Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB' long-term issuer rating on Sweden-based property manager Bonnier Fastigheter AB. The outlook is stable. At the same time the 'N-1+' short-term rating and 'BBB' senior unsecured issue rating were affirmed. Issue ratings are applicable to senior unsecured bonds issued by wholly owned subsidiary AB Bonnier Fastigheter Finans (publ) with a full guarantee from Bonnier Fastigheter.
Rationale
The long-term issuer rating reflects the company's high-quality property portfolio and focus on office premises in central Stockholm and Uppsala. It also reflects the company's low financial gearing and strong operating margins, as well as the stable operating environment.
These strengths are offset by Bonnier Fastigheter's small and concentrated property portfolio of only 15 properties (as of 31 Aug. 2021) with the top 10 tenants accounting for 46% of rental income. The rating also reflects the company's large project development pipeline, which has speculative elements, and its ambition to expand the portfolio substantially and increase leverage towards 50%. Furthermore, the rating is constrained by large single-year debt maturities, increasing refinancing risk, and our expectations of a decrease in occupancy, which negatively affects our view of Bonnier Fastigheter's operating efficiency.
Stable outlook
The stable outlook reflects our expectations that Bonnier Fastigheter's credit metrics will weaken from their currently strong levels as the company pursues a portfolio value target of SEK 25bn by 2025. We expect this weaker financial position to be offset by a stronger business profile due to a larger and less concentrated property portfolio, possibly with meaningful residential exposure.
We could raise the rating to reflect an increased proportion of residential properties under management, combined with a financial risk profile that is significantly stronger than we currently expect.
We could lower the rating to reflect deteriorating market fundamentals that could reduce profitability, or substantially weaker credit metrics such as net loan to value above 50% and net interest coverage below 5x over a protracted period.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB | BBB |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
| Senior unsecured issue rating*: | BBB | BBB |
| *Issued by AB Bonnier Fastigheter Finans (publ). | ||
Contacts:
Marcus Gustavsson, credit rating analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Yun Zhou, credit rating analyst, +46732324378, yun.zhou@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Methodology published on 14 Aug. 2018 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.