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Rating action

Scope Ratings GmbH (Scope) has today assigned a first-time issuer rating of B+/Stable to Nova LLC.

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 (new). Nova’s business risk profile is constrained by its relatively small scale compared to European peers and its limited geographical footprint, which restricts its ability to benefit from economies of scale and exposes it to greater earnings volatility. Nonetheless, the business risk profile is partially supported by solid, albeit volatile, operating profitability.

The company maintains niche positions in selected sub-segments of the construction materials production industry in Georgia. Within the wholesale and retail segment, Nova holds a small market share in the domestic construction materials and home improvement market. However, this segment benefits from the fragmented nature of the market, where a significant portion remains unorganized, offering opportunities for growth and margin stability.

Nova’s limited diversification further weighs on its business risk profile. The company’s exclusive focus on the Georgian market increases its exposure to fluctuations in the domestic construction cycle. Nova demonstrates solid product-level diversification, which has been further enhanced by recent additions to its portfolio. Nevertheless, the company remains focused on only two sub-segments of the construction industry, construction materials and home improvement products, limiting broader sectoral diversification. This concentration risk is partially mitigated by a well-diversified customer base across both operating segments.

Operating profitability is a relative strength, though it remains vulnerable to input cost volatility, particularly in the construction materials segment. Historical EBITDA margin fluctuations in 2021 and 2022 were driven by sharp movements in raw material prices. Although input costs have since stabilized and are expected to remain steady, Nova’s exposure to long shipping lead times and largely unhedged input costs continue to pose a risk. In contrast, the wholesale and retail segment demonstrates more stable and resilient margins, providing a buffer during periods of stress in the production segment.

Nova’s Scope-adjusted EBITDA margin* averaged 12% between 2019 and 2024, supported by robust construction and real estate activity in Georgia. Scope expects margins to remain stable over the medium term, underpinned by ongoing product expansion and continued growth in the primary real estate market.

Financial risk profile: BB- (new). Nova’s financial risk profile is supported by moderate leverage and interest coverage, however, historically weak cash flow coverage, driven primarily by elevated capital expenditures aimed at supporting growth, remains a concern.

Cash flow coverage is the weakest component of Nova’s financial risk profile. The company has historically invested a substantial portion of operating cash flow into capex to support growth. Free operating cash flow (FOCF) was negative in 2022 due to margin compression from extreme input price volatility, and again in 2024 due to significant working capital outflows. In the remaining four years, FOCF was positive. Scope expects FOCF to improve going forward, supported by stronger funds from operations and stable working capital. Consequently, the FOCF/debt ratio is projected to rise from an average of 3% over 2019–2024 to above 10% in 2025-2027.

In line with its expansion strategy the company has gradually increased its debt levels in recent years, executing its capex plans with discipline while maintaining control over leverage. Although leverage metrics were volatile in 2021 and 2022, largely due to input price fluctuations, in other years Nova has historically maintained a debt/EBITDA ratio in the range of 2.4x–3.7x and an average funds from operations/debt ratio of approximately 25%. Scope anticipates a temporary increase in leverage in 2025, driven by high, partially debt-funded land acquisition, though this will be partially offset by a total GEL 2.5m in equity injections from the owners. Despite continued significant capital expenditure in 2026, Scope expects a gradual deleveraging trend, driven by sustained top-line growth and stable margins.

Interest coverage is constrained by the relatively high cost of debt in Georgia. A significant portion of Nova’s debt is contracted at variable interest rates, exposing the company to interest rate risk. Additionally, around one-third of the debt is denominated in foreign currency, introducing foreign exchange risk. However, Nova actively manages this exposure through hedging strategies, which Scope views positively. The planned bond issuance is expected to reduce the average cost of debt, although the associated increase in total debt will likely exert downward pressure on interest coverage, thereby weighing on the financial risk profile.

Liquidity: adequate (new). Historically, Nova’s short-term debt coverage was below par, reflecting a high reliance on refinancing short-term obligations at maturity, a practice that is common in Georgia and other emerging markets. The planned bond issuance will have a bullet structure and is intended to refinance a substantial portion of existing short-term debt, thereby significantly alleviating liquidity pressure. As a result, Scope expects a marked improvement in Nova’s liquidity ratio, reaching levels above 100% from 2026 onwards.

Supplementary rating drivers: credit-neutral (new). Although supplementary rating drivers have no impact on this credit rating action, Scope notes the company’s history of covenant breaches, as well as its limited hedging of interest rate, foreign exchange rate and input cost risks.

Scope acknowledges that the recent relaxation of covenant thresholds provides some headroom relative to current levels, supported by the generally accommodating stance of the issuer’s core banks. Nevertheless, Scope expects the company to proactively address any covenant breaches through active risk management and to ensure ongoing compliance with agreed terms and conditions.

Some 59% of the company's debt is at a floating rate, and only part of its foreign currency debt benefits from short-term forward hedges of between two and three months with no hedging of input costs, all of which could lead to substantial volatility in cash generation. Furthermore, the undiversified funding structure after the prospective bond issuance and associated refinancing/cliff risk are noted as concerns.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that Nova’s leverage, as measured by its debt/EBITDA ratio, will remain below 3.5x, subject to the volatility created by limited hedging against input price risk. Despite the ongoing capital expenditure programme, stability in leverage is supported by continued topline growth and a relatively stable EBITDA margin of around 12%. The Outlook also reflects the successful issuance of the GEL 50m bond and/or continued support from banks, to roll over short-term debt.

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

1. Substantial increase in size to support diversification and improve the overall business risk profile (currently viewed as remote)
    
2. Debt/EBITDA sustainably below 2.5x

The downside scenarios for the rating and Outlook are (individually):

1. Failure to address covenant breaches proactively
    
2. Debt/EBITDA above 3.5x
    
3. FOCF/Debt <below 5%

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

Nova LLC

Issuer rating: B+/Stable, New

*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 this Credit Rating and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Retail and Wholesale Rating Methodology, 25 June 2025; Construction and Construction Materials Rating Methodology, 24 January 2025), are available on 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Rating if the Credit Rating 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, 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 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/or Outlook and the principal grounds on which the Credit Rating and/or Outlook is based. Following that review, the Credit Rating and/or Outlook was not amended before being issued.

Regulatory disclosures
The Credit Rating and/or Outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating and/or Outlook is UK-endorsed.
Lead analyst: Dániel Szebenyi, Executive Director
Person responsible for approval of the Credit Rating: Philipp Wass, Managing Director
The Credit Rating/Outlook was first released by Scope Ratings on 26 November 2025.

Potential conflicts
See 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
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