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Rating action

Scope Ratings GmbH (Scope) has today affirmed the issuer rating of Swedish real estate company Samhällsbyggnadsbolaget i Norden AB at CCC/Stable. Concurrently, the senior unsecured debt rating of Samhällsbyggnadsbolaget i Norden AB has been affirmed at CCC, the subordinated (hybrid) debt rating at C and the short-term debt rating at S-4. Subsequently Scope has withdrawn all ratings for business reasons.

Scope continues to observe a discrepancy between the operationally sound business risk profile of SBB and its distressed financial risk profile, which is characterised by inadequate liquidity. The recent IPO of Sveafastigheter has provided the necessary liquidity to repay and refinance the 2025 maturities, with the debt exchange having led to the withdrawal of the legal claims of a covenant breach, allowing the company to focus on its operations for the next 18 months as the next significant bond maturity is in August 2026.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

During 2024, Samhällsbyggnadsbolaget i Norden AB ('SBB', parent company) established a fully owned and irrevocably guaranteed subsidiary, Samhällsbyggnadsbolaget i Norden Holding AB ('SBB Holding', subsidiary), and subsequently transferred the majority of the group's assets to this subsidiary. At the end of the fiscal year, the subsidiary held 91.8% of the assets of the SBB Group. During December 2024, SBB offered most of its current senior unsecured bondholders the opportunity to voluntarily exchange their bonds on a one-to-one basis with equal coupon into new bonds of SBB Holding, which would have a maturity date one month before the old bonds. As part of this process, the company made minor amendments to the set of covenants, with the previously ambiguous and contested interest cover covenant being replaced by an incurrence interest cover covenant. 95% of eligible outstanding bonds participated in the exchange, with 93% of these being exchanged. In addition, the company offered its existing euro hybrid bondholders the opportunity to exchange their hybrid bonds for SBB Holding’s newly issued 2029 senior unsecured bonds, in which around a quarter of the hybrid bondholders participated, exchanging EUR 327m hybrids into EUR 154m senior unsecured bonds.

Following the tender exchange, two of the three funds of Fir Tree (an American Hedge Fund) discontinued their legal claims against SBB in early January 2025, as they no longer held any bonds. The funds had previously alleged that SBB had breached its interest covenant in Q1 2023 and initiated legal proceedings against the company in the British High Court, with a trial scheduled to commence on 14 January 2025. The sole remaining claimant, Fir Tree Credit Opportunity Master Fund LP, filed amended particulars of claim as its holding decreased to EUR 7.5m in the debt exchange, down from EUR 46m. On 13 January 2025, the last fund discontinued its legal proceedings. This development has effectively resolved the uncertainty surrounding the event of default in court, which could have led to the acceleration of bonds. In Scope's view, this provides SBB with access to capital market debt again, with interest observed in the recent exchange, while any potential hesitation banks might have had in providing long-term funding is also removed.

Business risk profile: BBB (unchanged). SBB's business risk profile continues to be supported by its market positioning. However, its reduced size has reduced its dominance in its target segments and visibility to tenants, while the concentration of tenants, properties and geographies has increased somewhat. Asset quality remains supportive, although headline figures for WAULT (8 years for the directly owned assets as at end-September 2024, calculated at 9 years for the overall portfolio) and occupancy (94% calculated for the overall portfolio) have declined over the last 12 months. The profitability of the company has been impacted by additional costs associated with balance sheet restructurings and legal expenses. The future stabilised profitability levels are uncertain but are expected to exceed a 50% Scope-adjusted EBITDA margin*.

Financial risk profile: B- (unchanged). The loan/value ratio was 65% at the end of 2023, increasing to 71% as at end-September 2024. The IPO of Sveafastigheter during Q4 2024 provided liquidity to reduce the loan/value ratio to an expected 66% at year-end 2024, a level that Scope sees as stabilising, although this is highly dependent on the impact of future transactions. EBITDA interest coverage was 1.8x at year-end 2023 and is expected to decline to 1.6x by year-end 2024. The latter is supported by SBB's high hedging ratio (interest rate hedges cover 100% of nominal debt) with an average maturity of 3.3 years, and the company's intention to repay capital market debt at maturity as seen in the latest January 2025 repayments, thereby reducing the overall debt and interest burden. Scope forecasts a marginally improved EBITDA interest coverage of 1.7x-1.8x in the future.

