(Reuters) -A unit of Swedish property group SBB will issue preference shares to an investment fund managed by Morgan Stanley (NYSE:MS) to boost its liquidity and financial profile, SBB said on Friday.
Following the transaction of shares worth 2.36 billion Swedish crowns ($228 million), Morgan Stanley Real Estate Investing will hold a minority stake in SBB Residential Property, the company said in a statement.
The unit, which currently comprises rent-regulated residential properties in Sweden with a fair value of about 6.2 billion crowns as of June 30, 2023, will be controlled and operated by SBB.
The preference shares have no maturity date and no payment obligation, and rely on the return of capital on an exit or by SBB redeeming the shares.
SBB is scrambling to salvage its finances after recently seeing its credit rating downgraded to junk. Its shares have lost over 90% of their value since peaking in 2021.
Some of SBB's bonds were up between 1 and 3 crown cents on Friday, according to Tradeweb data, as investors welcomed the news of the fundraising.
On Friday, the company also said in a separate statement that holders of a mandatory convertible note worth 10 million crowns had converted them into B-shares.
The notes were the remaining part of an original 2.75 billion crowns subordinated mandatory convertible note issued in 2021 and due this year. Following the conversion, no convertible note remains outstanding.
High debt, rising interest rates and a wilting economy have produced a toxic cocktail for Sweden's commercial property companies, with many such as SBB seeing their credit status cut to junk.
($1 = 10.3449 Swedish crowns)