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T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, November 14, 2025, Vol. 26, No. 228
Headlines
D E N M A R K
GENMAB A/S: S&P Assigns 'BB+' LongTerm ICR, Outlook Stable
WINTERFELL FINANCING: S&P Affirms 'B-' ICR & Alters Outlook to Neg.
F I N L A N D
CITYCON OYJ: S&P Lowers LongTerm ICR to 'B+', On Watch Negative
F R A N C E
BETCLIC EVEREST: S&P Affirms 'B+' ICR on Acquisition of Tipico
I R E L A N D
AQUEDUCT EUROPEAN 14: S&P Assigns B-(sf) Rating on Class F Notes
AQUEDUCT EUROPEAN 8: Fitch Assigns 'B-(EXP)sf' Rating on F-R Notes
ARINI EUROPEAN VII: S&P Assigns B-(sf) Rating in Class F Notes
BAIN CAPITAL 2025-3: S&P Assigns Prelim. B-(sf) Rating on F Notes
BBAM EUROPEAN VII: S&P Assigns Prelim. B-(sf) Rating on Cl. F Notes
CARLYLE EURO 2024-1: S&P Assigns B-(sf) Rating on Class E-R Notes
FIDELITY GRAND 2023-2: Fitch Rates Class F-R Debt 'B-sf'
HERA FINANCING 2024-1: S&P Raises Cl. F Notes Rating to 'B+(sf)'
NORTH WESTERLY X: Fitch Assigns 'B-sf' Final Rating on Cl. F Notes
PALMER SQUARE 2021-2: Fitch Assigns 'B-sf' Rating on Cl. F-R Notes
TRINITAS EURO VI: Fitch Assigns B-sf Final Rating on Cl. F-R Notes
T U R K E Y
GDZ ELEKTRIK: Fitch Affirms 'BB-' LongTerm Foreign Currency IDR
U N I T E D K I N G D O M
BUPL REALISATIONS: Creditor's Meeting Set for Nov. 26
D-FLY GLOBAL: FRP Advisory Appointed as Joint Administrators
DFLY TECHNOLOGY: Mercer & Hole Appointed as Joint Administrators
ENTAIN PLC: S&P Assigns 'BB-' Rating on New Senior Secured Notes
EUROHOME UK 2007-1: S&P Affirms 'BB+(sf)' Rating on Class B2 Notes
FOSSIL GROUP: Gets US & UK Approval on Restructuring
KING HOLDCO: S&P Assigns Prelim. 'B+' ICR on Acquisition by Apollo
PAVILLION CONSUMER 2025-1: S&P Assigns (P)'B' Rating on Cl. F Notes
SOPHOS INTERMEDIATE I: Fitch Affirms 'B' LongTerm IDR
TOWD POINT 2024-GRANITE 7: Fitch Cuts Rating on Cl. E Notes to 'B+'
X X X X X X X X
[] BOOK REVIEW: PANIC ON WALL STREET
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D E N M A R K
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GENMAB A/S: S&P Assigns 'BB+' LongTerm ICR, Outlook Stable
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S&P Global Ratings assigned its 'BB+' long-term issuer credit
ratings to Danish pharmaceutical company Genmab A/S and its 'BB+'
issue rating to Genmab's proposed $4.5 billion senior secured debt.
The recovery rating on the debt is '3'. S&P also assigned its 'BB-'
issue rating and '6' recovery rating to the group's proposed $1
billion unsecured notes due 2033.
The stable outlook indicates S&P's expectation that Genmab will
generate continued EBITDA growth, supported by its stable and
recurrent royalty revenue, product launches, the acceleration of
its commercial strategy, and positive dynamics in the biopharma
industry.
Genmab A/S is a biotechnology company that creates, develops, and
commercializes differentiated antibody therapeutics to treat cancer
and other serious diseases. In fiscal 2024, the company reported
revenue of $3.1 billion.
The group benefits from a high degree of stable recurring revenue
through royalties driven primarily by Darzalex, a blockbuster with
about 10% sales growth through 2026 and projected peak revenue in
2029 at $17.4 billion; a strong market position in oncology;
world-class antibody biology knowledge, and an established and
promising clinical pipeline. However, it has high product
concentration risk (with the top three royalty products accounting
for 69% of annual revenue), limited scale, and weaker pipeline
breadth than rated pharma peers.
The group plans to acquire Merus, a development-stage biotechnology
company, for $8.2 billion by raising a $1 billion senior secured
term loan A (TLA) due 2030, a $2 billion senior secured term loan B
(TLB) due 2032, $1.5 billion of senior secured notes due 2032, $1
billion of unsecured notes due 2033, and a $500 million revolving
credit facility (RCF) due 2030.
Genmab aims to acquire Merus, a development-stage biotechnology
company, for $8.2 billion. The group is looking to raise a $1
billion senior secured TLA due 2030, a $2 billion senior secured
TLB due 2032, $1.5 billion of senior secured notes due 2032, and $1
billion of unsecured notes due 2033. The group also expects to use
about $2.7 billion of cash from the balance sheet and raise a $500
million RCF due 2030.
Genmab benefits from the high degree of stable recurring revenue
through royalties primarily from Darzalex, a strong market position
in oncology, and an established and promising clinical pipeline,
partly offset by high product concentration. Genmab has high
product concentration, with its top three 3 accounting for almost
100% of annual revenue. Darzalex, its blockbuster drug for multiple
myeloma, generated about 65% of total sales in 2024, which
translates into low therapeutic diversity compared with that of
rated peers. Genmab enjoys a remarkable track record in oncology,
one of the fastest-growing and most profitable therapeutic fields
within biopharma. The company also has a track record of innovation
and delivery of new products thanks its solid research and
development (R&D) strategy and technological capabilities. Beyond
oncology, the group originated Kesimpta, a multi-sclerosis
blockbuster commercialized by Novartis. Although the group benefits
from an established and promising clinical pipeline comprising
differentiated and diversified biopharma drugs, S&P thinks the
pipeline is less diverse than that of other rated peers.
Importantly, the very significant royalty stream that Janssen
(previously J&J) is paying for Darzalex will plummet when the drug
loses exclusivity, necessitating substantial new growth channels.
S&P said, "We regard Genmab's business strategy to become a fully
integrated biotech company, increasing its focus on commercial
activities and maintaining all its R&D capabilities, as a positive
credit factor. The group is investing in expanding its
commercialization capabilities, which we think will allow the group
to capture more value from its proprietary technologies. While
Genmab has been highly successful as a science-focused biotech, it
has limited experience in large-scale commercialization and relies
on third parties as a route to market for its key products such as
Darzalex. Scaling up a commercial team could be challenging and
postpone some commercial or R&D initiatives. Although some
execution risks remain, the transition toward full vertical
integration started several years ago, with several achievements to
date in the key late-stage development and commercialization
steps.
"Our business risk assessment factors in Genmab's excellent market
exclusivity profile, with no risk of loss of exclusivity or loss of
royalty in the next three years. The group also benefits from an
established commercial relationship with leading pharmaceutical
companies providing revenue visibility and stability and product
innovation-driven collaborations. Furthermore, its pipeline
provides long-term visibility.
"Following the Merus acquisition, we forecast the adjusted EBITDA
margin will dip to 16%-25% in 2026 from about 38% in 2025, before
rising to close to 34.5% by 2027. We expect the Merus integration
to dilute margins for the overall group, because it will result in
negative EBITDA for the first two years following the transaction,
as Genmab will incur substantial late development costs and initial
commercialization expense. However, we expect strong revenue
contribution by 2027 from Merus' main drug, Petosemtamab, which
treats head and neck cancer. Similarly, we expect a positive
contribution to adjusted profitability from Merus by 2027 as
Petosemtamab's rollout progresses. Furthermore, we consider that
Merus' product portfolio is complementary to Genmab's, allowing the
latter to boost its pipeline and technological capabilities.
Overall, we expect Genmab to post strong growth of close to 15% in
2026 and 21.5% in 2027, driven by continued royalties from the
group's main drugs such as Darzalex, Kesimpta, and Tepezza,
alongside a contribution from Petosemtamab."
Genmab's S&P Global Ratings-adjusted leverage will likely stabilize
near 2x post-transaction. S&P said, "Our ratings incorporate the
company's financial policy commitment to maintain a solid high
speculative-grade profile and deleveraging following the
acquisition of Merus. Thanks to steady growth and the huge royalty
stream allowing for substantial discretionary prepayments, we
expect debt to EBITDA to fall sharply to about 2.2x in 2027 from
4.3x at the end of 2026. Our debt calculation includes the Danish
krone (DKK) 1 billion of adjustments for lease liabilities."
S&P said, "We view positively in our assessment Genmab's ability to
generate strong free operating cash flow (FOCF), forecast at about
DKK6.0 billion for 2025, DKK4.2 billion in 2026, and DKK 6.3
billion in 2027. The group's cost structure is stable, with R&D as
the largest cost (about 40% of revenue). Its R&D spending is
committed up to the next decision point for each project, which
means that R&D costs are fixed in the near term but will be
variable beyond then. Thanks to its asset-light business model, the
group's strong cash flow capabilities with limited capital
expenditure (capex) and working capital needs will provide it with
ample financial flexibility and the capacity to dramatically reduce
debt leverage.
"The stable outlook indicates our expectation that Genmab will post
continued EBITDA growth, supported by its stable and recurrent
royalty revenue, product launches, the acceleration of its
commercial strategy, and positive dynamics in the biopharma
industry. The outlook also reflects our view that the group will
integrate Merus, reinforcing its biotech pipeline. This should
allow Genmab to maintain adjusted debt to EBITDA of about 4.0x in
2026 before decreasing to 2.2x in 2027, while maintaining a prudent
financial policy, in line with the stated commitment to quickly
deleverage.
"We could lower the rating if Genmab's performance deviates from
our base-case such that the company fails to maintain adjusted debt
to EBITDA below 5.0x in 2026 and 4.0x in 2027. Unforeseen
competition from biosimilar, an unexpected drop in royalties for
Darzalex before patent expiry, or operational missteps regarding
the integration of Merus could put pressure of the group's EBITDA
and increase leverage. Furthermore, we could lower the rating if we
regard Genmab's financial policy as more aggressive than in our
base-case scenario.
"An upgrade would depend on Genmab demonstrating successful
operations following the integration of Merus, combined with a
commitment from management to a conservative financial policy. We
could take a positive rating action if the group demonstrates a
strong improvement in EBITDA margins above our base-case scenario,
pushing adjusted leverage comfortably and sustainably below 3.0x,
which we do not anticipate until 2027."
WINTERFELL FINANCING: S&P Affirms 'B-' ICR & Alters Outlook to Neg.
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S&P Global Ratings revised its outlook on Denmark-based building
materials distributor Winterfell Financing S.a.r.l. (the Stark
Group's reporting entity) to negative from stable and affirmed its
'B-' long-term issuer and issue credit ratings on Winterfell.
The negative outlook indicates that S&P could lower the rating if
the market recovery does not materialize as expected, keeping
leverage elevated and free cash flow generation negative, while
weighing on liquidity.
The delayed recovery of Stark Group's business, especially in
Germany, suggests that although it will underperform our previous
forecast in fiscal 2025, operating performance is likely to show a
moderate recovery from 2026. Despite modestly supportive conditions
in the Nordics and in the U.K., the overall market remains
difficult, especially in Germany. S&P said, "Therefore, we estimate
that revenue would remain broadly flat in fiscal 2025, at about
EUR7.6 billion-EUR7.8 billion, rather than growing by about
2.0%-2.5%, as we had previously forecast. We now project moderate
revenue growth to EUR8.0 billion-EUR8.1 billion (4.0%-4.4%) in
fiscal 2026, mainly because Germany's infrastructure program is
expected to have a positive impact on customer sentiment and the
overall economic environment, fueling a modest recovery in volumes,
albeit from low levels." In addition, volume development in the
Nordics and the U.K. is predicted to be broadly supportive,
although the U.K. outlook is clouded by the uncertainty related to
the November budget.
Stark Group's liquidity is adequate, but it has upcoming
refinancing needs. The company had EUR203 million in cash on its
balance sheet on April 30, 2025, as well as having EUR235 million
available under its EUR371 million committed revolving credit
facility (RCF). It has also contracted to dispose of some noncore
assets in 2026, which will bolster its liquidity. That said, the
company will need to refinance both its RCF, which matures in
November 2027, and its EUR1,795 million term loan, which matures in
May 2028. S&P said, "We anticipate that the terms of the
refinancing will depend on Stark Group's operating performance and
its progress toward reducing debt, and thus leverage, in fiscal
2026. We expect that the company will refinance well ahead of
maturity and before the liabilities become short term."
Adjusted EBITDA margin is expected to improve to about 4.8%-5.0% in
fiscal 2026, as restructuring costs fall and the company benefits
from its previous cost-saving initiatives. The company achieved
cost savings of about EUR230 million between fiscals 2023 and 2025,
by reducing its workforce and the merger or closure of over 125
branches in Germany and the U.K. S&P said, "That said, we estimate
that the cost of its various initiatives to preserve margins,
combined with lower volumes due to market conditions, will cause
its adjusted EBITDA margin to drop to an estimated 3.5%-3.9% in
fiscal 2025, from 4.2% in fiscal 2024. The company expects to save
an additional EUR40 million from implementing new cost-out
initiatives in fiscal 2026."
S&P said, "Although we forecast an increase in adjusted leverage in
fiscal 2025, we expect a slight improvement from fiscal 2026. We
estimate that lower-than-expected EBITDA, combined with an increase
in debt driven by higher factoring utilization, will cause adjusted
leverage to rise to 11.4x-11.8x in fiscal 2025, from 9.7x in fiscal
2024. Under our previous base case, we projected that adjusted debt
to EBITDA would be 7.9x-8.2x in fiscal 2025. As profitability
recovers in fiscal 2026, we anticipate some improvement in
leverage, although it will remain elevated at 8.7x-9.1x.
"We estimate that adjusted free operating cash flow (FOCF) after
lease payments will be negative by EUR265 million-EUR275 million in
fiscal 2025 and negative by EUR170 million-EUR180 million in fiscal
2026. Stark Group made considerable use of factoring in fiscal
2025, which depressed its adjusted FOCF. For instance, factoring
amounted to EUR253 million as of April 30, 2025. Although we
forecast that FOCF will improve in fiscal 2026, it is likely to
remain negative at EUR40 million-EUR50 million.
"Stark Group's capital expenditure (capex) is forecast to reach
about EUR150 million-EUR160 million in fiscal 2025 and drop to
EUR120 million-EUR130 million in fiscal 2026. We believe that
working capital optimization and the increased use of factoring in
fiscal 2025 will enable the company to maintain positive working
capital of about EUR160 million-EUR170 million, although we
forecast that it will turn modestly negative in fiscal 2026 to
facilitate business growth.
"The negative outlook indicates that we could lower the rating if
the market recovery does not materialize as expected, keeping
leverage elevated and free cash flow generation negative, while
weighing on liquidity."
S&P could lower the rating if:
-- The company's leverage remains elevated over a long period,
such that we no longer consider the company's capital structure to
be sustainable. This could occur if the business fails to recover
enough to support the company's cash flow generation and so enable
it to reduce its leverage; or
-- A delay in refinancing of either the RCF or the term loan turns
these debts into short-term liabilities. Liquidity pressure could
be compounded by the group's persistent cash burn, which has
weakened its cash balances and increased utilization of its RCF and
factoring lines.
S&P said, "We could revise the outlook to stable if operating
performance recovers more quickly than we currently assume, so that
Stark Group can sustain positive FOCF after lease payments. An
outlook revision to stable also depends on the company addressing
its upcoming maturities well ahead of time."
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CITYCON OYJ: S&P Lowers LongTerm ICR to 'B+', On Watch Negative
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S&P Global Ratings lowered its long-term issuer credit rating on
Nordic shopping center owner Citycon Oyj to 'B+' from 'BB', its
issue rating on its senior unsecured notes to 'BB-' from 'BB+', and
its issue rating on the hybrid notes to 'B-' from 'B'. S&P also
revised down itsstand-alone credit profile on Citycon to 'bb-' from
'bb'. S&P placed all issuer and issue ratings on Citycon on
CreditWatch with negative implications.
S&P said, "The CreditWatch placement reflects that we could lower
the ratings upon a further increase in G City's stake with the
ongoing tender offer, as it will likely deteriorate our view of
Citycon's insulation from the rest of the group.
"G City's opportunistic additional stake purchase has changed our
view and established effective control over Citycon. As of Nov. 3,
G City owned about 57% of Citycon and we now consider Citycon as
part of the group of its ultimate parent, Norstar. Before this
additional share purchase, we did not consider G City to have
effective control over Citycon, mostly due to its stake being under
50% (49.7% as of Aug. 30, 2025), Citycon's independent board, and
some relatively supportive measures such as dividend suspension and
equity raises (for more information, see “Citycon Oyj Downgraded
To 'BB' On Management & Governance; Outlook Stable”, Sept. 11,
2025). As we have said previously, an active increase of G City's
stake in Citycon to more than 50% voting rights, or any indication
of more active control from G City, would have negative credit
implications. This sizable stake purchase indicates a shift in G
City's control in our view, also triggering a mandatory purchase
offer and a potential delisting of Citycon.
"We now assess Citycon's management and governance as negative,
from moderately negative previously, which has a two-notch impact
on the company's stand-alone credit profile (from a one-notch
impact previously). This reflects how G City's reinforced presence
could influence Citycon's decision-making in terms of creditors'
interests, even if it has not been the case so far.
