Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB-' long-term issuer rating on Sweden-based Catena AB (publ). The outlook is stable. At the same time NCR affirmed the 'N-1+' short-term issuer rating.
Rating rationale
The long-term rating reflects the company's strong position as one of Sweden's largest logistics property managers, long remaining lease terms, and high occupancy rate. It further reflects the benefits of increasing e-commerce to the logistics sector as well as Catena's solid profitability, modest leverage and strong interest coverage.
These strengths are offset by a financial risk appetite that, in our view, is greater than warranted by the company's financial ratios. Specifically, we view Catena's concentrated debt maturity profile, with significant maturities in the next two years, as a credit weakness. Furthermore, we view the high tenant concentrations in the portfolio as a weakness, although these are mitigated by a significant proportion of government-backed tenants and tenants with exposure to the non-cyclical grocery business.
We have raised our financial risk appetite score by one notch to reflect the company's proven adherence to its financial policy since mid-2021.
Stable outlook
The stable outlook reflects our expectation that Catena will maintain its focus on logistics properties in prime locations in Sweden and Denmark. We expect the company to continue growing, primarily through project development, and that it will maintain its net loan-to-value (LTV) ratio below 50%, in line with its financial policy. Furthermore, we expect a continued increase in e-commerce to benefit the logistics subsector, and that Catena will proactively refinance upcoming debt maturities.
We could raise the rating to reflect improved credit metrics (EBITDA/net interest over 5x and net debt/EBITDA below 9x) over a protracted period, increased portfolio size combined with reduced portfolio concentrations, or a less concentrated debt maturity profile. We could lower the rating to reflect increased financial gearing (net LTV above 50% and EBITDA/net interest below 3.5x) over a protracted period or deteriorating market fundamentals that adversely affect occupancy and/or profitability.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
Contacts:
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@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.