfolios in
both transactions reflecting the collateral performance to date.
The performance of the transactions has continued to be stable
since the respective closing date. For Alba 13, total delinquencies
have slightly increased to 0.16% of current portfolio balance over
the past year, while 90 days plus arrears are unchanged currently
standing at 0.02% of current pool balance. Cumulative defaults
stand at 2.66% of original pool balance as of the reporting date in
June 2025 (up from 1.62% a year earlier), reflecting approximately
a Ba3 credit quality since closing date. For Alba 14, total
delinquencies amount to 0.14% as of the July 2025 reporting date
with 90 days plus arrears currently standing also at 0.02% of
current pool balance. Cumulative defaults stand at 1.08% of
original pool balance as of the reporting date in July 2025 up from
0.22% a year earlier, reflecting approximately a Ba2 / Ba3 credit
quality since closing date.
For Alba 13, Moody's assesses Moody's current expected default rate
at 6.0% of the current portfolio balance and the assumption for the
stochastic recovery rate is 35%. Moody's also determined Moody's
SME Stressed Loss assumption for this transaction. The SME Stressed
Loss captures the loss Moody's expects the portfolio to suffer in
the event of a severe recession scenario. Moody's have set the SME
Stressed Loss assumption at 23.7% for the Alba 13 transaction.
Similarly, for Alba 14, Moody's current expected default rate is
6.1% of the current portfolio balance and the assumption for the
stochastic recovery rate is 35%. Moody's assessed the SME Stressed
Loss to be 24.8% for the current Alba 14 portfolio.
Moody's assumptions reflect the portfolio compositions based on
latest available loan-by-loan information. Hence, they take into
consideration the current industry concentration and obligor size
concentration among other credit risk factors.
The rating actions took into consideration the notes' exposure to
relevant counterparties, such as servicer and account bank. The
ratings of the notes are currently not constrained by risks from
the servicer and the issuer account bank.
The principal methodology used in these ratings was "Equipment
Lease and Loan Securitizations" published in June 2025.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement, (3) improvements in the credit quality of the
transaction counterparties and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
PIETRA NERA: Fitch Affirms 'Bsf' Rating on E Notes, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Pietra Nera Uno S.R.L.'s class A, B, C,
D and E notes.
Entity/Debt Rating Prior
----------- ------ -----
PIETRA NERA UNO S.R.L.
A IT0005324402 LT A-sf Affirmed A-sf
B IT0005324410 LT BBB-sf Affirmed BBB-sf
C IT0005324428 LT BB+sf Affirmed BB+sf
D IT0005324436 LT BB-sf Affirmed BB-sf
E IT0005324444 LT Bsf Affirmed Bsf
Transaction Summary
At closing, the transaction securitised three floating‑rate
commercial mortgage loans (with variable margins) totalling
EUR403.8 million to Italian borrowers sponsored by Blackstone
funds. The collateral comprised four Italian retail assets: a
Sicilian shopping centre (Palermo loan) and three fashion outlet
villages (two under the Fashion District loan and one under the
Valdichiana loan).
Since the last review, two loans have been fully repaid: the
Valdichiana loan in August 2025; and the Palermo loan in November
2024. The Fashion District loan remains outstanding, with a current
balance of EUR105 million, secured by two outlet villages, Mantova
and Puglia.
KEY RATING DRIVERS
Improving Asset Performance: The operating performance of the two
remaining properties continues to improve: since the last review,
vacancies at Mantova fell to 8.3% from 11.9%; and at Puglia to
21.6%, from 25.6%. Persistent vacancies at Puglia relate primarily
to the Phase 2 extension, which remains largely unlet since
opening. On a trailing 12‑month basis, net operating income
increased by about 10% between 2Q24 and 2Q25, driven by higher
headline revenues from reduced vacancy, contractual rental uplifts
via ratchet mechanisms, and stabilising non‑recoverable landlord
costs. Property values have gone up by 5.2% over the last year,
resulting in a loan‑to‑value (LTV) of 66.7%.
Neutral Impact from Prepayments; Deleveraging: The repayment of the
Valdichiana and Palermo loans is neutral to the ratings. Since the
last review, the transaction's weighted‑average (WA) LTV has
reduced to 66.7%, from 72.3%, while WA debt yield went up by 1.5%,
to 15.3%. The transaction continues to de‑lever through
amortisation of EUR319,775 a quarter until loan maturity in May
2027. The Fashion District loan remains subject to a cash trap,
although the balance has declined to EUR5.3 million, from EUR4.6
million, since the last rating action, as the sponsor can apply
trapped amounts to qualifying items, including capex, letting costs
and service charge shortfalls.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Reductions in occupational demand, which leads to lower rents or
higher vacancy in the portfolio.
The change in model output that would apply with 1pp cap rate
increase is as follows:
'A-sf'/'BB+sf'/'BBsf'/'B+sf'/'CCCsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sustainable improvement in portfolio performance led by rent
increases and decline in vacancy, coupled with stable market
conditions
The change in model output that would apply with 1pp cap rate
decrease is as follows:
'A+sf' / 'BBB+sf' / 'BBBsf' / 'BB+sf' / 'BB-sf'
Key property assumptions (weighted by market value)
Depreciation: 10%
Applied estimated rental value: EUR16.5m
'Bsf' WA cap rate: 8.2%
'Bsf' WA structural vacancy: 19.0%
'Bsf' WA rental value decline: 18.0%
'BBsf' WA cap rate: 8.3%
'BBsf' WA structural vacancy: 21.2%
'BBsf' WA rental value decline: 24.3%
'BBBsf' WA cap rate: 8.5%
'BBBsf' WA structural vacancy: 23.8%
'BBBsf' WA rental value decline: 30.6%
'Asf' WA cap rate: 8.7%
'Asf' WA structural vacancy: 26.5%
'Asf' WA rental value decline: 36.8%
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 monitoring.
Prior to the deal closing, Fitch reviewed the results of a
third-party assessment conducted on the asset portfolio information
and concluded that there were no findings that affected the rating
analysis.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for its rating
analysis according to its applicable rating methodologies indicates
that it is adequately reliable.
ESG Considerations
PIETRA NERA UNO S.R.L. has an ESG Relevance Score of '4' for Rule
of Law, Institutional and Regulatory Quality due to uncertainty of
the enforcement process, which has a negative impact on the credit
profile, and is relevant to the rating[s] in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
===========
K O S O V O
===========
KOSOVO: Fitch Affirms 'BB-' LongTerm Foreign Currency IDR
---------------------------------------------------------
Fitch Ratings has affirmed Kosovo's Long-Term Foreign-Currency
Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook.
Key Rating Drivers
Fundamental Rating Strengths and Weaknesses: The rating is
supported by Kosovo's low and stable public debt/GDP, very low
interest/revenue, a record of prudent fiscal policy, sound banking
sector, and net external creditor position. These factors are
balanced by lack of full international recognition, risks from
unresolved tensions with Serbia, domestic political uncertainty, a
small economy, and reliance on diaspora flows to finance a large
structural trade deficit.
Government Formation Process Stalls: A government has yet to be
formed following February's legislative elections at which Prime
Minister Kurti's Vetevendosje party fell 13 short of a majority. It
is unclear whether the constitutional court will rule that the
stalemate over electing the final deputy speaker (representing the
Serbian minority parties) prevents the formation of a new
parliament. Furthermore, fractious party dynamics will make it
challenging to form a majority coalition and secure the necessary
quorum of two-thirds of MPs required to elect a new president when
her term ends in April 2026.
Potential Election, Contained Policy Risk: Fitch considers a new
election may well be required by April, but believe this would be
much less likely to result in a further impasse, given likely added
international pressure to form a government, and high domestic
political costs from failing to do so. There are no large
macro-fiscal policy differences between the main parties.
Adequate Financing: The caretaker Kurti government continues to
execute the budget and pre-existing reforms but is unable to
legislate new policy measures or approve new external financing
(which needs a two-thirds parliamentary majority). There is
sufficient demand from the domestic debt market, particularly from
the Kosovo Pension Fund, to meet financing needs. Fiscal reserves
(including Privatisation Agency holdings) rose in 1H25 due to the
drawdown of EUR96 million (0.9% of GDP) from the IMF standby
arrangement (SBA) but Fitch projects they will decline to 5.1% of
GDP in 2027, from 5.8% in 2025.
Fiscal Outperformance: Kosovo has continued to outperform its
fiscal targets, and the 2% of GDP fiscal deficit rule ceiling.
Fitch forecasts the general government deficit will widen to 1% of
GDP in 2025, from near 0.3% in 2023-2024, on higher public sector
pay, pensions, and capex execution, and then to 1.7% in 2026 and 2%
in 2027. Tax revenue rose 9% in 8M25, and Fitch assumes further
robust growth from ongoing progress in tax digitalisation and in
reducing the large economic informality.
Low Debt and Interest Costs: Fitch projects general government
debt/GDP, which fell 0.6pp in 2024 to 16.8%, will gradually rise to
18.4% in 2027, still well below the 'BB' median of 53.9%. Fitch
treats Kosovo's debt as 100% foreign-currency denominated,
consistent with its adoption of the euro since 2002 (it has no
domestic currency). However, 89% of debt is euro-denominated and
the absence of pressure on the exchange rate regime mitigates
currency risk. Fitch projects debt interest/revenue remains
extremely low, at 1.5% in 2027, compared to the projected 'BB'
median of 10.4%.
Large Pipeline of Concessional Finance: EU restrictions for new
project financing remain in place, partly due to the failure of a
requirement for new mayoral elections in the north of the country
due to their boycott by the public. Further political challenges
remain given Kosovo's lack of international recognition by five EU
member states. However, this restriction does not apply to the
EUR440 million, four-year, budget support allocation under the EU
Western Balkans Growth Fund. Other available concessional financing
includes two World Bank development policy loans, each for EUR90
million, and two bilateral loans totalling EUR160 billion.
Weak Prospects for Serbia Agreement: Relations with Serbia remain
highly strained, following a series of incidents over the last two
years, including an armed siege by ethnic-Serb militants in
September 2023, restrictions on the use of the Serbian dinar in
2024, and further closure of parallel institutions such as post
offices in the north of Kosovo early this year. Fitch sees little
prospect of a legally binding agreement that leads to full
normalisation of relations between the two countries, but view the
risk of outright military conflict as low, given costs to EU
finance and accession prospects, and the ongoing NATO presence in
Kosovo.
Low FX Reserves: Fitch forecasts the current account deficit will
remain near 9% of GDP in 2025, before steadily narrowing to 7.1% in
2027, on strong services exports, and moderating imports. Large
financial inflows, driven by the diaspora (which account for nearly
70% of foreign direct investment) have been relatively stable for
an extended period. Fitch projects FX reserves will rise slightly
to 1.9 months of current external payments at end-2027, from 1.8 at
end-2024, still well below the 'BB' median of 4.7 months. Liquidity
risks are mitigated by the rolling over of the EUR100 million repo
line with the ECB. Fitch forecasts Kosovo will remain a net
external creditor, of near 5% of GDP.
Solid Growth Prospects: Fitch projects GDP growth to moderate from
4.4% in 2024 to 3.8% in 2025 and 3.9% in 2026 and 2027, close to
the potential rate, largely driven by domestic demand, fuelled by
high remittances. A young average population age of 35 and expected
rise in female labour-force participation, offset the drag from
emigration of skilled workers, and low capital stock. The 2024
census lowered the population estimate by nearly 10%, to 1.6
million. Kosovo has completed its IMF SBA and Resilience and
Sustainability Facility under which programme implementation was
assessed as strong. Ongoing reforms includes energy tariff
liberalisation, and strengthening of public financial management.
Inflation Increases, Sound Banking Sector: Fitch forecasts
inflation to rise to average 3.5% in 2025, from 1.6% in 2024, on a
spike in imported food prices, before falling to 2.3% in 2026 and
2% in 2027. The economy is euroised, and most inflation is
imported. The banking sector is profitable, with a return on equity
of 17.6% in July, and its non-performing loan ratio is low at 2.1%
and fully provisioned. Tier 1 capital is 15.5%, and
macro-prudential measures have been introduced to help contain
credit growth, which accelerated to 20% in March. Foreign-owned
banks make up 84% of the sector, 52% owned by EU banks, supporting
prudential standards.
ESG - Governance: Kosovo has an ESG Relevance Score of '5' for
political stability and rights, and the rule of law, institutional
and regulatory quality and control of corruption. Theses scores
reflect the high weight that the World Bank Governance Indicators
(WBGI) have in its proprietary Sovereign Rating Model (SRM). Kosovo
has a medium WBGI ranking at the 43rd percentile, broadly in line
with the 'BB' median of 44. This reflects a moderate level of
rights for participation in the political process, moderate
institutional capacity, established rule of law, a moderate level
of corruption and political risks associated with relations with
Serbia.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Structural: Escalation of tensions with Serbia that have a
materially negative impact on macro-fiscal metrics.
- External Finances: A marked increase in external financing risk,
for example, due to a sizeable drop in the availability of external
concessional financing, remittances, or FDI.
- Public Finances: Greater funding pressure - potentially due to
political gridlock in securing the two-thirds parliamentary
approval required for external borrowing and more constrained
access to domestic finance - or a sharp widening in the fiscal
deficit.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Public Finances: Greater confidence in sustained access to
external financing, linked to a lower degree of government
instability - alongside continuation of very low debt servicing
costs.
- External: Reduction in external finance risk, for example, due to
a marked rise in international reserves, potentially reflecting
stronger and more diversified capital inflows and further progress
with structural reforms boosting trade competitiveness.
- Structural: Sustained improvement in relations with Serbia,
reducing political risks, and underpinning faster international
recognition and integration with EU economies.
Sovereign Rating Model (SRM) and Qualitative Overlay (QO)
Fitch's proprietary SRM assigns Kosovo a score equivalent to a
rating of 'BB' on the LTFC 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, to reflect risks from unresolved tensions
with Serbia, which also constrain full international recognition,
adding to political risk and adversely affecting the business
environment.
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.
Debt Instruments: Key Rating Drivers
Fitch does not currently rate any debt instruments for this
sovereign.
Country Ceiling
The Country Ceiling for Kosovo is 'BBB-', three notches above the
LTFC IDR. This reflects very 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
+3 notches above the IDR. Fitch's rating committee did not apply a
qualitative adjustment to the model result.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
There is no Climate Vulnerability Signal (VS) for Kosovo due to the
limited availability of data. However, Fitch is able to produce a
Climate VS for the transition risk, which is 35 in 2035. Fitch has
also qualitatively considered Kosovo's potential exposure to
physical risks, and concluded that these climate risk factors are
sufficiently captured in the SRM.
Climate Vulnerability Signals
There is no Climate VS for Kosovo due to data limitations, as noted
above.
ESG Considerations
Kosovo has an ESG Relevance Score of '5' for political stability
and rights as WBGI have the highest weight in Fitch's SRM and are
highly relevant to the rating and a key rating driver with a high
weight. As Kosovo has a percentile below 50 for the respective
governance indicator, this has a negative impact on the credit
profile.
Kosovo 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 Kosovo has a percentile rank below 50 for the
respective governance indicators, this has a negative impact on the
credit profile.
Kosovo 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 Kosovo has a
percentile rank below 50 for the respective governance indicator,
this has a negative impact on the credit profile.
Kosovo has an ESG Relevance Score of '4' for International
Relations and Trade as the lack of full international recognition
is relevant to the rating and is a rating driver, with a negative
impact on the credit profile.
Kosovo 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 Kosovo, as for all sovereigns. As Kosovo has
a record of 20+ years without a restructuring of public debt and
captured in its SRM variable, this has a positive 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
----------- ------ -----
Kosovo LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
Country Ceiling BBB- Affirmed BBB-
===================
L U X E M B O U R G
===================
SUBCALIDORA 1: Fitch Lowers LongTerm IDR to 'B-' & Withdraws Rating
-------------------------------------------------------------------
Fitch Ratings has downgraded Subcalidora 1 S.a.r.l.'s (Mediapro)
Long-Term Issuer Default Rating (IDR) to 'B-', from 'B'. The
Outlook is Stable. Fitch has also downgraded Subcalidora 2
S.a.r.l.'s EUR525 million term loan B senior secured rating to 'B',
from 'BB-', as the Recovery Rating was revised to 'RR3', from
'RR2'. Fitch has subsequently withdrawn the ratings.
The IDR downgrade reflects material trading underperformance due to
lower demand and material contract losses. This results in lower
profitability and tighter financial flexibility. Fitch expects
Mediapro's credit metrics to be more aligned with a 'B-' rating for
the next two years. The company's ability to secure future
contracts as markets recover should support expansion by 2028, but
execution risks remain high.
The Stable Outlook reflects its expectation of certain contract
wins from 2026 supporting revenue expansion to capture market share
in content production and broadcasting services, offsetting a
decline in profitability from La Liga contract.
Fitch has withdrawn Mediapro's ratings for commercial reasons.
Fitch will no longer provide ratings or analytical coverage for the
company.
Key Rating Drivers
Trading Underperformed Expectations: Mediapro has underperformed
materially its forecasts for 2024, with a 19% shortfall in
Fitch-defined EBITDA (-9% adjusted for discontinued non-core
operations), leading to a lower Fitch-defined EBITDA margin at
11.8% (2023: 13%). This reflects lower demand, alongside material
contract losses, adversely affecting non-sports production and
script content produced for studios.
Mediapro's 1H25 results further underperformed across the board.
Lower advertising revenue from rights and channels and project
delays in innovative products (i.e. Xperiences) contributed to
reported lower activity, mitigated by modest contract gains.
Consequently, profitability fell and cash burn increased, eroding
its liquidity buffer.
Forecasts Revised Lower: Fitch has revised down its forecasts for
the next three years. Fitch expects a decline in revenue and
Fitch-defined EBITDA to EUR1.02 billion and EUR104 million,
respectively, at end-2025, with a weaker EBITDA margin, at 10%.
Fitch expects revenues to fall by mid-single digits during 2025 on
muted demand, project delays and the non-renewal of a material
contract. Lower profitability will lead to negative cash flow
generation, mitigated by reductions in discretionary capex and a
lower interest burden after the 2024 refinancing.
Fitch anticipates that trading will stabilise in 2026, before
ramping up in 2027 and accelerating by 2028, with profitability
recovering to about 11.7%, broadly aligned with 2024 levels.
Higher Execution Risks: Execution risk has risen after major
contract losses in 2024-2025, reducing revenue visibility over next
12 to 18 months, especially in the Spanish audiovisual and content
production. Winning new contracts and accelerating pipeline
conversion will be central to restoring revenue and profitability
to 2024 levels. Fitch expects geographic and customer
diversification to improve over the medium term, although execution
risk is heightened during business recovery.
Higher Leverage: Leverage worsened to 4.3x at end-2024 (2023: 3x),
partly reflecting EUR45 million of additional debt issued under the
company's 2024 refinancing, and the EUR30 million of Fitch-defined
EBITDA shortfall versus 2023. Fitch forecasts that gross leverage
will rise above 5x for the next two years, before trending lower,
subject to business growth and improvement in profitability.
Liquidity Pressure: Fitch's forecasts assume weaker profitability
and negative FCF until 2028, leading to cash burn of about EUR20
million a year on average. This pressures liquidity, which Fitch
forecasts will decline to below EUR100 million by end-2025, from
roughly EUR130 million at end-2024. Fitch expects capital support
to be available for investment needs over the medium term, but no
additional funding is included in its forecasts, given uncertainty
around the ultimate capital structure.
Declining Revenue Visibility: The renewal of the international La
Liga agency contract in 2022 improved revenue visibility and
reduced execution risk; however, renewal risk is high ahead of
expiry in 2029. Declining commission rates will put pressure on the
company to increase league sales to sustain EBITDA beyond 2027.
Reducing the concentration risk from La Liga would lower revenue
visibility, while exposing the company to more industry volatility
related to content production. The latter is partly mitigated by a
high exposure to non-scripted content and moderate exposure to
advertising.
Strategy Focused on Revenue Diversification: Mediapro's key growth
drivers focus on the expansion of audiovisual and content
production services, improving geographical and customer
diversification. It is well positioned in audiovisual with a large
international platform covering production, outside broadcasting
and signal transmission. It has a leading mobile transmission fleet
and is at the forefront of signal transmission offerings. It also
benefits from strong credentials as the main producer of TV content
and over-the-top (OTT) streaming in Spain. Fitch expects these
strengths to help Mediapro to win new contracts created by
favourable market trends and regulation.
Higher Risk Channels and OTT: Fitch sees potential pressure on the
channel and OTT business model as major OTT content providers have
entered the sports rights market, which could result in them taking
over large parts of the value chain, such as cinematic and series
production. Fitch has been conservative in its forecasts in
relation to channel/OTT growth due to some in-sourcing trend seen
in the market in Spain.
Peer Analysis
Fitch assesses Mediapro using its Ratings Navigator for Diversified
Media Companies. The company has a strong competitive position, and
a stronger regional than global presence. However, this is offset
by a high dependence on key accounts (in particular the
International La Liga contract) and a lower FCF base than peers.
Mediapro has a weaker business profile than the two Fitch-rated
independent content producers, Banijay S.A.S (B+/Stable) and
Mediawan Holding SAS (B/Stable), due to high contract renewal risk
for some material contracts since 2024. Banijay has larger scale,
more geographic reach and is influenced by Fitch's assessment of
its stronger parent company, Banijay Group N.V. (formerly FL
Entertainment N.V.), resulting in a one-notch uplift from its 'b'
Standalone Credit Profile.
Mediapro also has smaller scale, higher leverage and a weaker
business profile than ITV plc (BBB-/Stable), one of the main
content producers outside the US and the second largest public
service broadcaster in the UK with the largest linear-TV
advertising platform and a revamped free to air streaming
platform.
Key Assumptions
- Revenue to decline 2.2% CAGR in 2024-2027, driven by soft demand
and material contract losses, with revenue turnaround expected by
2027. Revenue to recover 13.5% by 2028, returning revenue to 2024
levels.
- Fitch-defined EBITDA margin to decline to 10% by 2025, before
recovering to 11.7% by 2028, but still below the 12.5%-13% after
the Covid-19 pandemic.
- Capex at 5% of revenue in 2025 to support business recovery,
followed by 2.5%-3% until 2028.
- Working-capital outflows at 4% of sales in 2025, 2.5% in 2026 and
3% to 2028.
- No shareholder payments during 2025-2028.
- No bolt-on M&A during 2025-2028.
Recovery Analysis
The recovery analysis assumes that Mediapro would be considered a
going concern in bankruptcy and that the company would be
reorganised rather than liquidated. This is because most of its
value lies within its production and rights management
capabilities, strengthened by longstanding client relationships.
Fitch estimates a going concern EBITDA at EUR85 million, reflecting
the loss of key contracts and lower visibility on future revenue
increases.
An enterprise value multiple of 4.5x is used to calculate a
post-reorganisation valuation.
After deducting 10% for administrative claims, these assumptions
result in a Recovery Rating of 'RR3', resulting in one-notch uplift
from the IDR to 'B'.
RATING SENSITIVITIES
Not applicable as the ratings have been withdrawn.
