The commercial landlord at the center of Sweden’s property crunch has entered into talks with a large group of bond investors in an effort to shore up its finances.
SBB, as Samhallsbyggnadsbolaget i Norden AB is more commonly known, said on Friday that it was seeking to strengthening liquidity and had started several parallel processes including the possibility of obtaining capital from the stock market. The shares rose as much as 4.9% shortly after trading opened in Stockholm.
“Lenders, including bond holders, are one of our largest stakeholders and it’s natural to have constructive dialogs with them regularly,” Leiv Synnes, the newly installed chief executive officer, said in an interview.
A potential breach of debt term were not part of those discussions, he said. “We have been clear with that we’re meeting our covenants,” he added.
The talks come as the Stockholm-based company’s operations took a turn for the worse. SBB reported a net loss of 9.9 billion kronor ($970 million) in the second quarter, due to revaluations as a result of increased yield requirements. The figure was significantly higher than analyst estimates of a 2.88 billion kronor loss. Rental income fell 7% from a year ago to 1.75 billion kronor.
SBB has seen its share price plunge more than 90% since hitting a peak in late 2021 amid intensifying pressure to get its finances under control. The company, which borrowed heavily in the era of cheap money, has found its $8 billion debt pile increasingly unsustainable amid sharply rising interests and falling property valuations.
The company’s situation worsened in early May after its credit rating was downgraded to junk status by S&P Global Ratings. Since then, SBB has postponed a dividend, ousted its founder Ilija Batljan as chief executive officer and put up the whole firm as well as individual assets up for sale.
SBB’s struggles are part of the turmoil in real estate markets, as higher interest rates depress valuations around the world. Its troubles also risk becoming a broader issue in Sweden as the company owns many public-sector buildings like nursing homes and schools.
Read More: Why a Crisis Is Looming in Commercial Real Estate: QuickTake
Tasked with rolling over $1.6 billion of maturing bonds over the next three years, SBB is racing to find buyers for properties as well as raising fresh capital. On Thursday, the company said it signed a letter of intent to sell properties worth more than 3 billion Swedish kronor to existing tenants.
“Creditors, shareholders and employees are all currently working towards the same objective – safeguarding value for all stakeholders,” Synnes said in the report.
(Adds CEO interview comments, further details from report.)
