Debt

Definition:
Outstanding debt: the total amount of capital owed at a given time.

Debt management by the City of Nantes is characterised by the desire to pursue its debt reduction policy in the aim of alleviating financial expenses whilst also limiting the risks associated with rises in interest rates.

Key figure:
Outstanding debt: €310.8 million at 31 December 2008, or €1,119 per inhabitant.

At 31 December 2008, the outstanding debt of the city of Nantes stood at €310.8 million (€1,119 per inhabitant). This comprised primarily €309.0 million of principal debt, the balance (€1.8 million) being made up of loans relating to land acquisitions made by the Metropolis of Nantes on behalf of the City, and sureties. It is important to point out that a significant element of the principal debt (€50.8 million) related to the sale of assets to the Metropolis of Nantes in 2001. Specifically, the urban community will repay the corresponding annual instalments to the City until the loans have been completely discharged. After deducting this portion of the debt, the debt outstanding at 31 December 2008 comes to €260.0 million (or €936 per inhabitant).

During the second half of 2008 the financial crisis took on substantial dimensions, provoking a major loss of confidence. The banks thus became reluctant to lend cash to economic operators, and in particular local authorities. With this difficult context in mind, the City of Nantes decided, by way of prudence, to anticipate its year end financing requirements in October.
Since 2004 the City of Nantes has been trying to limit the risks associated with rises in interest rates by securing its debt through fixed-rate borrowing. Nonetheless, before the start of the financial crisis the City had entered into 6 structured loans on advantageous financial terms. However, one of these loans has been hit by the effects of the instability on the financial markets, which has led to the costs of this being repaid at an interest rate markedly higher than that originally envisaged.

This year the City of Nantes raised three loans from Dexia Crédit Local. The first, taken out to finance the construction of the school at Dervallières-Chézine, was for €8.1 million (12-month Euribor + 0.03%, for 20 years). The other two, for €5.0 million and €4 million, were taken out at fixed rates (4.65% and 3.99%). Finally the City took out a loan of €5.0 million from Société Générale (at a fixed rate of 4.84% until 2010, then 3-month Euribor +1.15%, for 15 years). Dexia Crédit Local remains the main financial partner of the City of Nantes, with 64% of the borrowing (or €194.6 million), followed by Société Générale (16%) and Caisse d’Epargne (15%).