Liquidity and Debt Structure
Fitch forecasts lower profitability and negative FCF generation
until 2028 will constrain Mediapro's liquidity profile until 2027,
despite readily available cash of about EUR130 million by end-2024.
This is mitigated by the absence of amortising debt after
refinancing and bullet maturities extension to 2029, making
refinancing risk more manageable.
Mediapro does not have a committed revolving credit facility.
However, Fitch expects debt or equity to provide the necessary
liquidity for business recovery and future expansion although its
forecasts do not include any additional funding due to the
uncertainty on the final capital structure.
Issuer Profile
Mediapro is a Spanish based vertically integrated global sports and
media entertainment group.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Sector Forecasts Monitor
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.
Following the rating withdrawal Fitch will no longer provide ESG
scores for the company.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Subcalidora 1 S.a.r.l. LT IDR B- Downgrade B
LT IDR WD Withdrawn
Subcalidora 2 S.a.r.l.
senior secured LT B Downgrade RR3 BB-
senior secured LT WD Withdrawn
=====================
N E T H E R L A N D S
=====================
EAGLE INTERMEDIATE: Moody's Cuts CFR to 'Caa3, Outlook Negative
---------------------------------------------------------------
Moody's Ratings has downgraded the Corporate Family Rating of Eagle
Intermediate Global Holding B.V.'s (dba The LYCRA Company) to Caa3
from Caa2 and the Probability of Default Rating (PDR) to Caa3-PD/LD
from Caa2-PD/LD. Moody's have also downgraded the rating of its USD
backed senior secured notes to Ca from Caa3. The SGL-4 Speculative
Grade Liquidity Rating (SGL) remains unchanged. The rating outlook
is changed to negative from stable.
RATINGS RATIONALE
The downgrade and negative outlook reflect the uncertainties around
the execution of LYCRA's restructuring plan based on the lock-up
agreement among its investors, the low recovery on its existing
debt obligations under the plan and very weak end market
conditions, which may continue to challenge profitability.
On September 05, 2025, LYCRA announced the initiation of the
restructuring plan as outlined in the Lock-Up Agreement reached
among its investors. The transaction, once completed, will lead to
a change of control of LYCRA with a group of existing creditors
becoming the new majority equity holders and the previous equity
investors having a greatly reduced stake in the company. Under the
lock-up agreement, all of the existing debts will be exchanged into
new debts and/or equity at different exchange ratios. While the
restructuring plan will reduce debt and improve cash flows, there
remains elevated execution risk till the transaction closes and
some uncertainty around the ultimate recovery rates of the existing
debts. Moody's will assess LYCRA's business plan and new capital
structure to assign ratings for its new debts upon the closing of
its restructuring plan.
LYCRA continues to face a challenging operating environment
including weak end market demand amid uncertain tariff policies and
intense competitive pressures, which have contributed to its weak
earnings, high financial leverage, and falling liquidity in 2025.
Moody's appended a limited default (/LD) to LYCRA's PDR in February
2025 after the amendment of its maturing super senior term loan
(SSTL, unrated) which was considered a missed payment default. As
the company further amended and extended all its debts in April
2025 and in June 2025, Moody's considers these amendments and
maturity extensions as follow-on distressed exchange and maintain
the /LD designation on its PDR. Moody's will remove the /LD
designation once the restructuring is completed with all existing
debts being exchanged and retired.
LYCRA's business profile still benefits from its market leadership
in the spandex industry with well-known brands and its long-term
relations with textile mills and garment manufacturers. The
company's focus on producing differentiated products and its price
premiums help mitigate partly the pricing pressures from the
generic competitors.
The company's liquidity will remain very weak until the
restructuring is completed as all of its roughly $1.4 billion in
outstanding debt will mature before the end of December 2025 under
the amended credit agreements. Based on company's Q2 2025 report,
The LYCRA Company's debt capital mainly comprises of its super
senior term loan with $194 million outstanding due December 2025,
its refinancing notes with $468 million outstanding due December
2025, and its USD notes with $740 million outstanding due December
2025.
The USD notes due December 2025 are rated Ca, one-notch below the
Caa3 Corporate Family Rating. This is due to the super senior term
loan (unrated) and a portion of the refinancing notes (unrated)
ranking ahead of the dollar notes in the debt capital structure.
RATINGS OUTLOOK
The negative outlook reflects that LYCRA is in the midst of
implementing a restructuring plan that has some execution risk,
along with some uncertainty over the ultimate recovery rates on its
existing debt obligations.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could consider an upgrade if LYCRA successfully completes
the restructuring transaction, materially reduces debt, and
generates positive free cash flow while maintaining adequate
liquidity. The rating could be downgraded further if LYCRA's
liquidity deteriorates or if the restructuring transaction is not
completed as planned. A distressed exchange would be considered a
default under Moody's definitions.
ESG CONSIDERATIONS
Environmental, social, and governance factors are important
considerations in LYCRA's credit profile, but not driver of the
action. LYCRA's Credit Impact Score of CIS-5 indicates that the
rating is lower than it would have been if ESG risks did not exist.
Governance is viewed as weak from a credit standpoint due to the
high debt leverage, weak liquidity and the challenges inherent in
the restructuring process. Additionally, its production process
exposes the company to waste and pollution, and health and safety
risks, which tend to have a long-term impact on its credit
profile.
Eagle Intermediate Global Holding B.V. (The LYCRA Company) is a
leading producer of man-made fibers, including spandex, polyester
and nylon, which are used by many apparel brands. Its owns
well-known brands such as LYCRA® fiber, ELASPAN® fiber, COOLMAX®
and THERMOLITE®, each of which provides garments with desired
functional performance. The company operates eight wholly owned
manufacturing and processing facilities in North America, Europe,
Asia and South America. The LYCRA Company is owned by a group of
investors comprised of Lindeman Asia, Lindeman Partners Asset
Management, Tor Investment Management, and China Everbright
Limited. It generated revenue of close to $800 million for the last
twelve months ended June 30, 2025.
The principal methodology used in these ratings was Chemicals
published in October 2023.
The net effect of any adjustments applied to rating factor scores
or scorecard outputs under the primary methodology(ies), if any,
was not material to the ratings addressed in this announcement.
===========
P O L A N D
===========
MLP GROUP: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
-----------------------------------------------------------
Fitch Ratings has affirmed MLP Group S.A.'s Long-Term Issuer
Default Rating (IDR) and senior unsecured rating at 'BB+'. The
Outlook on the IDR is Stable.
The rating affirmations reflect development-led growth of MLP's
mainly Polish, quality, well-located, and internally managed
logistics portfolio. This growth, which helps asset, tenant, and
geographical diversification, is accompanied by continued low
vacancies and long lease lengths.
Net debt/EBITDA leverage has spiked due to high capex during
2024-2025 on available land near existing domestic industrial
parks, and projects in Vienna, Schalke and Spreenhagen near Berlin,
with near-term completion dates but not pre-let. This adversely
affects MLP's immediate leverage but Fitch expects this to return
within the range for MLP's 'BB+' rating (9.5x-10.5x). Fitch
forecasts EBITDA interest cover at 1.7x-2.2x. Fitch expects MLP to
continue its strategy adopted in 2024 to fund itself with unsecured
debt.
Key Rating Drivers
Leverage Spike: Fitch forecasts MLP's net debt/EBITDA to be 11.4x
in 2025 and 10.5x in 2026 as the group progresses with its
development pipeline. Cash rent from these projects should mostly
come on stream in 2026, aiding leverage. In 2027-2028, lower capex
and a continuation of no dividends should help decrease leverage to
below 10x despite planned plot acquisitions to replenish the
landbank. Fitch-calculated loan to value (excluding
non-income-producing investment property) at end-2024 was 58%
(end-2023: 47%).
Comfortable Interest Coverage: Fitch expects EBITDA interest cover
at 1.7x in 2025, increasing to about 2x in 2026-2027 as rents from
completed developments more than offset higher-cost debt at new
interest rates.
Accelerated Capex Pipeline: MLP has accelerated property
development, deploying funds from the October 2024 EUR300 million
bond. At end-1H25, MLP had 275,000 sqm of space under construction,
including its 'city logistics' projects in Schalke (68,000 sqm) and
Spreenhagen (39,000 sqm). The pre-let ratio is 36% (by space), but
MLP has historically achieved over 70% pre-lets before completion.
Assuming completion and full occupancy, MLP expects the projects to
generate EUR25.7 million of annual rent: a high yield-on-cost of
11.5%.
Adequate Landbank: At end-1H25 MLP's landbank was 248 hectares
(end-2024: 257 hectares, of which 96 owned and 152 optioned) with a
development potential of about 1.2 million sqm of leasable area,
mainly in Poland (73%) and Germany (18%). About 87% is adjacent to
MLP's existing locations. Fitch expects MLP to spend about PLN675
million on land acquisitions during 2026-2028.
Stable Operating Performance: At end-1H25 MLP maintained stable
occupancy at 94% (2021-2024: 95%), supported by healthy tenant
demand in the group's markets. The weighted average lease length to
earliest break (WALB) was long, at 6.6 years. Like-for-like rental
growth is mainly due to contractual, inflation-linked indexation,
which was 2.4% in 1H25 (2024: 5.4%). Realisation of the
reversionary potential within MLP's portfolio will take time as the
lease expiration profile is well spread.
High Asset Concentration: MLP's portfolio concentration decreased,
with its top 10 logistics parks comprising a high 83% of total
end-1H25 value (end-1H24: 89%). The largest park (25%) comprises 15
buildings with a total area of 355,000 sqm let to about 40 tenants
(100% occupancy). Another 40,000 sqm is under construction. The
park is within the Warsaw agglomeration limits, 25 km from the city
centre and 6km from the nearest Warsaw-Berlin motorway junction.
Improving Tenant Diversification: The top 10 tenants' share
decreased to 30% of rent (end-2023: 38%) and the share of L-Shop
Team, MLP's biggest tenant, fell to 5.4% (7%). New names on the top
10 list include Janex (3.1%), a Polish food manufacturer, and
Specjał (2.9%), a local retail distributor. MLP has continued its
strategy of attracting light-industrial tenants, which now lease
37% of MPL's leasable area, followed by third-party logistics (28%)
and retailers (26%).
Gradual Portfolio Growth: The value of MLP's income-producing
industrial portfolio increased to EUR1.1 billion (PLN4.8 billion)
at end-1H25 (end-1H24: EUR0.9 billion), mainly due to the
completion of developments. MLP's leasable area reached 1.3 million
sqm (end-1H24: 1.2 million sqm). At end-1H25, Poland was still
MLP's main market at a decreased 78% (by value, 2023: 85%) as the
logistic park in Vienna, Austria (9%) was completed. Germany and
Romania's shares were 10% and 2%, respectively.
Local-Currency Reporting: MLP reports in Polish zloty, but most
rents and debt are denominated in euro. The property portfolio is
also valued in euro. Changes in the zloty/euro rate may distort
MLP's results.
Unchanged Ownership Structure: MLP biggest shareholder is The Land
Development of Nimrodi Group Ltd, with a 41% economic interest but
limited direct control. MLP operates independently, including
separate financing and treasury functions. Two independent
supervisory board members nominated by minority shareholders also
provide some independent oversight of the company's management.
Fitch rates MLP based on its standalone credit profile.
Peer Analysis
MLP's closest rated peer is DL Invest Group PM S.A. (DLIG; IDR
BB-/Positive), but DLIG's Silesia-focused PLN2.3 billion portfolio
has similar or higher asset, tenant and geographical concentrations
despite office and retail components. Both portfolios have high
occupancy rates and comparable WALBs for their logistic assets.
MLP is rated lower than continental European logistic peers,
including Catena AB (publ) and SELP Finance SARL (both IDRs
BBB/Stable); and AXA Logistics Europe Master S.C.A., Warehouses de
Pauw NV/SA and Montea NV (all IDRs BBB+/Stable) which have larger,
more diversified portfolios.
Only Titanium Ruth Holdco plc's (IDR BBB-/Stable) EUR1 billion
portfolio has similar asset concentration to MLP, with
significantly higher tenant concentration (top 10: 75%), but its
assets are in six countries, with the highest share in Germany (32%
of portfolio value).
The financial profiles of the rated western European logistic peers
are not directly comparable as their assets are mostly in countries
with a lower interest rate environment than Poland.
MLP's financial profile, including Fitch-forecast net debt/EBITDA
decreasing to around 10x from 11.4x in 2025, is better than DLIG's,
whose net debt/EBITDA Fitch forecasts to decrease to 11x in 2028
from 17x in 2025.
Key Assumptions
Fitch's Key Assumptions within Its Rating Case for the Issuer
- Rental income is modelled on an annualised rent basis
- Rent increase of 38% and 40% in 2025 and 2026, respectively,
driven mainly by the completed new developments' rental income
coming on stream; like-for-like growth including the CPI indexation
effect, and rent increases on renewals, limited to 2.5% a year
- About PLN2.1 billion of construction capex and PLN680 million
land acquisitions until 2028
- No dividends paid for the next four years
- Average cost of debt in 2025-2028 of about 4.6%
- Constant euro/zloty exchange rate at 4.3.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Net debt/EBITDA consistently above 10.5x
- EBITDA interest cover consistently below 1.5x
- Loan-to-value above 55%
- 12-month liquidity score below 1.0x
- For the senior unsecured rating: unencumbered investment property
assets/unsecured debt ratio below 1x
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Expansion of the portfolio reducing asset concentration while
maintaining portfolio quality and above 95% occupancy rate
- Net debt/EBITDA less than 9.5x on a sustained basis
- EBITDA interest cover above 1.7x on a sustained basis
- Unencumbered investment property assets/unsecured debt ratio
trending towards 2x
Liquidity and Debt Structure
At end-1H25, MLP held PLN285 million of readily available cash and
had an undrawn EUR85 million (PLN366 million) mortgage loan that
when drawn would increase cash sources to around PLN650 million.
Other than mortgage loans amortisation of around EUR6 million
(PLN26 million) a year MLP does not have meaningful debt maturing
until December 2026, when EUR41 million (PLN176 million) of
unsecured bonds fall due. MLP does not have committed revolving
credit facilities.
MLP has used proceeds from the EUR300 million unsecured bond to
fund development capex and prepay some existing secured debt and
unsecured local bonds. This created a pool of income-producing
unencumbered assets valued at EUR287 million at end-1H25. The
resultant Fitch-calculated unencumbered investment property
assets/unsecured debt ratio was 0.8x. Fitch expects this ratio to
grow further as the group continues to procure unsecured debt.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Sector Forecasts Monitor
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
----------- ------ -------- -----
MLP Group S.A. LT IDR BB+ Affirmed BB+
senior unsecured LT BB+ Affirmed RR4 BB+
===============
P O R T U G A L
===============
CONSUMER TOTTA 3: Moody's Assigns (P)B3 Rating to Class F Notes
---------------------------------------------------------------
Moody's Ratings has assigned the following provisional ratings to
Notes to be issued by Consumer Totta 3 2025:
EUR[ ]M Class A Floating Rate Notes due October 2035, Assigned
(P)Aaa (sf)
EUR[ ]M Class B Floating Rate Notes due October 2035, Assigned
(P)A1 (sf)
EUR[ ]M Class C Floating Rate Notes due October 2035, Assigned
(P)Baa3 (sf)
EUR[ ]M Class D Floating Rate Notes due October 2035, Assigned
(P)Ba2 (sf)
EUR[ ]M Class E Floating Rate Notes due October 2035, Assigned
(P)Ba3 (sf)
EUR[ ]M Class F Floating Rate Notes due October 2035, Assigned
(P)B3 (sf)
Moody's have not assigned a rating to EUR[ ]M Class R Notes due
October 2035 and EUR[ ]M Class X Notes due October 2035.
RATINGS RATIONALE
The Notes are backed by a static pool of Portuguese unsecured
consumer loans originated by Banco Santander Totta S.A. (Portugal)
("Santander Totta"), (A2/P-1 Bank Deposits; A2(cr)/P-1(cr)). This
represents the third ABS issuance originated by Banco Santander
Totta S.A.
The portfolio consists of approximately EUR388.9 million of loans
as of the July pool cut-off date. The Reserve Fund will be funded
to 1.0% of the A to E Notes balance at closing and the total credit
enhancement for the Class A Notes will be 18.0%.
The ratings are primarily based on the credit quality of the
portfolio, the structural features of the transaction and its legal
integrity.
The transaction benefits from various credit strengths such as the
granularity of the portfolio, securitisation experience of
Santander group, a reserve fund sized at 1.0% of the Class A-E
Notes as of closing with a floor of 0.25%, subordination of the
Notes and significant excess spread. However, Moody's notes that
the transaction features a number of credit weaknesses, such as a
(i) complex structure including interest deferral triggers for
junior Notes, (ii) pro-rata payments on all classes A-E of Notes,
and (iii) the relatively high linkage to Santander Totta acting as
originator and servicer. These characteristics, amongst others,
were considered in Moody's analysis and ratings.
Moody's determined the portfolio lifetime expected defaults of
6.0%, expected recoveries of 15% and portfolio credit enhancement
("PCE") of 18% related to borrower receivables. The expected
defaults and recoveries capture Moody's expectations of performance
considering the current economic outlook, while the PCE captures
the loss Moody's expects the portfolio to suffer in the event of a
severe recession scenario. Expected defaults and PCE are parameters
used to calibrate its lognormal portfolio loss distribution curve
and to associate a probability with each potential future loss
scenario in the ABSROM cash flow model to rate Consumer ABS.
Portfolio expected defaults of 6.0% are in line with the EMEA
Consumer Loan ABS average and are based on Moody's assessments of
the lifetime expectation for the pool taking into account (i)
historic performance of the loan book of the originator, (ii)
benchmark transactions, and (iii) other qualitative considerations,
such as the high balloon loan component of the portfolio.
Portfolio expected recoveries of 15% are in line with the EMEA
Consumer Loan ABS average and are based on Moody's assessments of
the lifetime expectation for the pool taking into account (i)
historic performance of the loan book of the originator, (ii)
benchmark transactions, and (iii) other qualitative
considerations.
PCE of 18% is in line with the EMEA Consumer Loan ABS average and
is based on Moody's assessments of the pool taking into account (i)
historical data variability; (ii) quantity, quality and relevance
of historical performance data; (iii) the relative ranking to peers
in EMEA. The PCE level of 18% results in an implied coefficient of
variation ("CoV") of 34.17%.
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" published in July
2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that may cause an upgrade of the ratings of the notes
include significantly better than expected performance of the pool
together with an increase in credit enhancement of Notes.
Factors that would lead to a downgrade of the ratings include: (i)
increased counterparty risk leading to potential operational risk
of (a) servicing or cash management interruptions and (b) the risk
of increased swap linkage due to a downgrade of a currency swap
counterparty ratings; and (ii) economic conditions being worse than
forecast resulting in higher arrears and losses.
=========
S P A I N
=========
MASORANGE HOLDCO: Moody's Withdraws 'Ba3' Corporate Family Rating
-----------------------------------------------------------------
Moody's Ratings has withdrawn MasOrange Holdco Limited (MasOrange
or the company) ratings, including its Ba3 corporate family rating
and its Ba3-PD probability of default rating. Concurrently, Moody's
have withdrawn the Ba3 rating on the backed senior secured bank
credit facilities issued by MasOrange Finco Plc and the senior
secured bank credit facilities issued by Lorca Co-Borrower LLC,
withdrawn the Ba3 ratings on the backed senior secured notes issued
by Lorca Telecom Bondco, S.A.U., and withdrawn the B2 rating on the
EUR500 million backed senior unsecured notes of Kaixo Bondco
Telecom, S.A.U. The outlook prior to the withdrawal on the above
entities was positive.
RATINGS RATIONALE
Moody's have decided to withdraw the rating(s) following a review
of the issuer's request to withdraw its rating(s).
LIST OF AFFECTED RATINGS
Issuer: MasOrange Holdco Limited
Withdrawals:
LT Corporate Family Rating, Withdrawn, previously rated Ba3
Probability of Default Rating, Withdrawn, previously rated Ba3-PD
Outlook Actions:
Outlook, Changed To Rating Withdrawn From Positive
Issuer: Kaixo Bondco Telecom, S.A.U.
Withdrawals:
Backed Senior Unsecured (Local Currency), Withdrawn , previously
rated B2
Outlook Actions:
Outlook, Changed To Rating Withdrawn From Positive
Issuer: Lorca Co-Borrower LLC
Withdrawals:
Senior Secured Bank Credit Facility (Local Currency), Withdrawn ,
previously rated Ba3
Outlook Actions:
Outlook, Changed To Rating Withdrawn From Positive
Issuer: Lorca Telecom Bondco, S.A.U.
Withdrawals:
Backed Senior Secured (Local Currency), Withdrawn , previously
rated Ba3
Outlook Actions:
Outlook, Changed To Rating Withdrawn From Positive
Issuer: MasOrange Finco Plc
Withdrawals:
Backed Senior Secured Bank Credit Facility (Foreign Currency),
Withdrawn, previously rated Ba3
Outlook Actions:
Outlook, Changed To Rating Withdrawn From Positive
COMPANY PROFILE
MasOrange is the parent company of the joint venture (JV) between
Masmovil Ibercom, S.A. (Masmovil) and Orange in Spain. The JV is
the largest telecom operator in Spain by subscribers and second by
total revenue.
MasOrange operates under the joint ownership of Orange (Baa1
stable) and the former stakeholders of Masmovil, with each party
holding a 50% stake in MasOrange. The former stakeholders of
Masmovil include Kohlberg Kravis Roberts (KKR), Cinven, Providence
Equity Partners, management and other shareholders.
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S W I T Z E R L A N D
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TRANSOCEAN LTD: Plans 100M Public Share Offering for Debt Repayment
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Transocean Ltd. announced that it intends to offer and sell
100,000,000 Transocean shares, par value $0.10, in an underwritten
public offering. All the shares subject to the offering are being
offered by Transocean. In addition, Transocean expects to grant the
underwriters a 30-day option to purchase up to an additional
15,000,000 shares in the offering at the public offering price,
less underwriting discounts and commissions.
Citigroup and Morgan Stanley are acting as joint book-running
managers for the offering.
Transocean intends to use the net proceeds from the offering for
the repayment or redemption of indebtedness, including the
repayment or redemption of a portion of the $655 million aggregate
principal amount of the 8.00% Senior Notes due February 2027 issued
by Transocean International Limited, a wholly owned subsidiary of
Transocean, to the extent such principal is not otherwise
refinanced, repaid or redeemed. Any proceeds from the offering that
are not used promptly for such purposes will be used for general
corporate purposes.
Transocean is offering the shares pursuant to a shelf registration
statement that was filed with the Securities and Exchange
Commission and became automatically effective on July 1, 2024. This
offering is being made only by means of a prospectus and prospectus
supplement that form a part of the registration statement. A
preliminary prospectus supplement relating to and describing the
terms of the offering is expected to be filed with the SEC and, if
and when filed, copies of the preliminary prospectus supplement
relating to the offering may be obtained for free by visiting the
SEC's website at www.sec.gov.
