Arctic Credit FLASH: Sweden Timber - Covenant breach following weak Q3, seeks waiver and to amend bond terms

Research evidence excerpt

Arctic Credit FLASH: Sweden Timber - Covenant breach following weak Q3, seeks waiver and to amend bond terms

cash position sat at SEK 63m, with SEK 89m drawn of its overdraft facility. The current overdraft

facility amounts to SEK 242m.

Company expects improvements, but outlook remains soft

The company guides for adj. EBITDA of SEK 72m over the next two quarters (-55% vs. ARCe,

-25% y/y), reflecting continued pressure on profitability. Compared to Q3, earnings are expected

to improve on the back of cost-efficiency initiatives and operational improvements. The most

significant measures are lower procurement costs and a new battery park operator. Sweden Timber

announced that they have become a shareholder in Sydved, a procurement company serving

the forest products industry. In connection with the purchase of ASPA, Sweden Timber obtained

an option to acquire this ownership interest. As the option formed part of the original acquisition

agreement, no additional consideration is paid for the stake. With this, Sweden Timber hopes to

secure a more stable and cost-efficient supply of raw materials. In addition, the company has

replaced their old battery park operator and expects to generate EBITDA of SEK 30m in Q4 from

the battery park alone. Despite these initiatives, earnings remain highly sensitive to factors outside

of the company’s control (commodity and FX prices primarily), providing high uncertainty to the

guiding. Moreover, even if the company delivers on its guidance, it will not provide any meaningful

improvement to its current tight liquidity situation.

Credit negative report

The Q3 report materially missed expectations, leaving profitability weak and liquidity under

significant pressure. Ahead of the figures, AMWODA Float 10/25/27 was indicated around 73