A group of investors holding more than €1 billion ($1.09 billion) of SBB bonds have hired an adviser to counter the efforts of rival creditors that claim the company is at risk of default.
The group of investors, which includes Anchorage Capital Group and BlackRock Inc., will be represented by PJT Partners and plan to work with the company to counter allegations that SBB breached terms of its bonds, according to people familiar with the matter.
It’s the latest step in an ongoing dispute between the company, known as Samhallsbyggnadsbolaget i Norden AB, and another creditor group that’s calling itself “B2023 Funds” that owns the company’s so-called social bonds.
The B2023 Funds sent a letter to SBB last week claiming a financial covenant had been broken, which would trigger an “event of default” on those securities and allow investors to demand repayment of the notes once a 90-day grace period expires on June 29.
The Swedish landlord built itself into a $13 billion behemoth during the era of low interest rates by binging on cheap debt to snap up schools and health-care centers. The landlord has seen its share price fall steeply since it was downgraded to junk status in May, and now hedge funds and rival landlords are increasingly circling the troubled company’s holdings.
The newly formed group also includes Carmignac Patrimoine, Man Group and Polus Capital Management and only consists of bondholders who are long SBB, according to a person familiar with the matter. They’re in an early stage of talks, some of the people said, asking not to be identified because the talks are private.
SBB’s shares rose as much as 3.4% after the news, before reversing gains to fall 2.6% at 5 p.m. in Stockholm.
Representatives for the funds and SBB declined to comment. A representative for PJT wasn’t available for comment.
For SBB’s creditors, the risk in asking to be immediately repaid is that the company is already under stress and may not have the cash on hand, according to Tolu Alamutu, a credit analyst at Bloomberg Intelligence.
The group called B2023 Funds has said SBB has failed to maintain its so-called coverage ratio since March 31. Analysts had noted a potential breach in SBB’s bonds last month, prompting a statement from the company stating that it “meets the consolidated coverage ratio as the covenant is calculated.”
An orderly restructuring could be a good outcome for investors that recently bought into the name, analysts at CreditSights said in a note to clients on Friday. “But the questions of ‘if’ it restructures, ‘how long’ the process takes, and ‘what’ that ultimately looks like are big unknowns regarding potential returns,” they added.
Ilija Batljan, SBB’s founder and dominant shareholder, stepped down as chief executive officer earlier this month. The shock move came shortly after Batljan spoke to investors in London about selling individual assets as well as the whole company.
Read More: SBB Attracts Brookfield Interest in Bid to Rescue Landlord (1)
(Adds context in fifth paragraph and analyst comment in tenth paragraph)