S&P Global Ratings today announced that it has upgraded Heimstaden AB's subsidiary, Heimstaden Bostad AB, to 'BBB' with a stable outlook. The rating agency cites Heimstaden Bostad’s strengthened residential portfolio, enhanced earnings base and strong financial discipline as key reasons for the upgrade.

Heimstaden Bostad is the first large investment grade residential real estate operating company globally to by upgraded by S&P in the last 12 months.

Heimstaden Bostad follows an ambitious strategy for responsible growth with strong financial results and conservative financial policies. The company grew its residential portfolio to SEK 139 billion in Q3 2020, from SEK 90 billion in Q3 2019. The portfolio is highly diversified with quality residential assets across stable European markets.

Over the same period, S&P-adjusted debt to debt plus equity (loan-to-value) decreased to 51% from 56% and adjusted EBITDA interest coverage (ICR) increased to 2.5x to 2.1x.

Commenting on the upgrade, CFO Arve Regland said:

“We are very pleased to be upgraded to 'BBB'. This serves as confirmation of our strategy for ambitious growth across attractive European markets with improving operational and financial quality. Moreover, it is an important milestone as we continue to work towards our ambition for a 'BBB+' rating.”

S&P anticipates that Heimstaden Bostad will be able to maintain leverage commensurate with a 'BBB' rating going forward.

S&P Global Ratings further assesses Heimstaden Bostad’s subordinated hybrid notes as having intermediate equity content and the issue ratings on these notes were upgraded to 'BB+' from 'BB', i.e., two notches below the issuer credit rating of 'BBB'.