AnaCap Financial Europe S.A.

The stable outlook reflects our view that AFE's entrenched position in the key markets of operations, good liquidity, and improved cash flow will support the company's credit profile over the next 12 months. We could lower the rating if the group's cash collections decline over the next 12 months due to an increasingly difficult macro environment. This suggests rating pressure from adjusted debt to EBITDA markedly exceeding, once again, our base-case assumption of 3.5x. This could also stem from underperformance in AFE's increasingly important direct real estate portfolios that, although profitable, could introduce unexpected volatility in asset quality, earnings, and cash flow. Furthermore, inability to refinance its senior secured notes over the next 12 months, leading to a shorter debt

...AnaCap Financial Europe's (AFE's) financial metrics have materially improved on the back of Europe's post-pandemic economic recovery. In 2021, AFE's core cash collections rebounded about 48% (after falling 34% in 2020) to 122.6 million thanks to the resumed collection process. This recovery boosted AFE's cash EBITDA to 93 million, an increase of 81% year on year, and enabled the company to materially improve its S&P Global Ratings-adjusted debt to EBITDA (including an add-back for amortization) to 4.2x in 2021 from 6.9x in 2020. This supports the current 'B' rating after a period of rating pressure. AFE's niche strategy and increasing investments in real estate should continue to generate robust, albeit volatile, profitability. We expects that AFE's operating performance will remain strong in 2022, supported by first-quarter results, with the last-12-months' cash collections of about 123.2 million. However, we expect that, over the medium term, the company's performance will remain volatile...

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