BAE-annual-report-2014

Financial statements
NOTES TO THE GROUP ACCOUNTS
CONTINUED
19. LOANS AND OVERDRAFTS
Loans and overdrafts are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, loans
and overdrafts are stated at either amortised cost or, where hedge accounting has been adopted, fair value in respect of the hedged
risk. Any difference between the amount initially recognised and the redemption value is recognised in the income statement over the
period of the borrowings on an effective interest basis.
Non-current
US$750m 5.2% bond, repayable 2015 – 453
US$350m 3.5% bond, repayable 2016 224 211
Albertville Hangar bond, repayable 2018 6 6
US$1bn 6.375% bond, repayable 2019 642 607
US$500m 4.75% bond, repayable 2021 320 301
£400m 4.125% bond, repayable 2022 398 397
US$800m 3.8% bond, repayable 2024 514 –
US$500m 7.5% bond, repayable 2027 319 299
US$400m 5.8% bond, repayable 2041 254 238
US$300m 4.75% bond, repayable 2044 190 –
Debt-related derivative financial instruments – liabilities 1 12
2,868 2,524
Current
Euro-Sterling £100m 10¾% bond, repayable 2014 – 100
US$500m 4.95% bond, repayable 2014 – 302
US$750m 5.2% bond, repayable 2015 481 –
Overdrafts 1 –
482 402
US$500m of the US$1bn 6.375% bond, repayable 2019, has been converted to a floating rate bond utilising a series of interest rate
swaps that mature in June 2019 and give an effective rate during 2014 of 4.8%.
The US$500m 7.5% bond, repayable 2027, was converted at issue to a sterling fixed rate bond by utilising cross-currency swaps and
has an effective interest rate of 7.7%.
On 7 October, BAE Systems issued US$800m of 3.8% fixed rate debt maturing in October 2024 and US$300m of 4.75% fixed rate debt
maturing in October 2044. Subsequently, the Group entered into interest rate derivatives to swap US$500m of the ten-year fixed rate debt
into a floating rate to October 2019. The swaps are at an average rate of LIBOR +1.9% for each three-month period and the initial fixing was
at 2.1% inclusive of LIBOR, giving an effective rate during 2014 of 2.8%. US$500m of the US$800m bond is measured at fair value.
The debt-related derivative financial instruments represent the fair value of interest rate and cross-currency derivatives relating to the
US$500m 7.5% bond, repayable 2027, and the US$800m 3.8% bond, repayable 2024. These derivatives have been entered into
specifically to manage the Group’s exposure to foreign exchange or interest rate risk. Debt-related derivative financial liabilities are
presented within loans and overdrafts above and debt-related derivative financial assets are presented within other financial assets
(see note 14).
2014
£m
2013
£m
132
BAE Systems
Annual Report 2014