TIDM31PE
RNS Number : 9885W
Canary Wharf Finance II PLC
28 April 2021
CANARY WHARF FINANCE II PLC
28 APRIL 2021
PUBLICATION OF THE ANNUAL FINANCIAL REPORT FOR THE YEARED 31
DECEMBER 2020
Pursuant to sections 4.1 and 6.3.5 of the Disclosure and
Transparency Rules, the board of Canary Wharf Finance II plc is
pleased to announce the publication of its annual financial report
for the year ended 31 December 2020, which will shortly be
available from www.canarywharf.com/Investor Relations.
The information contained within this announcement, which was
approved by the board of directors on 28 April 2021, does not
comprise statutory accounts within the meaning of the Companies Act
2006 and is provided in accordance with section 6.3.5(2)(b) of the
Disclosure and Transparency Rules.
In compliance with the Listing Rule 9.6.1, a copy of the 31
December 2020 annual financial report will be submitted to the UK
Listing Authority via the National Storage Mechanism and will
shortly be available to the public for inspection at
www.hemscott.com/nsm.do.
Dated: 28 April 2021
Contact for queries:
J J Turner
Company Secretary
Canary Wharf Finance II plc
Telephone: 020 7418 2000
STRATEGIC REPORT
for the year ended 31 December 2020
The directors, in preparing this Strategic Report, have complied
with section 414C of the Companies Act 2006.
This Strategic Report has been prepared for the company and not
for the group of which it is a member and therefore focuses only on
matters which are significant to the company.
BUSINESS MODEL
The company is a wholly owned subsidiary of Canary Wharf Group
plc and its ultimate parent undertaking is Stork HoldCo LP.
The company is a finance vehicle that issues securities which
are backed by commercial mortgages over properties within the
Canary Wharf Estate. The company is engaged in the provision of
finance to the Canary Wharf group, comprising Canary Wharf Group
plc and its subsidiaries ('the group'). All activities take place
within the United Kingdom.
BUSINESS REVIEW
Since March 2020, the UK economy has been significantly impacted
by the COVID-19 virus which has caused widespread disruption and
economic uncertainty. The crisis had no material impact on the
assets, liabilities or performance of the company during the
year.
At 31 December 2020, the company had GBP1,414,187,321 (2019 -
GBP1,443,512,520) of notes listed on the London Stock Exchange and
had lent the proceeds to a fellow subsidiary undertaking, CW
Lending II Limited ('the Borrower'), under a loan agreement ('the
Intercompany Loan Agreement'). The notes are secured on a pool of
properties at Canary Wharf, owned by fellow subsidiary
undertakings, and the rental income therefrom.
The securitisation has the benefit of an agreement with AIG
which covers the rent in the event of a default by the tenant of 33
Canada Square over the entire term of its lease. At 31 December
2020, AIG has posted GBP118,730,673 (2019 - GBP136,586,799) as cash
collateral in respect of this obligation.
The company also has the benefit of a GBP300.0m liquidity
facility provided by Lloyds Bank plc, under which drawings may be
made in the event of a cash flow shortage under the
securitisation.
The ratings of the notes are as follows:
Class Moody's Fitch S&P
A1 Aaa AAA A+
A3 Aaa AAA A+
A7 Aaa AAA A+
B Aa3 AA A+
B3 Aa3 AA A+
C2 A3 A A
D2 Baa3 BBB A-
KEY PERFORMANCE INDICATORS
The company has adopted the IFRS 9 measurement option and hence
the floating rate securitised notes are measured at fair value.
Changes in the fair value of derivative financial instruments are
recognised in the income statement.
2020 2019
GBP GBP
-------------- --------------
Securitised debt 1,414,187,321 1,443,512,520
Financing cost (before adjustment for
fair value) 84,909,622 86,643,107
Total comprehensive income 71,060 136,956
Weighted average maturity of debt 11.6 years 12.3 years
Weighted average interest rate 6.1% 6.1%
STRATEGY & OBJECTIVES
Exposure management
The mark to market positions of all the company's derivatives
are reported to the Group Treasurer on a monthly basis and to the
directors on a quarterly basis. The Group Treasurer monitors
hedging activity on an ongoing basis, in order to notify the
directors of any over hedging that may potentially occur and
proposals to deal with such events.
