Sweden's troubled SBB repays debt early to bolster finances

By Greta Rosen Fondahn and John O'Donnell

(Reuters) - Troubled Swedish property group SBB has paid back some debt early, buying more than 400 million euros ($436.3 million) of bonds and securities at a small discount as it scrambles to tackle a multi-billion debt pile.

The company will pay 404 million euros to buy back 417 million euros of nominal debt, tapping money from the sale of a schools property business. That will clear roughly a third of debt falling due in the coming 12 months.

The terms however disappointed some. Carlsquare analyst Bertil Nilsson said the deal was "unusually expensive" for the company because bondholders accepted only a small discount on the nominal value of their debt.

"I had expected... a bigger discount," said Nilsson, who labelled the venture a "disappointment".

Once a stock market darling, SBB is at the epicentre of a property crash that threatens to engulf Sweden's economy and has sent the company's stock into freefall.

The group, which built up a vast debt by buying public property, including social housing, government offices, schools and hospitals, is now scrambling to salvage its finances after its credit rating was downgraded to junk.

Before the deal the company's debt pile stood at roughly 59 billion Swedish crowns ($5.6 billion), with about 13.4 billion crowns falling due in the next 12 months.

SBB had originally planned to buy up to 600 million euros of securities after it invited bondholders, in a surprise move, to offer up their debt at a discount to the company. It has also negotiated with banks to pay them back over a longer time.

The company's problems are unfolding as Sweden struggles to contain a wider property crisis, triggered by high debts, rising interest rates and a wilting economy.

The sector's difficulties have alarmed investors and prompted the Swedish central bank to issue several warnings.

Earlier this year, it cautioned that problems in heavily indebted commercial property companies could spill over and hit the economy more widely, threatening a domino effect on banks, who have lent ever more to property companies.

($1 = 0.9168 euros)

($1 = 10.4988 Swedish crowns)

(Reporting by Greta Rosen Fondahn and Marie Mannes; Editing by Essi Lehto and Jan Harvey)