S&P cuts Adler, Adler Real Estate

S&P said it cut Adler Group SA and its subsidiary Adler Real Estate AG to B- from B+ and sliced its senior unsecured debt to B from BB-. The agency placed the ratings on CreditWatch with negative implications.

Adler is confronting a further delay in its plan to sell its nonstrategic development projects.

S&P also noted Adler reported it will likely delay the publication of its full-year 2021 financial accounts following a forensic investigation by its auditor KPMG. “If the delays exceed the permitted deadline for publishing full-year results under Adler's bond documentation, bondholders have the right to accelerate their payments based on a technical default (including following the 30-60 day grace period permitted under various bond indentures).”

“We also believe that Adler's cash flow volatility has increased significantly due to its increasing dependency on the development portfolio, which continues to underperform due to delayed sales and project deliveries. This creates further uncertainty on EBITDA and cash flow generation and could impinge on the company's ratios beyond our base case forecast. There is a risk that its debt to EBITDA may remain well above 24x and its EBITDA interest coverage below 1.3x over the next 12-24 months,” the agency said.

The CreditWatch indicates the ongoing uncertainty, S&P said.

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