Formerly BB, Now Under Supervisor’s Scrutiny

“Because the bonds purchased by the Adler Group no longer meet the requirements of the ECB, the central bank has now thrown them out of its portfolio in a move that caused a stir”, that is what the Börsen-Zeitung writes today.

Only rating reports from S&P Global Ratings are available on the Adler website, the latest reports uploaded by ADLER Real Estate AG are from September 2018.

Back in May 31, 2021 Moody’s Investors Service had withdrawn the Ba2 long-term corporate family rating (CFR), the Not Prime (NP) short-term issuer rating and the Ba2 rating of ADLER Group S.A.‘s 1.5% fixed rate senior unsecured Euronotes due in 2024. Moody’s has also withdrawn the stable outlook. Moody’s has decided to withdraw the ratings for its own business reasons and wrote: “ADLER Group S.A. is one of the largest residential landlords and property developers in Germany. The company owns almost 70,000 residential units and a €11.4 billion real estate portfolio.”

A Berlin rating agency wrote on October 15, 2021:

“Scope Ratings GmbH (Scope) has today downgraded the corporate issuer rating on German real estate company Adler Real Estate AG to BB- from BB and its senior unsecured debt rating to BB from BB+. The Outlook has been revised to Negative. The Ratings and Outlook have also been withdrawn for commercial reasons, as future capital market debt issuance will take place at the Adler Group S.A. level and there is no longer a need for a rating on Adler Real Estate AG.”

With a decision dated June 17, 2022, the Federal Financial Supervisory Authority ordered an audit of the approved consolidated financial statements as of the December 31, 2021 reporting date and the combined management report for the 2021 financial year of ADLER Real Estate Aktiengesellschaft in accordance with Section 107 (1) sentence 1 WpHG.

The reasons for the order are, firstly, indications that relationships and business transactions from this year or earlier years with related persons or companies within the meaning of International Accounting Standard (IAS) 24 may not have been fully and correctly recorded and presented in the group accounting; and secondly, the negative opinion of the group auditor, KPMG AG Wirtschaftsprüfungsgesellschaft, for the consolidated financial statements as of December 31, 2021 and the combined management report for the 2021 financial year.

The balance sheet control audits in relation to the financial statements and management reports for 2020 and 2019 of ADLER Real Estate Aktiengesellschaft are still ongoing.

Investor concerns about the real estate group Adler Group SA are now being underscored by a sale of securities that is a rarity. The European Central Bank has sold a bond issued by the company, which it once bought as part of its corporate bond-buying programme.

““The Adler bond in question no longer fulfills the Eurosystem collateral framework eligibility criteria and is therefore no longer CSPP-eligible,” central bank spokesman William Lelieveldt told Bloomberg, referring to the ECB’s corporate sector purchase program. According to Lelieveldt, the decision to sell is in line with the legal framework for the bond purchases. After that, the ECB could sell bonds if they lose central bank eligibility, but doesn’t have to.