Our 'A-' issuer rating on Swedish property company HEBA Fastighets AB (publ) (HEBA) is unchanged following the publication of its third-quarter results.

Earnings metrics in line with expectations
HEBA's third-quarter report was in line with our expectations. Revenues in the quarter were SEK 98m (compared with SEK 97m in the third quarter of 2019) and EBITDA was SEK 65m (SEK 64m), corresponding to an EBITDA margin of 67% (67%).

The company remains mostly unaffected by the ongoing COVID-19 pandemic. The residential property market is robust with no signs of tenants struggling to pay rent and given ongoing government support for furloughed employees. HEBA's current vacancy rate of 0.2% is indicative of the stable operating environment.

HEBA reported property investments of SEK 97m during the quarter, in accordance with its overall aim of rejuvenating the portfolio. As of 30 Sep. 2020, the project portfolio included approximately 600 rental apartments under construction, of which we expect about 200 to be finalised during the fourth quarter. During the third quarter, HEBA entered a 50/50 cooperation agreement with construction company Åke Sundvall Byggnads AB to create 304 residential apartments in Uppsala, of which close to half will be rental apartments eligible for government financing support.

Strong financial position
HEBA's interest coverage ratio was 4.7x as of 30 Sep. 2020, unchanged from a year earlier. The average loan maturity was 4.2 years (4.4 as of 30 Jun. 2020) and the average interest maturity 3.4 years (3.7). As of 30 Sep. 2020, HEBA's reported loan-to-value ratio was 36%. The NCR-adjusted metrics were in line with our expectations.

HEBA has obtained an initial green bank loan of SEK 400m together with Åke Sundvall Byggnads AB to finance a residential project in the Bredäng district of Stockholm. Some 52% of the company's debt matures within the next 12 months, with less than half being commercial paper. HEBA's liquidity profile remains adequate, despite a cash position of only SEK 0.7m, thanks to committed and unutilised revolving credit facilities and overdraft facilities amounting to roughly SEK 1.1bn, compared with SEK 800m in outstanding commercial paper.

This commentary does not constitute a rating action.

If you have any questions, please contact:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Marcus Gustavsson, credit rating analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com

About Us

Nordic Credit Rating AS is a credit rating agency headquartered in Oslo with a branch in Stockholm. The company provides credit ratings to companies and financial institutions in the Nordic region, and bases its analysis on local insights. Nordic Credit Rating is registered with the European Securities and Markets Authority (ESMA).

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NCR comments: HEBA Fastighets AB (publ) Q3 2020 report

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