Annual report 2010 - plazacenters

O
Br
Mg
Fs
Ai
Note 16 – Derivatives
Forward transactions
In the course of 2009 through 2010 the Company entered into, and later on in 2010 settled, two Forward transactions (“Forward A”
and “Forward B”), in line with it’s risk management policies. Both Forwards were in respect of Series A bonds (refer to note 22), and
in Forward B also in respect of Series B (refer to note 23).
In 2010, the Company received a total consideration of NIS 44.1 million (approximately EUR 9.3 million). following the settlement
of both Forwards.
Cross currency interest rate swap
As of the end of the reporting period the Group maintains, consistent with its risk management policies, an interest rate swap with par
value of NIS 799 million with Israeli financial institutions. The Company will pay interest in a range between six month Euribor + 3.52 %
and 3.66% and receive 5.4% interest linked to the Israeli CPI with the same amortization schedule as the Series B debentures.
At each payment date of the annual instalments of the debentures the Company will receive the principal amount in NIS and will pay
the principal amount in EUR (subject to the amortization schedule).
In January 2009 the Company settled its Cross Currency transaction in respect of its Series A debentures (“swap transaction”), for a total
proceeds of EUR 13.1 million. In addition, the Company released a long-term restricted deposit in the amount of EUR 5.3 million, which
served as a security for the swap transaction.
The swaps are measured at fair value at the end of each reporting period with changes in the fair value are charged to the profit or loss.
The aggregate fair value of the swaps, relating to Series B debentures, based on a valuation technique was EUR 52.7 million.
The swaps are presented as short-term and long-term derivatives as of the end of the reporting period, depending on the maturity of
the cross currency interest rate swap.
The fair value of the swaps is determined using valuations techniques which require management to make judgment and assumptions
regarding the following variables in respect of mainly the interest rate yield curves of the adjusted NIS and EUR.
In respect of PLN 60 million par value bonds issued (refer to notes 23, 36), the Company entered into a EUR-PLN cross-currency interest
rate swap in order to hedge the expected payments in PLN (principal and interest) and to correlate them with the EUR.
The Company will pay a fixed interest of 6.98% and will receive an interest of six months WIBOR + 4.5% with the same amortization
schedule as the Polish bonds.
As at the date of these financial statements, the Company has pledged a security deposit in the amount of EUR 16.3 million (refer to note
6(1) and 6(3) above). The above mentioned hedges are non-qualified hedges for accounting purposes.
Interest rate swap
In respect of Suwałki project loan, the Company hedges its exposure to cash flow due to floating interest rate. As a result, in June 2010,
the Company entered into swap transaction in which it will pay fixed interest rate of 2.02% and receives Euribor three months on a
quarterly basis starting on June 30, 2011 and ending on June 30, 2014.
The principle amount is EUR 22 million. The Company established a bail mortgage up to EUR 4 million encumbering the real
estate project.
In March 2011, the Company entered into additional swap transaction in connection with the above mentioned loan, in which it will
pay fixed interest rate of 2.97% and receives Euribor three months on a quarterly basis starting on June 30, 2011 and ending on June 30,
2014. The principle amount is EUR 3.1 million.
In respect of Kragujevac project loan, the Company hedges its exposure to cash flow due to floating interest rate. As a result, in October
2010, the Company entered into swap transaction in which it will pay fixed interest rate of 1.85% and receives three months Euribor on
a quarterly basis starting on January 1, 2012 and ending on December 31, 2014.
The principle amount is EUR 32.9 million. The Company has pledged a security deposit in amount of EUR 1 million. In respect of foreign
currency hedge using call options refer to note 40.
Plaza Centers N.V. Annual report 201095