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 'N-1' short-term issuer rating.
Rating rationale
Our 'BBB-' long-term issuer rating on Sweden-based property manager and developer CA Fastigheter reflects the company'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.
These strengths are offset by the company's active project and development activities, 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.
In 2021, CA Fastigheter increased its intra-group lending to group parent and sister companies, which we believe adds complexity and financial risk to the company when evaluated on a standalone basis. To reflect the increased lending exposure, combined with a short debt maturity profile and a somewhat constrained liquidity position, we have lowered our assessment of risk appetite by one notch.
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. We also expect CA Fastigheter to complete the sale of its tenant-owned property projects at a profit, reducing the need for further gearing on its future investments. We could raise the rating in the event of improved credit metrics, with EBITDA/net interest sustainably over 3.5x and net loan to value (LTV) permanently below 35%. We could also raise the rating to reflect reduced risk appetite, in combination with an extended debt maturity profile or an increased share of non-cyclical rental revenues. We could lower the rating in the event of increased financial gearing, with net LTV at levels sustainably over 50% and EBITDA/net interest below 2.2x over a protracted period. We could also lower the rating to reflect deteriorating market fundamentals or increased 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: | N-1 | N-1 |
Contacts:
Yun Zhou, analyst, +46732324378, yun.zhou@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@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 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.