Marks and Spencer 2010 Annual Report Download - page 106

Marks and Spencer Group plc Annual report and financial statements 2010 Financial statements 102
Notes to the financial statements continued
21 Borrowings and other financial liabilities
2010
£m
2009
£m
Current
Bank loans and overdrafts1 249.5 147.9
Syndicated bank facility2 219.8 781.2
Finance lease liabilities 13.6 13.7
482.9 942.8
Partnership liability to the Marks & Spencer UK Pension Scheme (see note 25) 71.9 71.9
554.8 1,014.7
Non-current
Bank loans 17.9 11.2
6.375% £308m (last year £375m) medium-term notes 20113 314.6 382.6
5.875% £267m (last year £400m) medium-term notes 20123 279.9 417.9
5.625% £400m medium-term notes 20143 399.5 399.0
6.250% US$500m medium-term notes 20174 333.8 354.4
6.125% £400m medium-term notes 20193 403.5 –
7.125% US$300m medium-term notes 20374 199.6 212.0
6.875% £250m puttable callable reset medium-term notes 20373,5 253.0 252.6
Finance lease liabilities 76.2 88.2
2,278.0 2,117.9
Partnership liability to the Marks & Spencer UK Pension Scheme (see note 25) –68.0
2,278.0 2,185.9
Total 2,832.8 3,200.6
1 Bank loans and overdrafts includes a £5.0m (last year £5.0m) loan from the Hedge End Park Limited joint venture (see notes 16 and 30).
2 Relates to a £1.2bn committed bank revolving credit facility set to mature on 26 March 2013.
3 These notes are issued under Marks and Spencer plc’s £3bn European Medium-Term Note Programme and all pay interest annually.
4 Interest on these bonds is payable semi-annually.
5 These notes include an investor put and issuer call option exercisable in December 2012.
On 25 November the Group announced the successful tender offer for £67.4m of the November 2011 medium-term notes and £132.6m
of the May 2012 medium-term notes incurring a one-off premium of £13.5m on the buy-back. In conjunction, new medium-term notes
were issued totalling £400m at a coupon rate of 6.125%, of which £200m have been swapped to floating rate and designated in a fair value
hedge relationship.
Finance leases
The minimum lease payments under finance leases fall due as shown in the table on the following page. It is the Group’s policy to lease
certain of its properties and equipment under finance leases. The average lease term for equipment is 6 years and 125 years for property.
Interest rates are fixed at the contract rate. All leases are on a fixed repayment basis and no arrangements have been entered into for
contingent payments. The Group’s obligations under finance leases are secured by the lessors’ charges over the leased assets.
22 Financial instruments
Treasury policy and financial risk management
The Group operates a centralised treasury function to manage the Group’s funding requirements and financial risks in line with the Board
approved treasury policies and procedures, and their delegated authorities.
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items, such as trade
debtors and trade creditors, that arise directly from its operations. The main purpose of these financial instruments is to finance the Group’s
operations.
Group treasury also enters into derivative transactions, principally interest rate and currency swaps and forward currency contracts.
The purpose of these transactions is to manage the interest rate and currency risks arising from the Group’s operations and financing.
It remains the Group’s policy not to hold or issue financial instruments for trading purposes, except where financial constraints necessitate
the need to liquidate any outstanding investments. The treasury function is managed as a cost centre and does not engage in speculative
trading.
The principal financial risks faced by the Group are liquidity/funding, interest rate, foreign currency and counterparty risks. The policies
and strategies for managing these risks are summarised as follows: