EANS-News: Atrium European Real Estate Limited

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Ratings/CREDIT RATING UPGRADE TO INVESTMENT GRADE

St Helier Jersey / Channel Islands (euro adhoc) - Atrium European
Real Estate Limited

CREDIT RATING UPGRADE TO INVESTMENT GRADE

Jersey, 6 September 2012. Atrium European Real Estate Limited
("Atrium" or the "Company") (VSE/Euronext: ATRS), a leading owner,
operator and developer of retail real estate and shopping centres in
Central and Eastern Europe, is pleased to announce that, 'based on
reduced exposure to development activities', 'steady growth rates in
its investment property portfolio' and 'the higher proportion of
income-producing retail property in Atrium's asset base' Standard and
Poor's has upgraded the Company's long- and short term corporate
credit rating to the investment grade level of 'BBB-/A-3' from
'BB+/B', with a 'stable' outlook.

Rachel Lavine, CEO of Atrium, commenting on the upgrade, said: "Since
the very outset of our involvement with the Company, and
subsequently, we have clearly stated that achieving an investment
grade rating for Atrium was a high priority. I am therefore very
pleased that all of our hard work in restructuring the Company,
improving its operating performance and creating a platform that
delivers visible recurring income with the potential for future
growth has resulted in today's decision by S&P."

The press release issued by Standard and Poor's is included below:

Jersey's Atrium European Real Estate Upgraded To 'BBB-/A-3' On
Stronger Portfolio; Outlook Stable

Overview -- We consider that Atrium European Real Estate Ltd.
(Atrium) has reduced its exposure to development activities and
experienced steady growth rates in its investment property portfolio.
-- We are raising our long- and short-term ratings on Atrium to
'BBB-/A-3' from 'BB+/B'. -- The stable outlook reflects our view that
Atrium will likely maintain its moderate financial policy centered on
a loan-to-value ratio below 40%. Rating Action

On Sept. 6, 2012, Standard & Poor's Ratings Services raised its long-
and short-term corporate credit ratings on Jersey-based real estate
company Atrium European Real Estate Ltd. (Atrium) to 'BBB-/A-3' from
'BB+/B'. The outlook is stable.

Rationale The upgrade reflects the higher proportion of
income-producing retail property assets in Atrium's asset base, which
led us to revise our assessment of its business risk profile to
'satisfactory' from 'fair.'

We anticipate that the share of development activities should remain
slightly lower than 20% of Atrium's asset base going forward, with a
strong focus on the extension and refurbishment of existing sites. We
estimate that the delivery of the extension projects in Plock and
Gdynia, Poland, should result in Atrium's standing investments
representing more than 80% of its EUR2.7 billon total portfolio value
and generating funds from operations (FFO) in excess of EUR100
million by the end of 2014, under our base-case scenario. We view
revenue from development activities as more volatile than passive
rent collection, as it is exposed to construction and letting risks.
An increasing part of Atrium's recurring income comes from mature
real estate assets, which should continue supporting cash flow
stability. Atrium's portfolio of 37 development projects, valued at
EUR567.5 million as of June 30, 2012, mainly consists of landbank and
extensions of existing assets, which we view as less risky than
greenfield or brownfield projects. We also take a positive view of
the company's stated target to reduce development to a maximum of 10%
of its total portfolio's market value over the long term.

The upgrade also incorporates the fact that Atrium's profitability
has stabilized thanks to local efficiency improvements and better
rent collection overall. This has resulted in a Standard &
Poor's-adjusted EBITDA margin reaching the 60%-70% range, which we
believe falls within our guidance for a retail real estate investment
trust (REIT) with a 'satisfactory' business risk profile. Under our
base-case scenario, we anticipate that Atrium's EBITDA interest
coverage ratio will remain higher than 3x over the next two years. We
believe that Atrium's strong presence in growing markets like Poland
(38% of gross rental income as of June, 30, 2012) and Russia (27%),
where retailers currently outperform the subdued European market, is
a key competitive advantage over the medium term. We think that low
vacancy and healthy growth rates reported by international retailers
in those countries should support the resilience of Atrium's
recurring income over the short term, although they could become more
vulnerable to the economic crisis in the longer term.

Offsetting these strengths, we note Atrium's slightly higher
percentage of development activities relative to other investment
grade-rated European REITs and we continue to regard its geographic
diversity as relatively modest. Additionally, we think Atrium's
ownership and management structures have stabilized after a period of
corporate change. We also view the company's financial policy as
moderate, reflecting its publicly stated target of a reported
loan-to-value (LTV) ratio remaining below 30%, which we view as
commensurate with an 'intermediate' financial risk profile.

Liquidity The short-term rating is 'A-3'. We assess Atrium's
liquidity as 'adequate' according to our criteria, because we
anticipate that its liquidity sources will be more than sufficient to
meet its funding needs in the next 12 months. On June 30, 2012,
Atrium's short-term debt maturities amounted to EUR7 million of
contractual amortization and EUR51 million of committed 2003 bond
repurchases over the next 12 months. Over the same period, we also
forecast about EUR90 million in investment costs and EUR62 million of
annual dividend distribution.

To cover these short-term cash calls, Atrium had EUR207 million of
unrestricted cash as of June 30, 2012. We also anticipate that the
portfolio of income-producing assets should drive FFO to about EUR95
million over the next 12 months.

Atrium does not, to our knowledge, have any committed bank lines at
present, although it is in a position to raise incremental debt,
based on its moderate debt leverage and significant unencumbered
assets. As of June 30, 2012, Atrium's debt amounted to EUR555
million, or about 20% of its combined balance sheet debt and equity
capital. We estimate Atrium's unencumbered income-producing assets at
almost EUR800 million.

Outlook The stable outlook reflects our view of positive trends in
Atrium's operating metrics and low debt relative to its peers, which
support the ratings. We believe Atrium should be able to pursue its
growth strategy in key markets, while maintaining EBITDA interest
coverage and adjusted LTV ratios above 3x and below 40%,
respectively. We also expect Atrium's ratio of debt to debt and
equity to remain modest, standing well below 50%.

We could raise the ratings if Atrium significantly diversified its
market exposures, generated a track record of raising unsecured debt,
and maintained a sufficient liquidity cushion to meet any unexpected
shortfalls in income or cost overruns in its development projects.

We could lower the ratings if we saw unexpected changes in
discretionary spending or shareholding structure that could limit the
funding options open to the company. We would consider a rebound in
the share of development activities to more than 20% of Atrium's
total portfolio value or a sharp deterioration of the environment in
its key markets to be a significant increase in the group's business
risk. This might prompt us to consider a rating review. Consumer
confidence in Central and Eastern Europe, and specifically retail
sector performance in Atrium's main markets, remain the principal
operating risks that could affect Atrium's interest cover and other
debt metrics.

For further information:

FTI Consulting Inc.:
+44 (0)20 7831 3113
Richard Sunderland

Will Henderson
Daniel O'Donnell

{atrium@fticonsulting.com}[HYPERLINK:
mailto:atrium@fticonsulting.com]

Further inquiry note:
For further information:
FTI Consulting Inc.:
+44 (0)20 7831 3113
Richard Sunderland
Will Henderson
Richard.sunderland@fticonsulting.com

end of announcement euro adhoc
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company: Atrium European Real Estate Limited
Seaton Place 11-15
UK-JE4 0QH St Helier Jersey / Channel Islands
phone: +44 (0)20 7831 3113
mail: richard.sunderland@fticonsulting.com
WWW: http://www.aere.com
sector: Real Estate
ISIN: JE00B3DCF752
indexes: Standard Market Continuous
stockmarkets: official market: Wien
language: English