"We now consider Citycon a strategically important subsidiary of
Norstar, although we think its insulation warrants up to two
notches of uplift relative to our group credit profile on its
parent. The establishment of effective control triggers a group
analysis including of G City and Norstar, both having a
significantly lower creditworthiness than Citycon. Citycon forms a
sizable portion of the group's asset base (about 40% on a fully
consolidated basis) and is likely to remain an important part of
the group's long-term strategy, but we do not expect a strong
likelihood of support from Norstar to Citycon because we think
opportunistic arbitrages cannot be ruled out. However, we treat
Citycon as an insulated subsidiary of the group because we view its
funding and operating performance as independent from the group.
Citycon maintains its own reporting; it does not commingle funds,
assets or cash flows; and the group can rely on other operations to
service its debt and there are no expected cross-default with other
entities of the group. These elements warrant up to one notch of
uplift from our group credit profile assessment. In addition, we
think there are minority shareholders at Norstar with significant
holdings and a quite independent board at Citycon to prevent a
potential further deterioration of its creditworthiness. These
additional elements warrant an additional notch of uplift from our
group credit profile assessment. Still, should the ongoing takeover
offer result in an increase in G City's stake, it could have
additional negative implications for our view of Citycon's
insulation and therefore the ratings.
"We lowered the issue ratings on the senior unsecured bonds two
notches, in line with the ICR, but lowered the hybrid instrument
rating only one notch, to 'B-'. The recovery prospects for senior
unsecured bonds remain substantial, and our '2' recovery rating
(which is unchanged) leads to a one-notch uplift from the ICR. The
hybrid instrument ratings reflect the application of our criteria
and our assessment of a moderate link between Citycon and G City.
We think that additional loss-absorbing capacity is limited.
Therefore, we apply a three-notch adjustment to the hybrid
instrument ratings from the company's stand-alone credit profile of
'bb-', including two notches for subordination and one notch for
optional deferability, in line with our criteria. Should our view
on the parent-subsidiary link change, we could apply our notching
of the hybrid instruments from the issuer credit rating instead of
the stand-alone credit profile. We maintained our intermediate
equity content on the instruments until 2030, 2031, and 2034
respectively, when the residual time until the effective maturity
falls to 15 years.
"We understand that the transaction does not trigger any change of
control covenant clause at this stage, but we will monitor closely
the liquidity headroom and the availability of credit lines over
the next 12 months. We understand there is no change of control
triggered for the company's existing bonds and hybrids because the
main shareholder remains G City. We will monitor Citycon's
liquidity position over the next 12 months, particularly the
availability of the revolving credit line, in the context of G
City's potential increase in shareholding. This is because the
facility is paramount in maintaining an appropriate liquidity
buffer at Citycon level, especially as EUR150 million will come due
in September 2026 and a further EUR142 million in February 2027.
"We expect Citycon to continue performing in line with our forecast
following a resilient first nine months of the year . The company
has performed broadly in line with our base-case scenario for the
year, with sound like-for-like net rental growth of 5.7% in the
first nine months, stable retail occupancy of 95.2%, positive
footfall and tenant sales evolution, and even slightly positive
valuation change (+1.1% based on external valuations). We have
revised our valuation assumptions to flat over our forecast period
against negative 2.5% previously. The company hasn't announced any
disposals so far in 2025, but about EUR61 million was reported as
assets held for sale, which we have integrated in our base-case for
2025. For 2026, we forecast EUR100 million of disposals. We now
expect a debt-to-debt-plus-equity ratio of 54%-56% over our
forecast period, from 56.7% at end-June 2025, while our debt to
EBITDA should be sustainably below 11x, from 11.1x at end-June.
"The CreditWatch placement reflects the likelihood that we could
lower our rating on Citycon by at least one notch should G City's
public purchase offering result in an increase in its current
stake. A change in Citycon's board of directors, leading us to
question its independence, or movements in cash flows, assets, or
funding within the group could also prompt us to lower our ratings.
In these cases, we could revise our insulation assessment by at
least one notch."
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BETCLIC EVEREST: S&P Affirms 'B+' ICR on Acquisition of Tipico
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S&P Global Ratings lowered its stand-alone credit profile (SACP) on
France-based gaming operator Betclic Everest Group S.A.S. (Betclic)
to 'bb-' from 'bb', S&P affirmed the long-term issuer credit rating
at 'B+' as the creditworthiness of Lov Group, the ultimate parent,
remains broadly unchanged after the transaction.
S&P said, "The stable outlook reflects our expectation that Betclic
will integrate Tipico smoothly, increasing its revenue to EUR3.46
billion and S&P adjusted EBITDA to close to EUR790 million in 2026,
while improving its margins to 22.8% from the historical average of
about 19%. We expect S&P Global Ratings-adjusted leverage to spike
to 4.6x after the transaction on a combined basis but should
benefit from the business growth on all geographies in the years
after the transaction. We anticipate that leverage at Lov Group
will remain stable."
Banijay group, the owner of France-based gaming operator Betclic
Everest Group S.A.S. (Betclic), has signed a binding agreement to
acquire the Germany-based gaming operator Tackle S.a.r.l. (Tipico);
for a total consideration of EUR4.8 billion partly financed with
EUR3 billion fully secured debt package.
The proposed acquisition enhances Betclic's geographic
diversification, supported by Tipico's leading position in strictly
regulated German and Austrian markets and improves the group's
omni-channel presence. As a result, S&P raises its assessment of
Betclic's business risk profile to fair.
Pro forma the transaction, S&P expects Betclic will generate EUR380
million annual free operating cash flow (FOCF) after leases in
2026; while S&P Global Ratings-adjusted leverage is expected to
increase from a forecast 1.7x in 2025 to 4.6x in 2026 before
decreasing to 4.2x in 2027.
S&P said, "Betclic's proposed combination with Tipico materially
increases S&P Global Ratings-adjusted debt to EBITDA to 4.6x in
2026, leading us to lower our SACP assessment on Betclic. On Oct.
28, 2025, Banijay group--the owner of Betclic--has signed a binding
agreement to acquire the German and Austrian leading sports betting
and online operator Tipico for a total consideration of about
EUR4.8 billion to be financed with a mix of equity and debt. As
part of the deal, Tipico's current shareholders will rollover their
shares into the combined entity. Therefore, after the transaction
Banijay group will remain a majority shareholder with 65% of the
combined group; Tipico founders will retain 22%; CVC Capital
Partners 6% (current Tipico sponsor); Betclic's chairman 6%; and
Tipico managers 1%. As part of the transaction, Betclic will raise
EUR3 billion of debt which will be used to finance the cash-portion
of the acquisition and refinance Tipico's existing EUR1.9 billion
debt. Betclic will upsize its revolving credit facility (RCF) from
EUR60 million to EUR130 million to align with its larger size,
which we expect will remain undrawn over our forecast horizon. We
expect S&P Global Ratings-adjusted leverage to stand at 4.6x at
end-2026 assuming 12 months contribution from Tipico (acquisition
expected to be completed mid-2026) and to decrease to 4.2x in 2027.
This represents a material increase compared with Betclic's
historical and current levels, because we expect S&P Global
Ratings-adjusted debt to EBITDA of about 1.7x at the end of 2025
(Betclic stand-alone). That said, we think that the partial equity
financing of the transaction is positive. Our adjusted net debt
calculation in 2026 includes EUR324 million of lease liabilities,
about EUR345 million of cash and approximately EUR35 million of
additional liabilities related to player claims that Tipico
provisioned."
The combination with Tipico improves Betclic's business profile
through better diversity, scale, and profitability. The combined
group will more than double its revenue size with expected topline
at EUR3.46 billion following the transaction year, compared to
EUR1.57 billion expected at end-2025 for Betclic stand-alone.
Additionally, Tipico brings diversity in terms of geographic
presence, with operations in Germany and Austria (through Admiral).
S&P said, "We expect the combined company to generate about 24% of
its revenue from France, 41% from Germany, 14% from Portugal, and
the rest from Austria, Poland, and Cote d'Ivoire. We view this new
geographic split as positive as it ensures resiliency in case of
adverse changes in regulatory framework in the different countries,
as recently happened in France with the elevated taxing scheme from
July 1, 2025, with a 4.4% increase in sports betting taxes and 6.6%
tax increases on poker. In Germany we do not expect material
changes in regulations in the near term given the already tight
regulations which ensures Tipico a leading market position with 58%
market share. Additionally, Tipico brings diversity through its
channels as it operates 1,250 outlets (mainly franchises) compared
to the full online model of Betclic. Going forward Betclic will
benefit from Tipico's expertise and experience to open retail shops
on its other jurisdictions on the medium term. Lastly, we expect
both entities to enhance their digital and technological edge
thanks to each other's expertise, while keeping both Betclic and
Tipico's platforms separated as a first step, indicating low
integration risk. These elements improve Betclic's business risk
profile and provide the group with a competitive advantage and
scale effect leading to potential revenue, cost, and capital
expenditure (capex) synergies. Our S&P Global Ratings-adjusted
profitability does not include synergies but still translates into
expected margins of 22.8% in 2026 and 23.4% in 2027 up from a lower
average of 19.0% in the past."
The absence of major sports events in certain years could reduce
the group's growth given the 82% exposure to sports betting for the
combined company. Tipico's performance has been slightly sluggish
in the year-to-date 2025 with revenues reaching EUR612.8 million in
first-half 2025, compared to EUR633.2 million in 2024. However, the
acquisition of Admiral from Sept. 1, 2025, will enhance Tipico's
revenue base going forward, as on a stand-alone basis Admiral
generated about EUR345 million in full year 2024. Performance in
2025 is somewhat affected by the absence of major global and local
sports events, impacting the number of active players for Tipico as
testified by the 3% revenue decline in first-half 2025. Betclic
demonstrated more resiliency and has outperformed its previous
record year with topline reaching EUR763.8 million in the
first-half 2025 compared to EUR676.4 million in 2024. S&P said,
"Overall, we expect that the FIFA World Cup will support the
topline in 2026, which, coupled with the combination of the two
groups and the sound performance of both entities in their own
markets, should result in revenues reaching EUR3.46 billion in 2026
and EUR3.68 billion in 2027 from an expected EUR1.57 billion at
end-2025 for Betclic stand-alone. In line with topline growth, we
expect S&P Global Ratings-adjusted EBITDA to expand to close to
EUR790 million in 2026 and further up to EUR860 million in 2027
from an expected EUR356 million in 2025 for Betclic stand-alone."
S&P said, "We expect Betclic to post EUR380 million annual FOCF
after leases post transaction, thanks to relatively low capex. We
expect capex of about EUR85 million-EUR95 million annually after
the transaction, which represents about 2.5% of total revenue. We
think that a material portion of the investments are related to
capitalized research and development costs primarily to develop new
games, while the remaining relate to the retail network. We
anticipate an increased interest burden of about EUR215 million
annually, including interest on the EUR600 million term loan B
(TLB) due 2031 and on the EUR3,000 million new debt. Overall, we
forecast FOCF after leases of approximately EUR380 million in 2026
and EUR440 million in 2027. This should translate to adjusted FOCF
to debt of about 10%-15% in 2026-2027.
"Betclic's leverage target remains unchanged, below 3.0x in company
terms, and should be achieved one to two years after the
transaction. This corresponds to about 3.5x in our S&P Global
Ratings-adjusted debt-to-EBITDA leverage metric. We expect the
group to meet its financial policy in 2028 at the earliest, which
should prevent an additional increase of leverage at Betclic. We
note Betclic's high cash conversion makes it the major contributor
to Banijay group's dividend payments to its shareholders with a
stated policy of a minimum EUR200 million per year notably
depending on performance. We include EUR400 million of dividend
distribution per year from 2026 in our base case, which should be
sufficient for Banijay group to finance call options on an
additional 7% stake of the combined group which could be exercised
over 2027-2029.
"Our rating on Betclic is capped at 'B+' given our view of the
creditworthiness of its ultimate parent, Lov Group. According to
the agreement, Betclic will be 65% owned by Banijay group, which
itself is controlled by Lov Group. The latter holds about 45% of
the capital and 71% of the voting rights in Banijay group. We view
Lov Group as the ultimate parent because it has significant
influence over Banijay group's strategy and financial
policy--Betclic and Banijay are two of its main operating assets.
Lov Group used debt for part of its investment in Banijay group,
and owns and operates luxury hotels, which are largely debt
financed. Mainly because of the higher debt burden, we assess the
group credit profile for Lov Group at 'b+' and cap the rating on
Betclic at this level. Although we expect Lov Group to have a
largely positive net asset value, we consider that it needs
dividends paid by Banijay group to service its interest payments.
"The stable outlook reflects our expectation that Betclic will
integrate Tipico smoothly, increasing its revenues to EUR3.4
billion and adjusted EBITDA to close to EUR790 million in 2026,
while improving its margins to 22.8% from historical average of
about 19%. We expect S&P Global Ratings-adjusted leverage to spike
to 4.6x after the transaction on a combined basis but should
benefit from the business growth on all geographies in the years
after the transaction. We also anticipate that leverage at Lov
Group will remain stable.
"We could lower our issuer credit rating on Betclic if Lov Group
performs worse than in our current base case or adopt a more
aggressive financial policy such that its leverage deteriorates
from the current level, thus likely constraining Betclic's
deleveraging trajectory."
Although this would not result in a downgrade, S&P could revise
down its assessment of Betclic's SACP if:
-- S&P Global Ratings-adjusted debt to EBITDA approached 5.0x;
and
-- S&P Global Ratings-adjusted FOCF to debt decreased toward 5%.
Upside would also hinge on the company and its parent's financial
policy that focuses on strengthening its credit metrics, as well as
on S&P's view of the improving credit quality of the parent.
Although this would not result in an upgrade, S&P could revise up
its assessment of Betclic's SACP if the group integrates Tipico
smoothly leading to a clear deleveraging trajectory such that:
-- S&P Global Ratings-adjusted debt to EBITDA reduced well-below
4.0x; and
-- S&P Global Ratings-adjusted FOCF to debt remained in line with
current levels at 10%-15%.
=============
I R E L A N D
=============
AQUEDUCT EUROPEAN 14: S&P Assigns B-(sf) Rating on Class F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Aqueduct European
CLO 14 DAC's class A loan and class A, B, C, D, E, and F notes. At
closing, the issuer also issued unrated class Z1, Z2, and Z3, and
subordinated notes.
The ratings assigned to Aqueduct European CLO 14 DAC's notes and
loan reflect our assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes and loan through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,810.79
Default rate dispersion 474.27
Weighted-average life (years) 5.18
Weighted-average life (years) extended
to cover the length of the reinvestment period 5.18
Obligor diversity measure 145.68
Industry diversity measure 23.46
Regional diversity measure 1.28
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 1.30
Target 'AAA' weighted-average recovery (%) 35.92
Target weighted-average spread (net of floors, %) 3.75
Target weighted-average coupon (%) 8.00
Rationale
Under the transaction documents, the rated notes and loan will pay
quarterly interest unless a frequency switch event occurs.
Following this, the notes and loan will switch to semiannual
payments. The portfolio's reinvestment period will end
approximately 4.7 years after closing.
S&P said, "The portfolio is well diversified, primarily comprising
broadly syndicated speculative-grade senior secured term loans and
bonds. Therefore, we have conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we modeled a target par of EUR400
million. We also modeled the target weighted-average spread
(3.75%), the covenanted weighted-average coupon (5.50%), and the
covenanted weighted-average recovery rates calculated in line with
our CLO criteria for all classes of notes and loan. We applied
various cash flow stress scenarios, using four different default
patterns, in conjunction with different interest rate stress
scenarios for each liability rating category.
"Until the end of the reinvestment period on July 25, 2030, the
collateral manager may substitute assets in the portfolio as long
as our CDO Monitor test is maintained or improved in relation to
the initial ratings on the notes and loan. This test looks at the
total amount of losses that the transaction can sustain--as
established by the initial cash flows for each rating--and compares
that with the current portfolio's default potential plus par losses
to date. As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, if the initial ratings are
maintained.
"Under our structured finance sovereign risk criteria, the
transaction's exposure to country risk is sufficiently mitigated at
the assigned ratings.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our counterparty criteria.
"The transaction's legal structure and framework is bankruptcy
remote, in line with our legal criteria.
"HPS Investment Partners CLO (UK) LLP manages the CLO, and the
maximum potential rating on the liabilities is 'AAA' under our
operational risk criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe the assigned ratings are
commensurate with the available credit enhancement for the class A
loan and class A notes. Our credit and cash flow analysis indicates
that the available credit enhancement for the class B to E notes
could withstand stresses commensurate with higher ratings than
those assigned. However, as the CLO will be in its reinvestment
phase starting from closing--during which the transaction's credit
risk profile could deteriorate--we have capped our ratings on the
notes.
"For the class F notes, our credit and cash flow analysis indicate
that the available credit enhancement could withstand stresses
commensurate with a lower rating. However, we have applied our
'CCC' rating criteria, resulting in a 'B- (sf)' rating on this
class of notes.”z
The ratings uplift for the class F notes reflects several key
factors, including:
-- The class F notes' available credit enhancement, which is in
the same range as that of other CLOs S&P has rated and that has
recently been issued in Europe.
-- The portfolio's average credit quality, which is similar to
other recent CLOs.
