Virgin Media 2010 Annual Report Download - page 129

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 10—Derivative Financial Instruments and Hedging Activities (continued)
All of our cross-currency interest rate swaps include exchanges of the notional amounts at the start and end
of the contract except for the contracts maturing in November 2016 hedging the $1,000 million convertible
senior notes due 2016.
Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations
As of December 31, 2010, we had outstanding interest rate swap agreements to manage the exposure to
variability in future cash flows on the interest payments associated with our senior credit facility, which accrue at
variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on three month LIBOR
in exchange for payments of interest at fixed rates.
The terms of our outstanding interest rate swap contracts at December 31, 2010 were as follows:
Hedged item/Maturity date Hedge type
Notional
amount
Weighted average
interest rate due from
counterparty
Weighted average
interest rate due to
counterparty
(in millions)
Senior credit facility
July 2012 to December 2015 .......... Accounting £600.0 6 month LIBOR 2.86%
Other
March 2013 ....................... Economic £300.0 3 month LIBOR 3.28%
March 2013 ....................... Economic 300.0 1.86% 3 month LIBOR
September 2012 .................... Economic 600.0 3 month LIBOR 3.09%
September 2012 .................... Economic 600.0 1.07% 3 month LIBOR
Foreign Currency Forward Rate Contracts—Hedging Committed and Forecasted Transactions
As of December 31, 2010, we had outstanding foreign currency forward rate contracts to purchase U.S.
dollars to hedge committed and forecasted purchases. The terms of our outstanding foreign currency forward rate
contracts at December 31, 2010 were as follows:
Hedged item/Maturity date Hedge type
Notional
amount due
from
counterparty
Notional
amount due to
counterparty
Weighted
average
exchange rate
(in millions) (in millions)
Committed and forecasted purchases January 2011 to
June 2011 .................................... Economic $70.0 £44.0 1.5897
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the
gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into
earnings in the same period or periods during which the hedged transactions affect earnings. In our consolidated
statement of cash flows, we recognize the cash flows resulting from derivative contracts that are treated as
Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized. All
other cash flows from derivative contracts are recognized as operating activities in the consolidated statement of
cash flows.
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