Welcome to the Balder Q4 2022 presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the speaker, CEO Erik Selin and CFO Ewa Wassberg. Please go ahead.
Good morning. Welcome to Balder's presentation of the year-end report for 2022. Here from us today is me, Ewa Wassberg, CFO at Balder, and Erik Selin. After the presentation, there will be a Q&A session.
Thanks, Awa. We present the year-end figures, but first we have some short information about Balder as a company. We are a listed real estate company since 2005. We have properties predominantly in the Nordic countries, and we have roughly half residential and half commercial properties. At year-end, the property value was SEK 217 billion, 96% occupancy rate. On the longer leases, the biggest leases are on average 10 years for our largest single leases. We have a rating at S&P that is a BBB. Net debt to total assets, 47.9%. We have cash SEK 25 billion, cash and facilities at year-end. NAV per share stands at SEK 92, compares to SEK 84 last year.
The average NAV growth since inception 2005 has been 29% per year. Looking at the Q4 figures, rental income was up 16% compared to last year. Profit from property management decreased slightly or 5%. The reason behind that decrease was in the financial cost that we had an extraordinary financial income last year. The underlying earnings were slightly better. Quarter on quarter, we have a decrease. Looking at the full year, rental income is up 17%, profit from property management is up 11%. Looking a bit at the current status and looking forward, the earnings capacity stands at SEK 5.39 per share at year-end, and that is 4% better than one year ago.
So this means that we have been able to offset increased interest rate costs with more income from the underlying business. Net debt to assets, 47.9%, and we had a like-for-like rental growth of 3.9%. Looking a bit more at the portfolio, the characteristics is that it's very diversified, both in property type and in geography, but there is a concentration to the larger cities and capitals in the Nordic regions. We have Helsinki, Gothenburg, Stockholm, and Copenhagen dominating. In property categories, resi is by far the biggest, and then we have office, some retail, logistics, and also other properties that can be mixed properties and hotels, for example.
We also invest in development of properties in the Nordic countries. We have basically two categories of development. One is where we build, and we keep it, mostly residentials, but can also be pre-let commercial properties. We have also another business line, predominantly in Sweden, but some cases in Finland and Denmark as well, where we build resi properties and sell to consumer. This shows up a bit differently in the P&L. The properties we keep will be unrealized value changes as we go along with the projects. The properties that we sell or the apartments that we sell, the result is booked after completion. The result from properties that we sell or apartment that we sell will be more irregular if we look at it quarter-to-quarter.
Of course, the long-term trend can be interesting to look at, but quarterly figures will be irregular in that segment. The most important thing has always been to, over time, increase the earning, the cash flow. We are a long-term owner and, so profit from property management is the single most important thing that we focus on. Since inceptions, we have had an upward trend there, over the years. Hasn't been the same increase every year, obviously, so it's been a bit irregular there as well. The long-term trend has been good over time. Things can happen in different years that sort of affect this trend a lot.
In 2008 we had a small decrease. You might think it was the financial crisis, but it actually wasn't because we sold lots of properties in 2007. It took off again. You can also see here on this slide six, they were flattish between 2019 and 2020, and that was the pandemic that made things slow down a bit. It was still an increase, but not that fast. Last year, as I said before, was 11%. On the next page you can see from the beginning the portfolio value been increasing since we started in 2005. At the same time, we have lowered the debt to assets. The trend is down there also on a longer time horizon.
Occupancy been very stable, and of course, we have a very spread portfolio of different areas, cities, asset classes, so it makes it very sticky. My forecast is that there will never be any big changes up or down the occupancy rate. As you can see, it's been 96 for many years in a row now, and it was 96 this year-end as well. We have what we call earnings capacity, and this is sort of how the situation is every quarter, and it's updated every quarter in the quarterly reports. There is how it looks on that particular quarter end. Here you see then, for example, the rental income on a yearly basis is SEK 11.6 billion at December 31st.