-- S&P said, "Our model generated break-even default rate at the
'B-' rating level of 27.40% (for a portfolio with a
weighted-average life of 5.18 years), versus if we were to consider
a long-term sustainable default rate of 3.2% for five years, which
would result in a target default rate of 16.58%."
-- S&P does not believe that there is a one-in-two chance of this
note defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
S&P said, "Following this analysis, we consider that the available
credit enhancement for the class F notes is commensurate with the
assigned 'B- (sf)' rating.
"Given our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for all the
rated classes of notes and loan.
"In addition to our standard analysis, to indicate how rising
pressures among speculative-grade corporates could affect our
ratings on European CLO transactions, we also included the
sensitivity of the ratings on the class A loan and class A to E
notes based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance
S&P said, "We regard the transaction's exposure to environmental,
social, and governance (ESG) credit factors as broadly in line with
our benchmark for the sector. Primarily due to the diversity of the
assets within CLOs, the exposure to environmental and social credit
factors is viewed as below average, while governance credit factors
are average. For this transaction, the documents prohibit or limit
certain assets from being related to certain activities.
Accordingly, since the exclusion of assets from these activities
does not result in material differences between the transaction and
our ESG benchmark for the sector, no specific adjustments have been
made in our rating analysis to account for any ESG-related risks or
opportunities."
Aqueduct European CLO 14 DAC is a European cash flow CLO
securitization of a revolving pool, comprising mainly
euro-denominated leveraged loans and bonds. The transaction is a
broadly syndicated CLO managed by Royal London Asset Management
Ltd.
Ratings
Amount Credit
Class Rating* (mil. EUR) Interest rate§ enhancement
(%)
A AAA (sf) 193.30 Three/six-month EURIBOR 38.00
plus 1.30%
A loan AAA (sf) 54.70 Three/six-month EURIBOR 38.00
plus 1.30%
B AA (sf) 45.00 Three/six-month EURIBOR 26.75
plus 1.85%
C A (sf) 24.00 Three/six-month EURIBOR 20.75
plus 2.20%
D BBB- (sf) 28.00 Three/six-month EURIBOR 13.75
plus 2.90%
E BB- (sf) 18.00 Three/six-month EURIBOR 9.25
plus 5.30%
F B- (sf) 11.00 Three/six-month EURIBOR 6.50
plus 8.10%
Z-1 NR 0.10 N/A N/A
Z-2 NR 0.10 N/A N/A
Z-3 NR 0.10 N/A N/A
Sub notes NR 30.00 N/A N/A
*The ratings assigned to the class A loan and class A and B notes
address timely interest and ultimate principal payments. The
ratings assigned to the class C, D, E, and F notes address ultimate
interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
AQUEDUCT EUROPEAN 8: Fitch Assigns 'B-(EXP)sf' Rating on F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned Aqueduct European CLO 8 DAC expected
ratings. The assignment of final ratings is contingent on the
receipt of final documents conforming to information already
reviewed.
Entity/Debt Rating
----------- ------
Aqueduct European
CLO 8 DAC
Class A-R Notes LT AAA(EXP)sf Expected Rating
Class B-R Notes LT AA(EXP)sf Expected Rating
Class C-R Notes LT A(EXP)sf Expected Rating
Class D-R Notes LT BBB-(EXP)sf Expected Rating
Class E-R Notes LT BB-(EXP)sf Expected Rating
Class F-R Notes LT B-(EXP)sf Expected Rating
Class Z-1 Notes LT NR(EXP)sf Expected Rating
Class Z-2 Notes LT NR(EXP)sf Expected Rating
Class Z-3 Notes LT NR(EXP)sf Expected Rating
Transaction Summary
Aqueduct European CLO 8 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 will be used to purchase a portfolio with a target par of
EUR400 million. The portfolio is actively managed by HPS Investment
Partners CLO (UK) LLP. The collateralised loan obligation (CLO)
will have a 4.6-year reinvestment period and an 8.5-year weighted
average life (WAL) test.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch
weighted-average rating factor of the identified portfolio is
24.9.
High Recovery Expectations (Positive): At least 90% of the
portfolio will comprise senior secured obligations. The recovery
prospects for these assets are more favourable than for second
lien, unsecured and mezzanine assets. The Fitch weighted-average
recovery rate of the identified portfolio is 61.5%.
Diversified Portfolio (Positive): The transaction will include
various concentration limits, including a maximum 40% exposure to
the three largest Fitch-defined industries in the portfolio and a
top 10 obligor concentration limit at 20%. These covenants ensure
the asset portfolio will not be exposed to excessive
concentration.
Portfolio Management (Neutral): The deal will have a 4.6-year
reinvestment period and include reinvestment criteria similar to
those of other European transactions. Fitch's analysis is based on
a stressed case portfolio with the aim of testing the robustness of
the deal structure against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL for the transaction's
Fitch-stressed portfolio analysis is 12 months less than the WAL
covenant. This is to account for the strict reinvestment conditions
envisaged by the deal after its reinvestment period. These
conditions include passing the coverage tests and the Fitch 'CCC'
bucket limitation test after reinvestment, and a WAL covenant that
gradually steps down, 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-R notes, and lead to
downgrades of one notch each on the class B-R to E-R notes and to
below 'B-sf' for the class F-R 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-R
to F-R notes each have a rating cushion of two 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 a downgrade of up to three
notches for the class A-R notes, four notches each for the class
B-R to D-R notes, and to below 'B-sf' for the class E-R and F-R
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 an
upgrade of up to four notches for the rated notes, except for the
'AAAsf' rated notes.
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 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 other nationally
recognised statistical rating organisations and European Securities
and Markets Authority- registered rating agencies. Fitch has relied
on the practices of the relevant groups within Fitch and 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 its analysis
according to its applicable rating methodologies indicates that it
is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Aqueduct European
CLO 8 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.
ARINI EUROPEAN VII: S&P Assigns B-(sf) Rating in Class F Notes
--------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Arini European
CLO VII DAC's class A-1 Loan and A-2 Loan and class A, B, C, D, E,
and F notes. At closing, the issuer also issued unrated
subordinated notes.
This is a European cash flow CLO transaction, securitizing a pool
of primarily syndicated senior secured loans or bonds. The
portfolio's reinvestment period will end approximately 4.70 years
after closing. Under the transaction documents, the rated notes
will pay quarterly interest unless there is a frequency switch
event. Following this, the notes will switch to semiannual
payment.
The portfolio is well diversified, primarily comprising broadly
syndicated speculative-grade senior secured term loans and senior
secured bonds. Therefore, S&P has conducted our credit and cash
flow analysis by applying its criteria for corporate cash flow
CDOs.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,583.34
Default rate dispersion 658.09
Weighted-average life (years) excluding
reinvestment period 5.09
Obligor diversity measure 166.12
Industry diversity measure 25.67
Regional diversity measure 1.31
Transaction key metrics
Total par amount (mil. EUR) 610
Defaulted assets (mil. EUR) 0
Number of performing obligors 192
Portfolio weighted-average rating
derived from our CDO evaluator B
'CCC' category rated assets (%) 0.66
Target 'AAA' weighted-average recovery (%) 37.03
Target weighted-average spread net of floors (%) 3.57
Target weighted-average coupon (%) 2.77
S&P said, "In our cash flow analysis, we modeled the EUR610 million
target par amount, the covenanted weighted-average spread of 3.50%,
the covenanted weighted-average coupon of 3.50%, and the covenanted
weighted-average recovery rate of 36.03% at the 'AAA' level. For
all the other rated notes, we used the target weighted-average
recovery rates. We applied various cash flow stress scenarios,
using four different default patterns, in conjunction with
different interest rate stress scenarios for each liability rating
category.
"Following the application of our structured finance sovereign risk
criteria, we expect the transaction's exposure to country risk to
be sufficiently limited at the assigned ratings, as the exposure to
individual sovereigns does not exceed the diversification
thresholds outlined in our criteria.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
"We consider the transaction's legal structure to be bankruptcy
remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our ratings are
commensurate with the available credit enhancement for the class
A-1 Loan and A-2 Loan and class A to F notes.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B to E notes is commensurate with
higher ratings than those we have assigned. However, as the CLO
will have a reinvestment period, during which the transaction's
credit risk profile could deteriorate, we have capped our ratings
on these notes.
"In addition to our standard analysis, we have also included the
sensitivity of the ratings on the class A to E notes based on four
hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit or limit assets from being
related to certain industries. Since the exclusion of assets from
these industries does not result in material differences between
the transaction and our ESG benchmark for the sector, no specific
adjustments have been made in our rating analysis to account for
any ESG-related risks or opportunities."
Arini European CLO VII is a European cash flow CLO securitization
of a revolving pool, comprising euro-denominated senior secured
loans and bonds issued mainly by speculative-grade borrowers. Arini
Capital Management US LLC is the collateral manager.
Ratings
Amount
Class Rating* (mil. EUR) Sub (%) Interest rate§
A AAA (sf) 148.20 38.00 Three/six-month EURIBOR
plus 1.30%
A-1 Loan AAA (sf) 200.00 38.00 Three/six-month EURIBOR
plus 1.30%
A-2 Loan AAA (sf) 30.00 38.00 Three/six-month EURIBOR
plus 1.30%
B AA (sf) 67.10 27.00 Three/six-month EURIBOR
plus 1.80%
C A (sf) 36.60 21.00 Three/six-month EURIBOR
plus 2.15%
D BBB- (sf) 42.70 14.00 Three/six-month EURIBOR
plus 2.85%
E BB- (sf) 27.40 9.50 Three/six-month EURIBOR
plus 5.15%
F B- (sf) 18.30 6.50 Three/six-month EURIBOR
plus 8.00%
Sub notes NR 45.40 N/A N/A
*The ratings assigned to the class A and B notes and class A-1 Loan
and A-2 Loan address timely interest and ultimate principal
payments. The ratings assigned to the class C to F notes address
ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
BAIN CAPITAL 2025-3: S&P Assigns Prelim. B-(sf) Rating on F Notes
-----------------------------------------------------------------
S&P Global Ratings assigned preliminary credit ratings to Bain
Capital Euro CLO 2025-3 DAC's class A to F European cash flow CLO
notes. At closing, the issuer will also issue unrated subordinated
notes.
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will permanently switch to semiannual payments.
The portfolio's reinvestment period ends 4.57 years after closing,
and its noncall period ends 1.5 years after closing.
The preliminary ratings reflect s&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,684.43
Default rate dispersion 546.38
Weighted-average life (years) 4.83
Obligor diversity measure 133.19
Industry diversity measure 19.04
Regional diversity measure 1.22
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.00
Target 'AAA' weighted-average recovery (%) 37.37
Target weighted-average spread (net of floors; %) 3.70
Target weighted-average coupon (%) 6.39
Rationale
S&P said, "Our ratings reflect our assessment of the collateral
portfolio's credit quality, which has a weighted-average rating of
'B'. At closing, we expect the portfolio to be well-diversified,
primarily comprising broadly syndicated speculative-grade senior
secured term loans and senior secured bonds. Therefore, we have
conducted our credit and cash flow analysis by applying our
criteria for corporate cash flow CDOs.
"Until the end of the reinvestment period on July 17, 2030, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and compares that with the
current portfolio's default potential plus par losses to date. As a
result, until the end of the reinvestment period, the collateral
manager may through trading deteriorate the transaction's current
risk profile, if the initial ratings are maintained.
"In our cash flow analysis, we used the EUR400 million target par
amount, the covenanted weighted-average spread (3.65%), the
covenanted weighted-average coupon (5.50%), and the target
weighted-average recovery rates at each rating level calculated in
line with our CLO criteria. We applied various cash flow stress
scenarios, using four different default patterns, in conjunction
with different interest rate stress scenarios for each liability
rating category.
"This transaction features a higher deferrable loan exposure cap,
allowing up to 5% of the collateral principal amount to be in
payment in kind (PIK) securities and an additional 5% in partial
PIK securities. This is a higher threshold than what we typically
see in European CLO transactions, where PIK collateral is generally
capped at 5%. As a result, this structure allows the portfolio to
hold up to 10% in assets that can defer cash interest. To reflect
the expanded PIK asset bucket, we applied a PIK interest stress to
the additional 5% fully PIK securities.
"Our credit and cash flow analysis show that the class B to E notes
benefits from break-even default rate (BDR) and scenario default
rate cushions that we would typically consider commensurate with
higher ratings than those assigned. However, as the CLO is still in
its reinvestment phase, during which the transaction's credit risk
profile could deteriorate, we have capped our preliminary ratings
assigned to the notes. The class A notes can withstand stresses
commensurate with the assigned preliminary rating.
"For the class F notes, our credit and cash flow analysis indicate
that the available credit enhancement could withstand stresses
commensurate with a lower rating. However, we have applied our
'CCC' rating criteria, resulting in a 'B- (sf)' rating on this
class of notes."
The ratings uplift for the class F notes reflects several key
factors, including:
-- The tranche's available credit enhancement, which is in the
same range as that of other CLOs S&P has rated and that has
recently been issued in Europe.
-- The portfolio's average credit quality, which is similar to
other recent CLOs.
-- S&P's model generated BDR at the 'B-' rating level of 20.18%
(for a portfolio with a weighted-average life of 4.83 years),
versus if it was to consider a long-term sustainable default rate
of 3.2% for 4.83 years, which would result in a target default rate
of 15.46%.
-- S&P does not believe that there is a one-in-two chance of this
note defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
S&P said, "Following this analysis, we consider that the available
credit enhancement for the class F notes is commensurate with the
assigned 'B- (sf)' rating.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk sufficiently
mitigated at the assigned preliminary rating levels.
"At closing, we expect the transaction's documented counterparty
replacement and remedy mechanisms to adequately mitigate its
exposure to counterparty risk under our current counterparty
criteria.
"We expect the transaction's legal structure and framework to be
bankruptcy remote. The issuer is a special-purpose entity that
meets our criteria for bankruptcy remoteness.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our preliminary
ratings are commensurate with the available credit enhancement for
the class A to F notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A to E notes
based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
The transaction securitizes a portfolio of primarily senior secured
leveraged loans and bonds and will be managed by Bain Capital
Credit CLO Management III (DE), LP.
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit assets from being related
to certain activities, including, obligors deriving revenue from
certain industries like production of palm oil, affecting animal
welfare etc. Accordingly, since the exclusion of assets from these
industries does not result in material differences between the
transaction and our ESG benchmark for the sector, no specific
adjustments have been made in our rating analysis to account for
any ESG-related risks or opportunities."
Ratings
Prelim Prelim amount Credit Indicative
Class rating* (mil. EUR) enhancement (%) interest rate§
A AAA (sf) 248.00 38.00 3mE +1.30%
B AA (sf) 44.00 27.00 3mE + 2.00%
C A (sf) 24.00 21.00 3mE +2.30%
D BBB- (sf) 29.00 13.75 3mE +3.40%
E BB- (sf) 18.00 9.25 3mE +6.00%
F B- (sf) 11.00 6.50 3mE +8.50%
Sub. Notes NR 30.60 N/A N/A
*The preliminary ratings assigned to the class A and B notes
address timely interest and ultimate principal payments. The
preliminary ratings assigned to the class C to F notes address
ultimate interest and principal payments.
§Solely for modeling purposes as the actual spreads may vary at
pricing. The payment frequency switches to semiannual and the index
switches to six-month Euro Interbank Offered Rate (EURIBOR) when a
frequency switch event occurs.
NR--Not rated.
N/A--Not applicable.
3mE--Three-month EURIBOR.
BBAM EUROPEAN VII: S&P Assigns Prelim. B-(sf) Rating on Cl. F Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to BBAM
European CLO VII DAC's class A to F notes. At closing, the issuer
will issue unrated subordinated notes.
Under the transaction documents, the rated loans and notes will pay
quarterly interest unless a frequency switch event occurs, upon
which the loans and notes pay semiannually.
This transaction has a 1.7 year noncall period, and the portfolio's
reinvestment period will end approximately 4.68 years after
closing.
The preliminary ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated loans and notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which we expect to be
bankruptcy remote.
-- The transaction's counterparty risks, which we expect to be in
line with our counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,739.58
Default rate dispersion 557.82
Weighted-average life (years) 5.07
Obligor diversity measure 150.38
Industry diversity measure 21.86
Regional diversity measure 1.32
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 1.75
Actual 'AAA' weighted-average recovery (%) 36.31
Actual weighted-average spread (net of floors; %) 3.75
Actual weighted-average coupon (%) 4.79
Rating rationale
S&P said, "Our preliminary ratings reflect our assessment of the
collateral portfolio's credit quality, which has a weighted-average
rating of 'B'. The portfolio primarily comprises broadly syndicated
speculative-grade senior secured term loans and bonds on the
effective date. Therefore, we conducted our credit and cash flow
analysis by applying our criteria for corporate cash flow CDOs.
"In our cash flow analysis, we modeled the EUR400 million target
par amount, the covenanted weighted-average spread of 3.70%, and
the actual weighted-average recovery rates. We applied various cash
flow stress scenarios, using four different default patterns, in
conjunction with different interest rate stress scenarios for each
liability rating category.
"Following the application of our structured finance sovereign risk
criteria, we consider the transaction's exposure to country risk to
be limited at the assigned preliminary ratings, as the exposure to
individual sovereigns does not exceed the diversification
thresholds outlined in our criteria.
