Royal Ontario Museum Annual Report 2007/2008

The following minimum payments are due as follows:
2009
$
[000’s]
25,000
2010 12,000
2011 15,000
2012 11,500
2013 1,500
Thereafter 23,640
88,640
Earlier repayments are required in certain circumstances. In addition, the
credit agreement includes covenants which must be met by the Museum
and, if not met, the OFA has the right to demand repayment of the
outstanding balance.
[c] As security for the credit facilities, the Foundation has provided an
undertaking to transfer all of its unrestricted donations to the Museum
under certain circumstances. In addition, the Museum has assigned
all payments from the Foundation restricted for the financing of the
Renaissance ROM Project.
16. Financial Instruments
[a] The Museum is exposed to foreign exchange risk with respect to
contractual obligations payable in foreign currency and to interest rate risk
with respect to its long-term debt. The Museum enters into derivative
financial instruments to manage its risk exposure.
The Museum is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments, but it does not
expect counterparties to fail to meet their obligations given their high
credit rating.
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[b] The Museum has in place an Interest Rate Swap Agreement [the
“Agreement”] with a notional value of $20,000,000, which will expire on
May 2, 2008. Under the terms of the Agreement, the Museum has agreed
with a counterparty to exchange, at specified intervals and for a specified
period, its floating interest obligation for fixed interest [4.53%] calculated
on the notional value of the loan. The use of the swap effectively enables
the Museum to convert part of the floating rate interest obligation of the
loan into a fixed rate obligation and thus manage its exposure to interest
rate risk. The swap is marked-to-market.
As at March 31, 2008, the fair value of the interest rate swap was a gain
of $22,110 [2007 - gain of $186,000]. The change in the fair value of
the interest rate swap is recorded as a decrease in interest included as an
addition to capital assets.
[c] The Museum has in place forward foreign currency contracts [the
“Forward Contracts”] to manage foreign exchange risk on contractual
obligations denominated in Euros. Under the terms of the Forward
Contracts, the Museum will receive delivery of the foreign currency at a
contracted rate of 1.4820. The use of the Forward Contracts enables the
Museum to fix the exchange rate and reduce the risk of fluctuations in
the rate. The Forward Contracts are marked-to-market.
As at March 31, 2008, the notional value of the Forward Contracts
totalled $949,000 [2007 – $373,000] with a gain of $153,000 [2007 – gain
of $13,000] recorded in the accounts. The change in the fair value of
the Forward Contracts is recorded as an increase in deferred capital
contributions.