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A Swedish flag flies in front of a house in Stockholm, Sweden, September 14, 2023.REUTERS/Marie Manns/File photo, licensed.
Oct 17 (Reuters) – Nordic property companies are likely to write down further property values in the next earnings season, analysts say, as rapidly rising interest rates hit high-debt sectors hard. said.
Interest rates remain high in the region as the region struggles to contain inflation, but mainly Swedish companies have scrambled in recent months to refinance large bond loans with short maturities as credit ratings have been downgraded to junk status. There is.
Barclays analyst Paul May said property values for Nordic real estate companies would come under pressure from higher property yields reported this quarter, which would weigh on the sector’s balance sheets. Stated.
Goldman Sachs predicts real estate values for real estate companies it covers in Europe will fall 7%, and the decline could continue into the first half of 2024.
The broker said the sector’s leverage of 48% was already higher than the European sector average of 39%, making Nordic companies’ balance sheets the most exposed to declines in asset values.
Falling real estate values can push up a company’s loan-to-value ratio, a key metric used to determine credit risk, and increase the risk that a company will breach debt covenants under which it borrows.
Still, Carl’s Square analyst Bertil Nilsson said liquidity and the ability to refinance loans remain the most important factors for companies struggling with interest rates and loan repayments.
In Sweden, where nearly 40 real estate companies are listed on the main market, the most in the Nordic countries, the Financial Supervisory Authority (FSA) said in May that around 100 billion Swedish crowns ($9.14 billion) will be sold over the next four years. ) warned that investment is expected. The sector’s outstanding bonds mature annually.
Swedish landlord SBB (SBBb.ST) recently announced it is considering selling its residential division to meet debt deadlines, while pension fund Alekta warns residential landlord Heimstaden Bostad needs cash did.
Local Swedish analysts are currently keeping an eye on further declines in real estate asset values.
Emil Ekholm, an analyst at Pareto Securities, said the closing prices of recent real estate transactions were “slightly low” compared to the book values of many companies.
Carl’s Square’s Bertil Nilsson predicted a further 0.5% to 1% writedown in the quarter, speaking to the company’s Swedish interview, after valuations fell by around 2.9% in the first half of this year. .
For companies like SBB and Corem (COREa.ST) that need to sell real estate to secure liquidity, the realization of realized losses puts pressure on them to write down other properties to similar values. Nilsson added that even larger cuts could be made.
Sweden’s Fabegi (FABG.ST) became the first Nordic real estate company listed on the pan-European STOXX600 index (.STOXX) to announce its results on October 19th, while struggling SBB announced its results on November 9th. We are planning to make an announcement.
($1 = 10.9352 Swedish Crowns)
Reporting by Greta Rosen Fondern.Editing: Sharon Singleton
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