Rogers 2014 Annual Report Download - page 65

MANAGEMENT’S DISCUSSION AND ANALYSIS
Matured debt derivatives in 2014
(In millions of dollars)
Maturity date
Notional amount
(US$)
Net cash
(proceeds) settlement
(Cdn$)
March 1, 2014 750 (61)
March 15, 2014 350 26
1,100 (35)
As at December 31, 2014, we had US$6.0 billion of US dollar-
denominated senior notes and debentures, all of which have been
hedged using debt derivatives.
(In millions of dollars, except exchange rates,
percentages and years)
December 31,
2014
December 31,
2013
US dollar-denominated long-term debt 1US$ 6,030 US$ 6,380
Hedged with debt derivatives US$ 6,030 US$ 6,380
Hedged exchange rate 1.0470 1.0447
Percent hedged 2100.0% 100.0%
Amount of borrowings at fixed rates 3
Total borrowings Cdn$ 15,055 Cdn$ 13,965
Total borrowings at fixed rates Cdn$ 13,963 Cdn$ 13,315
Percent of borrowings at fixed rates 92.7% 95.3%
Weighted average interest rate on
borrowings 5.20% 5.54%
Weighted average term to maturity 10.8 years 10.3 years
1US$ denominated long-term debt reflects the hedged exchange rate.
2Pursuant to the requirements for hedge accounting under IAS 39, Financial
Instruments: Recognition and Measurement, on December 31, 2014, and
December 31, 2013, RCI accounted for 100% of its debt derivatives as hedges
against designated US dollar-denominated debt. As a result, on December 31,
2014, 100% of US dollar-denominated debt is hedged for accounting and
economic purposes.
3Borrowings include long-term debt, including the impact of debt derivatives, and
short-term borrowings associated with our accounts receivable securitization
program.
Bond forwards
From time to time, we may use extendible bond forward derivatives
(bond forwards) to hedge interest rate risk on the debt instruments we
expect to issue in the future. As at December 31, 2014, approximately
$5.2 billion of our outstanding public debt matures over the next
5 years and we anticipate that we willissuepublicdebtoverthattime
to fund at least a portion of those maturities together with other
general corporate funding requirements. We use bond forwards for
risk-management purposes only. The bond forwards noted below
have been designated as hedges for accounting purposes.
During 2014, we entered into bond forwards to hedge the underlying
Government of Canada (GoC) interest rate risk that will comprise a
portion of the interest rate risk associated with our anticipated future
debt issuances. As a result of these bond forwards, we have hedged
the underlying GoC 10-year rate on $1.5 billion notional amount for
anticipated future debt issuances from 2015 to 2018 and the
underlying GoC 30-year rate on $0.4 billion notional amount for
December 31, 2018. The bond forwards are effective from December
2014. There was no bond forward activity or balances in 2013.
(In millions of dollars,
except interest rates)
GoC term (years) Maturity date 1
Initial GoC
Interest rate 1Notional amount
10 Dec 31, 2015 2.05% 500
10 Dec 31, 2016 2.04% 500
10 Apr 30, 2018 2.07% 500
30 Dec 31, 2018 2.41% 400
Total 1,900
1Bond forwards with maturity dates beyond December 31, 2015 are subject to GoC
rate re-setting from time to time.
EXPENDITURE DERIVATIVES
We use foreign currency forward contracts (expenditure derivatives) to
hedge the foreign exchange risk on the notional amount of certain
forecasted US dollar-denominated expenditures.
Expenditure derivatives entered into in 2014
(In millions of
dollars, except
exchange rates)
Notional
Trade date Maturity dates
Notional
amount
(US$)
Exchange
Rate
Converted
amount
(Cdn$)
February 2014 January 2015 to April 2015 200 1.1100 222
May 2014 May 2015 to December 2015 232 1.0948 254
June 2014 January 2015 to December 2015 288 1.0903 314
July 2014 January 2016 to December 2016 240 1.0833 260
Total as at December 31, 2014 960 1.0940 1,050
The expenditure derivatives noted above have been designated as
hedges for accounting purposes. In the year ended December 31,
2014, we settled US$900 million (2013 – US$435 million) of
expenditure derivatives for $923 million (2013 – $430 million).
EQUITY DERIVATIVES
We use stock-based compensation derivatives (equity derivatives) to
hedge the market price appreciation risk of the RCI Class B shares
granted under our stock-based compensation programs. As at
December 31, 2014, we had equity derivatives for 5.7 million RCI
Class B shares with a weighted average price of $50.37. These
derivatives have not been designated as hedges for accounting
purposes and so we record changes in their fair value as a stock-based
compensation expense or offset thereto which serves to offset a
substantial portion of the impact of changes in the market price of RCI
Class B shares have on the accrued value of the stock-based
compensation liability for our stock-based compensation programs. In
April 2014, we executed extension agreements for each of our equity
derivative contracts under substantially the same terms and conditions
with revised expiry dates to April 2015 (from April 2014).
2014 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 61