What's new for this year is that we also make a forecast for the profit from property management for the full year 2023. We never did that before, we felt it could have a value this year since there seems to be a lot of from an operational standpoint. Our forecast is that the profit from property management 2023 will be SEK 6.2 billion. As you can see, the last figure here, 31st December, is SEK 6,220, it's more or less the same. What we see in this year is that we will have some more rental income from projects that will be completed, and we'll most likely have some more interest costs. Net financial will be slightly more than SEK 2.9, but the rental income will also be slightly more than SEK 11.6. This is our forecast as of today. Now I hand over to Ewa again.
Yes, over to ESG. Here you can see our sustainability work, and sustainability is a prioritized issue for Balder and an integrated part of our strategy and operation. On this slide, you can see our framework for the sustainability, which is based on the international goals of Agenda 2030, and also commitment that the company strives to achieve. The sustainability work focuses on the issues where the company has the greatest opportunity to influence, and the same time manage the risk affecting real estate company linked to various sustainability issues. Examples of sustainability issues are reduced emissions of greenhouse gases, environmentally certified properties, sustainability in social in our property areas, business ethics together with a good working environment for our employees.
On the next slide, you can see a little bit what we have been focused on during this year and also a glance on the focuses for 2023. 2022 is the first year in which we must report the proportion of green activities in the business, the focus on our existing properties. We have recruited to strengthen the team around social sustainability and area development. We have also carried out a group-wide climate calculation and completed screening of Scope 3. We have started the transition conversion to a fossil-free vehicle fleet in the Swedish management organization, as well as initiatives undertaken for sustainable travel to and from our properties. For example, 120 charging points in Sweden. When we look ahead of 2023, we will focus on update of Balder Green Screen framework.
We will compile climate accounts for Scope 1, 2, and 3, which will also form the baseline for our science-based targets. We will carry out screening of Scope 3, that is in indirect emissions, which includes our subsidiaries at group level. We will also use their climate calculations to set the climate roadmap and submit our climate targets for validation at the Science Based Targets initiative. We will continue work with climate risk analysis and action plans as part of the EU taxonomy, of course. As many new requirements will affect sustainability reporting, we are making a review to meet these as well. Over to financing.
Having a balance sheet that satisfies the criteria for an investment grade is very important to us and the board of directors have decided to introduce an additional financing goal regarding net debt EBITDA with a target of maximum 11x over a period of time. We will achieve this goal through a combination of reduced net debt and increased income from our existing property portfolio and the completion of the projects. We have this to manage our balance sheet and maturity structure. During the fourth quarter, we have, for example, entered 5 new term loans to a value of just over 6.1 billion SEK. All of the banks that we have had contact with has been very positive and helpful in this. As you can see in the graph, we are very well equipped for the coming year.
You can also see some other things that we have been performing during the year. The direct share issue, of course, of SEK 1.8 billion. We have conducted a number of tender offerings maturing bonds 2023 of EUR 2.5 billion and EUR 500 million, resulting in buybacks of EUR 1.6 billion and EUR 223 million. We have also called the hybrid with first call date March 2023 amounting to EUR 320 million. As of year-end, the available liquidity, including confirmed loan commitments, was SEK 26 billion, which is 92% of all future maturities of interest-bearing liabilities within 18 months and 80% of within 24 months. 70% of the loans is hedged, while interest rate changes have a limited impact on the cost of borrowing.
All financial targets are met. Please note though that we have introduced a new financial target of the net debt to EBITDA of 11x over time, and that is of course not met at day one. You can also see in the graph, the portfolio value and the net debt to total assets as well as secured debt to total assets over time. At the next slide, you can see an overview of the debt maturity for bank, bonds, and commercial paper. For 2023, the combined debt amounts to approximately SEK 16 billion, and the bonds maturing in 2023 will be repaid after Q2. As you have seen, we have today announced a tender offer for all bonds maturing in 2024 amounting to SEK 4.5 billion.
On the lower end of the slide, you can see our financial targets. Equity assets ratio of 40% in line with our targets. Net debt to total assets, 47.9%, target of 15. ICR of 4.7, where we have a target at two. Also the new target, net debt to EBITDA of 13.4 with a long-term target of 11x .
Yes, looking at the share, as you all know, share prices can be very volatile, been absolutely so for the last year or two or three, not at least in real estate stocks. The long-term trend is anyhow there that over a long time period, most likely the share price will follow their NAV. You can have these short times where we have substantial premiums or substantial discounts. Year-end, there is a discount of almost 50%, if you look at the share price compared to NAV.
