DBRS Assigns a New Issuer Rating to Avintia Proyectos Y Construcciones, S.L. at BB (low) with a Stable Trend

DBRS Limited (DBRS) assigned an Issuer Rating of BB (low) with a Stable trend to Avintia Proyectos Y Construcciones, S.L. (Avintia PyC or the Company). The Company operates as a subsidiary of Grupo Avintia, S.L. which has operations within the construction, property development, property services, hotels, international and sport sectors. Avintia PyC was established on April 27, 2007, and is the original company and primary economic contributor within the Avintia Group of Companies. Avintia PyC is a residential contractor headquartered in Madrid and has domestic operations throughout Spain. Avintia PyC started operations just before Spain’s financial crisis and the housing sector collapse. Throughout a challenging period and Spain’s recent real estate sector’s restructuring, Avintia PyC has developed its core business and maintained profitability.

As a niche residential contractor, the Company’s revenue base of EUR 321 million is modest, and although it operates throughout Spain, it generates most of its revenue within Madrid (approximately 59% in F2016); and as such, Avintia PyC’s revenue is highly dependent on residential housing demand in Madrid. Avintia PyC’s business profile remains supported by its project evaluation processes and controls as well as by its focus on the relatively lower complexity residential construction market. Partly offsetting these strengths are Avintia PyC’s modest scale of operations, limited geographic diversification and limited self-performance capabilities.

The Stable trend reflects DBRS’s opinion that the rating takes into account Avintia PyC’s market position in Spain, its risk management practices, and its cautious approach toward growth. Although financial metrics are adequate for the Company’s operations and commensurate with the rating, Avintia PyC’s modest size and geographic reach, as well as its narrow scope in a competitive market and limited internal capabilities, which expose it to potential additional costs caused by subcontractor defaults, are likely factors that will constrain any rating uplift. A rating upgrade could be considered if Avintia PyC were to further diversify its revenue, either geographically or through the type of projects undertaken, as well as increase revenue visibility through long-term or maintenance contracts, ideally with diversification away from fixed-price contracts. Any change to Avintia PyC’s conservative business strategy that increases financial risk could pressure the rating.

Notes:
All figures are in euros unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodology is Rating Companies in the Construction and Property Development Industry (December 2016), which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.