Annual report 2010 - Imperial Tobacco Group

Notes to the Financial Statements continued16 Borrowings and Derivative Financial Instruments continuedThe table below summarises the Group’s major financial institution counterparties by credit rating and balances at30 September 2010:30 September 2010 30 September 2009S&P CreditRatingMaximumexposure tocredit risk£mS&P CreditRatingMaximumexposure tocredit risk£mCounterpartyFinancial institution A A+ 137 A+ 106Financial institution B A 136 A 81Financial institution C AA 131 AA 95Financial institution D AA- 83 AA- 21Financial institution E AA 80 AA 143Financial institution F A+ 77 A+ 81Financial institution G A+ 68 A+ 28Strategy Performance Governance FinancialsManagement do not expect these counterparties to default on their current obligations.Liquidity riskThe Group is exposed to liquidity risk, which represents having insufficient funds to meet the financing needs of the Group.To manage this risk the Group has a policy of actively maintaining a mixture of short, medium and long-term committedfacilities that are designed to ensure that the Group has sufficient available funds for the forecast requirements of the Groupover the short to medium term. At 30 September 2010 the Group had £1,798 million (2009: £3,109 million) of undrawncommitted facilities, maturing in July 2012.As well as forecasting and monitoring the Group’s core liquidity needs, the Group Treasury function is in regular dialoguewith subsidiary companies to ensure their liquidity needs are met. Subsidiary companies are funded by a combination ofshare capital and retained earnings, loans from central finance companies on commercial terms, or through local borrowingsby the subsidiaries in appropriate currencies. Funds over and above those required for short-term working capital purposesby subsidiary companies are remitted to Group Treasury where practical and possible and are used to pay down debtwhenever possible.The table below summarises the Group’s financial liabilities by maturity based on their contractual cash flows. Thecontractual cash flows disclosed in the table are undiscounted and have been calculated using spot rates at the relevantbalance sheet date, including interest to be paid. The balance sheet amounts disclosed in the table for derivative financialliabilities include collateral of £243 million (2009: £356 million) which has been transferred to counterparties in respect ofcertain derivatives with a negative fair value. The future cash inflows arising from collateral transferred have not beenallocated to time periods since there is no reasonable basis upon which to do so.At 30 September 2010Contractual cash flowsBalance sheetamountLess than1 yearBetween1 and 2 yearsBetween2 and 5 yearsMore than5 years£ millionTotalNon-derivative financial liabilitiesBank loans 2,061 2,087 1,549 538 – –Capital market issuance 8,271 11,513 530 1,942 3,304 5,737Trade payables 1,248 1,248 1,248 – – –Finance lease liabilities 25 28 3 3 22 –Total non-derivativefinancial liabilities 11,605 14,876 3,330 2,483 3,326 5,737Derivative financial liabilitiesNet settled derivatives 616 1,150 226 225 413 286Gross settled derivatives 394– receipts (6,993) (1,975) (1,553) (2,765) (700)– payments 7,449 1,881 1,739 2,969 860Total derivative financial liabilities 1,010 1,606 132 411 617 446126