The Swedish real estate group SBB announced on Sunday its intention to initiate a debt buyback program at a substantial discount of 60% from the original value of the debt. This move aims to assuage investor concerns amidst efforts to address a significant debt burden.
SBB disclosed its plan to allocate 162.7 million euros ($176 million) for the repurchase of debt totaling 407.7 million euros.
This strategic buyback endeavor is anticipated to alleviate the financial strain of the struggling property conglomerate, whose debt load stood at approximately 62 billion Swedish crowns ($5.9 billion) as of the previous year’s conclusion.
The real estate sector across Europe has been grappling with elevated debt levels, coupled with the adverse impacts of interest rate hikes and economic downturns. Among these, the Swedish property segment has been particularly hard-hit.
Carlsquare analyst Bertil Nilsson remarked, “It was an extremely large discount… SBB appears to be making a profit of around SEK 2.8 billion on the buyback. This compares with a market capitalization of SEK 6.3 billion for SBB.” He added cautiously, “SBB’s share price should rise as a result, but I won’t believe it until I see it.”
Last week, SBB extended its efforts to buy back more of its debt, seeking to reassure investors amidst a downturn in the property market. The company announced on Sunday its plans to repurchase hybrid bonds and senior securities maturing between 2025 and 2029.
CEO Leiv Synnes emphasized the importance of debt repurchase, stating, “Debt needs to be repurchased, which can occur at a faster pace when bonds are repurchased below par value.”
“The voluntary tender generates equity and provides better conditions for successfully developing the business. This benefits the company’s stakeholders,” in a statement to Reuters.
Several companies have initiated tender offers for their bonds, aiming to reduce debt at discounted prices and convey to investors the strength of their finances.
Last year, SBB expended 403.8 million euros on purchasing debt at a discount of approximately 3%. The price for the latest buyback was determined on Friday through a Dutch auction.
Initially, SBB indicated a potential buyback of debt up to 250 million euros, equivalent to about 70% of its liquidity as of December 31st.
Over recent years, SBB has accumulated a substantial amount of debt through its acquisitions of public real estate, encompassing social housing, government offices, schools, and hospitals.
On Friday, shares of SBB surged by 6.2%, closing at 3.7 Swedish crowns. However, the stock has experienced a downturn this year, declining by 27% thus far, following a staggering drop of over 70% in 2023.
($1 = 0.9253 euros and $1 = 10.5475 Swedish crowns.)