Copies of the preliminary prospectus supplement and the
accompanying prospectus may also be obtained, when available, by
contacting: Citigroup, c/o Broadridge Financial Solutions, 1155
Long Island Avenue, Edgewood, NY 11717 (Tel: 800-831-9146); or
Morgan Stanley & Co. LLC, Attn: Prospectus Department, 180 Varick
Street, 2nd Floor, New York, NY 10014.
The final terms of the offering will be disclosed in a final
prospectus supplement to be filed with the SEC.
About Transocean
Transocean Ltd. is an international provider of offshore contract
drilling services for oil and gas wells. The Company specializes in
technically demanding sectors of the offshore drilling business
with a particular focus on ultra-deepwater and harsh environment
drilling services. As of Feb. 14, 2024, the Company owned or had
partial ownership interests in and operated 37 mobile offshore
drilling units, consisting of 28 ultra-deepwater floaters and nine
harsh environment floaters. Additionally, as of Feb. 14, 2024, the
Company was constructing one ultra-deepwater drillship.
Transocean reported a net loss of $512 million in 2024, a net loss
of $954 million in 2023, a net loss of $621 million in 2022, and a
net loss of $591 million in 2021. As of June 30, 2025, the Company
had $17.8 billion in total assets, $6.9 billion in total long-term
liabilities, and $9.4 billion in total equity.
* * *
Egan-Jones Ratings Company on January 21, 2025, maintained its
'CCC-' foreign currency and local currency senior unsecured ratings
on debt issued by Transocean Ltd.
In May 2025, S&P Global Ratings affirmed its ratings on offshore
drilling contractor Transocean Ltd., including the 'CCC+' issuer
credit rating and revised the outlook to negative from stable.
VIKING CRUISES: Moody's Raises CFR to 'Ba2', Outlook Stable
-----------------------------------------------------------
Moody's Ratings upgraded its ratings of Viking Cruises Ltd
(Viking); corporate family rating to Ba2 from Ba3, probability of
default rating to Ba2-PD from Ba3-PD and senior unsecured rating to
Ba3 from B1. Moody's also upgraded the backed senior secured
ratings for Viking Ocean Cruises Ltd. and Viking Ocean Cruises Ship
VII Ltd to Baa3 from Ba1. The SGL-1 speculative grade liquidity
rating is unchanged. The ratings outlooks remain stable.
The upgrades of Viking's ratings reflect the improvement in the
company's credit metrics through the first half of 2025 and Moody's
expectations for further strengthening through 2026. Debt/EBITDA
and funds from operations + interest / interest will improve to
below 3.5x and to near 4.0x, respectively, by the end of 2025 with
further strengthening through 2026. The company will benefit from a
continuing favorable demand environment and fleet growth, both of
which will drive earnings expansion in upcoming years. Moody's
projects capacity growth of about 12% in 2025 and about 10% in
2026. Viking also benefits from a relatively affluent customer
base. Its offerings are positioned to appeal to relatively older
segments of the population, typically with significant financial
resources. Strong forward bookings for the industry and Viking for
2026 indicate the durability of demand for cruising generally and
particularly from its target market, notwithstanding potential
weakening of the economy because of the current fiscal and tariff
policies the US government is pursuing.
RATINGS RATIONALE
The Ba2 CFR reflects Viking's strong position in the premium river
cruise market and the benefits of its brand strength that
facilitated its entry into premium ocean cruising in 2015. The
company's river fleet of 85 vessels on June 30, 2025 is more than
three times larger than the second largest player, AMAWaterways.
The current orderbook for river vessels is approximately 30% of the
existing fleet. Moody's expects earnings growth in upcoming years
as these vessels enter service. Moody's also expects Viking to fund
a majority of its 2025 new river vessels with cash, which will
allay pressure on funded debt and financial leverage, all else
equal. Viking will also add three ocean ships through 2027. Moody's
anticipates that each of these will likely be funded with export
credit agency financings. Debt/EBITDA was 3.9x at June 30, 2025,
materially improved compared to the end of 2024. Moody's projects
debt/EBITDA to fall to around 3.1x at the end of fiscal 2026, which
solidly supports the Ba2 CFR.
Viking tailors its offerings to the above 55 year-old market, a
segment of the population with typically more disposable income and
net worth than the broader population. It also does not allow
passengers younger than 18 years of age there are no casinos on any
of the company's vessels. Viking offers itineraries that emphasize
the arts, history and exploration rather than resort-like rest and
relaxation. Unlike its larger ocean cruise peers, less than five
percent of the company's schedule serves the Caribbean and Mexico
markets. Potential headwinds include cost inflation, constraints on
access to ports and/or sensitive areas because of environmental
concerns and demand's exposure to economic cycles notwithstanding
the relative financial strength of the target customer base.
The SGL-1 speculative grade liquidity rating reflects Moody's
expectations that Viking will continue to hold significant amounts
of cash. At June 30, 2025, cash stood at $2.6 billion. Moody's
expects this level to be a floor for at least the next 24 months.
Annual free cash flow will be about $700 million in 2025 and about
$400 million in 2026; the decline driven by higher capital
investment. Moody's expects the $375 million revolver due in May
2029 (unrated) to remain undrawn.
The stable outlook reflects Moody's expectations for effective
execution of the fleet growth strategy, which will support further
strengthening of credit metrics.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Viking sustains debt/EBITDA below
3.0x and FFO plus Interest to Interest approaches 6.0x. An upgrade
would also require the company to maintain its very good liquidity.
The ratings could be downgraded if liquidity weakens, particularly
if Viking were to hold materially less cash or if Moody's expects
that debt/EBITDA will be sustained above 4.0x or FFO plus Interest
to Interest below 4.0x.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
The net effect of any adjustments applied to rating factor scores
or scorecard outputs under the primary methodology(ies), if any,
was not material to the ratings addressed in this announcement.
Incorporated in Bermuda, Viking had a fleet of 85 river vessels, 12
ocean ships and two expedition ships on June 30, 2025. In 2024,
around 90% of its river and ocean customers were from North
America. Chairman and Chief Executive Officer, Torstein Hagen,
beneficially owns shares representing approximately 87% of the
voting power of the Company's issued and outstanding share capital.
Gross and net revenue were $5.8 billion and $3.8 billion for the
last twelve months ended June 30, 2025.
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T U R K E Y
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LIMAKPORT: Moody's Alters Outlook on 'B3' Notes Rating to Stable
----------------------------------------------------------------
Moody's Ratings has affirmed the B3 rating on the senior secured
notes issued by Limak Iskenderun Uluslararasi Liman Isletmeciligi
A.S. (LimakPort), the concessionaire for the port of Iskenderun,
located in the south-east of Turkiye. The outlook was changed to
stable from negative.
RATINGS RATIONALE
The rating action reflects (1) the completion of a significant part
of the reconstruction works necessary to restore the port's
infrastructure, which was damaged by the devastating earthquakes
that struck Turkiye in 2023; (2) the good level of activity and
volumes reported at the port underpinning cash flow generation,
with container throughput now exceeding pre-earthquake levels; and
(3) the support to the company's liquidity profile provided by the
sizeable insurance payments received in connection with the 2023
earthquakes. The action takes into account planned changes in debt
service and O&M reserve arrangements, which Moody's do not expect
to constrain the rating, but anticipates that the company will
manage investment spending and shareholder distributions in order
to maintain adequate liquidity, particularly in the context of
increasing scheduled debt service obligations.
LimakPort's infrastructure was heavily damaged by the earthquakes
in southeast Turkiye on February 06, 2023 and the subsequent fire
at the port. Restoration efforts have progressed well and activity
at the port increased as berths were gradually reopened. With full
operations at berths 2, 3 and 4, LimakPort can now handle
approximately 800,000 TEUs, well above container throughput
reported before the earthquakes. Remaining outstanding repair works
involve berth 1 and the Turkish Grain Board (TMO) berth, but
LimakPort has indicated its intention to progress these investments
according to activity levels. The works on berth 1 and the TMO
berth are currently estimated to cost approximately USD90 million.
Following the earthquakes, LimakPort temporarily halted operations.
As the port's capacity gradually increased, volumes recovered,
while demand for services remained strong. In 2024, the port
handled 525,000 TEUs, thus exceeding pre-earthquake levels.
Performance has remained positive in recent months. In the eight
months to August 2025, LimakPort recorded an increase of 16.4% in
total throughput vs. the corresponding period in 2024, reaching
397,000 TEUs. Sustained activity levels, coupled with tariff
increases implemented earlier in the year, have supported cash flow
generation, thus also evidencing some resilience in the context of
heightened uncertainty and negative headwinds linked to
geopolitical tensions in the Red Sea area, the military conflict
between Israel and Hamas, the interruption of trade with Israel and
the imposition of trade tariffs by the US. Moody's notes that
LimakPort's exposure to the US market is relatively small, at
around 6% of total container throughput volume in 2024 (around 10%
expected in 2025).
The rating action also reflects the full receipt of
earthquake-related insurance payments for property damage and
business interruption, which supports LimakPort's liquidity
position. The overall settlement amount received totalled USD105
million. Whilst this is lower than initially anticipated by
management, the settlement eliminates any residual uncertainty
related to further negotiations and the timing of payments from
insurers.
The rating affirmation also takes into account planned changes to
debt service liquidity arrangements. More specifically, LimakPort's
debt documentation provides for reserving mechanisms covering six
months of debt service, currently funded through a Debt Service
Reserve Account (DSRA), as well as well as an O&M Reserve Account
covering the projected O&M charges for the following three months.
As allowed under the debt documentation, the company is planning to
replace the DSRA, as well as the O&M Reserve Account, with a Letter
of Credit (non-recourse to the company) providing equivalent debt
service and liquidity coverage. The funds available as a result are
expected to be partially distributed to shareholders. As of the end
of August 2025, the balance of the DSRA and O&M Reserve Account is
USD22 million and USD18 million, respectively.
More generally, LimakPort's B3 rating continues to be supported by
(1) the port's position as an important gateway for Turkish
international trade, with a mix of imports and exports, and a
fairly good product diversification; (2) the significant element of
revenue supported by demand in overseas markets, with most revenue
collected in US dollars; and (3) the company's liquidity position.
These factors are, however, balanced by (1) the port's size and
competitive dynamics in the region, including from Mersin port and
Assan port; (2) some uncertainty around the evolution of container
throughput in the context of an evolving operating environment; (3)
high financial leverage and rising debt service payment
obligations; and (4). the company's exposure to political, fiscal
and regulatory environment in Turkiye (Ba3 stable).
The stable outlook reflects Moody's expectations that LimakPort
will maintain a good liquidity profile and grow volumes and
earnings, improving its financial metrics and building financial
flexibility ahead of increasing scheduled debt repayments.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upgrade of the rating is not anticipated in the near term. Over
the longer term, positive rating pressure would develop if volume
growth is achieved and LimakPort builds greater flexibility in the
context of its increasing scheduled debt repayments.
Downward rating pressure could arise if (1) there were concerns
about the company's liquidity; (2) container volume growth was to
significantly lag expectations and the company had not built enough
financial flexibility to accommodate this weaker performance in the
context of its scheduled debt amortisation profile; or (3) if
government-imposed measures were to have an adverse impact on the
company's operations.
The principal methodology used in this rating was Privately Managed
Ports published in April 2023.
The net effect of any adjustments applied to rating factor scores
or scorecard outputs under the primary methodology(ies), if any,
was not material to the ratings addressed in this announcement.
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U K R A I N E
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CITY OF DNIPRO: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
-----------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Dnipro's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'CCC'.
Ratings at this level typically do not carry Outlooks due to their
high volatility.
The affirmation reflects Dnipro's financial resilience, despite its
significant financing needs and liquidity risks. The city still has
little capacity to deal with the adverse economic conditions, as
reflected in an unchanged Standalone Credit Profile (SCP) of 'ccc'.
Fitch expects an increase in the city's direct debt and the
city-guaranteed municipal companies' debt from international
financial institutions (IFIs), but the probability of default,
particularly over the next 12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR, as in its view, the financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default', following the government's
default on its Eurobonds in 2024 and as the ongoing suspension of
payments of GDP warrants and commercial loans until completion of
their restructuring. Fitch believes that due to its sufficiently
strong financial profile the city will be able to continue
servicing its debt obligations despite the sovereign default, so
its Long-Term Foreign-Currency IDR is insulated from the sovereign
downgrade (see Ukrainian City Ratings Are Not Directly Affected by
Sovereign Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates an SCP of 'b' or below. The 'ccc' SCP results
from the application of the Lower Speculative Grade of Fitch's
International Local and Regional Government (LRG) Rating Criteria
(Criteria). Fitch qualitatively assesses default risk, and the
remaining safety margin based on overall performance, guided by
ratings definitions. SCP is am qualitative assessment and does not
directly consider the Risk Profile or the financial metrics in the
Financial Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the city
being unable to service its debt, particularly over the next 12
months.
Risk Profile: 'Vulnerable'
Dnipro's 'Vulnerable' risk profile results from the assessment of
all six key risk factors at 'Weaker', as detailed below.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on central government decisions and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and
central government progresses with LRG reforms.
In 2024, tax revenue (77% of total) and state transfers (17%) were
the main income sources. Income tax revenues, which are largest
revenue source (50%), fell by 7.4% to UAH11.4 billion in 2024, as
taxes paid from military and police staff earnings were redirected
to the state. This decrease was compensated by a 14% increase in
local tax revenue (mainly the single and property tax) and 34%
higher transfers (primarily subsidy from the state for the
territories affected by the hostiles), leading to 5% growth in
total revenue. Fitch expects a rebound in income tax revenue in
2025, but a drop in transfers.
Revenue Adjustability: 'Weaker'
Dnipro has limited ability to generate additional revenue in
response to an economic downturn. Income tax rates and current
transfers are decided by the central government. The city has
limited rate-setting power of some local taxes (23% of total in
2024), but economic conditions make it difficult for households to
afford rate increases. There is an equalisation scheme for LRGs in
Ukraine, but Dnipro is a contributor to it (UAH2.5 billion planned
in 2025), as its per-capita personal income tax (PIT) revenue
exceeds 110% of the national average. In 2024, the city did not pay
the reverse subsidy, using the possible suspension provided by the
amendments to the Budget Code introduced under martial law.
Expenditure Sustainability: 'Weaker'
Dnipro remains exposed to fiscal pressures from inflation (Fitch
forecasts 13.2% in 2025), population shifts (refugees), frequent
minimum wage adjustments, and war damages. Despite these factors,
the city reduced its opex by 9% in 2024, mainly because of lower
operating transfers to municipal companies. Fitch expects them to
rebound in 2025, leading to 26% opex growth. Key mandatory
expenditure, such as education, housing, social services, and
healthcare accounted for nearly 59% of totex in 2024 and are
largely non-cyclical. Capex (31% of total) is set to fall in
2025-2026 but remains unpredictable due to major unplanned
infrastructure repairs and capital transfers to municipal companies
(plan for 2025: UAH2.6 billion).
Expenditure Adjustability: 'Weaker'
Dnipro's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investments difficult. Capital transfers, mostly to
municipal companies, represented 78% of capex in 2024, as these
entities rely heavily on the city's support. The city and its
municipal companies face significant underfunding and high
investment needs. Combined with high, although falling,
contributions to the municipal companies, this may further strain
the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks, further increased
by the depreciating Ukrainian currency. Municipal companies' debts
carry similar features contributing to financial instability.
Long-term debt at end-2024 was UAH1,799 million and consisted of
domestic bank loans and a UAH915 million loan from the European
Bank for Reconstruction and Development (AAA/Stable). Debt is
mostly in euros (65%) and has floating interest rates. Fitch
includes in direct debt an interest-free treasury loan (UAH218.3
million), from the Ministry of Finance from prior to 2014, which
will eventually be written off by the state. The city guarantees
loans of its government-related entities (GREs) totalling UAH1,723
million, mostly related to energy efficiency projects. Fitch
expects direct debt and GREs' debt to increase to finance
investments, primarily dedicated to the public transport and
municipal infrastructure.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Dnipro's cash
rose to UAH1,447 million at end-2024 (2023: UAH388 million), mostly
due to improved operating balance, which exceeded the increased
capital deficit. Fitch expects over cash to be depleted in line
with investment progress. Average cash held in the city's accounts
increased to almost UAH2,600 million in January-July 2025.
Financial Profile: 'b category'
Fitch assesses Dnipro's financial profile in the 'b' category,
considering the war's detrimental impact on the national economy
and infrastructure, which affects the city's short- and medium-term
performance and planning ability.
The war has created great uncertainty, including changes in PIT
revenue generation and distribution, high inflation, and increased
infrastructure investment needs. These factors collectively
increase the risk of unfavourable economic developments, which may
lead to increased borrowing and directly affect the city's
debt-servicing ability. Future debt repayments are a risk, and
Fitch expects an increase in direct debt to finance investments.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position. Fitch anticipates the
city's spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Short-Term Ratings
The 'C' Short-Term IDR at is the only possible option corresponding
to 'CCC' Long-Term IDRs.
National Ratings
The 'AA (ukr)' National Rating of the city is, the highest possible
rating corresponding to a 'CCC' Long-Term Local-Currency IDR. The
city's diversified revenue base and existing spending flexibility,
as reflected in large spending cuts in 2022, show that like other
Ukrainian LRGs, it is in a stronger position than national peers
from other asset classes and this justifies the highest possible
national rating for the given mapping.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
SCPs assessed at 'ccc'. International comparisons are difficult
because of the ongoing war in Ukraine. Nigerian states and the
municipality of Cordoba in Argentina have comparable risk profiles
('Vulnerable', with all the Key Risk Factors assessed as 'Weaker').
The Nigerian states are highly state-transfer-driven, whereas
Argentina's LRGs operate in a highly volatile environment
characterised by episodic distressed debt exchanges.
Like other cities, Dnipro faces high pressure on spending,
particularly for investments that were put on hold when the war
started, with new demands arising from damage. Dnipro also shares
common challenges with other rated cities, such as caring for
internal refugees, dealing with high inflation, and navigating
disrupted supply chains in a war environment that introduces
substantial uncertainty. Like its peers, Fitch expects Dnipro's
financial profile to be broadly unchanged, despite the expected
increase in expenditure and debt.
Issuer Profile
Dnipro city is the capital of the Dnipropetrovsk region and had a
population of about 1 million in January 2022. Its industrial
economy is dominated by metallurgy and heavy manufacturing.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 6.0% increase in operating revenue, driven
primarily by tax revenue growth (11.5%) boosted by regular
increases in the minimum wage and an anticipated national economic
rebound (real GDP growth of 2.5% in 2025 and 3.0% in 2026); this
assumption takes into account that the 4% additional PIT allocation
for LRGs regulation will no longer be valid from 2026; Fitch
further expects an 19.3% decrease in state transfers;
- Annual average 16.2% increase in operating spending; rising
inflation, expectations of salary growth pressuring spending,
higher transfers to the municipal companies;
- Annual net capex of almost UAH4.5 billion on average; considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt at 12% in 2025-2026, excluding the
interest-free loan from the government, and medium- to long-term
maturities of new debt (minimum five years); no interest costs caps
assumed;
- Municipal companies' debt only based on current knowledge about
the debt financed investment plans; but a rise in debt is very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade.
ESG Considerations
Dnipro has an ESG Relevance Score of '5' for Political Stability
and Rights due to the severe impact of the war with Russia, which
as compromised the cities political stability and security outlook,
negatively affecting their credit profiles and ratings. The war has
resulted in many casualties and extensive property damage.
Dnipro has an ESG Relevance Score of '4' for Creditor Rights due to
improving, but still weakened ability to service and repay debt.
The protracted war has weakened the city's ability to service and
repay debt, however Fitch observes some improvement in the legal
framework easing restrictions to service foreign currency debt.
IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Entity/Debt Rating Prior
----------- ------ -----
Dnipro, City of LT IDR CCC Affirmed CCC
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr)Affirmed AA(ukr)
CITY OF KHARKOV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
------------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Kharkov's
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR)
at 'CCC'. Ratings at this level typically do not carry Outlooks due
to their high volatility.
The affirmation reflects Kharkov's financial resilience, despite
its significant financing needs and liquidity risks. The city still
has little capacity to deal with the adverse economic conditions,
as reflected in an unchanged Standalone Credit Profile (SCP) of
'ccc'. Fitch expects an increase in the city's and city-guaranteed
municipal companies' debt from international financial institutions
(IFIs), but the probability of default, particularly over the next
12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR, as in its view, its financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default', following the government's
default on its Eurobonds in 2024 and ongoing suspension of payments
of GDP warrants and commercial loans until completion of their
restructuring. Fitch believes that the city's sufficiently strong
financial profile means it will be able to continue servicing its
debt obligations despite the sovereign default, so its Long-Term
Foreign-Currency IDR is insulated from the sovereign downgrade (see
Ukrainian City Ratings Are Not Directly Affected by Sovereign
Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates an SCP of 'b' or below. The 'ccc' SCP results
from the application of the Lower Speculative Grade of Fitch's
International Local and Regional Government (LRG) Rating Criteria.
Fitch qualitatively assesses default risk, and the remaining safety
margin based on overall performance, guided by ratings definitions.
The SCP is a qualitative assessment and does not directly consider
the Risk Profile or the financial metrics in the Financial
Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the city
being unable to service its debt, particularly over the next 12
months.
Risk Profile: 'Vulnerable'
Kharkov's 'Vulnerable' risk profile results from the assessment of
all six key risk factors at 'Weaker'.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on central government decisions and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and
central government progresses with LRG reforms.
In 2024, revenues primarily comprised tax income (68% of total) and
state transfers (27%). Personal income tax (PIT), the largest
source of tax revenue, declined by 11% to UAH8.0 billion in 2024.
This was mainly due to the redirection of military and police staff
earnings to the state budget and the relocation of residents to
other regions, as Kharkov has been the most affected by the war of
Fitch-rated Ukrainian cities. The decline was fully offset by
higher state subsidies while local taxes increased slightly. Fitch
expects PIT revenue to recover in 2025.
Revenue Adjustability: 'Weaker'
Kharkov has limited ability to generate additional revenue in
response to an economic downturn. Income tax rates and current
transfers are decided by the central government. The city has
limited rate-setting power of some local taxes (22% of total in
2024), but economic conditions make it difficult for households to
afford rate increases. There is an equalisation scheme for LRGs in
Ukraine, but Kharkov in 2024 did not benefit from it or contribute
to it, as its per-capita PIT revenue was within the range that
meant it did not qualify.
Expenditure Sustainability: 'Weaker'
Kharkov remains exposed to fiscal pressures from inflation (Fitch
forecasts 13.2% in 2025), costs of hosting internal refuges,
frequent minimum wage adjustments, and war damages. The city's main
mandatory responsibilities (education, housing, utilities, social
and healthcare), account for about 57% of totex, and are largely
non-cyclical. Fitch expects capex (19% of total in 2024) to rise
but it remains unpredictable due to major unplanned significant
infrastructure repairs required mainly for housing stock and
transfers to municipal companies. Fitch expects the city to
continue high capital transfers to its municipal companies to
support infrastructure projects.
Expenditure Adjustability: 'Weaker'
Kharkov's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investments difficult. Capex represented 19% of totex in
2024, with 66% of capex comprising capital transfers. The city and
its municipal companies face significant under-funding and high
investment needs. Combined with already high contributions to the
municipal companies, this may further strain the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks, further elevated
by the depreciating Ukrainian currency. Municipal companies' debt
carries similar features contributing to financial instability.
