Nordic Credit Rating said today that it had withdrawn its 'BBB-' long-term and 'N-1+' short-term issuer ratings on Sweden-based community service property manager Offentliga Hus i Norden AB (publ) (Offentliga Hus) at the issuer's request. At the point of withdrawal, the ratings were affirmed and the outlook was stable.
Rationale
The affirmation reflects the strong outlook for the community service property segment, the company's long-term contracts and its significant proportion of highly creditworthy tenants. The rating also reflects a geographically diverse property portfolio in Sweden.
These strengths are offset by Offentliga Hus' highly leveraged balance sheet and relatively large proportion of private-sector tenants. It also reflects the company's low profitability and significant financial risk appetite.
As of 30 Jun. 2021, Offentliga Hus was 98% owned by property manager Samhällsbyggnadsbolaget i Norden AB (publ) (SBB). In the second quarter of 2021, about one-third of Offentliga Hus' external debt was replaced with shareholder loans from SBB, and this trend continued in the third quarter. We view this development as illustrative of SBB's intention to merge Offentliga Hus' operations into its own and we expect SBB to provide support for Offentliga Hus, if needed. To reflect our expectations of owner support and that SBB is of higher creditworthiness than Offentliga Hus, the company's long-term issuer rating was two notches higher than the standalone credit profile at the point of withdrawal.
Stable outlook
At the point of withdrawal, the outlook was stable, reflecting our expectation that Offentliga Hus will be merged into SBB's operations. We see the company maintaining its focus on community service properties in Sweden and the sector remaining stable. Furthermore, we expect SBB to maintain its current focus and continue on its growth path with financial metrics in line with, or better than, current levels.
| Rating list | Withdrawal | To | From |
|---|---|---|---|
| Long-term issuer credit rating: | NR | BBB- | BBB- |
| Outlook: | - | Stable | Stable |
| Short-term issuer credit rating: | NR | N-1+ | N-1+ |
Contacts:
Marcus Gustavsson, credit rating analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Methodology published on 14 Aug. 2018 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.