Nordic Credit Rating (NCR) said today that it had lowered its long-term issuer rating on Sweden-based residential property manager Studentbostäder i Norden AB (publ) to 'SD' from 'C' due to the distressed exchange on its outstanding senior unsecured bond, which we define as a selective default ('SD') by the issuer. The short-term issuer rating was also lowered to 'SD'. NCR does not rate Studentbostäder's outstanding debt.
Rating rationale
On 11 Oct. 2023, Studentbostäder announced it had received approval from a qualified majority of its bondholders of the written procedure for its outstanding bond, published on 22 Sep. 2023. Effective 11 Oct. 2023, the terms of the company's SEK 600m bond were amended with a maturity extension of 2.5 years (to 15 Nov. 2026 from 14 May 2024) and a downward revision of the bond's interest coverage covenant, among other changes. According to our definition, the revisions qualify as a distressed exchange and an event of default on the bond, given that we consider the amendments were necessary to avoid a near-term default by the issuer. Although we do not rate the unsecured bond, we define the default by an entity on parts of its debt obligations as a selective default, warranting an 'SD' long-term issuer rating, where such entity continues to fulfil its other financial commitments, which Studentbostäder does.
We do not assign an outlook to an 'SD' rating, but expect to revise our issuer ratings in the coming weeks. This will follow a full review of Studentbostäder's new capital structure and liquidity coverage, and an assessment of the company's ability to fulfil its debt commitments, including, but not limited to, avoiding further covenant breaches and repaying the bond according to the revised amortisation schedule.
Depending on the outcome of our review, we could raise the long-term issuer rating to within the 'CCC'–'CC' range if we think an additional event of default is likely or believe that the capital structure remains unsustainable. Alternatively, we could raise the rating to 'B-' if our default concerns are more moderate, but we are unlikely to raise the rating higher than 'B-' at this time, given the continued strain on Studentbostäder's short-term liquidity.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | SD | C |
| Outlook | N/A | |
| Watch: | Watch Negative | |
| Short-term issuer credit rating: | SD | N6 |
Related publications:
i) Corporate Rating Methodology, publ. 8 May 2023
ii) Rating principles, publ. 24 May 2022
iii) Studentbostäder i Norden AB (publ) long-term issuer rating lowered to 'C'; Rating on Watch Negative, publ. 22 Sep. 2023
iv) Studentbostäder i Norden AB (publ) long-term issuer rating lowered to 'CC'; Rating on Watch Negative, publ. 18 Jul. 2023
v) Studentbostäder i Norden AB (publ) long-term issuer rating lowered to 'CCC'; Rating on Watch Negative, publ. 24 May 2023
vi) Studentbostäder i Norden AB (publ) long-term issuer rating lowered to 'B+'; Outlook negative, publ. 19 Jan. 2023