KBRA Downgrades and Withdraws the Ratings of Four Classes of Notes Issued by Artis LoanCo 1 PLC
5 Mar 2025 | Dublin
KBRA Europe (KBRA) downgrades its outstanding ratings on four classes of Notes issued by Artis LoanCo 1 PLC (Issuer), and removes them from Watch Downgrade, where they were placed on 21 February 2025. Immediately following such rating action, KBRA withdraws its ratings on the four classes of Notes because of a lack of sufficient information to maintain the ratings.
In performing the rating review, KBRA utilised its General Global Rating Methodology for Asset Backed Securities, as well as its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology. This transaction falls within “Category 1 – Financial Assets” categorisation noted within the General Global Rating Methodology for Asset Backed Securities, which typically relates to transactions that are backed by pools of consumer or commercial financial obligations owed by diverse obligors.
Transaction Update
The prior Watch Placements were effectuated following receipt of notice from the Issuer of a breach of the following performance triggers, which led to the occurrence of an Event of Default as defined within the transaction documentation, for the collection period ending on 5 February 2025:
- 24.3% of the Portfolio was in arrears by more than 60 days (includes any performing Loan Asset that has undergone a Pre-Approved Restructuring or an Eligible Restructuring), which amount exceeded the 20.0% threshold.
- 14.2% of the Portfolio was in arrears by more than 60 days (does not include any performing Loan Asset that has undergone a Pre-Approved Restructuring or an Eligible Restructuring), which amount exceeds the 10.0% threshold.
On 18 February 2025, KBRA received confirmation that the at-risk credit insurance, covering 100% of the outstanding loan amounts, remained in place. The Servicer subsequently informed KBRA on 27 February 2025 that insurance policies covering buyer receivables for two borrower positions were no longer in effect.
On 3 March 2025, KBRA received a written notification that Artis Finance Limited (AFL), as Servicer and Originator of the transaction, had entered administration under the United Kingdom’s Insolvency Act 1986, with individuals from PricewaterhouseCoopers LLP appointed as joint administrators (Joint Administrators) of AFL.
According to the notice, as a result of AFL’s ongoing investigation, “amendments were made to recent Servicing Reports which misrepresented the true performance of the Portfolio against various metrics, including that certain financial covenants were reported as met when they were not in fact met. The Joint Administrators have commenced their forensic investigation into these matters.”
Notwithstanding the lack of sufficient information on the performance of the portfolio in order for KBRA to maintain a rating, the notes now remain highly susceptible to loss over their remaining term due to, amongst other items, the occurrence of an Event of Default, the apparent misrepresentations in transaction reporting and heightened uncertainty over recoveries.
To access ratings and relevant documents, click here.