"We expect the transaction's documented counterparty replacement
and remedy mechanisms to mitigate its exposure to counterparty risk
under our current counterparty criteria.
"We expect the transaction's legal structure to be bankruptcy
remote, in line with our legal criteria.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B, C, D, and E notes is
commensurate with higher ratings than those we have assigned.
However, as the CLO will have a reinvestment period, during which
the transaction's credit risk profile could deteriorate, we have
capped the assigned preliminary ratings.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our preliminary
ratings are commensurate with the available credit enhancement for
each class of notes.
"In addition to our standard analysis, to indicate how rising
pressures among speculative-grade corporates could affect our
ratings on European CLO transactions, we have also included the
sensitivity of the ratings on the class A to E notes based on four
hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
BBAM European CLO VII DAC is a European cash flow CLO
securitization of a revolving pool, comprising mainly senior
secured loans and bonds issued mainly by sub-investment grade
borrowers. RBC Global Asset Management (UK) Ltd. will manage the
transaction.
Environmental, social, and governance factors
S&P said, "We regard the transaction's exposure to environmental,
social, and governance (ESG) credit factors as being broadly in
line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average. For
this transaction, the documents prohibit assets from being related
to certain activities. Accordingly, since the exclusion of assets
related to these activities does not result in material differences
between the transaction and our ESG benchmark for the sector, we
have not made any specific adjustments in our rating analysis to
account for any ESG-related risks or opportunities."
Ratings
Prelim Prelim amount Credit
Class rating* (mil. EUR) Interest rate§ enhancement (%)
A AAA (sf) 248.00 3M EURIBOR plus 1.29% 38.00
B AA (sf) 44.00 3M EURIBOR plus 1.85% 27.00
C A (sf) 24.00 3M EURIBOR plus 2.10% 21.00
D BBB- (sf) 28.00 3M EURIBOR plus 2.95% 14.00
E BB- (sf) 18.00 3M EURIBOR plus 5.20% 9.50
F B- (sf) 12.00 3M EURIBOR plus 8.00% 6.50
Sub. NR 32.00 N/A N/A
*The preliminary ratings assigned to the class A and B notes
address timely interest and ultimate principal payments. The
preliminary ratings assigned to the class C, D, E, and F notes
address ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
3
M--three month.
EURIBOR--Euro Interbank Offered Rate.
NR--Not rated.
N/A--Not applicable.
CARLYLE EURO 2024-1: S&P Assigns B-(sf) Rating on Class E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to the class A-1
Loan and class A-1-R, A-2-R, B-R, C-R, D-R, and E-R notes issued by
Carlyle Euro CLO 2024-1 DAC. At closing, the issuer has EUR39.05
million unrated subordinated notes outstanding from the existing
transaction and issued an additional 3.15 million subordinated
notes.
Carlyle Euro CLO 2024-1 is a European cash flow CLO transaction,
securitizing a portfolio of primarily senior secured leveraged
loans and bonds. S&P said, "This transaction is a reset of the
already existing transaction, which we rated. We withdrew our
ratings on the existing classes of notes, which were fully redeemed
with the proceeds from the issuance of the replacement notes."
Carlyle CLO Management Europe LLC manages the transaction.
Under the transaction documents, the rated loan and notes will pay
quarterly interest unless a frequency switch event occurs.
Following this, the notes and loan will permanently switch to
semiannual payments.
The portfolio's reinvestment period will end approximately 4.9
years after closing and the noncall period will end 1.7 years after
closing.
The ratings assigned to Carlyle Euro CLO 2024-1's reset notes and
loan reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
syndicated speculative-grade senior secured term loans and bonds
that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
--The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,718.45
Default rate dispersion 513.14
Weighted-average life (years) 4.52
Weighted-average life extended to cover the length of the
reinvestment period (years) 4.93
Obligor diversity measure 142.10
Industry diversity measure 21.28
Regional diversity measure 1.36
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.48
Actual target 'AAA' weighted-average recovery (%) 35.98
Actual target weighted-average spread (net of floors; %) 3.73
Actual target weighted-average coupon 4.65
S&P said, "Our ratings reflect our assessment of the collateral
portfolio's credit quality, which has a weighted-average rating of
'B'. The portfolio is well diversified at closing, primarily
comprising broadly syndicated speculative-grade senior secured term
loans and senior secured bonds. Therefore, we have conducted our
credit and cash flow analysis by applying our criteria for
corporate cash flow CDOs.
"In our cash flow analysis, we used the EUR400 million target par
amount, the actual weighted-average spread (3.73%), the actual
weighted-average coupon (4.65%), and the actual weighted-average
recovery rates in line with our CLO criteria. We applied various
cash flow stress scenarios, using four different default patterns,
in conjunction with different interest rate stress scenarios for
each liability rating category.
"Our credit and cash flow analysis show that the class A-2-R, B-R,
C-R, and D-R notes benefit from break-even default rate (BDR) and
scenario default rate cushions that we would typically consider to
be in line with higher ratings than those assigned. However, as the
CLO is still in its reinvestment phase, during which the
transaction's credit risk profile could deteriorate, we have capped
our ratings on these classes of notes. The class A-1-R notes and
A-1 Loan can withstand stresses commensurate with the assigned
ratings.
"For the class E-R notes, our credit and cash flow analysis
indicate that the available credit enhancement could withstand
stresses commensurate with a lower rating. However, we have applied
our 'CCC' rating criteria, resulting in a 'B- (sf)' rating on this
class of notes."
The ratings uplift for the class E-R notes reflects several key
factors, including:
-- The class E-R notes' available credit enhancement, which is in
the same range as that of other CLOs we have rated and that have
recently been issued in Europe.
-- The portfolio's average credit quality, which is similar to
other recent CLOs.
-- S&P's model generated BDR at the 'B-' rating level of 25.74%
(for a portfolio with a weighted-average life of 4.93 years),
versus if it was to consider a long-term sustainable default rate
of 3.2% for 4.93 years, which would result in a target default rate
of 15.78%.
-- S&P does not believe that there is a one-in-two chance of this
note defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
Following this analysis, S&P considers that the available credit
enhancement for the class E-R notes is commensurate with the
assigned 'B- (sf)' rating.
S&P said, "Until the end of the reinvestment period on Oct. 15,
2030, the collateral manager may substitute assets in the portfolio
for so long as our CDO Monitor test is maintained or improved in
relation to the initial ratings on the notes. This test looks at
the total amount of losses that the transaction can sustain as
established by the initial cash flows for each rating and compares
that with the default potential of the current portfolio plus par
losses to date. As a result, until the end of the reinvestment
period, the collateral manager may, through trading, deteriorate
the transaction's current risk profile, if the initial ratings are
maintained.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned ratings.
"The transaction's documented counterparty replacement and remedy
mechanisms mitigate its exposure to counterparty risk under our
current counterparty criteria.
"The transaction's legal structure is bankruptcy remote, in line
with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe that our assigned ratings
are commensurate with the available credit enhancement for the
class A-1-R to E-R notes and A-1 Loan.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A-1-R to D-R
notes and A-1-R Loan based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class E-R notes."
Environmental, social, and governance
S&P said, "We regard the exposure to environmental, social, and
governance (ESG) credit factors in the transaction as being broadly
in line with our benchmark for the sector. Primarily due to the
diversity of the assets within CLOs, the exposure to environmental
credit factors is viewed as below average, social credit factors
are below average, and governance credit factors are average."
For this transaction, the documents prohibit assets from being
related to certain industries. Accordingly, since the exclusion of
assets from these industries does not result in material
differences between the transaction and our ESG benchmark for the
sector, no specific adjustments have been made in our rating
analysis to account for any ESG-related risks or opportunities.
Ratings
Amount Credit
Class Rating* (mil. EUR) enhancement (%) Interest rate§
A-1-R AAA (sf) 200.00 38.00 3-month EURIBOR plus 1.30%
A-1 Loan AAA (sf) 48.00 38.00 3-month EURIBOR plus 1.30%
A-2-R AA (sf) 40.50 27.88 3-month EURIBOR plus 2.05%
B-R A (sf) 25.00 21.63 3-month EURIBOR plus 2.30%
C-R BBB- (sf) 30.00 14.13 3-month EURIBOR plus 3.05%
D-R BB- (sf) 18.00 9.63 3-month EURIBOR plus 5.90%
E-R B- (sf) 12.50 6.50 3-month EURIBOR plus 8.70%
Sub NR 42.20 N/A N/A
* The ratings assigned to the class A-1-R and A-2-R notes and A-1
Loan address timely interest and ultimate principal payments. The
ratings assigned to the class B-R to E-R notes address ultimate
interest and principal payments.
§ The payment frequency switches to semiannual and the index
switches to six-month EURIBOR when a frequency switch event occurs.
EURIBOR--Euro Interbank Offered Rate.
Sub—Subordinated notes.
NR--Not rated.
N/A--Not applicable.
FIDELITY GRAND 2023-2: Fitch Rates Class F-R Debt 'B-sf'
--------------------------------------------------------
Fitch Ratings has assigned Fidelity Grand Harbour CLO 2023-2 DAC
reset debt final ratings.
Entity/Debt Rating Prior
----------- ------ -----
Fidelity Grand Harbour
CLO 2023-2 DAC
A Loan LT PIFsf Paid In Full AAAsf
A Notes XS2755784795 LT PIFsf Paid In Full AAAsf
A-R Loan LT AAAsf New Rating
A-R Notes XS3201122069 LT AAAsf New Rating
B-1 XS2755783714 LT PIFsf Paid In Full AAsf
B-1-R XS3201124867 LT AAsf New Rating
B-2 XS2755783805 LT PIFsf Paid In Full AAsf
B-2-R XS3201126649 LT AAsf New Rating
C XS2755783987 LT PIFsf Paid In Full Asf
C-R XS3201133181 LT Asf New Rating
D XS2755784019 LT PIFsf Paid In Full BBB-sf
D-R XS3201136366 LT BBB-sf New Rating
E XS2755784100 LT PIFsf Paid In Full BB-sf
E-R XS3201141366 LT BB-sf New Rating
F XS2755784365 LT PIFsf Paid In Full B-sf
F-R XS3201148536 LT B-sf New Rating
X XS2755783557 LT PIFsf Paid In Full AAAsf
X-R XS3201120527 LT AAAsf New Rating
Transaction Summary
Fidelity Grand Harbour CLO 2023-2 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. Net proceeds from the debt issue have been used to redeem
existing notes, excluding the subordinated notes, and to fund a
portfolio with a target size of EUR400 million. The portfolio
manager is Fidelity CLO Advisers LP. The collateralised loan
obligation (CLO) has about 4.5-year reinvestment period and an
8.5-year weighted average life (WAL) test covenant at closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors at 'B'/'B-'. The Fitch-weighted
average rating factor of the identified portfolio is 24.9.
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 62.1%.
Diversified Asset Portfolio (Positive): The transaction includes
six Fitch matrices, each based on a top 10 obligor concentration
limit of 20%. Two matrices are effective at closing, corresponding
to fixed-rate asset limits of 5% and 15% and to an 8.5-year WAL
test. The remaining four matrices are effective 12 and 18 months
after closing and correspond to a 7.5-year and seven-year WAL test,
with the same fixed-rate asset limits as the closing matrices. The
two forward matrices can be elected by the collateral manager if
the collateral principal amount (with default carried at Fitch
collateral value) is at least equal to the reinvestment target par
balance.
The transaction includes additional covenants, including a maximum
exposure to the three largest Fitch-defined industries in the
portfolio at 40%. These covenants ensure the asset portfolio will
not be exposed to excessive concentration.
Portfolio Management (Neutral): The transaction has an
approximately 4.5-year reinvestment period and includes
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed case
portfolio with the aim of testing the robustness of the transaction
structure against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL Fitch modelled is 12 months
less than the WAL covenant. This is to account for the strict
reinvestment conditions envisaged by the transaction after its
reinvestment period. These include passing both the coverage tests
and the Fitch 'CCC' maximum limit, as well as a WAL covenant that
linearly steps down, both before and after the end of the
reinvestment period. Fitch believes these conditions would reduce
the effective risk horizon of the portfolio during the stress
period.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) across all ratings
and a 25% decrease of the recovery rate (RRR) across all ratings of
the identified portfolio would have no rating impact on the class
X-R and A-R notes and the class A-R loan, and lead to downgrades of
two notches for the class B-1-R, B-2-R and C-R notes, one notch for
the classes D-R and E-R notes, and to below 'B-sf' for the class
F-R notes.
Based on the identified portfolio, downgrades may occur if the loss
expectation is larger than initially assumed, due to unexpectedly
high levels of default and portfolio deterioration. Due to the
better metrics and shorter life of the identified portfolio than
the Fitch-stressed portfolio, the notes display rating cushions to
a downgrade of two notches for the class D-R, E-R and F-R notes and
one notch for the class B-1-R, B-2-R and C-R notes. The class A-R
notes, class A-R loan and X-R notes have no rating cushion as they
are already at their maximum achievable rating.
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 stressed
portfolio would lead to downgrades of two notches for the class A-R
notes and class A-R loan, four notches for the class B-1-R, B-2-R
and C-R notes, three notches for the class D-R notes and to below
'B-sf' for the class E-R and F-R notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
A reduction of the RDR at all rating levels in the stressed
portfolio by 25% of the mean RDR and an increase in the RRR by 25%
at all rating levels would result in upgrades of up to four notches
for all notes, except the 'AAAsf' rated debt, which is at the
highest level on Fitch's scale and cannot be upgraded.
During the reinvestment period, based on the Fitch-stressed
portfolio, upgrades may occur on better-than-expected portfolio
credit quality and a shorter remaining WAL test, allowing the notes
to withstand larger-than-expected losses for the remaining life of
the transaction. After the end of the reinvestment period, upgrades
may result from stable portfolio credit quality and deleveraging,
leading to higher credit enhancement and excess spread available to
cover losses in the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fidelity Grand Harbour CLO 2023-2 DAC
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
HERA FINANCING 2024-1: S&P Raises Cl. F Notes Rating to 'B+(sf)'
----------------------------------------------------------------
S&P Global Ratings raised its credit ratings on Hera Financing
2024-1 DAC's class B, C, D, E, and F notes to 'AA+ (sf)', 'A+
(sf)', 'A- (sf)', 'BB+ (sf)', and 'B+ (sf)', respectively. S&P also
affirmed its 'AAA (sf)' rating on the class A notes and removed all
the ratings from under criteria observation.
Rating rationale
S&P said, "The rating actions follow the publication of our global
CMBS criteria. As part of our review, we considered the
transaction's five key rating factors (the securitized assets'
credit quality, legal and regulatory risks, operational and
administrative risks, counterparty risks, and payment structure and
cash flow mechanisms).
"The transaction's credit and cash flow characteristics have
remained relatively stable since closing in September 2024. Our S&P
Global Ratings value is 5.0% higher than at closing, due to the
removal of purchase costs. Our upgrades of the class B, C, D, E,
and F notes are primarily due to this higher S&P value along with
the specific property and loan level recovery rate adjustments
under our new criteria."
Transaction overview
Hera Financing 2024-1 is a U.K. CMBS transaction that closed in
2024 and is backed by GBP220.0 million of a GBP520.0 million senior
ranking loan. The loan is secured on a portfolio of 19 flexible
office assets in the U.K., with the largest concentration being in
London (67% by market value). The senior loan balance has decreased
marginally to GBP519.45 million, after part of the Montacute Yards
property was sold just after closing. The proceeds were used to
partially repay the loan and notes.
The senior loan which matures in November 2027 can be extended as
it has two one-year extension options. The loan is lowly leveraged
with a loan-to-value (LTV) ratio of 60.0%. The loan is an
interest-only loan and does not provide for default financial
covenants before a permitted change of control of the property
owner/sponsor. However, cash trap mechanisms apply if the LTV ratio
reaches 60% or if the debt yield is less than 12.5%. The debt yield
covenant has been breached since closing.
The borrower may release one or more of the properties. However, a
cash sweep of 100% of net disposal proceeds applies until the loan
balance reduces to GBP440 million. Thereafter, the release premium
is 120% of the allocated loan amount (ALA) until the LTV ratio is
30% (calculated with reference to closing market value). At which
point, the release premium reduces to 102.5% of the ALA. The issuer
will allocate prepayments of ALAs to the notes pro rata. The loan
amounts allocated to the properties are proportionate to their
market value.
Table 1
Loan and collateral summary
Review as of Closing as of
September 2025 September 2024
Data as of August 2025 September 2023
Senior loan balance (mil. GBP) 519.5 520.0
Senior loan-to-value ratio (%) 60.0 60.0
Flexible office revenue annualized
(mil. GBP) 65.7* 60.3
Vacancy rate (%) 15 25
Market value assuming corporate sale
(mil. GBP) 866.4§
867.0
*Reporting only available for three quarters. The information
available has been annualized.
§ Montacute Yard's value decreased due to the disposal of a
residential unit.
Total rental revenue comprises flexible office revenue and full
repairing insuring income. Additional non-rental income will be
received for services provided by "Fora".
S&P said, "We maintained our 21.9% vacancy rate assumption despite
the reported vacancy rate improving since closing to 15%, given the
short period of occupancy data post-closing and the short-term
nature of the leases which may mean that future vacancies may be
higher than current vacancy. Our non-recoverable expenses
assumption remains unchanged at 37.0%. As a result, our S&P Global
Ratings net cash flow (NCF) remained unchanged at GBP44.7 million.
