The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today assigned a SD issuer rating to Ilija Batljan Invest AB (IB Invest) as well as a D rating to the company’s senior unsecured bond (ISIN SE0016101810). Scope has reinstated Ilija Batljan Invest AB’s issuer rating at C and its senior unsecured bond rating at C. Both ratings have been placed under review for a possible upgrade. The subordinated hybrid debt rating has been left unchanged at C.

Rating rationale

The assignment of an SD (Selective default) rating to the issuer and a D (Default) rating to the senior unsecured bond (ISIN SE0016101810) is driven by Scope's view of the bond restructuring agreed on 15 March 2024^{1, 2}. Scope regards the restructuring of the bond as a distressed debt restructuring. The subsequent reinstatement of the C rating on both the issuer and the senior unsecured bond reflects the removal of downside risk following the restructuring, while the placement under review for a possible upgrade of both ratings reflects the need for further analysis, with an upgrade being more likely given the anticipated improvement in liquidity and short-term total cost coverage following the restructuring.

The amendment to the terms and conditions of the 2021/2024 senior unsecured green bond (ISIN: SE0016101810) approved by bondholders on 15 March 2024 meets Scope's definition of a distressed exchange as it: i) results in less favourable terms or a loss of value compared to the original terms of the debt; and ii) has, in Scope's opinion the effect of avoiding a likely default. The first condition is primarily met by the extension of the maturity of the notes to January 2026 from December 2024 and the switch to PIK interest for the full term compared to the previous quarterly cash interest payments, as the increased PIK rate is back-loaded and considered uncertain by Scope. The second condition is met as Scope considered IB Invest's willingness and ability to pursue alternative options to meet its obligations through refinancing or repayment at the original maturity in December 2024 to be very limited. A liquidation of assets to redeem the bond at par in December was considered unlikely due to (1) the perceived limited willingness of IB Invest's sole shareholder to sell its stake in SBB i Norden; and (2) the issuer's high leverage, with a Scope-adjusted loan-to-value ratio of over 90%, coupled with the illiquidity of some of its investments. In addition, liquidity challenges, as a result of the issuer's dependence on external financing to ensure a going concern, which were reflected in the C ratings prior to the restructuring, highlight the issuer's limited access to funding that could cover the upcoming debt maturity. The changes to the terms and conditions of the senior unsecured green bond (ISIN: SE0016101810) are effective immediately. As a result, the immediate downside risk posed by the restructuring itself has been remedied and the issuer and senior unsecured ratings have been reinstated at 'C'. Both ratings are placed under review for a possible upgrade, reflecting the need for further analysis to determine the credit quality post-restructuring, in particular its impact on total cost coverage and liquidity, with the expectation that both will improve, indicating potential upside to the ratings.

Under review for a possible upgrade

The issuer and senior unsecured debt ratings have been placed under review for a possible upgrade, reflecting the expected improvement in total cost coverage and liquidity following the restructuring. Scope is in the process of obtaining the necessary information to resolve the under-review status as soon as possible.

An upgrade would require an improvement in the agency’s perception of liquidity as well as improved credit metrics post restructuring.

The ratings could be affirmed if concerns about severe liquidity constraints persist.

A negative rating action is currently considered unlikely.

Long-term debt rating

As of Q4 2023, IB Invest had SEK 56m in unsecured bank debt (ranking structurally ahead of the senior unsecured bond) in addition to SEK 1.34bn in outstanding senior unsecured bonds. Those rank ahead of the SEK 750m in subordinated perpetual floating-rate callable capital notes.

The senior unsecured bond (ISIN SE0016101810) has been assigned a D rating following the debt restructuring and subsequently has been reinstated at C in line with the issuer rating. The rating is placed under review for a possible upgrade.

The subordinated (hybrid) debt rating remains unchanged at C.
 
Rating driver references
1. 15 March 2024 Stamdata’s (agent) publication of the acceptance of the bond restructuring
2. 15 March 2024 IB Invest’s press release

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings, (General Corporate Rating Methodology, 18 October 2023; Investment Holding Companies Rating Methodology, 19 May 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit Ratings were not amended before being issued.
 
Regulatory disclosures
These Credit Ratings are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings are UK-endorsed.
Lead analyst: Thomas Faeh, Executive Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The issuer and senior unsecured debt Credit Ratings/Outlook were first released by Scope Ratings on 28 May 2021. The Credit Ratings/Outlook were last updated on 5 March 2024.
The subordinated debt (hybrid) Credit Rating was first released by Scope Ratings on 1 June 2021. The Credit Rating was last updated on 5 March 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

Conditions of use/exclusion of liability
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.