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 at December 31, 2023 amounted to SEK 9,400 million (9,000). Hufvudstaden has an MTN programme totalling SEK 12,000 million, and the total amount outstanding is SEK 6,100 million. In addition, there is a commercial paper programme amounting to SEK 3,000 million, with SEK 1,100 million outstanding.
Hufvudstaden ensures that at any point in time there are unutilised loan assurances to cover all outstanding commercial paper. As at December 31, 2023, cash and cash equivalents and unutilised loan commitments amounted to SEK 5,182 million, which covers all maturities for the next two years.
The average fixed interest period was 1.2 years (1.7), the average capital tie-up period was 2.2 years (2.6), and the average equivalent rate of interest was 3.2 per cent (1.9) including, and 3.1 per cent (1.7) excluding, costs for unutilised loan commitments. Interest-bearing net debt was SEK 9,018 million (8,547). In addition, leasing debt according to IFRS 16 amounted SEK 729 million (712), total net debt was SEK 9,747 million (9,259). In addition to outstanding loans, there are unutilised loan commitments amounting to SEK 4,800 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 4,300 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, December 31, 2023
| Maturity, year | Bank loans |
Bonds/Commercial paper | Total |
Unutilised |
| < 1 | - | 2,100 | 2,100 | 1,000 |
| 1 - 2 | 1,200 | 2,100 | 3,300 | 800 |
| 2 - 3 | - | 2,500 | 2,500 | 1,000 |
| 3 - 4 | 1,000 | 500 | 1,500 | 2,000 |
| Total | 2,200 | 7,200 | 9,400 | 4,800 |
Fixed interest structure, December 31, 2023
| Maturity, year | Credit amount, SEK m | AER, % | Proportion, % |
| < 1 | 5,100 | 4.71) | 54 |
| 1 - 2 | 1,300 | 1.7 | 14 |
| 2 - 3 | 2,500 | 1.2 | 27 |
| 3 - 4 | 500 | 2.2 | 5 |
| Total | 9,400 | 3.22) | 100 |
1) Including costs for unused loan commitments.
2) The average effective rate excluding cost for unutilised loan commitments was 3.1 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.
