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Rating action

Scope Ratings GmbH (Scope) has today affirmed the issuer rating of Swedish investment holding company Compactor Fastigheter AB at BBB-/Stable. Scope has also affirmed the senior unsecured debt rating at BBB- and the short-term debt rating at S-3.

The affirmation reflects Scope’s expectation that Compactor’s underlying investments will remain stable, supporting good credit metrics driven by total cost coverage and modest leverage, while concentration risks on recurring income and asset values remain.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BB (-1 notch). Compactor’s business risk profile is characterised by its portfolio structure and investment strategy, which focus on real estate holdings supplemented by Nordic blue-chip stocks. Most of the holdings generate cash flow through recurring dividends and most are listed and liquid, which entails less divestment restrictions and high degree of flexibility. Nevertheless, the business risk profile is also constrained by the lack of diversification and the ongoing reliance on the dominant core holding, which has led to a revised assessment.

The portfolio has a high concentration of few large holdings which poses a risk to the diversification of the investment model and portfolio sustainability. Around 81% of total income and 88% of gross asset value is generated by three companies, predominantly Fastpartner (rated BB/Positive at Scope) with 68% and 80%, respectively, SBB i Norden and H&M, making the issuer vulnerable to market value volatility and the dividend income from these companies. SBB i Norden has previously been a significant contributor in terms of dividends. However, the absence of their distributions due to recent restructuring is a negative factor.

Further concentration risk is posed by the high exposure to the real estate industry at around 86% of the portfolio by asset market value. In terms of underlying geographic exposure, an overarching theme of Compactor’s investments are companies with strong Swedish roots or a Nordic presence, but some also have a global profile such as H&M, Atlas Copco, ABB, Stora Enso and Ericsson. Geographical diversification overall is limited, as Compactor’s portfolio companies have a high presence in Sweden and the Nordics of ~80% in terms of recurring income which means portfolio performance hinges on the macroeconomic development of this region.

Income-generating holdings constitute around 91% of the portfolio based on gross asset value as at Q2 2025, displaying a dominant share of mature and dividend-yielding companies. As share prices and income of individual companies move, the mix of industries, geographic exposure, and asset values in the portfolio also shifts. At the moment, those shifts leave the industry mix slightly weaker.

The company’s proven investment philosophy supports the business risk profile. Compactor’s long-term buy-and-hold strategy directed at dividend-distributing companies, with only minor trading, has a good track record. Conducting active ownership for core companies and holding other investments over the long term has achieved growth in underlying asset values while generating consistent dividend yields of around 2%-3% annually.

Financial risk profile: BBB (unchanged). The financial risk profile reflects a good total cost coverage* maintained at around 1.5x. This is despite recent headwinds for its core holdings, for example, no dividend income is expected from SBB i Norden in the short to medium term following the company’s recent restructuring.

The stable total cost coverage is driven by recurring cash flows from core holdings and is largely sufficient to cover holding costs including shareholder remuneration. In addition, the sharp decline in the Swedish central bank rate from its peak at 4% to now 2% has not only reduced the company’s interest burden but has also been a positive driver for main investments financed in Swedish kroner, particularly real estate company Fastpartner. For 2027, Scope expects total cost coverage to increase to 1.7x, on the back of lower interest rates and an incremental growth in dividends, in line with Fastpartner’s target to increase distributions.

Leverage, as measured by loan/value (LTV) remains supportive of the financial risk profile and is expected at 10% for 2025. Based on an expected re-investment capex of SEK 150m a year and shareholder distributions remaining at SEK 80m as previously, Scope foresees a slight increase in the LTV to ~11% in 2027. The current ratio gives a strong buffer against potential portfolio market value volatility.

Scope acknowledges that Compactor can exercise flexibility regarding LTV and total costs through its lean cost structure and distributions to shareholders. Both the cost structure and dividend payouts are important levers to manage total cost coverage and maintain it above 1.0x in the event of a shortfall in recurring dividend income.

Liquidity: adequate (unchanged). Scope assesses Compactor's liquidity as adequate given the positive free operating cash flow of SEK 193m forecast for 2025 and unrestricted cash of SEK 160m (as at end of June 2025). Further supporting the liquidity situation is the undrawn portion of available credit facilities of SEK 480m (as at end-June 2025) and besides Fastpartner, a SEK 1.8bn portfolio of investments that can be liquidated quickly (as at end-June 2025). Short-term debt maturing in September 2025 of SEK 174m is well covered by these sources, until the next SEK 500m bond maturity in February 2027.

Supplementary rating drivers: credit-neutral (unchanged). The rating has no adjustments related to financial policy, governance and structure, parent support, or peer group considerations.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that the company will be able to maintain a total cost coverage at or above 1.5x and a modest LTV of around 10%.

The upside scenario for the ratings and Outlook is:

1. Significantly improved diversification in terms of industries, geographies and core holdings (remote)

The downside scenarios for the ratings and Outlook are (individually):

1. Total cost coverage deterioration below 1.5x on a sustained basis
    
2. Significant deterioration in the share price and dividend payment capacity of the dominant core holding (Fastpartner)

Debt ratings

The senior unsecured debt rating is affirmed at BBB-, in line with the issuer rating. At the end of June 2025, Compactor had SEK 1,304m in senior unsecured bonds outstanding.

The S-3 short-term debt rating is based on the BBB-/Stable issuer rating and reflects adequate liquidity cover, good banking relations and adequate access to diverse funding sources.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

Compactor's ESG focus aligns with that of its core holding, real estate company Fastpartner. This core holding seeks to enhance the value of its real estate portfolio through reduced emissions and a full use of renewable energy, thereby increasing the attractiveness of its properties to existing and potential customers. Fastpartner’s efforts simultaneously ensure continued high occupancy and related cash flows that provide Compactor with a stable income. Compactor applies the same principles, adapted to the relevant industries, to its non-real estate holdings.

All rating actions and rated entities

Compactor Fastigheter AB

Issuer rating: BBB-/Stable, affirmation

Short-term debt rating: S-3, affirmation

Senior unsecured debt rating: BBB-, affirmation

*All credit metrics refer to Scope-adjusted figures.
 
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 and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Investment Holding Companies Rating Methodology, 16 May 2025), are available on 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA):registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

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/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Eirik Loevdal Tollefsen, Associate Director
Person responsible for approval of the Credit Ratings: Marlen Shokhitbayev, Senior Director
The Credit Ratings/Outlook were first released by Scope Ratings on 10 September 2020. The Credit Ratings/Outlook were last updated on 6 September 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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