Nordic Credit Rating (NCR) said today that it had lowered its long-term issuer rating on Sweden-based Intea Fastigheter AB (publ) to 'BBB' from 'BBB+'. The outlook is stable. The short-term rating was affirmed at 'N3'. At the same time, NCR lowered the senior unsecured issue rating to 'BBB' from 'BBB+' in accordance with NCR's revised corporate rating methodology. The ratings are no longer under criteria review.
Rating rationale
The rating action on the long-term issuer rating reflects the company's weaker financial risk profile resulting from a reduction in shareholder commitments, a shortened debt maturity profile and increased financing uncertainty, as well as our lower expectations for key credit metrics. We have lowered our financial risk assessment on Intea, reflecting weaker credit metrics than those of its closest peers and projected further weakening due to higher yield requirements and further investments in its ongoing development projects. In our view, the exhaustion of previous shareholder commitments, together with an increasingly front-loaded debt maturity profile, has resulted in elevated refinancing risk and increasing uncertainty about the future capital structure. We also believe that uncertain property valuations could increase financing costs for the company's project portfolio.
On a positive note, we have raised our assessment of the company's operating efficiency, reflecting our expectations of improved EBITDA margins and low vacancy rates. In our view, the company has succeeded in reducing central administration costs by streamlining its organisation, improving cost control and obtaining a natural hedge of electricity costs by acquiring hydropower assets.
Stable outlook
The stable outlook reflects our expectations that Intea's interest coverage ratio and property values will stabilise over our forecasting period. The outlook reflects our expectations that owners will support the company and that Intea will be able to refinance its upcoming debt maturities. We believe the company will maintain its focus on specialised community service properties with long leases and government-backed counterparties. We expect Intea to primarily grow through its project portfolio, in which properties appear to be on schedule for completion, while maintaining its current financial risk profile.
We could raise the rating to reflect improved credit metrics, with a net loan-to-value (LTV) ratio below 50% and net interest coverage above 3.5x over an extended period, or to reflect substantial shareholder commitments that improve the overall financial risk profile. We could also raise the rating to reflect increased portfolio size and diversification, combined with reduced project development.
We could lower the rating to reflect worsened credit metrics, with net LTV above 60% and net interest coverage below 2.2x on a sustained basis, or to reflect an increased financial risk appetite or change in ownership. We could also lower the rating to reflect a lower proportion of public-sector tenants.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB | BBB+ |
| Outlook: | Stable | Negative |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB | BBB+ |
Contacts:
Gustav Nilsson, analyst, +46735420446,
gustav.nilsson@nordiccreditrating.com
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 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.