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S&P assigns preliminary rating to Testa Residencial amid impending IPO

S&P Global Ratings assigned a preliminary BBB- long-term issuer credit rating to Spanish residential company Testa Residencial SOCIMI SA, which is looking to go public in the coming months.

The rating agency noted that Testa is a leading pure-play residential player in Spain with a portfolio spread across the country, worth approximately €2.3 billion as of Dec. 31, 2017.

S&P said it also views positively the lack of the company's speculative development, since it would only undertake turnkey projects that would represent a maximum of 10% of the gross asset value.

The ratings outlook is positive, which takes into account the fact that the rating agency could raise the rating if Testa continues to produce steady rental and EBITDA growth due to good market conditions in Spain, and reduces vacancy in its portfolio toward its structural target of 5%, while increasing EBITDA interest cover above 3x and keeping debt-to-debt-plus-equity below 35%.

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 documents referred to in this news brief can be found here.