Good morning, everyone, and thank you for joining in on this webcast. As we've mentioned in our recent quarterly reports, housing markets have been challenging, and for some time now cash flow and a sound and stable balance sheet have been in focus for us. As a next step to increase financial stability, we have presented a new financing package comprising both extended loans and new equity. With me here today I have our President and CEO, Peter Wallin, and our Chief Financial Officer, Lars Granlöf. They will walk you through the details of our announcement. Afterwards we'll be happy to take your questions. Over to you, Peter.
Thank you very much, Sanna. So with the announcement that we made last night, I would like to frame that announcement with the following four points. Firstly, we have taken a number of actions to meet the challenges we have seen in the housing market and the volatility in the housing. Secondly, with this financial package that we put forward now, we see that this will put us in a very good position to take on the market going forward. Thirdly, the long-term need for sustainable housing is really there in the market, and the shortages in the market right now is also creating a pent-up demand in some of our key markets. Combined with the actions that we have taken and the renegotiated financial package and stronger balance sheet, we'll outperform the market going forward.
So if I talk a little bit more about the first point, the actions that we have been taking over a number of quarters or a year and a half here now in the company, we have done this also to the severe downturn in the market from the beginning of 2022. We have seen how the cash flow has been sort of strapped due to the slower sales speed and also that we have invested in attractive land bank in earlier committed investments. So we have not been able to back out of those commitments. And we have done a number of actions to improve cash flow and profitability. And so far we have done the wind down of Denmark. We have divested the operations in Norway and now lastly also the operations in St. Petersburg.
One very important part in what we have done over the past almost three years is that we have decentralized the business and decision making in Bonava. So moving the decision making closer out to the market and customers. We have also radically changed the cost level at Bonava. So with the restructuring that we presented in Germany, Sweden, and Finland, now up to.
Right, so Finland as well. Lars, do you have any comments on that?
It goes all over the organization, of course, where we have cost improvements and we have reorganization basically in all BUs as well as in the corporate group functions.
Yes. We also have the strengthened investment process.
Yes, absolutely. This is something that we have been looking into and introduced already before the war broke out in 2022 where we are really looking into the different aspects of investments, seeing too that we are definitely not investing in things that is adding to risk and we are very much looking at the cash flow component, of course.
That sounds very sound. Moving on to the next point, we have also done an external valuation of the building rights portfolio.
Absolutely. That we did in Q3, reported this in the third quarter and even though we took write-downs of our portfolio building rights portfolio at that point in time, we saw actually a surplus value of the total portfolio, SEK 1.2 billion. That will be coming into profit over the coming years.
Should we take the next?
The next slide?
Yes.
Okay. So let's look into the financing package that we introduced, reported this morning. So there is a long-term financing package comprising of an extended debt, a syndicate plus term loans of SEK 4.5 billion, which means that we actually are amortizing SEK 1.5 billion directly compared to where we are today. The maturity is then prolonged until March 2027, i.e., a three-year extension of the loans. But this is, of course, then conditional on the two points below. The new equity issue that we just launched, it's a fully underwritten rights issue of SEK 1 billion, just in excess of SEK 1 billion gross. And this will, of course, as Peter mentioned, decrease the financial risk and increase the flexibility for us going forward, making it possible for us to start new projects when the conditions are right there in the market.
This is, of course, subject to an approval from the shareholders. So there will be an extra general meeting in early February where the shareholders will approve of this. And the third point then is extension of the bond loans. We are in discussions with the bondholders and as you see, we have support from 63% today. And we have also then issued a press release this morning about us now starting this written procedure for voting and we are convinced that we will exceed the 67% that is needed for us to handle this. And the intention is, of course, then also here to prolong this amendment and extend it for three years until March 2027. Let's move on to how the net debt has been progressing and the financial risk has been progressing over time.
You know that we were peaking in Q1 this year with more than SEK 8 billion in net debt and since we have been amortizing on that debt with both cash from divestiture of Norway as well as positive cash flow from our operations over time. If we look forward now, we have in Q4 the SEK 564 million that we have received on the divestiture of the St. Petersburg business coming into the cash flow. It was part of the result already in Q3, i.e., the equity was increasing by this already in Q3, but the cash flow is coming now. As well as Q4 is the strongest quarter for us during the year, so we see a high number of handovers coming in, also generating cash flow.
