Moody's downgrades Entra

Moody's Investors Service said it downgraded Entra ASA's long-term issuer rating to Baa2 from Baa1.

“The downgrade reflects Entra's materially increased funding costs, and, hence weakened fixed charge cover to below the level required for the current rating given the continued challenging capital market conditions with rapidly increasing interest rates and high credit spreads. In combination with persistently high leverage (49.8%), this positions Entra weakly in the Baa2 rating category. In addition, the refinancing risk in the Nordic real estate sector has significantly increased leaving public bond markets unattractive and we therefore expect companies, including Entra, to revert to bank financing.

“Whilst we believe that bank financing for issuers with a good asset base such as Entra remains a credible refinancing option at lower costs compared to bond issuances, it will not shield Entra from rising interest costs. As a result of this credit market deterioration, we expect Entra's EBITDA interest coverage to remain weak at 2x-2.2x in 2023 from 2.2x as of LTM Q1 2023. Based on the definition of existing covenants the interest coverage is 2.6x which is an adequate distance to bank covenants that require the maintenance of a minimum 1.4x,” Moody’s said in a statement.

The outlook remains negative.

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