STOCKHOLM: Swedish real estate group SBB says it will buy back debt at a discount of 60% compared with the debt’s original value, in an attempt to calm investors’ nerves as it scrambles to tackle a multi-billion-dollar debt pile.

The property group said it would pay €162.7mil (US$176mil) to buy back €407.7mil worth of debt.

The buyback will trim the struggling property company’s debts, which amounted to some 62 billion Swedish crowns (US$5.9bil) at the end of last year.

High debt levels, interest rate hikes, and a wilting economy have hit many European property companies, with the sector in Sweden among the worst affected.

“It was an extremely large discount. SBB appears to be making a profit of around 2.8 billion Swedish crowns on the buyback,” said Carlsquare analyst Bertil Nilsson.

“This compares with a market capitalisation of 6.3 billion Swedish crowns for SBB.

“SBB’s share price should rise as a result, but I won’t believe it until I see it.”

SBB last week offered to buy back more of its debt, seeking to reassure investors about its finances amid a property market downturn.

SBB said last Sunday it would buy back hybrid bonds and senior securities maturing between 2025 and 2029.

“Debt needs to be repurchased, which can occur at a faster pace when bonds are repurchased below par value,” chief executive officer Leiv Synnes told Reuters.

“The voluntary tender generates equity and provides better conditions for successfully developing the business.

This benefits the company’s stakeholders,” he added.

Some companies have launched tender offers for their bonds, aiming to reduce debt at discounted prices and signal to investors that their finances are strong enough to do so.

SBB spent €403.8mil late last year on buying back debt at a discount of around 3%.

Last Friday, the price of the real estate group’s latest buyback was set via a so-called Dutch auction.

SBB had initially said it could buy back debt for up to €250mil.

This equated to around 70% of its liquidity as of Dec 31.

SBB has over the past few years built up a vast amount of debt buying public real estate.

This includes social housing, government offices, schools and hospitals.

Shares of SBB closed 6.2% higher on Friday at 3.7 Swedish crowns.

The stock has declined 27% so far this year after falling more than 70% in 2023.

 - Reuters