Swedish landlord SBB enters into talks with bondholders; net loss widens

 THE commercial landlord at the centre 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 is more commonly known, said on Friday (Jul 14) 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 per cent 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 (S$1.27 billion) 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 per cent from a year ago to 1.75 billion kronor. 

SBB has seen its share price plunge more than 90 per cent 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 US$8 billion debt pile increasingly unsustainable amid sharply rising interests and falling property valuations.

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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 CEO 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. 

Tasked with rolling over US$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 three 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. BLOOMBERG