Nordic Credit Rating said today that it had revised its outlook on Sweden-based commercial property manager Platzer Fastigheter Holding AB (publ) to negative from stable. At the same time, the 'BBB-' long-term and 'N4' short-term issuer ratings were affirmed. The 'BB+' senior unsecured issue rating was also affirmed.
The outlook revision reflects our expectation that Platzer's financial metrics are likely to weaken and remain at weaker levels than we previously projected. Our revised base case sees Platzer's interest coverage ratio (ICR) below our rating driver of 2.5x and remaining in the 2.2x–2.4x range over our forecast period through 2025, unless mitigating action is taken. The company's reported 12-month rolling ICR was 2.3x as of 30 Sep. 2023. We also project that net loan to value (LTV) will rise towards our rating trigger levels of 50% (48.7% as of 30 Sep 2023). The outlook revision reflects this elevated financial risk, but also accounts for the uncertainty regarding external factors such as market rates and yield requirements, as well as the potential for the company to take mitigating actions to support financial metrics.
We believe that the challenging market conditions with elevated financing costs and yield adjustments will continue to pressure Platzer's financial metrics, although the finalisation of projects and contract indexations will contribute positively to cash flow and EBITDA. We also believe the company will remain selective regarding new projects and will complete its current development projects without substantial cost overruns or delays. Furthermore, we do not believe that vacancies will increase substantially, despite a weaker economy.
We could lower the rating to reflect EBITDA/net interest below 2.5x or net LTV above 50% over a protracted period, deteriorating market fundamentals that adversely affect occupancy and/or profitability, or to reflect increased exposure to and risk-taking in development projects.
We could revise the outlook to stable to reflect stable credit metrics, with EBITDA/net interest above 2.5x and net LTV below 50% over a protracted period, or to reflect efforts and a commitment to deleverage.
(i) The Swedish real estate sector– waiting for sunshine after the rain, 27 Sep. 2023.
(ii) Decoding Swedish real estate in an uncertain market environment, 29 Aug. 2023.
(iii) Platzer Fastigheter Holding AB (publ) 'BBB-' long-term issuer rating affirmed; Outlook stable, 9 Jun. 2023.
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Yun Zhou, analyst, +46732324378, email@example.com
Ylva Forsberg, analyst, +46768806742, firstname.lastname@example.org
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.