Following two years of deleveraging, the city used a EUR10 million
new loan from European Bank for Reconstruction and Development
(part of a EUR25 million facility) to provide liquidity support for
its municipal companies. Fitch also includes in direct debt an
interest-free treasury loan (UAH361 million), from the Ministry of
Finance prior to 2014, which will eventually be written off by the
state. At end-2024, Kharkov's total direct debt rose to UAH800
million (2023: UAH361 million).
Other Fitch-classified debt totalled UAH641 million and consists
mainly of loans from municipal companies (transportation and water
utility). In its view, this could become the city's direct
obligation under unfavourable economic conditions. Fitch expects
debt to increase to finance investment in the near term,
particularly related to the Kharkov metro project.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Kharkov's cash
position improved to UAH1.5 billion at end-2024 (2023: UAH539
million) as a result of better-than-expected revenue. Fitch expects
cash to be depleted in line with investment progress, mainly
consisting of capital transfers to the municipal companies.
Financial Profile: 'b category'
Fitch assesses Kharkov's financial profile in the 'b' category,
considering the war's detrimental impact on the national economy
and infrastructure, which affects the city's short- and medium-term
performance. The war has created great uncertainty, including
changes in PIT revenue generation and distribution, high inflation,
and increased infrastructure investment needs. These factors
collectively increase the risk of unfavourable economic
developments, which may lead to increased borrowing and directly
affect the city's debt-servicing ability. Future debt repayments
are a risk, and Fitch expects an increase in direct debt to finance
investments.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position. Fitch anticipates the
city's spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Short-Term Ratings
The 'C' Short-Term IDR at is the only possible option corresponding
to the 'CCC' LT IDRs.
National Ratings
Kharkov's 'AA(ukr)' National Rating is the highest possible rating
corresponding to a 'CCC' Long-Term Local-Currency IDR. The city's
diversified revenue base and existing spending flexibility, proven
by significant spending cuts in 2022, show that like other
Ukrainian LRGs, it is in a stronger position than national peers
from other asset classes, justifying the highest possible National
Rating for the given mapping.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
SCPs rated at 'ccc'. International comparisons are difficult
because of the ongoing war in Ukraine. Nigerian states and the
municipality of Cordoba in Argentina have comparable risk profiles
('Vulnerable', with all the Key Risk Factors assessed as 'Weaker').
The Nigerian states are highly state-transfer-driven, whereas
Argentina's LRGs operate in a highly volatile environment
characterised by episodic distressed debt exchanges.
Issuer Profile
Kharkov, the capital of Kharkov region, had a population of about
1.4 million in January 2022. The city has had a diversified urban
economy supported by a large number of companies in various sectors
before the war started.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 8.2% increase in operating revenue, driven by
tax revenue growth (13.8%) boosted by regular increases in the
minimum wage and an anticipated national economic rebound (real GDP
growth of 2.5% in 2025 and 3.0% in 2026); this assumption takes
into account that the 4% additional PIT allocation for LRGs
regulation will no longer be valid from 2026; Fitch expects a -5.1%
decrease in state transfers following a high increase in 2024
driven by the additional subsidies from the state budget;
- Annual average 5.1% increase in operating spending; rising
inflation, expectations of salary growth pressuring spending,
higher transfers to the municipal companies;
- Annual net capex of UAH6.0 billion on average; considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt of 5.4% in 2025-2026, and medium-to
long-term maturities of new debt;
- Municipal companies' debt only based on current knowledge about
the debt financed investment plans; but a, rise in debt is very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade of the city's ratings.
ESG Considerations
Kharkov has an ESG Relevance Score of '5' for Political Stability
and Rights due to the severe impact of the war with Russia, which
as compromised the cities political stability and security outlook,
negatively affecting their credit profiles and ratings. The war has
resulted in many casualties and extensive property damage.
Kharkov has an ESG Relevance Score of '4' for Creditor Rights due
to improving but still weakened ability to service and repay debt.
The protracted war has weakened the city's ability to service and
repay debt, however Fitch observes some improvement in the legal
framework easing restrictions to service foreign currency debt.
IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Discussion Note
Committee date: September 24, 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Kharkov, City of LT IDR CCC Affirmed CCC
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr)Affirmed AA(ukr)
CITY OF KRYVYI: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
-----------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Kryvyi Rih's
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR)
at 'CCC'. Ratings at this level typically do not carry Outlooks due
to their high volatility.
The affirmation reflects Kryvyi Rih's financial resilience, despite
its significant financing needs and liquidity risks. The city still
has little capacity to deal with the adverse economic conditions,
as reflected in an unchanged Standalone Credit Profile (SCP) at
'ccc'. Fitch expects an increase in the city's direct debt and
guaranteed municipal companies' debt from international financial
institutions (IFIs), but the probability of default, particularly
over the next 12 months, remains low.
The city's LTFC IDR remains above Ukraine's IDR as in its view, its
financial profile is sufficiently strong to withstand a sovereign
default. The sovereign rating cap on the Long-Term Foreign-Currency
IDR is not applicable due to Ukraine remaining in 'Restricted
Default', following the default on its Eurobonds in 2024 and
ongoing suspension payments of GDP warrants and commercial loans
until restructuring is completed. Fitch believes that its
sufficiently strong financial profile means the city will be able
to continue servicing its debt obligations despite the sovereign
default, so its Long-Term Foreign-Currency IDR was insulated from
the sovereign downgrade (see Ukrainian City Ratings Are Not
Directly Affected by Sovereign Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates an SCP of 'b' or below. The 'ccc' SCP results
from the application of the Lower Speculative Grade of Fitch's
International Local and Regional Government (LRG) Rating Criteria.
Fitch qualitatively assesses default risk, and the remaining safety
margin based on overall performance, guided by ratings definitions.
The SCP is a qualitative assessment and does not directly consider
the Risk Profile or the financial metrics in the Financial
Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the city
being unable to service its debt, particularly over the next 12
months.
Risk Profile: 'Vulnerable'
Kryvyi Rih's 'Vulnerable' risk profile results from the assessment
of all six key risk factors at 'Weaker', as detailed below.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items heavily depends on central government decisions and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and
central government progresses with LRG reforms.
In 2024, tax revenue (78% of total) and state transfers (14%) were
the main income sources. Income tax revenues (UAH3.7 billion) fell
by 16% in 2024, as taxes paid from military and police staff
earnings were redirected to the state. This was partly offset by
improved local taxes (single and property tax), due to higher
volumes, rates, and the removal of tax exemptions. Fitch expects a
rebound in income tax revenue in 2025.
Revenue Adjustability: 'Weaker'
Kryvyi Rih has limited ability to generate additional revenue in
response to an economic downturn. Income tax rates and current
transfers are decided by the central government. The city has
limited rate-setting power of some local taxes (38% of total in
2024), but economic conditions make it difficult for households to
afford rate increases.
There is an equalisation scheme for LRGs in Ukraine, but Kryvyi Rih
is a contributor to it. As its per-capita PIT revenue exceeds 110%
of national average the city pays the reverse subsidy (UAH194.2
million planned in 2025). In 2024, the city did not pay the reverse
subsidy, due to the possible suspension provided by the amendments
to the Budget Code introduced under martial law.
Expenditure Sustainability: 'Weaker'
Kryvyi Rih remains exposed to fiscal pressures from inflation
(Fitch forecasts 13.2% in 2025), population shifts (refugees),
frequent minimum wage adjustments, and war damages. Consequently,
the city's opex grew by 8% in 2024, outpacing operating revenue
growth (2%), a trend Fitch expects to continue in 2025. Key
mandatory expenditure like education, housing, social services, and
healthcare accounted for nearly 66% of totex in 2024 and in non-war
conditions would be largely non-cyclical. Capex (15% of total) will
rise in 2025 and 2026 but remains unpredictable due to major
unplanned infrastructure repairs and transfers to municipal
companies (plan for 2025: UAH2.7 billion).
Expenditure Adjustability: 'Weaker'
Kryvyi Rih's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investment difficult. Capital transfers represented 30%
of capex in 2024, as municipal companies rely heavily on the city's
support. The city and its municipal companies face significant
underfunding and high investment needs. Combined with already high
contributions to the municipal companies, this may further strain
the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to the unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-rate loans and unhedged medium- to
long-term foreign-currency debt from IFIs, exposing them to
significant interest rate and currency risks, increased by the
depreciating Ukrainian currency.
Municipal companies' debt has similar features, contributing to
financial instability. Fitch includes in direct debt an
interest-free treasury loan (UAH159.3 million), from the Ministry
of Finance prior to 2014, which will eventually be written off by
the state.
Kryvyi Rih started to draw debt from 2024 with a EUR10 million loan
from the European Bank for Reconstruction and Development (EBRD;
AAA/Stable). The city guarantees UAH270 million of loans at its
government-related entities (GREs). All debt has floating interest
rates and is euro-denominated, resulting in interest rate and FX
risk. In the near term, Fitch expects direct debt and GREs' debt to
increase to finance investments, even though the city postponed the
tram project and terminated the EUR13.7 million loan agreement with
International Finance Corporation (World Bank Group) in 1H25.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Kryvyi Rih's cash
rose to UAH1,345 million at end-2024 (2023: UAH937 million) due to
the EBRD loan drawdown in July. The accumulated cash will be
depleted as investments progress. The average cash held in the
city's accounts increased to UAH1.6 billion in January-June 2025,
from UAH1.3 billion in the same period in 2024. The city has
undrawn committed credit lines of up to UAH500 million, which Fitch
expects to be drawn in 2025.
Financial Profile: 'b category'
Fitch assesses the financial profile in the 'b' category,
considering the war's detrimental impact on the national economy
and infrastructure, which affects the city's short- and medium-term
performance and planning ability. The war has created great
uncertainty, including changes in personal income tax revenue
generation and distribution, high inflation, and increased
infrastructure investment needs. These factors increase the risk of
unfavourable economic developments, which may lead to increased
borrowing and directly affect the city's debt-servicing ability.
Future debt repayments are a risk, and Fitch expects an increase in
direct debt to finance investments.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the financial position. Fitch anticipates the city's
spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Short-Term Ratings
The 'C' Short-Term IDR is the only possible option corresponding to
'CCC' Long-Term IDRs.
National Ratings
The 'AA(ukr)' National Rating is the highest possible rating
corresponding to a 'CCC' Long-Term Local-Currency IDR. The city's
diversified revenue base and existing spending flexibility, proven
by significant spending cuts in 2022, show that, like other
Ukrainian LRGs, it is in a stronger position than national peers
from other asset classes, justifying the highest possible National
Rating for the given mapping.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
'ccc' SCPs. International comparisons are difficult because of the
ongoing war. Nigerian states and the municipality of Cordoba in
Argentina have comparable risk profiles of Vulnerable', with all
Key Risk Factors 'Weaker'. The Nigerian states are highly
state-transfer-driven, whereas Argentina's LRGs operate in a highly
volatile environment characterised by episodic distressed debt
exchanges.
Issuer Profile
Kryvyi Rih is an industrial city in central Ukraine with a
population of about 603,000 in January 2022. The city's economy is
dominated by the iron ore mining and steel making.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even medium-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026. As Fitch bases the SCP derivation
on the qualitative assessment and Lower Speculative Section of its
criteria, the financial metrics become less meaningful for the
rating. The key assumptions include:
- An annual average 5% increase in operating revenue, driven
primarily by tax revenue growth (9%) boosted by regular increases
in the minimum wage and an anticipated national economic rebound
(real GDP growth of 2.5% in 2025 and 3.0% in 2026); this assumption
takes into account that the 4% additional personal income tax
allocation for LRGs regulation will no longer be valid from 2026;
Fitch further expects an 13% decrease in state transfers;
- Annual average 3.9% increase in operating spending; rising
inflation, expectations of salary growth pressuring spending,
higher transfers to municipal companies;
- Annual net capex of UAH1.1 billion on average; considers
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt of 5.3% in 2025-2026, excluding the
interest-free loan from the government, and medium- to long-term
maturities of new debt (minimum five years); no interest costs caps
assumed;
- Municipal companies' debt only based on current knowledge about
the debt financed investment plans; but a rise in debt very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade of the city's ratings.
ESG Considerations
Kryvyi Rih, City of has an ESG Relevance Score of '5' for Political
Stability and Rights due to {DESCRIPTION OF ISSUE/RATIONALE}, which
has a negative impact on the credit profile, and is highly relevant
to the rating, resulting in {an implicitly lower/higher rating or
outlook/watch or cite specific change(s) to the
rating/outlook/watch: stable from positive, stable from negative,
one notch downgrade, etc.}.
Kryvyi Rih, City of has an ESG Relevance Score of '4' for Creditor
Rights due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a
negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Discussion Note
Committee date: 24 September 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Kryvyi Rih, City of LT IDR CCC Affirmed CCC
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr) Affirmed AA(ukr)
CITY OF KYIV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
---------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Kyiv's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'CCC'.
Ratings at this level typically do not carry Outlooks due to their
high volatility.
The affirmation reflects Kyiv's financial resilience, despite its
significant financing needs and liquidity risks. The city still has
little capacity to deal with the adverse economic conditions, as
reflected in its unchanged Standalone Credit Profile (SCP) of
'ccc'. Fitch expects an increase in the city's direct debt and the
city-guaranteed municipal companies' debt from international
financial institutions (IFIs), but the probability of default,
particularly over the next 12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR. as in its view, its financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default', following the government's
default on its Eurobonds in 2024 and as the ongoing suspension of
payments of GDP warrants and commercial loans until completion of
their restructuring. Fitch believes that the city's financial
profile is sufficiently strong to be able to continue servicing its
debt obligations despite the sovereign default, so its Long-Term
Foreign-Currency IDR was insulated from the sovereign downgrade
(see Ukrainian City Ratings Are Not Directly Affected by Sovereign
Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates an SCP of 'b' or below. The 'ccc' SCP results
from the application of the Lower Speculative Grade of Fitch's
International Local and Regional Government (LRG) Rating Criteria.
Fitch qualitatively assesses default risk, and the remaining safety
margin based on overall performance, guided by ratings definitions.
The SCP is a qualitative assessment and does not directly consider
the Risk Profile or the financial metrics in the Financial
Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the
city's being unable to service its debt, particularly over the next
12 months.
Risk Profile: 'Vulnerable'
Kyiv's 'Vulnerable' risk profile results from the assessment of all
six key risk factors at 'Weaker', as detailed below.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on central government decisions and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and
central government progresses with LRG reforms.
In 2024, tax revenue (85% of total) and state transfers (9%) were
the main income sources. As the capital, Kyiv has a different
revenue structure and stronger results, relying more on taxes than
other rated Ukrainian cities. Unlike other cities, income tax
revenues (59% of total) grew by 32.6% to UAH60.2 billion in 2024,
as it has more high-income residents and highly paid jobs, which
were additionally boosted by growing salaries. Total revenue
increased by 27% in 2024, as all other major revenue positions
showed a similar trend. Fitch expects a decline in revenue in 2025,
with stable income taxes and lower transfers from the state and
local taxes.
Revenue Adjustability: 'Weaker'
Kyiv has limited ability to generate additional revenue in response
to an economic downturn. Income tax rates and current transfers are
decided by the central government. Local tax revenues were 26%-28%
of the city's total revenue in 2021-2024. Economic conditions make
it difficult for households to afford higher taxes. There is an
equalisation scheme for LRGs in Ukraine, but Kyiv is excluded from
it, benefiting instead from special income tax distributions and
road maintenance subsidies.
Expenditure Sustainability: 'Weaker'
Kyiv remains exposed to fiscal pressures from inflation (Fitch
forecasts 13.2% in 2025), population shifts (refugees), frequent
minimum wage adjustments, and war damages. The city's key mandatory
responsibilities (education, housing, utilities, social and
healthcare), account for about 52% of totex, and in non-war
conditions would be largely non-cyclical. Fitch expects opex will
grow by almost 20% in 2025 and that capex will be more stable (36%
of total in 2024), slightly below the 2024 level. Capex remains
unpredictable due to major unplanned infrastructure repairs and
capital transfers to municipal companies.
Expenditure Adjustability: 'Weaker'
Kyiv's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investments difficult. Opex and capex are highly
dependent on transfers to the municipal companies with operating
transfers expected at UAH25.3 billion (33% of opex) and capital at
UAH18.9 billion (55% of capex) in 2025. The city and its municipal
companies face significant underfunding and high investment needs,
which may further strain the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks. Municipal
companies also carry risky debt, including FX debt provided by
IFIs, further contributing to financial instability.
In 2024, Kyiv borrowed EUR50 million (UAH2.196 million) from the
European Bank for Reconstruction and Development (AAA/Stable)
maturing in 2029. This brought direct debt to UAH7,284 million at
end-2024, which included a domestic bank loan (UAH600 million) and
domestic bonds (UAH800 million). All debt has floating interest
rates. Fitch includes in direct debt an interest-free treasury loan
(UAH3,688 million) from the Ministry of Finance from prior to 2014,
which will eventually be written off by the state. The risk from
Kyiv's companies is low, with the city only guaranteeing a NEFCO
loan for an energy-saving project (UAH72 million at end-2024).
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Kyiv's cash
position improved to UAH15.9 billion at end-2024, compared with
UAH8.8 billion in 2023, mainly due to high revenue and the new loan
drawn in December, which led to an accumulation of cash. The
accumulated cash will be depleted in line with investment progress.
Average cash held at the city's accounts increased to UAH24 billion
in January-July 2025, compared with UAH19 billion in the same
period in 2024.
Financial Profile: 'b category'
Fitch assesses Kyiv's financial profile in the 'b' category,
despite favourable payback ratios of about 0x in 2021-2024. This
considers the war's detrimental impact on the national economy and
infrastructure, which affects the city's short- and medium-term
performance.
The war has created great uncertainty, including changes in
personal income tax revenue generation and distribution, high
inflation, and increased infrastructure investment needs. This
collectively increases the risk of unfavourable economic
developments, which may lead to increased borrowing and directly
affect the city's debt-servicing ability. Future debt repayments
are a risk, and Fitch expects an increase in direct debt to finance
investments.
Fitch has observed changes in the legal framework, in particular
the easing of restrictions on foreign-currency debt servicing,
leading to an improvement in the financial profile. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Short-Term Ratings
The 'C' Short-Term IDR at is the only possible option corresponding
to the 'CCC' Long-Term IDRs.
National Ratings
The city's 'AA(ukr)'National Rating is the highest possible rating
corresponding to a 'CCC' Long-Term Local-Currency IDR. The city's
diversified revenue base and existing spending flexibility, proven
by significant spending cuts in 2022, show that, like other
Ukrainian LRGs, it is in a stronger position than national peers
from other asset classes, justifying the highest possible National
Rating for the given mapping.
Debt Ratings
The ratings of Kyiv's domestic bonds are aligned with the Long-Term
IDRs. This is because Fitch views the domestic bonds as direct,
unconditional senior unsecured obligations of the city, ranking
pari passu with all its other present and future unsecured and
unsubordinated obligations.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
SCPs assessed at 'ccc'. International comparisons are difficult
because of the ongoing war in Ukraine. Nigerian states and the
municipality of Cordoba in Argentina have comparable risk profiles
('Vulnerable', with all the Key Risk Factors assessed as 'Weaker').
The Nigerian states are highly state-transfer-driven, whereas
Argentina's LRGs operate in a highly volatile environment
characterised by episodic distressed debt exchanges.
Like other cities, Kyiv faces high pressure on spending,
particularly for investments that were put on hold when the war
started, with new demands arising from damage. Kyiv also shares
common challenges with other rated cities, such as caring for
internal refugees, dealing with high inflation, and navigating
disrupted supply chains in a war environment that introduces
substantial uncertainty. Like its peers, Fitch expects Kyiv's
financial profile to be broadly unchanged, despite the expected
increase in the expenditure and debt levels.
Issuer Profile
Kyiv is the capital and largest city in Ukraine with a population
of about 3 million in January 2022. Kyiv's economy is diverse, with
strong sectors in finance, IT, manufacturing, and international
trade.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 2.7% increase in operating revenue, driven
primarily by tax revenue growth (5.6%) boosted by regular increases
in the minimum wage and an anticipated national economic rebound
(real GDP growth of 2.5% in 2025 and 3.0% in 2026); this assumption
takes into account that the 4% additional personal income tax
allocation for LRGs regulation will no longer be valid from 2026;
Fitch further expects a 21.3% decrease in state transfers;
- Annual average 13.2% increase in operating spending; rising
inflation, expectations of salary growth pressuring spending,
higher transfers to municipal companies;
- Annual net capex of UAH32 billion on average; considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt at 5.5% in 2025-2026, excluding the
interest-free loan from the government, and medium- to long-term
maturities of new debt (minimum five years); no interest costs caps
assumed;
- Municipal companies' debt only based on current knowledge about
the debt financed investment plans; but a rise in debt very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade.
ESG Considerations
Kyiv has an ESG Relevance Score of '5' for Political Stability and
Rights due to the severe impact of the war with Russia, which as
compromised the cities political stability and security outlook,
negatively affecting their credit profiles and ratings. The war has
resulted in many casualties and extensive property damage.
Kyiv has an ESG Relevance Score of '4' for Creditor Rights due to
improving but still weakened ability to service and repay debt. The
protracted war has weakened the city's ability to service and repay
debt, however Fitch observes some improvement in the legal
framework easing restrictions to service foreign currency debt.
IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Discussion Note
Committee Date: 24 September 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Kyiv, City of LT IDR CCC Affirmed CCC
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr)Affirmed AA(ukr)
senior unsecured LT CCC Affirmed CCC
CITY OF LVIV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
---------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Lviv's Long-Term
Foreign and Local-Currency Issuer Default Ratings (IDR) at 'CCC'.
Ratings at this level typically do not carry Outlooks due to their
high volatility.
The affirmation reflects Lviv's financial resilience, despite its
significant financing needs and liquidity risks. The city still has
little capacity to deal with the adverse economic conditions, as
reflected in an unchanged Standalone Credit Profile (SCP) of 'ccc'.
Fitch expects an increase in the city's and city-guaranteed
municipal companies' debt from international financial institutions
(IFIs), but the probability of default, particularly over the next
12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR, as in its view, the financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default', following the government's
default on its Eurobonds in 2024 and ongoing suspension of payments
of GDP warrants and commercial loans until completion of their
restructuring. Fitch believes that its sufficiently strong
financial profile means the city will be able to continue servicing
its debt obligations despite the sovereign default, so its
Long-Term Foreign-Currency IDR is insulated from the sovereign
downgrade (see Ukrainian City Ratings Are Not Directly Affected by
Sovereign Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and the 'b'
financial profile indicates an SCP of 'b' or below. The 'ccc' SCP
results from the application of the Lower Speculative Grade of
Fitch's International Local and Regional Government (LRG) Rating
Criteria (Criteria). Fitch qualitatively assesses default risk, and
the remaining safety margin based on overall performance, guided by
ratings definitions. The SCP is a qualitative assessment and does
not directly consider the Risk Profile or the financial metrics in
the Financial Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the
city's inability to service its debt, particularly over the next 12
months.
