(Bloomberg) -- Atos SE’s debt woes are rippling through the commercial mortgage-backed securities of the troubled IT provider’s landlords in Paris and Frankfurt.
In recent weeks two ratings agencies downgraded River Green Finance 2020 DAC — a CMBS underpinned by the River Ouest office block, which is largely occupied by Atos’ headquarters. S&P Global Ratings, meanwhile, cut the ratings of Taurus 2021-DE3 securities linked to the Squaire office-complex near Frankfurt’s main airport, where an Atos subsidiary contributes around 10% of the annual rent.
The downgrades highlight ratings agencies’ anxiety over the company, which is set to be taken over by its creditors after seeing nearly €12 billion ($13.1 billion) wiped off its market value over the past seven years. For the group’s landlords, uncertainty over Atos’ future tenancy has been exacerbated by an ongoing global downturn in commercial real estate.
Both Morningstar DBRS and Kroll Bond Rating Agency cited concerns about the firm’s tenancy in their decisions on River Green. Kroll drew attention to “the deteriorating credit strength of the largest tenant, Atos” in its justification for cutting the lowest tranche of the securities to junk. The company accounts for more than 80% of the development’s rental income.
In response to questions about the downgrade, an Atos spokesperson said that while the company is in constant discussions with its landlords around the world, moving the headquarters isn’t currently on the agenda.
Bloomberg News has reached out to the backers of the River Green securities for comment.
Falling valuations for commercial properties are adding to the woes for the securities. River Ouest was valued at €307 million ($332 million) in January 2023, but DBRS estimated that it may have dropped to €195.3 million. This level is close to the roughly €187 million of notes that remain outstanding, with the lowest of four tranches trading at distressed levels.
The loan underlying the River Green CMBS went into default in January and has been placed under the care of a special servicer.
Separately, S&P Global Ratings downgraded all classes of the Taurus notes last week. The CMBS is backed by two loans secured by the Squaire. The building, which includes hotels and parking, has also been struggling with the creditworthiness of another tenant, elevating concerns over its cash-flow.
Bloomberg News has reached out to the owners of the Squaire for comment.
--With assistance from Libby Cherry and Irene García Pérez.
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