As the last pages is also in more detail the P&L and the balance sheet where you can see all the specifics and also where you can see how the shareholder structure is by year-end. With that, we thank you all for listening in.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Markus Henriksson from ABG Sundal Collier. Please go ahead.
Thank you very much. Good morning, Erik and Ewa. I hope you can hear me. All right. I have a few questions. First off, when do you think you will reach this new financial target of below 11x ? I can't hear you.
We think that we will do that next year.
All right. Thank you. Also You have externally valued your portfolio here, 64%, and 90% of this was done in Q4 here, so almost 60% valued in Q4. Could you highlight a bit?
We are
... the external appraisers have reasoned given low transaction volumes.
We are
... significantly higher interest rates?
Low transaction volumes obviously, significantly higher interest rates.
Sorry, we didn't hear the question. Can you please repeat?
Yes, I'll take it again. You have externally valued 64% of the property portfolio, and 90% of these were in Q4, so around 58% valued here in Q4. Could you highlight how the external appraisers have reasoned given low transaction volumes and obviously significantly higher interest rates?
Sorry, we're having a little bit of technical issues here. Can everybody hear us now?
Yes, I can hear you.
Sorry. Technique is not my strong suit. I will have to ask you to address the question, one last time. I'm very sorry. Now we can hear you.
Can you confirm you can hear me now?
Yes. Now I can hear you. Thank you.
Perfect. No worries. You have externally valued around 65% of your portfolio, and 90% of this was in Q4, so almost 60% valued externally. Could you highlight a bit how the external appraisers have reasoned? Interest rates are up. We have very low transaction volumes. Could you elaborate a bit on that and how they have reasoned?
I think in some cases, they actually do assumptions of the right value. I mean, it's the same in the market in total. If there are a few transaction, I think they basically look at the past transaction and maybe make some forecast of increased yields. I mean, it's not exactly precise until you sell an asset, of course. I mean, but it's the same. It's the same everywhere, obviously.
Thank you for that. I will do a follow-up on my first question regarding your new financial target. You mentioned you will reach it in one year's time, if I was not misunderstanding you, hopefully. Then will the EBITDA be boosted by co-op divestments here in 2023 as it's included in the EBITDA definition?
Yes, we will have that, 2023 and 2024. We think during 2024. The reason for also including co-ops is because the capital employed is included in the debt, and we have cost for it. The alternative would be to make a calculation and exclude that segment, but we think that will be also complicated, you know, with a lot of adjustments. It's important to bear in mind that that business has cost and debt also, and that's why we take in the income from it. Otherwise, it would be a bit. Yeah, it wouldn't really match, then we have to make a lot of other adjustments.
Sounds reasonable.
We think during 2024 it's a reasonable guess.
Have you discussed this together with S&P and/or Moody's when you set that new target?
No. No.
Okay.
I think that target is reasonable to have in this higher interest rate environment in general, you know. Before, if interest rates are around zero, it doesn't really matter that much. Now, if we think that interest rate will be around this level, then we think it makes sense to look at net at the EBITDA going forward. We think this is reasonable no matter if S&P think it or not.
Thank you. Last question. In Skanska's Q4 report, they had negative sales in their residential development business as consumers have canceled their purchases. This was in Sweden. Could you give us an update and a bit more insight into the core projects? How much sales ratio do you have in 2023? What does the pipeline look for 2024? Any insight here would be helpful.
Absolutely. 2023 we have sold almost 100%. I think it's at least more than 95%. 2024 not yet that much, of course, because it's some time until then. We don't have that much to sell. I don't know about Skanska specifically, but if they have negative sale, I guess they have just reservation contract, not firm contract. If they're firm, you basically can't cancel unless you, as a developer, voluntarily says okay to cancel. One interesting thing, by the way, is we launched a small project in central Stockholm a couple of months ago on Birger Jarlsgatan. There, I think we have only two apartments left to sell, and we didn't change prices.