Risk Profile: 'Vulnerable'
Lviv's 'Vulnerable' risk profile results from the assessment of all
six key risk factors at 'Weaker', as detailed below.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on central government decisions and varies
yearly as the state aims to navigate through the difficult
conditions. Revenue sources' stability could improve once the war
ends, and central government progresses with LRG reforms.
In 2024, tax revenue (81% of total) and state transfers (12%) were
the main income sources. Income tax revenues increased by about 8%,
despite expectations of a slight decline, due to the redirection of
taxes paid by military and police staff to the state. The local
taxes grew by 20% (mainly single and property tax), thanks to
rising employment (return of citizens), higher wages and good and
services volumes, raised rates, and the removal of tax exemptions.
Fitch expects a further increase in income tax revenue in 2025.
Revenue Adjustability: 'Weaker'
Lviv has limited ability to generate additional revenue in response
to an economic downturn. Income tax rates and current transfers are
decided by the central government. The city has limited
rate-setting power of some local taxes (27% of total in 2024), but
economic conditions make it difficult for households to afford rate
increases. There is an equalisation scheme for LRGs in Ukraine, but
Lviv does not benefit from it or contribute to it as its per-capita
personal income tax (PIT) revenue is within the range that means it
does not qualify.
Expenditure Sustainability: 'Weaker'
Lviv remains exposed to fiscal pressures from inflation (Fitch
forecasts 13.2% in 2025), costs of hosting internal refuges,
frequent minimum wage adjustments, and war damages. The city's main
mandatory responsibilities (education, housing, social services and
healthcare), account for about 67% of totex, and are largely
non-cyclical. Capex (24% of total in 2024) is expected to rise but
remains unpredictable due to major unplanned significant
infrastructure repairs and transfers to municipal companies. Fitch
expects the city to continue high capital transfers to its
municipal companies to support their infrastructure projects.
Expenditure Adjustability: 'Weaker'
Lviv's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investments difficult. Capex represented 24% of totex in
2024, with about 70% of capex comprising capital transfers,
primarily transfers to municipal entities, and to a lesser extent,
payments into state budget funds aimed at regional development and
subsidies to households. The city and its municipal companies face
significant underfunding and high investment needs. Combined with
already high contributions to the municipal companies, this may
further strain the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks, further increased
by the depreciating Ukrainian currency. Municipal companies' debt
carries similar features contributing to financial instability.
At end-2024, long-term debt was about UAH1.3 billion and consisted
mainly of a domestic bond (UAH600 million) and EUR10 million loan
from European Bank for Reconstruction and Development. Fitch
includes in direct debt an interest-free treasury loan (UAH240
million), from the Ministry of Finance prior to 2014, which will
eventually be written off by the state.
Lviv is exposed to moderate foreign-exchange risk, with nearly 34%
of its total debt in euros and unhedged. Its debt has a fairly
short weighted average life of about two years. This is mitigated
by its average debt service coverage ratio, which will remain above
4.0x over Fitch's rating case. Other Fitch-classified debt totalled
about UAH4.3 billion and consists mainly of loans from municipal
companies in water, waste management and transportation. In its
view, it could become the city's direct obligation under
unfavourable economic conditions. Fitch expects municipal companies
to acquire new city-guaranteed debt financing in the near term.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Lviv's cash
position improved to UAH1,274 million at end-2024 (2023: UAH850
million) outperforming its expectation due to better-than-expected
tax revenue. Fitch expects cash to be depleted in line with
investment progress.
Financial Profile: 'b category'
Fitch assesses Lviv's financial profile in the 'b' category,
considering the war's detrimental impact on the national economy
and infrastructure, which affects the city's short- and medium-term
performance. The war has created great uncertainty, including
changes in PIT revenue generation and distribution, high inflation,
and increased infrastructure investment needs. These factors
collectively increase the risk of unfavourable economic
developments, which may lead to increased borrowing and directly
affect the city's debt-servicing ability. Future debt repayments
are a risk, and Fitch expects an increase in direct debt to finance
investments.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position. Fitch anticipates the
city's spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
National Ratings
Lviv's 'AA(ukr)' National Rating is the highest possible rating
corresponding to the 'CCC' LTLC IDR. The city's diversified revenue
base and existing spending flexibility, proven by significant
spending cuts in 2022, show that like other Ukrainian LRGs, it is
in a stronger position than national peers from other asset
classes, justifying the highest possible National Rating for the
given mapping.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
'ccc' SCPs. International comparisons are difficult because of the
ongoing war in Ukraine. Nigerian states and the municipality of
Cordoba in Argentina have comparable risk profiles ('Vulnerable',
with all the Key Risk Factors assessed as 'Weaker'). The Nigerian
states are highly state-transfer-driven, whereas Argentina's LRGs
operate in a highly volatile environment characterised by episodic
distressed debt exchanges.
Issuer Profile
Lviv is a cultural and historical city in western Ukraine with a
population of about 717,000 in January 2022. Lviv's economy is
driven by a growing IT sector, tourism, light manufacturing, and
trade, maximising its proximity to the EU border.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 5.8% increase in operating revenue, driven by
tax revenue growth (10.9%) boosted by regular increases in the
minimum wage and an anticipated national economic rebound (real GDP
growth of 2.5% in 2025 and 3.0% in 2026); this assumption takes
into account that the 4% additional PIT-allocation for LRGs
regulation will no longer be valid from 2026; Fitch expects a
-19.6% decrease in state transfers following a high increase in
2024 driven by the additional subsidies from the state budget;
- Annual average 7.7% increase in operating spending; rising
inflation, expectations of salary growth pressuring spending,
higher transfers to the municipal companies;
- Annual net capex of about UAH4.0 billion on average; considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt of 12.7% in 2025-2026 and medium- to
long-term maturities of new debt (minimum three years)
- Municipal companies' debt only based on current knowledge about
the debt financed investment plans; but a rise in debt is very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade of the city's ratings.
ESG Considerations
Lviv has an ESG Relevance Score of '5' for Political Stability and
Rights due to the severe impact of the war with Russia, which as
compromised the cities political stability and security outlook,
negatively affecting their credit profiles and ratings. The war has
resulted in many casualties and extensive property damage.
Lviv has an ESG Relevance Score of '4' for Creditor Rights due to
improving but still weakened ability to service and repay debt. The
protracted war has weakened the city's ability to service and repay
debt, however Fitch observes some improvement in the legal
framework easing restrictions to service foreign currency debt.
IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as the city's
direct obligation under unfavourable economic conditions.
Discussion Note
Committee date: 24 September 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Lviv, City of LT IDR CCC Affirmed CCC
LC LT IDR CCC Affirmed CCC
Natl LT AA(ukr)Affirmed AA(ukr)
CITY OF MYKOLAIV: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
-------------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Mykolaiv's
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR)
at 'CCC'. Ratings at this level typically do not carry Outlooks due
to their high volatility.
The affirmation reflects Mykolaiv's financial resilience, despite
its significant financing needs and liquidity risks. The city still
has little capacity to deal with the adverse economic conditions,
as reflected in an unchanged Standalone Credit Profile (SCP) of
'ccc'. Fitch expects an increase in the city's direct debt and the
city-guaranteed municipal companies' debt from international
financial institutions (IFIs), but the probability of default,
particularly over the next 12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR, as in its view, the financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default', following the government's
default on its Eurobonds in 2024 and ongoing suspension of payments
of GDP warrants and commercial loans until completion of their
restructuring. Fitch believes that its sufficiently strong
financial profile means the city will be able to continue servicing
its debt obligations despite the sovereign default, so its
Long-Term Foreign-Currency IDR was insulated from the sovereign
downgrade (see Ukrainian City Ratings Are Not Directly Affected by
Sovereign Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates an SCP of 'b' or below. The 'ccc' SCP results
from the application of the Lower Speculative Grade of Fitch's
International Local and Regional Government (LRG) Rating Criteria.
Fitch qualitatively assesses default risk, and the remaining safety
margin based on overall performance, guided by ratings definitions.
The SCP is a qualitative assessment and does not directly consider
the Risk Profile or the financial metrics in the Financial
Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the city
being unable to service its debt, particularly over the next 12
months.
Risk Profile: 'Vulnerable'
Mykolaiv's 'Vulnerable' risk profile results from the assessment of
all six key risk factors at 'Weaker', as detailed below.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on the central government decision and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and the
central government progresses with LRG reforms.
In 2024, tax revenue (64% of total) and state transfers (27%) were
the main income sources. Income tax revenues, the largest revenue
source (39%), fell significantly by 37% to UAH2.3 billion in 2024,
as the taxes paid from military and police staff earnings were
redirected to the state. This was not fully offset by the 37%
increase in local tax revenue (mainly single and property tax) and
87% higher transfers (primarily a subsidy from the state for
territories affected by the hostiles). Fitch expects a further
revenue decline by 3.1% in 2025, with lower transfers, but growing
tax revenue.
Revenue Adjustability: 'Weaker'
Mykolaiv has limited ability to generate additional revenue in
response to an economic downturn. Income tax rates and current
transfers are decided by the central government. The city has
limited rate-setting power of some local taxes (19% of total in
2024), but economic conditions make it difficult for households to
afford rate increases. There is an equalisation scheme for LRGs in
Ukraine, but Mykolaiv was a contributor to it until 2022. In
2023-2024, the city did not pay the reverse subsidy as its
per-capita personal income tax revenue fell below 110% of the
national average. Payment is also not planned in 2025.
Expenditure Sustainability: 'Weaker'
Mykolaiv remains exposed to fiscal pressures from inflation (Fitch
forecasts 13.2% in 2025), population shifts (refugees), frequent
minimum wage adjustments, and war damages. Despite these factors,
the city's opex grew by only 2.5% in 2024. Fitch expects it to
decline by 3.6% in 2025. Key mandatory responsibilities, as
education, housing, utilities, social services and healthcare,
account for about 56% of totex, and in non-war conditions would be
largely non-cyclical.
Fitch expects capex (27% of total in 2024) to rise by 8% in 2025,
but it remains unpredictable due to major unplanned infrastructure
repairs and transfers to municipal companies., although Fitch
expects the latter to fall by 27% due to a lower required
contribution.
Expenditure Adjustability: 'Weaker'
Mykolaiv's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investment difficult. Capital transfers, mostly to
municipal companies, represented 74% of capex in 2024, as these
entities rely heavily on the city's support. The city and its
municipal companies face significant underfunding and high
investment needs. Combined with high, although falling,
contributions to the municipal companies, this may further strain
the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks, further increased
by the depreciating Ukrainian currency.
Municipal companies' debts carry similar features contributing to
financial instability. Fitch includes in direct debt an
interest-free treasury loan (UAH81.7 million), from the Ministry of
Finance prior to 2014, which will eventually be written off by the
state.
Mykolaiv drew almost EUR1.6 million (UAH69 million) debt in 2024
from the European Investment Bank (AAA/Stable) through the Ministry
of Finance. The city guarantees loans at its government-related
entities (GREs) related to the improvement of public transport and
development of the water supply and sanitation system, which
increased to UAH1,250 million at end-2024 from just over UAH500
million at end-2023. Most debt has floating interest rates and is
euro denominated, resulting in interest rate and FX risks. In the
near term Fitch expects direct debt and GREs' debt to increase to
finance investment, primarily dedicated to the emergency water
supply project.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Mykolaiv's cash
position worsened to below UAH900 million at end-2024 (2023:
UAH1,271 million). Average cash held at the city's accounts
increased to over UAH1,200 million in January-June 2025, but Fitch
expects it may be depleted in line with investment progress.
Financial Profile: 'b category'
Fitch assesses Mykolaiv's financial profile in the 'b' category,
considering the war's detrimental impact on the national economy
and infrastructure, which affects the city's short- and medium-term
performance and planning ability. The war has created great
uncertainty, including changes in personal income tax revenue
generation and distribution, high inflation, and increased
infrastructure investment needs. These factors collectively
increase the risk of unfavourable economic developments, which may
lead to increased borrowing and affect the city's debt-servicing
ability. Future debt repayments are a risk, and Fitch expects an
increase in direct debt to finance investments.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position. Fitch anticipates the
city's spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
'ccc' SCPs. International comparisons are difficult because of the
ongoing war in Ukraine. Nigerian states and the municipality of
Cordoba in Argentina have comparable risk profiles ('Vulnerable',
with all Key Risk Factors assessed as 'Weaker'). The Nigerian
states are highly state-transfer-driven, whereas Argentina's LRGs
operate in a highly volatile environment characterised by episodic
distressed debt exchanges.
Like other cities, Mykolaiv faces high pressure on spending,
particularly for investments that were put on hold when the war
started, with new demands arising from damage. Mykolaiv also shares
common challenges with other rated cities, such as caring for
internal refugees, dealing with high inflation, and navigating
disrupted supply chains in a war environment that introduces
substantial uncertainty. LIke its peers, Fitch expects Mykolaiv's
financial profile to be broadly unchanged, despite the expected
increase in expenditure and debt.
Issuer Profile
Mykolaiv, the capital of the Mykolaiv region, had a population of
about 470,000 in January 2022. The city's economy evolves around
shipbuilding, ports, and maritime industries, as well as machinery
and food processing.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 4.6% increase in operating revenue, driven
primarily by tax revenue growth (13.4%) boosted by regular
increases in the minimum wage and an anticipated national economic
rebound (real GDP growth of 2.5% in 2025 and 3.0% in 2026); this
assumption takes into account that the 4% additional personal
income tax allocation for LRGs regulation will no longer be valid
from 2026; Fitch further expects an 11.9% decrease in state
transfers;
- Annual average 1.6% increase in opex; rising inflation,
expectations of salary growth pressuring spending, higher transfers
to the municipal companies;
- Annual net capex of almost UAH1.7 billion on average, considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt below 5% in 2025-2026, excluding the
interest-free loan from the government, and medium- to long-term
maturities of new debt (minimum five years); no interest costs caps
assumed;
- Municipal companies' debt only based on current knowledge about
the debt-financed investment plans; but a rise in debt is very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade of the city's ratings.
ESG Considerations
Mykolaiv, City of has an ESG Relevance Score of '5' for Political
Stability and Rights due to the severe impact of the war with
Russia, which has compromised the cities political stability and
security outlook, negatively affecting their credit profiles and
ratings. The war has resulted in many casualties and extensive
property damage.
Mykolaiv, City of has an ESG Relevance Score of '4' for Creditor
Rights due to improving, but still weakened ability to service and
repay debt. The protracted war has weakened the city's ability to
service and repay debt, however Fitch observes some improvement in
the legal framework easing restrictions to service foreign currency
debt. IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Discussion Note
Discussion Date: 24 September 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Mykolaiv, City of LT IDR CCC Affirmed CCC
LC LT IDR CCC Affirmed CCC
CITY OF ODESA: Fitch Affirms 'CCC' Foreign & Local Currency IDRs
----------------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Odesa 's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'CCC'.
Ratings at this level typically do not carry Outlooks due to their
high volatility.
The affirmation reflects Odesa's financial resilience, despite its
significant financing needs and liquidity risks. The city still has
little capacity to deal with the adverse economic conditions, as
reflected in an unchanged Standalone Credit Profile (SCP) of 'ccc'.
Fitch expects an increase in the city's and city-guaranteed
municipal companies' debt from international financial institutions
(IFIs), but the probability of default, particularly over the next
12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR, as in its view, its financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default' following the government's
default on its Eurobonds in 2024 and ongoing suspension of payments
of GDP warrants and commercial loans until completion of their
restructuring. Fitch believes that its sufficiently strong
financial profile means the city will be able to continue servicing
its debt obligations despite the sovereign default, so its
Long-Term Foreign-Currency IDR is insulated from the sovereign
downgrade (see Ukrainian City Ratings Are Not Directly Affected by
Sovereign Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates an SCP of 'b' or below. The 'ccc' SCP results
from the application of the Lower Speculative Grade of Fitch's
International Local and Regional Government (LRG) Rating Criteria
(Criteria). Fitch qualitatively assesses default risk, and the
remaining safety margin based on overall performance, guided by
ratings definitions. SCP is a qualitative assessment and does not
directly consider the Risk Profile or the financial metrics in the
Financial Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the
city's being unable to service its debt, particularly over the next
12 months.
Risk Profile: 'Vulnerable'
Odesa's 'Vulnerable' risk profile results from the assessment of
all six key risk factors at 'Weaker', as detailed below.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on central government decisions and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and
central government progresses with LRG reforms.
In 2024, tax revenue (73% of total) and state transfers (17%) were
the main income sources. Income tax revenues remained stable at
UAH6.5 billion, despite expectations of a slight decline, due to
the redirection of taxes paid by military and police staff to the
state. Local taxes grew by 18% (mainly single and property tax),
thanks to rising employment (return of citizens), higher wages and
good and services volumes, raised rates, and the removal of tax
exemptions. Fitch expects a slight increase in income tax revenue
in 2025.
Revenue Adjustability: 'Weaker'
Odesa has limited ability to generate additional revenue in
response to an economic downturn. Income tax rates and current
transfers are decided by the central government. The city has
limited rate-setting power of some local taxes (24% of total in
2024), but economic conditions make it difficult for households to
afford rate increases. There is an equalisation scheme for LRGs in
Ukraine, but Odesa is a contributor to it as its per-capita
personal income tax (PIT) revenue is above 110% of the national
average, qualifying for payment of the reverse subsidy. The city
did not pay the reverse subsidy in 2024, but it is included in the
budget for 2025-2026.
Expenditure Sustainability: 'Weaker'
Odesa remains exposed to fiscal pressures from inflation (Fitch
forecasts 13.2% in 2025), costs of hosting internal refuges,
frequent minimum wage adjustments, and war damages. The city's main
mandatory responsibilities (education, housing, social services and
healthcare), account for about 65% of totex, and are largely
non-cyclical. Fitch expects capex (28% of total in 2024) but it
remains unpredictable due to major unplanned significant
infrastructure repairs and transfers to municipal companies.
Expenditure Adjustability: 'Weaker'
Odesa's ability to reduce spending is limited due to mandatory
responsibilities and a volatile expenditure framework affected by
war and inflation. Operating on a 'pay-as-you-go' basis makes
long-term investments difficult. Capex represented 28% of totex in
2024, with about 53% of capex comprising capital transfers, mainly
payments into state budget funds aimed at regional development,
followed by transfers to municipal entities and subsidies to
households. The city and its municipal companies face significant
underfunding and high investment needs. Combined with already high
contributions to the municipal companies, this may further strain
the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks, further increased
by the depreciating Ukrainian currency.
Municipal companies' debt carries similar features contributing to
financial instability. Fitch includes in direct debt an
interest-free treasury loan (UAH205 million), from the Ministry of
Finance prior to 2014, which will eventually be written off by the
state.
Odesa repaid its bank loans ahead of schedule in 2023 but Fitch
expects it to raise new debt during 2025-2026. Risk from its
companies is moderate. The city guarantees four loans of its
municipal companies (Odesmiskelektrotrans and Odessa Development
Programs Agency (APRO)), totalling about UAH1 billion at end-2024.
Fitch treats this as 'other Fitch-classified debt', because Fitch
believes it could become the city's direct obligation under
unfavourable economic conditions. The debt of both companies is
floating-rate and is in euros or US dollars, adding interest-rate
and exchange-rate risk. Fitch expects the municipal companies to
acquire new city-guaranteed debt financing in the near term,
increasing other Fitch-classified debt to UAH1.7 billion by 2026.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Odesa's cash
position remained largely stable at UAH1,568 million at end-2024
(2023: UAH1,629 million). Fitch expects cash to be depleted in line
with investment progress.
Financial Profile: 'b category'
Fitch assesses Odesa's financial profile in the 'b' category,
considering the war's detrimental impact on the national economy
and infrastructure, which affects the city's short- and medium-term
performance. The war has created great uncertainty, including
changes in PIT revenue generation and distribution, high inflation,
and increased infrastructure investment needs. These factors
collectively increase the risk of unfavourable economic
developments, which may lead to increased borrowing and directly
affect the city's debt-servicing ability. Future debt repayments
are a risk, and Fitch expects an increase in direct debt to finance
investments.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position. Fitch anticipates the
city's spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Peer Analysis
The city's national peers all have 'Vulnerable' risk profiles and
'ccc' SCPs. International comparisons are difficult because of the
ongoing war in Ukraine. Nigerian states and the municipality of
Cordoba in Argentina have comparable risk profiles ('Vulnerable',
with all Key Risk Factors assessed as 'Weaker'). The Nigerian
states are highly state-transfer-driven, whereas Argentina's LRGs
operate in a highly volatile environment characterised by episodic
distressed debt exchanges.
Issuer Profile
Odesa city, the capital of the Odesa region, had a population of
over one million in January 2022. The city is a major port in
southern Ukraine.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 2.1% increase in operating revenue, driven by
tax revenue growth (7.6%) boosted by regular increases in the
minimum wage and an anticipated national economic rebound (real GDP
growth of 2.5% in 2025 and 3.0% in 2026); this assumption takes
into account that the 4% additional PIT-allocation for LRGs
regulation will no longer be valid from 2026; Fitch expects a
-18.1% decrease in state transfers following a high increase in
2024 driven by the additional subsidies from the state budget;
- Annual average 8.6% increase in operating spending; rising
inflation, expectations of salary growth pressuring spending,
higher transfers to the municipal companies;
- Annual net capex of UAH3.3 billion on average; considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt of 10.6% in 2025-2026 and medium-to
long-term maturities of new debt;
- Municipal companies' debt only based on current knowledge about
the debt financed investment plans; but a rise in debt is very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade of the city's ratings.
ESG Considerations
Odesa has an ESG Relevance Score of '5' for Political Stability and
Rights due to the severe impact of the war with Russia, which as
compromised the cities political stability and security outlook,
negatively affecting their credit profiles and ratings. The war has
resulted in many casualties and extensive property damage.
Odesa has an ESG Relevance Score of '4' for Creditor Rights due to
improving but still weakened ability to service and repay debt. The
protracted war has weakened the city's ability to service and repay
debt, however Fitch observes some improvement in the legal
framework easing restrictions to service foreign currency debt.
IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Discussion Note
Committee date: 24 September 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Odesa, City of LT IDR CCC Affirmed CCC
LC LT IDR CCC Affirmed CCC
CITY OF ZAPORIZHZHIA: Fitch Affirms 'CCC' Currency IDRs
-------------------------------------------------------
Fitch Ratings has affirmed the Ukrainian City of Zaporizhzhia's
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR)
at 'CCC'. Ratings at this level typically do not carry Outlooks due
to their high volatility.
The affirmation reflects Zaporizhzhia's financial resilience,
despite its significant financing needs and liquidity risks. The
city still has little capacity to deal with the adverse economic
conditions, reflected in an unchanged Standalone Credit Profile
(SCP) of 'ccc'. Fitch expects an increase in the city's and
city-guaranteed municipal companies' debt from international
financial institutions (IFIs), but the probability of default,
particularly over the next 12 months, remains low.
