Registration Document - Pernod Ricard

4 Notes
108
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
to the annual consolidated fi nancial statements
Financial instrument 50bp increase in interest rates 50bp decrease in interest rates
Cross currency swaps 10 (10)
Bonds hedged by cross currency swaps (12) 12
Fair value instruments (2) 2
Analysis of the sensitivity of financial instruments
to interest rate risks (impact on equity)
A relative fluctuation of +/-50bp in (USD and EUR) interest rates
would generate an equity gain or loss of approximately €70 million as
a result of changes in the fair value of the derivatives documented as
cash flow hedges (swaps and interest rate options).
Counterparty risk in financial transactions
The Group would be exposed to the default of a counterpart. In order
to limit this exposure, the Group performs rigorous selection of
PERNOD RICARD
counterparts according to several criteria, including credit ratings,
and depending on the maturity dates of the transactions. The Group’s
exposure to credit risk is limited and is not significantly concentrated
on any given counterpart.
3. Specific clauses
The Group met the thresholds set by the banks under the syndicated
loan agreement, requiring a ratio of net debt to EBITDA of 6.75 and
ratio of EBITDA to financing costs of 2.25.
NOTE 19 Interest rate and foreign exchange derivatives
1. Interest rate derivatives
In euro million
Notional amount of contracts
< 1 year 1 to 5 years > 5 years Total
Market value
Interest rate swaps – borrower floating rate - - - - -
Interest rate swaps – borrower fixed rate - 3,153 - 3,153 (167)
Purchases of caps 354 - - 354 -
Collars (Buy Caps-Sell Floors) 1,132 1,458 - 2,590 (85)
LENDER FIXED-RATE CROSS CURRENCY SWAPS €/£ - 1,031 - 1,031 (188)
The notional amount of these contracts is the nominal value of the
contracts. Notional amounts denominated in foreign currencies are
translated into euros at year-end rates. Estimated values are based
on information available on the financial markets and valuation
methods appropriate to the type of financial instrument concerned.
These valuation methods were subjected to a dedicated review during
the year and found to yield results consistent with the valuations
provided by bank counterparts.
2. Foreign exchange hedges on foreign
currency denominated debt
The Group uses currency swaps in the context of its cash pooling
operations. These financial instruments have an average duration of
one and a half month and do not have a significant market value.
3. Foreign exchange hedges on foreign
currency denominated transactions
The Group primarily uses forward contracts to hedge against currency
risks related to transactions recognised on its balance sheet.
I REFERENCE DOCUMENT 2008/2009 I