Parts of the market, at least in Stockholm, worked, but you couldn't have done that on a massive scale. Still you can sell, very expensive apartments, actually. That was kind of positive surprise.
Thank you very much, Erik and Awa.
Thank you.
Those were my questions.
Thank you.
The next question comes from Jan Ihrfelt from Kepler Cheuvreux. Please go ahead.
Okay. Good morning. Jan Ihrfelt, Kepler Cheuvreux. I have actually three questions. The first one is, you took down your property values by 0.4% in the fourth quarter. Could you elaborate a bit on the difference between different segments, geographies, whether the large swings behind this rather modest 0.4% negative revisions?
Yeah, sure, Jan. I also think it's important to look at whole year figures if you compare Balder with, for example, Vasakronan or some other company, because there can be quarterly differences that are quite big. For example, if you look at Vasakronan, I think we have slightly less increases in value for the whole 2022. Just to bear in mind that don't look only at quarters. Otherwise, we can see that Danish resis for us was quite stable, but that came from two things, basically, that we didn't push down the yield at bottom, when it was at its lowest level, and completed projects also contributed. There I think the yield was up 30, 40 points, but the value was still flat.
Norway, we saw higher yield requirements. Value is a bit down, but also good indexations. We have commercial properties there. Finnish resi is stable, and I think the explanation there is prices basically haven't gone up much. The market behaves in a bit different way, and it looks like it will be better later this year. The signs we have now is that still a lot of completions 2023, but very few starts. We think it will get better later this year. The signs are there. You have on the minus side is, for example, low yielding resi in Sweden without the potential to convert into co-ops. Those, we can see more decline. In properties with higher yield, we don't see any declines at all, actually.
The yield comes up. That seems to be enough for holding the value. If you have, for example, logistics with a good yield, then I think values are not down at all, as an example. It behaves a bit different in different market and categories. I should say the strongest is if you have a good yield in the beginning, it holds up quite well. The risk is, resi where you can't convert or in general, very low yielding properties seems to be more vulnerable to higher interest rates, which makes sense in a way.
Okay. hotels, what kind of revisions have you done during the year for your hotel, properties?
If they are indexed, the revision is indexed. It's a bit different in the different countries, as you know. For us, we got some turnover rents last year that we didn't got the year before. There you have a very good effect in Q4 like for like compared to last year when we didn't got turnover rents. Compared to last year, I don't remember the percentage, but it's a huge increase obviously.
Going back to the new target here, do you need to sell some assets to reach the net debt EBITDA target?
I think we will roughly make it anyway, but there will be some transactions, of course, there always are. This combination of completed projects, more income in the existing portfolio, and if we don't do anything, debt will slowly decrease in constant currency. You have a mix of basically three or four things that we think will end up around this level.
Okay. My last question regards your bond, and you launched a buyback program here, this morning for your Swedish bonds. Could that also be possible for your Euro bonds?
In Balder, we don't have Euro bonds 2024, we have 2025. The Finnish company has 2024. If you look at the combined, all the 23 bonds we bought back before, and they will mature in this or next quarter. Now we try to buy back all the 2024 in Swedish. We take one transaction at a time, but maybe we go for the 2025 as well, and then we are already on up to 2026. Let's see.
Okay. Okay. Thank you very much.
The next question comes from Fredrik Cyon from Carnegie. Please go ahead.
Good morning, Erik and Awa. A few questions. I'm not that imaginative, so I'll stick with the 11 times net to EBITDA target. Are you aiming to be a net seller of assets apart from the co-ops during 2023 and beyond to reach that level?
Not necessarily, but it might be that way, but not necessarily, Fredrik.
Moving over to the guidance on property management profit of SEK 6.2 billion, that's in line with the earnings capacity. Obviously, there are moving parts when we move into 2023. There is some indexation, I hope, but also possibly some higher interest rates. What kind of in-indexation have you assumed in the guidance of SEK 6.2 billion, roughly?
Yeah. Very good question. I mean, the numbers happens to be the same in the guidance as in earnings capacity. What we think then is that we will have a bit more interest rate cost. On the other hand, we will also have more NOI from completed properties and also some indexation in resi that is lagging. Otherwise in earnings capacity is updated for that is basically forward-looking or, you know, the exact date, the index in the rental income is included. We think a bit more income from existing, and then we have completion of projects. As it looks like, that will be roughly the same as a bit more interest rate cost.
