Virgin Media 2006 Annual Report Download - page 166

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Derivative Financial Instruments and Hedging Activities (Continued)
The fair values of our derivative instruments were as follows (in millions):
December 31,
2006 2005
Included within other long term assets:
Foreign currency forward rate contracts 16.4 —
Interest rate swaps £ 15.6 £ 11.9
32.0 11.9
Included within other current liabilities:
Foreign currency forward rate contracts £ 0.1 £ —
Interest rate swaps 0.4 —
£ 0.5 £ —
Included within deferred revenue and other long term liabilities
Foreign currency forward rate contracts £ 62.0 £ 16.8
Interest rate swaps 75.1 15.1
£ 137.1 £ 31.9
Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations
As of December 31, 2006, we have outstanding interest rate swap agreements to manage the exposure to variability in future cash
flows on the interest payments associated with £3,200 million of our outstanding senior credit facility, which accrue at variable rates
based on LIBOR. The interest rate swaps allow us to receive interest based on three and six month LIBOR in exchange for payments
of interest at fixed rates between 4.68% and 6.31%. All of the interest rate swaps entered into as part of our current financing
arrangements became effective during the year and mature in April 2009. The net settlement of £15.2 million under these interest rate
swaps is included within interest expense for the year ended December 31, 2006.
We have designated all of the interest rate swaps entered into as part of our current financing arrangements as cash flow hedges
under FAS 133, because they are highly effective hedges against changes in the amount of future cash flows attributable to changes in
LIBOR. In the year ended December 31 2006, we recorded £11.7 million of unrealized gains in accumulated other comprehensive
income (loss) as a result of the increase in fair market value of these interest rate hedges.
Certain interest rate swaps originally entered into under our previous financing arrangements are not designated as hedges under
FAS 133. Changes in the fair value of these contracts are recognized through gains (losses) on derivative instruments in our statement
of operations. A loss in relation to ineffectiveness of these swaps totaling £1.0 million is included within gains and losses on
derivative instruments for the year ended December 31, 2006.
Cross−Currency Interest Rate Swaps—Hedging the Interest Payments of Senior Notes and Senior Credit Facility
As of December 31, 2006, we have outstanding cross−currency interest rate swaps with principal amounts of $1,625 million and
€725 million. We currently hedge the pound sterling value of interest payments on the U.S. dollar denominated 8.75% senior notes
due 2014, interest payments on the U.S.
F−87
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007