The credit rating of PJSC Samolet Group (hereinafter, the Company, the Group, or Samolet) has been upgraded due to better assessments of geographic diversification, business profitability, coverage, and cash flow. The credit rating stems from the Company's very strong assessments of geographic diversification and liquidity, very high profitability, very low leverage, very high coverage, high assessments of business profile and corporate governance, and large business size. At the same time, the very high industry risk and the weak cash flow assessment constrain the credit rating.

Samolet is one of the leaders of the real estate market in the Moscow Region and the New Moscow District. Most of the Group's projects are integrated development projects. According to the Unified Registry of Developers as of January 1, 2023, the Company’s current construction portfolio amounts to 3.32 mln sq. m (second place in Russia).

Key assessment factors

Industry risk is assessed as very high due to the pronounced cyclical nature of the industry, high amount of overdue payments, and substantial number of developers that have defaulted over the last five years. Therefore, industry risk is a strong factor that limits the Company’s credit rating.

Strong business profile. The Company’s strong business profile is based on the very highly diversified project portfolio and the stable project completion timeline. ACRA notes an increase in the diversification of the project portfolio and an improvement in geographical diversification over the past three years. The Company is a leader in housing construction in the Moscow area.

Growing business size and better geographic diversification. In 2022, the Company's project portfolio continued to grow fast. The portfolio of current projects increased from 2.47 mln sq. m in January 2022 to 3.32 mln sq. m in January 2023 (the portfolio has more than doubled since 2021), and now the Company is ranked second in Russia in this indicator. Samolet has expanded its operations to some new regions: apart from Moscow and the Moscow Region (including the New Moscow District), the Company has projects in St. Petersburg, the Leningrad Region, Kazan, Tyumen, and Vladivostok. The Agency expects that in 2023–2025, the share of sales in regions other than the main region of presence (the Moscow Region and the New Moscow District) will be about one third of the Company's total sales.

Very low leverage and very high coverage. When calculating the ratio of net debt to FFO before interest, ACRA adjusted the total debt for the project finance debt fully secured by funds held on buyers’ escrow accounts. The weighted average ratio of net debt to FFO before net interest for 2020–2025 is estimated by ACRA at 0.88x. When assessing the coverage, ACRA included interest paid on the corporate debt as interest payments, while payments on the project finance debt secured by escrow accounts are included in prime costs. According to ACRA's estimates, the weighted average ratio of FFO before net interest to net interest for 2020–2025 is 8.8x.

Weak cash flow assessment and strong liquidity. In its calculations of free cash flow (FCF), the Agency adjusts the operating cash flow for changes in the project debt secured by escrow accounts and includes dividends in FCF. The growth of the Company's project portfolio in 2021–2022 negatively affected its FCF. ACRA also notes that in Q2 2022, the Company financed some of its construction projects with its own funds and not through project finance arrangements, which decreased its own funds by more than RUB 12 bln. The Agency estimates the weighted average FCF margin for 2020–2025 at -1.7% and expects the indicator to enter a positive area in 2023. The Company's liquidity assessment is very strong due to vast amounts of cash held in accounts and available open credit lines, the expected positive FCF in 2023–2025, and the Company's wide access to external funding sources.

Key assumptions

  •  Project completion and sales as planned.

  •  ACRA's estimates include projects under construction and projects expected to be completed in accordance with the Company’s current financial plans.

  • No significant decline in prices in the primary real estate market of the Moscow area in 2023–2025.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • The weighted average FFO before net interest and taxes sustainably exceeding RUB 100 bln and the weighted average FCF margin exceeding 2%.

A negative rating action may be prompted by:

  • The weighted average ratio of FFO before net interest to net interest declining below 8x;

  •  The weighted average ratio of adjusted net debt to FFO before net interest exceeding 1х;

  • Decrease in residential real estate prices in the primary market of the Moscow area by more than 15% in 2023–2025;

  • Regulatory changes capable of having a material adverse effect on the Company’s performance.

Rating components

SCA: a.

Adjustments: none.

Issue ratings

PJSC Samolet Group (ISIN RU000A102RX6), maturity date: February 15, 2024, issue volume: RUB 10.4 bln — A(RU).

PJSC Samolet Group (ISIN RU000A103L03), maturity date: August 21, 2024, issue volume: RUB 15 bln — A(RU).

PJSC Samolet Group (ISIN RU000A104JQ3), maturity date: February 8, 2028, issue volume: RUB 20 bln — A(RU).

PJSC Samolet Group (ISIN RU000A104YT6), maturity date: July 11, 2025, issue volume: RUB 15 bln — A(RU).

Rationale. The issues represent senior unsecured debt of PJSC Samolet Group. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. According to ACRA’s methodology, the recovery rate for unsecured debt belongs to category II, therefore the credit ratings of the issues are equivalent to that of the Company, i.e. A(RU).

Regulatory disclosure

The credit ratings of PJSC Samolet Group and the bonds issued by PJSC Samolet Group (ISIN RU000A102RX6, RU000A103L03, RU000A104JQ3, RU000A104YT6) 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 on the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.

The credit ratings of PJSC Samolet Group and the bonds issued by PJSC Samolet Group (ISIN RU000A102RX6, RU000A103L03, RU000A104JQ3, RU000A104YT6) were published by ACRA for the first time on July 10, 2018, February 18, 2021, August 24, 2021, February 15, 2022, and July 15, 2022, respectively. The credit rating of PJSC Samolet Group and its outlook, as well as the credit ratings of the bonds issued by PJSC Samolet Group (ISIN RU000A102RX6, RU000A103L03, RU000A104JQ3, RU000A104YT6), are expected to be revised within one year following the publication date of this press release.

The credit ratings were assigned based on data provided by PJSC Samolet Group, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited, and PJSC Samolet Group 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 ancillary services to PJSC Samolet Group. No conflicts of interest were identified in the course of credit rating assignment.

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