Vasakronan: Real Estate & Green Financing

• Vasakronan is Sweden's largest real estate company, with a property value of 178 billion SEK.
• The company owns, manages, and develops 2.4 million square meters across 166 properties.
• These properties are located in prime areas within Sweden’s four largest growth regions: Stockholm, Uppsala, Gothenburg, and Malmö.
• Vasakronan issued the world's first green commercial bond and commercial paper.
• It is the largest issuer of green corporate bonds in the Nordics.
• Vasakronan's debt portfolio totals 75 billion SEK.
• The company relies on borrowing money to operate effectively.
• Public markets, through the issuance of bonds and commercial paper, are the main financing source.
• Commercial papers are used for short-term financing, with maturities less than 1 year.
• Bonds are used for financing longer than a year, up to 25 years.
• Compared to bank loans, an established bond or commercial paper program allows a company to issue new debt very quickly.
• Borrowing in the capital market broadens the investor base, leading to more favorable financing terms.
• Capital market financing is unsecured, which is an advantage over bank loans.
• Capital market financing involves raising capital by issuing securities like stocks or bonds.
• It can be more cost-effective for large amounts of capital and offers greater flexibility in financing structure.
• This type of financing requires extensive regulation and reporting to protect investors and ensure market integrity.
• Bank financing involves borrowing money directly from a bank or financial institution.
• Capital market financing is suitable for larger companies needing substantial capital and willing to handle increased regulation.
• Bank financing is better for smaller companies or projects where a closer relationship with a financial institution is advantageous.
• Vasakronan issues corporate bonds under the EMTN program every other week and commercial papers several times every week.
• Euro Medium Term Note (EMTN) programs are international, allowing issuers to offer securities in multiple countries, mainly within Europe, following EU rules and regulations.
• Medium Term Note (MTN) programs can be more local, focusing on a specific market or country and following local rules and regulations.

Finance Policy

• Vasakronan's finance policy, signed by the board, sets the framework for its investment strategy.
• The policy outlines guidelines and limits for financial activities like borrowing, risk management, and capital allocation.
• It ensures that all financial decisions align with the company's strategic objectives and risk appetite.
• The policy prohibits Vasakronan from having any FX risk.
• Any bond issuance in currencies other than SEK must be fully hedged to eliminate currency fluctuation risk.
• Cross currency swaps are used to convert foreign currency obligations into SEK.
• This hedging strategy maintains a stable and predictable financial position.
• The EMTN program defines the total borrowing limit, approved dealers, and currencies.

Vasakronan Portfolio Manager

• Before a new bond is issued, the portfolio manager analyzes the company's borrowing needs and key financial metrics against the finance policy.
• This analysis determines the appropriate amount and timing of bond issuance.
• The portfolio manager ensures the bond issue complies with the EMTN program.
• The portfolio manager then communicates the financing requirements to one or more banks.
• Vasakronan issues new bonds every other week, typically around 200-300 million SEK.

Banks

• Banks act as intermediaries in the bond issuing process, facilitating communication between Vasakronan and potential investors.
• They market the bonds to investors, provide relevant information, and gauge investor interest.
• Banks work with Vasakronan to ensure the bond terms meet the company's needs and market conditions.

Investors

• Investors are entities or individuals who purchase bonds issued by Vasakronan.
• They evaluate bonds based on creditworthiness, interest rates, and maturity dates.
• Investors provide capital to Vasakronan and receive periodic interest payments and principal repayment at maturity.
• Information about the investors is not shared with Vasakronan.
• For an issuance around 100-300 million SEK, there are usually 1-3 investors involved.

Final Terms

• Once the details of the bond issuance are agreed upon, a final terms document is created.
• This document outlines the specific terms of the bond (amount, maturity, interest rate, currency).
• The final terms serve as a binding agreement between Vasakronan and the investors, detailing the obligations of each party.

Signing of Final Terms

• The signing of the final terms is a critical step in the bond issuing process.
• Back office teams at both Vasakronan and the bank review and sign the document, guaranteeing that all terms are accurately reflected.
• The signed final terms document is sent to the listing agent, who facilitates the official listing of the bonds on the appropriate exchange or market.

Issue Day

• On the issue day, the bonds are officially issued to investors.
• This involves the transfer of funds from investors to Vasakronan and the allocation of bonds to the investors' accounts.
• The issue day marks the culmination of the bond issuing process, with all parties fulfilling their responsibilities.
• It is also the day when the bonds begin trading on the secondary market.

Bond

• A bond is a fixed-income instrument representing a loan from an investor to a borrower.
• The borrower agrees to repay the principal amount on a specified maturity date, along with periodic interest payments at a predetermined coupon rate.
• Bonds are used by entities to raise capital for various purposes.
• They are considered a stable investment, providing regular income and principal repayment at maturity.

Commercial Paper

• Commercial paper is a short-term, unsecured debt instrument.
• It is issued at a discount, and the nominal amount is paid back at maturity.

EMTN vs MTN Program

• The main difference between an EMTN (Euro Medium Term Note) and a MTN (Medium Term Note) program lies in the Juristriction, structure and investor base.
• MTN programs are used for domestic bond issuance in Sweden (or applicable country).
• Bonds are usually listed on Nasdaq Stockholm
• EMTN programs are used for international bond issuance, often in multiple currencies (EUR, USD, GBP, etc.).
• They are typically listed on Euronext Dublin, the Luxembourg stock exchange, or another relevant market.

Vasakronan, Sweden's largest real estate company, manages 2.4 million square meters across 166 properties. It uses bonds and commercial paper for financing. The company is also known for issuing the world's first green commercial bond.