Our 'BBB+' long-term rating on Sweden-based Svensk FastighetsFinansiering AB (publ) and the stable outlook on the rating are unchanged following amendments to portfolio covenants in its senior secured loan terms.
SFF issues secured loans under strict transaction structures to ensure adequate capitalisation and a diversified portfolio across property types, companies, regions and sectors. After strong growth in certain segments and regions, SFF has amended its portfolio-level covenants to support further expansion and to reflect the growth of its customer owners.
The amendments are:
· Increase the maximum share of lending to logistics, industrial, and warehouse properties to 55%, from 20% previously.
· Reduce the minimum share of office lending in the Öresund region, Gothenburg or Stockholm to 50%, from 65% previously.
· Remove the requirement for a pledged account and permit the additional 1% cash requirement to be placed in accordance with the covenant on permitted placements of cash reserves.
· Remove the requirement for the security agent to hold the property-side documentation for the issue of mortgage certificates. However, the covenant requiring 100% mortgage certificates and an LTV of 70% to 75%, depending on the property type code, is unchanged.
The amendments will permit a significant increase in logistics, industrial and warehouse properties which is in line with recent strong demand, particularly in the logistics segment. In our view, these properties are generally well diversified geographically and will together with other covenants support a well-diversified portfolio.
We do not consider these changes significant enough to affect our rating on SFF or its senior secured debt. This view is based on the company's continued reliance on the secured loan structure and the role of SFF's owners as effective guarantors, which supports the framework and portfolio diversification. We believe the amendments will facilitate ongoing growth and allow SFF to remain a relevant funding alternative for its owners.
This commentary does not constitute a rating action.
Contacts:
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com