Overburdened with debt On Monday, the Swedish property firm SBB (SBBb.ST) announced an increase in the loss it incurred before taxes for the third quarter.
The landlord, which owns buildings across Sweden, including hospitals and care homes, recorded a pre-tax loss of 3.13 billion Swedish crowns ($287 million) for continuing operations, an increase from a loss of a revised 2.56 billion a year before.
Carlsquare analyst Bertil Nilsson had anticipated a loss of 2 billion crowns. Therefore, this result was far worse than he had expected.
In the early hours of the trading day, shares of SBB fell by 6%. Following analysts’ warnings that high interest rates might continue to pressure property values, the corporation reduced the value of its property holdings by 3.52 billion crowns during the quarter.
The poisonous combination of large loans with approaching maturities, rising interest rates, and a faltering economy has formed a toxic cocktail for Sweden’s commercial property firms. As a result, several companies, such as SBB, have had their credit ratings lowered to junk status over the past year.
In September, SBB announced that it would decentralize its commercial operations into three basic units: education, residential, and community. Its education subsidiary, EduCo, which SBB decided to dispose of to its partner Brookfield in September, was listed as having ceased operations for the quarter in question.
Due to the ever-increasing cost of borrowing money, the Swedish company is under increasing pressure to reduce its debt. Since reaching its high point in 2021, the value of the company’s shares has decreased by more than 90 percent.
Its net operating income was 0.93 billion crowns, much lower than the revised 1.02 billion crowns it brought in the previous year.
The SBB’s liquidity dropped from 4.42 billion crowns at the beginning of the year to its current level of 2.19 billion crowns at the end of September.
According to Carlsquare’s Nilsson, the company’s cash balance might drop to about 1.4 billion in a year, and he described the scenario as a “relatively strained financing situation despite the EduCo transaction.”