Credit Risk Assessment of Real Estate Companies : How does the Credit Assessment of Banks and Bond Investors Differ?

Abstract: The vast majority of the Swedish real estate companies are to some extent financed by debt and are dependent on external capital when expanding their business. Swedish real estate companies have traditionally financed their business through bank loans, but as a result of – among other things – stricter regulations, an increasing share of the Swedish real estate companies seek funding in the capital market, and corporate bonds in particular have emerged as an alternative to bank loans. In all types of lending, whether it is a bank loan or an investor who buys a bond, the lender must assess the credit risk of the company and / or the bond. This is to ensure the company's repayment ability and that the borrower gets sufficient compensation for the risk undertaken. In this thesis, the credit risk assessment process has been evaluated from two different perspectives to explore if there are any differences in the assessment conducted by banks and bond investors. In this thesis, it appears that the differences between the different parties' assessment are relatively small and that both parties evaluate approximately the same parameters and key performance indicators.