Scatec (Sell, TP: NOK56.00) - Debt market confirms higher cost of capital
Scatec’s new NOK1bn bond has been priced at 3m NIBOR+660bp, and we believe the interest rate of 10%+ will serve as a reality check for investors regarding higher debt costs going forward. With USD93m of debt due in Q1 2024, we consider the refinancing necessary, albeit at a high cost. We also believe the higher incremental debt cost should provide some read-across to the company’s cost of equity, as this should be at a premium. The current share price implies a cost of equity of ~10.5%, i.e. on a par with the company’s incremental cost of debt for the new bond, which we consider unwarranted.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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