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(Bloomberg) — Shares of a Swedish owner have fallen three-quarters this year and investors believe the worst is not over.
SBB, as Samhallsthroughggnadsbolaget i Norden AB is more commonly known, has the shortest inventory of the moment in Europe, with bearish bets on 35% of its free float, according to knowledge gathered through S
The Stockholm-based company is positioning itself as the canary in the coal mine for Europe’s faltering real estate market. While space costs in Sweden are expected to fall by 20% in one of the fastest growing real estate markets in the world, its business style is in the face of renewed pressure.
An SBB representative declined to comment on the short term at the company.
As valuations fall and the capital charge increases, SBB risks falling into sell-offs of its credit ratings.
“It’s already a bit tricky for SBB with its already superior loan-to-value ratio,” Emil Ekholm, an analyst at Pareto Securities, said in a broadcast interview last week. In such a scenario, “it is possible that it violates certain restrictive agreements and would be smart for the real estate portfolio. “
SBB is a specialist landlord of regulated and general interest residential rental housing in Sweden and other Nordic countries. It has noticed a meteoric rise since its inception through current CEO Ilija Batljan in 2016, but competitive expansion has led to a buildup of debt, whose yields are now trading at particularly high levels than other real estate pairs.
Its monetary dangers caught the attention of Viceroy Research LLC, Fraser Perring’s shortselling distributor, who published a series of scathing reports about the company. reaction to claims that cast doubt on his accounting.
SBB was unknown in credit markets outside Sweden before the start of the Covid-19 pandemic. That replaced when the company became the leader of European real estate borrowers, accumulating billions of euros in bond market debt.
Then, this year came the double whammy of interest rate hikes and a sharp drop in investor confidence. Like many in the industry, SBB has noticed that loan prices have skyrocketed. first of all they were sold with.
SBB has about $500 million in debt maturing next year and $1 billion in bonds and loans maturing in 2024, according to information compiled through Bloomberg.
“If we don’t have a bond market that’s so open to real estate companies, it’s going to be hard to refinance all of that,” Ekholm said. “Maybe it’s not possible to turn all of this into bank loans. “
One of the catalysts for SBB bond trading grades is what rating agencies do.
CEO Batljan is vigorously protecting his investment-grade status, pushing through a series of asset sales to leverage in hopes of an improvement. On Thursday, he signed a letter of intent to sell nine billion kroner ($841 million) of housing to an unidentified institutional investor. .
Sales don’t seem to be working yet. In July, S.
SBB’s main merit is its social housing portfolio, with a strong source of rental income and long-term contracts due to inflation-related increases, while its reasonable debt means financing prices remain low, according to Pareto’s Ekholm.
But short traffickers, the slowdown is too wonderful for the owner to escape unharmed.
“SBB has sold higher-yielding assets to make market leverage decline,” Perring said in an emailed statement. “SBB will inevitably be downgraded. “
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