(Bloomberg) -- Swedish landlord SBB has launched a major overhaul of its debt structure as it prepares to fight a landmark litigation case in London next month. 

Samhallsbyggnadsbolaget i Norden AB, as the company is officially known, is planning to issue at least €1.7 billion ($1.8 billion) of new bonds that existing noteholders can swap their securities for. The aim, in part, is to soften the impact of pending litigation from US hedge fund Fir Tree Partners. 

SBB said the new notes will include tweaked terms that remove “residual uncertainties” over its consolidated coverage ratio. Fir Tree is set to challenge SBB in court next month over whether the landlord allegedly breached this covenant — a gauge of a company’s ability to service its debt — last year. 

Investment firms including Corbin Capital Partners and Hudson Bay Capital Management, which hold a combined €128 million in SBB’s bonds, have also told the Swedish company that they intend to seek repayment in connection with the covenant. At the same time, that’s a fraction of SBB’s about €4.6 billion of outstanding bonds.

The exchange offer to noteholders aims to “take away some of the noise in the market,” Chief Executive Officer Leiv Synnes said in a phone interview. Big bondholders “have never raised any discussions about covenants,” he said.  

Still, the alleged covenant breach has been awkward for SBB, which is in the process of a major corporate revamp to raise fresh funds and pay down some of its debts. The landlord became one of the most prominent victims of the rapid rise in interest rates in recent years, as property prices plunged and financing became scarcer.

The new notes will also be issued by a new intermediate holding company which is positioned closer to SBB’s assets, according to the statement. The reworking of SBB’s corporate structure — which includes the establishment of an education-focused joint venture and a new residential unit — has meant that many of its assets have been moved under this new company, it said. 

“We want to create a better bond structure together with noteholders,” Synnes said in the interview. SBB will also offer to buy back certain shorter-dated notes, providing liquidity to holders. 

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