Post on 23-Jun-2020
Swedish Local Government
Debt Office
KOMMUNINVEST
Version: 30 September 2015
Photo
: E
ric L
indvall,
Im
ageB
ankS
weden
Bloomberg ticker: KOMINS
Disclaimer
www.kommuninvest.org 2
These materials are confidential and are not for release, publication or distribution, in whole or in part, directly or
indirectly, in or into the United States (other than to qualified institutional buyers ("QIBs") (as defined below) who
are also “qualified purchasers” within the meaning of Section 2(a)(51)(A) of the Investment Company Act (as
defined below) and the rules and regulations thereunder), Canada, Japan or Australia.
IMPORTANT: YOU ARE ADVISED TO READ THE FOLLOWING CAREFULLY BEFORE READING, ACCESSING
OR MAKING ANY OTHER USE OF THE MATERIALS THAT FOLLOW.
These materials have been prepared by and are the sole responsibility of Kommuninvest i Sverige AB (publ) (the “Issuer”)
and have not been verified, approved or endorsed by any lead manager, bookrunner or underwriter retained by the Issuer.
No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness,
accuracy, completeness or correctness of the information or opinions contained herein.
These materials are provided for information purposes only and do not constitute, or form part of, any offer or invitation to
underwrite, subscribe for or otherwise acquire or dispose of, or any solicitation of any offer to underwrite, subscribe for or
otherwise acquire or dispose of, any debt or other securities of the Issuer (“securities”) and are not intended to provide the
basis for any credit or any other third party evaluation of securities. These materials should not be considered as a
recommendation that any investor should subscribe for or purchase any securities. If any such offer or invitation is made, it
will be done pursuant to separate and distinct documentation in the form of a prospectus, offering circular or other
equivalent document (a "prospectus") and any decision to purchase or subscribe for any securities pursuant to such offer or
invitation should be made solely on the basis of such prospectus and not these materials. These materials may not be
relied upon for the entering into of any transaction.
In particular, investors should pay special attention to any sections of the final prospectus describing any risk factors. The
merits or suitability of any securities or any transaction described in these materials to a particular person’s situation should
be independently determined by such person. Any such determination should involve, inter alia, an assessment of the
legal, tax, accounting, regulatory, financial, credit and other related aspects of the securities or such transaction.
These materials may contain projections and forward looking statements. Any such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the Issuer’s actual performance or
achievements to be materially different from any future performance or achievements expressed or implied by such
forward-looking statements. Any such forward-looking statements will be based on numerous assumptions regarding the
Issuer’s present and future strategies and the environment in which the Issuer will operate in the future.
Bloomberg ticker: KOMINS www.kommuninvest.org 3
Further, any forward-looking statements will be based upon assumptions of future events which may not prove to be
accurate. Any such forward-looking statements in these materials will speak only as at the date of these materials and the
Issuer assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
These materials are confidential, are being made available to selected recipients only and are solely for the information of
such recipients. These materials must not be reproduced, redistributed or passed on to any other person or published, in
whole or in part, for any purpose without the prior written consent of the Issuer.
These materials are not intended for distribution to, or use by any person or entity in any jurisdiction or country where such
distribution or use would be contrary to local law or regulation. In particular, these materials are for distribution in the
United Kingdom only to persons who meet the following criteria: 1. (i) investment professionals falling within Article 19(5) of
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) persons falling within
Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order or 2. persons to whom
these materials may otherwise be directed without contravention of section 21 of the Financial Services and Markets Act
2000 (all such persons being referred to as “relevant persons”). These materials must not be acted or relied on by persons
who are not relevant persons. In member states of the European Economic Area, these materials are only directed at
persons who are “qualified investors” within the meaning of Article 2(1)(e) of Directive 2003/71/EC.
These materials and the information contained herein do not constitute and should not be construed as an offer to sell or
solicitation of an offer to buy securities in the United States. The securities described in these materials have not been, and
will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act") and may not be offered or
sold within the United States or for the account or the benefit of, US persons (as defined in Regulation S under the
Securities Act ("Regulation S")) absent registration under the Securities Act or unless an exemption from the registration
requirements of the Securities Act is available. The Issuer does not intend to conduct a public offering of any securities in
the United States. These materials are not for release, publication or distribution, in whole or in part, directly or indirectly, in
or into the United States except to qualified institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act
who are also “qualified purchasers” ("QPs") within the meaning of Section 2(a)(51)(A) of the US Investment Company Act of
1940, as amended (the "Investment Company Act"), and the rules and regulations thereunder. By accepting delivery of
these materials the recipient warrants and acknowledges that it is either (i) a non-US person (as defined in Regulation S)
outside the United States or (ii) a QIB that is also a QP. Any failure to comply with the foregoing restrictions may constitute
a violation of US securities laws.
Disclaimer (cont.)
Bloomberg ticker: KOMINS
KOMMUNINVEST
Value and security for AAA investors
www.kommuninvest.org 4
• Founded 1986 by ten local governments. Currently
280 owners/members (total=310), of which 272
municipalities and 8 county councils/regions.
• AAA/Aaa, stable outlook.
• Explicit, irrevocable, unlimited, joint and several
guarantee from owners/members. Local
governments have constitutional right to levy
income tax on citizens.
• BIS 0% risk-weighting. Level 1 asset for LCR
purposes in the EU & Switzerland. Proposed Level
1 in the UK.
• Regulated by the Swedish FSA – Securities issued
by Kommuninvest are equal to state risk1.
• Monetary policy counterparty to the Riksbank and
member of its clearing and payment system RIX.
1) Clarification from Finansinspektionen is included in Investor Factbook
Bloomberg ticker: KOMINS www.kommuninvest.org 5
KOMMUNINVEST
Local government sector borrowing
• Increased pace of investment, principally due to urbanisation.
Emphasis on infrastructure, housing and energy supply.
