26 Borrowings and derivative financial instruments
| Group | Company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| £m | £m | £m | £m | |
| Current liabilities | ||||
| Bank loans | – | 103.0 | – | 103.0 |
| Overdraft | 5.9 | 3.6 | 5.4 | 1.3 |
| 5.9 | 106.6 | 5.4 | 104.3 | |
| Non-current liabilities | ||||
| 6.5% Secured Bonds 2026 | 193.6 | 194.3 | – | – |
| Loan notes | 1.4 | 3.2 | 1.4 | 3.2 |
| Bank loans | 503.0 | 534.0 | 260.0 | 297.0 |
| Unsecured loans | 31.1 | 29.2 | 31.1 | 29.2 |
| Leasehold liabilities | 7.4 | 8.6 | – | – |
| 736.5 | 769.3 | 292.5 | 329.4 | |
| Derivative financial instruments – expiring in less than one year | 1.6 | – | 1.6 | – |
| Derivative financial instruments – expiring in greater than one year | 21.4 | 26.9 | 7.8 | 12.1 |
| 23.0 | 26.9 | 9.4 | 12.1 | |
| Total liabilities | 765.4 | 902.8 | 307.3 | 445.8 |
| Group | Company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| £m | £m | £m | £m | |
| Secured | ||||
| Bank loans | 503.0 | 637.0 | 260.0 | 400.0 |
| 6.5% Secured Bonds 2026 | 193.6 | 194.3 | – | – |
| 696.6 | 831.3 | 260.0 | 400.0 | |
| Unsecured | ||||
| Loan notes | 1.4 | 3.2 | 1.4 | 3.2 |
| Bank loans | 31.1 | 29.2 | 31.1 | 29.2 |
| Overdrafts | 5.9 | 3.6 | 5.4 | 1.3 |
| 38.4 | 36.0 | 37.9 | 33.7 | |
| Gross debt | 735.0 | 867.3 | 297.9 | 433.7 |
| Leasehold liabilities | 7.4 | 8.6 | – | – |
| Total debt | 742.4 | 875.9 | 297.9 | 433.7 |
| Cash and cash equivalents | (19.0) | (10.5) | – | – |
| Net debt | 723.4 | 865.4 | 297.9 | 433.7 |
At 31st December 2009, £1,225.2m (2008: £1,338.0m) of the group’s properties are subject to a fixed charge to secure the group’s bank loans. In addition, the bonds are secured by a floating charge over certain of the group’s companies, which contain £339.1m (2008: £337.3m) of the group’s properties.
At 31st December 2009, £738.7m (2008: £753.9m) of the group’s properties are subject to a fixed charge to secure the company’s bank loans.
IFRS 7, Financial Instruments: Disclosure, requires disclosure of the maturity of the group’s and company’s remaining contractual financial liabilities. The tables below show the anticipated undiscounted cash outflows arising from the group’s gross debt.
| < 1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | > 5 | ||
|---|---|---|---|---|---|---|---|
| year | years | years | years | years | years | Total | |
| £m | £m | £m | £m | £m | £m | £m | |
| Group | |||||||
| At 31st December 2009 | |||||||
| Bank overdrafts | 5.9 | – | – | – | – | – | 5.9 |
| Bank loans | – | 95.0 | – | 315.0 | 65.0 | 28.0 | 503.0 |
| 6.5% Secured Bonds 2026 | – | – | – | – | – | 175.0 | 175.0 |
| Loan notes | – | – | 1.4 | – | – | – | 1.4 |
| Unsecured loans | – | – | 31.1 | – | – | – | 31.1 |
| Total on maturity | 5.9 | 95.0 | 32.5 | 315.0 | 65.0 | 203.0 | 716.4 |
| Leasehold liabilities | 0.6 | 0.6 | 0.6 | 0.6 | 0.6 | 44.1 | 47.1 |
| Interest on gross debt | 22.1 | 28.2 | 30.0 | 22.2 | 14.0 | 133.0 | 249.5 |
| Effect of interest rate swaps | 13.3 | 7.7 | 3.3 | – | (0.2) | (1.5) | 22.6 |
| Gross loan commitments | 41.9 | 131.5 | 66.4 | 337.8 | 79.4 | 378.6 | 1,035.6 |
| At 31st December 2008 | |||||||
| Bank overdrafts | 3.6 | – | – | – | – | – | 3.6 |
