Nordic Credit Rating (NCR) said today that it had assigned a 'A' long-term issuer rating to Norway-based property manager and developer Bane NOR Eiendom AS. The outlook is stable. At the same time, an 'N2' short-term issuer rating was assigned. NCR also assigned 'A' issue ratings to Bane NOR Eiendom's senior unsecured bonds.
Rating rationale
The long-term issuer rating reflects Bane NOR Eiendom's strong credit metrics, solid average remaining lease-term, and highly creditworthy tenants. The rating is supported by the company's de facto monopoly over domestic railway stations and workshops and its importance to the national railway infrastructure. The rating also reflects the company's large land bank, which supports future development opportunities.
The rating is constrained by Bane NOR Eiendom's management portfolio which is average in size in comparison with those of its peers, though this is mostly offset by the specialised nature of the properties. It is also constrained by the company's geographic revenue concentration and the risk of reduced footfall through its railway stations as passenger throughput has yet to recover fully to pre-COVID-19 levels. Bane NOR Eiendom's project development portfolio increases overall risk and represents a negative rating factor.
We add two notches to our standalone credit assessment to reflect Bane NOR Eiendom's 100% indirect ownership by the Norwegian government and our view that the government has a strategic interest due to the company's role as a provider of critical public transport infrastructure.
Stable outlook
The stable outlook reflects our expectation that Bane NOR Eiendom's credit metrics will remain strong despite increasing interest rates and potential financial headwinds in the form of high inflation and reduced economic prosperity. It also reflects our expectation that the company will maintain its successful development portfolio and achieve competitive prices. In addition, we expect footfall through the company's railway stations to return towards pre-COVID levels, effectively consolidating occupancy ratios and increasing the attractiveness of the property locations.
We could raise the rating to reflect a strengthened financial policy through tighter leverage targets or increased revenue diversity and a larger management portfolio while maintaining highly creditworthy tenants. We could also raise the rating to reflect a significant reduction in the NCR-adjusted loan to value (LTV) ratio (towards 20%) and a stabilising NCR-adjusted EBITDA margin (above 65%). We could lower the rating to reflect increased leverage (NCR-adjusted net LTV above 35% and NCR-adjusted net interest coverage below 3.5x), deteriorating market fundamentals, or a change in the company's government relationship or policy role.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | A |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | A |
Contacts:
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 18 Feb. 2022, NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022 and NCR's Rating Principles published on 24 May 2022. For the full regulatory disclaimer please see the rating report.