• Stable debt levels in relation to GDP, between 11-13% of GDP
Bloomberg ticker: KOMINS
Municipalities (41%) (Lending solely to members of
Kommuninvest Cooperative Society)
KOMMUNINVEST
Loan portfolio distribution
www.kommuninvest.org 6
Municipal housing companies (29%) (Loans guaranteed by members of
Kommuninvest Cooperative Society)
Other municipal companies (22%) (Loans guaranteed by members of
Kommuninvest Cooperative Society)
Municipal energy companies (7%) (Loans guaranteed by members of
Kommuninvest Cooperative Society)
County councils (1%) (Lending solely to members of
Kommuninvest Cooperative Society)
Source: Kommuninvest. Loan portfollio as of 30 June 2015
Loan portfolio duration: 2.3 yrs
(30 June 2015)
* Share of submitted loan offers accepted by
clients. Excludes proprietary capital markets
funding by clients.
Bloomberg ticker: KOMINS
KOMMUNINVEST
Financial highlights 2011– 2015
www.kommuninvest.org 7
FY 2011 FY 2012 FY 2013 FY2014 HY2015
Lending, USDbn 20.4 24.4 25.3 27.0 29.4
Balance sheet total, USDbn 28.4 34.4 33.7 37.9 42.6
Net interest income, USDm 69.5 93.7 117.7 111.1 45.0
Operating profit, USDm 48.1 30.2 92.0 88.5 8.4
Leverage Ratio, reported according to CRR*, % n.a. 0.33 0.57 0.76 0.67
Leverage Ratio, including subordinated loan**, % n.a. 0.65 0.91 1.09 0.96
Total capital ratio 45.7% 30.4% 59.5% 49.3% 53.1%
Tier 1 capital
Note: Increase in share capital during
2015 must be approved by Swedish
FSA before inclusion as core Tier 1
capital. Approval was obtained on 24
August 2015.
SEK/USD = 8.2389 (30 Jun 2015)
* Tier 1 capital in relation to total assets and commitments (exposures).
** Tier 1 capital and subordinated loan issued by Kommuninvest Cooperative Society,
in relation to total assets and commitments (exposures).
Lending margins reduced from Q4-2014.
Future capital build-up to be based on direct
capital injections rather than income statement.
MACRO-ECONOMIC FRAMEWORK
Key facts Sweden
www.kommuninvest.org 8
Capital Stockholm.
Government Parliamentary democracy,
Constitutional monarchy.
Population 9.7 million.
Currency Swedish krona (SEK).
European Union EU member since 1995, but not a
member of the monetary union,
EMU. Independent central bank.
Industry Diversified, export-based.
Major export sectors Machinery, Electrical products &
telecom, Chemicals & pharma-
ceuticals, Forestry, Minerals,
Automotive, Energy.
Major export markets Norway, USA, Germany, UK.
Rankings Social Progress Index (Soc. Prog. Initiative, Apr 2015) #2
U21 National Higher Education Systems (U21, May 2014) #2
BSRI Sovereign Risk Index (BlackRock, Jan 2015) #4
Global Competitiveness Index (World Economic Forum, 2014-15) #10
ORIGIN FOR LEADING COMPANIES
Volvo Ericsson
H&M Skanska
Electrolux
Sandvik
Tobii Technology
Swedish public sector debt 2003-2014
MACRO-ECONOMIC FRAMEWORK
Robust public finances
www.kommuninvest.org 9
Current account balance 1997-2015
Source: IMF World Economic Outlook Database, April 2015
Sourc
e:
IMF
World
Econom
ic O
utlo
ok
Data
base,
April 2015
Sourc
e:
Sw
edis
h N
atio
nal D
ebt
Off
ice
and K
om
munin
vest,
Apr
2015
Bloomberg ticker: KOMINS
SWEDEN’S PUBLIC SECTOR
Constitutional system
www.kommuninvest.org 10
Central Government
30 % of public sector spending
Local Governments
70 % of public sector spending
International Debt Market
An unlimited joint and
several guarantee covers
all liabilities
Kommuninvest has
already entered into and
will subsequently enter
into.
Local governments
cannot legally declare
insolvency nor suspend
payment.
Co-equal status between
central and local
government defined by
constitution.
Swedish constitution –
Instrument of Government
Art 1 Swedish democracy is
founded on the free formation
of opinion and on universal
and equal suffrage. It shall be
realized through a
representative and
parliamentary polity and
through local self-
government.
Art 7 Sweden has local
authorities at local and
regional level.
Chapter 14, Art 4 The local
authorities may levy tax for
the management of their
affairs.
Bloomberg ticker: KOMINS
SWEDEN’S PUBLIC SECTOR
Structure of public sector spending
www.kommuninvest.org 11
• Childcare
• Healthcare
• Municipal housing
• Care of elderly and disabled
• Schooling for children and young
people •
• Law, order and security
• Sanitation and waste management
• Energy supply •
• Water supply and sewage
• Construction issues
Local governments 70% of public sector spending
Central government 30% of public sector spending
• Laws and ordinances
• Judicial system
• Defence & security
• Environment
• Higher education and research
• Transport infrastructure
• Rural affairs, animals and food
• Migration and integration
• National economy and budget
Bloomberg ticker: KOMINS
SWEDEN’S PUBLIC SECTOR
Local governments are major tax recipients
www.kommuninvest.org 12
Local governments collect > 90% of income tax
Total income tax on households in 2012: SEK 605 bn, of
which local governments collected SEK 561 bn and central
government SEK 44 bn. Average Swedish income tax 2012:
26.4% (including effect of tax reductions).
Source: Swedish Tax Authority, Tax Statistical Yearbook 2014
Citizens income tax 2015: Income up to USD ~56,700 p.a. Solely local government tax paid, 29-34% of income (before effect of tax reductions). Income from USD ~56,700 - ~82,900 p.a.
Local government tax paid on all income. State income tax 20% paid on income above USD 56,700 Income above USD ~82,900 p.a. Local government tax paid on all income. State income
tax 20% paid on income between USD 56,700 and USD 82,900. State income tax 25% paid on income above USD 82,900. (SEK/USD=7.82 as of 2 January 2015)
Financing
comparison Norway Sweden Finland Denmark
Income tax 39% 69% 46% 46%
State grants 42% 16% 18% 25%
Charges 14% 6% 26% 19%
Other 5% 9% 10% 10%
Revenue of Nordic local governments
Public sector revenues – taxes and fees, 2012 SEK 1,728 bn
Source: Statistics Sweden
Bloomberg ticker: KOMINS
SWEDEN’S PUBLIC SECTOR
Strong institutional framework
www.kommuninvest.org 13
Balanced budget
requirement
Annual local
government budgets
should normally be in
balance, imbalances
must be restored within
3 years.