Hedging instruments and transaction authorisation
Instruments that may be used for hedging interest rate exposure
include:
-- Interest rate swaps
-- Interest rate caps, collars
and floors
-- Gilt locks
No hedging activity is undertaken without explicit authority of
the board.
Transaction accounting
All derivatives are required to be measured on balance sheet at
fair value (mark to market).
Credit risk
The Group's policies restrict the counterparties with which
derivative transactions can be contracted and cash balances
deposited. This ensures that exposure is spread across a number of
approved financial institutions with high credit ratings.
All other debtors are receivable from other group
undertakings.
PRINCIPAL RISKS AND UNCERTAINTIES
The risks and uncertainties facing the business are monitored
through continuous assessment, regular formal reviews and
discussion at the Canary Wharf Group Investment Holdings plc audit
committee and board. Such discussion focuses on the risks
identified as part of the system of internal control which
highlights key risks faced by the Group and allocates specific day
to day monitoring and control responsibilities as appropriate. As a
member of Canary Wharf Group, the current key risks of the company
include COVID-19, the cyclical nature of the property market,
concentration risk and financing risk.
The COVID-19 pandemic has had a significant impact on the UK
economy. Despite this, the Group has demonstrated the resilience of
its office rental income and during the year ended 31 December
2020, the Group collected over 99.0% of the office rents
billed.
Cyclical nature of the property market
The valuation of the Company and Group's assets are subject to
many external economic and market factors. In recent years, the
London real estate market has had to cope with fluctuations in
demand caused by events such as uncertainty in the Eurozone, the
implications of UK withdrawal from the EU, and renewed turmoil in
the financial markets following the spread of the coronavirus. The
full impact of the coronavirus is not yet possible to predict. Any
long term continuation of the pandemic will however inevitably
affect short and medium term economic performance and confidence,
with adverse implications for the property market. The real estate
market has to date, however, been assisted by the depreciation of
sterling since the EU referendum and the continuing presence of
overseas investors attracted by the relative transparency of the
real estate market in London which is still viewed as both
relatively stable and secure. Property valuations for office
properties let on long lesases to good covenants have remained
relatively strong despite continuing uncertainties which are
unhelpful to confidence across the wider real estate sector.
Concentration risk
The majority of the Group's real estate assets are currently
located on or adjacent to the Estate. Although a majority of
tenants have traditionally been linked to the financial services
industry, this proportion has now fallen to around only 50.0% of
tenants. Wherever possible steps are still taken to mitigate or
avoid material consequences arising from this concentration.
Financing risk
The broader economic cycle inevitably leads to movement in
inflation, interest rates and bond yields.
The company has issued debenture finance in sterling at both
fixed and floating rates and uses interest rate swaps to modify its
exposure to interest rate fluctuations. All of the company's
borrowings are fixed after taking account of interest rate hedges.
All borrowings are denominated in sterling and the Company has no
intention to borrow amounts in currencies other than sterling.
The company enters into derivative financial instruments solely
for the purposes of hedging its financial liabilities. No
derivatives are entered into for speculative purposes.
The company is not subject to externally imposed capital
requirements.
The company's securitisation is subject to a maximum loan minus
cash to value ('LMCTV') ratio covenant.
The maximum LMCTV ratio is 100.0%, but there is also a cash trap
covenant of 50.0%. Based on the 31 December 2020 valuations of the
properties upon which the company's notes are secured, the LMCTV
ratio at the interest payment date in January 2021 was 42.9%. The
securitisation is not subject to a minimum interest coverage ratio.
A breach of financial covenants can be remedied by depositing
eligible investments (including cash).
