In a separate release, Scope said it had placed the B+ issuer rating and BB- senior unsecured debt rating of Appeninn under review for a possible downgrade, prompted by a shift in strategy initiated by the companyʼs new owners and a change in management.
Scope noted that in March 2020 Avellino Holding, controlled by Dániel Jellinek, took over 24% of Appeninn shares, and Zinventive, controlled by Attila Balázs, acquired 18.3% of shares. The new owners suggested changes to Appeninnʼs strategy which the old management started executing and the new management is continuing from October 1.
Appeninnʼs new strategy is to strengthen its existing buy-and-hold commercial real estate portfolio in Budapest; postpone previous plans to acquire performing retail real estate in Central and Eastern Europe; and start to develop its own hotel and recreational real estate around Lake Balaton and in the Tokaj wine-growing region.
"The new exposure to development projects adversely alters Scope’s industry risk assessment. Moreover, the new strategy affects to a certain degree the companyʼs competitive position within the business risk profile, which applies pressure on the rating, especially in terms of profitability. Regarding the financial risk profile, the hotel and leisure development projects will entail elevated risks as the significant capex expenditure spending levels will not be covered by income until completion or beyond," Scope said.
As part of its review, Scope said it intends to meet with Appeninnʼs new management "to understand the new strategy as well as monitor ongoing changes in the company’s capital structure and business model".
"A potential downgrade by a maximum of one notch could result from a significant worsening in debt protection and leverage compared to 2019 levels as a consequence of a sustained change in the capital structure driven by the new strategy," it added.
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