Sweden's Kefren Properties said on Wednesday that it has initiated negotiations with a potential investor for a capital injection that will allow it to improve its financial position. The operation comes after the company revealed a breach of its loan-to-value covenant in December, prompted by a sharp drop in the year-end valuation of its assets.

Sweden's Kefren Properties said on Wednesday that it has initiated negotiations with a potential investor for a capital injection that will allow it to improve its financial position. The operation comes after the company revealed a breach of its loan-to-value covenant in December, prompted by a sharp drop in the year-end valuation of its assets.

'As part of the process to find a long-term solution, the company is in dialogue with a potential investor with respect to bringing extra liquidity to the structure to use for, amongst other things, capital expenditures (Capex) for the purpose of strengthening the value of the portfolio,' it said in a statement.

Following the breach of the loan-to-value covenant on a senior loan, the creditor bank has agreed to extend the stand-still period until 17 February 2010, Kefren said.

The Swedish property firm saw the value of its portfolio drop by 6.6% last year from SEK 5.2 bn (EUR 506 mln) at end-2008 to SEK 4.8 bn at end-2009. The bank is now assuming a portfolio valuation of SEK 4.5 bn in relation to the senior loan, in the assumption that Capex funding will not be available.

Kefren Properties IX was founded in the autumn of 2006 through the acquisition of a large portfolio from Kungsleden. The company, which owns, manages and develops properties in Sweden, has a portfolio of 154 assets with approximately 842,000 m2 of rental space. The portfolio comprises office, warehouse and retail space, and is managed by DTZ in cooperation with Scius Partners.