OREANDA-NEWS. S&P Global Ratings said today that it has affirmed its 'AA-/A-1+' long - and short-term issuer credit ratingson Swedish public housing provider Forvaltnings AB Framtiden. The outlook is stable.

At the same time, we affirmed our 'K-1' short-term Nordic regional scale rating on Framtiden.

Framtiden has now been fully integrated into the City of Goteborg's (AA+/Stable/A-1+) in-house bank and, in our view, this has effectively transferred all Framtiden's external financing risks to the city treasury. Formalized contracts regulate this relationship, whereby the city treasury assumes full responsibility for financing Framtiden. Given the contractual arrangement between Framtiden and the city, as well as our assessment of the stability and predictability of this set-up, we now consider the strengthened financial ties between the company and the city as ongoing financial support. Hence, we have incorporated the future loan funding from the city into our assessment of Framtiden's liquidity, leading us to revise our assessment of the company's stand-alone credit profile (SACP) to 'a+' from 'a-'.

For the same reason, we now consider Framtiden's role for the government to beimportant rather than very important, and have therefore reassessed our view of the likelihood of extraordinary support for Framtiden to high from very high, resulting in one notch of uplift to the SACP, compared with three notches previously. In accordance with our criteria for government-related entities, our view of a high likelihood of support is based on our assessment of Framtiden's:

Important role for Goteborg, which regards the company as an important contributor to the city's overall infrastructure and public policy, as illustrated by the city's ambitious goals for new construction; and

Very strong link with the city, which is actively involved in defining Framtiden's strategy, appoints its board of directors, and intends to maintain its 100% ownership.

Framtiden's 'a+' SACP is based on its very strong enterprise profile and strong financial risk profile. Furthermore, because we have reassessed its liquidity to adequate from less than adequate previously, the SACP is no longer capped at 'a-'.

We consider Framtiden to have a very strong enterprise profile due to low industry risk, very strong economic fundamentals, and strong market position. Specifically, the group had 71,345 housing units in the Goteborg area at year-end 2015. Framtiden benefits from very strong demand for its rental apartments in the expanding city of Goteborg, which results in minimal vacancies in its housing stock. We calculate the average price for private houses in Goteborg at a high 179% of the national average, which, combined with very strong population growth of 1.6% annually over the past three years, suggests very strong local economic fundamentals.

Furthermore, Framtiden's properties are generally well maintained, with maintenance expenditure in 2015 amounting to about Swedish krona (SEK) 1.1 billion (about €114 million).

We continue to assess Framtiden's financial profile as strong, due to its conservative financial policies and robust balance sheet. Framtiden is continuing to expand and we expect it will invest about SEK1.87 billion annually in 2016-2018. With these planned investments adding about SEK350 million in net new loans per year, we forecast the group's ratio of debt to debt and equity will increase slightly to 64% by year-end 2018 from 63% in 2015. However, Framtiden has a strong loan-to-value ratio of 20% and headroom within its interest coverage ratios.

As of Aug. 31, 2016, Framtiden's loans totalled about SEK16 billion, of which SEK10.6 billion came from the city treasurer, SEK700 million was secured by mortgage deeds, and SEK4.6 billion consisted of senior unsecured medium-term notes in its own name, with principal repayments in 2016-2018.

We now assess Framtiden's liquidity as adequate, instead of less than adequatepreviously, after reviewing the liquidity access offered by the contractual arrangement between Framtiden and the city treasury. Specifically, including the funding volumes from the city treasury, we calculate Framtiden's liquiditysources-to-uses ratio at 120%.

The stable outlook reflects our expectation that over the next two years Framtiden's risks will remain limited. We anticipate that Framtiden's very strong enterprise risk profile and strong financial risk profile will comfortably sustain the SACP, assuming continued healthy financial performanceand a sound debt position after a gradual, mild increase in leverage. We do not foresee any changes in Framtiden's ownership and support structure that would affect our view of the company's role for or link to Goteborg.

We could raise the ratings if Framtiden's relationship with the city strengthened further, for example through a formal, unconditional, and irrevocable guarantee. We could also raise the ratings if we saw a marked improvement in Framtiden's financial risk profile, such as through a noticeable and sustainably improvement in financial performance.

We could lower the ratings if we saw a lower likelihood of extraordinary support for Framtiden. This could, for example, occur if there were plans for Framtiden's privatization or if there were uncertainty regarding Goteborg's financing responsibility. Pressure on the ratings could also build if we witnessed a marked deterioration in Framtiden's financial risk profile, for example, through debt rising noticeably beyond our current projections or a significant slump in financial performance. We however consider both scenariosremote at this stage.