At closing, there was no income attributed to the residential unit
sold at Montacute Yards as this was being sold before the first
loan interest payment date. We then applied our 8.3% capitalization
(cap) rate against our NCF to arrive at our value of GBP538.3
million. The difference in the S&P value at closing and at our
current review is due to the removal of the purchase costs of 5%.
Table 2
Key assumptions
Review as of Closing as of
September 2025 September 2024
Gross rent fully let (mil. GBP) 90.9 90.9
Vacancy (%) 21.9 21.9
Non-recoverable expenses (%) 37.0 37.0
Net cash flow (mil. GBP) 44.7 44.7
Purchase costs (%)* 0.0 5.0
S&P Global Ratings value (mil. GBP) 538.3 511.4
S&P Global Ratings cap rate (%) 8.3 8.3
Haircut to reported market value
assuming corporate sale (%) 37.9 38.1
S&P Global Ratings LTV ratio before
recovery rate adjustments (%) 96.5 101.7
*The 2025 figure no longer includes the purchaser's costs of 5%.
Property and loan-level adjustments
S&P made an overall positive adjustment of 4.17% to its recovery
rates which reflects a quality asset score of 3.5, a
weighted-average income stability score of 3.2, and an additional
adjustment for the multi-asset single borrower.
Other analytical considerations
S&P said, "We also assessed whether the cash flow from the
securitized assets would be sufficient, at the applicable ratings,
to make timely payments of interest and ultimate repayment of
principal by the floating-rate notes' legal final maturity date,
after considering available credit enhancement and allowing for
transaction expenses and external liquidity support.
"Our analysis also included a full review of the legal and
regulatory risks, operational and administrative risks, and
counterparty risks. Our assessment of these risks remains unchanged
since our previous review and is commensurate with the ratings
assigned."
Rating actions
S&P said, "Our ratings in this transaction address the timely
payment of interest, payable quarterly, and the payment of
principal no later than the legal final maturity dates in November
2024. In our view, the transaction's credit quality has remained
stable since closing.
"Our opinion of the long-term sustainable value is slightly higher
than at closing, reflecting a change in our criteria, with our
value now net of purchase costs. As a result, we no longer deduct
5% from the gross value. Therefore, our S&P value has increased to
GBP538.3 million from GBP511.4 million. Our previous criteria made
adjustments for loan size and LTV ratio, whereas our revised
criteria do not make adjustments to the recovery rates for these
factors, which means that the transaction benefits from the
application of our revised criteria.
"After considering recovery rate adjustments, we affirmed our
rating on the class A notes and raised our ratings on the class B,
C, D, E, and F notes. Our rating on the class E notes could be
higher. However, because this class does not benefit from liquidity
reserve support, we do not consider its credit risk to be
commensurate with an investment-grade rating."
NORTH WESTERLY X: Fitch Assigns 'B-sf' Final Rating on Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has assigned North Westerly X ESG CLO DAC final
ratings.
Entity/Debt Rating Prior
----------- ------ -----
North Westerly X
ESG CLO DAC
A XS3123472618 LT AAAsf New Rating AAA(EXP)sf
A-1 Loan LT AAAsf New Rating
A-2 loan LT AAAsf New Rating
B XS3123472881 LT AAsf New Rating AA(EXP)sf
C XS3123473343 LT Asf New Rating A(EXP)sf
D XS3123473855 LT BBB-sf New Rating BBB-(EXP)sf
E XS3123474077 LT BB-sf New Rating BB-(EXP)sf
F XS3123474317 LT B-sf New Rating B-(EXP)sf
M-1 XS3123474580 LT NRsf New Rating NR(EXP)sf
M-2 XS3123474820 LT NRsf New Rating NR(EXP)sf
Subordinated Notes
XS3123475124 LT NRsf New Rating NR(EXP)sf
Transaction Summary
North Westerly X ESG CLO 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 were used to fund a portfolio with a target par of EUR400
million that is actively managed by Aegon Asset Management UK PLC
and North Westerly Holding BV, a wholly owned subsidiary of Aegon
Asset Management Holding BV. The CLO has a 4.5-year reinvestment
period and an 8.5-year weighted average life (WAL) test at
closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors to be within the 'B' category.
The Fitch weighted average rating factor of the identified
portfolio is 23.9.
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 61.9%.
Diversified Asset Portfolio (Positive): The transaction has a
concentration limit for the 10 largest obligors at 20%. The deal
also includes other concentration limits, including a maximum
exposure of 40% to the three largest Fitch-defined industries in
the portfolio. These covenants ensure the portfolio will not be
excessively concentrated.
Portfolio Management (Neutral): The transaction has two matrices
effective at closing, two that are effective 12 months after
closing, and two that are effective 18 months after closing, all
with fixed-rate limits of 5% and 10%. All six matrices are based on
a top 10 obligor concentration limit of 20%. The closing matrices
correspond to an 8.5-year WAL test, while the forward matrices
correspond to a 7.5-year and a seven-year WAL test.
The deal has a reinvestment period of about 4.5 years and includes
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed-case
portfolio, with the aim of testing the robustness of the deal
structure against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL for the transaction's
Fitch-stressed portfolio analysis 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 the
coverage tests and Fitch 'CCC' limit after the reinvestment period,
and a WAL covenant that progressively steps down, before and after
the end of the reinvestment period. 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
An increase of the mean default rate (RDR) by 25% and a decrease of
the recovery rate (RRR) by 25% at all rating levels in the
identified portfolio would have no impact on the class A notes, but
would lead to downgrades of no more than two notches each for the
class B to E notes and to below 'B-sf' for the class F notes.
Downgrades may occur if the build-up of the notes' credit
enhancement following amortisation does not compensate for a larger
loss expectation than assumed due to unexpectedly high levels of
defaults and portfolio deterioration.
The class B to F notes each have a rating cushion of up to two
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 four notches
each for the class B and C debt, three notches each for the class A
and class 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 reduction of the mean RDR by 25% and an increase in the RRR by
25% at all rating levels in the Fitch-stressed portfolio would
result in upgrades of up to three notches each for all notes,
except for the 'AAAsf' rated notes.
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 stable portfolio credit quality
and deleveraging, leading to higher credit enhancement and excess
spread 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 North Westerly X
ESG CLO 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.
PALMER SQUARE 2021-2: Fitch Assigns 'B-sf' Rating on Cl. F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned Palmer Square European CLO 2021-2 DAC's
reset notes final ratings, as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Palmer Square European
CLO 2021-2 DAC
Class A-R XS3207976591 LT AAAsf New Rating AAA(EXP)sf
Class B-R XS3207976757 LT AAsf New Rating AA(EXP)sf
Class C-R XS3207976914 LT Asf New Rating A(EXP)sf
Class D-R XS3207977136 LT BBB-sf New Rating BBB-(EXP)sf
Class E-R XS3207977300 LT BB-sf New Rating BB-(EXP)sf
Class F-R XS3207977565 LT B-sf New Rating B-(EXP)sf
Subordinated Notes
XS2357233365 LT NRsf New Rating NR(EXP)sf
Transaction Summary
Palmer Square European CLO 2021-2 DAC is a securitisation of mainly
senior secured obligations (at least 90%) with a component of
senior unsecured, mezzanine, second-lien loans and high-yield
bonds. Note proceeds have been used to redeem the existing notes,
except the subordinated notes, and to fund a portfolio with a
target par of EUR400 million. The portfolio is actively managed by
Palmer Square Europe Capital Management LLC. The collateralised
loan obligation (CLO) has a 4.4-year reinvestment period and an
8.5-year weighted average life (WAL) test at closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch places the
average credit quality of obligors at 'B'/'B+'. The Fitch weighted
average rating factor of the identified portfolio is 23.
High Recovery Expectations (Positive): At least 90% of the
portfolio comprises senior secured obligations. Fitch views the
recovery prospects for these assets as more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the identified portfolio is 63.1%.
Diversified Asset Portfolio (Positive): The transaction has various
concentration limits including a maximum exposure to the three
largest Fitch-defined industries in the portfolio at 40%. These
covenants ensure the asset portfolio will not be exposed to
excessive concentration.
Portfolio Management (Neutral): The transaction has six matrices.
Two are effective at closing with fixed-rate limits of 7.5% and
12.5%, corresponding to a 8.5 year WAL. Two others are effective
one year after closing and another two are effective at 18 months
after closing with the same fixed-rate limits, provided the
portfolio balance (defaults at Fitch-calculated collateral value)
is at least at the target par. All six matrices are based on a top
10 obligor concentration limit of 20%.
The transaction has a 4.4-year reinvestment period and includes
reinvestment criteria similar to those of other European
transactions. Fitch's analysis is based on a stressed portfolio
with the aim of testing the robustness of the transaction structure
against its covenants and portfolio guidelines.
Cash Flow Modelling (Positive): The WAL used for the Fitch-stressed
portfolio analysis is 12 months less than the WAL covenant at the
issue date. This is to account for the strict reinvestment
conditions envisaged after the reinvestment period. These include
passing the coverage tests and the Fitch 'CCC' maximum limit after
reinvestment, and a WAL covenant that progressively steps down over
time. Fitch believes these conditions would reduce the effective
risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A-R, C-R and D-R notes,
result in downgrades of one notch to the class E-R notes, and to
below 'B-sf' for the class F-R 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-R,
D-R and E-R notes each have a two-notch rating cushion, the class
C-R notes have a three-notch cushion and the class F-R notes have a
one-notch cushion, 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 up to four
notches each for the A-R to D-R notes and to below 'B-sf' for the
class E-R and F-R 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 three notches each for the notes, except for the
'AAAsf' rated notes.
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 stable portfolio credit quality
and deleveraging, leading to higher credit enhancement and excess
spread 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 on for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
Date of Relevant Committee
27 October 2025
ESG Considerations
Fitch does not provide ESG relevance scores for Palmer Square
European CLO 2021-2 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.
TRINITAS EURO VI: Fitch Assigns B-sf Final Rating on Cl. F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned Trinitas Euro CLO VI DAC's reset notes
final ratings.
Entity/Debt Rating Prior
----------- ------ -----
Trinitas Euro
CLO VI DAC
A-R XS3208427941 LT AAAsf New Rating AAA(EXP)sf
B-R XS3208428162 LT AAsf New Rating AA(EXP)sf
C-R XS3208428592 LT Asf New Rating A(EXP)sf
D-R XS3208428758 LT BBB-sf New Rating BBB-(EXP)sf
E-R XS3208428915 LT BB-sf New Rating BB-(EXP)sf
F-R XS3208429137 LT B-sf New Rating B-(EXP)sf
Transaction Summary
Trinitas Euro CLO VI DAC reset is a securitisation of mainly senior
secured obligations (at least 90%) with a component of senior
unsecured, mezzanine, second-lien loans and high-yield bonds. Note
proceeds have been used to redeem the outstanding notes (except the
subordinated ones) and fund a portfolio with a target par of EUR500
million.
The portfolio is managed by Trinitas Capital Management, LLC. The
CLO has a 4.4-year reinvestment period and a 7.5-year weighted
average life (WAL) test covenant at closing.
KEY RATING DRIVERS
Average Portfolio Credit Quality (Neutral): Fitch assesses the
average credit quality of obligors in the identified portfolio to
be in the 'B' category. The Fitch weighted average rating factor of
the identified portfolio is 23.8.
Strong Recovery Expectation (Positive): At least 90% of the
portfolio will comprise senior secured obligations. The recovery
prospects for these assets are more favourable than for
second-lien, unsecured and mezzanine assets. The Fitch weighted
average recovery rate of the identified portfolio is 62%.
Diversified Portfolio (Positive): The transaction includes two
Fitch test matrices that are effective at closing. These correspond
to a top 10 obligor concentration limit of 25%, two fixed-rate
asset limits at 5% and 10%, and a 7.5-year WAL test covenant. It
has another two matrices, corresponding to the same limits but a
seven-year WAL, which can be selected by the manager 12 months
after closing (or 18 months after closing if the WAL step up is
exercised after the first anniversary from closing), provided the
collateral principal amount (including defaulted obligations at
Fitch collateral value) is at least at the reinvestment target par
balance.
Other portfolio concentration limits include 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.
WAL Step-Up Feature (Neutral): The deal can extend the WAL by one
year on the step-up date, which can be a year after closing at the
earliest. The WAL extension is subject to conditions, including the
satisfaction of all tests and the aggregate collateral balance
(defaults at Fitch collateral value) being at least equal to the
reinvestment target par amount.
Portfolio Management (Neutral): The transaction has a 4.4-year
reinvestment period and includes reinvestment criteria similar to
those of other European transactions. Fitch's analysis is based on
a stressed case portfolio with the aim of testing the robustness of
the transaction structure against its covenants and portfolio
guidelines.
Cash Flow Modelling (Positive): The WAL used for the transaction's
Fitch-stressed portfolio and matrices analysis is 12 months less
than the WAL test covenant, to account for strict reinvestment
conditions after the reinvestment period, including the
satisfaction of over-collateralisation (OC) test and Fitch's 'CCC'
limit tests, plus a linearly decreasing WAL test covenant. These
conditions reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A 25% increase of the mean default rate (RDR) and a 25% decrease of
the recovery rate (RRR) across all ratings of the identified
portfolio would have no impact on the class A-R, B-R and C-R notes,
and lead to downgrades of one notch each for the class D-R and E-R
notes, and to below 'B-sf' for the class F-R notes.
Downgrades, which are based on the actual portfolio, may occur if
the loss expectation is larger than assumed, due to unexpectedly
high levels of default and portfolio deterioration. The class C-R
notes have a rating cushion of three notches, and the class B-R,
D-R, E-R and F-R notes each have a cushion of two 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 up to two
notches for the class A-R notes, three notches each for the class
C-R and D-R notes, four notches for the class B-R notes, and to
below 'B-sf' for the class E-R and F-R 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 three notches each for the notes, except the
'AAAsf' rated notes.
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 stable portfolio credit quality
and deleveraging, leading to higher credit enhancement and excess
spread to cover losses in the remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognised statistical rating organisations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
Date of Relevant Committee
30 October 2025
ESG Considerations
Fitch does not provide ESG relevance scores for Trinitas Euro CLO
VI 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.
===========
T U R K E Y
===========
GDZ ELEKTRIK: Fitch Affirms 'BB-' LongTerm Foreign Currency IDR
---------------------------------------------------------------
Fitch Ratings has affirmed GDZ Elektrik Dagitim Anonim Sirketi's
(GDZ) Long-Term Foreign-Currency Issuer Default Rating (IDR) at
'BB-' with a Stable Outlook. Fitch has also affirmed the senior
unsecured rating on its USD519 million 9% notes due 2029 at 'BB-',
with a Recovery Rating of 'RR4'.
The affirmation reflects that GDZ's financial profile remains
consistent with its rating, supported by fully regulated revenues
under a regulatory framework of investment renumeration and
insulation from price and volume risks, good network quality, and
solid operating performance.
Rating constraints include GDZ's high exposure to the Turkish
economy with a challenging operating environment and high
inflation, plus a regulatory framework prone to social or political
pressure that may lead to revenue underperformance and cash flow
volatility. It also faces high FX risks due to currency mismatch
between revenue and debt.
Key Rating Drivers
New Regulatory Period Ahead: EMRA, the Turkish regulator, is set to
announce by end-2025 the regulatory parameters for the next tariff
period of 2026-2030, including the weighted average cost of capital
(WACC), allowed opex and capex ceilings, and efficient mechanisms.
EMRA should also approve GDZ's capex programme. Fitch does not
expect material changes in the regulatory framework, although WACC
may change, and the regulator may introduce a stricter approach to
renumeration of operational outperformance.
Healthy Tariff Growth: The regulator increased the distribution fee
by 34.5% from April 2025, broadly in line with its expectation for
2025 average inflation. Previous distribution fee indexations were
59% in July 2024 and 10% in July 2023. Fitch forecasts GDZ's tariff
to continue growing at slightly below inflation from 2026.
Commensurate Financial Profile: Fitch forecasts funds from
operations (FFO) net leverage to remain at or below 3x for
2025-2028, within the rating sensitivities, and FFO interest
coverage at about 4.5x, which is solid for the rating. Fitch
forecasts cash flow from operations at about TRY10 billion (around
USD190 million) on average a year for 2025-2028, but moderately
negative free cash flow (FCF), driven mostly by capex for network
maintenance and modernisation. Fitch also expects bond covenants to
allow GDZ to start paying dividends from 2026.
Regulatory Framework with Long Record: GDZ's tariffs have been
based on the company's regulated asset base since 2006. The key
parameters for the fourth regulatory period of 2021-2025 such as
regulated asset base, real WACC of 12.3%, a 10-year reimbursement
period and efficiency incentives, have supported GDZ's
profitability. Tariffs are protected from volume and inflation
risks. Any deviation of actual results from projected figures is
corrected through tariffs with a moderate lag, including
adjustments to compensate for the lag itself.
Regulatory Weaknesses: Regulatory weaknesses include delayed and
insufficient tariff increases, or mismatch between operating
spending allowances and actual spending affected by high inflation.
Regulatory decisions can be influenced by social and political
reasons to cap utility bill growth. In 2024, GDZ incurred an extra
interest expense of TRY2.7 billion related to its energy payables,
which was not included in the company's business plan. Fitch treats
this interest expense as a non-operating item, with no impact on
interest coverage.
