HSBC 2007 Annual Report Download - page 419

417
Property, plant and equipment
The property, plant and equipment classified as held for sale comprises two principal categories. The first is as a
result of the repossession of property that had been pledged as collateral by customers. These assets are expected to
be disposed of within 12 months of acquisition. Neither a gain nor loss was recognised on reclassifying these assets
as held for sale. The majority arose within the geographical segment, North America.
Secondly, on 31 May 2007, HSBC entered into a contract for the sale and leaseback of the property and long
leasehold land comprising 8 Canada Square, London to Metrovacesa, S.A. (‘Metrovacesa’) for £1,090 million
(US$2,154 million). Under the terms of this arrangement, HSBC leased the building back from Metrovacesa for a
period of 20 years at an annual rent of £43.5 million (US$87 million), with annual upward-only rent reviews linked
to the RPI (all items) and subject to an annual maximum and minimum increase of 6 per cent and 2.5 per cent,
respectively. In the normal course of business, HSBC provided finance to Metrovacesa in respect of the debt element
of this transaction at arm’s length market rates in the form of a bridging loan of £810 million (US$1,601 million),
secured by a charge on the property. The bridging loan had an original maturity date of 30 November 2007 and was
extended with a new facility provided by HSBC with a maturity date of 30 November 2008. The equity portion of
£280 million (US$553 million) was settled in cash by Metrovacesa on 31 May 2007.
The sale has not been recognised in the financial statements at 31 December 2007 because HSBC has retained a
significant interest by virtue of the loan provided to part-finance the purchase of the building. Accordingly, 8 Canada
Square is presented within ‘Non-current assets held for sale’ with a carrying value of US$884 million. The equity
portion received from Metrovacesa is presented in the balance sheet as deferred income with a value at 31 December
2007 of US$562 million. It is expected that the sale will be recognised by HSBC when the bridging loan is repaid.
26 Trading liabilities
2007
US$m
2006
US$m
Deposits by banks .............................................................................................................................. 58,940 32,040
Customer accounts ............................................................................................................................. 102,710 89,166
Other debt securities in issue ............................................................................................................. 44,684 34,115
Other liabilities – net short positions ................................................................................................. 108,246 71,287
314,580 226,608
27 Financial liabilities designated at fair value
HSBC
2007 2006
US$m US$m
Deposits by banks and customer accounts ........................................................................................ 7,724 577
Liabilities to customers under investment contracts ......................................................................... 16,053 13,278
Debt securities in issue (Note 28) ...................................................................................................... 38,587 33,167
Subordinated liabilities (Note 32) ..................................................................................................... 22,831 18,503
Preference shares (Note 32) ............................................................................................................... 4,744 4,686
89,939 70,211
The carrying amount at 31 December 2007 of financial liabilities designated at fair value was US$648 million less
(2006: US$1,257 million more) than the contractual amount at maturity. At 31 December 2007, the accumulated
amount of the change in fair value attributable to changes in credit risk was a gain of US$1,619 million (2006: loss of
US$1,535 million).
HSBC Holdings
2007 2006
US$m US$m
Subordinated liabilities (Note 32):
– owed to third parties ................................................................................................................... 14,496 9,839
– owed to HSBC undertakings ...................................................................................................... 4,187 4,231
18,683 14,070