| Bank loans | 103.0 | – | 115.0 | – | 391.0 | 28.0 | 637.0 |
| 6.5% Secured Bonds 2026 | – | – | – | – | – | 175.0 | 175.0 |
| Loan notes | – | – | – | 3.2 | – | – | 3.2 |
| Unsecured loans | – | – | – | 29.2 | – | – | 29.2 |
| Total on maturity | 106.6 | – | 115.0 | 32.4 | 391.0 | 203.0 | 848.0 |
| Leasehold liabilities | 1.0 | 0.9 | 1.0 | 1.0 | 1.0 | 69.4 | 74.3 |
| Interest on gross debt | 37.9 | 39.3 | 39.9 | 39.5 | 20.1 | 141.1 | 317.8 |
| Effect of interest rate swaps | 8.9 | 6.8 | 3.8 | 3.5 | 1.4 | 2.2 | 26.6 |
| Gross loan commitments | 154.4 | 47.0 | 159.7 | 76.4 | 413.5 | 415.7 | 1,266.7 |
Reconciliation to total debt:
| Adjustments: | ||||||
|---|---|---|---|---|---|---|
| Gross loan | Interest on | Effect of interest | Leasehold | Non-cash | Total | |
| commitments | gross debt | rate swaps | liabilities | amortisation | debt | |
| £m | £m | £m | £m | £m | £m | |
| At 31st December 2009 | ||||||
| Maturing in: | ||||||
| < 1 year | 41.9 | (22.1) | (13.3) | (0.6) | – | 5.9 |
| 1 to 2 years | 131.5 | (28.2) | (7.7) | (0.6) | – | 95.0 |
| 2 to 3 years | 64.4 | (30.0) | (3.3) | (0.6) | – | 32.5 |
| 3 to 4 years | 337.8 | (22.2) | – | (0.6) | – | 315.0 |
| 4 to 5 years | 79.4 | (14.0) | 0.2 | (0.6) | – | 65.0 |
| > 5 years | 378.6 | (133.0) | 1.5 | (36.7) | 18.6 | 229.0 |
| 1,035.6 | (249.5) | (22.6) | (39.7) | 18.6 | 742.4 | |
| At 31st December 2008 | ||||||
| Maturing in: | ||||||
| < 1 year | 154.4 | (37.9) | (8.9) | (1.0) | – | 106.6 |
| 1 to 2 years | 47.0 | (39.3) | (6.8) | (0.9) | – | – |
| 2 to 3 years | 159.7 | (39.9) | (3.8) | (1.0) | – | 115.0 |
| 3 to 4 years | 76.4 | (39.5) | (3.5) | (1.0) | – | 32.4 |
| 4 to 5 years | 413.5 | (20.1) | (1.4) | (1.0) | – | 391.0 |
| > 5 years | 415.7 | (141.1) | (2.2) | (60.8) | 19.3 | 230.9 |
| 1,266.7 | (317.8) | (26.6) | (65.7) | 19.3 | 875.9 |
| < 1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | > 5 | ||
|---|---|---|---|---|---|---|---|
| year | years | years | years | years | years | Total | |
| £m | £m | £m | £m | £m | £m | £m | |
| Company | |||||||
| At 31st December 2009 | |||||||
| Bank overdrafts | 5.4 | – | – | – | – | – | 5.4 |
| Bank loans | – | 95.0 | – | 100.0 | 65.0 | – | 260.0 |
| Loan notes | – | – | 1.4 | – | – | – | 1.4 |
| Unsecured loans | – | – | 31.1 | – | – | – | 31.1 |
| Total on maturity | 5.4 | 95.0 | 32.5 | 100.0 | 65.0 | – | 297.9 |
| Interest on debt | 5.8 | 9.1 | 7.9 | 6.8 | 1.0 | – | 30.6 |
| Effect of interest rate swaps | 5.2 | 2.2 | 0.8 | 0.1 | 0.1 | – | 8.4 |
| Gross loan commitments | 16.4 | 106.3 | 41.2 | 106.9 | 66.1 | – | 336.9 |
| At 31st December 2008 | |||||||
| Bank overdrafts | 1.3 | – | – | – | – | – | 1.3 |
| Bank loans | 103.0 | – | 115.0 | – | 182.0 | – | 400.0 |
| Loan notes | – | – | – | 3.2 | – | – | 3.2 |
| Unsecured loans | – | – | – | 29.2 | – | – | 29.2 |
| Total on maturity | 104.3 | – | 115.0 | 32.4 | 182.0 | – | 433.7 |
| Interest on debt | 15.1 | 15.7 | 14.8 | 14.2 | 4.5 | – | 64.3 |
| Effect of interest rate swaps | 4.0 | 2.7 | 1.2 | 1.0 | 0.9 | – | 9.8 |
| Gross loan commitments | 123.4 | 18.4 | 131.0 | 47.6 | 187.4 | – | 507.8 |
There are no differences for the company in 2009 or 2008 between the total on maturity shown above and total debt.
