Heimstaden AB - comment

As stated above, Heimstaden Bostad are not paying a dividend for FY23 and as a result, Heimstaden AB have deferred the coupon on the SEK Hybrid bond in April as well as future quarterly payments, until further notice. Although Heimstaden AB has sufficient liquidity to meet FY24 and FY25 upcoming bond maturities without the dividends AB will require additional liquidity to cover FY26+ maturities. With the Icelandic assets sold, AB is solely reliant on Bostad’s dividend. 

Fitch has downgraded Heimstaden AB's rating to B with an outlook negative due to dividend suspension and cancellation of the Hybrid coupon. Fitch outlines that debt recoveries could be high on the Hybrids if Heimstaden AB sells part or all of its stake in Bostad, acknowledging the unlisted asset may be difficult to sell. We are surprised Fitch continues to highlight the potential for an equity raise at Heismtaden Bostad, as we believe this option has reduced in probability due to the impact of rates tightening  (equity requirement is reduced), and continued Swedish FSA investigations and continued perceived difficulties in shareholders agreeing terms (equity raise is more difficult).