Law:
“Kommunallagen chap. 8
§4-5 (1991:900)”
Financial
equalisation
Imbalances between
local governments are
equalised annually
through income and
cost equalisation
schemes.
Law: “Lagen (2004:773)
om kommunalekonomisk
utjämning”
Requirement for
sound financial
management
Local governments
must work according to
a sound financial
management.
Law:
“Kommunallagen chap. 8
§1-2 (1991:900)”
Local government
financing principle
If the government alters
the tasks of local
governments, the
government must also
neutralise their financial
effect.
Approved by the
government and in force
since 1973.
Financial prudence explains Sweden’s strong public finances
and low levels of public debt
According to the Swedish Bankruptcy Act a local government cannot be declared bankrupt since they do not
fulfil the criteria of being insolvent. This is due to the fact that the local governments have the constitutional
right to levy taxes. The Swedish Court has stated that the local governments in Sweden are not covered by the
Bankruptcy Act. (RH 1996:75) This view is supported by the Swedish legal doctrine.
Bloomberg ticker: KOMINS
KOMMUNINVEST
Explicit and unlimited guarantee
www.kommuninvest.org 14
STRONG
STABLE
IMMEDIATELY
ENFORCEABLE
• Joint and several guarantee (explicit, irrevocable and unlimited )
signed by all members of Kommuninvest Cooperative Society,
for all undertakings made by Kommuninvest i Sverige AB.
municipalities and county councils cannot be declared bankrupt and
cannot cease to exist other than by merging;
Swedish municipalities and county councils are entitled to levy taxes;
state bears ultimate responsibility for the local government sector.
• Underpins Kommuninvest’s AAA/Aaa rating.
• No Swedish local government has ever defaulted
on a payment commitment.
Sweden’s Supreme Administrative Court confirmed the right of local
government to sign the joint and several guarantee in a 1994 ruling.
• Investors can make a claim on any, or all, of the guarantors
without a court order
All debt guaranteed by Swedish local governments is BIS 0% risk-
weighted in the EU area
Bloomberg ticker: KOMINS www.kommuninvest.org 15
KOMMUNINVEST
Leverage ratio
• Kommuninvest aims to reach prescribed leverage ratio level
through profit build-up; additional contribution capital from
members/owners and, if required, other capital instruments.
• New upper level for capital contributions established at the
2014 and 2015 AGMs of Kommuninvest Cooperative Society:
SEK 900 per inhabitant for municipality members/owners,
equivalent to 1.5 % leverage ratio by 2018 in expected growth
scenario (in combination with expected increase of SEK 1 bn
subordinated loan issued in 2010).
• Possibility to issue AT1 capital instruments to members
/owners or external parties were resolved by AGMs in 2014
and 2015 and now legally binding according to Swedish law.
Members/owners’ preference is to be sole providers of capital.
• Members/owners who contribute capital up to the upper level
are entitled to best loan margins. Letters to members/owners
sent out in May 2015, binding response re 2015 capital
subscription required by 31 Oct 2015.
Bloomberg ticker: KOMINS www.kommuninvest.org 16
KOMMUNINVEST
Liquidity coverage ratio (LCR)
Sweden: Level 1 • Effective from 1 January 2013.
European Union: Level 1 • According to European Commission Delegated Act on Liquidity Coverage Ratio, dated
10 October 2014, Kommuninvest securities are Level 1 assets. Effective from 1
January 2015.
UK: Proposed Level 1 • According to a consultation paper published by the Prudential Regulation Authority
(CP27/14, on the application of the European Union LCR in the UK), Kommuninvest
securities will be eligible as Level 1 assets in the UK (currently level 2) from October
2015.
Switzerland: Level 1 • According to the Swiss National Bank, Kommuninvest securities are Level 1 assets.
Effective from 1 January 2015.
US: Possible Level 1 • In Sweden, local governments are constitutionally at the same level as the sovereign.
Regarding US LCR Kommuninvest considers itself at same level as sovereign
issuers, and eligible as Level 1 at investor discretion. Effective from 1 January 2015.
Funding
Photo
: N
icho S
ödlin
g,
ImageB
ankS
weden
Funding
Bloomberg ticker: KOMINS
Borrowing per currency 2011 – 2015 (25 sept), USD bn
excl. commercial paper borrowing
Major transactions 2015/2014 (fixed)
Apr ‘15: 6yr SEK 7.1bn benchmark bond due Sept 2021 (SEK 9.4 bn outstanding)
Apr ‘15: 2yr USD 500m bond due Apr 2017 & 10.5 yr AUD 100m due Oct 2025
Jan ’15: 3yr USD 1.25 bn RegS/144A benchmark bond due January 2018
Jan ‘15: 5yr CAD 250m RegS/144A bond due Jan 2020
Nov ‘14: 4yr SEK 5.4bn benchmark bond due June 2018 (SEK 9.1 bn outstanding)
Sep ’14: 5yr USD 1bn RegS/144A benchmark bond due Nov 2019
Funding strategy based on diversification
and core benchmark markets
www.kommuninvest.org 18
Eligible
currencies
AUD, BRL, CAD,
CHF, DKK,
EUR, GBP,
HKD, JPY,
KRW, MXN,
NOK, NZD,
SEK, TWB,
ZAR, USD
• Diversification
(currencies, investors,
instruments)
• Flexibility
• Benchmark sizes
• Liquid curves
• 50 percent in SEK
Bloomberg ticker: KOMINS
STRATEGIC STRATEGIC STRATEGIC
www.kommuninvest.org 19
PROGRAMME Commercial
Paper
Euro-
Commercial
Paper (Step-classification)
Euro Medium
Term Note
(144 A)
Swedish
Benchmark
Programme
Kangaroo
and Kauri
Schuldschein,
JPY Loan
CAPACITY SEK 50 bn EUR 7 bn EUR 25 bn unlimited AUD 1 bn unlimited
DEALERS Nordea, SEB,
Danske Bank,
Swedbank, SHB
Citi, Barclays,
Deutsche, Goldman
Sachs, Credit
Suisse, BoA/ML,
UBS
Citi, Commerzbank,
Deutsche, Daiwa,
J.P.Morgan, Merrill
Lynch, Mizuho,
Morgan Stanley,
Nomura, UBS
Swedbank, Danske
Bank, Handels-
banken, Nordea,
SEB
Nomura, CBA,
RBC, TD
Securities, ANZ,
Westpac, National
Australia Bank
RATING K1 (S&P),
P-1 (Moody’s)
A-1+ (S&P),
P-1 (Moody’s)
AAA (S&P),
Aaa (Moody’s)
AAA (S&P),
Aaa (Moody’s)
AAA (S&P),
Aaa (Moody’s)
AAA (S&P),
Aaa (Moody’s)
CURRENCIES SEK, EUR EUR, USD, SEK,
CHF, GBP
Any currency
subject to
agreement
SEK AUD/NZD EUR
SHORT-TERM MEDIUM- AND LONG-TERM
KOMMUNINVEST
Funding programmes
Bloomberg ticker: KOMINS
USD 1.95 bn
FLOATING
Oct 2015: 0.65bn, Jan 2016: 0.3bn, Dec 2018: 0.5bn, May 2019: 0.5bn
CHF 0.865 bn
Dec 2015: 300m, Dec 2016: 250m, Oct 2020: 65m, Mar 2021: 100m, Feb 2022: 150m
FIXED
www.kommuninvest.org
20
OUTSTANDING BONDS (A SELECTION)
Commitment to benchmark markets
SEK 121.7 bn
Eligible as collateral &
repos with the Riksbank
(Sweden’s central bank),
Bank of Canada,
European Central Bank,
Federal Reserve,
Monetary Authority of
Singapore, Reserve
Bank of Australia,
Reserve Bank of New
Zealand and Swiss
National Bank.
