Vonovia SE

The stable outlook reflects our view that Vonovia will maintain robust and stable cash flow generation, supported by ongoing demand for affordable housing in Germany, and to a lesser degree in Austria and Sweden. This should enable its EBITDA interest coverage to remain well above 2.4x for at least the next two years. We also expect the company to integrate its recent transactions and ensure a sufficient liquidity cushion afterward. In our view, Vonovia will finance any potential acquisitions with enough equity to maintain debt to debt plus equity below 60%. We could consider a negative rating action if Vonovia deviated from its stated distribution policy, or if it decreased its liquidity cushion--for example, because of another cash transaction. A

...S&P Global Ratings assumes a global recession with GDP growth for the eurozone with a contraction of 2% for 2020 according to its latest forecasts, due to the economic impact of COVID-19. The residential sector should remain more resilient to the impact compared to retail or even office real estate and we currently forecast no material negative impact on Vonovia SE's cash flow. In light of the coronavirus pandemic, S&P Global Ratings has revised its GDP growth forecast globally and now expects the eurozone economy to shrink 2% for 2020. Germany has been strongly affected by the pandemic and followed, as many other countries, with closing shopping malls, retail stores, bars, and restaurants. While we believe that the residential landlords are not directly affected by COVID-19, we could see an increase in the rent loss rate or tenants not being able to pay rents for several months, depending on how long the pandemic lasts and what final impact it has on private financial situations. Vonovia...

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