Cogeco 2013 Annual Report Download - page 87

86 COGECO CABLE INC. 2013 Consolidated financial statements
The following table summarizes the contractual maturities of the financial liabilities and related capital amounts at August 31, 2013:
Contractual cash flows
(In thousands of Canadian dollars)
Carrying
amount
$2014
$2015 $2016 $2017 $2018 $Thereafter $Total $
Bank indebtedness 13,166 13,166 — — — — — 13,166
Trade and other payables(1) 231,272 231,272 — — — — — 231,272
Long-term debt(2) 2,890,188 13,900 26,536 233,555 148,538 685,180 1,819,425 2,927,134
Derivative financial instruments (833) — — 1,805 — — — 1,805
Finance leases(3) 2,077 1,340 791 — — — — 2,131
3,135,870 259,678 27,327 235,360 148,538 685,180 1,819,425 3,175,508
(1) Excluding accrued interest on long-term debt.
(2) Principal excluding finance leases.
(3) Including interest.
The following table is a summary of interest payable on long-term debt (excluding interest on finance leases) that is due for each of the next
five years and thereafter, based on the principal amount and interest rate prevailing on the outstanding debt at August 31, 2013 and their
respective maturities:
2014 2015 2016 2017 2018 Thereafter Total
(In thousands of Canadian dollars) $ $ $ $ $ $ $
Interest payments on long-term debt 120,313 119,749 111,919 102,548 90,243 253,224 797,996
Interest receipts on derivative financial
instruments (14,393) (14,360) (7,002) — — — (35,755)
Interest payments on derivative financial
instruments 15,448 15,379 7,307 — — — 38,134
121,368 120,768 112,224 102,548 90,243 253,224 800,375
Interest rate risk
The Corporation is exposed to interest rate risks for both fixed and floating interest rate instruments. Fluctuations in interest rates will have
an effect on the valuation and collection or repayment of these instruments. At August 31, 2013, all of the Corporation’s long-term debt was
at fixed rate, except for the Corporation’s Revolving Facilities and Term Facilities. To mitigate such risk, the Corporation has entered on July
22, 2013 into interest rate swap agreements to fix the interest rate on US$200 million of its LIBOR based loans. These agreements have the
effect of converting the floating US LIBOR base rate at an average fixed rate of 0.39625% under the Term Revolving Facility until July 25,
2015. The Corporation elected to apply hedge accounting on these derivative financial instruments. The sensitivity of the Corporation’s annual
financial expense to a variation of 1% in the interest rate applicable to the Revolving Facilities is approximately $7.6 million based on the
outstanding debt at August 31, 2013.
Foreign exchange risk
The Corporation is exposed to foreign exchange risk related to its long-term debt denominated in US dollars that is not designated as a hedge
on its US dollar net investments. In order to mitigate this risk, the Corporation has established guidelines whereby cross-currency swap
agreements can be used to fix the exchange rates applicable to its US dollar denominated long-term debt. All such agreements are exclusively
used for hedging purposes. Accordingly, on October 2, 2008, the Corporation entered into cross-currency swap agreements to set the liability
for interest and principal payments on its US$190 million Senior Secured Notes Series A issued on October 1, 2008. These agreements have
the effect of converting the US interest coupon rate of 7.00% per annum to an average Canadian dollar interest rate of 7.24% per annum.
The exchange rate applicable to the principal portion of the debt has been fixed at $1.0625. The Corporation elected to apply cash flow hedge
accounting on these derivative financial instruments. The impact of a 10% change in the exchange rate of the US dollar and British Pounds
into Canadian dollars would change financial expense by approximately $5.8 million based on the outstanding debt at August 31, 2013.
The Corporation is also exposed to foreign exchange risk on cash and cash equivalents, bank indebtedness and trade and other payables
and provisions denominated in US dollars, Euros or British Pounds. The Corporation’s exposure to foreign currency risk is as follows:
At August 31, 2013 2012
US Euros British Pounds US Euros
(In thousands of Canadian dollars) $ $ $ $ $
Financial assets (liabilities)
Cash and cash equivalents 7,394 1,171 257 3,630 1,243
Trade and other payables and provisions (16,554) (6,933 ) — (21,569) (7,068)
(9,160) (5,762 ) 257 (17,939) (5,825)
Due to their short-term nature, the risk arising from fluctuations in foreign exchange rates is usually not significant. The impact of a 10%
fluctuation in the foreign exchange rates (US dollar, Euro and British Pound) would change financial expense by approximately $1.5 million.