Undrawn committed bank facilities – maturity profile
| < 1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | > 5 | ||
|---|---|---|---|---|---|---|---|
| year | years | years | years | years | years | Total | |
| £m | £m | £m | £m | £m | £m | £m | |
| Group | |||||||
| At 31st December 2009 | – | 105.0 | – | 260.0 | 60.0 | – | 425.0 |
| At 31st December 2008 | 22.0 | – | 85.0 | – | 184.0 | – | 291.0 |
| Company | |||||||
| At 31st December 2009 | – | 105.0 | – | 100.0 | 60.0 | – | 265.0 |
| At 31st December 2008 | 22.0 | – | 85.0 | – | 18.0 | – | 125.0 |
Fixed interest rate and hedged debt
At 31st December 2009 and 31st December 2008, the group’s and company’s fixed rate debt comprised the Secured Bonds 2026 together with the instruments used to hedge its floating rate debt.
Secured Bonds 2026
On the acquisition of London Merchant Securities plc in 2007, the Secured Bonds 2026 were included at fair value less acquisition costs. This difference from its principal value is being amortised through the income statement. The fair value shown in note 27 was determined by the mid-price of £101.31 per £100.00 as at 31st December 2009 (2008: £89.36 per £100.00). The carrying value at 31st December 2009 was £193.6m (2008: £194.3m).
Hedged debt
The hedged debt consists of interest rate swaps and an interest rate cap. The fair value of the interest rate swaps represents the net present value of the difference between the contracted fixed rates and the fixed rates payable if the swaps were to be replaced on 31st December 2009 for the period to the contracted expiry dates. The fair value of the interest rate cap represents the net cost of replacement on identical terms at prices prevailing on 31st December 2009.
| Group | Company | ||||||
|---|---|---|---|---|---|---|---|
| Weighted | Weighted | ||||||
| average | Weighted | average | Weighted | ||||
| Principal | interest rate | average life | Principal | inerest rate | average life | ||
| £m | % | Years | £m | % | Years | ||
| At 31st December 2009 | |||||||
| Interest rate swaps | 398.0 | 4.731 | 4.03 | 170.0 | 4.712 | 4.10 | |
| Interest rate cap | 10.0 | 6.010 | 1.46 | 10.0 | 6.010 | 1.46 | |
| At 31st December 2008 | |||||||
| Interest rate swaps | 370.0 | 5.030 | 4.29 | 170.0 | 5.150 | 4.35 | |
| Interest rate cap | 10.0 | 6.010 | 2.46 | 10.0 | 6.010 | 2.46 | |
Interest rate exposure
After taking into account the various interest rate hedging instruments entered into by the group and the company, the interest rate exposure of the group’s and company’s gross debt was:
| Weighted | Weighted | ||||||
|---|---|---|---|---|---|---|---|
| Floating | Fixed | Gross | average | average | |||
| rate | Hedged | rate | debt | cost of debt | life | ||
