OSLO (Reuters) – Sweden’s SBB on Thursday said it would offer to buy back up to 600 million euros ($651 million) in hybrid and senior securities as the real estate group looks to cut debt on its balance sheet, boosting its shares.
Loss-making SBB is at the epicentre of a Swedish property crash, having racked up vast debt by buying public real estate, including social housing, government offices, schools and hospitals.
SBB said the purpose of the planned buybacks was to “proactively manage” its balance sheet as well as the group’s overall wholesale funding level.
SBB in September announced a deal to sell a stake in its EduCo property unit, giving up majority control of the company and in return securing a cash boost of 8 billion Swedish crowns ($759 million), which it expects to receive this month.
One of its creditors last week requested that SBB immediately repay a bond in full, saying it was in breach of a debt clause, a claim the company has denied.
The voluntary buyback includes the two bonds that SBB has previously indicated the creditor holds, along with nine other bonds.
The offer price in the buyback will be set via an auction that will determine how large a discount SBB will receive on its own debt.
The buyback offer came as a surprise, analysts at Carlsquare and Danske Bank said.
“It suggests that management is more in control of present and future funding than what the market or auditors and others have believed,” Carlsquare analyst Bertil Nilsson said.
Danske Bank credit analyst Louis Landeman said the move suggests the company is confident in its liquidity position, but added it did not come without risk as SBB was due to repay debts of some 13 billion Swedish crowns in the next 12 months.
“At the moment, at least based on currently available information, we do not see that the company would cover that with the liquidity position they currently have,” Landeman said.
While long-term debt holders might be happy with a voluntary buyback, short-term debt holders might not, he added.
“If you’re a holder of short-term debt you’d probably rather see the company preserve its liquidity and make sure that (they) have sufficient cash at hand to repay you once your short term comes due,” Landeman said.
SBB’s share price was up 5% by 1235 GMT but is still down 78% year to date.
($1 = 0.9218 euros)
($1 = 10.5446 Swedish crowns)
(Reporting by Terje Solsvik in Oslo, Greta Rosen Fondahn in Gdansk, Marie Mannes in Stockholm; editing by Louise Rasmussen, Essi Lehto and Jan Harvey)