Scania annual report 2003

Note 33 continued
Interest rate refixing in Customer Finance
Interest-bearing
Interest-bearing
liabilities
Customer (including interest
Finance portfolio 1 rate derivatives) 2
2004 14,118 13,893
2005 5,125 4,025
2006 3,719 2,262
2007 2,084 942
2008 679 457
2009 and later 201 202
Total 25,926 21,781
1 Including operating leases.
2 Other funding consists mainly of shareholders’ equity.
On 31 December 2003, the effective interest rate on outstanding
borrowings was 3.6 percent. Borrowing occurs largely at the corporate
level in a small number of currencies. By means of currency swaps,
these loans are then converted to the desired currencies.
Effective interest
rate in percent
Borrowings Borrowings (including currency
excluding including and interest
currency swaps currency swaps rate derivatives)
EUR 14,859 16,735 3.2
SEK 9,012 53 3.4
GBP 549 3,112 5.0
USD 308 2,442 2.6
Other 1,480 3,866 5.0
Total 26,208 26,208 3.6
Credit risk
Credit risk is defined as the risk that the counterparty in a transaction
will not fulfil its contractual commitments and that any collateral will not
cover the company’s claim. An overwhelming share of the credit risk
for Scania is related to receivables from customers and is distributed
among a large number of end customers.
Trade receivables outstanding 1
31 December, SEK m. 2003 2002 2001
Customer Finance
Interest-bearing
customer finance portfolio 2 25,926 25,303 25,091
Other receivables 51 74 169
Vehicles and Service
Trade receivables 6,297 6,428 7,562
Interest-bearing receivables 2 1,347 1,592 1,874
Total 33,621 33,397 34,696
1 Including provisions for bad debt.
2 Including operating leases before subtracting deferred profit recognition.
To maintain a controlled level of credit risk in the Customer Finance
segment, the process of issuing credit is supported by a credit policy
as well as credit instructions. Credit risks are managed by active credit
monitoring and administration of customers who do not follow the
agreed payment plan.
Provisions for bad debt losses are based on an individual assessment
of each customer, based on the customer’s payment capacity and expected
future risk.
Provisions in relation to the credit portfolio
in Customer Finance
31 December, SEK m. 2003 2002 2001
Total receivables 25,926 25,303 25,091
Provisions for bad debts 458 408 413
Provisions as a percentage
of receivables 1.77 1.62 1.65
The table below shows the credit risk exposure in Customer Finance.
Percentage
of total
Number of number of Percentage
Concentration customers customers of portfolio
Exposure < SEK 15 m. 19,722 97.3 60.1
Exposure SEK 15–50 m. 510 2.5 20.5
Exposure > SEK 50 m. 37 0.2 19.4
Total 20,269 100 100
The administration of the credit risks that mainly arise in corporate treasury
operations, among other things when investing liquidity and in
derivatives trading, is regulated in Scania’s financial policy. Transactions
occur only within established limits and with selected, creditworthy
counterparties. “Creditworthy counterparty” means that the counterparty
has received an approved credit rating from Standard and Poor’s
and/or Moody’s. To further limit credit risk, the volume of exposure
allowed per counterparty is limited, depending on the counterparty’s
credit rating. Overall counterparty exposure related to investments of
liquidity and derivatives trading, calculated as a net receivable per
counterparty, amounted to SEK 2,663 m. as per 31 December 2003.
Refinancing risk
Refinancing risk is the risk of not being able to meet the need for future
funding. To ensure access to funding, Scania applies a conservative
policy which prescribes that there should be a liquidity reserve consisting
of available liquid assets and unutilised credit facilities that exceeds
its funding needs for the next 1–2 years.
At the beginning of 2003, Scania had a committed revolving credit
facility of USD 1,850 m. from an international banking syndicate, expiring
in November 2004. In May 2003, Scania renegotiated USD 1,000 m.,
with a new expiration date in May 2008. At year-end 2003 the credit
facility, which was unutilised at that time, thus totalled USD 1,850 m.,
equivalent to SEK 13,459 m., translated at the closing day rate. Scania
intends to replace the USD 850 m. that expires in 2004 with similar
funding.
In addition to its committed revolving credit facility, Scania has a
capital market programme of more than SEK 36 billion (30), of which
more than SEK 18 billion (17) was being utilised at year-end.
Under Scania’s Medium Term Note (MTN) programme, borrowing
may occur in maturities of between 1 and 10 years. The ceiling was
raised during 2003 from SEK 7,000 m. to SEK 13,000 m. During 2003,
Scania issued SEK 3,201 m. worth of borrowing. At year-end, the total
amount outstanding was equivalent to SEK 7,892 m.
Under its European Medium Term Note Programme (EMTN), Scania
can borrow at the international financial market. The ceiling at year-end
was EUR 1,500 m., which was equivalent to SEK 13,641 m. when
translated at the closing day rate. During 2003, Scania issued a bond
equivalent to SEK 469 m. The total amount outstanding at year-end was
equivalent to SEK 10,290 m.
Scania also has short-term borrowing facilities in the form of commercial
paper programmes in Sweden and Belgium, totalling SEK 6,000 m.
and EUR 400 m., respectively. At year-end, Scania had only utilised the
Swedish programme in the amount of SEK 200 m.
In addition to the above programmes, Scania has taken out bilateral
loans of SEK 3,578 m. The company also has other borrowing with
varying maturities, totalling SEK 4,247 m.
Total borrowing and
Total
ceiling, SEK m. borrowing Ceiling
EMTN 10,290 13,641
MTN 7,892 13,000
Bilateral loans 3,578 –
Credit facility (USD) – 13,459
Commercial paper, Sweden 200 6,000
Commercial paper, Belgium – 3,638
Bank loans 4,247 –
Total 26,207 49,738 1
1 Of the total ceiling, SEK 13,459 m. consisted of a committed
revolving credit facility.
Scania’s liquidity reserve at the close of 2003, consisting of unutilised
credit facilities and liquid assets, amounted to SEK 15,375 m. (18,044).
Aside from safeguarding access to credit facilities, Scania controls
its refinancing risk by diversifying the maturity structure of its borrowing
portfolio. At year-end, Scania’s total borrowing had the following maturity
structure:
Maturity structure of borrowing, SEK m.
2004 5,380
2005 3,605
2006 4,015
2007 6,759
2008 5,608
2009 and later 840
Total 26,207
ANNUAL REPORT 2003
72