173 / 220
\ 167
Notes to the Consolidated Accounts
\ Annual Accounts
Fair value of financial assets and liabilities
1
The financial instruments that are valued, subsequent to their initial recog-
nition, at their fair value on the balance sheet, can be presented according
to three levels (1 to 3), based on the degree to which they are observable:
•
The level 1 fair value measurements are those derived from listed
prices (unadjusted) in active markets for similar assets or liabilities.
•
The level 2 fair value measurements are those derived from data,
other than listed prices included within level 1, that are observable
for the assets or liabilities in question, either directly (i.e. as prices)
or indirectly (i.e. as data derived from prices).
•
The level 3 fair value measurements are those that are not based on
observable market data for the assets or liabilities in question.
Change in the fair value of the convertible bonds
2013
2012
(x €1,000)
Convertible 1
Convertible 2
Total
Convertible 1
Convertible 2
AT 01.01
177,289
190,820
2
368,109
161,496
N/A
Residual change in the fair value attributable to changes in the
credit risk of the instrument recognised during the financial year
-5,746
-8,673
-14,419
7,937
N/A
Change in the fair value attributable to changes in market
conditions generating a market risk (interest rates, share prices)
during the financial year
6,529
12,916
19,445
7,856
N/A
AT 31.12
178,072
195,063
373,135
177,289
N/A
Level 1
The convertible bonds issued by Cofinimmo are level 1.
At 31.12.2013, the convertible bonds have a total fair value of €373,134,998.
If the bonds are not converted into shares, the redemption value will
amount to €364,147,188 at final maturity.
Level 2
All other financial assets and liabilities and namely the financial deriva-
tives stated at fair value by Cofinimmo are level 2. Their fair value is deter-
mined as follows.
The fair value of financial assets and liabilities with standard terms and
conditions and negotiated on active and liquid markets is determined
based on stock market prices.
The fair value of "trade receivables", "trade debts", "loans to associated
companies" as well as any floating-rate debt is close to their book value.
Bank debts are primarily in the form of roll-over credit facilities drawn over
one month.
The fair value of listed bonds (retail bonds and private placements) is
determined by using reference prices listed in an active market
3
.
The calculation of the fair value of "finance lease receivables" and "swap"
derivatives is based on the discounting of future capital flows at the
appropriate market rates. More details on the finance lease receivables
can be found in Note 24.
The fair value of derivative instruments is calculated based on stock mar-
ket prices. When such prices are not available, analyses of discounted
cash flows based on the applicable yield curve with respect to the
duration of the instruments are used in the case of non-optional deriva-
tives, and option valuation models are used in the case of optional deriva-
tives. Interest rate swaps are valued according to the discounted value of
estimated cash flows in accordance with the yield curves obtained on the
basis of market interest rates.
Level 3
Cofinimmo currently does not hold any financial instrument meeting the
definition of level 3.
B. MANAGEMENT OF FINANCIAL RISK
Interest rate risk
Since the Cofinimmo Group owns a (very) long-term property portfolio, it
is highly probable that the borrowings financing this portfolio will be refi-
nanced upon maturity by other borrowings.
Therefore, the company's total financial debt is regularly renewed for an
indetermined future period.
For reasons of cost efficiency, the Group’s financing policy by debt sep-
arates the raising of borrowings (liquidity and margins on floating rates)
from the management of interest rates risks and charges (fixing and
hedging of future floating interest rates).
Generally, funds are borrowed at a floating rate. Some borrowings con-
tracted at a fixed rate have been converted into a floating rate through
interest rate swaps. The goal of this is to take advantage of low short-term
rates.
1
For more details on the changes which occurred during 2013, and on the composition and conditions of our bonds, we also recommend reading the chapter “Management of Financial
Resources” of this Annual Financial Report.
2
Issue value in June2013.
3
It concerns namely bonds issued in 2004 and 2009 and maturing in 2014. Their valuation comes from Bloomberg.
Allocation of borrowings
(non-current and current)
at floating rate and at fixed rate
(calculated based on their nominal values)
(x €1,000)
2013
2012
Floating-rate borrowings (incl. €200,000 of bonds converted into floating rate)
1,224,150
1,161,721
Fixed-rate borrowings
464,826
578,365
TOTAL
1,688,976
1,740,086