In a separate statement, Scope said it downgraded Appeninn's issuer rating to B, with a stable outlook, from B+. Scope also downgraded Appeninn's senior unsecured debt to B- from BB-.
"The downgrade is driven by the company's large development projects, which burden it with significantly more debt and put a strain on credit metrics," Scope said.
Scope noted that Appeninn's shareholder structure had changed in 2020, and its new major shareholders, Avellino Holding (24%) and Zinventive (18.3%), "shifted strategy from buy-and-hold commercial real estate to real estate development for tourism properties".
The new strategy involves strengthening Appeninn's existing buy-and-hold commercial real estate portfolio in Budapest through the selective disposal of non-core properties while acquiring class A buildings, and making tourism developments on Lake Balaton, in the Tokaj wine-growing region and on the Danube Bend.
"Scope judges Appeninn's liquidity to be adequate, despite the highly negative cash flows which, together with unrestricted cash, are not sufficient to cover limited short-term debt. Nevertheless, as all developments are pre-funded through state grants and construction loans, Scope does not foresee a liquidity issue arising from those contracts that need to be fulfilled," Scope said.
The B- debt rating is two notches under the B+ threshold for participation in the Bond Funding for Growth Scheme (BGS) of the National Bank of Hungary (MNB). Appeninn raised a little more than HUF 20 billion in proceeds from a BGS bond in November 2019.
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