Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB-' long-term issuer rating on Sweden-based CA Fastigheter AB. The outlook is stable. At the same time NCR affirmed the 'N4' short-term rating.
Rating rationale
The long-term rating reflects CA Fastigheter's relatively low financial gearing, high occupancy, diversification benefits from the company's share of residential properties and low tenant concentrations in its commercial portfolio. It also reflects our expectations that the residential rental market will remain strong and that the company will continue to increase rental income from its commercial portfolio and completed projects.
These strengths are offset by the company's active project and development activities and associated capital expenditure, which create volatility in cash flows and have a higher risk than pure property management. We also view CA Fastigheter's intra-group lending and short debt maturity profile with large single-year maturities as credit weaknesses in our standalone assessment. We consider CA Fastigheter's market position to be modest, given the relatively small portfolio in most of its core geographic locations.
Stable outlook
The stable outlook reflects our expectation that the investment properties will continue to generate stable cash flows, allowing the company to invest in future projects for its own portfolio. Given the uncertain economic environment, the company has postponed many projects in its pipeline to support capital metrics and demonstrate its long-term investment horizon. We expect CA Fastigheter to complete the sale of current tenant-owned property projects at a modest profit and maintain the flexibility to postpone projects if markets deteriorate further.
We could raise the rating to reflect improved credit metrics (EBITDA/net interest sustainably over 3.5x and net loan to value (LTV) sustainably below 35%) or reduced risk appetite and an extended debt maturity profile. We could lower the rating to reflect increased financial gearing (net LTV at levels sustainably over 50% or EBITDA/net interest below 2.2x over a protracted period), deteriorating market fundamentals that affect occupancy and/or profitability, or to reflect increased lending exposure to, or deteriorating credit quality of, CA Group.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N4 | N4 |
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Yun Zhou, analyst, +46732324378, yun.zhou@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 18 Feb. 2022, 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.