The Debt Office’s guarantees

The Debt Office has large commitments in the form of guarantees for infrastructure projects, credit institutions and pensions for employees of government agencies that have been privatised, such as the former Swedish Post Office.

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A guarantee constitutes a risk, which is usually shared by the central government and the lender. For this reason, a guarantee should never cover the full amount. There are different types of guarantee commitments.

Credit guarantees

Standing surety for someone else’s loan, i.e. acting as guarantor, is the type of guarantee most commonly provided by the Debt Office. The borrower pays a fee to compensate for the risk accepted by the Debt Office.

Pension guarantees

When government agencies started being privatised in the early 1990s, their pension undertakings were transferred to the new company and are guaranteed by the Debt Office. These relate to former government agencies such as the Post Office, the National Forest Enterprise and the National Board of Public Building. The single largest undertaking is PostNord. Some of these undertakings are insured with PRI Pensionsgaranti. This means that the Debt Office has issued a supplementary guarantee, should the company or PRI be unable to pay out pensions

Capital guarantees

A guarantee to inject capital under certain future circumstances is a type of guarantee that is becoming increasingly uncommon. Only the Riksdag and the Government can commission the Debt Office to issue such guarantees.

  • A guarantee fund is a guarantee to inject capital in a company that is in a vulnerable position. This guarantee is valid for a limited time with a limited amount. The Debt Office annually issues a guarantee fund for Svenska Skeppshypotek for SEK 350 million, which is valid for 20 years.
  • A capital adequacy guarantee is similar to a guarantee fund, but has no limitation in terms of time and amount. It is an unlimited undertaking, which makes the risk difficult to assess.
  • Callable capital for international financial institutions – Sweden is a member of several multilateral financial institutions, such as the Nordic Investment Bank. The membership is based on authorised capital, provided in the form of callable capital, which means that the central government via the Debt Office is obligated to inject the capital requested by the institution. This is an unlimited credit, for which we keep a special reserve. Payments from this reserve are then subsequently deducted from the appropriations for the ministry concerned.
  • Guarantee programmes are a more standardised initiative to support a certain industry or field. These may for example relate to the shipbuilding industry or to national emergency preparedness.

 

The Debt Office's guarantees

The Debt Office manages a credit guarantee for the benefit of Eurofima, a supranational organization owned by a number of railway administrations in Europe. Eurofima finances railway equipment purchased by its shareholders.

This undertaking means that the Swedish government guarantees Eurofima's financing of railway equipment together with the other shareholders until 2036. The Swedish government owns 2 percent of the shares in Eurofima. The ownership is administrated by the Ministry of Enterprise and Innovation.

The extent of the guarantee equals the owner share, up to a maximum of 52 million Swiss franc (the size of subscribed share capital). The guarantee can only be invoked if a loan default exceeds Eurofima's guarantee reserve and remains unmet by the defaulting railway's government.

Our largest individual guarantee undertaking is the credit guarantees for the bonds of Öresundsbro Konsortiet, a consortium owned by one Danish and one Swedish company.

The consortium financed the building of the Öresund Bridge between Sweden and Denmark by issuing government guaranteed bonds on the international credit market.

The bonds are guaranteed jointly by the Danish and Swedish governments via Danmarks Nationalbank and the Swedish National Debt Office. When the Öresund Bridge was opened for traffic on 1 July 2000, the debt amounted to the equivalent of approximately SEK 24 billion.

The consortium runs and manages the bridge and will use the profits it generates to pay off the debt incurred to finance its construction. The length of time this will take depends largely on traffic trends and the revenues brought in by the bridge. The debt is expected to be repaid by around 2035, according to a forecast made when the bridge was opened.

The work on Arlandabanan started in 1995 as a collaborative project between the Government and the private industry. The purpose of the project was to finance, build and run Arlandabanan; the railway connecting Arlanda Airport to the rest of the national rail network.

The wholly state-owned company Arlandabanan Infrastructure AB, previously Arlandabanan Projekt AB, is tasked with preserving the Government's rights and obligations in accordance with the agreements made between the parties involved.

The company's equity capital is small in relation to its undertakings in the project. The Swedish Civil Aviation Administration and Swedish Rail Administration (now the Swedish Transport Administration) therefore issued a capital adequacy guarantee in 1996. The guarantee ensures that the company has sufficient funds to fulfil its obligations, primarily to the company A-Train AB, which has the right to use of the track for 40 years.

As the shares in the company were transferred to the Ministry of Enterprise, Energy and Communications, the Debt Office took over responsibility for the capital adequacy guarantee. Any payment will therefore be made by us, for which we are then compensated by the Swedish Transport Administration.

Related content

Preparedness guarantees (SFS 1982:517) Ship credit guarantees (SFS 1995:1122) Terminated guarantees