If we then look into 2025, as was mentioned in the previous slide here, we will start to see now from 2025 the full effect of the cost savings. It will be gradually coming during 2024. But from a cash flow perspective, we also need to remember that we have costs cash outflow from these reorganizations activities in excess of SEK 400 million. And the rights issue, of course, the SEK 1.2 billion is expected then to come into our bank accounts in first quarter in March 2024. And it's also then, of course, important to state that with this there will not be dividends distributed in the near future. So with that, I hand over to you again, Peter.
Let's see if we can switch slides. There we go. So let's see if Peter can take us through this next.
Yes. Yeah. Sorry. It's Peter here now. Sorry for having the technical issues here now. Can you hear me?
Yes, we hear you loud and clear.
Perfect. Very good. So as this slide shows, if we look on the core market here, you can see the development of the starts in the various markets. Germany to the left-hand side, in the middle part we see the Swedish market. And on the right-hand side we see both Finland depicted in the graph, but we also see the statement on the Baltic markets. And as you can see there, this is a huge difference compared to the long-term need that is established in the various markets, leading to the pent-up demand as I described. And this will benefit Bonava since we have a good market position in these markets and we have a very attractive land bank. So could we please turn to the next slide?
This slide is to illustrate we have winter outside or supposed to have winter outside, but we are still, despite this, seeing some green foliage coming up. So if we wrap up what Bonava have, we have a strong position to outperform the market going forward and we have the exposure to the high growth regions. We have an attractive building rights portfolio. We have done a dramatic work of making sure that we are improving and sustaining higher margins and this is especially strengthened on the basis of cost control and cost efficiency. With all the measures we have also taken to reduce the overhead and admin costs, the lower cost base as a result of this and the reduced financial leverage as a function of the financial package, this decreases both the risk and improves the flexibility for us going forward.
So as Lars alluded to, we want to start projects when the conditions are right and we are starting projects already. So going to the wrap up of the slides we have prepared for you, again, we have taken a lot of actions to meet the housing market under pressure, which have increased the flexibility and also the preparedness to meet the lower volume. With this complete long-term financing package that is negotiated and presented now, we have much lower risk in the company and also higher flexibility. And we see that the need for sustainable housing in there is there and it underpins the long-term demand. And finally, we in Bonava have a strong position to outperform the market going forward. With that, Sanna, would you care to take the lead?
Yes. Thank you, Peter, and thank you, Lars. Now we will be taking questions. If you wish to ask a question, you simply type it in the webcast. I have a first question here. We've seen interest rates coming down quite dramatically. How do you see this affecting demand for housing in the near future, Peter?
Yes. We haven't seen a radical change in the interest rates on the back of the success in fighting inflation. And so sort of long-term swap rates have sort of slumped by 113 basis points over the past 6-7 weeks. It's, of course, too early to say that this is the turn of the market, but we are seeing a pickup of interest and a pickup of sales. I think it's easier for both consumer and investors to understand then what kind of levels they should be portraying investments into the development sector.
Okay. Yes. You also mentioned in the presentation that 63% of bondholders have already agreed on these suggested terms, but two-thirds are needed. So Lars, do you expect the bond to be extended?
Yes, we are expecting that. We have progressing very well in the discussions with bondholders. And due to technicalities, of course, there are certain bondholders that don't want to be what we call wall-crossed, i.e., they've made insiders because then they cannot trade in shares in the meantime. So even though they are positive in the discussions, they have chosen not to be wall-crossed. And as soon as we now start the written procedure, we are convinced that we will see us exceeding two-thirds rather soon.
So a last formal step in that process?
Yes.
Very good. Those were some good questions. We know that the need for sustainable housing isn't going away and as we've heard, Bonava has a strong position to outperform the market going forward. This quarter, the present quarter, is the most intense part of the year in our business. The year-end report will be released on February 1st, 2024. We look forward to seeing you then and now. I would like to thank you all for joining in.
What can I set the audio on or off?
