Swedish FSA to investigate property group SBB over accounts

STOCKHOLM, June 22 (Reuters) – Sweden’s Financial Supervisory Authority (FSA) said on Thursday it will investigate whether SBB (SBBb.ST) broke accounting rules in the commercial landlord’s 2021 annual report.

High debt, rising interest rates and a wilting economy have produced a toxic mix for Sweden’s commercial property companies, including SBB, which has lost almost 94% of its stock market value since November 2021.

And concern over the sector is weighing on the Swedish crown, while investors are wondering if Sweden will be the first domino to fall among beleaguered property sectors across Europe.

SBB shares were down nearly 14% and close to a record low of 3.4 Swedish crowns ($0.3180) at 1310 GMT.

Sweden’s FSA said in a statement it will look at SBB’s valuation of real estate in some portfolios, its accounting methods for asset acquisitions, disclosure of significant assumptions and its use of alternative accounting metrics.

The investigation will establish whether the FSA should take action against the company, the watchdog said.

SBB said that it has been in contact with the council for Swedish financial reporting supervision and has assessed that its treatment of its transactions and valuations are correct.

It has also contacted the Swedish FSA after its statement on Thursday morning, SBB added in a statement.

A spokesperson for Ernst & Young, which audited SBB’s 2021 annual report said: “As mandated by law we cannot comment on the companies we audit”.

In February last year short-seller Viceroy alleged accounting irregularities at SBB and said it inflated the valuation of several of its newly purchased assets by as much as 50%. SBB denied the allegations.

Some SBB bondholders this month said it had breached a financial covenant, which could trigger a debt default. The company has repeatedly denied any such breach.

SBB on Wednesday postponed its 2023 dividend payment for a year. The dividend had been paused since May after SBB’s credit rating was cut to junk status and it had to scrap a planned rights issue.

($1 = 10.6782 Swedish crowns)

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