Last month, Fitch Ratings said SBB needs to sell 8 billion kronor ($800 million) of assets this year to maintain a rating that’s one notch above speculative grade.
Those divestments are a “key prerequisite for SBB’s current credit ratings,” Landeman said. “The CEO’s investigation ultimately weakens the company’s ability to safeguard its ratings from a downgrade to high-yield.”
On Friday Standard & Poor’s signaled the company’s BBB- ratings could be cut to junk once more is known “about the effect of these events on the company’s operations and financial credit metrics.”
The company however doesn’t expect the current situation to complicate the necessary reduction in its balance sheet, according to spokesman Adrian Westman. “Our goal is still to achieve and maintain a BBB+ rating within the next 12 months,” he said in emailed comments.
SBB has almost 4.3 billion euros in debt outstanding and has been a prolific issuer in both euros and Swedish kronor. In the first quarter alone it sold three euro bonds totaling 1.3 billion euros, including a hybrid note and a 20-year private placement.
But a number of SBB’s creditors aren’t allowed to hold junk-grade bonds, and would have to sell their investment if Standard & Poor’s and Fitch lowered their ratings on the company.
“The initial effect might be some forced selling in the senior unsecured bonds from mutual funds with strict investment-grade mandates,” Tauson said.
This article was provided by Bloomberg News.