CORPORATE & SOCIAL RESPONSIBILITY
Canary Wharf Group plc has adopted a formal corporate
responsibility policy including environmental and social issues
which extends to all of its wholly owned subsidiary undertakings,
including the Company. Full details of this policy together with a
copy of the latest Canary Wharf Group plc Corporate Responsibility
Report can be obtained from www.canarywharf.com.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2020
2020 2019
Note GBP GBP
------------- -------------
Administrative expenses (14,007) (8,952)
------------- -------------
OPERATING LOSS (14,007) (8,952)
Interest receivable from group companies 3 84,989,312 86,773,071
Bank interest receivable 3 5,377 15,944
Loan interest payable 4 (84,909,622) (86,643,107)
Hedge reserve recycling 4 (9,948,337) (4,689,581)
Fair value movements 5 - 14,646,700
------------- -------------
(LOSS)/PROFIT BEFORE TAX (9,877,277) (10,094,075)
Tax on (loss)/profit/) 6 - -
------------- -------------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR (9,877,277) 10,094,075
------------- -------------
OTHER COMPREHENSIVE INCOME FOR THE YEAR
Fair value movement on effective
hedging instruments 13 - (14,646,700)
Hedge reserve recycling 9,948,337 4,689,581
------------- -------------
OTHER COMPREHENSIVE INCOME FOR THE YEAR 9,948,337 (9,957,119)
------------- -------------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 71,060 136,956
------------- -------------
The notes numbered 1 to 14 form part of these financial
statements.
STATEMENT OF FINANCIAL POSITION
as at 31 December 2020
2020 2019
Note GBP GBP
---------------- ----------------
CURRENT ASSETS
Debtors:
Amounts falling due after more than
one year 7 1,677,350,801 1,680,875,352
Amounts falling due within one year 7 49,463,641 48,215,880
Cash at bank and in hand 3,601,415 3,366,239
---------------- ----------------
1,730,415,857 1,732,457,471
Creditors:
Amounts falling due within one year 8 (47,596,531) (46,184,654)
---------------- ----------------
NET CURRENT ASSETS 1,682,819,326 1,686,272,817
---------------- ----------------
TOTAL ASSETS LESS CURRENT LIABILITIES 1,682,819,326 1,686,272,817
Creditors:
Amounts falling due after more than
one year 9 (1,677,350,801) (1,680,875,352)
---------------- ----------------
NET ASSETS 5,468,525 5,397,465
---------------- ----------------
CAPITAL AND RESERVES
Called up share capital 12 50,000 50,000
Hedging reserve 13 (147,056,987) (157,005,324)
Retained earnings 13 152,475,512 162,352,789
---------------- ----------------
5,468,525 5,397,465
---------------- ----------------
The numbered notes 1 to 16 form part of these financial
statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
Called up Hedging Retained Total
share capital reserve earnings equity
GBP GBP GBP GBP
At 1 January 2020 50,000 (157,005,324) 162,352,789 5,397,465
Loss for the year - - (9,877,277) (9,877,277)
Hedge reserve recycling
(Note 13) - 9,948,337 - 9,948,337
------- -------------- ------------ ------------
TOTAL COMPREHENSIVE
INCOME FOR THE YEAR - 9,948,337 (9,877,277) 71,060
------- -------------- ------------ ------------
AT 31 DECEMBER 2020 50,000 (147,056,987) 152,475,512 5,468,525
------- -------------- ------------ ------------
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
Called up Hedging Retained Total
share capital reserve earnings equity
GBP GBP GBP GBP
At 1 January 2019 50,000 (147,048,205) 152,258,714 5,260,509
Profit for the year - - 10,094,075 10,094,075
Fair value movement
on effective hedging
instruments - (14,646,700) - (14,646,700)
Hedge reserve recycling - 4,689,581 - 4,689,581
------- -------------- ------------ -------------
TOTAL COMPREHENSIVE
INCOME FOR THE YEAR - (9,957,119) 10,094,075 136,956
------- -------------- ------------ -------------
AT 31 DECEMBER 2019 50,000 (157,005,324) 162,352,789 5,397,465
------- -------------- ------------ -------------
The notes numbered 1 to 14 form part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2020
1. GENERAL INFORMATION
Canary Wharf Finance II plc is a public company limited by
shares incorporated in the UK under the Companies Act 2006 and
registered in England and Wales at One Canada Square, Canary Wharf,
London, E14 5AB.
