Virgin Media 2006 Annual Report Download - page 76

Also, substantially all of our revenues and operating costs are earned and paid in pounds sterling but we pay interest and principal
obligations on some of our indebtedness in U.S. dollars and euros. As of December 31, 2006, £827.7 million, or 13.4% of our
long−term debt, was denominated in U.S. dollars and £487.1 million, or 7.9%, of our long−term debt was denominated in euros. As a
result, we have exposure to volatility in future cash flows and earnings associated with changes in foreign exchange rates on payments
of principal and interest on a portion of our indebtedness.
To mitigate the risk from these exposures, we have implemented a cash flow hedging program. The objective of this program is
to reduce the volatility of our cash flows and earnings caused by changes in underlying rates. To achieve this objective we have
entered into a number of derivative instruments. The derivative instruments utilized comprise interest rate swaps, cross−currency
interest rate swaps and foreign currency forward contracts. We do not enter into derivative instruments for trading or speculative
purposes. See note 11 to Virgin Media’s consolidated financial statements—Derivative Financial Instruments and Hedging Activities,
and Management’s Discussion and Analysis of Financial Condition and Results of Operations—Derivative Instruments and Hedging
Activities.
The fair market value of long−term fixed interest rate debt and the amount of future interest payments on variable interest rate
debt are subject to interest rate risk.
The following table provides information as of December 31, 2006 about our long term fixed and variable interest rate debt that
are sensitive to changes in interest rates and foreign currency exchange rates (in millions).
Fair Value
Year ended December 31, December 31,
2007 2008 2009 2010 2011 Thereafter Total 2006
Long term debt including current portion
U.S. Dollars
Fixed rate — — — — — $ 975.0 $ 975.0 $ 1,023.9
Average interest rate 8.97%
Average forward exchange rate 0.51
Pounds Sterling
Fixed rate — — — — — £ 375.0 £ 375.0 £ 398.6
Average interest rate 9.75%
Euros
Fixed rate — — — — — € 225.0 € 225.0 € 240.8
Average interest rate 8.75%
Average forward exchange rate 0.71
Pounds Sterling
Variable Rate £ 124.0 £ 474.0 £ 740.0 £ 1,107.0 £ 967.0 £ 1,612.6 £ 5,024.6 £ 5,024.6
Average interest rate LIBOR
plus
1.25−2.25%
LIBOR
plus
1.25−2.25%
LIBOR
plus
1.25−2.25%
LIBOR
plus
1.25−2.25%
LIBOR
plus
1.25−2.25%
LIBOR
plus
1.25−2.75%
72
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007