Financing

Here you can read about Hufvudstaden's financing, refinancing and interest risks to which the Company is exposed as well as the Company's debt management.

Hufvudstaden’s finance function is a Group function charged with central responsibility for financing and liquidity planning. The work is governed by the Finance policy decided by the Board of Directors, which aims to secure the Group’s financing requirements at the lowest possible cost and risk.

Within the finance function, there are instructions, systems and rules of procedure to achieve good internal control and follow-up of operations. Major financing solutions and derivative transactions should be approved by the Chairman of the Board and the Board is informed at each Board meeting about financial issues.

Financing structure

Hufvudstaden's borrowing as at September 30, 2017 amounted to SEK 6,450 million (6,650 at the turn of the year). 

Hufvudstaden has an MTN programme totalling SEK 4.0 billion, and the outstanding amount is SEK 3.2 billion. Outstanding commercial paper amounted to SEK 0.8 billion. Hufvudstaden ensures that at any point in time there are unutilized loan assurances to cover all outstanding commercial paper. The average fixed interest period was 1.6 years (1.9 at the turn of the year), the average capital tie-up period was 2.3 years (2.7 at the turn of the year), and the average annual equivalent rate of interest was 1.9 per cent (2.1 at the turn of the year). Net interest-bearing debt was SEK 5,925 million (5,536 at the turn of the year). Of the total borrowing, SEK 2,700 million carry a fixed rate of interest. To achieve the desired interest payment structure, use is made of interest derivatives. The underlying credit of SEK 2,700 million (3,250 at the turn of the year) is hedged via interest derivatives. The fair value of all interest derivatives as at September 30, 2017 was SEK -43.5 million (-91.9 at the turn of the year). The negative figure can be explained by a general fall in market interest rates since the derivatives were signed. Derivatives are valued at fair value in the Balance Sheet. All derivatives are classified as level 2 according to IFRS 13. There is no set-off of financial assets and liabilities and there are no agreements that permit netting. Other financial assets and liabilities are reported at amortized cost, which in all material respects concurs with the fair value.

Capital tie-up structure, SEK m, September 30, 2017

Maturity, year Credit agreement Bank loans
Bonds
Commercial paper1 Total
Proportion, %
< - 1 2,950 1,450 1,000 - 2,450 38
1 - 2 500 - 500 - 500 8
2 - 3 1,000 - - 300 300 5
3 - 4 1,000 - 500 500 1,000 15
4 - 5 2,200 1,000 1,200 - 2,200 34
Total 7,650 2,450 3,200 800 6,450 100

 1) Capital tie-up for commercial paper loans has been calculated according to the underlying loan assurances.

 

Fixed interest structure, SEK m, September 30, 2017

Maturity, year Credit amount Interest derivatives Net Average AER, %1 Proportion, % 
< - 1 4,250 -700 3,550 1.9 54
1 - 2 500 700 1,200 2.5 19
2 - 3 - - - - -
3 - 4 500 - 500 1.8
4 - 5 1,200 - 1,200 1.5 19 
Total 6,450 0 6,450 1.9 100 

1) The credit margins in the table are allocated to the period in which the credit is reported.

Surplus liquidity

Hufvudstaden’s aim is to use surplus liquidity to amortize existing loans. Surplus liquidity not used for amortization may only be invested in instruments with high liquidity and low risk.

Financing risks and interest risks

Hufvudstaden is mainly exposed to financing risks and interest risks. The Group endeavours to have a credit portfolio with a diverse credit renewal structure that facilitates possible amortizations. No loans are raised in foreign currency and consequently the Group is not exposed to a currency exchange risk. Borrowing normally takes place with short fixed interest periods and interest swaps are used to achieve the desired fixed interest structure.

Derivatives

Derivatives are only used for the purposes of minimizing the risk and should be linked to an underlying exposure. At present, the Group has derivatives reported in the category financial assets and liabilities valued at fair value in profit or loss. Hedge accounting is not applied.

The Company has satisfactory margins with regard to the lenders' restrictions (covenants) in the loan agreements.