The nature of the company's operations and its principal
activities are set out in the Strategic Report.
2. ACCOUNTING POLICIES
2.1 Basis of preparation of financial statements
This announcement does not constitute the company's statutory
accounts for the year ended 31 December 2020 but is derived from
those accounts. The statutory accounts for the year ended 31
December 2020 will be delivered to the Registrar of Companies
following the company's annual general meeting. The auditors have
reported on those accounts and their report was unqualified, did
not contain a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying the report and did
not contain statements under sections 498(2) or (3) of the
Companies Act 2006.
This announcement has been prepared on the basis of the
accounting policies set out in the company's financial statements
for the year ended 31 December 2020 which are prepared in
accordance with United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice, including FRS 102 "the
Financial Reporting Standard applicable in the United Kingdom and
Republic of Ireland").
2.2 Going concern
At the year end, the company was in a net asset position.
Having made the requisite enquiries and assessed the resources
at the disposal of the company, the directors have a reasonable
expectation that the company will have adequate resources to
continue its operation for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the
financial statements.
The impact of the COVID-19 virus is disclosed in the Strategic
Report.
3. INTEREST RECEIVABLE AND SIMILAR INCOME
2020 2019
GBP GBP
Interest receivable from group companies 84,989,312 86,773,071
Bank interest receivable 5,377 15,944
----------- -----------
84,994,689 86,789,015
----------- -----------
4. INTEREST PAYABLE AND SIMILAR CHARGES
2020 2019
GBP GBP
Interest payable on securitised debt
(Note 10) 84,909,622 86,643,107
Hedge reserve recycling 9,948,337 4,689,581
----------- -----------
94,857,959 91,332,688
----------- -----------
5. FAIR VALUE ADJUSTMENTS
2020 2019
GBP GBP
Derivative financial instruments 45,779,026 17,109,613
Securitised debt (18,209,165) 4,268,326
Loan to fellow subsidiary undertaking (27,569,861) (36,024,639)
------------- -------------
- (14,646,700)
------------- -------------
`6. TAXATION
2020 2019
GBP GBP
-----
Current tax on profits for the year - -
TAXATION ON PROFIT ON ORDINARY ACTIVITIES - -
-----
FACTORS AFFECTING TAX CHARGE FOR THE YEAR
The tax assessed for the year is different to the standard rate
of corporation tax in the UK of 19.0% (2019 - 19.0%). The
differences are explained below:
2020 2019
GBP GBP
(Loss)/profit on ordinary activities
before tax (9,877,277) 10,094,075
------------ ------------
(Loss)profit on ordinary activities
multiplied by standard rate of corporation
tax in the UK of 19.0% (2019 - 19.0%) (1,876,683) 1,917,874
EFFECTS OF:
Fair value movements not subject
to tax 1,890,184 (1,891,852)
Group relief (13,501) (26,022)
TOTAL TAX CHARGE FOR THE YEAR - -
------------ ------------
FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
Enacted in the Finance Act 2020 is a provision to hold the rate
of corporation tax rate at 19.0% on 1 April 2020.
Following the year end, in 2021 Budget, HM Treasury announced
its intention to raise corporation tax to 25.0% in 2023.
