SBB ends talks with Brookfield over EduCo stake sale

financialpost.com:

SBB abruptly ended talks with Canada’s Brookfield Asset Management Ltd. over the sale of a 51 per cent stake in a portfolio of school buildings, reflecting the struggles the embattled Swedish landlord faces to close a looming funding gap.

The sale of the holding to Brookfield, which already owns a 49 per cent stake in the unit called SBB EduCo AB, had been seen as key to reviving the landlord’s fortunes. Samhallsbyggnadsbolaget i Norden AB — as the company is formally known — is racing to plug an 8.1 billion-krona cash shortfall over the next 12 months.

Stockholm-based SBB is at the epicenter of the broader turmoil in real estate markets, as higher interest rates depress valuations around the world. The company’s troubles risk becoming a broader issue in Sweden as it owns many public-sector buildings like nursing homes and schools.

Shares in the Swedish property company dropped as much as 21 per cent, reversing earlier gains on prospects of narrowing its funding gap. Over night, SBB announced a deal to raise US$228 million from a sale of new preference shares in a residential unit to a fund managed by Morgan Stanley. The company’s bonds also reversed earlier gains.

The company “now faces even more pressing liquidity challenges,” Bloomberg Intelligence analyst Tolu Alamutu said in an interview. “The end of talks with Brookfield may add urgency to ongoing bondholder discussions.”

In a statement on Friday, SBB didn’t specify why the talks broke down, but made it clear it was ready to continue speaking with Brookfield. The landlord “does not rule out that the discussions can be resumed at a later point in time,” SBB said.

“It is understandable that SBB does not want to dispose of its high-quality assets at too large