Ja.
You have it on there.
Oh, there.
Good morning, everyone, and thank you for joining in on this webcast. As we've mentioned in our recent quarterly reports, housing markets have been challenging. For some time now, cash flow and a sound and stable balance sheet have been in focus for us. As a next step to increase financial stability, we have presented a new financing package comprising both extended loans and new equity. With me here today, I have our President and CEO, Peter Wallin, and our Chief Financial Officer, Lars Granlöf. They will walk you through the details of our announcement. Afterwards, we'll be happy to take your questions. Over to you, Peter.
Thank you very much, Sanna. So with the announcement that we made last night, I would like to frame that announcement with the following four points. Firstly, we have taken a number of actions to meet the challenges we have seen in the housing sector. Secondly, with this financial package that we lay forward now, we see that this will put us in a very good position to take on the market going forward. Thirdly, the long-term need for sustainable housing is really there in the market. And the shortages in the market right now are also creating a pent-up demand in some of our key markets. And combined with the actions that we have taken and the renegotiated financial package and stronger balance sheet, we will outperform the market going forward.
So if I talk a little bit more about the first point, the actions that we have been taking over a number of quarters or a year and a half here now in the company, we have done this also to the severe downturn in the market from the beginning of 2022. We have seen how the cash flow has been sort of strapped due to the slower sales speed and also that we have invested in attractive land bank in earlier committed investments. So we have not been able to back out of those commitments. And we have done a number of actions to improve cash flow and profitability. And so far, we have done the wind down of Denmark. We have divested the operations in Norway and now lastly also the operations in St. Petersburg.
One very important part in what we have done over the past almost three years is that we have decentralized the business and decision making in Bonava. So moving the decision making closer out to the market and customers. We have also radically changed the cost level at Bonava. So with the restructuring that we presented in Germany, Sweden, and Finland, we are now to.
Right. So Finland as well. Lars, do you have any comments on that?
It goes all over the organization, of course, where we have cost improvements and we have reorganization basically in all BUs as well as in the corporate group functions.
Yes. We also have the strengthened investment process.
Yes, absolutely. This is something that we have been looking into and introduced already before the war broke out in 2022, where we are really looking into the different aspects of investments, seeing too that we are definitely not investing in things that are adding to risk. We are very much looking at the cash flow component, of course.
That sounds very sound. Moving on to the next point, we have also done an external valuation of the building rights portfolio.
Absolutely. That we did in Q3, reported this in the third quarter. And even though we took write-downs of our portfolio, building rights portfolio at that point in time, we saw actually a surplus value of the total portfolio, SEK 1.2 billion. That will be coming into profit over the coming years.
Should we take the next?
The next slide?
Yes.
Okay. So let's look into the financing package that we introduced, reported this morning. So there is a long-term financing package comprising of an extended debt, a syndicate plus term loans of SEK 4.5 billion, which means that we actually are amortizing SEK 1.5 billion directly compared to where we are today. The maturity is then prolonged until March 27, i.e., a three-year extension of the loans. But this is, of course, then conditional on the two points below. The new equity issue that we just launched, it's a fully underwritten rights issue of SEK 1 billion, just in excess of SEK 1 billion gross. And this will, of course, as Peter mentioned, decrease the financial risk and increase the flexibility for us going forward, making it possible for us to start new projects when the conditions are right there in the market.
This is, of course, subject to an approval from the shareholders. So there will be an extra general meeting in early February where the shareholders will approve of this. The third point then is extension of the bond loans. We are in discussions with the bondholders. As you see, we have support from 63% today. We have also then issued a press release this morning about us now starting this written procedure for voting. We are convinced that we will exceed the 67% that is needed for us to handle this. The intention is, of course, then also here to prolong this amendment and extend it for three years until March 2027. Let's move on to how the net debt has been progressing and the financial risk has been progressing over time.
You know that we were peaking in Q1 this year with more than SEK 8 billion in net debt. Since we have been amortizing on that debt with both cash from divestiture of Norway as well as positive cash flow from our operations over time. If we look forward now, we have in Q4 the SEK 564 million that we have received on the divestiture of the St. Petersburg business coming into the cash flow. It was part of the result already in Q3, i.e., the equity was increasing by this already in Q3, but the cash flow is coming now. As well as Q4 is the strongest quarter for us during the year. So we see a high number of handovers coming in, also generating cash flow.
