XXI. Bonds

(k)  31.12.201531.12.2014Change
Bonds 463,738 418,006 45,732
Commissions on bond issues (2,025) (2,206) 181
Total 461,713 415,800 45,913

“Bonds” refer to private placements issued by HMSHost Corporation:

  • in May 2007 for a total of $ 150m, maturing in May 2017 and paying interest half-yearly at a fixed annual rate of 5.73%. For this private placement, the interest rate may be adjusted depending on the trend in the leverage ratio of the group headed up by HMSHost Corporation. The redemption of these bonds at maturity is easily covered by the subsidiary’s existing credit lines and generation of cash;
  • in January 2013 for a total of $ 150m, maturing in January 2023 and paying interest half-yearly at a fixed annual rate of 5.12%;
  • in March 2013 for a total of $ 200m, paying interest half-yearly and split into tranches as summarized in the table below:

Nominal amount (m$)Issue dateAnnual fixed rateExpiry
25 March 2013 4.75% September 2020
40 March 2013 4.97% September 2021
80 March 2013 5.40% September 2024
55 March 2013 5.45% September 2025

On the whole, at 31 December 2015 this item amounted to € 461,713k, compared with € 415,800k at the end of 2014. The change is essentially due to the appreciation of the US dollar against the Euro (€ 47,856k) and the change in the fair value of hedging instruments (Notes II and XX).

At the close of 2015 the bond issued in 2007 reflects a fair value change of € 6,479k ($ 7,054k), recognized in relation to the outstanding fair value hedge and referring to Interest Rate Swaps that were terminated ahead of their maturity in December 2014. The difference resulting from the early termination is accounted for using the amortized cost method; at 31 December 2015 there was a positive impact of € 3,060k ($ 3,395k) recognized under “Interest expense”.

In December 2014, new Interest Rate Swaps were negotiated on some of the bonds issued in 2013, for a notional value of $ 100m. At the end of 2015 there was a loss on the hedged item of € 691k ($ 766k) and a profit of a similar amount on the hedge, so the effect on the income statement was essentially nil (Note XXXII).

The fair value of the bonds outstanding is measured using valuation techniques based on parameters other than price that can be observed in the open market. They can therefore be classified in level 2 of the fair value hierarchy (as defined by IFRS 7), with no change on the previous year.

The regulations for these bonds require the maintenance of certain financial ratios: a leverage ratio (gross debt/EBITDA) of 3.5 or less and interest coverage ratio (EBITDA/Net financial expense) of at least 4.5, calculated solely with respect to HMSHost Corporation and its subgroup. For the calculation of these ratios, gross debt, EBITDA and financial charges are measured according to contractual definitions and therefore differ from the amounts valid for financial reporting purposes. Thus, they are not readily apparent from the financial statements. At 31 December 2015 these contractual requirements were amply satisfied and forecasts for 2016 confirm that they will continue to be met over the next 12 months.