Saab 2015 Annual Report Download - page 110

FINANCIAL INFORMATION – FINANCIAL STATEMENTS
Note 38, cont.
Liquidity risk
Liquidity risk refers to the risk of not being able to meet payment obligations due to
insufficient liquidity. The company consistently maintains unutilised credit facilities
or liquid assets corresponding in value to MSEK 3,000, adjusted for loans with
maturity dates within 12 months and never less than the lower of:
• 10% of sales (total sales)
• 50% of outstanding on-demand guarantees for the three largest commitments.
Liquidity risk is minimised by diversifying financing sources and maturities. For term
analysis of the Group’s financial liabilities, see tables for each class of derivatives in
this note as well as information on interest-bearing liabilities in note 32. The Group’s
other financial liabilities include accounts payable with credit terms normally within
30-90 days as well as other operating liabilities which are classified as current.
Saab has access to the following credit facilities:
Loan facilities
MSEK Facility Utilised Available
Revolving credit facility (maturity 2021) 6,000 - 6,000
Overdraft facility (maturity 2016) 100 3 97
Total confirmed credit facilities 6,100 3 6,097
Commercial paper 5,000 400 4,600
Medium Term Notes (MTN) 6,000 4,150 1,850
Total loan programmes 11,000 4,550 6,450
Total loan facilities 17,100 4,553 12,547
Saab has two revolving credit facilities with an equivalent value of MSEK 6,000 divi-
ded between eight banks. In January 2015, the initial facility of MSEK 4,000 was
renegotiated and in March 2015 a new facility of MSEK 2,000 was raised. Both
facilities have a term of five years to 2021 with the option to extend the term by one
plus one year. Saab also has a commercial paper programme with a limit of
MSEK5,000 (5,000) and a Medium Term Note (MTN) programme with a limit of
MSEK 6,000 (3,000). In September 2015, the limit on the latter was extended by
MSEK 3,000, and during the year another bank joined the programme.
As of 31 December 2015, MSEK 400 in commercial paper and MSEK 4,150 in
MTN had been issued.
In addition to these credit facilities, as part of efforts to diversify funding sources,
Saab has borrowed MSEK 926 (MEUR 100) under a Schuldschein documentation.
MEUR 23 had settlement in December 2015 and the remaining MEUR 77 have
settlement during the first half of 2016. The loans were distributed on maturities of
between 5.25 and 7.25 years.
In addition, Saab has an established programme for the sale of trade receivables
with a framework of MSEK 1,475, of which MSEK 1,299 (1,071) was utilised at
31December 2015.
No financial covenants are attached to any of Saab’s credit facilities.
Refinancing risk
Refinancing risk refers to the risk that Saab cannot replace maturing loans with
either new loans or its own funds. To minimise this risk, Saab maintains a diversified
loan maturity structure; see the table under funding.
Interest rate risk
Interest rate risk refers to the risk that Saab will be negatively affected by changes
in interest rate levels. Interest rate futures and swaps are used to manage interest
rate risks and achieve the desired interest rate duration. Lending to subsidiaries in
foreign currency is normally financed in SEK and converted to the subsidiary’s cur-
rency through swaps. Interest rate risk and foreign currency risk is managed with
cross currency basis swaps.
Saab is exposed to interest rate risk when the market value of certain items in the
statement of financial position is affected by changes in underlying interest rates. The
item with the largest exposure is pension obligations due to the liability’s long duration.
Changes in market rates affect Saab’s net financial items.
Funding
Fixed interest rates in the Group’s funding may not exceed an average duration of
60 months. As of year-end, the duration of the funding was 42 months (49).
The interest rates on long-term floating-rate funding are primarily hedged at fixed
rates through interest rate swaps. In its reporting, Saab applies cash flow hedging,
which means that changes in the value of interest rate swaps are recognised in other
comprehensive income and separately recognised in the hedge reserve in equity. The
change in value is recognised in financial income and expenses when transferred to
profit or loss. Inefficiency affecting net income for the year amounted to MSEK 0 (0).
Financing (refers to utilised credit facilities)
MSEK
Maturities Fixed interest 1) Tied-up capital
1 years 1,787 400
2 years - -
3 years 1,150 1,350
4 years 1,575 1,575
5 years and forward 964 2,151
Total 5,476 5,476
1) Effects of derivative agreements entered are included in the fixed interest.
Investments
Interest rate risk in the Group’s financial investments is managed based on a dura-
tion of 12 months with the option to deviate by +/- 12 months. As of 31 December
2015, the duration for investments was 12 months (10).
Investments in interest-bearing securities and bank deposits
MSEK
Maturities Fixed interest 1) Tied-up capital
1 years 989 819
2 years 1,450 1,530
3 years -400 90
4 years 200 200
5 years and forward 150 300
Total 2,389 2,939
1) Effects of derivative agreements entered are included in the fixed interest.
Forward exchange contracts
Forward exchange contracts used to hedge commercial currency flows contain an
interest component. In certain cases Saab may decide to shift the hedge to an ear-
lier date than when the cash flow is expected. This primarily refers to very long-term
customer contracts, which then generate an interest rate risk. The underlying cash
flows that are exposed to extensions through forward exchange contracts amoun-
ted to MUSD 331 (248) at 31 December 2015.
Interest rate derivatives
The table below shows the Group’s outstanding interest rate derivatives.
Interest rate derivatives Fair value 2015 2014
Million
Cur-
rency
Local
cur-
rency
Asset
SEK
Liability
SEK Net
Local
Cur-
rency Net
Maturity up to 1 year USD - - - - 1 -
Subtotal - - - -
Maturity 1 to 3 years SEK 750 - 43 -43 217 -12
Subtotal - 43 -43 -12
Maturity 3 to 5 years SEK 1,900 - 40 -40 1,650 -79
Subtotal - 40 -40 -79
Maturity over 5 years SEK 400 5 - 5 - -
EUR1) 100 1 5 -4 - -
Subtotal 6 5 1 -
Interest derivatives,
total
2)3)4) 6 88 -82 -91
1) Refers to cross currency basis swaps (CCY).
2) Market value includes accrued interest of MSEK -5 (-4).
3) Of which used for cash flow hedges MSEK -73 (-78).
4) Also corresponds to the interest rate derivatives in the Parent Company.
Commodity price risk
Commodity price risk refers to the risk that Saab will be negatively affected by
changes in commodities. Purchasing costs for material are managed primarily
through contract clauses with customers/suppliers. Purchasing costs for electricity
are managed through hedging instruments. Electricity directives are managed
through a discretionary management mandate. The market value of electricity deri-
vatives as of year-end was MSEK -16 (-5). Hedge accounting is applied to electri-
city derivatives in the Stockholm price area (SE3). Inefficiency affecting net income
for the year amounted to MSEK 0 (0).
106 – SAAB ANNUAL REPORT 2015