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S&P assigns BBB rating, positive outlook to Covivio Hotels


According to Market Intelligence, December 2022


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S&P assigns BBB rating, positive outlook to Covivio Hotels

S&P Global Ratings assigned Covivio Hotels a BBB long-term issuer credit rating, with a positive outlook.

The French hotel real estate investment trust is a core division of Covivio, and S&P said the rating aligns with that of its parent and reflects the agency's moderate view of the REIT's credit metrics.

S&P said it expects Covivio Hotels' adjusted debt-to-debt-plus-equity ratio to stay in the 43% to 44% range, in line with the company's financial policy of a reported 40% loan-to-value ratio. It also expects the company to be able to cover its interest burden, projecting a sustained EBITDA interest coverage of above 4.0x in the next two years.

The rating agency also attributed the rating to Covivio Hotels' high exposure to major cities in Europe with strong tourism numbers, its large and geographically diverse portfolio and its long-term ties with its top tenants, Accor and InterContinental Hotels Group PLC, among other credit strengths.

The rating agency, however, cited Covivio Hotels' sole focus on the hotel sector, as well as competition from Airbnb Inc. and other online hospitality marketplaces, as possible obstacles.

The positive outlook takes into account a potential upgrade of the REIT should Covivio sustain credit measures that align with the higher BBB+ rating in the next 24 months, including an adjusted debt-to-debt-plus-equity ratio of meaningfully below 50% and EBITDA interest coverage of roughly 3x.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings document referred to in this news brief can be found here.