Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB' long-term issuer rating on Sweden-based community service property manager Fastighets AB Stenvalvet (publ). The outlook is stable. At the same time, the 'N3' short-term issuer rating and 'BBB' senior unsecured issue rating were also affirmed.
Rating rationale
The rating affirmation reflects our view that Stenvalvet has performed largely in line with our expectations. Except for a dip in interest coverage in 2024, we expect that the company's credit metrics will improve over our forecast period through 2026.
We have revised our assessment of Stenvalvet's operating efficiency to reflect marginally weaker occupancy rates over the last few years.
We have also lowered our assessment of Stenvalvet's risk appetite to reflect the continued uncertainty related to its main owner, the Church of Sweden, which has indicated plans to reduce its ownership in Stenvalvet to below 50%. We view the previous repayment of shareholder loans as an indication of a lower degree of financial owner support. There is currently no further news regarding a potential change in ownership, but we will follow any news about this on an ongoing basis.
Stable outlook
The stable outlook reflects our expectation that Stenvalvet will continue to focus on community service properties, with long lease contracts under which rents are funded directly or indirectly by public institutions. We expect the net interest coverage to weaken but stabilise over our forecast period. The outlook also reflects our expectation that Stenvalvet will maintain its leverage and remain cautious with regard to capital expenditure and growth.
We could raise the rating to reflect credit metrics improving over the long term to NCR-adjusted net loan to value (LTV) below 40%, net debt/EBITDA below 10.0x and EBITDA/net interest over 3.0x, combined with reduced uncertainty over ownership and shareholder commitment.
We could lower the rating to reflect leverage increasing on a long-term basis to NCR-adjusted net LTV above 55% with EBITDA/net interest below 2.2x, given the current ownership. We could also lower the rating to reflect a higher proportion of non-public-sector tenants or increased ownership uncertainty.
Related rating actions
i) Fastighets AB Stenvalvet long-term issuer rating lowered to 'BBB'; Outlook stable, 30 May 2023
Rating list | To | From |
---|---|---|
Long-term issuer credit rating: | BBB | BBB |
Outlook: | Stable | Stable |
Short-term issuer credit rating: | N3 | N3 |
Senior unsecured issue rating: | BBB | BBB |
Contacts:
Yun Zhou, analyst, +46732324378, yun.zhou@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Rating Principles published on 14 Feb. 2024, NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024 and NCR's Corporate Rating Methodology published on 8 May 2023. For the full regulatory disclaimer please see the rating report.