S&P views Heimstaden Bostad negatively

S&P said it revised its outlook for Heimstaden Bostad AB to negative from stable and affirmed the BBB ratings on the company and its senior unsecured debt as well as the BB+ on its subordinated hybrids.

“The outlook revision reflects our view of significant exposure to increasing interest rates and widening credit spreads due to challenging capital market conditions, which could materially increase the company´s funding costs over the next 12-24 months and hit its servicing capacity beyond our current forecast. Heimstaden has an average fixed-interest term in the loan portfolio of 3.1 years but about 45% of its fixed-interest-rate term is maturing in the next 12 months. In addition, the company´s exposure to pure floating-rated debt is about 25%, which immediately affects funding costs,” the agency said in a press release.

S&P said it sees the company's average cost of debt rising to at least 2.2%-2.5% in 2023 and 2024 from 1.2% at Sept 30, resulting in an overall weaker debt-service capacity. The agency now forecasts S&P Global Ratings-adjusted EBITDA interest coverage declining to nearly 2x in 2023 and 2024 compared with 2.7x at Sept. 30.

S&P warned it could downgrade Heimstaden in the next 12-24 months if its credit metrics weaken beyond its current forecast.

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