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Notes to the Consolidated Accounts
\ Annual Accounts
Liquidity obligation at maturity related to non-current loans
(contractual flows and non-discounted interests)
(x €1,000)
2013
2012
Between one and two years
268,546
651,690
Between two and five years
889,945
457,193
Beyond five years
153,422
280,000
TOTAL
1,311,912
1,388,883
Undrawn long-term credit facilities
(x €1,000)
2013
2012
Expiring within one year
50,000
Expiring after one year
614,400
669,400
Collateralisation
The book value of the pledged financial assets stands at €38,832,250 at
31.12.2013.
The terms and conditions of the pledged financial assets are detailed in
Note 40.
During 2013, there were no payment defaults on loan agreements, nor vio-
lations of the terms of these agreements.
C. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments (Interest Rate Swaps, pur-
chase of CAP options, sale of FLOOR options) to hedge its exposure to
interest rate risks arising from its operational, financing and investment
activity.
Type of hedging derivative financial instruments
CAP
A CAP is an interest rate option. The buyer of a CAP buys the right to pay
a maximum interest rate during a specific period. He only exercises this
right if the actual short-term rate exceeds the CAP’s maximum interest rate
level. In order to buy a CAP, the buyer pays a premium to the counterparty.
By buying a CAP, Cofinimmo obtains a guaranteed maximum rate. The CAP
therefore hedges against unfavourable rate increases.
FLOOR
The seller of a FLOOR sells the right to benefit from a minimum interest
rate during a specific period and will thus have to pay this rate to the
buyer, even if it is higher than the market rate. By selling a FLOOR, the seller
receives a premium from the buyer.
Through the combination of the purchase of a CAP and the sale of a FLOOR,
Cofinimmo ensures itself of an interest rate that is fixed in a corridor (inter-
est rate collar) between a minimum rate (the rate of the FLOOR) and a max-
imum rate (the rate of the CAP), while limiting the cost of the premium paid
for this insurance.
For 2014, this corridor is fixed between 3.00% and 4.25% for an amount of
€1.0 billion.
The bought CAP options and sold FLOOR options are detailed below.
Interest Rate Sw
ap (IRS)
An Interest Rate Swap (IRS) is an interest rate forward contract, unlike a
CAP or a FLOOR, which are interest rate options. With an IRS, Cofinimmo
exchanges a floating interest rate against a fixed interest rate or vice
versa.
As part of its hedging policy of financial charges, Cofinimmo has con-
tracted Interest Rate Swaps to exchange floating rates against fixed rates.
With regard to its two bonds issued in 2004 and 2009 at a fixed rate,
Cofinimmo has contracted Interest Rate Swaps in order to exchange the
fixed rates against floating rates. Both these Swaps are designated as
cash flow hedging. The €140million bond issued in 2012 was partially con-
verted from a fixed rate to a floating rate; the Swap, with a nominal value of
€100 million, is designated as held for trading. The increase in the floating
rates is hedged via the CAP options bought by the Group.
The combination of these IRS contracts and CAP options bought allows
Cofinimmo to benefit from the decreasing interest rates (compared to the
initial fixed rates of the bonds) whilst protecting itself against an increase
of these rates via the CAP options. The IRS contracts are detailed in the
table on page 171.
Cancellable Interest Rate Swap
A Cancellable Interest Rate Swap is a classic IRS that also contains a
cancellation option for the bank as from a certain date. Cofinimmo has
contracted Cancellable Interest Rate Swaps to exchange floating inter-
est rates against fixed interest rates. The sale of this cancellation option
allowed to reduce the guaranteed fixed rates during the period covering at
least the first cancellation date.
The Cancellable Interest Rate Swaps are detailed in the table on page 171.
In accordance with its financial policy, the Group does not hold nor issue
derivative financial instruments for trading purposes. However, derivatives
that do not qualify for hedge accounting are accounted for as trading
instruments.
Floating-rate borrowings at 31.12.2013 hedged by derivative financial
instruments
The floating-rate debt (€1,224 million) is obtained by deducting from the
total debt (€1,722million) the elements of the debt which remained at fixed
rate after taking into account the Interest Rate Swaps, as detailed in the
table below:
(x €1,000)
Financial debts
1,722,174
Convertible bonds
-373,135
Fixed-rate bonds
-90,000
Mandatory Convertible Bonds (MCB)
-4,196
Fixed-rate borrowings
-10,726
Other
-19,967
Floating-rate borrowings hedged by derivative financial instruments
1,224,150