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Bulletin: Inmobiliaria Colonial Increases Direct Exposure To Paris Office Market Via SFL Without Impairing Metrics Significantly

MADRID (S&P Global Ratings) June 4, 2021--S&P Global Ratings today said that Inmobiliaria Colonial's (BBB+/Stable/A-2) announcement to acquire the remaining minority stake of its Paris subsidiary Société Foncière Lyonnaise (SFL; BBB+/Stable/A-2), which would increase its shareholding to 95%-100% from 82%, will further strengthen the alignment of interests between the two and reinforce Colonial's direct exposure to the prime Paris office market by about €1.0 billion. The company's credit metrics will not be materially affected because the transaction, assuming full acceptance, will imply only about €110 million in a cash payment.

Colonial will acquire Predica's 13% stake of SFL via a mixed offer through a share exchange, asset swap and cash payment. Concomitantly, Colonial launched a voluntary tender offer for the remaining 5% with minority shareholders. It will fund the transaction of about €800 million, assuming full acceptance, via a capital increase of around €340 million and a net asset swap with Predica through joint ventures for around €350 million, in which Colonial will retain a controlling stake and cash sources of about €110 million. The transaction strengthens our view of SFL as a core subsidiary to Colonial, and continuing being integral to Colonial's identity and strategy. We continue to expect that Colonial would likely support SFL under any foreseeable circumstances and understand that there is no plan for now to change SFL's governance structure.

We believe that this transaction will not result in a material deviation from our base-case scenario for Colonial, with S&P Global Ratings-adjusted debt to debt plus equity at 41%-43% in the next two years, below our downside trigger of 45%.

This report does not constitute a rating action.

Primary Credit Analysts:Kathleen Allard, Paris + 33 14 420 6657;
Luis Peiro-camaro, Madrid +34 91 423 31 97;
Secondary Contacts:Marie-Aude Vialle, Paris +33 6 15 66 90 56;
Carlos Garcia Bayon, CFA, Madrid + 34 91 423 3195;

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