Zengun contemplates issuing new senior secured bonds, a buy-back and full refinancing of the outstanding bonds, brings forward the publication of its full year report and provides a financial update

Zengun Group has mandated ABG Sundal Collier and DNB Carnegie to sound out investors for senior secured floating-rate bonds with an expected initial tranche of SEK 750m under a SEK 1,500m framework and is offering holders of SEK 400m outstanding bonds (maturity 5 Feb 2028; SEK 10m held by the company) a roll‑over option. Proceeds are earmarked to redeem preference shares, refinance outstanding bonds and for general corporate purposes; Zengun may early‑redeem remaining outstanding bonds at 103.175% of nominal plus a 1.00% sustainability‑linked premium. The company moved its FY2025 report forward to 9 Feb and provided unaudited FY25 results: net turnover SEK 2,407.3m, EBITDA SEK 157.5m, operating cash flow SEK 67.7m, net debt SEK 125.1m, equity ratio 40.1% and an order book of SEK 2,947.9m (plus a phase‑1 pipeline of SEK 5,200m).

Analysis

Market structure: Zengun’s contemplated SEK 750m–1,500m senior secured floating-rate bond increases supply in the Swedish mid‑market construction credit space and directly benefits secured bond investors and bookrunners (ABG, DNB). Existing holders of the SEK 400m Outstanding Bonds are offered an attractive early redemption (103.175% + 1% sustainability premium), which de-risks rollover holders but tightens secondary supply — a net neutral to modestly negative price shock for unsecured credit. The firm’s net debt falling to SEK 125m from SEK 186.5m and improved operating cash flow (SEK 67.7m) reduces default probability but the weaker order intake (orders received 2,256m vs 2,892m) flags medium-term revenue risk.

Risk assessment: Tail risk is a failed bond placement triggering liquidity pressure or covenant renegotiation; probability medium but impact high—could force asset sales or dilutive equity issuance within 3–6 months. Near term (days) watch the 9 Feb audited report and bookbuild terms; short term (weeks–months) the covenant package, margin step‑ups and LTV; long term (quarters) execution of acquisitions and conversion of the SEK 5.2bn phase‑1 pipeline into phase‑2 contracts. Hidden dependencies: success hinges on Swedish credit appetite and STIBOR moves — a sudden 50–100bp parallel rise in short rates materially increases Zengun borrowing cost given floating‑rate structure.

Trade implications: Direct credit play only if new bonds price >= STIBOR+600–650bps with first‑loss security and standard covenants; otherwise pass. Equity/relative plays: prefer larger, liquid contractors (Skanska SKA‑B) as defensive longs vs small/mid peers (Peab PEAB B, NCC‑B) as shorts on potential sector contagion; implement delta‑hedged put spreads on smaller peers for 3–6 months to cap cost. FX/other: a SEK sell bias of 0.5–1.5% is warranted if bookbuilding shows >SEK1bn issuance and Swedish corporate spreads widen >20bps within 7 trading days.

Contrarian angle: Market may underweight that Zengun’s improved cash‑flow and reduced net debt materially lower credit risk despite increased nominal issuance; if New Bonds are priced wide (>=STIBOR+700bps) an opportunistic high‑coupon, short‑duration buy (3 years) could offer asymmetric return given secured status. Conversely, the consensus may underprice the execution risk of converting the SEK 5.2bn phase‑1 pipeline — failure to convert could depress earnings 10–20% over 12–24 months. Historical parallel: small regional builders that recapitalised via secured bonds often re‑rate positively when cash flow stabilises, but failed placements produced >30% equity drawdowns — size positions accordingly.

Key Decisions for Investors

• Conditional credit buy: allocate 2–3% of portfolio to Zengun New Bonds only if priced >= STIBOR+600bps (floater) with 3‑5 year tenor, first‑priority security and no adverse springing covenants; cap exposure at SEK 50–100m equivalent and exit if audited 9 Feb report shows net debt >SEK 200m or covenant waiver requests within 30 days.
• Relative equity trade: go long Skanska (SKA‑B) 2% weight and short Peab (PEAB B) 1.5% or NCC (NCC‑B) 1.5% (beta‑neutralize) over 3–6 months to capture flight‑to‑quality flows should mid‑cap construction credit reprice; trim both legs if sector spreads tighten >30bps.
• Options hedge: buy 3‑month put spreads (buy 1 put, sell 1 lower strike) on Peab or NCC sized to cover 1–2% portfolio downside, strikes ~10–15% OTM to cap cost, trigger entry if Zengun New Bond bookbuild shows >SEK1bn issuance or sector HY spread widens >25bps.
• FX tactical: short SEK vs EUR (sell SEK forward) for 0.5–1.5% move if within 7 days the bookbuild signals >SEK1bn issuance and EUR/SEK moves >+0.3%; set stop‑loss at 0.75% adverse move and take‑profit at 1.25%.