The financial partner that controls 50% of Servatur, a hotel manager in the south of Gran Canaria, Fredensborg, is in the eye of the storm in Norway. The hotel company that Santiago Caballero once directed, which maintains a small percentage of the capital, has a financial credibility problem in the holding that cannot be ruled out that it will have to prepare the sale of the hotel chain if the bank requests it. In Las Palmas, however, it was news this week that they have appointed a CEO of the chain, Michael Lund Jensen, to replace Anders Lindvall.
Servatur's ownership remains calm and has come up with a good financial trick to avoid increasing capital at a time when the parent company is having difficulties. The group that owns 50% of Servatur is using derivatives, convertibles and hybrid bonds to reinforce its balance sheet and finance its debt. No matter how smart it is, it leaves the company at origin at the mercy of rating agencies and market tensions. At the moment, it starts 2024 as a junk bond.
The Servatur hotel chain has Ivar Tollefsen as its main shareholder and the debt rating agency S&P Global Ratings has placed the outlook of the Swedish real estate company Heimstaden Bostad owned by the tourism investor on Canary Islands to negative due to the adjustment of the coverage ratio; 'BBB'.
Around 45% of Heimstaden Bostad AB's (Heimstaden) fixed rate interest term will mature in the next 12 months "and we assume that financing costs could increase materially over the next 12 to 24 months amid challenging market conditions" . The company has designed an exit plan with the possible giant sale of apartments in Oslo: 2.200 newly formed apartments.
The goal is to pay off debt and reduce interest costs, and defend the triple B rating. Before Christmas, the company was downgraded to triple B-, which is the lowest level of investment grade rating. The company has pointed out Norway as one of several markets in which it is relevant to sell homes. The plan is to put the apartments up for sale when the lease ends and sell them on the market, possibly to tenants.
The Heimstaden group owns 163.000 rental properties in several European countries, including Sweden, Denmark, Germany and Norway, worth NOK 339.000 billion as of the third quarter of 2023. The vast majority of the Heimstaden group's properties and debts are located in the subsidiary Heimstaden Bostad.
Heimstaden Bostad is owned by Heimstaden (36 percent) and Swedish pension and insurance companies such as Alecta and Folksam (64 percent). Ivar Tollefsen controls Heimstaden through Fredensborg and 50% of Servatur in the Canary Islands. The company has not revealed how many units can be sold in Oslo or which houses are suitable for sale. But the company has left some clues that allow us to know the plans.
Hybrid debt is a common method that developers use when selling homes in a development project in a tax-optimal manner. These bonds have a perpetual maturity, they are part of the mandatory regulatory capital buffer that is designed to protect taxpayers against bank bailouts. Bonds can be converted into equity or their value can disappear entirely when certain stress conditions are met, providing immediate debt relief to an entity and making bonds a much riskier investment than senior debt.
