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173
Liquidity obligation at maturity related to non-current loans
(contractual flows and non-discounted interests)
(x €1,000)
2014
2013
Between one and two years
300,976
268,546
Between two and five years
711,371
889,945
Beyond five years
142,540
153,422
TOTAL
1,154,887
1,311,912
Undrawn long-term credit facilities
(x €1,000)
2014
2013
Expiring within one year
20,000
Expiring after one year
597,700
614,400
Collateralisation
The book value of the pledged financial assets stands at €39,439,728
(2013: €38,832,250) at 31.12.2014.
The terms and conditions of the pledged financial assets are
detailed in Note 41.
During 2014, there were no payment defaults on loan agreements,
nor violations of the terms of these agreements.
C. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments (Interest Rate
Swaps, purchase 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 unfa-
vourable rate increases.
FLOOR
The seller of a FLOOR sells the right to benefit from a minimum inter-
est 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 (interest rate collar) between a minimum rate (the rate of the
FLOOR) and a maximum rate (the rate of the CAP), while limiting the
cost of the premium paid for this insurance.
For 2015, this corridor is fixed between 3.00% and 4.25% for an
amount of €400 million. The corridor is fixed between 3.00% and
4.25% as a result of the fact that the majority of the instruments
were contracted at a time when the interest rate were higher.
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
contracted Interest Rate Swaps to exchange floating rates against
fixed rates, not qualifying for hedge accounting.
The €140 million bond issued in 2012 was partially converted 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 174.
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 float-
ing interest rates against fixed interest rates. The sale of this cancel-
lation 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 174.
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 31.12.2014 hedged by derivative
financial instruments
The floating-rate debt (€1,119 million) is obtained by deducting
from the total debt (€1,622 million) the elements of the debt which
remained at fixed rate, as detailed in the table below:
(x €1,000)
2014
2013
FINANCIAL DEBTS
1,621,522
1,722,174
Convertible bonds
-381,391
-373,135
Fixed-rate bonds
-90,000
-90,000
Mandatory Convertible Bonds (minimum fixed coupon)
-4,063
-4,196
Fixed-rate borrowings
-10,183
-10,726
Other (debit accounts, rental guarantees received)
-16,685
-19,967
FLOATING-RATE BORROWINGS HEDGED BY DERIVATIVE FINANCIAL INSTRUMENTS
1,119,200
1,224,150