SBB, the landlord at the center of Sweden’s property crunch, is selling 2.4 billion kronor ($228 million) of shares in a new subsidiary to Morgan Stanley as it seeks to shore up its debt-laden balance sheet.
(Bloomberg) — SBB, the landlord at the center of Sweden’s property crunch, is selling 2.4 billion kronor ($228 million) of shares in a new subsidiary to Morgan Stanley as it seeks to shore up its debt-laden balance sheet.
Samhallsbyggnadsbolaget i Norden AB — as SBB is formally known — is racing to plug a funding gap having amassed an $8 billion debt pile during the era of zero interest rates. As part of those efforts it hopes to raise fresh funds from asset sales and new investors. In the wake of a downgrade to a junk credit rating in May, a sale of the entire company is also up for consideration.
The latest capital raise will see the landlord issue preference shares via a newly created subsidiary called SBB Residential Property to a fund managed by Morgan Stanley Real Estate Investing. The Stockholm-based firm will control and operate the new unit that consists of apartments in Sweden valued at 6.2 billion kronor.
SBB’s shares gained as much as 5.5% when trading started in the Swedish capital on Friday. Its senior unsecured bonds due in November 2029 gained 0.6 cents on the euro to 58.9, according to data compiled by Bloomberg.
The deal “demonstrates the range of capital options available to SBB,” Chief Executive Officer Leiv Synnes said in a statement, released at 2 a.m. local time on Friday.
There were mixed reactions from credit analysts at Danske Bank A/S in Stockholm to the development. “Positively, it will provide SBB with a well needed liquidity boost and give the company some time to execute on its ongoing strategic review,” Louis Landeman wrote in a note to clients. However, the capital raise “could imply some structural subordination for SBB’s bondholders if a minority interest is introduced at a subsidiary level.”
Nor is this the first time SBB has turned to a residential property subsidiary to shore up its finances. The landlord earlier this year spun out Neobo Fastigheter AB and has said it’s planning to do the same with Sveafastigheter Bostad Group AB.
SBB needs at least 6 billion kronor in cash to meet its funding needs over the next 12 months, according to recent analysis by research firm CreditSights Inc. Last week the company said it had entered into talks with a large group of bondholders as part of its refinancing efforts.
The transaction with Morgan Stanley provides “further flexibility” for the ongoing strategic review, according to the CEO. Closing of the deal is expected in the middle of next month.
Read More: Troubled Swedish Landlord SBB Enters Talks With Bondholders
(Updates with share and bond prices, analyst comment.)
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