The city's Long-Term Foreign-Currency IDR remains above Ukraine's
IDR as, in its view, its financial profile is sufficiently strong
to withstand a sovereign default. The sovereign rating cap on the
Long-Term Foreign-Currency IDR is not applicable due to Ukraine
remaining in 'Restricted Default', following the default on its
Eurobonds in 2024 and ongoing suspension of payments of GDP
warrants and commercial loans until completion of their
restructuring. Fitch believes that its sufficiently strong
financial profile means the city will be able to continue servicing
its debt obligations despite the sovereign default, so its LTFC IDR
was insulated from the sovereign downgrade (see Ukrainian City
Ratings Are Not Directly Affected by Sovereign Default).
KEY RATING DRIVERS
The combination of a 'Vulnerable' risk profile and 'b' financial
profile indicates a SCP assessment of 'b' or below. The 'ccc' SCP
results from the application of the Lower Speculative Grade of
Fitch's International Local and Regional Government (LRG) Rating
Criteria. Fitch qualitatively assesses default risk, and the
remaining safety margin based on overall performance, guided by
ratings definitions. The SCP is a qualitative assessment and does
not directly take into consideration the Risk Profile or the
financial metrics in the Financial Profile.
The 'ccc' SCP indicates that default is still a real possibility
and reflects significant refinancing needs and liquidity risk, even
if an immediate or unavoidable default is not expected or the city
has no current debt, and the city's limited ability to adverse
economic conditions. However, Fitch does not see a risk of the
city's being unable to service its debt, particularly over the next
12 months.
Risk Profile: 'Vulnerable'
Zaporizhzhia's 'Vulnerable' risk profile results from the
assessment of all six key risk factors at 'Weaker',.
Revenue Robustness: 'Weaker'
Revenues remain unstable amid a weak operating environment in
Ukraine and maintained martial law. The level of major revenue
items depends heavily on central government decisions and varies
yearly as the state aims to navigate the difficult conditions.
Revenue sources' stability could improve once the war ends, and the
central government progresses with LRG reforms.
In 2024, tax revenue (74% of total) and state transfers (19%) were
the main income sources. Income tax revenues (UAH5 billion) fell
slightly by 2% in 2024, as taxes paid from military and police
staff earnings were redirected to the state. The decrease was fully
offset by the 32% increase in local tax revenue (mainly single and
property tax), thanks to rising employment (return of citizens),
higher wages and goods and services volumes, raised rates, and the
removal of tax exemptions. Fitch expects a rebound in income tax
revenue in 2025.
Revenue Adjustability: 'Weaker'
Zaporizhzhia has limited ability to generate additional revenue in
response to an economic downturn. Income tax rates and current
transfers are decided by the central government. The city has
limited rate-setting power of some local taxes (38% of total in
2024), but economic conditions make it difficult for households to
afford rate increases.
There is an equalisation scheme for LRGs in Ukraine, but
Zaporizhzhia is a contributor to it as its per-capita personal
income tax revenue is above 110% of the national average,
qualifying the city for payment of the reverse subsidy. In 2024,
the city did not pay the reverse subsidy due to the possible
suspension provided by the amendments to the Budget Code introduced
under martial law.
Expenditure Sustainability: 'Weaker'
Zaporizhzhia remains exposed to fiscal pressures from inflation
(Fitch forecasts 13.2% in 2025), population shifts (refugees and
return of citizens), frequent minimum wage adjustments, and war
damages. Key mandatory expenditures as education, housing, social
services, and healthcare accounted for 66% of total spending in
2024 and in non-war conditions would be largely non-cyclical. Capex
(12% of total in 2024) is set to rise in 2025 and 2026 but remains
unpredictable due to major unplanned infrastructure repairs and
transfers to municipal companies (plan for 2025: UAH2.57 billion).
Expenditure Adjustability: 'Weaker'
Zaporizhzhia's ability to reduce spending is limited due to
mandatory responsibilities and a volatile expenditure framework
affected by war and inflation. Operating on a 'pay-as-you-go' basis
makes long-term investments difficult. Capital transfers
represented 30% of capex in 2024, as municipal companies rely
heavily on the city's support. The city and its municipal companies
face significant underfunding and high investment needs. Combined
with already high contributions to the municipal companies, this
may further strain the city's spending.
Liabilities and Liquidity Robustness: 'Weaker'
Ukrainian cities operate in a difficult debt and liquidity
management framework due to an unpredictable domestic capital
market and a banking sector with sub-investment-grade
counterparties. Access to international markets is limited,
undermined by recent sovereign defaults. Cities need to rely on
short- to medium-term floating-interest-rate loans and unhedged
medium- to long-term foreign-currency debt from IFIs, exposing them
to significant interest rate and currency risks, increased by the
depreciating Ukrainian currency.
Municipal companies' debt has similar features contributing to
financial instability. Fitch includes in direct debt an
interest-free treasury loan (UAH278.1 million) from the Ministry of
Finance prior to 2014, which will eventually be written off by the
state.
In 2024, Zaporizhzhia did not draw new debt, which was UAH807.5
million at year-end. Medium-term loans from domestic banks made up
95% of the debt portfolio. Those loans are in local currency but
bear interest rate risk as they have floating rates. The remainder
was a EUR1 million long-term loan granted by the European
Investment Bank (via the Ukrainian Ministry of Finance). The loan
has a fixed interest rate but carries foreign-currency risk.
The city guaranteed a loan for its international airport company of
USD10.1 million, which should be repaid by 2027. It also guarantees
a EUR10.8 million loan for the municipal transportation company,
with drawdown planned from 2025. In the near term Fitch expects
direct debt and municipal companies' debt to increase to finance
investment.
Liabilities and Liquidity Flexibility: 'Weaker'
High counterparty risk and the limited effectiveness of emergency
state liquidity, given the sovereign's sub-investment-grade
ratings, drive this assessment. Liquidity challenges are worsened
by reliance on domestic banks rated below 'BBB-'. Zaporizhzhia's
cash rose to UAH565 million at end-2024 (2023: UAH356 million) as a
result of better-than-expected revenue. This will be depleted by
investment progress. Average cash at the city's accounts increased
to UAH966 million in January-June 2025, compared with UAH517
million in the same period in 2024. The city has UAH500 million
undrawn committed credit lines, which Fitch expects to be drawn in
2025-2026.
Financial Profile: 'b category'
Fitch assesses Zaporizhzhia's financial profile in the 'b'
category, considering the war's detrimental impact on the national
economy and infrastructure, which affects the city's short- and
medium-term performance. The war has created great uncertainty,
including changes in personal income tax revenue generation and
distribution, high inflation, and increased infrastructure
investment needs. These factors collectively increase the risk of
unfavourable economic developments, which may lead to increased
borrowing and directly affect the city's debt-servicing ability.
Future debt repayments are a risk, and Fitch expects an increase in
direct debt to finance investment.
Fitch has observed changes in the legal framework, particularly the
easing of restrictions on foreign-currency debt servicing. The
availability of liquidity lines and loans from IFIs further
supports the city's financial position. Fitch anticipates the
city's spending and debt will rise due to the impact of the war and
related urgencies.
ESG - Political Stability and Rights: Russia's invasion and
subsequent ongoing full-scale war has severely compromised the
city's political stability and the security outlook. The war has
caused many deaths and extensive property damage, with the aim of
changing the city's government or occupying its territory.
Short-Term Ratings
The 'C' Short-Term IDR is the only possible option corresponding to
the 'CCC' Long-Term IDRs.
Peer Analysis
The city's national peers have 'Vulnerable' risk profiles and 'ccc'
SCPs. International comparisons are difficult because of the
ongoing war in Ukraine. Nigerian states and the municipality of
Cordoba in Argentina have comparable risk profiles ('Vulnerable',
with all the Key Risk Factors assessed as 'Weaker'). The Nigerian
states are highly state-transfer-driven, whereas Argentina's LRGs
operate in a highly volatile environment characterised by episodic
distressed debt exchanges.
Issuer Profile
Zaporizhzhia is an industrial city in south-eastern Ukraine with a
population of about 625,000 as of mid-2025, down from 710,000 in
January 2022. The city is known for its heavy industry, including
metallurgy, machinery, and chemical production.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'b'
Asymmetric Risk: 'N/A'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Rating Cap (LT IDR): 'N/A'
Rating Cap (LT LC IDR) 'N/A'
Rating Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case typically follows a through-the-cycle scenario,
incorporating a combination of revenue, cost, and financial risk
stresses. Under normal circumstances, this would be based on
figures from 2020-2024 and projected ratios for 2025-2029. However,
the war has severely disrupted Ukraine's economy and the financial
capacity of its LRGs, impairing even the mid-term planning ability.
This disruption has significantly constrained its ability to
develop a reliable rating scenario due to high uncertainty and
volatility.
Consequently, Fitch is limited to projecting key assumptions for
the scenario only for 2025-2026 and as Fitch bases the SCP
derivation on the qualitative assessment and Lower Speculative
Section of the Criteria, the financial metrics become less
meaningful for the rating. The key assumptions include:
- An annual average 9.2% increase in operating revenue, driven
primarily by tax revenue growth (11.1%) boosted by regular
increases in the minimum wage and an anticipated national economic
rebound (real GDP growth of 2.5% in 2025 and 3.0% in 2026); this
assumption takes into account that the 4% additional personal
income tax allocation for LRGs regulation will no longer be valid
from 2026; Fitch further expects an 2.5% increase in state
transfers;
- Annual average 7.0% increase in opex; rising inflation,
expectations of salary growth pressuring spending, higher transfers
to the municipal companies;
- Annual net capex of UAH1.7 billion on average; considering
uncertainty about the timing and amount of available capital grants
as well as debt financing;
- Average cost of debt of 9.3% in 2025-2026, excluding the
interest-free loan from the government, and medium- to long-term
maturities of new debt (minimum five years); no interest costs caps
assumed;
- Municipal companies' debt only based on current knowledge about
debt-financed investment plans; but a rise in debt is very
probable.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Increased risk of default due to weakened liquidity that could
pressure the city's ability to service debt.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Overall financial stabilisation, along with a reduced risk of
liquidity stress and greater confidence in the domestic capital
market, leading to enhanced financial stability and increased
liquidity, could result in an upgrade in the city's ratings.
ESG Considerations
Zaporizhzhia has an ESG Relevance Score of '5' for Political
Stability and Rights due to the severe impact of the war with
Russia, which as compromised the cities political stability and
security outlook, negatively affecting their credit profiles and
ratings. The war has resulted in many casualties and extensive
property damage.
Zaporizhzhia has an ESG Relevance Score of '4' for Creditor Rights
due to improving, but still weakened ability to service and repay
debt. The protracted war has weakened the city's ability to service
and repay debt, however Fitch observes some improvement in the
legal framework easing restrictions to service foreign currency
debt. IFIs' financing start to resume, also in form of emergency
liquidity lines, which will provide the city with some headroom for
cost coverage and debt servicing. This has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Summary of Financial Adjustments
Fitch-adjusted debt includes the guaranteed debt of municipal
companies as, in Fitch's view, it could crystallise as cities'
direct obligations under unfavourable economic conditions.
Discussion Note
Committee date: 24 September 2025
There was an appropriate quorum at the committee and the members
confirmed that they were free from recusal. It was agreed that the
data was sufficiently robust relative to its materiality. During
the committee no material issues were raised that were not in the
original committee package. The main rating factors under the
relevant criteria were discussed by the committee members. The
rating decision as discussed in this rating action commentary
reflects the committee discussion.
Entity/Debt Rating Prior
----------- ------ -----
Zaporizhzhia, City of LT IDR CCC Affirmed CCC
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
===========================
U N I T E D K I N G D O M
===========================
CHATSWORTH HOMES: Moorfields Named as Administrators
----------------------------------------------------
Chatsworth Homes (BA) Limited was placed into administration
proceedings in the High Court of Justice, Business and Property
Courts of England and Wales Insolvency and Companies List (ChD), No
006496 of 2025, and Arron Kendall and Michael Solomons of
Moorfields were appointed as administrators on Sept. 18, 2025.
Chatsworth Homes (BA) engaged in bookkeeping activities.
Its registered office and principal trading address is at Tennyson
House, Cambridge Business Park, Cambridge, CB4 0WZ
The joint administrators can be reached at:
Arron Kendall
Michael Solomons
Moorfields
82 St John Street
London, EC1M 4JN
Tel No: 020 7186 1144
For further details, contact:
Ralph Williams
Moorfields
Tel No: 020 7186 1163
Email: ralph.williams@moorfieldscr.com
82 St John Street
London EC1M 4JN
DART CUBICLES: Begbies Traynor Named as Administrators
------------------------------------------------------
Dart Cubicles LLP was placed into administration proceedings in the
High Court of Justice Business and Property Courts in Manchester,
Insolvency & Companies List (ChD), Court Number:
CR-2025-MAN-001309, and Bob Maxwell and Richard Kenworthy of
Begbies Traynor (Central) LLP were appointed as administrators on
Sept. 17, 2025.
Dart Cubicles LLP specialized in the supply of portable washrooms.
Its registered office is at Unit 33 Caldervale Business Park,
Huddersfield Road, Dewsbury, West Yorkshire, WF13 3JL.
The joint administrators can be reached at:
Bob Maxwell
Richard Kenworthy
Begbies Traynor (Central) LLP
Floor 2, 10 Wellington Place
Leeds, LS1 4AP
For further details, contact:
Benjamin Silverwood
Begbies Traynor (Central) LLP
E-mail: benjamin.silverwood@btguk.com
Telephone on 0113 285 8610
DERBY LABOUR: CG & Co Named as Administrators
---------------------------------------------
Derby Labour Club Ltd was placed into administration proceedings in
the Business and Property Courts in Manchester, Insolvency and
Companies List, Court Number: 2025-MAN-001314, and Edward M
Avery-Gee and Nick Brierley of CG&Co were appointed as
administrators on Sept. 17, 2025.
Derby Labour engaged in the development of building projects.
Its registered office is c/o CG & Co, 27 Byrom Street, Manchester,
M3 4PF
Its principal trading address is Office 1, 4 Roding Lane South,
Ilford, IG4 5NX
The joint administrators can be reached at:
Edward M Avery-Gee
Daniel Richardson
CG & Co
27 Byrom Street
Manchester, M3 4PF
For further details, contact:
Lucy Duckworth
Tel No: 0161 505 1250
Email: Lucy.Duckworth@cg-recovery.com
FERROGLOBE PLC: Moody's Alters Outlook on 'B2' CFR to Negative
--------------------------------------------------------------
Moody's Ratings has affirmed Ferroglobe PLC's (Ferroglobe)
corporate family rating at B2, its probability of default rating at
B2-PD, and changed the outlook to negative from stable.
RATINGS RATIONALE
The rating action reflects ongoing financial pressures and market
uncertainties experienced by Ferroglobe in the first half of 2025.
The company's EBITDA turned negative in the first quarter of 2025,
and despite slight improvements in the second quarter, the
financial outlook remains constrained by pricing pressures due to
imports of cheaper competing products into the EU market.
Consequently, Ferroglobe has withdrawn its performance guidance for
2025, citing heightened uncertainty and limited visibility into
future market conditions.
The company's credit metrics have sharply weakened, with
debt/EBITDA standing at 5.8x for the last twelve months (LTM)
ending June 2025 and projected to rise to 8.9x by the end of 2025
from 1.3x in 2024. The free cash flow (FCF) is expected to turn
negative in 2025, reversing from nearly 50% FCF/debt in 2024. All
credit metrics include Moody's standard adjustments.
Adding to the uncertainty is the pending decision from the European
Commission regarding its safeguard investigation into imports of
manganese and silicon-based alloying elements. While the potential
implementation of effective antidumping controls could favor
Ferroglobe, the timing and impact of such measures remain unclear.
Despite these challenges, Ferroglobe has managed to improve the
overall quantum and structure of its debt obligations since the
last downturn. The company's asset-based lending (ABL) and local
facilities, coupled with its factoring facilities, comprise a
stronger balance sheet without bullet maturities than in prior
years. This positions the company strongly to navigate the current
industry downturn.
Ferroglobe's B2 CFR continues to reflect its status as one of the
largest producers in the silicon metal industry, supported by a
vertically integrated business model that offers some insulation
from fluctuations in raw materials prices. Additionally, the rating
takes into account the history of volatility in the company's
profitability and working capital, along with its ongoing
susceptibility to market price changes and limited predictability
of demand and supply trends in the market.
LIQUIDITY
Ferroglobe's liquidity is currently adequate owing to over $100
million of cash on hand and over $70 million available on its $100
million ABL. The company also has a strong track record of raising
debt locally in the markets where it operates. No material
near-term maturities are upcoming; however, Moody's expects
Ferroglobe to consume cash in 2025 as a result of weakened top line
and material expected capex spend.
RATING OUTLOOK
The negative rating outlook reflects the uncertainty associated
with market conditions for Ferroglobe's products in 2026 as the
details and implementation of any countervailing duties that the
European Commission may choose to implement are unclear at
present.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade is unlikely in the near term, given the negative
outlook. Still, should the company demonstrate consistent ability
to weather different market conditions while maintaining moderate
debt levels, solid metrics and good liquidity and cash flow
generation, positive pressure on the rating could develop. In
addition, this would require Moody's-adjusted debt/EBITDA sustained
comfortably below 3.0x through the cycle.
Negative pressure could arise if debt levels rise or liquidity
weakens, for example from weak cash flow generation. An inability
to sustain profitability in a weak market environment would also
pressure the rating, and so would persistent negative free cash
flow.
The principal methodology used in these ratings was Manufacturing
published in September 2025.
The net effect of any adjustments applied to rating factor scores
or scorecard outputs under the primary methodology(ies), if any,
was not material to the ratings addressed in this announcement.
Headquartered in London and listed on the Nasdaq, Ferroglobe PLC is
a large producer of silicon metal and silicon/manganese alloys
serving primarily the aluminium and chemical industries. The
revenue tends to be mostly generated in Europe (approximately 57%
in 2024) followed by the US (41%). The main shareholder is Grupo
Villar Mir, S.A.U. which controls 36% of the shares. In 2024,
Ferroglobe reported $1.6 billion of revenues and $38 million of
operating profit.
FLEET TOPCO: S&P Affirms 'B+' ICR on Planned Debt Raise
-------------------------------------------------------
S&P Global Ratings affirmed its 'B+' issuer credit rating on Fleet
Topco Ltd., parent of U.K.-based Argus Media, and its 'B+' issue
rating on the term loan (including the proposed add-on) with a '3'
recovery rating, reflecting its expectation of meaningful (60%)
recovery prospects.
S&P said, "The stable outlook reflects our view that, after the
temporary spike in leverage, Argus will deleverage to 5.0x in
fiscal 2027, enabled by continued organic revenue growth, strong
EBITDA margins above 45%, and robust FOCF. We also assume the group
will remain committed to its financial policy and will not
undertake material debt-funded acquisitions or shareholder
distributions until its company-adjusted leverage reduces to less
than 3.5x."
Fleet Topco plans to issue a $500 million fungible add-on to its
existing $1.089 billion senior secured term loan and use existing
cash to fund a $540 million share buyback, with the company
acquiring part of private equity firm General Atlantic (GA)'s
minority stake and some management shares, increasing majority
shareholder Mr. Adrian Binks' ownership to 66% and reducing GA's to
29% from 36%.
S&P said, "As a result, we expect Argus' adjusted leverage will
increase to about 5.8x in fiscal year 2026 (ending June 30, 2026)
and reduce to 5.0x in fiscal 2027 thanks to robust free operating
cash flow (FOCF) generation. We see limited risk of future similar
leveraging transactions.
"We expect the spike in leverage in fiscal 2026 will be temporary
and that Argus will deleverage below 5.5x in fiscal 2027 thanks to
strong operating performance. Price reporting agency (PRA) Argus is
planning to fund a share buyback of $540 million by issuing a $500
million fungible add-on to its senior secured term loan B due in
2031 and using some on-balance sheet cash. We understand as part of
the transaction the company will purchase part of GA's stake in the
business and a further $40 million in management-owned shares. As a
result, majority shareholder and CEO Adrian Binks' ownership of
Argus will increase to 66%. We estimate Argus' S&P Global
Ratings-adjusted leverage will increase to about 5.8x in fiscal
2026 from an estimated 4.4x in fiscal 2025. We assume that from
fiscal 2027, leverage will reduce toward 5.0x, as a result of
strong revenue growth, sound free cash flow generation, and the
company's plan to reduce leverage toward its financial policy
target.
"We expect Argus to continue delivering strong organic growth and
above-average profitability. We expect revenue growth of about 8%
in fiscal 2026 and fiscal 2027, after an estimated 9% growth in
fiscal 2025. This will be driven by market share gains, growth in
subscription-based revenue, and Argus' in-person conference
business, despite a challenging macroenvironment. Argus benefits
from increased commodity market volatility and the energy
transition, and continued demand for price reporting data due to
growth in oil-related sectors as well as expanding sectors such as
GenFuels, fertilizers, chemicals, and metals. Meanwhile, the EBITDA
margin will remain strong at about 46% and above the industry
average thanks to a well-managed cost base, with further cost
savings of $6.5 million annually following a cost reduction program
in fiscal 2025.
"Free cash flow generation will remain robust. We expect FOCF will
remain sound in fiscal 2026 thanks to strong operating performance
and low capital expenditure (capex) needs somewhat offsetting
higher interest costs after the debt raise. We expect cash interest
will increase to about $95 million in fiscal 2026, up from $56
million in fiscal 2025. That said, FOCF to debt will weaken only
modestly to 7% in fiscal 2026 from about 10% in fiscal 2025.
Overall, Argus has strong cash generation, and we assume the
company will prioritize deleveraging over the next two years. FOCF
would also be sufficient to fund small bolt-on acquisitions and
debt amortization and potentially leave room for dividend payments
from fiscal 2027.
"We expect the company will focus on reducing leverage in line with
its financial policy target. We expect that following the
transaction Argus will prioritize reducing leverage in line with
its financial policy target of 3.5x company-adjusted net leverage
(equivalent to about 4.0x S&P Global Ratings-adjusted leverage)
without further debt-funded shareholder returns in the near term.
That said, we see the proposed transaction and the large debt
issuance in fiscal 2024 related to the buyout of private equity
sponsor Hg Capital as an indication that Argus' financial policy
can temporarily allow for higher-than-target leverage beyond our
current base case.
"The stable outlook reflects our view that, after a temporary spike
in leverage to about 5.8x in fiscal 2026, Argus will prioritize
deleveraging and reduce its adjusted debt to EBITDA toward 5.0x in
fiscal 2027 on the back of continued organic earnings growth,
EBITDA margin remaining above 45%, and robust FOCF. The outlook
also assumes the group will remain committed to its financial
policy and will not undertake material debt-funded acquisitions or
shareholder distributions until its company-adjusted leverage
reduces to less than 3.5x.
"We could lower the rating in the next 12 months if adjusted
leverage remains above 5.5x or FOCF to debt falls below 5.0%. This
could occur if Argus pursues large debt-funded acquisitions or
shareholder distributions, or if it underperforms our base case
such that revenue and earnings decline materially, for example, due
to increased competition, loss of key customers, or the inability
to constrain rising operating costs.
"We could raise the rating if Argus reduces its adjusted leverage
comfortably below 4.5x and FOCF to debt exceeds 10% on a sustained
basis. We would expect the company to demonstrate a track record of
maintaining leverage at this level, continue operating
successfully, and adhere to a conservative financial policy."
