Fitch puts Heimstaden Bostad on watch

Fitch Ratings said it put Heimstaden Bostad AB's BBB long-term issuer default rating on rating watch negative. Before the RWN, the outlook was negative.

“The RWN reflects Heimstaden Bostad's slow deleveraging due to its high pace of investments and the adverse effects of rising interest rates on its debt service, yet lower-than-inflation's immediate rises in like-for-like rents due to the regulated rent frameworks within its portfolio. In its end-June 2023 results, the management acknowledged the need to deleverage and announced a target interest cover ratio (ICR, company-calculated) of above 1.8x.

“In our view, a significant reduction in debt or hybrid bonds is required to achieve this threshold. Fitch expects to resolve the RWN when the management finalizes the details and quantifies the planned disposal proceeds and possible equity raise as well as the timeline to achieve these,” Fitch said in a press release.

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