7. DEBTORS
2020 2019
GBP GBP
-------------- --------------
DUE AFTER MORE THAN ONE YEAR
Loan to fellow subsidiary undertaking
due after more than one year 1,677,350,801 1,680,875,352
1,677,350,801 1,680,875,352
-------------- --------------
2020 2019
GBP GBP
------------------------------------------------------------ -----------
DUE WITHIN ONE YEAR
Other amounts owed to fellow subsidiaries 3,580,353 2,098,450
Loan to fellow subsidiary undertaking
due within one year 29,325,200 29,325,200
Accrued interest on loan to fellow
subsidiary undertaking 16,558,088 16,792,230
49,463,641 48,215,880
------------------------------------------------------- -----------
2020 2019
GBP GBP
-------------- --------------
The loan to a fellow subsidiary undertaking
comprises:
At 1 January 1,710,200,552 1,706,598,286
Repaid in the year (29,325,200) (29,325,200)
Amortisation of issue premium (1,769,231) (1,864,598)
Movement in accrued financing expenses (1,233,839) (1,232,575)
Fair value adjustment 28,803,719 36,024,639
At 31 December 1,706,676,001 1,710,200,552
-------------- --------------
Comprising:
2020 2019
GBP GBP
-------------- --------------
Loan to fellow subsidiary undertaking
due after more than one year 1,677,350,801 1,680,875,352
Loan to fellow subsidiary undertaking
due within one year 29,325,200 29,325,200
1,706,676,001 1,710,200,552
-------------- --------------
The fair value of the loans to group undertakings at 31 December
2020 was GBP1,969,316 (2019 - GBP1,988,296,841), calculated by
reference to the fair values of the Company's financial
liabilities. In the event that the company were to realise the fair
value of the securitised debt and the derivative financial
instruments, it would have the right to recoup its losses as a
repayment premium on its loans to CW Lending II Limited. As such,
the fair value of the loans to group undertakings is calculated to
be the sum of the fair value of the securitised debt and the fair
value of the derivative financial instruments.
The loan to the company's fellow subsidiary undertaking was made
in tranches, the principal terms of which are:
Effective 2020 2019
Class Interest interest Repayment GBPm GBPm
------ -------- --------- ------------------------ ------- ---------
A1 6.465% 6.161% By instalment 2009--2033 221.7 244.2
A3 5.962% 5.824% By instalment 2032--2037 400.0 400.0
A7 5.409% 5.308% January 2035 222.0 222.0
B 6.810% 6.420% By instalment 2005--2030 127.9 134.8
B3 5.593% 5.445% January 2035 77.9 77.9
C2 6.276% 6.068% January 2035 239.7 239.7
D2 7.071% 6.753% January 2035 125.0 125.0
------- ---------
1,414.2 1,443.6
Unamortised premium 13.9 15.7
Accrued financing costs 17.3 18.6
1,445.4 1,477.9
------- -------
In January 2017, interest on the tranche A7 loan increased to
5.409% from 5.124% and interest on the tranche B3 loan increased to
5.593% from 5.173%.
The A7, B3 and C2 tranches of the intercompany loan are carried
at fair value. The A1, A3, B and D2 tranches are carried at
amortised cost. The total fair value of the intercompany loan was
GBP1,969,316,124 .
The carrying value of financial assets represents the Company's
maximum exposure to credit risk.
The maturity profile of the Company's contracted undiscounted
cash flows is as follows:
2020 2019
GBP GBP
--------------
Within one year 115,602,313 117,551,720
In one to 2 years 113,903,740 115,741,960
In 2 to 5 years 329,421,776 335,707,881
In 5 to 10 years 569,539,291 494,901,669
In 10 to 20 years 1,300,950,484 1,484,484,940
At 31 December 2,429,417,604 2,548,388,170
-------------- --------------
2020 2019
GBP GBP
-------------- --------------
Comprising:
Principal repayments 1,414,187,320 1,443,512,520
Interest repayments 1,015,230,284 1,104,875,650
At 31 December 2,429,417,604 2,548,388,170
-------------- --------------
The above table contains undiscounted cash flows (including
interest) and therefore results in a higher balance than the
carrying values of fair values of the intercompany debt.
Other amounts owed by the group undertakings are interest free
and repayable on demand.
