Sweden’s troubled property industry faced another setback as Moody’s Investors Service downgraded one of the major office landlords in the capital city. Stockholm-based FastPartner AB had its rating lowered to junk status (Ba1), with the potential for additional downgrades if the company fails to strengthen its financial position.
Moody’s attributed the downgrade to the swift rise in interest rates and the resulting difficulties in the capital markets. The statement was released by Moody’s late on Friday night.
The company’s shares fell as much as 6.6% when trading started in Stockholm on Monday.According to data compiled by Bloomberg, the bid price for its floating-rate notes due in May 2025 slightly decreased to 91.9.
Sweden’s Property firm, with 80% of its rental value from the Greater Stockholm area, joins a growing list of so-called fallen angels that have seen their ratings leave the investment grade bracket and enter high yield. The rating actions are worsening a financing crunch in a market that experts view as an early indicator for Europe’s real estate industry, considering that a significant portion of the debt consists of short-term and floating-rate obligations.
Investment grade rating
Armed with an investment grade rating, companies such as Samhallsbyggnadsbolaget i Norden AB and Fastighets AB Balder were able to raise billions of dollars debt on the bond markets during the era of zero interest rates. But with a jump in interest rates and the prospect of falling property valuations, landlords have been increasingly unable to defend their credit ratings despite efforts to offload assets and seek alternative bank financing.
For FastPartner, Moody’s said that the benefits of inflation-linked rents over the coming months “are unlikely to be sufficient to offset pressure on valuations and from higher funding costs.”
FastPartner Chief Executive Officer Sven-Olof Johansson downplayed the latest rating move, saying in a separate statement that “the lowered credit rating has marginal significance for the company’s day-to-day operations.”