Annual Report 2010 - Christchurch City Council

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Borrowings (continued) Financial statements Annual Report Christchurch Otautahi 2010 p205. Notes to financial statements 28. Borrowings (continued) Parent Secured loans Christchurch City Council’s secured debt of $302.3 million (2009: $209.0 million) is issued at both fixed and floating rate of interest. For floating rate debt, the interest rate is reset quarterly based on the 90-day bank bill rate plus a margin for credit risk. As at 30 June 2010, this rate averaged 5.48% (2009: 4.45%). Christchurch City Council has entered into derivative contracts to hedge its exposure to interest rate fluctuations. As at 30 June 2010 the average effective interest rate for the fixed rate debt is 6.93% (2009: 6.85%). Security Christchurch City Council’s loans are secured over either separate or general rates of the district. Fair Value The fair value of loans is $317.9 million (2009: $223 million). The fair values are based on cash flows discounted using a rate based on the borrowing rates ranging from 2.89-5.38% (2009: 2.80-5.96%). The carrying amounts of borrowings repayable within one year approximate their fair value, as the impact of discounting is not significant. Group Details of the material borrowings are as follows: CCHL CCHL’s borrowings at 30 June 2010 comprised: • Bonds and floating rate notes totalling $175 million (2009: $150 million) in five tranches ranging from $5 million to $70 million. These borrowings mature at various intervals until November 2018. Bond coupon rates are between 6.21% and 6.87%. • A loan facility of $30 million (2009: $30 million). The facility matured in July 2010, and was replaced by a $30 million floating rate note issue. • Commercial paper of $76 million (2009: $23 million). This is short term debt on a 90 day rollover period. • The company also has an undrawn $20 million standby facility. The borrowings were put in place under a $350 million debt issuance programme. The borrowings are unsecured, but the loan documentation imposes certain covenants and restrictions on CCHL. The company has entered into derivative contracts to hedge its exposure to interest rate fluctuations. Orion New Zealand Ltd The company’s bank debt of $37.2 million (2009: $46.8 million) is unsecured against the company; however a deed of negative pledge and guarantee requires the company to comply with certain covenants. This facility matures 30 September 2010 (2009: 30 September 2010). Subsequent to balance date the facilities were extended to mature on 31 December 2010 and the company elected to reduce its facility limit to $90 million. Interest rates for all borrowings are floating rate based on bank bill rates plus a margin. As at 31 March 2010 this rate averaged 3.06% (2009: 3.83%). The company has entered into derivative contracts to hedge its exposure to interest rate fluctuations. Christchurch International Airport Ltd The company has a $250 million funding facility with four banks to fund the ongoing business and the proposed terminal development. In addition, the company has a fully drawn subordinated $50 million facility with CCHL and an overdraft facility of $1 million (2009: $250 million funding facility, $50 million subordinated facility with CCHL and $1 million overdraft facility). All borrowings under the bank facility and overdraft facility are unsecured and supported by a negative pledge deed. Interest rates paid during the year, including offsetting interest rate swaps, ranged from 6.99-8.80% (2009: 7.08-8.55%). Lyttelton Port Company Ltd Current and term advances of $57.9 million (2009: $57.1 million) have been raised pursuant to a multi-currency facility agreement with Westpac Banking Corporation. Those funds have been lent against a negative pledge deed where Westpac ranks equally with other creditors. The facility is in two tranches of $95 million and $55 million respectively with renewal dates of 1 July 2011 and 1 July 2012 respectively. There was no difference between the face value and carrying amount of these loans and borrowings as at 30 June 2010 or 30 June 2009.
p206. Annual Report Christchurch Otautahi 2010 Financial statements Finance leases liabilities Notes to financial statements 29. Finance leases liabilities Parent Group 30 Jun 10 30 Jun 09 30 Jun 10 30 Jun 09 Actual Actual Actual Actual $000s $000s $000s $000s No later than one year - - 785 841 Later than one year and not later than five years - - 2,425 2,912 Later than five years - - 9,585 10,695 Minimum lease payments* - - 12,795 14,448 Less future finance charges - - (6,853) (8,492) Present value of minimum lease payments - - 5,942 5,956 Minimum future lease payments No later than one year - - 354 330 Later than one year and not later than five years - - 1,074 1,260 Later than five years - - 4,514 4,366 Total present value of minimum lease payments - - 5,942 5,956 Represented by Current portion - - 354 330 Non-current portion - - 5,588 5,626 - - 5,942 5,956 *Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual. The finance lease liability above primarily relates to agreements between Orion and Transpower New Zealand Limited (Transpower) for Transpower to construct assets at Transpower grid exit points. The agreements are for terms of 10, 20 or 35 years. The company does not own the assets at the end of the lease term and there is no residual value. There is no security provided for the arrangements. The monthly payment amount may be reviewed annually by Transpower and the risk free portion of the interest rate may be adjusted. Also included above are agreements by City Care Ltd in respect of motor vehicles. The company does not have an option to purchase the leased assets at the expiry of the lease period and there are no renewal rights.
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Annual Report 2010 - Christchurch City Council

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