Liquidity: inadequate; -2 notches (unchanged). Liquidity remains insufficient as upcoming debt maturities (SEK 7.7bn in the twelve months to end-2025) are not covered by cash sources (estimated SEK 2bn as at year-end 2024). However, the company has successfully repaid/refinanced SEK 3.6bn of capital market maturities in January 2025, leaving only SEK 1bn of capital market debt to refinanced throughout 2025. Liquidity remains tight and dependent on refinancing of bank debt. To date, the rolling over of bank debt has not been a problem, as demonstrated by SBB's reporting of outstanding bank debt over the last few quarters. Scope views the legal case being abandoned by American Hedge Fund Fir Tree in mid-January 2025 as beneficial for the company's access to long-term capital, as it removes uncertainty surrounding a potential partial acceleration of instruments.

Supplementary rating drivers: -1 notch (unchanged). Scope has identified a negative governance factor (ESG factor: credit-negative), which is described in the ESG section below.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope's view of a prolonged period of balance sheet simplification for SBB, during which the company is expected to be able to address repayments of its capital market debt but remains dependent on rollover of bank debt. Scope has gained comfort that SBB is progressing on its strategic review, though on a slow pace, addressing its structural and refinancing challenges step-by-step through dissolution of JVs, listing of subsidiaries, and addressing its liabilities with excess liquidity generated through transactions.

Debt ratings

As at 31 December 2024, SBB Group had outstanding senior unsecured debt of SEK 38.1bn, split between SEK 6.2bn at the level of the parent company Samhällsbyggnadsbolaget i Norden AB and SEK 31.9bn at the level of the subsidiary Samhällsbyggnadsbolaget i Norden Holding AB.

Ongoing balance sheet restructuring has increased uncertainty about the available assets and their encumbrances, as well as the liability structure, in a hypothetical default scenario assumed at year-end 2025. The agency highlights the high sensitivity of recovery expectations to advance rates and the liability structure at the time of a hypothetical default.

The average recovery expectations for the structurally subordinated senior unsecured debt of Samhällsbyggnadsbolaget i Norden Holding AB (the parent) results in an affirmation at issuer level CCC.

Following the recent tender offer, outstanding subordinated (hybrid) debt amounted to SEK 8.6bn. Hybrid debt benefits from coupon deferral at the issuer's discretion, deep contractual subordination and a long remaining maturity. Scope grants 50% equity credit for these hybrid debt instruments. The recovery expectations for subordinated (hybrid) debt are very low, which has led to the affirmation of the C debt rating.

Scope has affirmed the S-4 short-term debt rating. The rating is based on SBB’s CCC/Stable issuer rating and reflects SBB's worse than adequate liquidity and limited access to the capital markets. However, SBB still has access to banks and undrawn committed credit lines with maturities of over one year.

Environmental, social and governance (ESG) factors

Scope highlights the negative governance issues (ESG factor: credit-negative) that have resulted in a negative one-notch adjustment of SBB’s standalone rating. These stem from an investigation in 2023 by the Swedish financial services authority into violations of accounting provisions linked to restatements of the 2021 annual accounts, and the repeated restatement of quarterly reports. These issues have fuelled negative market sentiment. That is reflected in an unchanged negative adjustment of the standalone rating by one notch.

The previously identified governance issue concerning a legal dispute regarding an alleged covenant breach (which the company disputed) has been withdrawn by the claimant, thus bringing it to a closure.

All rating actions and rated entities

Samhällsbyggnadsbolaget i Norden AB

Issuer rating: CCC/Stable, affirmation; withdrawal

Senior unsecured debt rating: CCC, affirmation; withdrawal

Subordinated hybrid debt rating: C, affirmation; withdrawal

Short-term debt rating: S-4, affirmation; withdrawal

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (European Real Estate Rating Methodology, 28 March 2024; General Corporate Rating Methodology, 16 October 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation      YES
With access to internal documents                                   YES
With access to management                                            YES  
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Thomas Faeh, Executive Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 12 November 2021. The Credit Ratings/Outlook were last updated on 12 July 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.