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Atrium European Real Estate Limited

EANS-News: Atrium European Real Estate Limited
Credit Rating Upgrade

St Helier Jersey / Channel Islands (euro adhoc) -

  Corporate news transmitted by euro adhoc. The issuer/originator is solely
  responsible for the content of this announcement.
Company Information
Credit Rating
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Jersey, 29 November 2010. Atrium European Real Estate Limited 
("Atrium" or the "Company") (VSE/Euronext: ATRS), one of the leading 
real estate companies focused on shopping centre investment, 
management and development in Central and Eastern Europe, is pleased 
to announce that Standard and Poor's has upgraded the Company's 
long-term corporate credit rating to 'BB' from 'BB-', with a 'Stable'
outlook. Atrium's Short-term rating was affirmed as 'B'.
This follows the announcement by Fitch Ratings on 29 October 2010 
that it had upgraded Atrium's senior unsecured rating and Long-term 
Issuer Default Rating by two levels to 'BB+'.
The press release issued by Standard and Poor's is included below.
Atrium European Real Estate Upgraded To 'BB' On Improved Capital 
Structure; Outlook Stable
Overview * Jersey-based Atrium European Real Estate Ltd.'s (Atrium's)
capital structure and liquidity is much improved by the repayment of 
its 2013 bond. * We are raising our long-term corporate credit rating
on Atrium to 'BB' from 'BB-' and maintaining our short-term rating at
'B'. * The stable outlook reflects our view that Atrium's debt levels
will increase to a sustainable level in the medium term as the 
company starts executing its growth strategy.
Rating Action On Nov. 26, 2010, Standard & Poor's Ratings Services 
raised its long-term corporate credit rating on Jersey-based real 
estate company Atrium European Real Estate Ltd. (Atrium) to 'BB' from
'BB-'. The short-term corporate credit rating on Atrium is unchanged 
at 'B'. The outlook remains stable.
Rationale The upgrade follows Atrium's improved operating performance
in the nine months to end-September, its successful deleveraging, and
improvements in its operating margins. The rating action also takes 
into account our opinion that Atrium will pursue a prudent growth 
strategy commensurate with the quality and size of its real estate 
portfolio.
Atrium owns, manages, and develops retail real estate properties in 
Central and Eastern Europe. On June 30, 2010, the market value of its
portfolio was E2.2 billion. We note that the company is subject to a 
litigation dating back to its existence as Meinl European Land. As we
are not at present able to assess the effect of this pending 
litigation on credit quality, we have not factored it into the 
current ratings.
The ratings on Atrium are constrained by our view of the lack of 
visibility on the timing of the company's execution of its growth 
strategy, as well as ongoing pressure on its portfolio asset values. 
Atrium also has a short track record of improvements in corporate 
governance, an area that in our opinion remains key to restoring 
investor confidence.
These negative factors are balanced by the company's improved capital
structure and stronger credit metrics resulting from the debt 
deleveraging; and what we consider an adequate liquidity position, 
with no major debt refinancing in the next two years.
We assess Atrium's business risk profile as fair. The company has a 
portfolio of midsize, food-anchored shopping centers mostly in 
smaller cities. The company's operating performance has improved over
the past 12 months as a result of higher occupancy rates and a long 
lease maturity profile (about 5 years), leading to improvements in 
its operating margins. Although development activities have been 
mostly put on hold, we anticipate that the company will continue to 
invest in new and existing assets.
In our view, Atrium's financial risk profile has improved to 
significant from aggressive, which acknowledges the company's debt 
deleveraging, adequate liquidity, and improving cash flow metrics. In
the nine months to Sept. 30, 2010, like-for-like net rental income 
increased by 9% over the same period the previous year. At the same 
time, the operating margin rose to about 90%, from 80% in September 
2009, supported by an improvement in the occupancy rate to 94.7% from
93.6%.
The company's capital structure has been improved through the 
combined effect of deleveraging and operating efficiency, resulting 
in a funds from operations-to-debt ratio of over 11%. Atrium's 
loan-to-value (LTV) ratio is now at a low level of 19%. However, we 
believe that that Atrium is likely to start executing its growth 
strategy in 2011, and that leverage levels will rise over time.
Liquidity We view Atrium's liquidity as adequate. Following the 
repayment of the 2013 Euro Medium-Term Note in June 2010, Atrium's 
maturity profile has improved considerably. In addition, the company 
had a good cash position as of Sept. 30, 2010, with unrestricted cash
balances of E361 million. Debt maturities until 2015 amount to only 
E314 million, in addition to planned capital expenditures of E67 
million until the end of 2011. The company currently does not have 
any committed bank lines.
Outlook The stable outlook reflects our view of Atrium's stabilizing 
operating performance and solid capital structure, which support the 
current ratings. We believe that the company will maintain a prudent 
debt leverage until its property portfolio is able to generate stable
cash flows, albeit at a higher LTV ratio than currently. We also 
anticipate that the company will manage its development projects 
prudently.
We could raise the ratings should the recovery in Atrium's main real 
estate markets prove to be more dynamic than we anticipate, providing
higher rental growth prospects.
Conversely, the ratings could come under pressure if market 
conditions become more difficult than we anticipate, or if 
debt-financed acquisitions reduce the company's financial 
flexibility. We would also view negatively any unexpected change in 
the capital structure or corporate governance that adversely affects 
investors' confidence. Furthermore, the ratings could be lowered in 
the event that litigation results in additional liabilities for 
Atrium.
For further information:
Financial Dynamics:                              +44 (0)20 7831 3113
Richard Sunderland
Laurence Jones
Will Henderson
richard.sunderland@fd.com
end of announcement                               euro adhoc

Further inquiry note:

Financial Dynamics, London
Richard Sunderland / Laurence Jones
Phone: +44 (0)20 7831 3113
mailto:richard.sunderland@fd.com

Branche: Real Estate
ISIN: JE00B3DCF752
WKN:
Index: Standard Market Continous
Börsen: Wien / official market

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