Holiday Inn 2007 Annual Report Download - page 75

GROUP FINANCIAL STATEMENTS
Notes to the Group financial statements 73
20 LOANS AND OTHER BORROWINGS (CONTINUED)
Secured bank loans
These mortgages are secured on the hotel properties to which they relate. The rates of interest and currencies of these loans vary.
Finance leases
Finance lease obligations, which relate to the 99 year lease on the InterContinental Boston, are payable as follows:
2007 2006
Minimum Present Minimum Present
lease value of lease value of
payments payments payments payments
£m £m £m £m
Less than one year 8833
Between one and five years 32 24 33 24
More than five years 1,689 68 1,745 70
1,729 100 1,781 97
Less: amount representing finance charges (1,629) – (1,684) –
100 100 97 97
The Group has the option to extend the term of the lease for two additional 20 year terms. Payments under the lease step up at regular
intervals over the lease term.
Unsecured bank loans
Unsecured bank loans are borrowings under the Group’s 2009 £1.1bn Syndicated Facility and its short-term bilateral loan facilities.
Amounts are classified as non-current when the facilities have more than 12 months to expiry. These facilities contain financial
covenants and as at the balance sheet date the Group was not in breach of these covenants, nor had any breaches or defaults occurred
during the year.
2007 2006
Utilised Unutilised Total Utilised Unutilised Total
Facilities provided by banks £m £m £m £m £m £m
Committed 777 377 1,154 213 944 1,157
Uncommitted –2525 33639
777 402 1,179 216 980 1,196
2007 2006
£m £m
Unutilised facilities expire:
Within one year 75 86
After one but before two years 327 –
After two years –894
402 980
GROUP FINANCIAL STATEMENTS
21 FINANCIAL RISK MANAGEMENT POLICIES
Overview
The Group’s treasury policy is to manage financial risks that
arise in relation to underlying business needs. The activities
of the treasury function are carried out in accordance with Board
approved policies and are subject to regular audit. The treasury
function does not operate as a profit centre.
The treasury function seeks to reduce the financial risk of the
Group and manages liquidity to meet all foreseeable cash needs.
Treasury activities include money market investments, spot
and forward foreign exchange instruments, currency options,
currency swaps, interest rate swaps and options and forward
rate agreements. One of the primary objectives of the Group’s
treasury risk management policy is to mitigate the adverse impact
of movements in interest rates and foreign exchange rates.
Market risk exposure
The US dollar is the predominant currency of the Group’s
revenue and cash flows. Movements in foreign exchange rates,
particularly the US dollar and euro, can affect the Group’s
reported profit, net assets and interest cover. To hedge this
translation exposure the Group matches the currency of its
debt (either directly or via derivatives) to the currency of its net
assets, whilst maximising the amount of US dollars borrowed.
Foreign exchange transaction exposure is managed by the
forward purchase or sale of foreign currencies or the use of
currency options. Most significant exposures of the Group
are in currencies that are freely convertible.