Swedish FSA to investigate accounts of property group SBB

The Swedish Financial Supervisory Authority (FSA) will investigate whether commercial landlord SBB broke accounting rules in its 2021 annual report, the FSA said in a statement on Thursday.

SBB’s valuation of real estate in some of its portfolios, accounting methods for asset acquisitions, disclosure of significant assumptions and use of alternative accounting metrics will be looked at, the FSA said.

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

Shares in the company were down nearly 12% and close to a record low at 3.5 Swedish crowns ($0.3278) by 0952 GMT. The company has lost almost 94% of its value since November 2021.

High debts, rising interest rates and a wilting economy have produced a toxic cocktail for Sweden’s commercial property companies.

Concern over the sector is weighing on the nation’s currency while investors are wondering if Sweden will be the first domino to fall among beleaguered property sectors across Europe.

Representatives of SBB and its 2021 annual report auditor Ernst & Young were not immediately available for comment on Thursday after Reuters contacted the companies and the individual auditor by phone and email.

In February last year short-seller Viceroy accused SBB of accounting irregularities and claimed that the company inflated the valuation of several of its newly purchased assets by as much as 50%, accusations the property company has denied.

SBB was also accused by some of its bondholders this month of breaching a financial covenant, which could trigger a default on its bonds. The company has repeatedly denied there has been any such breach.

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

($1 = 10.6782 Swedish crowns)