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Sorry we’re a bit late to this, we were reading the company name.
Samhällsbyggnadsbolaget i Norden, the Swedish property company commonly referred to as SBB, has published second-quarter results twice.
The report that’s on SBB’s website is different to the one that was sent last month to investors, analyst and the media.
There’s SBB’s emailed version (which at pixel time is also available on the site of PR company Cision) and this version currently shared on SBB’s investor relations page. For convenience we’ll call these version one and version two, respectively.
PDF metadata suggests the files may have been switched post publication: version one was last modified at 11.15pm on July 13, the night before results day. Version two was updated at 3.25pm on results day itself, July 14.
And importantly for a company facing a liquidity crunch, the two versions present significantly different balance sheets. Some SKr3.2bn ($300mn) of debt classified as long-term in version one is reclassified as short-term in version two. Here’s an annotated comparison:
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SBB did not flag or even formally acknowledge the revisions, we’ve been told by analysts and investors. We’ve contacted the company with a request for comment and will update this post as soon as we hear back.
Update, 15:25 GMT: We’ve heard back. Helena Lindahl, SBB’s treasury director, says by email:
In our report for the second quarter, our debt maturity profile was correctly described in the underlying data on page 19. Later on reporting day, we corrected an editing error in the balance sheet with regards to the maturity profile. Due to the nature of the edit, a press release was not warranted.
SBB put itself up for sale in May, having been crushed by a combination of rising debt refinancing costs, falling property values, aggressive shorting by hedge funds and attacks from an activist short seller. Sweden’s Financial Supervisory Authority said last month it would investigate whether SBB had broken accounting rules around property valuations and asset acquisitions in its 2021 annual report.
The shares are down 94 per cent since the start of 2021 and its senior unsecured bonds maturing in 2029 have been trading at around 57 cents on the euro. Last month, a bondholder group called on Leiv Synnes, SBB’s newly installed chief executive officer, to outline the reasons for what it called “unexplained cash burn” and threatened legal action if its demands to appoint new board members are not met.
The extra short-term debt revealed in release version two “meaningfully impacts our calculation of SBBʼs funding hole,” said CreditSights. By its estimates SBB now needs to find SKr6.9bn over the next 12 months:
The outlook for SBB is bleak. This new round of confusion regarding restatements of their accounts leaves us beyond frustrated. However, given the recent news and as the bonds approach their recent lows, we are not sure how much worse it can get.
Shortly after publishing results, SBB abandoned a plan to sell its educational properties portfolio to joint venture partner Brookfield. It’s now investigating raising cash against its residential business, which has a book value of SKr36.5bn, via a partial IPO or 50 per cent stake sale to institutional investors, React News and Bloomberg reported on Friday.
Margins on residential property are lower than for commercial so fair values are more sensitive to small changes in yields, meaning the amount of cash a part-disposal can raise is unlikely to offer more than a short-term fix, says CreditSights:
As we have said repeatedly, we are very cautious on SBBʼs ability to execute on an asset sale given the uncertainty with regards to “fair value” and that it would enter into negotiations from a position of weakness. We were not surprised the EduCo deal fell apart, and we remain skeptical that SBB is able to sell a stake in its Residential assets to a co- investor. [. . .]
With regards to an IPO, if SBB is willing to meet the equity market where it finds buyers for its Residential business, an IPO is certainly within the realm of possibility in our view. However, based on SBBʼs and Balderʼs EV/Portfolio ratios, we think a discount in the range of -15% to -25% is a fair base case range for the IPO. Assuming secured debt at that entity with an LTV around 23% (in line with SBB as a whole) and a 49% stake sale, this would imply proceeds to SBB in the range of SEK 12-10 bn.
This would clearly plug the SEK 6.9 bn funding hole, but it would not also cover debt maturing over the next 24 months (from 3Q24-2Q25 SEK 12.7 bn). Assuming SBB can roll all its bank debt, we estimate this would cover its bond maturities through the EUR 1.75% Jan-25s.
The only other change we’ve spotted between SBB’s two results statements is in the introductory “key ratios” table, where the interest coverage ratio is 2.8 times in version one and 2.9 times in version two. It’s probably a typo, since the higher number appears elsewhere in the text of both filings.
Given some bond investors have been claiming SBB changed its definition of interest coverage to dodge a covenant breach, putting the wrong ratio figure in a KPI table isn’t ideal. But when the corporate name itself looks like a keyboard malfunction, perhaps such carelessness is inevitable.
Update, 15:25 GMT: There’s one more edit we missed! Version one is signed off with what appears to be the CEO’s direct email; it’s replaced in version two with a generic investor-relations email. Oöps!
