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SBB, a Swedish real estate company facing financial difficulties, is considering the possibility of selling a majority share in its residential division, which possesses 23,000 apartments. This move is part of the company's broader efforts to restructure its operations in order to address upcoming debt obligations. CEO Leiv Synnes indicated that the recent sale of a portion of its school property business to Canadian investor Brookfield is the initial step in a comprehensive restructuring plan, and selling a minority or majority stake in its residential division may follow suit.
This marks the initial move stated Synnes in reference to the EduCo control sale, enabling the settlement of an inter-company loan, freeing up 7.8 billion Swedish crowns ($706 million) in cash. Further actions are required.Synnes mentioned ongoing talks with investors regarding the 39-billion-crown ($3.5 billion) residential arm, aiming to bridge a financing gap. The company also revealed consideration of a stock-market listing for this business.
Numerous investors are keen on growing their presence in the Nordics noted that Synnes SBB's challenges emerge amidst Sweden's efforts to manage a broader property crisis driven by elevated debts, escalating interest rates, and a weakened economy.
By divesting control of this segment, SBB aims to concentrate on its community-focused division, encompassing care homes, government facilities, hospitals, police stations, fire stations, and army barracks. Despite being historically favoured by investors, SBB finds itself at the core of a property downturn that poses a threat to the state's economy.
The $13 billion conglomerate, holding extensive property assets throughout Sweden, recorded a pre-tax loss of 11 billion Swedish crowns ($1.09 billion) in the second quarter, accompanied by a decline in cash reserves. The EduCo transaction, where Brookfield becomes the majority owner, leaving the Swedish firm with a 49.84% stake, ensures additional funds. This move propelled SBB's shares by approximately a third, enhancing its bond performance.
The SBB group accumulated substantial debt through the acquisition of public assets, encompassing social housing, government facilities, schools, and hospitals. Faced with a credit rating downgrade to junk status, the company is urgently working to restore its financial stability. Some are considering the government as a possible lifeline. Since reaching its peak in 2021, the company's shares have plummeted by over 90%, causing concern among investors and leading the Swedish central bank to issue multiple warnings about the real estate industry's challenges.
At the beginning of this year, it issued a warning stating that challenges within highly leveraged commercial property firms might extend beyond, potentially impacting the broader economy and posing a risk of a cascading effect on banks, which have increasingly extended loans to property companies.
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