The credit rating of PJSC Samolet Group (hereinafter, the Company, the Group, or Samolet) has been downgraded in view of the growing residential construction industry risk on the backdrop of macroeconomic factors, which affected the assessments of leverage, coverage and business size due to a significant revision of targets in future periods.
The credit rating stems from the Company’s very strong assessments of geographic diversification, profitability, and liquidity, high assessments of business profile and corporate governance, and the large size of business. The rating is constrained by the medium assessments of leverage, and debt coverage, as well as the very high industry risk (residential construction).
Samolet is a leader of the real estate market in the Moscow Region and the New Moscow District. The Company operates in nine regions outside the Moscow agglomeration. A significant share of the Group’s projects are integrated development projects. According to the Unified Registry of Developers as of December 1, 2024, the Company’s current construction portfolio amounts to 5.33 mln sq. m (first place in Russia).
Key assessment factors
Very high industry risk. According to Agency’s methodology, the residential construction industry risk is a strong factor that constrains the Company’s credit rating.
The Company’s market position is strong due to its leading positions in Russia in terms of both current construction and commissioning. Samolet is a leading developer in the Moscow Region, with a share of about 23% in the current construction market in the region. The purchase of a large developer GC MIC in 2023 strengthened Samolet’s position in the market of “old” Moscow. In addition, the Group is a leader in the volume of development of territories.
Strong business profile reflects the very high diversification of the Company’s project portfolio and the comparably stable project completion timeline despite a slight decrease in the share of sold apartments. ACRA notes further increase in the diversification of the project portfolio due to the continuing regional expansion: in 2024. According to the Agency’s expectations, the share of the largest project in the forecast revenue over the next three years will become insignificant. In 2024, Samolet continued to enter new regions, and in the coming years it intends to strengthen its geographic diversification and to increase the share of revenue from regional sales on the backdrop of higher availability of preferential mortgage programs in those regions.
Large business size. After an active expansion of the Company’s project portfolio in 2023, the portfolio remained stably above 5 mln sq. m this year, which allowed the Company to hold the first place in Russia in this indicator. At the same time, the score for the weighted average FFO before net interest and taxes for 2022–2027 has been lowered from ‘very high’ to ‘high’ due to a major correction of the targets amid weaker demand and less mortgage applications.
Medium leverage and medium debt 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. According to the Agency’s estimates, the weighted average ratio of net debt to FFO before net interest for the period from 2022 to 2027 will be 2.7x. ACRA believes that the Group’s leverage will be ‘medium’ due to the active corporate borrowings in 2024 and higher volumes of project financing for new projects. According to the Agency’s expectations, the growth rate of project financing will outpace the coverage by escrow accounts, which is associated with more restrained housing sales amid the cease of a massive preferential mortgage program and very high market mortgage rates. At the same time, ACRA assesses the quality of the Company’s leverage as very high since the debt structure is well-balanced and the creditor base is highly diversified.
To estimate the debt coverage, ACRA takes into account interest payments on the project debt as part of the prime costs. The Agency estimates the weighted average ratio of FFO before net interest to net interest for the specified period at 2.7x. This indicator is negatively affected by a sharp increase in debt financing rates due to the tightening of the monetary policy by the Bank of Russia, as well as the need to refinance a significant portion of the Company’s bonds in conditions of peak rates in 2025.
Very high liquidity assessment. The Company’s weighted current liquidity ratio is 1.7x, which is due to, on the one hand, the significant volume of corporate debt repayments expected in the medium term and, on the other, sufficient amounts of funds held in accounts and undrawn credit lines. The qualitative assessment of liquidity hinges on diversified internal and external funding sources, including debt market issuances and equity.
Key assumptions
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Project completion and sales as planned.
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ACRA’s estimates include projects under construction and projects expected to be completed in accordance with the Company’s current financial plans.
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No significant decline in prices in the primary real estate market of the Moscow, the Moscow Region, St. Petersburg, and the Leningrad Region in 2025–2027;
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Access to external funding sources.
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:
- Weighted average ratio of FFO before net interest to net interest exceeding 8.0x and the weighted average ratio of adjusted net debt to FFO before net interest falling below 2.0x.
A negative rating action may be prompted by:
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Weighted average ratio of FFO before net interest payments to net interest payments declining below 2.5x;
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Weighted average ratio of adjusted net debt to FFO before net interest payments exceeding 3.5х;
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Decrease in residential real estate prices in the primary market of Moscow, the Moscow Region, Saint Petersburg, and the Leningrad Region by more than 15% in 2025–2027;
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Worse access to external sources of liquidity;
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Regulatory changes capable of having a material adverse effect on the Company’s performance.
Rating components
Standalone creditworthiness assessment (SCA): a.
Adjustments: none.
Issue ratings
PJSC Samolet Group (ISIN RU000A107RZ0), maturity date: January 24, 2027, issue volume: RUB 24.5 bln — A(RU).
PJSC Samolet Group (ISIN RU000A1095L7), maturity date: July 22, 2027, issue volume: RUB 20 bln — A(RU).
PJSC Samolet Group (ISIN RU000A109874), maturity date: July 30, 2027, issue volume: RUB 5 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 Grouphave 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 RU000A104JQ3, RU000A104YT6, RU000A107RZ0, RU000A1095L7, RU000A109874) were published by ACRA for the first time on July 10, 2018, February 15, 2022, July 15, 2022, February 9, 2024, August 6, 2024, and August 14, 2024, 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 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.
The decision to downgrade the credit rating of PJSC Samolet Group to A(RU), with a Stable outlook, and its bond issues to A(RU) was made at a repeated meeting of the rating committee, taking into account ACRA’s consideration of a reasoned appeal against the rating committee’s decision to downgrade the credit rating of PJSC Samolet Group to A-(RU) and to change the outlook to Negative, as well as to downgrade bond issues to A-(RU). PJSC Samolet Group provided new additional information on the management structure, the structure of the loan portfolio, and sources of liquidity. At the repeated meeting of the rating committee, it was decided assign the credit rating with due regard of this information, as well as the Bank of Russia’s decision to maintain the key rate at 21% p. a. Other rating factors have not changed.
ACRA provided ancillary services to PJSC Samolet Group. No conflicts of interest were identified in the course of credit rating assignment.
