Swedish landlord Samhallsbyggnadsbolaget i Norden AB (SBB) has been downgraded to a junk credit rating of BB+ by Standard & Poor's, with the rating agency signaling it may downgrade further if the company doesn't secure sufficient funds to meet its short-term financial obligations. The development raises serious questions for SBB as it grapples with $8.1 billion of debt and potentially higher borrowing costs.
The rating agency believes that SBB will maintain an S&P Global Ratings-adjusted debt-to-debt plus equity ratio of well below 60% over the next 12 months, with EBITDA interest coverage falling to about 2x by year-end. In response, SBB had announced plans to raise 2.6 billion kronor ($253 million) in new class D shares in an effort to shore up its finances; however, the company’s shares fell 5.4% at 10:35 a.m. Stockholm time following news of the downgrade.
Sweden's largest commercial landlord is now on negative outlook by S&P Global Ratings due to concerns regarding its substantial amount of short-term debt worth about $1.4 billion maturing in the next twelve months.
"SBB's current liquidity position is concerning," said Anna Karpova, senior analyst at Standard & Poor's Global Ratings, "and we believe more downgrades are possible if they don't manage their short-term financial obligations."
News of the rating action sent SBB’s Class B shares plunging 17% in Stockholm trading markets — reaching their lowest level since 2018 — and also dragged down Swedish peers Fastighets AB Balder and Castellum AB.
In response to these challenges, SBB has chosen various measures including selling assets, raising bank loans and tapping into stock market resources aiming to bring its debt metrics under control. Despite these measures, shares of the Stockholm-based company fell more than 15% on Monday and are now down over 85% from a late-2021 peak.
"We are working diligently to secure new sources of funding," said SBB CEO Ilija Batljan, "including by tapping shareholders for cash and exploring other avenues to strengthen our financial position."
As one of Europe's most indebted developers faces increasing challenges due to this downgrade, the real estate sector will be closely monitoring SBB's efforts to manage its short-term financial obligations and improve its credit rating in the coming months.