Yeah. What we Swedish call the gungor och karuseller, I guess. Moving over to the rating agency. Moody's had a comment on the risk associated with you owning shares in Hedin. Do you understand the rationale for that comment?
No, I don't. I haven't heard anyone else who understood it either, actually. I think it's rather the other way around. I mean, in the beginning, when I was in the Hedin board, I didn't own any shares in it. In that case, it could be negative for Hedin in theory, but not for us. I injected SEK 3.6 billion in that company, so it actually turned out to be a much stronger tenant than before. Even now I own 25 there and 35 in Balder. I think it's actually 100% the other way around. No. It's hard to understand actually. From an economical point of view, at least you can't really come up with any other conclusion, I think.
Agree. My final question on investments. I think 2022 was a record year. You invested, SEK 9 billion in existing properties and projects.
Mm-hmm.
What kind of level are you forecasting, in 2023?
2023 will be very slow. You have all the ongoing projects will basically be that we get money from co-ops that will finance the existing developments, properties that we'll keep. I think it will actually be some surplus if we look at it now. Otherwise, there are much smaller investments in general. If it picks up, it could be in good demand. In that case, it can be positive. Otherwise, it looks very slow for the time being. It will be much less activity than you've seen the latest years.
Okay, perfect. Those were my questions.
Thank you very much.
Please state your name and company. Please go ahead.
Hi, this is Andres Toome from Green Street Advisors. I have a few questions. Firstly, maybe you can just speak to the like-for-like, rent growth, print in Q4, which has accelerated quite a bit. Is that as a result of indexation in the commercial real estate segment already kicking in, or is there anything else driving that?
That indexation will be next quarter. The reason why Q4 like for like is very strong compared to last year Q4 is, the strongest part of it is actually hotels where the turnover rent was 0 Q4 last year, now we get turnover rents. We have most fixed rents, there are not zero turnover rents. That goes from zero to this double amount. Last year, we had 2.8% indexation in, for example, in Sweden in commercial properties. Like for like is Q4, you know. That's why the figure looks maybe a bit better than you could have guessed. I was a bit surprised myself, I have to admit.
With the indexations, kicking in this quarter, that would mean, potentially that the pace, would be higher going into this year with, you know.
Yes.
-around the results at 4%.
Yes. That's very likely.
Then I had a question around earnings guidance as well. Just to get a sense of what sort of cost inflation you are assuming for property expenses and overheads.
You have it in earnings capacity, you can see. I don't have a percent figure exactly. It also big differences, but in general it's not as bad here as in some places in Europe where we had a lot of energy prices surging extremely much, for example, when you have gas and so on. Here heating is normally district heating that doesn't move around that much except for Malmö. It's not as dramatic here as in other places in Europe.
Okay. I guess the cost inflation would be almost equal to the indexation as it seems from the earnings capacity that the, you know, surplus ratios is not moving.
No. Something like that, I would guess. Something like that.
Okay. My final question was about Helsinki residential. Any sort of commentary about what's happening on the ground there? Obviously, you are optimistic about the outlook as supply is falling off, but just the leasing velocity and I guess the rental trends and occupancy trends as you see it today.
As we see it today. Right now it seems stable, I would say, in all segments. It actually behaves a bit better than you could guess if you read the newspaper headlines and things like that. In reality, it's not as bad as the perception perhaps. They are a bit different depending on what city and market and segment obviously. Right now it's pretty decent market if you're have assets in the Nordic capitals. I think that is the same for all companies, by the way.
Understood. Thank you. That's all from my end.
Thank you.
Please state your name and company. Please go ahead.
Hello. Am I audible?
Hello?
Hello. Yeah. Thank you for taking my question. I'm Neeraj from Barclays. My first question is regarding the comments from Moody's regarding the potential downgrade to high yield. Are you considering getting rated from any other rating agencies like Fitch, et cetera?
We will have a call with them and see how they look at life.
Okay. All right. My second question is regarding your access to bond markets. Do you think the current spreads and the yields make an economic sense for the company to issue debt into?
