Neinor Homes outlook revised to positive on Aedas Homes acquisition

Investing.com -- S&P Global Ratings has revised its outlook on Spanish real estate developer Neinor Homes to positive from stable following the company’s offer to acquire peer Aedas Homes.

The rating agency affirmed Neinor’s ’B+’ issuer credit rating and ’BB-’ issue rating, with the recovery rating remaining at ’2’ with 85% recovery expected in a default scenario.

On Monday, Neinor announced an offer to acquire Aedas Homes and entered into an irrevocable commitment with Aedas’ main shareholder, Castelake, which holds a 79% stake.

The transaction will be primarily financed through a €750 million debt facility provided by Apollo and €225 million in equity issuance. The equity increase is fully underwritten by Neinor’s three largest shareholders - Orion Capital Managers, Stoneshield Capital, and Adar Capital Partners (WA:CPAP) - who collectively hold 70.8% of Neinor’s share capital.

If completed successfully, the acquisition would significantly strengthen Neinor’s market position, creating a market leader with a combined strategic gross asset value portfolio of €3.5 billion. The negotiated price represents approximately a 30% discount on net asset value.

The Spanish real estate developer market is currently fragmented, with four main players combining for only 10% market share. The combined entity would have a strong presence in key Spanish markets, with more than 40% of its landbank located in the Madrid area.

While the transaction will temporarily increase Neinor’s leverage, S&P expects the company’s debt to EBITDA ratio will return to about 5.0x and EBITDA interest coverage to 2.5x-2.7x by the end of 2026.

The rating agency forecasts that Neinor’s EBITDA generation will expand significantly to exceed €240 million annually from 2026 onward, up from €76.5 million reported for fiscal year 2024.

As part of the transaction, Aedas’ currently outstanding senior secured bond of €258 million will be repaid. Gross debt on a consolidated basis is expected to reach about €1.4 billion at year-end 2025, up from €520 million at year-end 2024.

S&P projects positive free operating cash flow for the next 12-24 months, supported by property deliveries and working capital inflows. The combined entity is expected to deliver between 4,000-5,700 units annually.

Neinor has also increased its dividend expectations to approximately €850 million to be distributed by 2027, an increase of about 44%. Of this target, about €500 million remain to be distributed over the next three years.

The positive outlook reflects S&P’s view that it could upgrade Neinor over the next 12-18 months following a successful closing and integration of Aedas, provided debt to EBITDA declines below 5x and EBITDA interest coverage remains well above 2x.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.