Nordic Credit Rating (NCR) said today that it had affirmed its 'BB-' long-term issuer rating on Sweden-based Stendörren Fastigheter AB (publ) (Stendörren). The outlook is stable. The 'N-2' short-term rating was also affirmed.
The long-term rating reflects Stendörren's high financial leverage, short debt maturity profile, and low adjusted interest coverage ratio. It also reflects the company's high single-name tenant concentrations. Rating constraints include a high vacancy rate and an aging property portfolio. Moreover, the owners' growth ambitions and the company's large project pipeline point to a continued increase in project development over the next few years.
Positively, Stendörren's properties are mostly located in strategic logistics hubs. The company also benefits from a stable operating environment and generally beneficial economic conditions. Stendörren has a moderate average remaining lease term of 3.6 years (as of 30 Sep. 2021), a diverse tenant base, and stable operating margins.
The stable outlook reflects our expectation that Stendörren will continue to focus on costs, resulting in future improvements in EBITDA. It also reflects the company's proactive management of lease maturities and continued focus on reducing vacancies. We expect Stendörren to maintain its 2021 growth rate via acquisitions and to increase investments in its development pipeline. We further expect the company to keep projects under development at a manageable pace in terms of both resources and finances.
We could raise the rating to reflect an NCR-adjusted loan-to-value ratio below 55% and EBITDA/net interest above 2.2x. We could also raise the rating if the company finds long-term tenants for its large impending vacancies or increases the number of cash-generative properties through successful projects and acquisitions.
We could lower the rating to reflect an NCR-adjusted loan-to-value ratio above 65% and EBITDA/net interest below 1.5x, excessive project risk through engagement in speculative projects or increased leverage leading to tight covenant headroom.
|Long-term issuer credit rating:||BB-||BB-|
|Short-term issuer credit rating:||N-2||N-2|
Mille Fjeldstad, analyst, +4799038916, firstname.lastname@example.org
Marcus Gustavsson, analyst, +46700442775, email@example.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.