On 15 September 2006, Stadshypotek will convert outstanding mortgage bonds and retail bonds with a nominal value of SEK 245 billion to covered bonds in accordance with the new Act on the Issuance of Covered Bonds (2003:1223). The conversion will be carried out in accordance with the authorisation to issue covered bonds granted to Stadshypotek by Finansinspektionen (Swedish Financial Supervisory Authority) on 13 March 2006.

 

Covered bonds are bonds with priority in the issuing institution's collateral. The collateral in Stadshypotek will mainly consist of loans to private individuals and companies both granted against mortgages in real property such as single-family houses, second homes, multi-family dwellings and tenant-owned apartments - in all cases 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. Stadshypotek's retail bonds directed at households will also be covered. As previously reported, Stadshypotek's other debt, such as funding from credit institutions and funding in various commercial paper markets will not be converted into covered bonds.

 

The conversion includes all outstanding bonds under Loan nos. 1565-1579, 1015-1020, 2222-2227, 5016-5027 and 5516-5527. New issues under these bond loans and bonds under new loans of the same type will also become covered bonds. Stadshypotek will carry out the conversion by entering these bonds into a special register that it maintains in accordance with the Act on the Issuance of Covered Bonds. No measures need to be taken by the bondholders. The conversion does not involve any changes or additions to the applicable conditions of these bond loans. However, in connection with the conversion, an updating of Stadshypotek's basic prospectus will be registered with Finansinspektionen.

 

Stadshypotek's covered bonds have received a preliminary Aaa rating from Moody's Investors Service.

 

Frank Vang-Jensen, chief executive of Stadshypotek, states in a commentary to the conversion, "With the new legislation on covered bonds, Sweden has acquired a new funding form of the same high class that exists in several other EU member states. Covered bonds offer a high level of security to investors and a privileged position in the EU's financial regulatory systems. An Aaa rating means that Stadshypotek can build on the excellent collaboration with existing investors and also gain access to new groups of investors in new markets. In addition, this provides us with the conditions for enhancing our position as an attractive partner for existing and new mortgage loan customers by enabling us to have even more competitive borrowing costs.

 

For further information, please contact:

 

Bengt Edholm, head of treasury +46 8 701 5220

Frank Vang-Jensen, chief executive, +46 8 701 3616