Sweden’s SBB exchanges $2.9 billion debt, eyes lower leverage

OSLO (Reuters) -Swedish real estate group SBB will have greater flexibility to divest property and to reduce its overall debt after completing a bond exchange offer on Wednesday, the company’s CEO told Reuters.

The group said bondholders had agreed to an exchange of debt valued at 2.78 billion euros ($2.92 billion) in return for new securities, part of an effort to overcome objections from some creditors to its restructuring.

Built on a public property buying spree that included social housing, government offices, schools and hospitals, SBB stood at the centre of a Swedish real estate bubble that unravelled from 2022 to 2023 when inflation and interest rates soared.

SBB had set a minimum requirement of 1.7 billion euros for going ahead with the debt exchange transaction, which the company said set clearer bond clauses, also known as covenants, helping facilitate the group’s turnaround.

“Most of the bondholders were friendly and have worked with us,” SBB CEO Leiv Synnes said, adding that 95% of the relevant creditors accepted the exchange offer.

“This is like a restart of a long-term relationship,” he added.

The high degree of voluntary debt conversion reduces the liquidity risk to SBB from a lawsuit, due to begin in January, from a group of creditors demanding payback of bonds they hold, analysts said.

“The exchange increases the likelihood that SBB can manage a scenario, from a liquidity perspective, where the remaining bondholders would demand immediate redemption,” Danske Bank credit analyst Marcus Gustavsson told Reuters.

“The equity market should show relief today that the risk of default in SBB has lessened,” Arctic Securities analyst Michael Johansson said in a note to clients.

SBB’s share price was up 22% at 1206 GMT to 4.28 Swedish crowns on the Stockholm bourse. It is still down more than 90% from its 2022 peak.

SBB has spun off several property units as independent companies this year, and plans further restructuring.

“We have proven that we can do property transactions in a good manner and have a dialogue with creditors,” Synnes said.

“We understand that we need to lower our leverage, and we will do that,” he added.

($1 = 0.9518 euros)

(Reporting by Terje Solsvik in Oslo and Agata Rybska in Gdansk. Editing by Mark Potter)