On 18 Feb. 2022, Nordic Credit Rating (NCR) published its new Group and Government Support Methodology and placed four affected issuer ratings under criteria review. We have today completed our internal review of those issuers with ratings directly affected by the implementation of the methodology. As anticipated, the review concluded with the affirmation of all the affected issuer and issue ratings.
For all entities concerned, the issuer and issue ratings are no longer under criteria review.
The following is a summary of the decisions taken when applying the new methodology to each issuer that was placed under criteria review. For further details, please see the separate rating action report on each entity, which can be found on its respective NCR issuer page.
Bonnier Fastigheter AB and instruments issued by AB Bonnier Fastigheter Finans (publ)
We have reviewed Bonnier Fastigheter and the senior unsecured instruments issued by subsidiary AB Bonnier Fastigheter Finans (publ), which are fully guaranteed by Bonnier Fastigheter. Using the rating principles for special-purpose financing entities, defined in the new methodology, we have assigned a 'BBB' long-term issuer rating and an 'N-1+' short-term issuer rating to AB Bonnier Fastigheter Finans (publ). We have also affirmed the ratings on senior unsecured instruments issued by the company and affirmed our 'BBB' long-term issuer rating on Bonnier Fastigheter AB. The outlook on both companies is stable.
Danske Hypotek AB (publ)
We also reviewed the group status of Danske Hypotek, as a subsidiary of Danske Bank A/S (Danske Bank). While our rating has always considered Danske Hypotek's role within the Danske Bank group, the new methodology provides clearer guidelines for describing Danske Hypotek's role as a 'vital' entity within the group structure. Under our definition, the issuer rating on a 'vital' entity is aligned with NCR's credit assessment of the parent, in the absence of a public parent issuer rating from NCR. Danske Hypotek is financed in part by Danske Bank and is highly integrated with the group's Swedish operations. In addition, we expect any financial resolution (as defined by the EU's Bank Recovery and Resolution Directive) involving Danske Bank to result in the Swedish subsidiary maintaining its current relationship with the parent. For this reason, Danske Hypotek is not eligible to be rated above the level of our credit assessment of the parent. Our current assessment of Danske Bank is 'a', which is already in line with our standalone credit assessment on Danske Hypotek. We have therefore affirmed our 'A' long-term issuer rating and our 'AAA' covered-bond issue rating. The outlook is stable.
Kongsberg Gruppen ASA
We reviewed the government support status for Kongsberg Gruppen, which is owned 50.004% by the Norwegian government. We view Kongsberg Gruppen as of 'strategic interest' to the government, which maintains a controlling ownership' stake under our definition. According to the Government Support definitions in the new criteria, this allows a one- or two-notch increase from our 'bbb+' standalone credit assessment of Kongsberg Gruppen. We have opted to maintain the one notch we attribute for government support, which is reflected in the 'A-' long-term issuer rating, which we now affirm. The outlook is stable.
Even with an established willingness and ability to support the company's strategy, the business relationship with the government has a material impact on our standalone credit assessment of Kongsberg Gruppen. For example, the company's large contracts and orderbook with the government are, in our view, a strong driver of business risk and market position. While we believe that the Norwegian government is likely to support Kongsberg Gruppen in an event of distress, we also believe that in an event of corporate bankruptcy, the Norwegian state would retain ownership of the defence technology that the group develops on behalf of the Norwegian Armed Forces. Furthermore, we believe that situations could arise in which it is deemed politically imprudent to support the company.
Svensk FastighetsFinansiering AB (publ)
Finally, we reviewed owner support for Svensk FastighetsFinansiering (SFF), whose 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). SFF 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 of SFF 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 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. We have affirmed the 'BBB+' long-term issuer and issue ratings. The outlook is stable
Contacts:
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com