Sweden’s Fastator Aims for Standstill Agreement with Creditors over Debt Breach
In a critical move amid Sweden’s burgeoning property crisis, Fastator, a Swedish real estate conglomerate, has announced its intention to negotiate a standstill agreement with its bondholders. This decision comes on the heels of a covenant breach by the company, underscoring the challenging environment that property companies in Sweden currently face.
The property crisis in Sweden has been compounded by a combination of high debt levels, escalating interest rates, and an ailing economy. Fastator’s recent announcement that it breached its financial solvency covenant in February has precipitated negotiations with major bondholders to forestall the situation.
As of the end of 2023, Fastator’s equity was estimated at 33% of its total balance sheet, falling short of the 45% minimum requirement as dictated by its covenants. The company’s aim to secure a standstill agreement with its bondholders is a strategic move to prevent enforcement actions and to create a window for devising long-term financial remedies.
A successful standstill agreement would entail a commitment from Fastator’s creditors to refrain from demanding immediate repayment of the bonds. This grace period would afford Fastator the opportunity to consider various options, including the extension and amendment of bond terms or the negotiation of security exchanges among other strategies.
However, not all of Fastator’s endeavors to renegotiate debt terms have been successful. The company revealed that its portfolio company, Point Properties, did not manage to secure an agreement with its bondholders for a bond scheduled to mature in 2024, an extension it had earnestly sought.
As reported in its third-quarter earnings of last year, Fastator’s overall liabilities amounted to 2.6 billion Swedish crowns ($253.76 million). The financial strain on the company was further highlighted by its fourth-quarter report, which disclosed a significant loss of 561.5 million crowns. This represented a considerable increase from the 186.0 million loss recorded a year earlier. The company attributed part of these losses to write-downs of property values within Fastator’s portfolio companies.
In light of these developments, the path forward for Fastator is fraught with challenges as it seeks to navigate the troubled waters of Sweden’s property market. The company’s efforts to reach a compromise with its creditors and to secure its financial sustainability are critical episodes in what is a much larger narrative of the real estate sector’s struggle in Sweden.
