Asset Buyout Partners Annual Report 2019

Note 22 Subsequent events After year-end there has been significant global events creating a volatile market environment. As the Covid-19 virus spread from a regional crisis in China’s Hubei province to a global pandemic, equi- ties plummeted, and market volatility increased around the world. The fast spreading of the coronavirus worldwide and the measures taken to curb the contagion will have implications for the growth in the global economy and the development in capital markets. In addition to the Covid-19 outbreak, there has been considerable volatility in the oil price following the collapse of Opec+ resulting in an oil supply shock with brent crude price trading below USD 30/ bbl, down from USD 60/bbl at year-end 2019. The outbreak is still in its early stages, and we do not know how long the pandemic will last or how deep the impact on the economy will be. Authorities around the world are implementing aggressive measures to bolster economic activity. The uncertainty of the financial impact is assessed as being too high to quantify specific effects on ABP’s assets and liabilities. Market value of investment properties As many of ABPs tenants operate within the Oil and Gas industry it is expected that the uncertain market conditions due to Covid-19 and the challenging market conditions in the petroleum industry may have a negative impact on their operations. These effects may lead to decreased occupancy and weaker rental growth going forward, and may also impact yield levels for valuations of the properties. However, ABPs property portfolio is robust with solid tenants, a lease duration close to 10 years and a rental income backlog (future minimum payments under non-cancellable leases) of NOK 6.2 billion. ABP’s industrial assets are also more resilient to the potential adoption of agile- and co-working, switch from manpower to technology, and increased utilization of space, compared to other real estate segments such as office, retail and hotels. Rental income and accounts receivables ABPs contracted rental income is a key input factor to operations and to market value of the portfolio. A risk in uncertain markets is that some tenants may default and thus creating a loss for ABP. With respect to trade receivables the risk is limited as this accounted for only NOK 6 million at year end. In addition, almost all outstanding rent for the first two quarters of 2020 has been paid in full at the time of adoption of this Annual Report, in accordance with ABP’s non-terminal lease agreements. Derivative financial instruments The decline in interest rates has had a negative impact on the market values of ABPs derivative financial instruments. These instruments are entered into for hedging purposes, securing reduced volatility in interest cost for ABP. About 66 % of ABPs interest payments are fixed through these contracts. However, the decrease in long-term interest rates are expected to counteract some of these effects, by way of lowering yields and increasing real estate values. Liquidity The Groups liquidity is robust with significant available cash and unu- tilized credit facilities at the time of adoption of this Annual Report. In addition, there is no material debt due until the end of 2023 and there is headroom in covenants levels. The Groups financial position is therefore assessed as strong and management don’t see any need for short term actions related to liquidity. Asset Buyout Partners | Annual Report 2019 45