Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB+' long-term issuer rating on Sweden-based Svensk FastighetsFinansiering AB (publ) (SFF). The outlook is stable. At the same time, the 'N-1+' short-term issuer rating and the 'BBB+' senior secured issue ratings were also affirmed. The issuer and issue ratings are no longer under criteria review.
Rating rationale
On 18 Feb. 2022, NCR published its new Group and Government Support Methodology and placed the issuer rating and senior secured issue ratings on SFF under criteria review. SFF's common stock is divided equally among Catena AB (publ), Diös Fastigheter AB (publ), Fabege AB (publ), Platzer Fastigheter Holding AB (publ), and Wihlborgs Fastigheter AB (publ). The company is effectively a financing vehicle for its five owners, issuing secured bonds with security in the form of selected properties associated with its owners' core businesses in accordance with the prospectus for its medium-term note (MTN) programme. Under the new criteria, NCR may elect to reflect material credit enhancement and/or legally binding support agreements in cases of diversified ownership, even if the standalone credit assessment is higher than the credit quality of any or all of its owners.
NCR factors in continual support from SFF's owners by adding an additional notch to the 'bbb' standalone credit assessment to take account of the credit enhancement not reflected elsewhere within the assessment. In particular, we factor in a requirement for the owners to replace non-performing assets and/or provide additional security if loan-to-value (LTV) levels were to rise, and for the owners to confirm available liquidity/bank facilities three months prior to any loan maturity. Furthermore, while we note that there are no guarantees between the owners, the security agent has the ability to sell any of the company's pool properties for the benefit of MTN investors, which, together with the strong ties between the five owners, provides incentives for them to resolve any issues collectively.
Stable outlook
The stable outlook reflects our expectations of stable performance by both SFF's property operations and its owners. We expect the company to maintain net LTV at around historical levels and risk appetite to remain low, given the restrictions in the MTN prospectus. Furthermore, we expect SFF to remain an attractive funding source for its five owners and its current ownership structure to remain unchanged. We could raise the rating to reflect: a sustainable reduction in NCR-adjusted net LTV to below 45%; an improvement in portfolio quality and/or a greater proportion of pledged residential properties; or a greater number of pledged properties, together with improved tenant diversity. We could lower the rating to reflect: an increase in risk appetite or changes to and/or non-compliance with covenants; a deterioration in the creditworthiness or withdrawal of one or more of the owners; or an increase in NCR-adjusted net LTV to above 55% over a protracted period.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
| Senior secured issue rating: | BBB+ | BBB+ |
Contacts:
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 18 Feb. 2022, NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.