Rating action

Scope Ratings affirms Immobilien-Projektgesellschaft Salamander-Areal Kornwestheim mbH’s (IPSAK) bond rating at BBB, Outlook Stable. Rating withdrawn at the request of the issuer.

Rating rationale

The BBB rating for IPSAK’s EUR 30m secured corporate bond (6.75% 2012/2019) is supported by the company’s high market share in residential developments in Kornwestheim/Ludwigsburg and Kassel and its sound recurring income position. Both of these factors partially mitigate the volatility of IPSAK’s development business. The company also has strong financial metrics with a comparably low loan/value ratio (LTV), strong EBITDA interest cover and solid liquidity.

Negative rating factors include IPSAK’s small size, heavy reliance on top customers, concentrated development pipeline focussing on only a few regional markets, and key person risk.

The bond rating benefits from over-collateralisation of 1.9x.

Bond

Scope considers the pledged assets of: i) a second-lien mortgage on the Salamander Areal valued at EUR 82.1m in 2015 (the beneficiary of the first-lien mortgage is bank debt of EUR 27m at YE 2017); and ii) the fixed deposit account of EUR 2m to be sufficiently robust collateral to secure the recovery of funds for bond investors in a default scenario, even if the market value of the Salamander Areal should decline by 25% or more. This solid collateral partially delinks the bond’s credit quality from the credit quality and performance of IPSAK.

Outlook

Given the withdrawal of IPSAK’s ratings Scope does not assign a rating outlook.

Rating-change driver
In view of the withdrawal of the issuer rating, Scope is not providing numerical triggers for a rating change.

Stress testing
No stress testing was performed.

Cash flow analysis
No cash flow analysis was performed. Scope performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for this rating and rating outlook (Corporate Rating Methodology; Rating Methodology: European Real Estate Corporates are available on www.scoperatings.com.
Historical default rates of Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity, third parties and Scope internal sources.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Philipp Wass, Director
Person responsible for approval of the rating: Olaf Tölke, Managing Director
The ratings/outlooks were first released by Scope on 03.12.2012. The ratings/outlooks were last updated on 21.09.2017.

Potential conflicts
Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
© 2018 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstrasse 5 D-10785 Berlin.

Scope Ratings GmbH, Lennéstrasse 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 192993 B, Managing Director(s): Dr. Stefan Bund, Torsten Hinrichs.