Corporate bonds are another way for companies to finance their operations other than
the traditional loans form a bank. Since the fiscal crisis in 2008, stricter banking
regulations have led to a surge in bond issuance. However, issues like unrated bonds,
low liquidity, and lack of pricing transparency remain, exacerbated by the COVID-19
pandemic and geopolitical tensions have been recognized in the latest years, in
combination with the interest rate hike that started in October 2021. The research
explores how Swedish real estate firms manage bond financing during periods with
volatile interest rates.
This study was made in a qualitative way with semi-structured interviews. We
interviewed people from the real estate and banking industries to get a better
understanding of how specific companies act and their reasoning behind it while also
getting a better view of the market as a whole. Behind our research lies theories such as
regulations, derivatives, capital structures and more. The interviewsÅL resulted in a strong
engagement by many of the respondents who happily contributed to the study and
shared our interest on the Swedish corporate bond market. The qualitative strategy gave
us an insight into the views and beliefs by actors on the markets. The respondents
include companies of varied sizes and firms with different property portfolios further
strengthening the various experiences on the market.
We found that there is a view that the margins on new bonds are high during these
periods which results in smaller companies lowering their bond financing ratio, and
sometimes reduce the time to maturity on their new bonds. It is also apparent that risk
management is key and that the companies focus on stabilizing interest payments via
derivatives and spreading the maturities of their bonds in order to being able to
refinance the bonds in a less stressful environment. From our study, we also find that
there are problems with liquidity and transparency that can affect the issuing process,
which implemented regulations has failed to solve. Today's regulations regarding green
frameworks make it possible for companies to perform greenwashing by issuing green
bonds. A broader study covering more companies could be done in the future to get
create a generalised view of the strategies used, while in the future also being able to
cover the aftermath of the interest rate hike, since the first decrease in Sweden came just
before the finalising of this thesis.
2024.