Challenging Operating Environment, FX Risk: FX volatility and
operating environment risks in Turkiye undermine the stability of
the regulatory framework for Turkish distribution companies. The
lira depreciated against the US dollar by around 3.1x between
end-2021 and October 2025, including by around 20% in 2025. The FX
mismatch between GDZ's fully US dollar-denominated debt and
lira-denominated cash flows limits financial flexibility. However,
this is mitigated by inflation-linked tariffs and GDZ's limited
leverage.
Working-Capital Volatility: GDZ is exposed to high working-capital
fluctuations, with an inflow at 15% of revenue in 2022 and an
outflow of 11%-18% of revenue in 2023-2024. Working capital outflow
of TRY6.2 billion (45% of revenue) in 1H25 is due to repayment of
payables after a bond tap issue and lower collections from retail
companies, which GDZ expects to reverse. The low transparency of
GDZ's receivables collection from related-party retail companies
limits visibility on its cash flows.
Standalone Profile Drives Rating: GDZ's bondholders benefit from
covenants that restrict dividend payments, loans to the parent and
other affiliate transactions. Fitch therefore views legal
ring-fencing as 'Insulated' under its Parent and Subsidiary Rating
Linkage Criteria, while Fitch assesses access and control of the
parent as 'Porous', resulting in a standalone rating approach for
GDZ.
Peer Analysis
In Turkiye, GDZ compares well with Zorlu Enerji Elektrik Uretim
A.S. (B+/Negative). Zorlu has a slightly higher debt capacity than
GDZ as it is integrated across regulated networks business and
quasi-regulated earnings in electricity generation under a
renewable energy resources support mechanism (YEKDEM) with
dollar-linked revenues. Zorlu is rated one notch lower than GDZ due
to higher leverage.
Nama Electricity Distribution Company SAOC (BB+/Positive), an
electricity network covering most of the territory of Oman,
operates under a more transparent, stable and predictable
regulatory framework, and benefits from its larger size, higher
profitability and lower FX risks than GDZ. This results in Nama's
rating being two notches higher than GDZ's despite the latter's
lower leverage. The Positive Outlook on Nama's rating reflects that
on the sovereign.
GDZ is larger and has better asset quality than Georgia Global
Utilities JSC (GGU, BB-/Positive, Standalone Credit Profile: b+), a
water network in Georgia. This is counterbalanced by a stronger
operating environment in Georgia. Both companies have a high FX
mismatch between revenue and debt, and a similar debt capacity. The
Positive Outlook on GGU's IDR is driven by anticipated deleveraging
and its rating also benefits from a one-notch uplift for parental
support from FCC Aqualia S.A. (BBB-/Stable).
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
Include:
- GDP growth in Turkiye of 2.5%-3.5% a year over 2025-2028 and
inflation declining to 20% in 2027, from 34% in 2025
- Distribution fees increasing slightly below inflation from 2026
- Capex reimbursement period of 10 years, as assumed by the
regulatory framework
- Capex averaging TRY13 billion a year over 2025-2028, above
management guidance, reflecting lower capex outperformance rate
- Dividends starting from 2026 at TRY1.2 billion-TRY3 billion a
year
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- FFO net leverage above 3.5x and FFO interest coverage below 3x,
both on a sustained basis
- A downward revision of Turkiye's 'BB-' Country Ceiling
- Material weakening of the liquidity profile
- Adverse regulation effects including delays or insufficient
tariff increases, contraction of return on investments and
excessive cash flow volatility could have a negative impact on debt
capacity
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upward revision of Turkiye's Country Ceiling, alongside FFO
net leverage below 2.5x and FFO interest coverage above 3.7x on a
sustained basis
- Greater stability of the regulatory framework through consistent
tariff adjustments as foreseen by regulation and reduced cash flow
volatility, which could have a positive impact on debt capacity
Liquidity and Debt Structure
At end-June 2025, GDZ held TRY1.1 billion (USD27 million) in cash.
Maturities in 2026-2028 include only moderate amortisation payments
on its remaining bank loans of around USD10 million annually over
2025-2028, before a USD519 million bond matures in 2029. Fitch
expects GDZ to have a cash balance of at least USD25 million, in
line with covenants. A tap bond issue of USD119 million in February
2025 supported GDZ's liquidity. However, GDZ will have to fund
expected negative FCF in its rating case over 2H25-2028.
Issuer Profile
GDZ, 100% owned by Aydem Holding, is a Turkiye-based electricity
distribution company serving the Izmir and Manisa regions, with an
8% market share of the country's distribution volumes.
Summary of Financial Adjustments
In its EBITDA calculation Fitch adds Capex reimbursement and WACC
reimbursement, and deduct financial income accrued but not yet
paid, for better EBITDA comparability with international peers. In
the company's reporting, these items are part of FFO but they are
not included in Profit and Loss statement.
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
----------- ------ -------- -----
GDZ Elektrik Dagitim
Anonim Sirketi LT IDR BB- Affirmed BB-
senior unsecured LT BB- Affirmed RR4 BB-
===========================
U N I T E D K I N G D O M
===========================
BUPL REALISATIONS: Creditor's Meeting Set for Nov. 26
-----------------------------------------------------
A meeting of creditors in the administration case of BUPL
Realisations Limited, fka Barony Universal Products Limited and
Barony Universal Products Plc, is scheduled for November 26, 2025
at 11:00 a.m.
BUPL Realisations entered administration in the Court of Session,
No P996 of 2025. Clare Kennedy, Alastair Beveridge, and Kevin Wall
of AlixPartners UK LLP were appointed as joint administrators on
Sept. 30, 2025.
The physical meeting of creditors will be held at AlixPartners, 7th
Floor, 6 New Street Square, London, EC4A 3BF.
As a result of the requirement to hold this physical meeting, the
original deemed approval procedure in relation to the
Administrators' Statement of Proposals is superseded. The
Administrators are permitting remote attendance (meaning attending
and being able to participate in the meeting without being in the
place where it is being held) if such a request to do so is
received in advance of the meeting. All requests for remote
attendance should be sent to the Administrators at
baronyuniversal@alixpartners.com. It is the Administrators'
intention for remote attendance to be facilitated via Microsoft
Teams.
A creditor may appoint a person as a proxy-holder to act as their
representative and to speak, vote, abstain or propose resolutions
at the meeting. A proxy for a specific meeting must be delivered to
the chair at or before the meeting. A continuing proxy must be
delivered to the Administrators and may be exercised at any meeting
which begins after the proxy is delivered.
Proxies may be delivered via email to
baronyuniversal@alixpartners.com or via post to AlixPartners UK
LLP, 6 New Street Square, London, EC4A 3BF.
In order to be counted, a creditor's vote must be accompanied by a
Statement of Claim in respect of the creditor’s claim (unless it
has already been given). A vote will be disregarded if a
creditor's Statement of Claim in respect of their claim is not
received by 4 p.m. on business day before the meeting date (unless
the chair of the meeting is content to accept the Statement of
Claim later).
A creditor who has opted out from receiving notices may
nevertheless vote if the creditor provides a Statement of Claim in
the requisite time frame.
Claims may be delivered via email to
baronyuniversal@alixpartners.com, via post to AlixPartners UK LLP,
6 New Street Square, London, EC4A 3BF, or alternatively may be
provided electronically at www.ips-docs.com, using the details
previously provided to all known creditors.
BUPL Realizations' registered office is at 272 Bath Street,
Glasgow, G2 4JR. Its principal trading address is at 5 Riverside
Way, Riverside Business Park, Irvine, Ayrshire, KA11 5DJ
The joint administrators can be reached at:
Clare Kennedy
Alastair Beveridge
Kevin Wall
AlixPartners UK LLP
6 New Street Square
London, EC4A 3BF
For further information, contact:
Email: baronyuniversal@alixpartners.com
D-FLY GLOBAL: FRP Advisory Appointed as Joint Administrators
------------------------------------------------------------
D-Fly Global IP Limited entered administration in the High Court of
Justice, Business and Property Courts of England and Wales,
Insolvency & Companies List (ChD), Court Number CR-2025-007869, and
Henry Page of Mercer & Hole and David Hudson of FRP Advisory
Trading Limited were appointed as joint administrators on Nov. 7,
2025.
The company was engaged in activities of other holding companies
not elsewhere classified.
Its registered office is at 19-20 Bourne Court, Southend Road,
Woodford Green, Essex, IG8 8HD. The principal trading address is
not applicable.
The joint administrators can be reached at:
Henry Page
Mercer & Hole
7th Floor, 21 Lombard Street
London, EC3V 9AH
David Hudson
FRP Advisory Trading Limited
110 Cannon Street
London, EC4N 6EU
For further information, contact:
Henry Page at Mercer & Hole
21 Lombard Street
London, EC3V 9AH
or
David Hudson
FRP Advisory
110 Cannon Street
London EC4N 6EU
or
Harry Smart
Case Administrator
Email: harry.smart@mercerhole.co.uk
Tel No: 020 7236 2601
DFLY TECHNOLOGY: Mercer & Hole Appointed as Joint Administrators
----------------------------------------------------------------
DFLY Technology Group Ltd entered administration in the High Court
of Justice, Business and Property Courts of England and Wales,
Insolvency & Companies List (ChD), Court Number CR-2025-007868, and
Henry Page of Mercer & Hole and David Hudson of FRP Advisory
Trading Limited were appointed as joint administrators on Nov. 7,
2025.
The company was engaged in retail sale in non-specialised stores.
Its registered office is at 19-20 Bourne Court, Southend Road,
Woodford Green, Essex, IG8 8HD.
The joint administrators can be reached at:
Henry Page
Mercer & Hole
7th Floor, 21 Lombard Street
London, EC3V 9AH
David Hudson
FRP Advisory Trading Limited
110 Cannon Street
London, EC4N 6EU
For further information, contact:
Henry Page at Mercer & Hole
7th Floor, 21 Lombard Street
London, EC3V 9AH
or
David Hudson
FRP Advisory
110 Cannon Street
London EC4N 6EU
or
Harry Smart
Case Administrator
Email: harry.smart@mercerhole.co.uk
Tel No: 020 7236 2601
ENTAIN PLC: S&P Assigns 'BB-' Rating on New Senior Secured Notes
----------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue rating on the proposed
senior secured fixed notes of at least EUR800 million in euro and
pound sterling maturing in 2031, issued by Entain PLC (Entain;
BB-/Stable/--). S&P assigned a '3' recovery rating to the notes,
indicating its expectation of meaningful recovery prospects of 60%
in the hypothetical event of a default.
The recovery rating considers that the proposed notes will rank
pari passu and will benefit from the same security as the existing
senior secured debt, which includes the $1,100 million term loan B
(TLB)-5 due in July 2032, the $2,218 million TLB-6 due in October
2029, and the GBP645 million revolving credit facility (RCF) with a
springing maturity of three months before the earliest TLB.
The group intends to use the proceeds of the new notes to refinance
its EUR1,265 million euro denominated TLB-4 due in 2028, well ahead
of its maturity date, and other associated fees. S&P said, "We view
this as proactive management of Entain's balance sheet and risk
management discipline. The transaction itself extends the debt
maturities and is broadly neutral on net leverage. However, in
light of Entain's latest guidance that its joint venture BetMGM
would return cash dividends of at least $200 million in 2025 to its
parents (of which, $100 million [GBP75 million] we adjust as part
of Entain's EBITDA for its 50% ownership), we now forecast an S&P
Global Ratings-adjusted EBITDA margin of about 20% in 2025 and
above 21% in 2026, and debt to EBITDA of about 5.4x in 2025 and
slightly below 5.0x in 2026."
S&P said, "We remain vigilant and will monitor the upcoming U.K.
government budget and other announcements around the proposed taxes
on the gaming industry, to assess the probable impact on Entain and
other operators exposed to the U.K. market.
"The issue and recovery ratings are subject to our review of the
final documentation."
Issue Ratings--Recovery Analysis
Key analytical factors
-- S&P rates the group's proposed senior secured debt 'BB-', with
a recovery rating of '3'. This is line with its ratings on the
existing instruments including the $1,100 million TLB-5 due in July
2032, the $2,218 million TLB-6 due in October 2029, and the GBP645
million RCF maturing in March 2030.
-- The '3' recovery rating reflects S&P's expectations of
meaningful recovery prospects (50%-70%; rounded estimate: 60%) in
the event of a hypothetical payment default.
-- S&P said, "In our view, the recovery rating is constrained by
the significant amount of senior debt, the asset-light nature of
the business, and relatively weak security package, which comprises
share pledges on the obligors and all material subsidiaries. The
documentation includes a minimum guarantor coverage test of 75% of
guarantor jurisdictions EBITDA as well as a springing maintenance
leverage covenant (applicable only to the RCF). We note that the
guarantors generated 47% of the group's underlying EBITDA, for the
twelve months ended Jun. 30, 2025."
-- In S&P's hypothetical default scenario, it assumes a
combination of factors--including material changes in regulation,
fines, or losses of material licenses in key jurisdictions--placing
significant pressure on the scope and competitiveness of
operations.
-- S&P values the business as a going concern because of the
group's strong market positions, well-known brands, geographic and
product diversification, and strong technology platform.
Simulated default assumptions
-- Year of default: 2029
-- Jurisdiction: U.K.
Simplified waterfall
-- Emergence EBITDA: GBP402 million
-- Multiple: 7.0x. The multiple for the entity is 0.5x higher than
the 6.5x anchor for the company's sector to reflect its strong
market position, proprietary technology platform, diversified
product offering compared with peers, and recent acquisitions
-- Gross enterprise value: GBP2.8 billion
-- Net recovery value after administrative expenses (5%): GBP2.7
billion
-- Estimated senior secured debt claims: GBP4.3 billion*
-- Recovery rating: 3
-- Recovery prospects: 50%-70% (rounded estimate: 60%)
*RCF assumed 85% drawn at the time of default. All debt amounts
include six months of prepetition interest.
EUROHOME UK 2007-1: S&P Affirms 'BB+(sf)' Rating on Class B2 Notes
------------------------------------------------------------------
S&P Global Ratings affirmed its 'A+ (sf)' credit ratings on
Eurohome UK Mortgages 2007-1 PLC's class A, M1, and M2 notes. At
the same time, S&P affirmed its 'BBB (sf)' rating on the class B1
notes and 'BB+ (sf)' rating on the class B2 notes. S&P also
resolved the UCO placements of the class A, M1, and M2 notes.
S&P said, "The affirmations reflect our full analysis of the most
recent information we have received and the transaction's current
structural features. The application of our global RMBS criteria
resulted in a decrease in our expected losses due to lower
weighted-average foreclosure frequency (WAFF) and weighted-average
loss severity (WALS) assumptions. The lower WAFF reflects lower
arrears. Additionally, our WALS assumptions decreased due to
updates to our under- and overvaluation assessments for the U.K.
residential real estate market."
Credit analysis results
Rating level WAFF (%) WALS (%) Credit coverage (%)
AAA 42.10 27.10 11.41
AA 35.11 20.55 7.21
A 31.36 9.77 3.06
BBB 27.46 5.10 1.40
BB 23.46 2.77 0.65
B 22.46 2.00 0.45
WAFF--Weighted-average foreclosure frequency.
WALS--Weighted-average loss severity.
The ratings remain capped at the counterparty level under our
revised counterparty criteria.
The liquidity facility remains undrawn. S&P said, "However, the
liquidity facility agreements held with Deutsche Bank AG do not
comply with our counterparty criteria, as the transaction documents
lack a strong commitment from the liquidity provider to replace
itself or draw-to-cash its obligation if we lower its rating below
'A-1'. Furthermore, following our June 9, 2015, downgrade of
Deutsche Bank, it failed to take any remedial actions. Therefore,
in scenarios where we give benefit to the liquidity facility, the
ratings remain capped at the 'A ' long-term ICR on Deutsche Bank."
Barclays Bank PLC is the swap counterparty. S&P said, "Under our
counterparty criteria, the collateral assessment for the swap is
"no collateral". Therefore, in scenarios where we give credit to
the swap counterparty, we limit the maximum supported rating for
the notes to the swap counterparty, which corresponds to the 'AA- '
RCR on Barclays Bank."
S&P said, "The bank account documents do not comply with our
counterparty criteria. As a result, the ratings on the notes are
capped at our 'A+' long-term ICR on the bank account provider, U.S.
Bank Europe DAC.
"Following the application of our criteria, we have determined that
our assigned ratings on this transaction's classes of notes should
be the lower of (i) the rating as capped by our counterparty
criteria, or (ii) the rating that the class of notes can attain
under our global residential loans criteria.
"Our credit and cash flow results for the class A, M1, and M2 notes
indicate that these notes could withstand our stresses at higher
ratings than those currently assigned. However, due to the bank
account provider rating cap, we affirmed our 'A+ (sf)' ratings on
these classes of notes.
"Under our credit and cash flow analysis, the class B1 and B2 notes
could withstand our stresses at higher ratings than those currently
assigned. However, we affirmed the ratings because they are
constrained by additional factors that we considered. These include
the exposure of these classes to tail-end risk due to any potential
increase in defaults from the high level of interest-only loans and
high arrears, their relative position in the capital structure, and
the significantly lower credit enhancement for the subordinated
classes than for the senior notes. We also considered the
consistently high level of fees in the transaction."
The transaction is backed primarily by a pool of nonconforming
mortgage loans.
