Fitch slashes Heimstaden

Fitch Ratings said it downgraded Heimstaden AB's long-term issuer default rating to B from BB. The ratings have been removed from rating watch negative, except for the euro-denominated hybrid, which has been maintained on RWN. The outlook is now negative.

The rating actions follow Heimstaden Bostad AB's (IDR: BBB/RWN) proposal to not pay a 2023 cash dividend (previously reflected in the RWN on Heimstaden AB) including the preference A dividend to Heimstaden AB (which we did not expect) that forms part of the holding company's core income stream. Heimstaden AB has subsequently announced that it will defer interest on its Swedish krona hybrid and propose no preference share dividends. Fitch calculates that Heimstaden AB has sufficient liquidity to cover scheduled debt maturities until 2026,” the agency said in a press release.

Fitch added, “Heimstaden Bostad's decision to retain capital, and already-announced disposal plan, help preserve its investment-grade ratings, while negotiations continue with Alecta and other institutional shareholders on an equity raise. Until dividends can resume, cash flows to Heimstaden AB are disrupted and its 34.8% (attributable SEK 40.8 billion) equity stake in Heimstaden Bostad is vulnerable to dilution. If negotiations result in material detrimental changes to existing shareholder agreement mechanisms for Heimstaden AB, it could be credit negative.”

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