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Swedish real estate group SBB's shares fall again as debt concerns mount

Published 09/05/2023, 09:05
Updated 09/05/2023, 10:25
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STOCKHOLM (Reuters) -Shares in Swedish real estate company SBB extended their decline on Tuesday after it said on Monday it would halt dividend payments and scrap a planned share issue in the wake of a credit rating cut.

The shares were down 7.1% by 0904 GMT, adding to a 20% dive in the previous session and also dragging down shares of rival real estate companies.

"This is sending shockwaves to the real estate sector in Sweden (and also spreading across Europe) and once again raising questions about the path of monetary policy in Sweden in light of the large slumps in house prices," ING strategist Francesco Pesole said in a note.

S&P Global on Monday cut its long-term credit rating for SBB to "BB+" from "BBB-" and warned that a further downgrade deeper into junk territory was possible over the next six to 12 months if the company did not secure sufficient funding.

Hours later, SBB announced its decision to halt its dividend and said the market reaction to S&P's downgrade had made it impossible to go ahead with a planned 2.63 billion crowns ($259 million) share issue.

"SBB continues to work with previously announced disposals in order to continue to strengthen the company's financial position," it added in a statement.

Rising interest rates, soaring inflation and growing debt have hit real estate companies in Sweden, which the country's policymakers see as a risk to financial stability.

Sweden's central bank raised its policy rate by a half-percentage-point to 3.50% in April and said it would probably tighten policy again before its hiking cycle comes to an end.

Apartment prices in Sweden fell 10% in February-April compared from the same period a year earlier, according to industry data.

($1 = 10.1526 Swedish crowns)

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