8. CREDITORS: Amounts falling due within one year
2020 2019
GBP GBP
Securitised debt (Note 10) 29,325,200 29,325,200
Amounts owed to group undertakings 1,660,594 -
Accruals and deferred income 16,610,737 16,859,454
47,596,531 46,184,654
----------- -----------
Amount owed to the group undertakings are interest free and
repayable on demand.
9. CREDITORS: Amounts falling due after more than one year
2020 2019
GBP GBP
Securitised debt (Note 10) 1,282,476,486 1,331,780,063
Derivative financial instruments
(Note 11) 394,874,315 349,095,289
1,677,350,801 1,680,875,352
-------------- --------------
10. SECURITISED DEBT
The amounts at which borrowings are stated comprise:
2020 2019
GBP GBP
-------------- --------------
At 1 January 1,361,105,263 1,389,259,312
Repaid in the year (29,325,200) (29,325,200)
Amortisation of issue premium (1,769,231) (1,864,598)
Movement in accrued financing expenses (1,233,839) (1,232,577)
Fair value adjustment (16,975,307) 4,268,326
At 31 December 1,311,801,686 1,361,105,263
-------------- --------------
2020 2019
GBP GBP
Payable within one year or on demand 29,325,200 29,325,200
Payable after more than one year 1,282,476,486 1,331,780,063
1,311,801,686 1,361,105,263
-------------- --------------
The company's securitised debt was issued in tranches, with
notes of classes A1, A3, A7, B, B3, C2 and D2 remaining
outstanding. The A1, A3 and B notes were issued at a premium which
is being amortised to the income statement over the life of the
relevant notes. At 31 December 2020 GBP13,898,133 (2019 -
GBP15,667,363 ) remained unamortised.
At 31 December 2020 there were accrued financing costs of
GBP17,344,422 (2019 - GBP18,578,262) relating to previous
contractual increases in margins.
The notes are secured on 6 properties at Canary Wharf, owned by
fellow subsidiary undertakings, and the rental income stream
therefrom.
The securitisation continues to have the benefit of an
arrangement with AIG which covers the rent in the event of a
default by the tenant of 33 Canada Square over the entire term of
the lease. At 31 December 2020, AIG had posted GBP118,730,673 as
cash collateral in respect of this obligation.
The company also has the benefit of a GBP300.0m liquidity
facility provided by Lloyds Bank plc, under which drawings may be
made in the event of a cash flow shortage under the
securitisation.
At 31 December 2020 the securitised debt comprised the
following:
Fair
Principal value Effective
Tranche GBPm GBPm Interest interest Repayment
--------- -------- -------- --------- --------- -------------------
By instalment 2009
A1 221.7 276.5 6.455% 6.149% - 2033
By instalment 2032
A3 400.0 586.1 5.952% 5.814% - 2037
A7 222.0 187.6 Floating 5.311% January 2035
By instalment 2005
B 127.9 163.5 6.800% 6.410% - 2030
B3 77.9 63.5 Floating 5.435% January 2035
C2 239.7 195.3 Floating 6.071% January 2035
D2 125.0 101.9 Floating 6.756% January 2035
1,414.2 1,574.4
-------- --------
At 31 December 2019 the securitised debt comprised the
following:
Fair
Principal value Effective
Tranche GBPm GBPm Interest interest Repayment
--------- -------- -------- --------- --------- -------------------
By instalment 2009
A1 244.2 308.1 6.455% 6.151% - 2033
By instalment 2032
A3 400.0 590.3 5.952% 5.814% - 2037
A7 222.0 192.0 Floating 5.298% January 2035
By instalment 2005
B 134.8 174.4 6.800% 6.410% - 2030
B3 77.9 66.6 Floating 5.435% January 2035
C2 239.7 201.9 Floating 6.058% January 2035
D2 125.0 105.9 Floating 6.743% January 2035
1,443.6 1,639.2
-------- --------
Interest on the A1 notes, A3 notes and B notes is fixed until
maturity. Interest on the floating notes is repriced every 3
months.
