The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today withdrawn Alfa Equity Holding Kft.’s (AEH) issuer rating of B- under review for developing outcome, for lack of sufficient information. Scope has not been able to verify the correct rating level before withdrawal.

Rating rationale

Due to unreliable, insufficient, and inaccurate information, Scope is not able to uphold its issuer rating on AEH and thereby withdraws the issuer rating. The withdrawal is driven by concerns around AEH's business model and strategy, which are in a state of continuous change, raising significant concerns for Scope. Scope's apprehensions are that AEH's frequent strategic shifts could jeopardise both its financial stability and operational focus. Such a constantly changing strategy adds complexity to Scope's task of accurately evaluating AEH's creditworthiness and prospects. Scope remains sceptical of AEH’s unpredictable business strategy, and the reliability of information provided, notably concerning the HA11ER 1 development, thus highlighting governance concerns (ESG factor: credit negative).

Scope has previously expressed concerns regarding the HA11ER 1 development, which was anticipated to restart in February 2024 with additional funds from the refinancing of Alfa Hub 11 and Korzo Retail Park, alongside a possible capital injection. However, AEH has updated Scope that initiation of work is on hold, pending an extension of the building permit. AEH is also considering the sale of the partially finished HA11ER 1 development, a move that could significantly affect the project's prospects and return expectations. These factors not only pose a risk of increased financial strain for AEH through higher holding costs and possible penalties but also erode Scope’s confidence in AEH’s project management and delivery capabilities.

This situation directly impacts AEH's growth and revenue generation strategy, casting doubt on its ability to accurately forecast liquidity. The volatility in these projections complicates Scope's assessment of AEH's creditworthiness and financial stability, especially as the uncertain future of the HA11ER 1 development could undermine creditor confidence in AEH's financial health and operational efficiency. This volatility presents Scope with challenges in forming a definitive view on AEH's Scope-adjusted metrics, thereby amplifying the perceived risks tied to AEH's unpredictable strategy and execution of projects.

As such, the withdrawal reflects the uncertainty regarding the partially finished HA11ER 1 development, the lack of a stable, strategic direction from AEH and Scope’s doubts on the issuers ability to accurately forecast liquidity. Given the above, Scope is unable to verify the rating at the appropriate level due to a lack of sufficient information, a prerequisite for a credit rating, and therefore withdraws the rating.

One or more key drivers of the credit rating action are considered an ESG factor.

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 this Credit Rating, (European Real Estate Rating Methodology, 25 January 2023; General Corporate Rating Methodology, 16 October 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.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

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 Rating: 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 unsatisfactory. The information and data supporting the Credit Rating 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 Rating and the principal grounds on which the Credit Rating are based. Following that review, the Credit Rating was not amended before being issued.

Regulatory disclosures
The Credit Rating is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating is UK-endorsed.
Lead analyst: Patrick Murphy, Analyst
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Rating was first released by Scope Ratings on 21 October 2021. The Credit Rating was last updated on 11 December 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
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis 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.