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 financing requirements are met through a number of the major Nordic banks and the capital market. Total borrowings as of September 30, 2024 amounted to SEK 9,850 million (9,400 at year-end). Hufvudstaden has an MTN programme totalling SEK 12,000 million, and a commercial paper programme amounting to SEK 3,000 million. The amount outstanding in bonds was SEK 7,950 million and there was SEK 400 million in commercial paper.
Hufvudstaden ensures that at any point in time there are unutilised loan assurances to cover all outstanding commercial paper. As of September 30, 2024, cash and cash equivalents and unutilised loan commitments amounted to SEK 6,025 million, which covers all maturities for the next two years.
The average fixed interest period, including effects of derivative instruments, was 2.1 years (1.2 at year-end), the average capital tie-up period was 2.2 years (2.2 at year-end), and the average effective rate of interest was 3.0 per cent (3.2 at year-end) including, and 2.8 per cent (3.1 at year-end) excluding, the cost of unutilised loan commitments. Interest-bearing net debt was SEK 9,325 million (9,018 at year-end). In addition, the lease liability according to IFRS 16 amounted to SEK 737 million (729 at year-end), and total net debt was SEK 10,062 million (9,747 at year-end). In addition to loans outstanding, there are unutilised loan commitments amounting to SEK 5,500 million.
To achieve the desired interest payment structure, borrowing takes place at both a fixed and a variable rate of interest and the Group has entered into interest-rate derivative agreements to manage exposure to fluctuations in market interest rates. Underlying credits of SEK 1,000 million (-) are hedged via interest-rate derivatives. In addition, total borrowing of SEK 5,650 million carries a fixed rate of interest. The derivatives are measured at fair value in the balance sheet. Other financial assets and liabilities are recognised at amortised cost which, apart from the bond loans, essentially concurs with fair value.
Capital tie-up structure, SEK m, September 30, 2024
| Maturity, year | Bank loans |
Bonds/Commercial paper | Total |
Unutilised |
| < 1 | 500 | 2,700 | 3,200 | 500 |
| 1 - 2 | - | 1,800 | 1,800 | 2,000 |
| 2 - 3 | - | 2,000 | 2,000 | 1,000 |
| 3 - 4 | 1,000 | 500 | 1,500 | 1,000 |
| 4 - 5 | - | 1,350 | 1,350 | 1,000 |
| Total | 1,500 | 8,350 | 9,850 | 5,500 |
Fixed interest structure, September 30, 2024
| Maturity, year | Credit amount, SEK m | AER, % | Proportion, % |
| < 1 | 3,200 | 3.91) | 33 |
| 1 - 2 | 1,800 | 1.7 | 18 |
| 2 - 3 | 2,000 | 1.9 | 20 |
| 3 - 4 | 500 | 3.9 | 5 |
| 4 - 5 | 2,350 | 3.4 | 24 |
| Total | 9,850 | 3.02) | 100 |
1) Including costs for unused loan commitments.
2) The average effective rate excluding cost for unutilised loan commitments was 2.8 per cent.
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.
