The outlook on the credit rating of Setl Group, Ltd (hereinafter, the Company, Setl Group) has been changed from Stable to Negative to reflect the declining debt coverage and the risks of further deterioration of this factor assessment, which, in turn, is associated with the tight monetary policy of the Bank of Russia and the need to refinance a portion of the Company’s bond debt at higher rates in 2025.
The Company’s credit rating is determined by the low leverage, very high profitability, and strong liquidity. The medium cash flow assessment still constrains the general assessment of the financial risk profile. The operational risk profile is based on the strong market position and strong business profile.
Setl Group is the largest residential real estate developer in the north-west of Russia. As of May 1, 2025, the Company’s portfolio of projects under construction was about 1.3 mln sq. m. In terms of this indicator, the Company is among the country’s top ten developers and holds leading positions in St. Petersburg. The Company’s land bank is 10.9 mln sq. m of net selling area.
Key assessment factors
Very high industry risk. According to the Agency’s methodology, the very high risk inherent to the housing construction industry is a strong deterrent to the Company’s credit rating.
Strong market position and geographic diversification. Setl Group’s business is mostly focused on St. Petersburg and the Leningrad Region, which accounted for 98.7% of the revenue in 2024. The Company also has projects in the Kaliningrad Region. As of May 1, 2025, the Company held leading positions among developers operating in St. Petersburg in terms of the volume of construction-in-progress (1.1 mln sq. m) and the total floor space sold since 2016 (5.1 mln sq. m). Setl Group’s share in the residential construction market of St. Petersburg is about 18% of the total volume of construction-in-progress.
Strong business profile and high level of corporate governance. The Company sells the entire volume of floor spaces through its own sales channel, exclusive broker PDC “Petersburg Real Estate”. This competitive advantage allows the Company to consolidate the housing market data in its key region of presence timely and efficiently (the share of St. Petersburg in the Company’s land bank is over 90%).
The Agency assesses the diversification of projects as very high. In Q2 2025, Setl Group’s construction portfolio consisted of 18 ongoing projects, most of which relate to the “comfort” and “high-comfort” classes. The Company also demonstrates very high sales figures for current projects and a low weighted average delay in commissioning, which amounted to 0.12 months for the period from 2022 to 2024.
Dependence on materials and subcontracting is medium. Construction work is subcontracted. There are no own production facilities. The Company has a high level of organization in terms of management functions, including the function of general contractor and technical supervision. Setl Group mainly performs architectural and design functions independently.
The Agency is positive of the Company’s operational risk management system that effectively minimizes the risks of project delays. In 2024, all projects were commissioned on time. The Company has a consistent formalized strategy setting forth attainable goals for operational and financial metrics.
Very low leverage and high interest coverage. When calculating the ratio of net debt to FFO before net interest, ACRA adjusted the Company’s total debt for project finance borrowings secured by homebuyers’ escrow accounts. The Agency also includes interest expense on the project debt as part of prime costs. According to the Agency’s calculations, the weighted average ratio of adjusted net debt to FFO before net interest for 2022–2027 will be 0.7x.
By the end of 2024, the ratio of FFO before net interest to net interest amounted to 2.9x vs. 4.5x in 2023; the weighted average ratio for the period from 2022 to 2027 indicates a high coverage of the Company’s debt, but its value is on the boundary level, therefore, the credit rating outlook is set to Negative.
Large business size and high profitability. In 2024, the Company’s revenue amounted to RUB 151 bln and FFO before net interest and taxes — to RUB 33 bln. The weighted average FFO before net interest and taxes for the period from 2022 to 2027 is RUB 39 bln, and the volume of the portfolio of projects under construction is about 1.3 mln sq. m (as of May 1, 2024), which, according to the Agency’s methodology, is an indication of a large business size. The weighted average FFO before net interest and taxes margin for 2022–2027 is estimated by ACRA at 24.6%.
Strong liquidity and medium cash flow assessment. Strong assessment of the Company’s liquidity is due to the presence of significant amounts of undrawn loans and a fairly comfortable repayment schedule for the corporate debt. The FCF margin for 2024 is negative due to, among other things, dividend payments. The FCF margin for the forecast period of 2025 to 2027, in the Agency’s opinion, may enter a positive area as funds held in escrow accounts are disbursed to the Company. ACRA believes that the payment of dividends amid a very low leverage, high coverage and strong liquidity does not worsen the credit quality of the Company, and therefore the Agency assesses its cash flow as medium as per ACRA’s methodology.
Key assumptions
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Project completion and sales as planned.
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ACRA’s estimates include only projects under construction and planned projects in accordance with the Company’s current financial plans.
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Absence of significant decline in prices on the primary residential real estate market in the Company’s regions of presence in 2025–2027.
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Dividend payments in the forecast period in line with the Company’s financial model.
Potential outlook or rating change factors
The Negative outlook assumes that the rating will highly likely be downgraded within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- Weighted average FCF margin exceeding 10% coupled with the weighted average ratio of FFO before net interest to net interest exceeding 8.0x.
A negative rating action may be prompted by:
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Weighted average ratio of FFO before net interest to net interest falling below 5.0x;
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Weighted average FCF margin declining below 2%;
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Worse score for the following business profile sub-factors: Project Diversification and/or Sales Terms and Conditions;
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Weighted average FFO before net interest and taxes falling below RUB 30 bln;
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Weighted average FFO before net interest and taxes margin declining below 20%;
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Weighted average ratio of net debt to FFO before net interest exceeding 1.0x;
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Weighted average ratio of total debt to capital exceeding 0.5x.
Rating components
Standalone creditworthiness assessment (SCA): a.
Support: none.
Issue ratings
Setl Group, Ltd (RU000A1053A9), maturity date: August 13, 2025, issue volume: RUB 10 bln — A(RU).
Setl Group, Ltd (RU000A105X64), maturity date: March 5, 2026, issue volume: RUB 5.5 bln — A(RU).
Setl Group, Ltd (RU000A1084B2), maturity date: March 14, 2027, issue volume: RUB 12 bln — A(RU).
Setl Group, Ltd (RU000A10B8M0), maturity date: March 12, 2030, issue volume: RUB 6 bln — A(RU).
Rationale. The issues represent senior unsecured debt instruments of Setl Group, Ltd. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as pari passu with other existing and future unsecured and unsubordinated debt obligations of the Company. According to ACRA’s methodology, the detailed approach is applicable. According to ACRA’s estimates, the unsecured debt recovery rate belongs to the first category. Therefore, the credit rating of the issues is equivalent to that of the Company, i.e. A(RU).
Regulatory disclosure
The credit ratings have been assigned to Setl Group, Ltd and the bond issues of Setl Group, Ltd (RU000A1053A9, RU000A105X64, RU000A1084B2, RU000A10B8M0) 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 Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation was applied to assess the regions where the rated entity implements its construction projects (the sub-factor Presence in the Cities of Federal Importance).
The credit rating of Setl Group, Ltd and the credit ratings of the bond issues of Setl Group, Ltd (RU000A1053A9, RU000A105X64, RU000A1084B2, RU000A10B8M0) were published by ACRA for the first time on June 19, 2017, August 17, 2022, March 9, 2023, March 29, 2024, and April 7, 2025, respectively. The credit rating of Setl Group, Ltd and its outlook and the credit ratings of the bond issues of Setl Group, Ltd (RU000A1053A9, RU000A105X64, RU000A1084B2, RU000A10B8M0) 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 Setl Group, Ltd, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited, and Setl Group, Ltd 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 no ancillary services to Setl Group, Ltd. No conflicts of interest were identified in the course of credit rating assignment.
