DBRS Finalizes Provisional Rating of BB (low) on Avintia Proyectos Y Construcciones, S.L.’s Senior Secured Notes

DBRS Limited (DBRS) finalized its provisional rating of BB (low) on the EUR 50 million 4.00% Senior Secured Notes (the Notes) of Avintia Proyectos Y Construcciones, S.L. (Avintia PyC or the Company). The Notes have a maturity date of September 1, 2020. DBRS also confirmed the Issuer Rating of Avintia PyC at BB (low). The trends on both ratings are Stable.

The Notes are fully and unconditionally guaranteed by deeds of commitment to grant second-ranking mortgages on three real estate properties held within related parties. Avintia PyC, Grupo Avintia, S.L. and its major subsidiaries have provided intercompany guarantees that are consistent with DBRS’s consolidated credit approach (please see “DBRS Criteria: Guarantees and Other Forms of Support” (February 2018) and “Rating Corporate Holding Companies and their Subsidiaries” (December 2017)). It is DBRS’s understanding that the amount of debt secured by first mortgage positions on pledged assets will not be increased. Proceeds from the issuance are expected to be used toward general corporate and operating purposes.

On a stand-alone basis, DBRS expects the issuance to weaken Avintia PyC’s core credit metrics because of the increased level of debt. Forecast coverage ratios are expected to remain in the bottom range of acceptability for the current rating.

On a consolidated basis, Grupo Avintia, S.L.’s financial metrics are expected to weaken in the short term, with gradual improvement to a level commensurate with the current rating by 2019. The consolidated structure also modestly enhances the Company’s business risk profile, as the overall group’s business model strengthens the Company’s size and market position, as well as its diversification away from fixed-price construction contracts, specifically with a broader focus on property services and hotel management.

Due to the recent inclusion of intercompany guarantees and the resulting application of DBRS’s consolidated credit approach, DBRS’s future rating reports will change from the current analysis of Avintia PyC on a stand-alone basis to the analysis of Grupo Avintia S.L. on a consolidated basis.

Please refer to the Avintia PyC rating report issued by DBRS on September 28, 2017, for additional details regarding the Company’s credit profile.

Notes:
All figures are in euros unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Rating Companies in the Construction and Property Development Industry (January 2018), the DBRS Criteria: Guarantees and Other Forms of Support (January 2018), and the DBRS Criteria: Recovery Ratings for Non-Investment Grade Corporate Issuers (February 2018), which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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