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.
Hufvudstaden's financing requirements are met through a number of the major Nordic banks and the capital market. Total borrowings as at 31 March 2022 amounted to SEK 9,100 million (9,200 at year-end). Hufvudstaden has an MTN programme totalling SEK 12,000 million, and the total amount outstanding is SEK 7,800 million. In addition, there is a commercial paper programme amounting to SEK 3,000 million, with SEK 300 million outstanding.
Hufvudstaden ensures that at any point in time there are unutilised loan commitments to cover all outstanding commercial paper. The average fixed interest period was 2.3 years (2.2 at year-end), the average capital tie-up period was 2.6 years (2.6 at year-end), and the average equivalent rate of interest was 1.4 per cent (1.3 at year-end) including, and 1.3 per cent (1.2 at year-end) excluding, costs for unutilised loan commitments. Interest-bearing net debt was SEK 8,499 million (8,018 at year-end). In addition, leasing debt according to IFRS 16 amounted SEK 714 million (716 at year-end), total net debt was SEK 9,213 million (8,734 at year-end). In addition to outstanding loans, there are unutilised loan commitments amounting to SEK 4,500 million.
To achieve the desired interest payment structure, borrowing takes place at both a fixed and variable rate of interest. Of the long-term borrowings, SEK 6,000 million carries a fixed rate of interest. Financial assets and liabilities are recognised at amortised cost, which concurs in all essentials with fair value.
Capital tie-up structure, SEK m, 31 March 2022
|Maturity, year||Credit agreement||Bank loans
|1 - 2||3,000||500||1,000||1,500||1,500|
|2 - 3||3,000||-||2,000||2,000||1,000|
|3 - 4||1,500||-||500||500||1,000|
|4 - 5||3,500||-||2,500||2,500
Fixed interest structure, 31 March 2022
|Maturity, year||Credit amount, SEK m||AER, % 1) 2)||Proportion, %|
|1 - 2||1,000||1.3||11|
|2 - 3||2,000||1.2||22|
|3 - 4||500||1.2||6|
|4 - 5||2,500||1.4||27|
1) The credit margins in the table are allocated to the period in which the credit is reported.
2) The average effective rate excluding cost for unutilised loan commitments was 1.3 per cent.
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 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.