YIT is aiming to rearrange its financing

Automatic translation: Originally published in Finnish on March 11th, 2025 at 7:00 AM EET. Please note that the automatic translation of the content currently only covers the text visible here and may contain errors. You can provide feedback on the quality of the translations and possible errors here.

YIT is planning to issue a new 120 MEUR senior secured green bond, which matures in 2028. At the same time, the company is making a voluntary tender offer for the 100 MEUR green bond maturing in early 2026. We estimate that if the arrangement is carried out, it would increase the Group's financing costs, which would put moderate downward pressure on our estimates for the coming years. 

The financing arrangement offers room to manoeuvre for the business

We estimate that most of the financing from the new bond will be used to repurchase the old bonds. Thus, in our view, the main purpose of the arrangement is to extend the maturity of YIT's debts. We consider this justified, as there are no prerequisites to pay off the previous loan maturing on January 15, 2026, due to the company's weak cash position, which we do not expect to improve this year either.

The price of the new green bond is likely to be higher than before

The offer period for the repurchase ends on March 17, 2025, and it is conditional on the issuance and successful pricing of the new bond. The company’s current fixed-rate green bond has a coupon of 3.25%. In our view, in the current interest rate and market situation, the price of the new green bond will be higher in terms of margin. In addition, YIT's own financial situation is also on a weaker footing than at the time of the bond listing. According to our preliminary estimate, the price of the new bond could be around 6.5–7.5%, which would increase financing costs by an estimated 5 MEUR annually. However, the net effect is mitigated by the recent fall in market interest rates. If the arrangement is carried out as we expect, YIT's financing expenses in the coming years would be subject to upward pressure and the earnings per share estimates to moderate downward pressure.

The large amount of debt still weighs on the company's balance sheet and earnings

Even before the potential arrangement, we estimated that YIT's financial expenses would exceed its operating profit this year, leading to a loss for the company in 2024-25. A significant portion of the earnings for the following years will also go toward covering financing expenses, even though debt levels are clearly decreasing in our estimates. The company’s indebtedness is, in our opinion, still at a high level, and the large amount of debt also weighs on its balance sheet and earnings. Resolving the situation would require the release of capital from the balance sheet and an improvement in cash flow. We will include the arrangement in our estimates when it is realised, at the latest in connection with the Q1 earnings.