Holiday Inn 2012 Annual Report Download - page 119

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OVERVIEW BUSINESS REVIEW GOVERNANCE
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS OTHER INFORMATION
Notes to the Group Financial Statements 117
23. Derivative financial instruments continued
Currency swaps
At 31 December 2012, the Group held currency swaps with a principal of $415m (2011 $415m). These swaps were transacted at the same
time as the £250m 6% bonds were issued in December 2009 in order to swap the bonds’ proceeds and interest flows into US dollars. Under
the terms of the swaps, $415m was borrowed and £250m deposited for seven years at a fixed exchange rate of £1 = $1.66. The fair value of
the currency swap comprises two components: $11m (2011 $29m) relating to the repayment of the underlying principal and $8m (2011
$10m) relating to interest payments. The element relating to the underlying principal is disclosed as a component of net debt (see note 24).
The currency swaps are designated as net investment hedges.
Interest rate swaps
At 31 December 2012, the Group did not hold any interest rate swaps (2011 notional principals held of $100m). These swaps were held to fix
the interest payable on borrowings under the Syndicated Facility; at 31 December 2011, $100m of US dollar borrowings were fixed at 1.99%
until May 2012. The interest rate swaps were designated as cash flow hedges.
Forward foreign exchange contracts
At 31 December 2012, the Group held short dated foreign exchange swaps with principals of Ð75m and $170m (2011 Ð75m).
The swaps are used to manage sterling surplus cash and reduce euro and US dollar borrowings whilst maintaining operational flexibility.
The foreign exchange swaps have been designated as net investment hedges.
24. Net debt
2012 2011
$m $m
Cash and cash equivalents 195 182
Loans and other borrowings – current (16) (21)
– non-current (1,242) (670)
Derivatives hedging debt values (note 23) (11) (29)
Net debt (1,074) (538)
Movement in net debt
Net increase in cash and cash equivalents 15 107
Add back cash flows in respect of other components of net debt:
Issue of long-term bonds (632) –
Decrease in other borrowings 99 119
(Increase)/decrease in net debt arising from cash flows (518) 226
Non-cash movements:
Finance lease obligations (3) (3)
Exchange and other adjustments (15) (18)
(Increase)/decrease in net debt (536) 205
Net debt at beginning of the year (538) (743)
Net debt at end of the year (1,074) (538)
Net debt includes the exchange element of the fair value of currency swaps that fix the value of the Group’s £250m 6% bonds at $415m.
An equal and opposite exchange adjustment on the retranslation of the £250m 6% bonds is included in non-current loans and other borrowings.