Oct 2016: 21.6bn, Aug 2017: 28.0bn, June 2018: 9.7bn, Mar 2019: 23.9bn, Dec 2020: 29.1bn, Sep 2021: 9.4bn
SEK BENCHMARK PROGRAMME (FIXED)
USD 10.4 bn
Jun 2016: 2.35bn, Sep 2016: 0.8 bn, Dec 2016: 1.25 bn, Feb 2017: 1.0bn, Apr 2017: 1.0bn,
Oct 2017: 1.75bn, Jan 2018: 1.25bn, Nov 2019: 1.0bn
USD BENCHMARK PROGRAMME (FIXED)
Nov 2018: 125m, Aug 2022: 275m, Feb 2024: 50m, Oct 2025: 150m
AUD 0.6 bn
FIXED
Jan 2020
CAD 0.3 bn
FIXED
Bloomberg ticker: KOMINS www.kommuninvest.org 21
KOMMUNINVEST
Funding plan 2015
Long-term funding: USD 12-14 bn • Focus on USD and SEK benchmark programmes, Uridashi
Short-term funding: • ECP, domestic CP, short-term Uridashi
What impacts funding volume during the year? • Revisions to lending forecast
• Early redemptions in outstanding borrowings
Change in funding need – impact on funding programmes USD benchmark programme No impact (strategic programme)*
SEK benchmark programme No impact (strategic programme)*
Private placements More / fewer transactions
ECP Issuance adapted to cover early
redemptions in outstanding
borrowings or to adapt to
increase/fall in short-term lending
* Issuance may rise, provided there is investor demand
Bloomberg ticker: KOMINS
KOMMUNINVEST
Green Bond issuance
www.kommuninvest.org 22
Eligible projects
• Renewable energy
• Energy efficiency, focus on
non-fossil energy systems
• Green buildings and energy
efficiency:
• Public transportation
• Waste management
• Water management
• Adaptation measures in
buildings, infrastructure and
sensitive surroundings
• Environmental management
• Green Loans offered to
customers from 1 June 2015.
• Multi-level loans approval
process, incl. verification by the
environmental functions of
Kommuninvest’s members and
final approval by Kommuninvest
Green Bonds Environmental
Committee.
• Framework developed w/
leading bank.
• Second opinion from Cicero.
• Aim to launch inaugural Green
Bond Q4-2015.
Bloomberg ticker: KOMINS
FUNDING PROGRAMMES
Swedish benchmark programme
www.kommuninvest.org 23
• Strategic funding programme est. 2010.
Main tool in SEK 50% funding target.
• 5 market makers, repo facility, buybacks.
• 1-2 new bonds per year (syndication) + taps.
• LCR Level 1. Liquidity class 2 with Riksbank.
Issue ISIN Maturity Coupon Outstanding amount*
K1610 SE0005423753 12 Oct, 2016 2.00% SEK 21.6 bn
K1708 SE0003787985 12 Aug, 2017 4.00% SEK 28.0 bn
K1806 SE0006424990 12 Jun, 2018 1.00% SEK 9.7 bn
K1903 SE0005131299 12 Mar, 2019 2.25% SEK 23.9 bn
K2012 SE0005705621 1 Dec, 2020 2.50% SEK 29.1 bn
K2109 SE0006995064 15 Sept, 2021 1.00% SEK 9.4 bn
Total SEK 121.7 bn
Repo facility
• Established to support
programme liquidity.
• Unlimited ability for market
makers to enter into
reverse repos with
Kommuninvest.
• Attractively priced.
* Outstanding as of 31 August 2015.
Namn ISIN Förfall Kupong Utestående volym
(SEK)
K1610 SE0005423753 2016-10-12 2,00% 21 570 000 000
K1708 SE0003787985 2017-08-12 4,00% 27 986 000 000
K1806 SE0006424990 2018-06-20 1,00% 9 732 000 000
K1903 SE0005131299 2019-03-12 2,25% 23 870 320 000
K2012 SE0005705621 2020-12-01 2,50% 29 117 000 000
K2109 SE0006995064 2021-09-15 1,00% 9 440 000 000
Total 121 715 320 000
Bloomberg ticker: KOMINS
SWEDISH BENCHMARK PROGRAMME
Issue process
www.kommuninvest.org 24
New bond (primary issue)
Kommuninvest (KI) informs market makers (MMs) of issue intent approx.