FRONTERA LONDON: R2 Advisory Named as Administrators
----------------------------------------------------
Frontera London Ltd was placed into administration proceedings in
the High Court of Justice, Court Number: CR-2025-006212, and Robert
Horton of R2 Advisory Limited was appointed as administrators on
Sept. 17, 2025.
Frontera London was an advertising agency.
Its registered office is c/o R2 Advisory Limited, St Clements
House, 27 Clements Lane, London, EC4N 7AE
Its principal trading address is at St Johns House, 54 St John's
Square, London, EC1V 4JL
The joint administrators can be reached at:
Robert Horton
R2 Advisory Limited
St Clement's House
27 Clements Lane
London EC4N 7AE
For further details, contact:
The Administrator
Tel No: 0207 043 4190
Email: enquiries@r2a.uk.com
Alternative contact:
Ella Harvey
FRONTIER MORTGAGE 2025-1: Fitch Assigns BBsf Rating on Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has assigned Frontier Mortgage Funding 2025-1 plc's
notes final ratings.
Entity/Debt Rating Prior
----------- ------ -----
Frontier Mortgage
Funding 2025-1 plc
A NRR Loan Note LT AAAsf New Rating
A XS3179829091 LT AAAsf New Rating AAA(EXP)sf
B XS3179829257 LT AAsf New Rating AA(EXP)sf
C XS3179829760 LT Asf New Rating A(EXP)sf
D XS3179829844 LT A-sf New Rating BBB+(EXP)sf
E XS3179829927 LT BBB-sf New Rating BB+(EXP)sf
F XS3179830008 LT BBsf New Rating B+(EXP)sf
X XS3179830263 LT BB+sf New Rating BB+(EXP)sf
Z XS3179830180 LT NRsf New Rating NR(EXP)sf
Transaction Summary
Frontier Mortgage Funding 2025-1 plc is a static securitisation
containing a mixed pool of seasoned owner-occupied (OO) loans
(91.1%) and buy-to-let (BTL) loans (8.9%) originated by Santander
UK (STUK). STUK remains the legal title holder and servicer of the
assets.
KEY RATING DRIVERS
Seasoned Portfolio, High Arrears: The pool primarily consists of OO
mortgages originated by STUK and its predecessors, with weighted
average (WA) seasoning of 9.1 years. Overall, the pool's credit
profile is in line with prime RMBS transactions, despite a material
share (34.9%) of pre-2014 originations; 93.3% of the borrowers had
verified income and limited adverse credit markers at origination.
However, the pool was selected to include weaker loans, featuring
8.7% of restructured loans and 5.5% with more than three payments
in arrears, of which 1.6% have been reclassified as defaulted.
Fitch has modelled the pool using the prime matrix with a 1.0x
transaction adjustment to foreclosure frequencies (FF). The ratings
of the class B to F notes have been constrained at one notch below
their model-implied ratings (MIR) to reflect the historical
performance of the pool, the presence of weaker loans and a
potential rise in the WAFF.
Alternative Prepayment Rates, Over-hedging Risk: Of the loans,
81.6% pay a fixed interest rate (ultimately reverting to a floating
rate), while the notes pay a SONIA-linked floating rate. The issuer
entered into a swap at closing to mitigate the interest rate risk
arising from the fixed-rate mortgages in the pool. The swap
features a defined notional balance that could lead to over-hedging
in the structure due to defaults or prepayments. This could reduce
available revenue funds in a decreasing interest rate environment.
Fixed-rate loans are subject to early repayment charges. The point
at which these loans are scheduled to revert from a fixed to the
relevant follow-on rate will likely determine the timing of
prepayments. Fitch has therefore applied an alternative high
prepayment stress that tracks the pool's fixed-rate reversion
profile. The prepayment rate applied is floored at 10%-15% and
capped at a maximum 40% a year.
Product Switches, Limited Interest-rate Risk: Product switches
granted by STUK for non-forbearance reasons will be repurchased
from the pool. Product switches to a fixed-rate loan for borrowers
in arrears (forbearance related) will be retained in the pool. STUK
offers a fixed product for 12 months, based on a discount from its
standard variable rate (SVR). The issuer will enter into additional
hedging when the portion of fixed rate loans exceeds the existing
swap notional amount by 5% of the pool's balance to mitigate the
risk of a material portion of unhedged fixed-rate loans. Fitch has
incorporated the exposure to unhedged product switches up to the
allowed limit in its analysis.
Non-payers Presence, Moderate Pay Rates: About 1.2% of the pool
represents advances to borrowers that did not make any scheduled
payments over three consecutive months before June 2025. The WA pay
rate remained close to 100% before falling to around 50% in 2020
and has since improved to about 100%. Fitch has assumed a 2% margin
in rising interest rate environments for SVR loans, which is at the
lower end of its criteria range, to address the risk of fluctuating
cash flows and yield compression.
Final Ratings Above Expected Ratings: The margins on all notes are
lower than those provided to Fitch for the assignment of expected
ratings. The lower margins had a positive effect on the MIRs for
the class D, E and F notes, which resulted in Fitch assigning them
final ratings one to two notches above the expected ratings.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transaction's performance may be affected by adverse changes in
market conditions and the economic environment. Weakening economic
performance is strongly correlated to increasing delinquencies and
defaults that could reduce credit enhancement available to the
notes.
In addition, unexpected declines in recoveries could result in
lower net proceeds, which may make certain notes susceptible to
negative rating action, depending on the extent of the decline in
recoveries.
Fitch found that a 15% increase in the WAFF and 15% decrease of the
WA recovery rate (RR) would imply the following:
Class A: 'AA+sf'
Class B: 'Asf'
Class C: 'BBBsf'
Class D: 'BB+sf'
Class E: 'B+sf'
Class F: 'B-sf'
Class X: 'BB+sf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing credit enhancement and,
potentially, upgrades.
Fitch found that a 15% decrease in the WAFF and 15% increase of the
WARR would imply the following:
Class A: 'AAAsf'
Class B: 'AAAsf'
Class C: 'AA+sf'
Class D: 'AAsf'
Class E: 'A+sf'
Class F: 'A-sf'
Class X: 'BB+sf'
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 reviewed the results of a third party assessment conducted on
the asset portfolio information, and concluded that there were no
findings that affected the rating analysis.
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
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.
FYLDE FUNDING 2025-1: DBRS Gives Prov. BB(low) Rating on X2 Notes
-----------------------------------------------------------------
DBRS Ratings Limited assigned provisional credit ratings to the
residential mortgage-backed notes to be issued by Fylde Funding
2025-1 PLC (the Issuer) as follows:
-- Class A Notes at (P) AAA (sf)
-- Class B Notes at (P) AA (high) (sf)
-- Class C Notes at (P) A (high) (sf)
-- Class D Notes at (P) BBB (high) (sf)
-- Class E Notes at (P) BB (high) (sf)
-- Class F Notes at (P) BB (high) (sf)
-- Class X1 Notes at (P) BB (high) (sf)
-- Class X2 Notes at (P) BB (low) (sf)
The provisional credit rating on the Class A Notes addresses the
timely payment of interest and the ultimate repayment of principal
on or before the final maturity date in July 2057. The provisional
credit ratings on the Class B, Class C, Class D, Class E and Class
F Notes address the timely payment of interest once they are the
senior-most class of notes outstanding, otherwise the ultimate
payment of interest, and the ultimate repayment of principal on or
before the final maturity date. The provisional credit ratings on
the Class X1 and Class X2 Notes address the ultimate payment of
interest and principal. Morningstar DBRS did not rate the Class Z
Notes also expected to be issued in this transaction.
CREDIT RATING RATIONALE
The issuance will comprise UK residential mortgage-backed
securities (RMBS) backed by second-lien mortgage loans originated
by Tandem Home Loans Limited (the Originator), a subsidiary of
Tandem Bank Limited (Tandem).
The Issuer is a bankruptcy-remote special-purpose vehicle
incorporated in the UK. The notes to be issued will fund the
purchase of UK second-lien mortgage loans originated by Tandem. The
Originator, a company of the Tandem group, will also act as the
Servicer of the portfolio.
Tandem is a UK provider of second-charge mortgages, home
improvement loans, and motor finance. Tandem was established in
2014 as a digital challenger bank in the UK and subsequently
acquired Harrods Bank in 2018 and Allium Lending Group in 2020.
Tandem merged with Oplo (established in 2009) in 2022 to form a
green digital bank.
This is the second securitization from Tandem following Fylde
Funding 2024-1 PLC that closed in October 2024. The mortgage
portfolio as of August 2025 consisted of GBP 209.6 million of
second-lien mortgage loans collateralized by a large majority of
owner-occupied properties (96.4%) and buy-to-let properties (3.6%)
in the UK. The pool has a short seasoning of eight months,
comprising mostly mortgages originated in the past 12 months, which
account for 71% of the portfolio, and yields a current
weighted-average coupon of 8.02%.
Liquidity in the transaction is provided by a liquidity reserve
fund, which will cover senior costs and expenses as well as
interest shortfalls for the Class A and Class B Notes. In addition,
principal borrowing is also envisaged under the transaction
documentation and can be used to cover senior costs and expenses,
including swap payments, as well as interest shortfalls of Classes
A to F. However, Class B will be subject to the principal
deficiency ledger (PDL) condition, which states that if the Class B
Notes are not the most senior outstanding, in case of a PDL debit
of more than 10% of the Class B PDL balance, principal funds will
not be available to cover Class B interest. For the Class C to
Class F Notes, principal draws will only be available when they are
the most senior class outstanding.
The transaction also features a fixed-to-floating interest rate
swap, given the presence of fixed-rate loans (which would revert to
a floating rate in the future), while the liabilities will pay a
coupon linked to Sonia. The swap counterparty to be appointed as of
closing will be Banco Santander SA; Citibank, N.A., London Branch
will be appointed as the Issuer Account Bank; and National
Westminster Bank Plc will act as the Collection Account Bank.
Morningstar DBRS based its credit ratings on a review of the
following analytical considerations:
-- The transaction's capital structure, including the form and
sufficiency of available credit enhancement.
-- The credit quality of the provisional mortgage portfolio and
the ability of the Servicer to perform collection and resolution
activities. Morningstar DBRS estimated stress-level probability of
default (PD), loss given default (LGD), and expected losses (EL) on
the mortgage portfolio. Morningstar DBRS used the PD, LGD, and EL
as inputs into the cash flow engine. Morningstar DBRS analyzed the
mortgage portfolio in accordance with its "European RMBS Insight
Methodology".
-- The transaction's ability to withstand stressed cash flow
assumptions and repay the Class A, Class B, Class C, Class D, Class
E, Class F, Class X1, and Class X2 Notes according to the terms of
the transaction documents.
-- The structural mitigants in place to avoid potential payment
disruptions caused by operational risk, such as a downgrade, and
replacement language in the transaction documents.
-- The sovereign credit rating of AA with a Stable trend on the
United Kingdom of Great Britain and Northern Ireland as of the date
of this press release.
-- The expected consistency of the transaction's legal structure
with Morningstar DBRS' "Legal and Derivative Criteria for European
Structured Finance Transactions" methodology and the presence of
legal opinions that are expected to address the assignment of the
assets to the Issuer.
Notes: All figures are in British pound sterling unless otherwise
noted.
HAYMAN HOSPITALITY: Quantuma Advisory Named as Administrators
-------------------------------------------------------------
Hayman Hospitality Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Court Number: CR-2025-6528, and Sean
Bucknall and Marc Norman of Quantuma Advisory Limited were
appointed as administrators on Sept. 19, 2025.
Hayman Hospitality, trading as Whispers of Billingshurst,
specialized in the retail sale of food in specialised stores.
Its registered office is at 3rd Floor 21 Perrymount Road, Haywards
Heath, RH16 3TP, and it is in the process of being changed to 3rd
Floor, 37 Frederick Place, Brighton, BN1 4EA.
Its principal trading address is at 3rd Floor, 21 Perrymount Road,
Haywards Heath, RH16 3TP
The joint administrators can be reached at:
Sean Bucknall
Marc Norman
Quantuma Advisory Limited
3rd Floor, 37 Frederick Place
Brighton, Sussex, BN1 4EA
For further details, contact:
Adam Stenning
Tel No: 01273 322424
Email: adam.stenning@quantuma.com
M.R CONSULTANCY: Oury Clark Named as Administrators
---------------------------------------------------
M.R Consultancy Ltd was placed into administration proceedings in
the High Court of Justice, Court Number: CR-2025-006335, and Nick
Parsk and Carrie James of Oury Clark Chartered Accountants were
appointed as administrators on Sept. 23, 2025.
M.R Consultancy engaged in the management of real estate on a fee
or contract basis.
Its registered office and principal trading address is at Terminal
E2/3b Farnborough Airport, Farnborough, Hampshire, GU14 6XA
The joint administrators can be reached at:
Nick Parsk
Carrie James
Oury Clark Chartered Accountants
Herschel House
58 Herschel Street
Slough, Berkshire, SL1 1PG
For further details, contact:
The Joint Administrators
Email: IR@ouryclark.com
Tel No: 01753-551-111
Alternative contact:
Alex Goderski
NUVOLA DISTRIBUTION: Quantuma Advisory Named as Administrators
--------------------------------------------------------------
Nuvola Distribution Limited was placed into administration
proceedings in the High Court of Justice, Court Number:
CR-2025-006476, and Kelly Mitchell and Richard Wragg of Quantuma
Advisory Limited, were appointed as administrators on Sept. 18,
2025.
Nuvola Distribution, fka Nuage Distribution Limited, was into
telecommunications.
Its registered office is at Unit J, Lambs Farm Business Park,
Basingstoke Road, Swallowfield, Reading, RG7 1PQ and it is in the
process of being changed to Office D, Beresford House, Town Quay,
Southampton, SO14 2AQ
Its principal trading address is at Unit J, Lambs Farm Business
Park, Basingstoke Road, Swallowfield, Reading, RG7 1PQ
The joint administrators can be reached at:
Kelly Mitchell
Richard Wragg
Quantuma Advisory Limited
Office D, Beresford House
Town Quay
Southampton SO14 2AQ
For further details, please contact:
Elli Salmon
Tel No: 02380 821862
Email: elli.salmon@quantuma.com
POLYNT GROUP: S&P Affirms BB- Issuer Credit Rating, Outlook Stable
------------------------------------------------------------------
S&P Global Ratings affirmed its 'BB-' long-term issuer credit
rating on Polynt Group's parent SCIL IV LLC and its outstanding
EUR300 million senior secured notes (SSNs), S&P assigned its 'BB-'
rating on the proposed EUR1,470 million term loan B (TLB). The
recovery rating remains '3', reflecting its expectation of about
50% recovery of the debt in the event of a default.
The stable outlook reflects S&P's view that its S&P Global
Ratings-adjusted debt to EBITDA should peak slightly above 4.5x in
2025 before recovering to ratings-commensurate levels below 4.5x in
2026, together with strong free cash flow generation.
Composites and coatings technology producer SCIL IV LLC (Polynt
Group) plans to issue a EUR1,470 million term loan B (TLB) to
refinance the existing capital structure, extend maturities, and
fund a EUR500 million dividend, including from cash on hand.
S&P said, "In our view, this transaction signals a more aggressive
financial policy that exhausts the already thin rating headroom,
with our adjusted debt-to-EBITDA metric declining to 4.6x-4.8x in
2025 hitting our downside trigger of 4.5x. We forecast deleveraging
in 2026, dependent on modest market recovery from current downcycle
conditions, while strong cash generation will continue.
"In our view, the dividend distribution is aggressive from a
financial policy standpoint, given the current limited rating
headroom due to lower EBITDA. Polynt plans to issue a EUR1,470
million of TLB (partly issued in U.S. dollar) to refinance its
existing SSNs and floating rate notes (FRNs) and fund a dividend
distribution to its shareholder of about EUR500 million, with the
balance funded through cash on balance sheet. After the transaction
our S&P Global Ratings-adjusted debt to EBITDA should increase to
4.6x-4.8x in 2025, from 4.1x in 2024, and deleveraging to about
4.1x-4.3x in 2026. The increase of gross debt exhausts the already
limited rating headroom due to the weak demand in all its major
markets. The rating headroom built over 2021-2022 has largely been
used for shareholder remuneration, with S&P Global Ratings-adjusted
leverage increasing from 2.3x in 2022 to 4.1x in 2024. We will
monitor how financial policy evolves, as the dividend recap in the
current industrial environment is the first to entirely deplete
rating headroom. We expect that EBITDA will improve in 2026 based
on soft market conditions recovery, translating into leverage below
our downside trigger of 4.5x, alongside continued strong free cash
flow, which is a key strength for the company's credit quality. We
do not net the cash as part of our leverage calculation because of
the private-equity sponsor ownership."
Polynt's capacity to produce free operating cash flow (FOCF), even
in challenging market conditions, is a crucial aspect of its
creditworthiness. In 2024, Polynt achieved approximately EUR220
million in FOCF, surpassing our expectations. This strong
performance was fueled by moderate capital expenditure (capex) and
substantial cash inflows from working capital, resulting in an
FOCF-to-debt ratio of 12.5%. S&P said, "Looking ahead to 2025, we
anticipate a decline in FOCF to about EUR160 million-EUR190
million. This forecast is based on the expectation of higher cash
taxes in the coming years compared to 2024, along with a
normalization of working capital outflows, leading to an
FOCF-to-debt ratio of approximately 8%-12%. This remains above our
downside trigger of 5%. In our view, Polynt's asset-light business
model is positive, factoring in capex of about EUR55 million-EUR65
million, primarily for maintenance."
S&P said, "We forecast that Polynt will maintain an adequate
liquidity buffer following the transaction. As part of the
transaction, Polynt is planning to upsize its super senior
revolving credit facility (RCF) from EUR105 million to EUR125
million, which will provide a further buffer for temporary
cash-outs such as working capital needs or small acquisitions.
Conversely, we do not expect these to translate to any
deterioration in the adjusted leverage metrics from our 2025
forecast. Cash on balance sheet will decrease from EUR434 million
to EUR70 million of cash on the balance sheet at transaction
closing, reducing Polynt's ability to navigate potential challenges
in 2025. At this stage, given the current challenging market
conditions and subdued demand, we do not expect any significant
recovery in 2025, with some recovery potential in 2026.
"We factor Polynt's solid market position and good vertical
integration as positive considerations into our business risk
analysis. The company holds the No. 1 or No. 2 market position
across its portfolio and regions, being the largest player in the
relatively niche composites and coating resins market, with a share
of about 30% in composites and 60% in coatings. Most of the
company's sales are in developed countries, with about 39% of
revenue from Europe, 58% from North America, and about 5% in Asia.
This geographic exposure helps mitigate volatility of operating
results during difficult economic times. Moreover, the company has
a very flexible cost base, with about 70% of total costs related to
raw materials, styrene and glycols accounting for the majority.
Moreover, we note that earnings volatility has reduced, thanks to
the company's vertically integrated business model and efficient
passthrough of raw material costs. We think that Polynt is one of
the most integrated players in its market niche."
Limited product offering and exposure to some cyclical end markets
constrain the rating. The company generates 90%-95% of sales from
specialty chemical products, with many customized formulations for
composite resins and specialties. S&P said, "However, we think that
the degree of product and services differentiation remains
relatively low, due to the core technology being available to other
players in the market. Partly counterbalancing this assessment, we
think that, compared with its direct composites competitors, Polynt
has wider product differentiation. Moreover, most of the company's
products are used in the construction and transportation
industries, which we view as cyclical markets mostly linked to GDP
growth, accounting for about 24% and 15% of gross value added
(GVA), respectively. The remaining exposure is to housing
appliances (13%), electricity (8%), marine (7%) and wind energy
(6%), and food and beverage, food packaging, aircraft interior
materials, and storage tanks. Although we think that this
end-market diversification is somewhat better than that of other
players, we note that Polynt's sales remain mostly concentrated in
highly cyclical sectors."
S&P said, "The stable outlook reflects our view that our S&P Global
Ratings-adjusted debt to EBITDA will recover to a more
ratings-commensurate level in 2026, after peaking slightly above
4.5x in 2025. This factors in mild market improvement from current
prolonged downcycle conditions and continued strong free cash flow
generation."
S&P could lower the rating if:
- Material deterioration of market conditions translates into
materially weaker profitability, resulting in S&P Global
Ratings-adjusted debt to EBITDA remaining above 4.5x or FOCF to
debt declining below 5% on a prolonged basis, with limited
possibility of a swift recovery.
-- The company pursues further dividend distributions or large
debt-funded acquisitions, leading to a significant deterioration of
credit metrics and highlighting a more aggressive financial
policy.
S&P considers an upgrade unlikely in the next two years, given the
aggressive stance on dividend distributions. However, S&P could
take a positive rating action if:
-- S&P Global Ratings-adjusted debt to EBITDA declines to below
3.5x on a sustainable basis, while FOCF remains solid; and
-- The holding company SCIL IV shows a track record and strong
commitment to maintaining low leverage.
POOLE BAY: Leonard Curtis Named as Administrators
-------------------------------------------------
Poole Bay Warehousing Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Court Number: CR-2025-006086, and
David Smithson and Michael Robert Fortune of Leonard Curtis were
appointed as administrators on Sept. 17, 2025.
Poole Bay Warehousing, trading as Poole Bay, specialized in
warehouse storage and transport.
Its registered office is at 1580 Parkway, Solent Business Park,
Whiteley, Fareham, Hampshire PO15 7AG
Its principal trading address is at 79 Condor Close, Woolsbridge
Industrial Estate, Three Legged Cross, Wimborne, Dorset BH21 6SU
The joint administrators can be reached at:
David Smithson
Michael Robert Fortune
Leonard Curtis
1580 Parkway, Solent Business Park
Whiteley, Fareham
Hampshire, PO15 7AG
For further details, contact:
The Joint Administrators
Email: creditors.south@leonardcurtis.co.uk
Alternative contact:
Cheryl Richards
THREE LEGGED TRANSPORT: Leonard Curtis Named as Administrators
--------------------------------------------------------------
Three Legged Transport Limited was placed into administration
proceedings in the High Court of Justice Business and Property
Courts of England and Wales, Court Number: CR-2025-006087, and
David Smithson and Michael Robert Fortune of Leonard Curtis were
appointed as administrators on Sept. 17, 2025.
Three Legged Transport Limited engaged in warehouse storage and
transport.