FOSSIL GROUP: Gets US & UK Approval on Restructuring
----------------------------------------------------
As distressed companies seek to strengthen their capital structures
without the stigma of chapter 11, Weil has developed a
groundbreaking method for companies to restructure debt that avoids
equity cancellation, delisting and the need to address the entire
capital structure. Instead, this new approach surgically addresses
only the part of the capital structure that needs attention to give
companies more runway to turn their businesses around.
Weil's new "Stapled Exchange" was developed through the Firm's work
for Fossil Group, a U.S. retailer with brands including Fossil,
Skagen, Relic and Zodiac and licensed names like Armani Exchange,
Diesel, Michael Kors, Tory Burch, and Kate Spade. Fossil faced a
debt issue: unsecured "baby bonds" held in $25 increments in
approximately 1,500 separate accounts.
Doing an out-of-court exchange with that many small holders would
have been almost impossible, and chapter 11 was too harsh a remedy
since the company was already in an operational turnaround that was
gaining traction.
Weil designed Stapled Exchange as a way to target Fossil's debt by
taking its restructuring to the U.K., combining an exchange offer
with a backstop U.K. Restructuring Plan to address maturities and
bind holdouts. If enough holders exchanged, court proceedings were
avoided; if not, the U.K. plan proceeded. The approach mirrors
stapling a prepackaged chapter 11 filing to a U.S. exchange offer,
but here tied to a U.K. plan.
This is the first time a U.S. public company has gone outside the
U.S. to conduct a restructuring of U.S.-governed debt and Fossil is
the first publicly listed U.S. company to adopt the Stapled
Exchange. Similar transactions have occurred in Europe before,
where companies changed their "center of main interest" to England,
or another jurisdiction to access that regime.
On November 10, 2025, the High Court of Justice of England and
Wales approved Fossil's plan in the United Kingdom. Shortly
thereafter, on November 12, the Bankruptcy Court for the Southern
District of Texas entered an order recognizing and giving effect to
the U.K. plan under chapter 15 of the bankruptcy code, enabling
enforcement of the U.K. plan in the United States. The U.K. permits
third-party releases, and chapter 15 recognition makes them
enforceable in the U.S. (despite recent U.S. rulings in the chapter
11 context).
Stapled Exchange has cross-border applicability around the world.
Companies could also elect to staple a U.K. Scheme of Arrangement
to an exchange offer (a "Stapled Scheme Exchange" or "SSE"). While
Singapore seeks to attract more restructuring work, England remains
preferred for consistency and case law. Under the "law of Gibbs,"
English courts control contracts governed by English law. Stapled
Exchange and SSE also appeal to Latin American and Asian companies
with New York law bonds and family ownership, since they preserve
equity while fixing debt.
The Weil team advising Fossil is led by Restructuring Department
Co-Chair Sunny Singh and partner Gary Holtzer and includes
Restructuring associates Phil DiDonato, Alexandra Langmo, Joe
Sullivan and Immanuel Vorbach (Not Yet Admitted in New York);
Capital Markets partners Frank Adams and Corey Chivers and
associates Michael Cremers, Emma McBride, Andrene Loiten and Evan
Caltavuturo; Co-Head of Weil's Governing, Securities & Reporting
Group Lyuba Goltser and partner Adé Heyliger; Banking & Finance
partner Vynessa Nemunaitis and associates Angela Estrada and Emma
Xing (Not Yet Admitted in New York); U.K. Restructuring partners
Andrew Wilkinson and Gemma Sage, counsel Kirsten Erichsen and
associates Kyle McLachlan and Rupert Balfe (Not Yet Admitted in
U.K.); U.K. Litigation partner Jamie Maples, counsel Frankie Cowl
and Rosalind Meehan and associates Craig Watson, Reece Williams and
Dhru Vyas (Not Yet Admitted in the U.K.); U.K. Tax counsel Stuart
Pibworth and associate Anna Ritchie; and Tax partners Stuart
Goldring and Graham Magill and counsel Adam Sternberg.
About Fossil (UK)
Fossil (UK) Global Services Ltd. is a subsidiary of U.S.-based
Fossil Group, Inc., a global leader in the design, production, and
marketing of watches, jewelry, handbags, and related accessories.
The UK unit supports the company’s European operations,
handling distribution, logistics, and administrative functions for
its retail and wholesale network across the region.
Fossil Group Inc. sought relief under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Tex. Case No. 25-90525) on
October 20, 2025. In its petition, the Debtor reports about $150
million in unsecured debt.
Honorable Bankruptcy Judge Christopher M. Lopez handles the case.
The Debtor is represented by Clifford William Carlson, Esq. of Weil
Gotshal And Manges.
About Fossil Group Inc.
Fossil Group Inc. is the U.S.-based watch and accessories company.
KING HOLDCO: S&P Assigns Prelim. 'B+' ICR on Acquisition by Apollo
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary 'B+' long-term issuer
credit rating to King Holdco Ltd. and its 'B+' issue rating to its
proposed notes (issued by King US Bidco, its direct subsidiary),
with the preliminary recovery rating of '3' (rounded recovery
estimate: 50%). S&P affirmed the ratings on Mangrove LuxCo III
S.a.r.l., which it will withdraw once the transaction is complete.
S&P said, "The stable outlook reflects our expectation that King
will continue to benefit from positive demand momentum from its end
markets. We believe that higher volumes, along with implemented
restructuring measures, will result in improved S&P Global
Ratings-adjusted EBITDA margins, above 14% in 2025 and 2026. We
expect that the company will maintain an S&P Global
Ratings-adjusted debt-to-EBITDA ratio below 5x and a funds from
operations (FFO)-cash-interest-coverage ratio of more than 3x over
the next 12 months. Meanwhile, we further expect that the group
will continue to generate positive free operating cash flow (FOCF)
in 2025."
Private equity fund Apollo Global Management is acquiring a 70%
majority stake in Kelvion (operating entity of King Holdco,
previously Mangrove LuxCo) from Triton Partners, which will remain
as a minority stakeholder.
Under this new ownership, King Holdco proposes to issue EUR750
million in senior secured floating rate notes, which will mainly be
used to repay the existing debt and finance part of the
acquisition, and cover the fees and expenses related to the
transaction.
S&P said, "Under the new proposed capital structure, we anticipate
S&P Global Ratings-adjusted debt to EBITDA of 3.5x-4.0x in 2025 and
less than 3.5x in 2026, with the higher debt quantum offset by
higher EBITDA generation, supported by strong demand in its
high-tech and green-tech segments, especially from booming
investments in data centers.
"Following the ownership change, we expect King Holdco's S&P Global
Ratings-adjusted leverage to stay below 4.0x in 2025 and 2026 under
the new capital structure, despite a higher debt quantum. The
transaction involves Apollo Global Management acquiring a 70% stake
in Kelvion Group from Triton, which will retain a 30% minority
interest, through the newly established King Holdco. The financing
package comprises EUR750 million of floating senior secured notes
maturing in 2032 and an equity contribution from Apollo
representing about 60% of the total transaction value. Proceeds
will be used to fund the acquisition and refinance the existing
EUR525 million senior secured notes and related transaction costs.
The super senior revolving credit facility (RCF) will be increased
to EUR120 million from EUR65 million and will mature six months
prior to the notes, we expect the RCF to be fully undrawn at the
transaction's close. The existing guarantee and factoring
facilities will remain unchanged. As part of the ownership change,
the approximately EUR80 million of preferred equity certificates
issued to Triton will be redeemed or converted, removing all
interest-bearing shareholder financing instruments from the capital
structure. We expect Kelvion's leverage to remain below 4x over
2025-2026. 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 EUR750 million
floating rate notes, EUR64 million in leases, about EUR29 million
in trade receivables, about EUR25 million in pension obligations,
and EUR10 million-EUR15 million in litigation and other contingent
claims or liabilities. We do not net cash and short-term
investments against debt, given the financial sponsor ownership.
"Kelvion has demonstrated its ability to capture strong end-market
demand in its high-tech and green-tech segments, and we anticipate
this to continue over the forecast period. The company's top line
grew by 25.1% in 2023 and by a further 18.1% in 2024, reflecting
robust market momentum and strong execution across its core
segments. For the forecast period, we expect annual revenue growth
of 6.0%-7.5%, supported primarily by the company's high-tech
segment, particularly the data center end market. This segment now
accounts for about 42% of total revenue and about 50% of company
normalized EBITDA year to date September 2025, driven by continued
expansion in Europe and North America. Demand from data centers
remains elevated, underpinned by significant investment from global
hyperscalers, which are expanding their computing and AI
infrastructure. Industry research indicates that the overall data
center market continues to grow strongly (compound average growth
rate of >11.5% in data center capacity (in kW) between Q3
2025-2030, Source: 451 research), with Kelvion's key customers
among the leading investors in new capacity, supporting sustained
medium-term growth potential. Kelvion is well positioned to capture
this trend through its geographic set up, established client
relationships, and its dry-cooling-centric portfolio, which
addresses water and power scarcity challenges and benefits from a
higher compound growth trajectory than traditional water-cooling
systems. The company's long-term growth trajectory is further
supported by its green-tech end market, which is exposed to
segments with strong structural growth potential, such as heat
pumps and carbon capture solutions, which might also indirectly
benefit from the data center boom, given that data centers consume
high amounts of electricity and require additional investment in
the energy infrastructure. By contrast, growth in the company's
more conventional end markets, particularly those exposed to oil
and gas, remain broadly stable, but this is more than compensated
by the strong and sustained momentum in the high-tech segment,
resulting in continued solid overall revenue expansion.
"Given the top-line expansion, favorable product mix, and continued
cost discipline, we anticipate further improvements in S&P Global
Ratings-adjusted EBITDA resulting in sound cash flow generation in
2025 and 2026. We expect S&P Global Ratings-adjusted EBITDA of
about EUR250 million in 2025 and EUR270 million in 2026,
corresponding to an EBITDA margin of 14.2%-15.2% compared with
11.8% in 2024. The expected margin expansion reflects a combination
of operating leverage, ongoing cost-optimization initiatives, and
favorable pricing dynamics, particularly in the data center end
market, where strong demand has allowed Kelvion to secure pricing
improvements as customers prioritize supply reliability amid
capacity expansion. In addition, the shift toward the high-tech
segment, which carries structurally higher margins than the
conventional portfolio, further supports profitability gains. On
the other hand, this will lead to an increasing concentration of
its high-tech segment and individual customers, because we
understand that within the high-tech segment, the customer
concentration is relatively high. In terms of cash flow, we
anticipate annual capital expenditure (capex) of about EUR55
million-EUR60 million over 2025-2026, as well as working capital
outflows of about EUR45 million in 2025 and EUR25 million in 2026
to support growth and backlog execution. As a result, we forecast
positive FOCF of EUR30 million-EUR40 million in 2025 and EUR65
million-EUR75 million in 2026.
"Liquidity remains solid, with about EUR100 million in cash on hand
after the transaction closes. We note that Kelvion does not face
any short-term maturities and will have full availability under its
EUR120 million super senior RCF. Furthermore, we do not expect any
further shareholder distributions in 2025 and 2026.
"The preliminary 'B+' rating reflects Kelvion's financial policy
and ownership structure following the transaction. Our assessment
takes into account the company's S&P Global Ratings-adjusted
leverage of 3.0x-4.0x in 2025 and 2026, supported by solid earnings
and FOCF generation. At the same time, the rating also reflects the
financial sponsor ownership, which constrains the rating, given the
limited track record of maintaining leverage at such low levels
under the new ownership structure and the flexibility to incur
additional indebtedness under the debt documentation.
"The final rating will depend on our receipt and satisfactory
review of all final transaction documentation. Accordingly, the
preliminary rating should not be construed as evidence of a final
rating. If we do not receive the final documentation within a
reasonable time or if the final documentation departs from the
materials reviewed, we reserve the right to withdraw or revise our
preliminary rating. Potential changes include but are not limited
to the size of the notes and the utilization of its proceeds,
maturity, size, and conditions of the notes and the RCF, financial
and other covenants, security, and ranking.
"The stable outlook reflects our expectation that Kelvion will
continue to benefit from positive demand momentum from its end
markets. We believe that higher volumes, along with implemented
restructuring measures, will result in improved S&P Global
Ratings-adjusted EBITDA margins, above 14% in 2025 and 2026. We
expect that the company will maintain an S&P Global
Ratings-adjusted debt-to-EBITDA ratio below 5x and an
FFO-cash-interest-coverage ratio greater than 3x over the next 12
months. Meanwhile, we further expect that the group will continue
to generate positive FOCF in 2025."
S&P could lower the rating if Kelvion underperformed its base case,
translating into:
-- Debt to EBITDA at around 5x;
-- FFO cash interest coverage falling below 3x; and
-- Negative or only slightly positive FOCF generation.
S&P said, "This could materialize if the order flow dries up,
leading to lower volumes and pressure on EBITDA margins. Albeit not
expected in the next 18 months, we could lower the rating if the
group's liquidity cushion substantially deteriorated.
"Currently we see only limited ratings upside, reflecting the
financial sponsor ownership. Over the long term, we would consider
a positive rating action if the company establishes a track record
of low leverage, supported by a conservative financial policy and
sound operating performance including the reduction of the
volatility in margins and FOCF generation."
PAVILLION CONSUMER 2025-1: S&P Assigns (P)'B' Rating on Cl. F Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Pavillion
Consumer 2025-1 PLC's class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd,
F-Dfrd, and X-Dfrd notes. At closing, the issuer also issued
unrated class Z-Dfrd and R-Dfrd notes, and class S and Y
certificates.
Pavillion Consumer 2025-1 is the first public securitization of a
portfolio of unsecured consumer loans originated and serviced by
Barclays Bank UK PLC in the U.K.
The issuer will use the proceeds of the notes to purchase a
portfolio of unsecured consumer loans, to fund the liquidity
reserve, and to pay certain issuer expenses and fees (including the
cap premium).
The transaction is expected to revolve for 12 months from the first
interest payment date, until December 2026. During this period,
Pavillion Consumer 2025-1 can purchase further eligible receivables
if no early amortization event occurs.
Collections will be distributed monthly according to a split
waterfall, separate for interest and principal collections. During
the amortization period, principal payments will be applied
sequentially until the class A notes balance reaches 75% of the
initial class A notes balance. At that point, the transaction will
switch to pro rata amortization until a sequential amortization
event occurs.
The transaction benefits from an amortizing liquidity reserve fund,
which is available to cover interest shortfalls on the
collateralized notes as well as senior items in the interest
waterfall. The excess of the liquidity reserve above its required
amounts following reserve amortization to its required level is
released in the interest priority of payment and may be used to
cure the principal deficiency ledgers.
A combination of note subordination, excess spread, and the excess
of the liquidity reserve above its required amount will provide
credit enhancement for the rated notes.
S&P said, "Considering the collections sweeping frequency, payments
are remitted to the transaction account within eight business days
of receipt, the securitized assets' weighted-average remaining term
at closing, and our issuer credit rating on the servicer, Barclays
Bank UK PLC (BBUK; A+/Stable/A-1), we consider commingling risk to
be immaterial in this transaction. Notwithstanding this assessment,
the transaction structure incorporates a commingling reserve as an
additional layer of protection. The commingling reserve is expected
to be funded upon the downgrade of the collection account bank
below a specified threshold. Furthermore, collections are protected
by a declaration of trust over the seller's collection account."
BBUK is a deposit-taking institution. There is a risk that
borrowers who also have deposits with BBUK may choose to offset
their loan payments using deposits held by the bank if it became
insolvent. Setoff risk may also arise if borrowers are employees of
BBUK. Any setoff exposure will crystallize upon borrower
notification. Our analysis considered the transaction's exposure to
potential deposit and employee setoff risk.
The rated notes pay a daily compounded Sterling Overnight Index
Average rate plus a margin subject to a floor of zero, while the
assets pay a monthly fixed interest rate. To partially mitigate
fixed-float interest rate risk, the notes benefit from an interest
rate swap. The structure also benefits from an interest rate cap.
Both the swap and cap notional amounts are based on a predetermined
notional schedule based on a 25% prepayment rate and expected
defaults. S&P modelled the swap mechanics in its analysis.
Interest due on all classes of notes other than the most senior
tranche outstanding is deferrable under the transaction documents.
Nonpayment of interest on the junior notes does not constitute an
event of default. Once a class becomes the most senior, current
interest is due on a timely basis, while any outstanding deferred
interest is due either at the maturity date or when the relevant
class of notes is repaid.
S&P said, "The preliminary ratings are not constrained by
counterparty, operational, or sovereign risks. We consider the
issuer to be bankruptcy remote. We expect to assign final credit
ratings on the closing date, subject to a satisfactory review of
the transaction documents, pool audit report, and legal opinions."
Preliminary ratings
Class Prelim. rating* Prelim. class size (%)
----- --------------- ----------------------
A AAA (sf) 79.00
B-Dfrd AA (sf) 7.50
C-Dfrd A (sf) 4.25
D-Dfrd BBB (sf) 3.00
E-Dfrd BB (sf) 1.50
F-Dfrd B (sf) 1.25
Z-Dfrd NR 3.50
X-Dfrd§ B- (sf) 1.75
R-Dfrd§ NR 1.29
S Certificates NR N/A
Y Certificates NR N/A
*S&P's preliminary rating on the class A notes addresses timely
payment of interest and ultimate repayment of principal. Its
ratings on the class B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd, and
X-Dfrd notes address the ultimate repayment of both interest and
principal, and consider the timely payment of interest, including
any previously deferred amounts, once the class is the most senior.