2 weeks prior to issue. Benchmark bond status (min. SEK 3 bn
outstanding) typically sought on first day of issue – MMs are then
required to continuously provide bid/ask quotes. Volume allocation split
equally between MMs, or adjusted according to MM interest.
On issue date, KI issues bonds to MMs. Typically, bonds are available to
investors through MMs within 15 minutes.
Tap to existing outstanding bonds
Taps in smaller volumes on an on-going basis, until the bond has a one
year remaining maturity. Targeted maximum size outstanding in a bond
is SEK ~25 bn.
Investors can buy or sell the bond through the MM. The MM can bid for
the bond in the market or with KI, or stay short and repo it from KI.
Bloomberg ticker: KOMINS
SWEDISH BENCHMARK PROGRAMME
Spreads vs Swedish government bonds
www.kommuninvest.org 25
Source: Bloomberg (Mid-
Swaps to Benchmark)
Bloomberg ticker: KOMINS
FUNDING PROGRAMMES
USD benchmark programme
www.kommuninvest.org 26
• Strategic funding programme.
• 1-2 issues per year (auctioned public offerings).
Target BM size USD ~1.5 bn. RegS and 144A.
• Eligible as collateral and for repos with the
Riksbank (Sweden’s CB), ECB, Fed and central
banks of Australia, Singapore and Switzerland.
ISIN (RegS) Maturity Coupon Outstanding
XS0919401678 15 Jun, 2016 0.500% USD 2.35 bn
XS0981932279 13 Dec, 2016 0.875% USD 1.25 bn
XS0745301258 13 Feb, 2017 1.625% USD 1.00 bn
XS1053517394 11 Apr, 2017 1.000% USD 1.00 bn
XS0847832267 24 Oct, 2017 1.000% USD 1.75 bn
XS1173233237 29 Jan, 2018 1.000% USD 1.25 bn
XS1114373274 12 Nov, 2019 2.000% USD 1.00 bn
Distribution statistics $1.25bn, issued in Jan 2015
By geography
By investor type
Bloomberg ticker: KOMINS
USD BENCHMARK PROGRAMME
USD Pricing comparables
www.kommuninvest.org 27
So
urc
e: B
ofA
ML
/Blo
om
be
rg
Bloomberg ticker: KOMINS
USD BENCHMARK PROGRAMME
Spreads vs US Treasuries
www.kommuninvest.org 28
Source: Bloomberg
Bloomberg ticker: KOMINS
FUNDING
Floating rate notes
www.kommuninvest.org 29
• Opportunistic funding – reverse inquiries.
Private placements and club deals.
• Target maturities 2-3 years, can do up to 10.
ISIN Maturity Outstanding
XS1238251448 28 May 2019 USD 500m
XS1144483978 3 Dec 2018 USD 500m
XS1087838188 15 Jan 2016 USD 300m
XS0918632356 17 Oct 2015 USD 500m
XS0969181196 1 Oct 2015 USD 150m
XS0836466598 1 Oct 2015 USD 650m
Bloomberg ticker: KOMINS
KOMMUNINVEST
Summary
www.kommuninvest.org 30
• AAA/Aaa, “closest proxy” to Swedish sovereign risk.
0% risk-weighted.
• Explicit, irrevocable, unlimited, joint and several guarantee by
member local governments. Constitutional right for members
to levy income tax.
• Prudent risk management, significant high-quality liquidity
reserve and access to central bank funding.
• Accepted as collateral and repo with numerous central banks.
In Sweden, eligible as Level 1 assets with 100% weighting in
LCR calculation.
• Equal to Swedish government bonds from a domestic
regulatory risk perspective*.
* Clarification letter from Swedish FSA is included in the Kommuninvest Investor Factbook
Photo
: H
enrik T
rygg,
ImageB
ankS
weden
The Swedish economy
Bloomberg ticker: KOMINS
MACRO-ECONOMIC FRAMEWORK
Forecast for the Swedish Economy
www.kommuninvest.org 32
Source: National Institute of Economic Research, NIER, ”The Swedish Economy”, August 2015
• One of the few countries with triple AAA-rating & stable outlook.
• Low levels of public sector debt, one of Europe’s strongest economies.
• Strong institutional framework guaranteeing balanced public budgets.
NIER forecast, August 2015 2014 2015 2016 2017
GDP, working day adjusted, % 2.3 3.0 3.1 2.6
Employment growth, % 1.4 1.1 1.4 1.6
Unemployment, % 7.9 7.7 7.5 7.0
Inflation, CPI, % -0.2 0.1 1.2 2.2
Inflation with fixed interest rate, CPIF, % 0.5 0.9 1.6 1.7
Repo rate (at year-end, %) 0.0 -0.40 -0.25 0.75
General government net lending, % of
GDP -1.9 -1.5 -1.0 -0.5
General government gross debt
(Maastricht debt), % of GDP 43.8 43.7 42.8 42.3
Annual growth mortgage lending (%)
MACRO-ECONOMIC FRAMEWORK
Containing housing market risks
www.kommuninvest.org 33
LTVs and mortgages (% of disp. income)
Loan-to-Value ratios, new loans (%)
Sourc
e:
Sta
tistics S
weden,
Jam
2015
Loan-to-Value ratios, mortgage stock (%)
So S
ourc
e:
Fin
ansin
spektio
nen
, "T
he
Sw
edis
h M
ort
gage M
ark
et"
, A
pr
2015
Sourc
e:
Fin
ansin
spektio
nen
, "T
he
Sw
edis
h M
ort
gage M
ark
et"
, A
pr
2015
Sourc
e:
Fin
ansin
spektio
nen
, "T
he
Sw
edis
h M
ort
gage M
ark
et"
, A
pr
2015
Bloomberg ticker: KOMINS
MACRO-ECONOMIC FRAMEWORK
Sweden not burdened by EU bailouts
www.kommuninvest.org 34
EU member, eurozone member
EU member, non-eurozone member
Non EU country
Sweden is not a member of the eurozone, because the
"no" vote prevailed in the 2003 referendum. No new
referendum is planned.
Therefore, Sweden has not participated with credits
through the European Stability Mechanism, ESM (nor its
predecessors EFSF and EFSM)*.
