Singapore Airlines 2015 Annual Report Download - page 154

Notes to the Financial Statements
31 March 2015
19 Long-Term Liabilities (in $ million) (continued)
Loans
A short-term loan of $9.3 million is a revolving credit facility denominated in USD taken by a subsidiary company. The loan
is unsecured and bears a fixed interest at 2.75% (FY2013/14: 2.50%) per annum. The current revolving credit facility shall be
repayable within 12-months aer the reporting date.
The other short-term loans of $83.7 million are European Export Credit Agency (“ECA”) aircra financing loans denominated in
SGD taken by a subsidiary company. These are in the form of credit support, where a bank or other financial institution lends
money to the borrower with the loan guaranteed by the ECA. The secured bank loans are secured via assignment of the aircra
purchase agreement, assignment of engine warranty and credit agreement as well as mortgage of the aircra. The interest rates
range from 0.90% to 4.11% per annum and the loans shall be repayable within 12-months aer the reporting date.
A long-term loan of $23.9 million denominated in USD is taken by a subsidiary company is unsecured and bears an average
floating rate of 1.47% (FY2013/14: 1.47%) per annum, re-priced quarterly. This loan is repayable by 29 April 2022.
The other long-term loans of $223.3 million are ECA aircra financing loans denominated in SGD taken by a subsidiary company.
The interest rates range from 0.90% to 4.11% per annum and the loans shall be repayable by 21 April 2023.
As part of the ECA financing arrangements with banks, special purpose entities (“SPE”) (Note 23) were incorporated. As at 31 March
2015, there were ECA financing arrangements with banks to finance 11 aircra (2014: 11). Pursuant to the ECA financing, the legal
ownership of the aircra is vested in the SPEs. The subsidiary companies leased the aircra using finance lease arrangement with
Falcon Aircra Limited and Winnie Aircra Limited. The subsidiary companies have purchase options to acquire legal ownership
of the aircra from the SPEs at the end of the lease term at a bargain purchase option price.
The fair value of the loans amounted to $336.3 million as at 31 March 2015 (2014: $22.8 million).
Finance lease commitments and purchase option price payable
SIA Cargo holds four B747-400 freighters under finance leases, which mature between 2015 and 2018, without any options for
renewal. Three leases have options for SIA Cargo to purchase the aircra at the end of the lease period of 12 years. The fourth
lease has an option for SIA Cargo to purchase the aircra at the end of the 15th year of the lease period. Sub-leasing is allowed
under the lease agreements.
Interest on three of SIA Cargo’s finance lease commitments are charged at a margin above the London Interbank Oered Rate
(“LIBOR”). These ranged from 0.26% to 0.99% (FY2013/14: 0.27% to 1.12%) per annum. The interest rate on the fourth finance
lease commitment is fixed at 5.81% (FY2013/14: 5.81%) per annum.
The net carrying amounts approximate the fair value as the interest rate approximates the market rate.
SIA Cargo continues to remain the primary obligor under the lease agreements, and as such, there are unpaid lease commitments
of $86.3 million (2014: $79.1 million) as at 31 March 2015. In 2013, $66.4 million was covered by funds placed with financial
institutions under defeasance to provide for payments due at time of exercise of purchase option at the end of the 15th year of the
lease period. The funds placed with financial institutions are expected to generate interest in order to meet the obligation at time
of maturity. These arrangements have not been included in the financial statements for 2013. During the year, this arrangement
has been terminated and the deposit, amounting to $76.6 million has been transferred to the SIA Cargo (Note 27). This amount
has been designated by SIA Cargo to meet the obligation at maturity in December 2017. The fair value of the purchase option
price payable amounted to $85.3 million as at 31 March 2015.
152 FINANCIAL