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Rating action

Scope Ratings GmbH (Scope) has today affirmed the B+/Stable issuer rating of Appeninn Holding Nyrt (“Appeninn”). Scope has also affirmed the B+ senior unsecured debt rating.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: B (unchanged). Appeninn’s business risk profile remains constrained by its relatively small size, with Scope-adjusted total assets* of EUR 185m as at end-2024 (down 3% YoY), its continued high geographic concentration in Hungary despite recent diversification efforts in Poland, and a tenant portfolio that remains highly concentrated.

Scope acknowledges the company’s progress toward a more geographically balanced portfolio, while property segment diversification remains adequate. The quality of Appeninn’s portfolio remains constrained by its notable exposure to secondary locations and a large proportion of older properties in need of maintenance. These factors reduce the appeal of properties to prospective tenants and investors, limit rental growth prospects, while also affecting liquidity and achievable valuations.

Nevertheless, the company has undertaken measures to address these structural weaknesses, including the step-up in capital expenditure for maintenance and refurbishment (allocating approximately 2% of the portfolio’s value annually), as well as the potential disposal of selected non-core properties.

Profitability benefited from the full-year contribution of properties acquired in 2023, with the EBITDA margin rising to 65% in 2024 (up 8.7 pp YoY). Scope expects profitability to remain above 60%, supported by continued solid operating performance. However, profitability is likely to remain constrained in the short term by steady transaction and maintenance costs.

Financial risk profile: BB+ (revised from BB). The financial risk profile reflects Appeninn’s adequate debt protection and moderate leverage. It also reflects the EBITDA accretive investment strategy, with acquisitions expected to remain largely cash funded.

Debt protection remains solid, with EBITDA interest cover at above 6x in 2024 (net interest income in 2023). The income contribution from properties acquired in 2023, with limited debt financing, has helped earnings to catch up with the interest burden. Furthermore, debt protection continued to benefit from the remuneration of cash deposits. Appeninn will benefit from its relatively favourable debt structure (fixed-rate and long-dated), especially if profitability continues to develop positively.

Leverage, as measured by the loan/value ratio, increased to 56% as at end-2024 (up from 48% in 2023). The rise in leverage was primarily driven by a decline in total assets, while reported debt increased by 13% YoY to EUR 103m. Looking ahead, Scope does not expect excessive pressure on leverage from property devaluations, as yields are likely to have peaked.

The current leverage remains satisfactory for a buy-and-hold company, as it provides some headroom against potential volatility or decline in property values. The agency anticipates that the company will keep its leverage below 55%, with no anticipation of raising additional debt.

Given Appeninn’s limited reliance on additional financing and accretive EBITDA contribution from acquired properties, Scope anticipates debt/EBITDA to remain below 10x. However, there is downside risk to cash flow due to the low weighted average unexpired lease term of the portfolio (approximately 4 years).

Liquidity: adequate (unchanged). Appeninn’s liquidity is adequate, with unrestricted cash of EUR 47m as of end-2024 fully covering short-term debt of EUR 3.1m due in the 12 months to end-December 2025. Scope considers liquidity and refinancing risks to be manageable and expects liquidity to remain adequate in the short-term, owing largely to the lack of major upcoming debt maturities (no major repayments due before 2029).

Scope highlights that Appeninn’s senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 20bn) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B- (immediate repayment). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is zero notch. Given the limited rating headroom, the company must at least maintain its current credit profile to avoid triggering the rating-related covenant.

Supplementary rating drivers: credit-neutral (unchanged). Supplementary rating drivers have no impact on the issuer rating. Scope acknowledges that progress has been made in addressing previously identified transparency and corporate governance issues. In particular, Scope sees positive developments with the redefined and now more stable strategy, the simplification of the corporate structure (registered as a regulated property investment company with SZIT status since July 2024), the strengthening of management and internal functions, and the clarity and transparency of financial disclosures. However, Scope continues to note persisting concerns, particularly regarding the numerous interdependencies with closely related entities and the extensive use of outsourcing and third-party service providers, which continue to limit overall transparency (ESG factor: credit negative).

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

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that the company will continue to deliver solid operating performance and keep credit metrics within Scope’s rating guidance. The Stable Outlook also captures that liquidity will remain adequate and that the company will maintain a conservative financial policy. Scope expects the loan/value ratio to return below 55% after peaking in 2024 and EBITDA interest cover to remain above 2.2x.

The upside scenarios for the ratings and Outlook are (collectively):

1. Reducing interdependencies with the owners’ other holdings and significant improvement of the business risk profile (remote for the time being)
    
2. Loan/value ratio maintained below 50% and EBITDA interest cover above 2.2x

The downside scenarios for the ratings and Outlook are (collectively):

1. Loan/value ratio rising above 55% on a sustained basis
    
2. EBITDA interest cover declining below 1.7x on a sustained basis

Debt rating

Scope has affirmed the B+ rating on Appeninn’s senior unsecured debt. Despite showing an ‘above-average’ recovery in a hypothetical 2026 default scenario based on the issuer’s liquidation value, Scope caps the rating at the issuer level given the limited creditor protection available to senior unsecured bondholders. This view is based on the assumption that the company would fully utilise its available secured debt capacity to maximise liquidity in the lead-up to a potential default.

As at end-2024, Appeninn held a large pool of assets that have not been pledged as collateral, translating into an unencumbered asset ratio of well above 110%. The company’s outstanding bond will mature in 2029.

Environmental, social and governance (ESG) factors

Following repeated changes in management, ownership structure and strategic direction, Scope acknowledges that the company has made notable progress and that its strategy now appears to have stabilised. Previous concerns related to ‘clarity and transparency’, no longer appear to be significant. Accordingly, Scope recognises improvements in addressing earlier shortcomings in transparency and corporate governance.

Nevertheless, some concerns remain, particularly regarding the numerous interdependencies with closely related entities and the company’s continued reliance on outsourcing and third-party service providers, both of which continue to limit overall transparency (ESG factor: credit negative).

All rating actions and rated entities

Appeninn Holding Nyrt.

Issuer rating: B+/Stable, affirmation

Senior unsecured debt rating: B+, affirmation

*All credit metrics refer to Scope-adjusted figures.

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 and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; European Real Estate Rating Methodology, 28 March 2024), 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 Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation   YES
With access to internal documents                                      YES
With access to management                                               YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities' Related Third Parties 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 these 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/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Fayçal Abdellouche, Senior Specialist
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 1 October 2019. The Credit Ratings/Outlook were last updated on 5 April 2024.

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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab 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. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.