Swiss railways: safe, but without return

By Martin Player, August 22, 2018

The SBB is fully financed by the public sector. As a private investor, you can invest in the Südostbahn and the Rhaetian Railway. Photo: Keystone

I am a railroad fan and I also have a large model railroad. As a owner of a GA I drive a lot by train. And I had the following idea: how can I invest in saving with my savings? Can you also subscribe to SBB bonds? W. F.

No. The SBB, the number one in Swiss rail transport, is fully financed by the public sector. Most other railways in Switzerland are also supported by public funds.

Among the few railway companies in this country where you can invest as a private investor, but including the Südostbahn and the Rhaetian Railway.

The latter provided a public loan two years ago for the financing of new rolling stock, which is provided with a federal solidarity guarantee. This gives you the highest level of security for this bond because the federal government has an AAA rating.

The Swiss Confederation also has a 43.1 percent stake in the company. 51.3 percent is owned by the Canton of Graubünden.

The Rhaetian Railway operates mainly in the Canton of Graubünden, where it offers services in passenger and freight transport. Internationally known and popular with us is the Rhaetian Railway, also because of the Glacier Express and the Bernina Express. Part of the route is part of the Unesco World Heritage.

Holger Frisch from Bond-Research of the Zürcher Kantonalbank classifies the Rhaetian Railroad with an AA rating with a stable view. In a study he points out that the Rhaetian Railway as a mountain railway must provide its services under difficult production conditions. He concludes: "Negative is the low profitability, the weak cash flow generation and the high debt burden."

This year, the Swiss Southeast Railway (SOB) also appeared for the first time with a public bond on the Swiss capital market. With 600 employees, this focuses on transport services in Eastern and Central Switzerland. With the money from the bond SOB financed new rolling stock.

ZKB Bond research analyst Holger Frisch classifies the SOB with an AA rating with a stable outlook. At the same time he points out: "Since we understand that the investments are intended to offer compensatory benefits and have been approved accordingly by the client, ie the Confederation and the cantons, the issued bond is a federal guarantee of solidarity."

In fact, the AAA rating of the Confederation would apply.

With both bonds you will certainly not get rich, because the return is very low and therefore completely uninteresting. Because of the very high level of security that the two debtors offer and the solidarity that the federal government has to pay, their risks are also very low.

As a fan of the track, you can safely park your money and you do not have to worry about your finances being derailed as a result of this investment.

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