However, Sweden has made voluntary bailout
commitments (bilateral loans), to support fellow European
countries:
• Iceland EUR 495m (2008), 495m paid out, 205m
outstanding after two early prepayments.
• Latvia EUR 720m (2009), terminated, not paid out
• Ireland SEK 600m (2010), 300m paid out
* Sweden’s commitments are limited to:
1) its share, 3.1%, of the guarantee arrangements of the ESM /
EFSM loan facilities.
2) its quota share of the financial support provided by IMF, the
International Monetary Fund. Sweden’s quota is SEK 25bn. There
are also additional commitments to the IMF, capped at SEK 45bn.
Photo
: U
lf L
undin
, im
agebank.s
weden.s
e
Public sector system
Bloomberg ticker: KOMINS
SWEDEN’S PUBLIC SECTOR
A recognised welfare state
www.kommuninvest.org 36
Social equality
Co-operation
Quality of life
Responsibility
Tax revenue as percentage of GDP, 2013
The world’s top
countries
1. Denmark
2. Sweden
3. Switzerland
4. Norway
5. Finland
6. Netherlands
Source: Tallberg Foundation,
compilation of 16 recognized ranking
lists (human development,
democracy, enterprise, environment,
education, competitiveness, etc)
Pic
ture
s: L
en
a G
ran
efe
lt, H
en
rik T
ryg
g,
Hen
rik T
ryg
g,
Le
na
Gra
ne
felt/I
ma
ge
Ban
k S
we
de
n
Source: OECD database, January 2015
Bloomberg ticker: KOMINS
Net borrowing increase recorded in 2013 and 2014 mainly due to on-lending
from the Swedish National Debt Office to the Riksbank, to increase the
Riksbank’s currency reserve. Official central govt. debt/GDP forecast for 2015
is 35 percent, including on-lending to the Riksbank and money market assets.
Adjusting for these items, the debt forecast is 29 percent of GDP.
SWEDEN’S PUBLIC SECTOR
Sovereign debt level low and stable
www.kommuninvest.org 37
So
urc
e: T
he
Na
tio
na
l I
nstitu
te fo
r E
co
no
mic
Rese
arc
h a
nd
th
e S
we
dis
h
Natio
na
l D
eb
t O
ffic
e, Ju
ne
20
14
. F
ore
ca
st fo
r 2
01
5 a
nd
20
16
Bloomberg ticker: KOMINS www.kommuninvest.org 38
SWEDEN’S PUBLIC SECTOR
Local government finances
Aggregate income statement 2014-2018
SEK Billion in current prices unless otherwise stated
Out-
come Forecast Calculation
2014 2015 2016 2017 2018
Income from activities* 175 184 189 198 209
Expenses from activities -868 -907 -951 -997 -1,047
Depreciation -28 -30 -32 -34 -36
Net expenses from activities -721 -753 -794 -833 -875
Tax revenue 602 636 672 708 749
Gen gov grants and
equalisation 127 127 128 133 139
Net financial income** 6 2 3 0 -4
Net income before
extraordinary items 14 11 8 8 9
Share of taxes and grants % 1.9 1.5 1.0 1.0 1.0
*The non-recurring effect of repayments of AFA premiums is included with SEK 5
bn for 2015.
0
50
100
150
200
250
20042005200620072008200920102011201220132014
Municipalities distributed by result in % of income from taxes
and state grants
Deficit Result 0 to 2 % Result > 2 %
Source: Swedish Association of Local
Authorities and Regions, “The Economy Report,
April 2015”
Photo
: Im
ageB
ankS
weden
Kommuninvest
Bloomberg ticker: KOMINS www.kommuninvest.org 40
KOMMUNINVEST
Strategic framework
Local government borrowing
• Investment needs in municipal services and infrastructure fuel
increase in local government borrowing.
• Expected annual growth rate in local government borrowing: 7
percent until 2017. (2011-2013 average: 7.6 percent.)
Kommuninvest strategic targets
Customer Satisfaction Index
Employee Satisfaction Index
Investor Satisfaction Index & efficiency in funding
Bloomberg ticker: KOMINS www.kommuninvest.org 41
KOMMUNINVEST
Legal structure
Ultimate owners
Ownership association
Credit market company
Bloomberg ticker: KOMINS
KOMMUNINVEST
Surplus distribution model
www.kommuninvest.org 42
Key dates 2013-2015
18 April, 2013 AGM Kommuninvest Cooperative
Society. SEK 778.5 mn decided in refunds and interest
to members. Decision on SEK 768.0 mn in new capital
contributions.
10 April, 2014 AGM Kommuninvest Cooperative
Society decided on:
- Distribution of surplus to members (SEK 696.5 mn)
and new capital contributions (SEK 696.5 mn).
- Amendments to articles of association, including
new minimum requirement for contribution capital
and new possible capital formats (leverage ratio
preparation).
April, 2015 Members to make second and ratifying
decision on amendments to articles of association, and
decide on refunds and interest to members & capital
contributions.
Bloomberg ticker: KOMINS
By rating category
By country
KOMMUNINVEST
Liquidity reserve, 30 June 2015
www.kommuninvest.org 43
By issuer category
Bloomberg ticker: KOMINS
KOMMUNINVEST
Regulations compliance
www.kommuninvest.org 44
Source: the Riksbank and Kommuninvest
Bloomberg ticker: KOMINS www.kommuninvest.org 45
KOMMUNINVEST AND THE LIQUIDITY COVERAGE RATIO
High Quality assets
Equal to the Swedish sovereign
Swedish constitution, article 1: ”Swedish democracy is founded on the free formation of opinion and on universal
and equal suffrage. It is realised through a representative and parliamentary form of government and through local
self-government.”
Principles governing the organisation and working procedures of local authorities and local taxation are adopted by
law, the Government may not adopt provisions which relate to the Riksdag – the supreme body – or authorities
under the Riksdag. Nor may the Government adopt provisions which relate to local taxation.
Explicitly guaranteed by 280 Swedish local governments (SLGs)
All bonds are guaranteed until maturity through a joint and several, explicit and irrevocable guarantee. The
guarantee is signed by the 272 municipalities and 8 county councils that own Kommuninvest.
i. SLGs cannot be declared bankrupt (court decision in Investor Factbook)
ii. Guarantee is valid (legal opinion in Investor Factbook)
iii. SLGs are entitled to enter into guarantee arrangement (see Investor Factbook)
KI bonds are treated as sovereign risk (0 % risk weight, according to Swedish FSA1.