No.
My follow-up and last question would be, how do you plan to refinance your upcoming maturities, apart from what you have got in terms of credit facilities?
We already now, if you look at the figures and then include cash flow, you know, from operations...
Mm-hmm.
We can wait with the bond market until 2026. I mean, during that time we can also take more bank financing. Hopefully bond markets will normalize and get better. If it doesn't, we can actually stay out of the bond market at least until 2026. My guess is we can stay out forever more or less. We don't think that is likely scenario. In theory, we could actually stay out forever. I think it will normalize.
Once interest rates sort of peaks and we can see that it's flat and then, maybe a quarter or two, three passes by, so you'll see the underlying market also continues to be stable, then I think there is no reason for investors to be that afraid of Nordic real estate bonds. It can take some time.
Got it.
For the time being, we use cash and bank funding and cash flow.
Got it. Probably my last question is, how do you see your interest coverage ratio developing over the next couple of years or so?
I think it's very hard to predict the interest rates. If I do, you should do the opposite. I have a good tendency to always be wrong on my predictions.
All right. Thank you. Thank you very, very, very much for taking my questions.
Thank you very much.
Please state your name and company. Please go ahead.
Hello. Stefan Andersson, Danske Bank. A few questions. First, on the commercial side, with the invoices going out and the indexation being high, how have you seen that being received? Has there been any difficulties at all to get that through?
No. No, it hasn't.
Good. Good. A little bit of an old question, but on the residential side, you were pretty early out to with an agreement here in November, end of November. We've seen some agreements coming through here now at a little bit higher levels. Could you maybe give a little bit of flavor on your rationale for ending up where you did back then?
The level we saw the other day was actually a bit lower than our, but we had different parts in our agreement. If it was to be higher, we have this tag-along deal anyhow. It looks like it was slightly lower. The rationale is that you have to have sort of long-term perspective on regulated residential rents, and they will not move year on year, you know, with inflation or stuff like that. I think if you look at the longer time period, five, 10 years, then it tends to be inflation plus something. And big differences also, by the way, from city to city. Over time, I think it will be okay. This year, the increase is actually a bit too small to compensate for everything.
With a long-term horizon, I think it will be, continue to be okay.
Yeah.
Parts, you know. In negotiations, you always have many parts, actually. It's also different percentages depending on average size of apartment and also average construction year. An average figure holds a lot of different parameters behind that average figure.
Good. Thank you. Then, on the ratings side, I, this might be difficult to answer, but I'll try anyhow. I mean, I would guess that you have a dialogue with S&P ongoing and get some flavors back and forth. I mean, is your impression that with the plan that you have now and the guidance given and the targets going down to 11x in 2024, that's enough for them to keep trading?
We haven't talked with S&P lately, actually, but we always have an update call with them after the report. We haven't had much contact lately with S&P. If nothing special happened, then sort of things moves along. If something bigger happened, then we inform them so that they keeping track of it. If you look at our economics, there are no reason for them to be worried. I don't think they will be.
No, we're very comfortable with our figures, and it was more a reflection of the market in general, the negative outlook from S&P.
Okay. Maybe the last question, coming back then to reaching the 11 times. You mentioned that maybe there could be a divestment of a property.
Yeah.
Not sure. Should we interpret that, any of your JVs, you're not expecting to divest any of that?
No, most likely not. I think, I mean, there are always discussions ongoing, you know. I think it's better that we communicate once it happens than sort of guess before. There are interest in the market for buying in properties. Actually a very big interest. The question is if you can meet on price. There are a lot of equity, and I also have contact with many big investors who want to invest. Let's see how this plays out. We will anyway be very cautious and don't do much, but something might be sold. Let's see.
Thank you, sir, very much.
Please state your name and company. Please go ahead.
Hi, this is Silvia Durante from An investment Partners. Can you hear me?
Yes, we can hear you.
Okay, great. Thanks. Just a follow-up on the rent negotiation. Can you please share more information about the like for like rental growth that you saw for the residential part? Did you have any pushback with the tenant association for the Swedish residential?
You mean like for like Q4, or do you mean going forward in 2023?
