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5 Financial instruments and net debt

Swisscom aims not to exceed a net debt of 1.9 times EBITDA (operating income before interest, taxes, depreciation and amortisation). Exceeding this limit temporarily is permitted. As at 31 December 2017, the net debt/EBITDA ratio was 1.7. Net debt comprises financial liabilities less cash and cash equivalents, current financial assets and non-current certificates of deposit, and derivative financial instruments for financing.

Below is a breakdown of financial liabilities and net debt in the first nine months of 2018 as well as the fair values of financial assets and liabilities:


In CHF million
  Carrying
amount
31.12.2017
 

Issuance
 

Repayment
 
Other
changes a
  Carrying
amount
30.09.2018
 

Fair value b
Bank loans   760   895   (69)   (22)   1,564   1,581 2
Debenture bonds   6,137   735   (1,385)   (76)   5,411   5,520 1
Private placements   493       3   496   498 2
Finance lease liabilities   461     (21)   15   455   804 2
Derivative financial instruments   60       (16)   44   44 2
Other financial liabilities   375   3   (38)   (9)   331   331 2
Total financial liabilities   8,286   1,633   (1,513)   (105)   8,301   8,778
Cash and cash equivalents   (525)               (375)   (375) 2
Other financial assets   (314)               (285) c   (285) 2
Net debt   7,447               7,641    
a Interest expense, interest payments as well as other changes.
b Fair value hierarchy.
c Not included are other financial assets with a carrying amount of CHF 110 million, trade receivables and payables as well as other receivables and liabilities whose carrying amount corresponds to a reasonable estimation of their fair value.

In the first quarter of 2018, Swisscom issued a debenture bond for CHF 150 million. It has a coupon of 1.0% and matures in 2035. In addition, in the second quarter of 2018 Swisscom issued a debenture bond for EUR 500 million (CHF 585 million). It has a coupon of 1.125% and matures in 2026. The funds received were applied to repay existing debt. In the third quarter of 2018, short-term bank loans were also issued to repay a debenture bond for CHF 1,385 million upon maturity. The debenture bond in EUR was designated for hedge accounting of net investments in foreign operations.