§The class X-Dfrd and R-Dfrd notes are not asset-backed. Their
proceeds will be used to fund the liquidity reserve and to pay
certain issuer expenses and fees (including the cap premium).
NR--Not rated.
N/A--Not applicable.
SOPHOS INTERMEDIATE I: Fitch Affirms 'B' LongTerm IDR
-----------------------------------------------------
Fitch Ratings has affirmed Sophos Intermediate I Limited's (Sophos)
Long-Term Issuer Default Rating (IDR) at 'B' with a Stable Outlook
and Sophos Holdings S.A.R.L.'s and Sophos Holdings, LLC's senior
secured instrument ratings at 'B+' with a Recovery Rating of
'RR3'.
The affirmation reflects its belief that Fitch-defined EBITDA
leverage and Fitch-defined cash flow from operations (CFO) less
capex/total debt will remain comfortably within their 'B' rating
sensitivities over FY26-FY28 (year-end March). Fitch expects
Fitch-defined free cash flow (FCF) margins to reach the low double
digits, supported by billings and EBITDA growth. Fitch forecasts
leverage reduction to 5.7x in FY28 from 6.7x in FY26, with
manageable refinancing risk.
Sophos's ratings remain supported by its strong position in
end-point and network security solutions for SMBs and the
middle-market segment. This is balanced by inherent risks of
primarily supplying to small-to-medium-sized businesses (SMB),
which typically suffer from greater volatility.
Key Rating Drivers
Continued Deleveraging: Leverage peaked at 7.3x in FY25, driven by
the debt-financed acquisition of Secureworks in February 2025.
However, Fitch forecasts leverage to fall to 6.7x in FY26 and
continue declining to 6.3x in FY27, as Fitch-defined EBITDA for the
combined group expands. Fitch expects refinancing risks to stay
manageable even though Sophos's term loans mature in March 2027,
given the group's solid organic growth and cash flow generation
capabilities. Sophos does not have a public financial policy, but
Fitch expects leverage to remain within its sensitivities of
5.5x-7.0x in the absence of major M&A.
EBITDA Margin Evolution: Fitch forecasts EBITDA margin to fall to
24% in FY26, from 27.5% in FY25, due to the presence of
lower-margin Secureworks. Fitch also expects higher research and
development costs than normal, with product investments and the
impact of lower Research and Development Expenditure Credits. Fitch
forecasts the EBITDA margin to remain in mid-20% for the
foreseeable future, due to growth in managed services (MDR)
balanced by the benefit of operating leverage. The latter reflects
a higher proportion of revenue generated from more labour-intensive
services, underlining a trade-off between scale and profitability.
Robust FCF: Sophos has a stable, cash-generative business, driven
by a high portion of recurring revenues, upfront billings, and low
capex requirements. Fitch expects a Fitch-defined FCF margin of 11%
in FY26 after non-recurring integration costs and continued high
cash interest costs, offset by cost synergies stemming from the
Secureworks acquisition, which Fitch expects to be fully achieved
by 2026. Fitch estimates Fitch-defined FCF margins to be in the low
to mid-teens for FY26-FY29.
Enhanced Product Portfolio: Sophos has been expanding its MDR
services, which represented the mid-teens of annual recurring
revenue in FY25. MDR has been a small contributor to recurring
revenue relative to Sophos' core security expertise but Secureworks
and the integration of its Taegis platform into Sophos Central -
the flagship platform - should strengthen capabilities and improve
portfolio breadth faster than is organically feasible. The platform
brings a comprehensive set of managed services nearly 90% of
billings from subscriptions, a gross margin of nearly 80%, and a
retention rate in the mid-80%. Fitch sees minimal customer overlap,
negating the risk of revenue cannibalisation.
Moderate Execution Risks: Fitch expects the integration of
Secureworks' products and services with Sophos's to complete over
the next two calendar years. In the near term Fitch expects
customers will still be offered existing products but over time
services will be unified and fully available through Sophos
Central. Fitch expects this process to occur smoothly, given the
alignment between the companies' products and services. However,
meaningful gains in revenue and EBITDA, driven by new logos and
cross-selling to existing customers, entail execution risks.
Demand for Managed Services: MDR and incident response are a key
strategic focus for Sophos. Fitch expects the market to have
double-digit growth in 2025-2028, driven by increasingly complex
cybersecurity threats. Sophos' 24/7 professional support, by making
use of experts and automated solutions, is ideal for SMBs that need
a comprehensive solution but cannot afford an in-house
cybersecurity team. A channel-centric and sophisticated MDR
platform should enable swift and cost-effective scaling up.
Disruption Opportunities: Sophos remains a leading provider of
security services to SMBs, with offerings across network, firewall
and MDR. Secureworks' traditional customer base has been larger
enterprises. Sophos has opportunities to leverage the customer base
and technology of the combined group to offer a suite of products
to larger enterprises, typically served by scaled providers such as
Crowdstrike, SentinalOne and Palo Alto Networks. Enterprise
cybersecurity services have very high switching costs and risks,
making this a lucrative but challenging and complex market to
disrupt. Larger enterprise segments tend to be more competitive on
new business.
Competitive Threats: Fitch sees growing threats from larger
providers offering simplified versions of products to SMBs through
the increasing use of artificial intelligence (AI). Sophos's
traditional products are well established and adapted for its
customers, but broadening the customer base and segment would be a
rational strategy. Competitors can adapt product suitability and
pricing for SMBs, particularly for services such as MDR, where
operating leverage can make this segment attractive to providers
that have the infrastructure already in place. AI has the potential
to improve threat detection and prevention while reducing the costs
of services delivery to customers.
Further Bolt-on M&A Possible: Fitch believes excess cash flow will
likely be used for opportunistic bolt-on M&As rather than debt
repayment or dividend distributions. However, high multiples in the
sector would require achievable synergies to justify debt-funded
acquisitions.
Peer Analysis
Sophos' operating profile compares well with that of other
medium-sized cyber security companies, in particular Imperva Inc.
and Darktrace Finco US LLC (B/Stable), although Sophos benefits
from lower leverage. Solid cash flow generation, supported by
healthy deleveraging capacity from EBITDA growth, allows Sophos to
operate with high leverage for the rating.
Larger cyber security companies such as Gen Digital Inc.
(BB+/Negative) and Citrix Systems, Inc. benefit from their larger
scale and have lower leverage. CYBERSPACE B.V. (Nord Security,
BB/Stable) also benefits from lower leverage, fast deleveraging
capabilities and high organic growth as the world's leading VPN
provider.
Key Assumptions
Fitch assumptions:
- Revenue growth of 23% in FY26 following the full-year benefit
from the acquisition of Secureworks, before slowing to mid-single
digits in FY26-FY29, supported by industry growth and growth in
managed services
- Fitch-defined EBITDA margin (on a pre-IFRS16 basis) declining to
24% in FY26 and reaching 25% by FY28.
- Changes in deferred revenue of USD120 million in FY25 and USD70
million in FY27-FY28 included in FCF but not in EBITDA, reflecting
the benefit from largely upfront cash from billings
- Annual working-capital outflow at 4% of sales in FY26-FY29
- Capex at 1.3% of revenue in FY26-FY29
- Exceptional cash outflows of USD41 million in FY26, of which
USD35 million is treated as non-recurring
- Regular amortisation of term loans of around USD26 million a
year
Recovery Analysis
The recovery analysis assumes that Sophos would be reorganised as a
going concern (GC) in bankruptcy rather than liquidated.
Fitch estimates that the post-restructuring GC Fitch-defined EBITDA
would be around USD250 million. Fitch would expect a default to
come from a material decline in revenue and EBITDA following
reputational damage or intense competitive pressure. Fitch applies
a multiple of 6.5x to the GC EBITDA to calculate a
post-reorganisation enterprise value of USD1.5 billion, after
deducting 10% for administrative claims from bankruptcy and
associated costs.
The multiple is higher than the median for technology, media and
telecoms, but is in line with that of other similar software
companies with strong FCF characteristics. The post-restructuring
EBITDA accounts for Sophos's scale, its customer and geographical
diversification, and its exposure to secular growth in the cyber
security market.
Its waterfall analysis, after assuming a fully drawn revolving
credit facility, generates a ranked recovery for the senior secured
debt rating of 'B+'/'RR3' for the US dollar and euro term loans.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A weakening market position, underscored by slowing revenue
growth or increasing customer churn
- Material EBITDA margin compression and/or more aggressive capital
allocation driving EBITDA leverage above 7.0x on a sustained basis
- CFO less capex/total debt with equity credit below 5% on a
sustained basis
- EBITDA interest coverage consistently below 1.5x
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- Solid EBITDA margin progression and evidence of some commitment
to deleveraging resulting in EBITDA leverage below 5.5x on a
sustained basis
- CFO less capex/total debt with equity credit consistently above
7.5%
- EBITDA interest coverage consistently above 2.5x
Liquidity and Debt Structure
Fitch forecasts FY26 balance-sheet cash of around USD400 million,
and rising to around USD420 million in FY27. Sophos also has an
undrawn USD92.5 million Revolving Credit Facility (RCF). Cash
interest costs remain high due to the large amount of gross debt on
its balance sheet. However, Fitch expects liquidity to remain
comfortable. Sophos typically benefits from a highly
cash-generative business model, as demonstrated by consistent
positive FCF generation and a prudent approach to cash management.
The RCF matures in December 2026, following an extension, from
March 2025, on the close of the Secureworks acquisition. The
amortising senior secured term loans are due in March 2027, but
Fitch believes refinancing risk remains manageable. Fitch believes
Sophos has sufficient FCF headroom to absorb potentially higher
interest rates on a refinancing at less favourable terms.
Issuer Profile
Sophos is a global provider of next-generation cyber security
solutions, spanning end-point and next-generation firewall, cloud
security, server security, and managed threat response to SMBs.
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
----------- ------ -------- -----
Sophos Holdings
S.A.R.L.
senior secured LT B+ Affirmed RR3 B+
Sophos Intermediate
I Limited LT IDR B Affirmed B
Sophos Holdings, LLC
senior secured LT B+ Affirmed RR3 B+
TOWD POINT 2024-GRANITE 7: Fitch Cuts Rating on Cl. E Notes to 'B+'
-------------------------------------------------------------------
Fitch Ratings has downgraded Towd Point Mortgage Funding 2024 -
Granite 7 PLC's class E notes, affirmed the others and revised the
Outlooks on the class D to F notes to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
Towd Point Mortgage Funding
2024 - Granite 7 PLC
Class A1 XS2950571062 LT AAAsf Affirmed AAAsf
Class B XS2950571492 LT AA-sf Affirmed AA-sf
Class C XS2950571575 LT A-sf Affirmed A-sf
Class D XS2950571732 LT BBB-sf Affirmed BBB-sf
Class E XS2950571815 LT B+sf Downgrade BB-sf
Class F XS2950571906 LT B-sf Affirmed B-sf
Class XA1 XS2950572201 LT CCsf Affirmed CCsf
Transaction Summary
The transaction is a securitisation of owner-occupied (OO)
residential mortgage assets originated by Northern Rock (now
Landmark Mortgages Limited) and secured against properties in
England, Scotland and Wales. It also contains a small proportion of
unsecured loans (about 3% of the portfolio balance) linked to the
mortgage products.
KEY RATING DRIVERS
UK RMBS Rating Criteria Updated: The rating actions reflect Fitch's
updated UK RMBS Rating Criteria (see " Fitch Ratings Updates UK
RMBS Rating Criteria" dated 23 May 2025). Key changes include
updated representative pool weighted average foreclosure
frequencies (WAFF), changes to sector selection, revised recovery
rate (RR) assumptions and changes to cash flow assumptions.
The non-conforming sector representative 'Bsf' WAFF has seen the
largest revision. Fitch applies dynamic default distributions and
high prepayment rate assumptions rather than the previous static
assumptions. Fitch's updated criteria account for worsening asset
performance by assuming loans in 12-months plus have defaulted at
the review date.
Sector Selection: The pool's performance is considerably worse than
Fitch's Prime index and in line with Fitch's Non-Conforming Index.
Fitch has consequently modelled the transaction using the
non-conforming sector assumptions rather than adjusting the UK
prime assumptions as Fitch did at closing. As per the updated
rating criteria, Fitch has treated loans more than 12 months in
arrears as defaulted, which affects 9.7% of the total asset balance
at September 2025 (over the 0.8% reported defaults).
Class E Downgraded, Negative Outlooks: The transaction is
amortising sequentially, resulting in a build-up in credit
enhancement. However, the class E notes are more sensitive to
Fitch's updated criteria, particularly the revised RR and default
assumptions, which treat loans that are more than 12 months in
arrears as defaults for both asset and cash-flow modelling.
Combined with updated sector selection, and despite some
deleveraging since closing, this has resulted in larger expected
losses levels and led to the downgrade of the class E notes.
Servicing fees have been volatile since closing and above initial
expectations, likely due to high arrears and defaults and the
higher servicing costs associated with them. The Negative Outlooks
on the class D, E and F notes reflect this pressure and signal
potential downgrades if servicing fees remain consistently above
Fitch's modelled assumption, which could lead to Fitch revising its
assumption upward in future reviews.
Worsening Arrears Performance: At September 2025, one-month-plus
and three-month-plus payments in arrears were 21.8% and 17.1% of
the secured portfolio balance, respectively, from 20.9% and 16.9%
in December 2024. Early-stage arrears are flattening on a
loan-count basis, with the rise in overall arrears driven by an
amortising pool and loans migrating into deeper arrears buckets.
Transaction Adjustment: The portfolio consists of seasoned OO
loans, predominantly originated between 2005 and 2008, with a high
portion of interest-only and restructured loans, and a small
unsecured component representing about 3% of the portfolio balance.
The transaction's historical performance is aligned with Fitch's
non-conforming indices. Accordingly, Fitch applied its
non-conforming assumptions and an OO transaction adjustment of 1.0x
to FF in its analysis.
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
weighted average RR (WARR) would imply the following:
Class A: 'AA-sf'
Class B: BBB+sf'
Class C: 'BB+sf'
Class D: 'B-sf'
Class E: 'CCCsf'
Class F: below 'Bsf'
Class X1A: below 'Bsf'
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: 'AA+sf'
Class C: 'AA-sf'
Class D: 'A-sf'
Class E: 'BBB-sf'
Class F: 'BB-sf'
Class X1A: below 'Bsf'.
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
Towd Point Mortgage Funding 2024 - Granite 7 PLC
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.
Prior to the transaction closing, Fitch sought to receive a third
party assessment conducted on the asset portfolio information, but
none was available for this transaction.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
TPMF - Granite 7 PLC has an ESG Relevance Score of '4' for Customer
Welfare - Fair Messaging, Privacy & Data Security due to a high
portion of interest-only loans in legacy OO mortgages, 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.
===============
X X X X X X X X
===============
[] BOOK REVIEW: PANIC ON WALL STREET
------------------------------------
A History of America's Financial Disasters
Author: Robert Sobel
Publisher: Beard Books
Softcover: 469 Pages
List Price: $34.95
Review by: Gail Owens Hoelscher
http://www.beardbooks.com/beardbooks/panic_on_wall_street.html
"Mere anarchy is loosed upon the world, the blood-dimmed tide is
loosed, and everywhere the ceremony of innocence is drowned; the
best lack all conviction, while the worst are full of passionate
intensity."
What a terrific quote to find at the beginning of a book on a
financial catastrophe! First published in 1968. Panic on Wall
Street covers 12 of the most painful episodes in American financial
history between 1768 and 1962. Author Robert Sobel chose these
particular cases, among a dozen or so others, to demonstrate the
complexity and array of settings that have led to financial panics,
and to show that we can only make; the vaguest generalizations"
about financial panic as a phenomenon. In his view, these 12 all
had a great impact on Americans of the time, "they were dramatic,
and drama is present in most important events in history." They had
been neglected by other financial historians. They are:
William Duer Panic, 1792
Crisis of Jacksonian Fiannces, 1837
Western Blizzard, 1857
Post-Civil War Panic, 1865-69
Crisis of the Gilded Age, 1873
Grant's Last Panic, 1884
Grover Cleveland and the Ordeal of 183-95
Northern Pacific Corner, 1901
The Knickerbocker Trust Panic, 1907
Europe Goes to War, 1914
Great Crash, 1929
Kennedy Slide, 1962
Sobel tells us there is no universally accepted definition if
financial panic. He quotes William Graham Sumner, who died long
before the Great Crash of 1929, describing a panic as "a wave of
emotion, apprehension, alarm. It is more or less irrational. It is
superinduced upon a crisis, which is real and inevitable, but it
exaggerates, conjures up possibilities, take away courage and
energy."
Sobel could find no "law of panics" which might allow us to predict
them, but notes their common characteristics. Most occur during
periods of optimism ("irrational exuberance?"). Most arise as
"moments of truth," after periods of self-deception, when players
not only suddenly recognize the magnitude of their problems, but
are also stunned at their inability to solve them. He also notes
that strong financial leaders may prove a mitigating factor, citing
Vanderbilt and J.P. Morgan.
Sobel concludes by saying that although financial panics have
proven as devastating in some ways as war, and while much research
has been carried out on war and its causes, little research has
been done on financial panics. Panics on Wall Street stands as a
solid foundation for later research on the topic.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante,
Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman,
Editors.
Copyright 2025. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000.
* * * End of Transmission * * *