Fitch trims Heimstaden

Fitch Ratings said it downgraded Heimstaden AB's long-term issuer default rating to BB from BB+, its senior unsecured rating to BB/RR4 from BB+/RR4 and its subordinated rating to B+/RR6 from BB-/RR6 and placed them on rating watch negative.

“The downgrades and RWN reflect the forecast deterioration of Heimstaden AB's core interest cover ratio (ICR) to 0.7x in 2023 (1H23: 0.7x), driven by rising interest costs on its partially floating-rate debt. The interest cover (including hybrids at 100%) is at risk of no longer being supported by regular subordinated dividend income (preference B and common share class dividends) from its subsidiary Heimstaden Bostad AB, as the latter focuses on supporting its own credit metrics.

“Previously, Heimstaden AB received these sizeable dividends on a gross basis from Heimstaden Bostad, and would first retain enough liquidity to comfortably cover its interest expense (1H23: 2.75x) and mandatory debt repayments before reinvesting excess proceeds in Heimstaden Bostad's equity,” Fitch said in a press release.

The agency said it aims “to resolve the RWN when Heimstaden Bostad quantifies its plans to deleverage, including potentially raising equity and carrying out disposals.”

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