Interest on the floating rate notes is at 3 month LIBOR plus a
margin. The margins on the notes are: A7 notes - 0.475% per annum;
B3 notes - 0.7% per annum; C2 notes - 1.375% per annum; and D2
notes - 2.1% per annum.
All of the notes are hedged by means of interest rate swaps and
the hedged rates plus the margins are:
A7 notes - 5.3985%; B3 notes - 5.5825%; C2 notes - 6.2666%; and
D2 notes - 7.0605%.
The effective interest rates include adjustments for the hedges
and the issue premium.
The floating rate notes are carried at FVTPL. The fixed rate
notes are carried at amortised cost. The total fair value of the
debt is GBP1,574,441,809.
The fair values of the sterling denominated notes have been
determined by reference to prices available on the markets on which
they are traded.
The maturity profile of the company's contracted undiscounted
cash flows is as follows:
2020 2019
GBP GBP
Within one year 82,952,422 89,809,309
In one to 2 years 81,019,851 87,713,767
In 2 to 5 years 234,041,879 254,209,302
In 5 to 10 years 420,336,390 365,735,335
In 10 to 20 years 1,176,109,117 1,350,476,115
At 31 December 1,994,459,659 2,147,943,828
-------------- --------------
2020 2019
GBP GBP
-------------- --------------
Comprising:
Principal repayments 1,414,187,320 1,443,512,520
Interest repayments 580,272,339 704,431,308
At 31 December 1,994,459,659 2,147,943,828
-------------- --------------
The above table contains undiscounted cash flows (including
interest) and therefore results in a higher balance than the
carrying values of air values of the borrowings.
The weighted average maturity of the debentures at 31 December
2020 was 11.6 years (2019 - 12.3 years). The debentures may be
redeemed at the option of the company in an aggregate amount of not
less than GBP1.0m on any interest payment date subject to the
current rating of the debentures not being adversely affected and
certain other conditions affecting the amount to be redeemed.
After taking into account the interest rate hedging
arrangements, the weighted average interest rate of the company at
31 December 2020 was 6.1% (2019 - 6.1%).
Details of the derivative financial instruments are set out in
Note 11.
Details of the company's risk management policy are set out in
the Strategic Report.
11. DERIVATIVE FINANCIAL INSTRUMENTS
The company uses interest rate swaps to hedge exposure to the
variability in cash flows on floating rate debt caused by movements
in market rates of interest. At 31 December 2020 the fair value of
these derivatives resulted in the recognition of a net liability of
GBP394,874,315 (2019 - GBP349,095,289).
The fair values of derivative financial instruments have been
determined by reference to market values provided by the relevant
counter party.
The terms of the derivative financial instruments correlate with
the terms of the financial instruments to which they relate.
Consequently the cash flows and effect on profit or loss are
expected to arise over the term of the financial instrument set out
above.
12. SHARE CAPITAL
2020 2019
GBP GBP
------- -------
Allotted, called up and fully paid
50,000 (2018 - 50,000) Ordinary shares
of GBP1.00 each 50,000 50,000
------- -------
13. RESERVES
Prior to 1 July 2019, financial instruments were carried under
the measurement criteria of IAS 39. The B3 and C2 financial
instruments were designated as effective hedges of the
corresponding notes and carried at Fair Value through Other
Comprehensive Income. The hedging relationships were terminated on
1 July 2019 with the adoption of fair value accounting for the
floating rate securitised debt. The balance in the hedging reserve
is being amortised over the remaining life of the corresponding
notes.
Distributable reserves
The distributable reserves of the company differ from its
retained earnings as follows:
2020 2019
GBP GBP
Retained earnings 152,475,512 162,352,789
Hedging reserve (147,056,987) (157,005,324)
Distributable reserves 5,418,525 5,347,465
-------------- --------------
14. OTHER FINANCIAL COMMITMENTS
As at 31 December 2020 and 31 December 2019 the company had
given security over all its assets, including security expressed as
a first fixed charge over its bank accounts, to secure the notes
referred to in Note 10.
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