Stadshypotek has today submitted an application to the Finansinspektionen (Swedish Financial Supervisory Authority) to issue covered bonds pursuant to the new law in Sweden on issuing covered bonds (2003:1223).

 

Covered bonds are bonds with priority in the issuing institution's cover assets. These assets will mainly consist of loans to private individuals and companies granted against mortgages in real property such as single-family houses, second homes and multi-family dwellings and with a loan-to-value ratio of 75% of the market value.

 

This new type of funding will replace the current form of institutional bond funding in Stadshypotek.

 

On condition that the Finansinspektionen gives permission, issuance of covered bonds will start during the first half of 2006. At the same time, Stadshypotek's outstanding bonds for institutional funding, namely loans no. 1560, 1561 and 1564 - 1579 will be converted into covered bonds. New issues under these bond loans and in new loans will subsequently be in the form of covered bonds.

 

However, Stadshypotek's other debt such as retail bonds, other funding from credit institutions and funding in the various commercial paper markets will not be converted into covered bonds.

 

In a comment concerning the application, Stadshypotek's chief executive Claes Norlén says, "The new legislation on covered bonds has given Sweden a type of funding of the same high quality as exists in several other EU member countries. Covered bonds offer a high level of security to investors and a privileged position in the EU's financial regulatory systems. A couple of rating agencies have already confirmed that the Swedish legislation allows an AAA rating, which is a condition for Stadshypotek to issue covered bonds. An AAA rating will also allow Stadshypotek to further develope the excellent collaboration with existing investors and also to gain access to new groups of investors in new markets. It also gives us the opportunity to strengthen our position as an attractive partner for both existing and new customers since our funding costs can be even more competitive."