S&P rates Signa, notes B

S&P said it assigned B ratings to Signa Development Selection AG and its planned €300 million senior unsecured bond. The notes’ recovery rating is 3.

“Our assessment of SDS' business is constrained by the inherent volatility and cyclicality of the real estate developer industry. We believe property development is closely tied to economic cycles and that competition can be intense. That has translated into a high degree of variability in sales and property values historically in the industry, which we factor into our assessment of SDS. We estimate SDS' EBITDA margin, using percentage of completion (PoC) revenue recognition, will be about 20%-25% over the next 12 months,” S&P said in a press release.

The agency noted the company is highly leveraged, with gross debt to EBITDA projected to improve toward 10x in the next six to 12 months from 15.3x at end-2020.

The outlook is stable.

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