Nordic Credit Rating (NCR) said today that it had lowered its long-term issuer rating on Sweden-based property manager Bonnier Fastigheter AB to 'BBB-' from 'BBB'. The outlook is stable. At the same time, the 'N3' short-term issuer rating was affirmed. NCR also lowered its senior unsecured issue ratings on bonds issued by subsidiary AB Bonnier Fastigheter Finans (publ) to 'BBB-' from 'BBB'. The outlook and the long- and short-term issuer ratings on the subsidiary are aligned with those of the parent.
The lowering of the long-term issuer rating reflects Bonnier Fastigheter's weaker financial risk profile, with significantly lower interest coverage and higher loan to value (LTV). We believe that the challenging market conditions with high interest rates and further pressure on asset values will remain over our forecast period. As a result, we believe the increased financial risk is of a more permanent nature than previously anticipated. The weaker financial risk profile also reflects the higher LTV in Bonnier Fastigheter's joint venture (JV) portfolio, which contributes to higher overall financial risk. If consolidated, the inclusion of the JVs would result in weaker financial metrics.
We have, however, also raised our assessment of the company's business risk profile and market position, size and diversification to better reflect the diversification benefits from the JV exposures. The company's JVs add to revenue diversification and result in lower tenant concentrations, despite a limited portfolio size.
The stable outlook reflects our expectations that Bonnier Fastigheter will have weaker financial metrics over our forecast period. However, we believe these metrics will be accompanied by a stronger business risk profile with extensive JV exposures, resulting in a more diversified and less concentrated property portfolio. We also expect the company to postpone some higher-risk projects in the near term, but that it will continue to pursue its growth ambitions once market conditions stabilise.
We could raise the rating to reflect improved credit metrics, including net LTV below 35% and net interest coverage above 3.5x over a protracted period. We could also raise the rating to reflect an increased proportion of residential properties under management, combined with reduced growth ambitions and stronger credit metrics.
We could lower the rating to reflect weakened credit metrics, including net LTV above 50% or net interest coverage below 2.2x over a protracted period, or to reflect deteriorating market fundamentals that negatively affect profitability and/or occupancy.
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Yun Zhou, analyst, +46732324378, firstname.lastname@example.org
Elisabeth Adebäck, analyst, +46700442775, email@example.com
Sean Cotten, chief rating officer, +46735600337, firstname.lastname@example.org
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 24 May 2022 and NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022. For the full regulatory disclaimer please see the rating report.NCR - Bonnier_Fastigheter_AB - Full Rating Report 20 Oct. 2023.pdf (381.07 KB) NCR - Bonnier_Fastigheter_AB - Rating Action Report 20 Oct. 2023.pdf (155.75 KB) Bonnier Fastigheter AB BBB - Stable Real estate N3 Off On Off