If we then look into 2025, as was mentioned in the previous slide here, we will start to see now from 2025 the full effect of the cost savings. It will be gradually coming during 2024. But from a cash flow perspective, we also need to remember that we have costs, cash outflow from these reorganizations activities in excess of SEK 400 million. And the rights issue, of course, the SEK 1.2 billion is expected then to come into our bank accounts in first quarter in March 2024. And it's also then, of course, important to state that with this, there will not be dividends distributed in the near future. So with that, I hand over to you again, Peter.
Let's see if we can switch slides. There we go. So let's see if Peter can take us through this next.
Yeah. Sorry. It's Peter here now. Sorry for having the technical issues here now. Can you hear me?
Yes, we hear you loud and clear.
Perfect. Very good. As this slide shows, if we look on the core markets here, you can see the development of the starts in the various markets. Germany to the left-hand side, in the middle part, we see the Swedish market. On the right-hand side, we see both Finland depicted in the graph, but we also see the statement on the Baltic markets. As you can see, this is a huge difference compared to the long-term need that is established in the various markets, leading to the pent-up demand as I described. This will benefit Bonava since we have a good market position in these markets and we have a very attractive land bank. So could we please turn to the next slide?
This slide is to illustrate we have winter outside or supposed to have winter outside, but we are still, despite this, seeing some green foliage coming up. If we wrap up what Bonava have, we have a strong position to outperform the market going forward. We have the exposure to the high-growth regions. We have an attractive building rights portfolio. We have done a dramatic work of making sure that we are improving and sustaining higher margins. This is especially strengthened on the basis of cost control and cost efficiency. With all the measures we have also taken to reduce the overhead and admin costs, the lower cost base as a result of this and the reduced financial leverage as a function of the financial package, this decreases both the risk and improves the flexibility for us going forward.
As Lars alluded to, we want to start projects when the conditions are right. We are starting projects already. Going to the wrap-up of the slides we have prepared for you, again, we have taken a lot of actions to meet the housing market under pressure, which have increased the flexibility and also the preparedness to meet the lower volume. With this complete long-term financing package that is negotiated and presented now, we have much lower risk in the company and also higher flexibility. We see that the need for sustainable housing in there is there and it underpins the long-term demand. Finally, we in Bonava have a strong position to outperform the markets going forward. With that, Sanna, would you care to take the lead?
Yes. Thank you, Peter. Thank you, Lars. Now we will be taking questions. If you wish to ask a question, you simply type it in the webcast. I have a first question here. We've seen interest rates coming down quite dramatically. How do you see this affecting demand for housing in the near future, Peter?
Yes. We haven't seen a radical change in the interest rates on the back of the success in fighting inflation. And so sort of long-term swap rates have sort of slumped by 113 basis points over the past 6-7 weeks. It's, of course, too early to say that this is the turn of the market, but we are seeing a pickup of interest and a pickup of sales. And I think it's easier for both consumer and investors to understand what kind of levels they should be portraying investments into the development sector.
Okay. Yes. You also mentioned in the presentation that 63% of bondholders have already agreed on these suggested terms, but two-thirds are needed. So Lars, do you expect the bond to be extended?
Yes, we are expecting that. We are progressing very well in the discussions with bondholders. Due to technicalities, of course, there are certain bondholders that don't want to be what we call wall-crossed, i.e., they've been made insiders because then they cannot trade in shares in the meantime. Even though they are positive in the discussions, they have chosen not to be wall-crossed. As soon as we now start the written procedure, we are convinced that we will see ourselves exceeding two-thirds rather soon.
So a last formal step in that process.
Yes.
Very good. Those were some good questions. We know that the need for sustainable housing isn't going away. As we've heard, Bonava has a strong position to outperform the market going forward. This quarter, the present quarter, is the most intense part of the year in our business. The year-end report will be released on February 1st, 2024. We look forward to seeing you then. Now, I would like to thank you all for joining in.