ACRA has assigned the “Rating under review: negative” status to the credit rating of “Garant-Invest Commercial Real Estate” JSC (hereinafter, Garant-Invest, or the Company) and its bonds due to uncertainty regarding the future assessments of the Company’s financial risk profile factors, including as a result of its plans to carry out a new project amid ACRA’s expectations of weaker financial results in 2022 compared to the Agency’s initial projections. ACRA plans to review the Company’s credit rating and credit rating outlook in the short-term, taking into account its actual 2022 results. This may lead to the Agency changing the credit ratings of Garant-Invest and its bond issues and is the reason for assigning the “Rating under review: negative” status.
The Company’s current credit rating, BBB-(RU), is based on the high industry risk, small business size (net operating income was less than RUB 5 bln), high leverage coupled with a low coverage assessment, and a medium liquidity assessment. The Agency noted that the rating was supported by the Company’s strong business profile and geographic presence, as well as its high profitability.
The Company is the main business asset of Financial and Industrial Corporation “Garant-Invest”. The Company owns and manages a portfolio of commercial real estate, and develops and redevelops commercial real estate in Moscow. As of September 30, 2022, the Company owned 16 properties, including 13 functioning shopping centers (Galereya Aeroport shopping center, Moskvoreche shopping center, Tulsky retail and business complex, and others).
potential outlook or rating change factors
The “Rating under review: negative” status indicates that the rating may be downgraded.
Removal of the “Rating under review: negative” status and affirmation of the credit rating may be prompted by:
- Limited impact of the new project on the Company’s projected financial results coupled with unchanged assessments of other credit rating factors.
Removal of the “Rating under review: negative” status and downgrading the credit rating may be prompted by:
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A lack of sufficient up-to-date information on the Company’s current financial standing and operations and/or the new project;
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Significant deterioration of operational and financial risk profile factors by the end of 2022 taking into account the Agency’s expectations in the forecast period;
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Worsened access to existing liquidity sources.
rating components
Standalone creditworthiness assessment (SCA): bbb-.
Adjustments: none.
issue ratings
“Garant-Invest Commercial Real Estate” JSC, 001Р-05 series (RU000A1005T9), maturity date: April 5, 2024, issue volume: RUB 6 bln — BB+(RU).
“Garant-Invest Commercial Real Estate” JSC, 001Р-06 series (RU000A1016U4), maturity date: December 13, 2022, issue volume: RUB 500 mln — BB+(RU).
“Garant-Invest Commercial Real Estate” JSC, 002Р-01 series (RU000A102DZ1), maturity date: November 23, 2022, issue volume: RUB 800 mln — BB+(RU).
“Garant-Invest Commercial Real Estate” JSC, 002Р-02 series (RU000A102LS9), maturity date: December 25, 2023, issue volume: RUB 500 mln — BB+(RU).
“Garant-Invest Commercial Real Estate” JSC, 002Р-03 (RU000A102X18), maturity date: March 26, 2024, issue volume: RUB 1.5 bln — BB+(RU).
“Garant-Invest Commercial Real Estate” JSC, 002Р-04 (RU000A103WX4), maturity date: May 26, 2023, issue volume: RUB 1.2 bln — BB+(RU).
Rationale. The above issues represent senior unsecured debt of “Garant-Invest Commercial Real Estate” JSC. Due to the absence of either structural or contractual subordination of the issues, ACRA regarded these issues as pari passu to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. When calculating the loss recovery rate, ACRA took into account the planned purchase of new commercial real estate. According to ACRA’s methodology, the loss recovery rate for the Issuer’s unsecured debt belonged to Category III. Therefore, the above bond issues were rated BB+(RU), i.e. one notch below the credit rating of the “Garant-Invest Commercial Real Estate” JSC. The “Rating under review: negative” status has been assigned to the credit rating of “Garant-Invest Commercial Real Estate” JSC and therefore the Company’s bond issues have also been assigned the “Rating under review: negative” status.
regulatory disclosure
The credit ratings of “Garant-Invest Commercial Real Estate” JSC and the bonds issued by “Garant-Invest Commercial Real Estate” JSC (RU000A1005T9, RU000A1016U4, RU000A102DZ1, RU000A102LS9, RU000A102X18, RU000A103WX4) have been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the bonds issued by “Garant-Invest Commercial Real Estate” JSC.
The credit ratings of “Garant-Invest Commercial Real Estate” JSC and the bonds (RU000A1005T9, RU000A1016U4, RU000A102DZ1, RU000A102LS9, RU000A102X18, RU000A103WX4) issued by “Garant-Invest Commercial Real Estate" JSC were published by ACRA for the first time on December 26, 2018, March 12, 2019, December 25, 2019, November 26, 2020, December 29, 2020, April 5, 2021, and October 25, 2021, respectively. The credit rating of “Garant-Invest Commercial Real Estate” JSC and its outlook and the credit ratings of the bonds issued by “Garant-Invest Commercial Real Estate” JSC are expected to be revised by January 31, 2023.
The credit ratings were assigned based on data provided by “Garant-Invest Commercial Real Estate” JSC, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited and “Garant-Invest Commercial Real Estate: JSC” participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to “Garant-Invest Commercial Real Estate” JSC. No conflicts of interest were discovered in the course of credit rating assignment.
