Nordic Credit Rating said today that it had raised its long-term issuer rating on Sweden-based property manager Stendörren Fastigheter AB (publ) (Stendörren) to 'BB' from 'BB-'. The outlook is stable. At the same time, the 'N4' short-term issuer rating was affirmed.
Rating rationale
The rating action reflects an improved financial risk profile, following successful deleveraging, proactive hedging, and a stronger balance sheet following an equity injection earlier this year. We expect that net interest coverage will strengthen to above 2x on a lasting basis and that net loan to value (LTV) will remain around 55% over our forecast period through 2026, despite continued growth through acquisitions and development projects. The stronger financial risk profile also reflects the company's proactive refinancing approach and adequate liquidity position.
Stendörren has attracted negative media attention about chemical contamination at its largest property, located in Upplands-Bro. We expect the issue to be resolved with minimal financial impact on the company.
The long-term rating reflects Stendörren's diverse tenant base and improved occupancy rates and operating margins. The company's properties are mostly located in attractive logistics hubs, which supports their long-term appeal. We take a positive view of the company's extensive interest rate hedging, with about 64% of interest-bearing liabilities hedged, mainly using interest rate caps. It also reflects the owners' growth ambitions and Stendörren's significant project pipeline, which point to continued high project development risk over the next few years.
Stable outlook
The stable outlook reflects our view that Stendörren's net interest coverage will improve to above 2x, as the company grows through acquisitions and project development. The company strengthened its balance sheet through an equity injection of about SEK 500m earlier in the year and we believe it will maintain its current LTV at around 55% through our forecast period. We expect the company to remain proactive in managing its debt maturities. We also expect that the chemical contamination at the Upplands-Bro site will be resolved with limited financial impact.
We believe a higher rating is unlikely at this time. We could, however, raise it to reflect a proven commitment to a more moderate financial risk profile combined with an improved operating environment and greater diversity.
We could lower the rating to reflect net LTV above 60%, diminishing covenant headroom, or deteriorating liquidity.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BB | BB- |
| Outlook: | Stable | Positive |
| Short-term issuer credit rating: | N4 | N4 |
Contacts:
Yun Zhou, analyst, +46732324378, yun.zhou@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@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 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.