SBB bondholder asks property group for immediate repayment as pressure mounts

By Marie Mannes

STOCKHOLM (Reuters) -SBB said one of its creditors has requested the Swedish property group immediately repay a bond, saying it was in breach of a debt clause, the first such official demand faced by the landlord.

U.S hedge fund Fir Tree Partners told Reuters it was accelerating the notes and starting proceedings against SBB for recovery of the debt.

In its statement late on Thursday, SBB said the 46 million euro ($49 million) holdings in question correspond to 1% of its total bond debt as of June 30, and are part of its bonds maturing in 2028 and 2029.

The group, which did not identify Fir Tree, firmly denied that it was in breach of a consolidated covenant ratio – a measure of a company’s ability to service its debt – set among the terms of that borrowing programme.

“As such (SBB) considers that the acceleration notice received from this Eurobond holder is ineffective,” SBB said.

“SBB will continue to take all necessary measures to protect its interests and those of its stakeholders and has for some time engaged experienced legal and financial advisors,” it said.

The group is at the epicentre of a property crash that threatens to engulf the Swedish economy, having racked up vast debt by buying public property, including social housing, government offices, schools and hospitals.

The landlord has been exploring the sale of a controlling stake in its residential arm, which owns more than 20,000 apartments, to help meet debt deadlines next year.

Fir Tree said in an email to Reuters that it believed SBB’s own financial statement made it clear that it had been in breach of its financial covenant since March 31, 2023.

Carlsquare analyst Bertil Nilsson said, however, there was a a debate over which definition of interest coverage should apply and he did not expect SBB would be forced to repay the requested amount.

“I would give a low probability that these claims by the bondholders will be successful,” Nilsson said.

SBB in late May made several accounting adjustments to its first quarter report, which some credit analysts suggested it would have breached interest coverage requirements for the first quarter without those changes.

SBB issued a statement the same day saying it met its consolidated coverage ratio and soon after was approached by a group of bondholders that claimed SBB was in breach of the key financial covenant and threatened legal action if changes were not made.

The bondholder group and other creditors subsequently entered discussions with SBB on the debt, according to SBB’s second quarter report.

It is not known if Fir Tree Partners participated in these discussions.

CEO of SBB Leiv Synnes said in an email to Reuters that the company had not heard from the bondholders for some months.

“We’ve managed to make improvements in the business and I assume our bondholders think we’re on the right track,” he said.

Shares in SBB were down 6% at 1421 GMT on Friday and around 80% so far this year. Most of its bonds also traded lower on Friday, with prices on several falling more than 1 point, though the 2028 and 2029 bonds were little moved, according to Tradeweb.

SBB’s longer-term bonds trade with cash prices below 70 cents on the euro, levels considered distressed, suggesting a possibility of default.

SBB recently sold multiple assets back to municipalities, divesting 1.16% of its education subsidiary EduCo to its partner Brookfield and it looks at divesting its residential arm.

($1 = 0.9373 euros)

(Reporting by Marie Mannes; Additional reporting by Yoruk Bahceli in Amsterdam, Greta Rosen Fondahn in Gdansk; Writing by Anna Ringstroma and Marie Mannes; Editing by Jan Harvey, Peter Graff and Tomasz Janowski)