(Adds comments from SNB chairman and pictures)
By John Revill
ZURICH, Dec 21 (Reuters) - The Swiss National Bank has bought a majority stake in a maker of special paper for banknotes and passports to guarantee production of its new banknotes.
In its first acquisition in decades, the central bank said on Thursday it was purchasing a 90 percent stake in Landqart AG after the company -- which makes the polymer material used in new 10-franc notes -- got into financial difficulties.
Buying the company was the best solution to avoid interruptions in the production of the Durasafe paper, described by SNB Chairman Thomas Jordan as “integral” to the safety of new notes.
“In case the Swiss National Bank was not ready to .. buy the company we would have had the risk of liquidation of the company, that would have been orderly or less orderly,” Jordan told a press conference.
“The risk would have been an interruption of the production of Durasafe which (would) be very problematic for our bank note issuance that takes place at this moment.”
The SNB said the remaining 10 percent would be bought by printing and publishing company Orell Fuessli Holding, which prints the SNB’s notes, with the two companies paying a combined 21.5 million francs for Landqart.
The deal came about after an overseas customer unexpectedly cancelled an order with Landqart, which employs 260 people, leading to a big drop in sales and cash flow problems.
The company reduced workers’ hours to deal with the crisis, which the SNB said posed a “direct and existential threat” to Landqart’s survival.
The company, which was a subsidiary of Canada’s Fortress Paper, is important to the SNB because it makes the Durasafe substrate used in the latest series of Swiss bank notes.
The paper allows special security features like a transparent Swiss cross and ultraviolet fibres to be incorporated into the notes to make them difficult to counterfeit.
The substrate is a three-layered paper which is used to print the new 10, 20 and 50-franc bank notes in the past 18 months as part of its redesign of the currency. It is due to launch new versions of the 100, 200 and 1,000-franc notes in the next two years.
The SNB said Landqart would be provided with enough funds to ensure its survival, with between 5 and 15 million francs earmarked for the project.
Chairman Jordan said the SNB would look to reorganise the business but had no interest in printing its own money or keeping a paper business in the long term.
The SNB had the obligation to supply Switzerland with bank notes as part of its mandate, Jordan said.
“As long as the public wants to have bank notes, we will provide them with bank notes,” he said. “As long as this is the case we have the ambition to provide state of the art and very safe bank notes.”
$1 = 0.9861 Swiss francs Reporting by John Revill; Editing by Brenna Hughes Neghaiwi and Ralph Boulton