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Rating action

Scope Ratings GmbH (Scope) has today downgraded the issuer rating of Germany-based residential real estate developer Euroboden GmbH to D from C under review for a possible downgrade. Scope has also downgraded the senior unsecured debt rating to D from C under review for a possible downgrade.

Rating rationale

The insolvency application on 11 August 2023¹ follows Euroboden's expectation that it will not be able to realise the planned cash flow from the ongoing projects or that it will generate significantly lower cash flows than expected.

Following the announcement on 24 July 2023 to convene a bondholders' meeting² to request a restructuring of the terms and conditions of the bonds, it became apparent that the originally planned cash flow can no longer be reliably realised nor can it be realised in the expected time frame. The bondholders' meetings scheduled for 22 and 23 August 2023 are therefore cancelled.

Euroboden's business environment has deteriorated significantly over the last twelve months. As tighter credit conditions are restricting demand, several projects have been postponed or cancelled altogether due to customers' inability to obtain financing. Lack of visibility on Euroboden’s project developments remains high, given the difficult economic environment and persisting uncertainty on the German real estate market.

Long-term debt rating

The rating downgrade to D from C under review for possible downgrade also applies to the two senior unsecured bonds, EUR 40m due in October 2024 (ISIN DE000A2YNQ5), and EUR 75m due in November 2025 (ISIN DE000A289EM6).

Rating driver references
1. Euroboden GmbH – Ad-hoc News; 11.08.2023
2. Euroboden GmbH – Ad-hoc News; 24.07.2023

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings, (General Corporate Rating Methodology, 15 July 2022; European Real Estate Rating Methodology, 25 January 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. 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 Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings are UK-endorsed.
Lead analyst: Claudia Aquino, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings were first released by Scope Ratings on 28 May 2015. The Credit Ratings were last updated on 1 August 2023.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

Conditions of use/exclusion of liability
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