For Q4. Also if you can share any information about your feeling for the going forward, that would be great.
Okay. In Sweden, we are guessing around 5%. It depends on actually what city you have your assets and also the average apartment size. There are examples that you can have even 7% or 8%. It's quite big differences actually, depending on where the property is. It might sound a bit crazy, but you actually have regional negotiations. From 1 year to another, it can be big differences from one city to another. Over time, I think it will even out. Year by year, it's a bit irregular. Now it looks like you have bigger increases in older properties with small apartments in general, and you have less percent increases in new properties with the bigger apartments.
You have maybe the average of 5-ish%, but you can have one owner that gets maybe 3 and one gets perhaps 7 or 8, maybe even.
Okay.
I think you should have a long-term view on this, and then it tends to be inflation and something extra over time.
Okay. Got it. This 5% was in line with what you saw in Q4 as well?
Yeah.
Okay, thanks. My second question is about the liquidity and the credit facility. I saw you raised several credit facilities in Q4, actually reading also on the rating agency report, there were some concerns about some old credit facilities that will mature in the next two years. Can you share more information on the discussion you had with the banks and the maturity of these new facilities? Thanks.
Um-
That's actually a revolving credit facility that's up for extension, and it's nothing dramatic at all. We have an extension period from mid-January to mid-February, that we have sent in and which has been accepted by the bank. It's just business as usual and nothing dramatic at all.
No. During 2023, 3, 2022, we with all the proposals to bank, we got a yes. So far no bank have said no, actually. We have some more discussions going on. The banking system is working normally.
Okay.
So-
That's very good to hear.
I don't know if anyone thought something else, actually, but that's the case.
Okay. That's very good to hear. Thanks very much for taking my questions.
Thank you very much.
Thank you.
The next question comes from Megie Leka from PGIM. Please go ahead.
Apologies if you already answered this. I was wondering if you could give a little bit more color on exactly how the net debt to EBITDA will be reduced. Some more figures on how much cash flow you expect to reduce net debt and how much of the benefit will come from the EBITDA increase. Thank you.
It will be a combination. The exact figure we don't have, now, but you can, for example, have as an example that EBITDA moves from 10- 11 and debt from 126- 121, then you have 11x. That could be an example. Exactly how it will be, it's a bit early to say.
Thanks. Can I confirm that this would be to the end of 2023?
No, I think we reach it in 2024.
Okay, great. Thank you very much.
Thank you.
Please state your name and company. Please go ahead.
Hi, can you hear me?
Yes.
Yeah, we can hear you.
Hi. it's Emmanuel Owusu-Darkwa calling from Bank of America. I just wanted to follow up on a question that was asked previously. Can you confirm you're looking at, potentially getting a Fitch rating?
We are. We're talking with them.
Okay. On your existing liquidity, how much runway do you think that gives you in terms of months ahead?
I think it's maybe three, four years. five, perhaps. I mean, bank loan is always prolonged, and then we have bonds, and assuming that we will not do any bonds, I think maybe 2026, 2027, we have to think about something more actively. I mean, we will do more loans as we go along and I think also the bond market will be better.
Okay. It's.
until then.
It's just I asked that question in relation to Moody's recent comments. Like they talk about, you having 15 months of runway, and I just wanted to confirm.
Yeah.
if you thought that was accurate.
No, the problem is if we send exact figures to Moody's, they don't look at them. They do their own calculation.
Mm-hmm.
You have two parallel. The one is how it is, and one is their calculation. There is a big deviation from how it is. I think if you look at our reports, you have the exact figures. The other things is some sort of forecast that I don't know. It's their forecast, but it's actually not the actual figures.
Okay. Just to be crystal clear, when you talk about having this new net debt to EBITDA target to, you know, firm up and assure an investment-grade rating, is that independent of what Moody's may or may not do?
We don't use Moody's. They rate us.
Okay.
against everybody's will more or less. No, the figures will be fine. We don't see anything else. Based on economics, it will not be a problem.
Okay. All right. Thanks a lot. Cheers.
Thanks.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you everyone for listening in on the questions. That's it from our side.
Yes. Thank you. Have a nice day.