SBB, the embattled landlord at the center of Sweden’s property crisis, received demands from a group of bondholders to make sweeping changes, in an escalation of tensions over efforts to close a looming funding gap.
(Bloomberg) — SBB, the embattled landlord at the center of Sweden’s property crisis, received demands from a group of bondholders to make sweeping changes, in an escalation of tensions over efforts to close a looming funding gap.
The creditors, advised by PJT Partners, demanded that Samhallsbyggnadsbolaget i Norden AB — as the company is formally known —appoint two new board members and a chief restructuring officer, according to a letter seen by Bloomberg News. The group also asked SBB to provide key terms of recent sales transactions and outline the reasons behind “unexplained cash burn,” they said in the letter sent Sunday.
The investors — representing nearly €2 billion ($2.2 billion) of bonds and including Polus Capital Management Ltd, Anchorage Capital Group and BlackRock Inc. — threatened to take legal action if its demands weren’t met by the end of this week.
They warned that “a signification portion” of the group believes SBB has breached a key financial covenant in its bond terms and would push for an event of default if progress isn’t made quickly enough.
SBB declined to comment.
The shares dropped to 1.4% in Stockholm, reversing earlier gains of as much as 5.5%. Some of SBB’s bonds moved lower on Monday afternoon by 0.6 cents, according to Bloomberg’s prices.
The 4-page letter shows how tension is mounting as SBB struggles to find ways to raise enough money to plug a self-identified cash shortfall of 8.1 billion Swedish kronor ($779 million) over the next 12 months. Its efforts suffered a major setback on Friday when the company said talks had ended with Brookfield Asset Management Ltd. over the sale of a 51% stake in a portfolio of school buildings.
Read More: Embattled SBB’s Woes Worsen After Abrupt End to Brookfield Talks
The PJT-led group was formed in June after the emergence of a separate group of bondholders, calling itself “B2023 Funds.” Last month, B2023 alleged that the company breached the same coverage ratio on March 31. SBB has since said the claims aren’t true.
What Bloomberg Intelligence Says:
Reports of a letter from bondholders to SBB suggest that the standoff between the issuer and some creditors is escalating, and the threat of legal action as soon as this week could mean bonds remain weak.
—Tolu Alamutu, senior credit analyst (Click here for more)
Writing in the letter, the PJT bondholders demanded that SBB refrain from any future material disposals or capital increases without first consulting the group. It expressed concern that SBB is moving money out of their reach after the landlord last week struck a deal with a fund managed by Morgan Stanley to raise cash via an issuance of preference shares.
The group — which also includes Sona Asset Management Ltd., Elliott Investment Management LP, Man Group GLG and Diameter Capital Partners — claimed that the Morgan Stanley deal undermines existing creditors and appears to have been structured to circumvent the credit protections, according to the letter sent by law firm White & Case LLP.
Representatives for Man Group, Diameter, Polus, Blackrock, Elliott and White & Case declined to comment, while a representative for Anchorage did not respond to a request for comment.
–With assistance from Irene García Pérez.
(Updates with share reaction and analyst comment)
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