Bonds are LCR Level 1 eligible in EU, UK (proposed) and Switzerland, from 2015.
Accepted as collateral with numerous central banks, increasingly used in repo
transactions globally.
Monetary policy counterparty to the Riksbank. Member of Riksbank clearing and
payment system, RIX.
1) Clarification letter from Swedish FSA, Finansinspektionen, included in Investor Factbook
Bloomberg ticker: KOMINS www.kommuninvest.org 46
KOMMUNINVEST AND THE LIQUIDITY COVERAGE RATIO
Liquid Assets
• Global investor base, focus on central banks and official institutions.
Eligilibity as LCR Level 1 has broadened investor appeal to include bank
treasuries.
• Outstanding USD benchmark bond curve exceeding USD 10 bn – strategic
funding programme.
• Ongoing relations with many of the world’s largest investment banks, who
quote prices in Kommuninvest paper.
• Eligible as collateral with NasdaqOMX.
• Eligible as collateral with increasing numbers of central banks, including the
Federal Reserve. As a result, Kommuninvest USD benchmark bonds are
reputedly being used in the repo market.
• AAA rating reflects, among other things, rating agencies’ views on
Kommuninvest refinancing capabilities; e.g. the liquidity of securities issued.
Photo
: O
la E
ricson/im
agebank.s
weden.s
e
Securities classification
– Sweden
www.kommuninvest.org 48
SECURITIES CLASSIFICATION | SWEDEN
Riksbank – fixed rate notes
Kommuninvest in liquidity class 2
The Swedish Central Bank (Riksbanken) accepts Kommuninvest’s
SEK-denominated bonds as collateral with the following haircuts for
price risk. Also other currencies, with haircut for currency risk.
Time to maturity Kommuninvest
(liquidity class 2)
Swedish Govt. Bond
(liquidity class 1)
0-3 yrs 3.0% 3.0%
3-5 yrs 5.0% 4.0%
5-7 yrs 7.0% 5.0%
7-10 yrs 10.0% 6.0%
>10 yrs 15.0% 7.0%
www.kommuninvest.org 49
SECURITIES CLASSIFICATION | SWEDEN
Riksbank – floating rate notes
Kommuninvest in liquidity class 2
The Swedish Central Bank (Riksbanken) accepts Kommuninvest’s
SEK-denominated bonds as collateral with the following haircuts for
price risk. Also other currencies, with haircut for currency risk.
Time to maturity Kommuninvest
(liquidity class 2)
Swedish Govt. Bond
(liquidity class 1)
0-3 yrs 3.0% 1.0%
3-5 yrs 4.0% 2.0%
5-7 yrs 6.0% 5.0%
7-10 yrs 10.0% 6.0%
>10 yrs 14.0% 7.0%
www.kommuninvest.org 50
SECURITIES CLASSIFICATION | SWEDEN
Nasdaq OMX – category 2
Valued as Swedish government bonds
“Swedish Securities, category 1: Swedish government bills and fixed rate, unstructured and
dated government bonds denominated in SEK. Swedish index linked bonds denominated in
SEK are also eligible as collateral.
Swedish Securities, category 2: Fixed rate and unstructured bonds issued by
Kommuninvest of Sweden which fall within liquidity class 2 as classified by the Riksbank
(Sweden’s central bank) and are denominated in SEK.”
Note: Nasdaq OMX does not accept floating rate notes as collateral.
Time to maturity Kommuninvest
(category 2)
Swedish Govt. Bond
(liquidity class 1)
0-5 yrs Value 95% Value 95%
5-10 yrs Value 93% Value 93%
>10 yrs Value 90% Value 90%
Maximum amount No limit if through Margin
Requirement Account: additional
10% haircut if only KI bonds used
as collateral. If through custodian,
limit is SEK 1bn per issuer.
No limit
www.kommuninvest.org 51
SECURITIES CLASSIFICATION | SWEDEN
Finansinspektionen (Swedish FSA)
According to the Swedish Financial Supervisory Authority,
Kommuninvest bonds are equal to government bonds when calculating
the liquidity coverage ratio, LCR1.
Bonds issued by Kommuninvest are considered to be Level 1 assets
and are not subject to a haircut under the LCR, provided that the bonds
possess certain fundamental and market-related characteristics.
Kommuninvest’s Swedish Benchmark Programme and USD
benchmark bonds meet the requirements.
1) Finansinspektionen, Beslutspromemoria 2012-11-13, FI Dnr 11-13136 – IN SWEDISH ONLY.
TRANSLATED SECTIONS AVAILABLE IN KOMMUNINVEST INVESTOR FACTBOOK.
See also Finansinspektionen’s Regulatory Code 2012:6, published in December 2012 (AVAILABLE IN
KOMMUNINVEST INVESTOR FACTBOOK, and Basel Committee on Banking Supervision, “Basel III: The
Liquidity Coverage Ratio and liquidity risk monitoring tools”, January 2013
Photo
: Johan A
lp,
ImageB
ankS
weden
Risk management
Bloomberg ticker: KOMINS
KOMMUNINVEST
Risk management
www.kommuninvest.org 53
Market risk
Interest rate risk
Strict hedging principles for lending and
funding transactions. Interest rate risk is kept
at a minimum.
Exchange risk
All currency exposure hedged on asset &
liability basis to SEK, USD and EUR.
Refinancing risk
Diversified funding sources limit risk.
Liquidity risk
• The liquidity reserve has to be between
20-40% of the lending.
• Kommuninvest is a monetary policy
counterparty to Sweden’s central bank, the
Riksbank.
Credit risk
• Lending to members and companies
guaranteed by members only.
• Local governments have unlimited right
to set income tax rates.
• Strict methods for assessing and
analyzing applications for membership.
• Each member’s credit monitored at
least twice yearly.
• A local government cannot be declared
bankrupt.
• Liquidity invested in highly rated assets
only: 0 or 20% risk-weight.
