Nordic Credit Rating (NCR) has affirmed its 'A' long-term issuer rating on Norway-based property manager Bane NOR Eiendom AS. The outlook is stable. The 'N2' short-term issuer rating and 'A' senior unsecured issue rating were also affirmed.
Rating rationale
The affirmation reflects our expectation that Bane NOR Eiendom's credit metrics will remain moderate, supported by the recent extension of its NOK 1.8bn shareholder loans to 15 years. We see this extension as an increased commitment from its owner Bane NOR SF. We now consider these loans as long-term financing and treat them as 100% equity in our calculation of financial metrics. This underscores Bane NOR Eiendom's significant role for its owner in achieving policy objectives related to regulating parcels and developing areas around train hubs.
We forecast net loan to value (LTV) of approximately 36% through 2027, positively influenced by the treatment of shareholder loans as equity. We believe the company's EBITDA to net interest ratio will remain under pressure due to high capital expenditure, which will increase external debt and interest costs. We expect interest coverage to EBITDA to remain between 2.2x and 2.4x in 2025−2027. We assume a significant reduction in capital expenditure in 2027, supported by improved EBITDA, will stabilise debt levels.
The long-term issuer rating continues to reflect the company's moderate leverage, solid average remaining lease term and high proportion of government-funded tenants. The rating is further supported by the company's monopoly over domestic railway stations and workshops, as well as its importance to Norwegian railway infrastructure. Additionally, the company's extensive and centrally located land bank offers future development opportunities in city centres near existing train stations.
The rating is constrained by the size of Bane NOR Eiendom's management portfolio, although this is mostly offset by the specialised nature of the properties. It is also constrained by the company's revenue concentrations and the risks associated with development projects.
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 moderate, despite high capital spending and a rise in debt in 2025 and 2026. It also reflects our belief that the company will sell off completed projects in its development portfolio, which will increase earnings and improve cash flow. In addition, footfall through the company's railway stations is back to pre-COVID-19 pandemic levels, supporting occupancy and increasing the attractiveness of its property locations.
We could raise the rating to reflect an LTV ratio of around 20% and an EBITDA margin above 65% for a prolonged period. We could also raise the rating to take into account improved profitability and revenue stability, or to reflect a strengthened financial policy through tighter leverage targets.
We could lower the rating to reflect net LTV above 40% or net interest coverage below 2.2x over a prolonged period, or to take into account weaker profitability or an inability to achieve competitive prices on development properties.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A | A |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | A | A |
Contacts:
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.