EUROPE – "Select" Swedish pension schemes have bypassed their traditional mandate requirement for fixed income credit ratings to invest in the market's first property-secured bond.
Property firm Klövern will use the capital raised by the SEK700m (€83.8m) five-year bond issue to finance the acquisition of a SEK1.1bn portfolio located in Karlstad.
Anna Ringby, head of Nordic Fixed Income, which arranged the bond, described the issue as "a benchmark transaction" that would set a precedent for domestic pension schemes.
Swedish pension funds – including those that did not invest in the bond – were involved in drafting the documentation for the issue announced this week.
"It will open up the Scandinavian market," she said.
Adviser Catella, which partly owns Nordic Fixed Income, said the bond issue represented "the beginning of a new market".
Asked why it had not been done before, Ringby said: "The problem has not been real estate companies – they've been looking forward to doing it.
"The problem has been that institutional investors, especially large pension funds, needed to adjust their mandates [to bypass the requirement for credit ratings] in order to invest."
Ringby said previously reticent pension funds would in future look more closely at property-secured bonds because they offered a suitable risk/reward profile.
"No-one wants to do it the first time – but the second time they'll look at it – definitely," she said.
Klövern – which includes among its shareholders the third Swedish buffer pension fund and pensions provider Avanza – previously issued a senior unsecured bond scheduled to mature in 2017.
That bond is now trading at 375 basis points.
