Landlord SBB gets 8 billion Swedish kronor cash boost in Brookfield deal

STRUGGLING Swedish landlord SBB took a major step towards stabilising its finances after agreeing to sell a further stake in a portfolio of school buildings to Canada’s Brookfield Asset Management.

Samhallsbyggnadsbolaget i Norden – as the company is officially known – agreed to sell a 1.16 per cent holding in the education division to Brookfield, making the Canadian investor the majority shareholder after it already owned 49 per cent of the unit called SBB EduCo.

In what is a complex chain of events, the transaction will see SBB get a cash injection of 8 billion Swedish kronor (S$983 million) as a result of a part repayment of a 14 billion kronor inter-company loan that was put in place in 2022 when Brookfield first became an owner in EduCo, according to a statement on Sunday (Sep 24) evening.

The liquidity measure marks the first significant breakthrough for SBB chief executive officer Leiv Synnes, who replaced embattled founder Ilija Batljan in June. SBB, which owns schools, elderly care homes and other public-sector buildings, put itself as well as its entire portfolio up for sale as it tries to manage an US$8 billion debt pile amid sharply rising interest rates.

Proceeds for the loan repayment will come from a banking group that’s providing financing to the Brookfield-controlled unit, according to Synnes. “You could say it’s a bridge from banks, and then it will be a capital markets solution,” he said.

Three divisions

The strategic review announced at the end of May has now concluded, the company said. The Brookfield deal forms part of a bigger reorganisation to split SBB into three wholly or partially-owned business units in an effort to tap more sources of funding. The education division, which the Canadian asset manager will control, will no longer be a subsidiary of SBB and operate on a standalone basis.

“EduCo’s ambition is eventually to be solely financed through long-term capital market financing with a strong investment grade rating,” SBB said.

The other two business units will comprise the community and residential portfolios. SBB said it would continue to explore opportunities to bring in equity partners that would hold a majority stake in its residential business by the end of next year, confirming an earlier report by Bloomberg News.

Synnes – an industry veteran who ran the books at rival Swedish landlord Akelius Fastigheter – has already refreshed SBB’s management team with a new finance chief and treasury director. But the internal promotions have done little to calm investor concerns. The company’s bonds and shares have languished near record lows in recent weeks without clear progress on easing the financing crunch.

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SBB abruptly ended talks in July with Brookfield over the sale of the 51 per cent stake. That deal was widely seen by the market as key for the ailing landlord as it raced to plug a funding shortfall of 8.1 billion kronor over the next 12 months. Prior to Sunday’s announcement, the company had struck deals with Morgan Stanley – through the sale of preferential shares – and some of its tenants to help plug that gap.

“We will need to raise more capital in the coming year to meet our commitments,” SBB’s CEO told Bloomberg. “This is a good step forward and will open up for more possibilities later.” BLOOMBERG