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Swedish property group SBB recently announced that one of its divisions plans to issue preference shares to an investment fund overseen by Morgan Stanley. The purpose of this move is to improve the division’s liquidity and overall financial standing. After completing the share transaction valued at 2.36 billion Swedish crowns ($228 million), Morgan Stanley Real Estate Investing will become a minority shareholder in SBB Residential Property.
SBB will retain control and operation of the unit, which presently includes rent-regulated residential properties in Sweden valued at approximately 6.2 billion crowns as of June 30, 2023. The preference shares issued to the investment fund do not have a specific maturity date or require immediate payments. Instead, the return of capital depends on either the unit's eventual sale or SBB’s redemption of the shares.
SBB is facing financial difficulties after a recent credit rating downgrade to junk status, which has led to a significant decline in the value of its shares, dropping by over 90% since the downgrade. The company is now working hard to improve its financial situation.
Based on Tradeweb data, certain bonds issued by SBB experienced an increase of 1 to 3 crown cents last Friday, which was well-received by investors after the news of the fundraising. Additionally, SBB made a separate announcement on the same day, stating that the holders of a mandatory convertible note valued at 10 million crowns have now converted them into B-shares. These notes constituted the remaining portion of an initial 2.75 billion crowns subordinated mandatory convertible note that was issued in 2021 and was due to be settled this year. With this recent conversion, there are no outstanding convertible notes remaining.
Sweden’s commercial property firms, including SBB, are facing a hazardous combination of challenges, such as excessive debt, increasing interest rates, and a weakening economy. These factors have resulted in a detrimental impact on their credit status, leading to downgrades to junk ratings.
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