EDC 2014 SR (UPDATED)
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<strong>EDC</strong> <strong>2014</strong> Performance Report<br />
The Company settled these foreign currency swap contracts in <strong>2014</strong> resulting to a 15.1 million<br />
gain that was recorded under “Derivative gains - net” in the consolidated statement of income.<br />
For the years ended December 31, <strong>2014</strong> and 2013, the Company recognized ₱7.5 million gain and<br />
₱12.9 million gain, respectively, from the fair value changes of the foreign currency swap<br />
contracts. These are recorded under “Derivative gains (losses) - net” in the consolidated statements<br />
of income.<br />
The Company did not enter into any foreign currency swap transaction in <strong>2014</strong>.<br />
B. Foreign Currency Forward Contracts<br />
These are contractual agreements to buy or sell a foreign currency at an agreed rate on a future<br />
date.<br />
In 2013, the Company entered into a total of 45 currency forward contracts with various<br />
counterparty banks. These contracts include one deliverable and 44 non-deliverable forward<br />
contracts. The deliverable buy JP¥ - sell US$ forward contract has notional amount and forward<br />
rate of US$3.0 million and JP¥91.0, respectively. As for the non-deliverable forward contracts,<br />
the Company entered into sell US$ - buy PH₱ transactions with onshore banks and simultaneously<br />
entered into buy US$ - sell PH₱ transactions with offshore banks as an offsetting position. The<br />
aggregate notional amount of these sell PH₱ - buy US$ forward contracts was US$130.0 million<br />
while the average forward rate was ₱43.61.<br />
For the year ended December 31, 2013, the Company recognized ₱1.6 million gain from fair value<br />
changes of these foreign currency forward contracts. Such amount is recorded under “Derivative<br />
gains - net” in the consolidated statement of income.<br />
The Company did not enter into any foreign currency forward transaction in <strong>2014</strong>.<br />
Derivatives Designated as Accounting Hedges<br />
A. Cross Currency Swap Contracts<br />
In 2012, the Parent Company entered into six (6) non-deliverable cross-currency swap (NDCCS)<br />
agreements with an aggregate notional amount of US$65.00 million. These derivative contracts<br />
are designed to partially hedge the foreign currency and interest rate risks on the Parent<br />
Company's Refinanced Syndicated Term Loan (Hedged Loan) that is benchmarked against US<br />
LIBOR and with flexible interest reset feature that allows the Parent Company to select what<br />
interest reset frequency to apply (i.e., monthly, quarterly or semi-annually) [see Note 17]. As it is<br />
the Parent Company’s intention to reprice the interest rate on the Hedged Loan quarterly, the<br />
Parent Company utilizes NDCCS with quarterly interest payments and receipts.<br />
During <strong>2014</strong>, the Parent Company entered into additional six (6) NDCCS with aggregate notional<br />
amount of US$45.0 million to further hedge its foreign currency risks and interest rate risks<br />
arising from the Hedged Loan.<br />
Effectively, the twelve (12) NDCCS converted 62.86% of Hedged Loan into a fixed rate peso loan.<br />
Under the NDCCS agreements, the Parent Company receives floating interest based on 3-month<br />
US LIBOR plus 175 basis points and pays fixed peso interest. On specified dates, the Parent<br />
Company also receives specified USD amounts in exchange for specified peso amounts based on<br />
the agreed swap rates. These USD receipts correspond with the expected interest and fixed<br />
principal amounts due on the Hedged Loan.<br />
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