The Best Beer Company in a Better World - Anheuser-Busch InBev

104 | Annual Report 2008 Financial Report
Private placement hedges (foreign currency risk + interest rate risk on borrowings in US dollar)
Private placement of 850m US dollar of which :
• 300m US dollar matures in 2009;
• 475m US dollar matures in 2010;
• 75m US dollar matures in 2013.
The company hedged the foreign currency and fixed interest rate risk of 730m US dollar of the private placement (180m US dollar of tranche
2009, full tranche 2010 and full tranche 2013) by entering into US dollar fixed/euro floating cross currency interest rate swaps for a total
amount of 730m US dollar expiring in 2009, 2010 and 2013.
In conformity with the IAS 39, these hedges were designated as fair value hedges.
In addition, two US dollar fixed/euro fixed CCIRS’s (nominal amount of 120m US dollar) were entered into to convert for an amount of
120m US dollar (piece of tranche 2009) the fixed US dollar interest rate exposure into a fixed euro interest rate.
In conformity with IAS 39 these hedges are designated as cash flow hedges.
AmBev bond hedges (foreign currency risk + interest rate risk on borrowings in US dollar)
In December 2001, AmBev issued 500m US dollar in foreign securities (bond 2011). This bond bears interest at 10.7 % and is repayable
semi-annually as from July 2002 with final maturity in December 2011. In September 2003 AmBev issued another 500m US dollar in foreign
securities (bond 2013). This bond bears interest at 8.75 % and is repayable semi-annually since March 2004 with final maturity in September
2013. In July 2007 AmBev issued a Brazilian real bond (bond 2017), which bears interest at 9.5 % and is repayable semi-annually with final
maturity date in July 2017.
AmBev entered into several US dollar fixed/Brazilian real floating cross currency interest rate swaps to manage and reduce the impact of
changes in the US dollar exchange rate and interest rate on these bonds. In addition to this, AmBev entered into a fixed/floating interest rate
swap to hedge the interest rate risk on the bond 2017. These derivative instruments, in conformity with the IAS 39 hedge accounting rules,
have been designated as fair value hedges.
Canada bond hedges (foreign currency risk + interest rate risk on borrowings in Brazilian real)
The company entered into a series of forward exchange contracts to hedge the Brazilian real and fixed interest rate risk from two bank loans;
the first one issued in June 2006 for 717m Brazilian real issued and the second one in January 2007 for 474m Brazilian real. The unwinding of
the forward exchange contracts acts like a receive Brazilian real fixed/pay Canadian dollar fixed cross currency interest rate swap. The maturity
dates of these foreign exchange forwards are identical to the maturity dates of the interest flows and the maturity date of the principal, being
20 June 2011 for the first loan and 18 January 2012 for the second loan.
In conformity with IAS 39, these hedges were designated as cash flow hedges. In conformity with the company’s hedge accounting policy, the
impact of the interest differential fixed at inception on the exchange of principal amounts in Canadian dollar and Brazilian real is amortized
over the life of the transaction.
Argentina bond hedges (foreign currency risk + interest rate risk on borrowings in US dollar)
To hedge the US dollar and fixed interest rate risk from a 150m US dollar bond issued in Argentina, the company entered into two US dollar
fixed/Argentinean peso cross currency interest rate swaps for the total exposure. The maturity date of the cross currency interest rate swaps
is identical to the maturity date of the hedged bond, being 22 March 2012. A portion of the bond’s principal amount is reimbursed annually
until maturity.
In conformity with IAS 39, these hedges were designated as cash flow hedges.