Its registered office is at 1580 Parkway, Solent Business Park,
Whiteley, Fareham, Hampshire PO15 7AG
Its principal trading address is at 79 Condor Close, Woolsbridge
Industrial Estate, Three Legged Cross, Wimborne, Dorset BH21 6SU
The joint administrators can be reached at:
David Smithson
Michael Robert Fortune
Leonard Curtis
1580 Parkway, Solent Business Park
Whiteley, Fareham
Hampshire, PO15 7AG
For further details, contact:
The Joint Administrators
Email: creditors.south@leonardcurtis.co.uk
Alternative contact:
Cheryl Richards
TOGETHER ASSET 2025-1ST1: Fitch Assigns BBsf Rating on Cl. X1 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Together Asset Backed Securitisation 14
2025-1ST1 PLC (TABS2025-1) final ratings, as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Together Asset Backed
Securitisation 14
2025-1ST1 PLC
Class A XS3174366966 LT AAAsf New Rating AAA(EXP)sf
Class B XS3174367188 LT AAsf New Rating AA(EXP)sf
Class C XS3174367345 LT Asf New Rating A-(EXP)sf
Class D XS3174367774 LT BBBsf New Rating BBB(EXP)sf
Class E XS3174369044 LT BB+sf New Rating BB+(EXP)sf
Class X1 XS3174369390 LT BBsf New Rating BB(EXP)sf
Class X2 XS3174369556 LT CCCsf New Rating CCC(EXP)sf
Transaction Summary
TABS 2025-1 is a securitisation of buy to-let (BTL) and
owner-occupied (OO) mortgages backed by properties in the UK
originated by Together Personal Finance and Together Commercial
Finance. Both entities are fully owned subsidiaries of Together
Financial Services Limited (Together; BB/Stable/B). The transaction
includes originations up to June 2024.
KEY RATING DRIVERS
Transaction Adjustment Updated: Fitch has updated the transaction
adjustment (TA) based on the historical performance data provided
by Together and the update of its UK RMBS Rating Criteria in May
2025. The TA is 2.0x for both sub-pools (previously 1.4x for OO and
1.5x for BTL), leading to weighted average (WA) foreclosure
frequency (FF) assumptions in line with those for other TABS
transactions. The alignment of the WAFF assumptions reflects
Fitch's unchanged opinion on Together's origination and
underwriting policies and practices, and its historical performance
data.
Low LTVs Driving Recoveries: The pool comprises first-lien OO
(30.2%) and BTL (69.8%) mortgage loans that were predominantly
originated in 2024 (85.2%). The WA original loan-to-value (LTV)
ratio of the portfolio is 59.3%, lower than that of comparable peer
transactions, which typically have LTVs at 70%-75%, but marginally
higher than the previous deal (TABS 2024-1 ST2: 57.8%). This is the
main driver of Fitch's recovery rates (RR), which are higher than
those of peers. This results in WA expected loss assumptions that
are comparable with Fitch-rated transactions from other specialist
lenders.
Specialised Lending: Together takes a manual approach to
underwriting, focusing on borrowers that do not necessarily qualify
on the automated scorecard models of high-street lenders. It
attracts a higher proportion of borrowers with complex incomes,
notably self-employed (where Fitch applied a 1.3x FF adjustment
compared with the standard FF adjustment of 1.2x) and borrowers
with adverse credit histories, than is typical for prime UK
lenders.
Together allows more underwriting flexibility than other specialist
lenders by permitting interest-only OO lending flexible exit
strategies (such as downsizing, if plausible). It also includes BTL
borrowers' personal income for affordability calculations (i.e. top
slicing) that do not meet the minimum rental income coverage.
Performance Could Worsen: TABS2025-1 will have a similar proportion
of loans in arrears at closing as previous Fitch-rated TABS
transactions. The performance trends of these transactions and
book-level observations indicate that arrears performance has not
yet stabilised and may worsen within this pool. TABS transactions
have also under-performed compared with peer transactions.
Fitch incorporated a scenario to address this risk, resulting in
the assignment of ratings for the class C, D and X1 notes one notch
below their model-implied ratings (MIR). Fitch has capped the class
E notes' rating at 'BB+sf' due to excessive reliance on excess
spread, in line with its criteria.
Fixed Interest Rate Hedging Schedule: Fixed-rate loans make up
96.2% of the pool, hedged through an interest rate swap. This
fixed-rate proportion is higher than previous TABS transactions,
which generally contained significant proportions of floating-rate
loans. The swap features a scheduled notional balance that could
lead to over-hedging in the structure if defaults or prepayments
are higher than 10%. Over-hedging results in additional available
revenue funds in rising interest rate scenarios but reduced
available revenue funds in decreasing interest rate scenarios.
Alternative Prepayment Rates: The transaction contains a high
proportion of fixed-rate loans subject to early repayment charges.
The point at which these loans are scheduled to revert from a fixed
rate to the relevant follow-on rate will likely determine when
prepayments occur. Fitch has therefore applied an alternative high
prepayment stress tracking the fixed-rate reversion profile of the
pool. The prepayment rate applied is floored at 10% during periods
of no reversion and capped at a maximum 40% a year during.
Final Ratings Above Expected Ratings: The margins on the
collateralised notes are lower than those provided to Fitch for the
assignment of expected ratings. The lower margins have had a
positive effect on the class C notes' MIR resulting in Fitch
assigning a rating one notch above its expected rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The transaction's performance may be affected by changes in market
conditions and economic environment. Weakening economic performance
is strongly correlated to increasing levels of delinquencies and
defaults that could reduce the credit enhancement available to the
notes. Fitch conducts sensitivity analyses by stressing the
transaction's FF and RR assumptions and examining the rating
implications for all classes of notes. A 15% increase in the WAFF
and a 15% decrease in the WARR indicate downgrades of up to one
notch for the class A and D notes and two notches for the class B,
C and X1 notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing credit enhancement and
potential upgrades. Fitch tested an additional rating sensitivity
scenario by applying a decrease in the FF of 15% and an increase in
the RR of 15%. The impact on the notes could be upgrades of up to
two notches for the class B notes, three notches for the class C
notes, four notches for the class D notes and one notch for the
class X1 notes. The class A notes are at the highest rating on
Fitch's scale and cannot be upgraded.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch reviewed the results of a third party assessment conducted on
the asset portfolio information, and concluded that there were no
findings that affected the rating analysis.
Fitch conducted a review of a small targeted sample of the
originator's origination files and found the information contained
in the reviewed files to be adequately consistent with the
originator's policies and practices and the other information
provided to the agency about the asset portfolio.
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
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.
VEDANTA RESOURCES II: Fitch Rates Up to $750MM New Unsec Notes 'B+'
-------------------------------------------------------------------
Fitch Ratings has assigned the proposed senior unsecured notes of
up to USD750 million to be issued by Vedanta Resources Finance II
Plc (VRF2) a rating of 'B+' and Recovery Rating of 'RR4'.
The notes will be unconditionally and irrevocably guaranteed by
VRF2's parent, Vedanta Resources Limited (VRL, B+/Stable), and will
constitute the senior unsecured obligations of VRL. The proceeds
will be used mainly for repaying existing debt and other corporate
purposes.
VRL's rating factors in its governance and group structure risks,
and currently manageable liquidity and refinancing risks at the
holdco, formed by VRL and other offshore investment holding
companies owned by VRL. The rating also factors in the reduction in
VRL's consolidated leverage in recent years, and its business
profile strengths from a large scale, strong market and cost
position in some segments, and product and geographic
diversification.
Fitch treats the risk of adverse regulatory actions against the VRL
group, following a series of short seller reports since July 2025,
as an event risk.
Key Rating Drivers
Governance Structure Risks Factored In: Its governance assessment
incorporates the risk that VRL's small board of directors and lack
of majority independent directors could lead to inadequate checks
to prevent cash leakage outside VRL and to protect creditors'
interests. The board of three includes two from the founding
family. The eight-member board of VRL's main operating subsidiary
(opco), Vedanta Limited (VLTD), includes three from the founding
family, while two out of four independent directors were senior
executives in the VRL group.
Complex Structure; Structural Subordination: The group structure is
complex with structurally subordinated cash flow, as operating
companies are held via indirectly owned intermediate subsidiaries
incorporated in different jurisdictions. The presence of upstream
debt guarantees at intermediate holding companies (holdcos) adds to
the complexity. Fitch assesses VRL's key credit metrics based on
its effective stake in key opcos VLTD (56.4%), Hindustan Zinc
Limited (HZL, 34.9%) and Bharat Aluminium Corporation Limited
(BALCO, 28.8%).
The higher importance of management and corporate governance on the
company's rating navigator weighs down VRL's rating. The rating
could have been higher otherwise, considering VRL's business
profile strengths. Fitch rates the senior unsecured bonds at the
same level as VRL's IDR, given its estimates of average recovery
prospects under the assumption that VRL's stake in VLTD is
liquidated under bankruptcy.
Cash Upstreaming Supports Rating: Fitch believes that cash
upstreaming from the key opcos supports VRL's liquidity and credit
profile. VRL has received around USD1 billion from subsidiaries in
the form of dividends and brand fees in the financial year ending
March 2026 (FY26) so far, and Fitch expects it to continue
receiving around the same amount annually. VRL's significant
control over subsidiary dividends also supports its use of
proportionately consolidated net leverage as a key credit metric.
However, reduced cash upstreaming relative to VRL's debt servicing
needs could affect VRL's liquidity ratios negatively and lead to
negative rating action.
Lower Consolidated Leverage, Holdco Debt: Fitch estimates VRL's
proportionately consolidated EBITDA net leverage to remain at
around 3.5x over the next two years. Holdco debt fell to around
USD5 billion as of FYE25, from USD9 billion as of FYE22, as VRL
focused on debt repayment instead of shareholder returns. Fitch
expects holdco debt to shrink by another USD1 billion by FYE27.
Improved Financial Discipline and Access: VRL has undertaken
proactive liability management exercises over the last two years
that indicate an improvement in financial discipline. Funding
access has also improved, as evident from the proposed issuance and
USD1.1 billion of syndicated loan facilities it has raised so far
in FY26, at interest cost of around 9% or lower, significantly
lower than rates incurred on several past loans.
Diversified Operations; Cyclical Industry: VRL's rating reflects
its commodity diversification, with zinc, aluminium, and oil and
gas contributing around 40%, 40% and 10%, respectively, to FY25
operating EBITDA. However, the prices of most of these minerals
tend to move sharply and in the same direction, partly offsetting
the diversification benefit. The rating also reflects benefits from
the generally low-cost position of VRL's zinc mining assets in
India. The assets have a modest weighted-average reserve mine life
of around 10 years, shorter than that at many higher-rated peers.
Peer Analysis
VRL is rated at the same level as gold producer Eldorado Gold
Corporation (B+/Stable) and Indonesia-based conglomerate PT Indika
Energy Tbk (Indika, B+/Stable), whose main asset is a large thermal
coal mine in Indonesia. VRL has larger EBITDA scale and greater
commodity diversification than the two peers. The majority of VRL's
mining assets owned through VLTD have attractive cost positions
that are generally in the first half of their respective cost
curves. However, VRL's rating is weakened by its governance and
group structure.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for VRL
- London Metal Exchange prices at around USD2,700/tonne (t) and
USD2,625/t for zinc over FY26 and FY27, respectively; and
USD2,500/t for aluminium for these two years.
- Brent crude oil prices at USD68/barrel (bbl) in FY26 and
USD65/bbl in FY27.
- Annual capex of USD2.0 billion-2.4 billion during FY26-FY27.
- Volume growth across various segments based on capex-led new
capacities ramping up.
- Average annual dividend received by VRL from operating companies
at around USD750 million during FY26-FY27.
Recovery Analysis
The recovery analysis assumes that VRL's stake in its main listed
subsidiary, VLTD, would be liquidated in a bankruptcy. To calculate
the liquidation value of VRL's 56% stake in VLTD, Fitch refers to
the 25th percentile of VLTD's market capitalisation during
2015-2024 to incorporate the risk of a weaker valuation at the time
of liquidation. Fitch takes off 10% from the enterprise value to
account for administrative claims, such as bankruptcy and
associated costs.
Fitch includes the inter-company loan of around USD417 million from
subsidiary Cairn India Holdings Limited and the USD5.1 billion of
holdco debt at VRL as of FYE25 to estimate recoveries (end-August
2025: USD4.6 billion).
The assumptions result in a recovery rate corresponding to a
Recovery Rating of 'RR3'. However, VLTD is listed in and mainly
operates in India, which Fitch classifies under the Group D of
jurisdictions, capping the Recovery Rating for VRL's senior
unsecured notes at 'RR4'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- VRL's proportionately consolidated EBITDA net leverage increases
above 4.5x for a sustained period.
- VRL's holdco coverage (sustainable dividend + brand fees/gross
interest) reduces below 2.0x for a sustained period.
- Adverse regulatory action, materialisation of contingent
liabilities, and signs of weakening liquidity, funding access or
financial discipline.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A sustained record of disciplined and predictable financial
policies.
- VRL's proportionately consolidated EBITDA net leverage decreases
below 3.2x for a sustained period.
Liquidity and Debt Structure
VRL Holdco has USD1.2 billion of debt due in the rest of FY26 and
FY27 as of end-August 2025, including the USD417 million loan from
Cairn India. Pro forma for the proposed issuance and refinancing,
these maturities will reduce to USD669 million. Fitch expects VRL
to meet these liquidity needs through refinancing, and dividends
and brand fees from operating subsidiaries. VRL's financial access
has not been affected so far due to the allegations but could
weaken in case of regulatory action. In that case, Fitch thinks VRL
could delay the repayment of the intercompany loan or raise cash
through asset sales to support liquidity.
Issuer Profile
UK-based VRL acts as a group financing vehicle and a holding
company for diversified metal and mining businesses held under its
56.4% stake in VLTD. Fitch estimates that the zinc, aluminium, and
oil and gas segments contributed almost 90% of VRL's Fitch-adjusted
consolidated EBITDA of around USD5.4 billion in FY25.
Date of Relevant Committee
13 August 2025
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
VRL's 66% parent, Vedanta Inc, is a private company for which Fitch
does not have financial information. Therefore, Fitch is unable to
assess risk of support from VRL for Vedanta Inc., in case of
financial difficulty.
VRL has not paid any substantial dividends to Vedanta Inc. and
instead has focused on debt reduction. Nonetheless, Fitch assumes
higher dividends, which Fitch thinks reasonably incorporates the
risk of higher payouts. This has enabled us to rate VRL, despite
lack of detailed information on parent.
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
VRL has an ESG Relevance Score of '4' for Group Structure due to
its complex group organisation, which has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
VRL has an ESG Relevance Score of '4' for Governance Structure due
to its smaller board of directors than peers, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery
----------- ------ --------
Vedanta Resources
Finance II Plc
senior unsecured LT B+ New Rating RR4
VEDANTA RESOURCES: Moody's Rates New Senior Unsecured Bonds 'B2'
----------------------------------------------------------------
Moody's Ratings has assigned a B2 rating to Vedanta Resources
Limited's (VRL) proposed senior unsecured bonds to be issued by
Vedanta Resources Finance II Plc, which are guaranteed by VRL. The
bond proceeds will be used to refinance existing debt. The outlook
remains stable for all entities.
Bond proceeds will be used for refinancing the company's existing
$550 million private credit facility (PCF) due April 2026, which
has an interest rate of 18%. Any shortfall for the repayment of the
PCF will be met out of the company's existing syndicated bank
facility, of which about $250 million remains available.
"The refinancing of higher cost debt coupled with a more favorable
interest rate environment should improve VRL's interest coverage
ratio as measured by adjusted EBIT/interest expense to about 2.5x
by fiscal 2027 (financial year ending March 2027), from 1.9x for
fiscal 2025," says Nidhi Dhruv, a Moody's Ratings Vice President
and Senior Credit Officer, and lead analyst for VRL.
The proposed notes are rated at the same level as the existing
senior unsecured notes issued by Vedanta Resources Finance II Plc,
and guaranteed by VRL. VRL's senior unsecured bonds are rated B2,
one notch lower than the B1 CFR, reflecting structural
subordination of the holding company's bondholders to creditors at
the rest of the group. Furthermore, majority of the debt at the
operating companies is secured. Moody's estimates the operating
company's claims are around 80% of total consolidated claims as of
March 2025, with the remaining claims distributed across VRL and
its intermediate holding companies that have a direct shareholding
in Vedanta Limited (VDL).
RATINGS RATIONALE
The company's B1 CFR reflects its large-scale and diversified
low-cost operations; exposure to a wide range of commodities such
as zinc, aluminum, iron ore, oil and gas, steel and power; strong
position in key markets, enabling it to command a pricing premium;
and history of relative margin stability through commodity cycles.
These strengths are counterbalanced by its complex organizational
structure, with the company owning less than 100% of its key
operating subsidiaries, and its historically weak financial
management and liquidity.
VRL's recent liability management initiatives – which encompass
debt reduction and refinancing using proceeds from newly issued
bonds, dividends received from subsidiaries and proceeds from the
sale of stakes in subsidiaries – have led to significant debt
reduction and extension of debt maturity profile at the holding
company. Debt at VRL's holding company reduced to $4.8 billion as
of June 2025 from $9.1 billion as of March 2022.
Lower debt at VRL holding company also results in reduced reliance
on dividends from the operating companies. Moody's expects the
holding company to receive dividends of $700 million - $800 million
going forward, a reduction from $1.5 billion in fiscal 2024.
Despite lower dividends, Moody's expects the coverage ratio of
dividends and management fees from operating companies to interest
expense at the holding company will remain over 2x.
Vedanta has emerged as the top bidder for Jaiprakash Associates
Limited (JAL). The potential acquisition can be accommodated at its
current ratings due to staggered payments that mitigate financial
strain. However, execution risks remain, as JAL operates in
unrelated and largely loss-making segments, which may require
significant investment to turn around. JAL operates in power,
cement, real estate and fertilizer segments and also benefits from
a land bank in Noida, Uttar Pradesh.
The transaction also comes at a time when VRL is facing regulatory
hurdles in its demerger process. While Moody's expects the demerger
and potential acquisition will proceed separately, the acquisition
introduces additional complexity.
OUTLOOK
The outlook is stable, reflecting Moody's expectations that VRL's
credit profile will remain commensurate for its B1 corporate family
rating and the company will continue to address its debt maturities
in a timely manner.
LIQUIDITY
VRL is a pure holding company with operations held at various
subsidiaries and step-down subsidiaries. Its cash sources comprise
dividends and management fees for the use of the Vedanta brand from
its subsidiaries. Following the planned notes issuance, VRL's cash
sources should be largely sufficient to cover its interest and debt
servicing needs through September 2026.
VRL has demonstrated a track record of upstreaming dividends from
its operating subsidiaries. Even so, liquidity at its operating
subsidiaries has, over the past few years, thinned substantially.
As of June 2025, its operating subsidiaries held around $2.6
billion in cash, down from $4.2 billion at March 2023.
Liquidity at VRL's subsidiaries will remain weak as cash flows are
used for dividends requiring them to continue borrowing to fund
their capital expenditure, as well as roll over debt and retain
their reliance on short-term working capital facilities.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's could upgrade VRL's ratings if its financial metrics remain
strong, including (1) leverage staying below 4.0x; and (2)
EBIT/interest coverage above 2.5x on a sustained basis. A reduction
in overall gross debt, coupled with a consistent record of
proactive refinancing and effective liquidity management at the
consolidated and holding company levels, will be essential for an
upgrade.
Downward ratings pressure could emerge if commodity prices soften
substantially and reduce VRL's EBITDA and free cash flow
generation, resulting in a sustained weakening of its credit
metrics, with adjusted debt/EBITDA above 4.5x or EBIT/interest
coverage below 1.5x on a sustained basis. Any difficulties
encountered by the holding company in accessing cash flows from the
operating companies, or a reduction below 1.5x in the coverage
ratio of opcos dividend plus management fees to Holdco interest,
will also result in a downgrade.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Mining published
in April 2025.
COMPANY PROFILE
Vedanta Resources Limited (VRL) is headquartered in London and is a
diversified resources company with interests mainly in India. Its
main operations are held by Vedanta Limited (VDL), a 56.4%-owned
subsidiary. Through VRL's various operating subsidiaries, the group
produces oil and gas, zinc, lead, silver, aluminum, iron ore, steel
and power. In September 2023, VDL announced its demerger into six
separate listed entities, subject to the relevant approvals. Its
shareholders will receive one share in each of the six companies
upon completion of the demerger, while VDL and the five companies
will have the same shareholding; i.e. VRL will hold a 56.4% stake
in VDL and the five new companies.
VRL delisted from the London Stock Exchange in October 2018 and is
now wholly owned by Volcan Investments Ltd. VRL's founder and
chairman Anil Agarwal and his family are Volcan's key shareholders.
For the fiscal year ended March 2025, VRL generated revenues of
$18.2 billion and an adjusted EBITDA of $5.6 billion.
===============
X X X X X X X X
===============
[] BOOK REVIEW: Management Guide to Troubled Companies
------------------------------------------------------
Taking Charge: Management Guide to Troubled Companies and
Turnarounds
Author: John O. Whitney
Publisher: Beard Books
Softcover: 283 Pages
List Price: $34.95
Order a copy today at:
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Review by Susan Pannell
Remember when Lee Iacocca was practically a national hero? He won
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as troubled that humor columnists joked their kids grew up thinking
the corporate name was "Ayling Chrysler." Whatever else Iacocca may
have been, he was a leader, and leadership is crucial to a
successful turnaround, maintains the author.
Mediagenic names merit only passing references in Whitney's book,
however. The author's own considerable experience as a turnaround
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name-dropping. While Whitney states that he "share[s] no personal
war stories" in this book, it was, nonetheless, written from inside
the "shoes, skin, and skull of a turnaround leader." That sense of
immediacy, of urgency and intensity, makes Taking Charge compelling
reading even for the executive who feels he or she has already
mastered the literature of turnarounds.
Whitney divides the work into two parts. Part I is succinctly
entitled "Survival," and sets out the rules for taking charge
within the crucial first 120 days. "The leader rarely succeeds who
is not clearly in charge by the end of his fourth month," Whitney
notes. Cash budgeting, the mainstay of a successful turnaround, is
given attention in almost every chapter. Woe to the inexperienced
manager who views accounts receivable management as "an arcane
activity 'handled over in accounting.'" Whitney sets out 50
questions concerning AR that the leader must deal with -- not
academic exercises, but requirements for survival.
Other internal sources for cash, including judiciously managed
accounts payable and inventory, asset restructuring, and expense
cuts, are discussed. External sources of cash, among them banks,
asset lenders, and venture capital funds; factoring receivables;
and the use of trust receipts and field warehousing, are handled in
detail. Although cash, cash, and more cash is the drumbeat of Part
I, Whitney does not slight other subjects requiring attention. Two
chapters, for example, help the turnaround manager assess how the
company got into the mess in the first place, and develop
strategies for getting out of it.
The critical subject of cash continues to resonate throughout Part
II, "Profit and Growth," although here the turnaround leader
consolidates his gains and looks ahead as the turnaround matures.
New financial, new organizational, and new marketing arrangements
are laid out in detail. Whitney also provides a checklist for the
leader to use in brainstorming strategic options for the future.
Whitney's underlying theme -- that a successful business requires
personal leadership as well as bricks and mortar, money and
machinery -- is summed up in a concluding chapter that analyzes the
qualities that make a leader. His advice is as relevant in this
1999 reprint edition as it was in 1987 when first published.
John O. Whitney had a long and distinguished career in academia and
industry. He served as the Lead Director of Church and Dwight Co.,
Inc. and on the Advisory Board of Newsbank Corp. He was Professor
of Management and Executive Director of the Deming Center for
Quality Management at Columbia Business School, which he joined in
1986. He died in 2013.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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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
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Information contained herein is obtained from sources believed to
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contact Peter Chapman at 215-945-7000.
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