• Strategy to limit credit risk relating to
derivatives: ratings restrictions on
derivative counterparties and collateral
agreements. Lowest A/A2-rating without
collateral agreement.
www.kommuninvest.org 54
• Day-to-day follow-up of exposures
• Follow-up of specific municipalities
• Member and sector follow-up twice a year
• Continuous follow-up required if risk model
classification so indicates
Risk monitoring bodies (micro)
• Lending Group
• Risk & Analysis Group
• Credit Group
• CEO
• Board of the Company
Risk monitoring bodies (macro)
• Lending Group
• Risk & Analysis Group
• Credit Research & Finance Committee
• Board of the Company (sets lending limit upon
membership approval and reviews it yearly)
• Board of the Cooperative Society (approves
membership application)
Upon membership application | Throughout membership
Liquidity
preparedness
Historical
profits Financial
capacity
Development
potential Activities
with risks
Assessment criteria pre and post
membership approval
• Decision to offer membership is
taken by the Board of Directors
of the Kommuninvest
Cooperative Society.
• Fundamental requirement: The
municipality must be able to
meet its obligations as a
borrower and a guarantor.
The full analysis is always
based on a qualitative &
quantitative assessment,
taking into account the group
perspective, e.g. considering
growth opportunities,
regional/local economic
activity, financial sustainability
and surplus / deficit values in
the balance sheet.
KOMMUNINVEST
Credit analysis in lending operations
Lending to Swedish local governments is 0% risk-weighted from a capital adequacy
perspective. No Swedish local government has ever defaulted on a payment commitment.
www.kommuninvest.org 55
CREDIT ANALYS | LENDING
Credit model – risk factor scale
Quantitative model based on 11 key ratios Member key ratios analysed against both the member’s own trend and the average for similar members.
Population growth Current ratio Government grants Net debt
Net cost Commitments Loan debts Tax
Solvency incl. pension
commitments
Results before
extraordinary items
Vacancy rates, municipal
housing company
From excellent (risk factor 0-3) to
“watch list” (risk factor 8.5-13)
www.kommuninvest.org 56
CREDIT ANALYS | LENDING
KI risk factor and lending limits
Lending limit Kommuninvest’s decision on the highest acceptable net
debt level of a member, including items “below the line”,
e.g. pension commitments. General limit set at SEK 125,000
per inhabitant for 2015, equivalent to 32 % of Sweden’s GDP.
K-Max Amount that member can borrow from Kommuninvest (K-Max)
= Kommuninvest’s lending limit – member’s net debt
Risk factor 0–3.0 Borrowing can be made up to 100% of K-Max
Risk factor 3.5–6.0 Borrowing generally limited to 75% of K-Max
Risk factor 6.5–8.0 Borrowing generally limited to 50% of K-Max
Risk factor 8.5–13 Borrowing generally limited to 50% of K-Max
Member put on watch-list, discussions initiated
Access to new loans can be restricted Special limit
Some members can support a higher lending limit, due to significant income from the
municipal energy company, surplus values in the housing company or other. Kommuninvest
places higher demands on such members and they are also monitored more closely.
Bloomberg ticker: KOMINS www.kommuninvest.org 57
0
10
20
30
40
50
60
Number of
municipalities
Net debt =
+ Loan debt
+ Pension liability
+ Provisions
- Cash
- Investments in liquid assets
Source: Kommuninvest
KOMMUNINVEST
Municipal net debt, per citizen in SEK
Bloomberg ticker: KOMINS
Mr. Anders Gånge Head of Funding & Treasury
Tel: +46 (0)10 470 87 12
anders.gange@kommuninvest.se
KOMMUNINVEST
Contacts
www.kommuninvest.org 58
Mr. Carl-Henrik Arosenius Head of Investor Relations
Tel: +46 (0)10 470 88 81
carl-henrik.arosenius@kommuninvest.se
Mr. Per Adolfsson Funding Officer
Tel: +46 (0)10 470 88 66
per.adolfsson@kommuninvest.se
Ms. Maria Viimne Deputy CEO
Tel: +46 (0)10 470 87 11
maria.viimne@kommuninvest.se
Mr. Karl Aigéus Funding Officer
Tel: +46 (0)10 470 88 84
karl.aigeus@kommuninvest.se
Investor Relations – ir@kommuninvest.se
Mr. Björn Bergstrand Senior Investor Relations Manager
Tel: +46 (0)10 470 87 31
bjorn.bergstrand@kommuninvest.se
Mr. Kanichiro Hirata Senior Advisor, Japan/Asia Rep.
Tel: +81 90 2758 0222
kanichiro.hirata@kommuninvest.se
Funding – funding@kommuninvest.se
Mr. Tobias Landström Senior Funding Officer
Tel: +46 (0)10 470 88 83
tobias.landstrom@kommuninvest.se
Ms. Ulrika Gonzalez Hedqvist Senior Funding Officer
Tel: +46 (0)10 470 88 82
ulrika.hedqvist@kommuninvest.se
Bloomberg ticker: KOMINS www.kommuninvest.org 59
The Kommuninvest Investor
Factbook contains in-depth
information material on
Kommuninvest and the Swedish
local government sector, including
financial reports, rating reports
and legal documentation. The
Factbook is specifically designed
to facilitate investor/counterparty
credit approval and review
processes.
All documents included in the
Factbook are available for download at
Kommuninvest’s website
www.kommuninvest.org
Investor Relations
Financial information.
KOMMUNINVEST
Investor Factbook
Bloomberg ticker: KOMINS
Additional information
www.kommuninvest.org 60
Kommuninvest: www.kommuninvest.org
Swedish Government: http://www.sweden.gov.se/
(loans to other countries: http://www.government.se/sb/d/3323/a/157255 )
The Swedish Central Bank, the Riksbank – financial stability reports:
http://www.riksbank.se/en/Financial-stability/ collateral information:
http://www.riksbank.se/en/Financial-stability/The-RIX-payment-system/Collateral/
The National Institute of Economic Research – economic surveys and forecasts
for the Swedish economy: www.konj.se
The Swedish Financial Supervisory Authority – risk and supervision reports:
http://www.finansinspektionen.se/Folder-EN/Startpage/Supervision/Reports/
Swedish Association of Local Authorities and Regions – publications and reports:
http://english.skl.se/publications_and_reports
Notes