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 December 31, 2017 amounted to SEK 6,200 million (6,650).

Hufvudstaden has an MTN programme totalling SEK 4.0 billion and the outstanding amount is SEK 3.7 billion. Outstanding commercial paper amounted to SEK 1.3 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 1.8 years (1.9), the average capital tie-up period was 3.4 years (2.7), and the average annual equivalent rate of interest was 1.9 per cent (2.1). Net interest-bearing debt was SEK 5,805 million (5,536). Of the total borrowing, SEK 3,200 million carries a fixed rate of interest. To achieve the desired interest payment structure, use is made of interest derivatives. The underlying credit of SEK 1,750 million (3,250) is hedged via interest derivatives. The fair value of all interest derivatives as at December 31, 2017 was SEK -30.3 million (-91.9). The negative figure can be explained by a general fall in market interest rates since the derivative contracts 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 the amortized cost, which in all material respects concurs with the fair value.

Capital tie-up structure, SEK m, December 31, 2017

Maturity, year Credit agreement Bank loans
Bonds
Commercial paper1 Total
Proportion, %
< - 1 1,700 200 1,000 - 1,200 20
1 - 2 500 - 500 - 500 8
2 - 3 1,500 500 - - 500 8
3 - 4 2,000 500 1,000 300 1,800 29
4 - 5 1,200 - 1,200 - 1,200 19
5 - 6 - - - - - -
6 - 7 1,000 - - 1,000 1,000 16
Total 7,900 1,200 3,700 1,300 6,200 100

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

 

Fixed interest structure, SEK m, December 31, 2017

Maturity, year Credit amount Interest derivatives Net Average AER, %1 Proportion, % 
< - 1 3,500 -450 3,050 1.9 49
1 - 2 500 450 950 2.7 15
2 - 3 - - - - -
3 - 4 1,000 - 1,000 1.5 16 
4 - 5 1,200 - 1,200 1.5 20
Total 6,200 0 6,200 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.