| £m | £m | £m | £m | % | Years | ||
| Group | |||||||
| At 31st December 2009 | |||||||
| Bank overdrafts | 5.9 | – | – | 5.9 | 2.50 | – | |
| Bank loans | 95.0 | 408.0 | – | 503.0 | 4.65 | 2.93 | |
| 6.5% Secured Bonds 20261 | – | – | 193.6 | 193.6 | 6.50 | 16.22 | |
| Loan notes | 1.4 | – | – | 1.4 | – | 2.09 | |
| Unsecured loans | 31.1 | – | – | 31.1 | 1.36 | 2.47 | |
| 133.4 | 408.0 | 193.6 | 735.0 | 5.00 | 6.58 | ||
| At 31st December 2008 | |||||||
| Bank overdrafts | 3.6 | – | – | 3.6 | 5.14 | – | |
| Bank loans | 257.0 | 380.0 | – | 637.0 | 5.80 | 3.79 | |
| 6.5% Secured Bonds 20261 | – | – | 194.3 | 194.3 | 6.50 | 17.22 | |
| Loan notes | 3.2 | – | – | 3.2 | 5.25 | 3.09 | |
| Unsecured loans | 29.2 | – | – | 29.2 | 6.67 | 4.26 | |
| 293.0 | 380.0 | 194.3 | 867.3 | 5.96 | 6.59 | ||
| Company | |||||||
| At 31st December 2009 | |||||||
| Bank overdrafts | 5.4 | – | – | 5.4 | 2.50 | – | |
| Bank loans | 80.0 | 180.0 | – | 260.0 | 4.23 | 2.31 | |
| Loan notes | 1.4 | – | – | 1.4 | – | 2.09 | |
| Unsecured loans | 31.1 | – | – | 31.1 | 1.36 | 2.47 | |
| 117.9 | 180.0 | – | 297.9 | 4.02 | 3.07 | ||
| At 31st December 2008 | |||||||
| Bank overdrafts | 1.3 | – | – | 1.3 | 5.14 | – | |
| Bank loans | 220.0 | 180.0 | – | 400.0 | 5.98 | 3.16 | |
| Loan notes | 3.2 | – | – | 3.2 | 5.25 | 3.09 | |
| Unsecured loans | 29.2 | – | – | 29.2 | 6.67 | 4.26 | |
| 253.7 | 180.0 | – | 433.7 | 6.01 | 3.15 |
1 The weighted average cost of debt for the Secured Bonds is based on the nominal amount of £175.0m.
The following table provides an analysis of the anticipated contractual cash flows for the derivative financial instruments using undiscounted cash flows. These amounts represent the gross cash flows of the derivative financial instruments and are settled as either a net payment or receipt.
| 2009 | 2009 | 2008 | 2008 | |
|---|---|---|---|---|
| Receivable | Payable | Receivable | Payable | |
| £m | £m | £m | £m | |
| Group | ||||
| Maturing in: | ||||
| < 1 year | 4.8 | (18.1) | 8.9 | (17.8) |
| 1 to 2 years | 8.2 | (15.9) | 9.5 | (16.3) |
| 2 to 3 years | 12.2 | (15.5) | 10.2 | (14.0) |
| 3 to 4 years | 8.0 | (8.0) | 10.2 | (13.7) |
| 4 to 5 years | 5.2 | (5.0) | 4.8 | (6.2) |
| > 5 years | 12.5 | (11.0) | 8.6 | (10.8) |
| Gross contractual cash flows | 50.9 | (73.5) | 52.2 | (78.8) |
| Company | ||||
| Maturing in: | ||||
| < 1 year | 2.0 | (7.2) | 3.9 | (7.9) |
| 1 to 2 years | 2.8 | (5.0) | 3.7 | (6.4) |
| 2 to 3 years | 4.0 | (4.8) | 3.0 | (4.2) |
| 3 to 4 years | 4.7 | (4.8) | 2.9 | (3.9) |
| 4 to 5 years | 3.9 | (4.0) | 3.0 | (3.9) |
| > 5 years | 6.9 | (6.9) | 8.6 | (8.6) |
| Gross contractual cash flows | 24.3 | (32.7) | 25.1 | (34.9) |