-
-
-
-
- -
-
- -
19. Derivative Financial Instruments and H
edging
The G roup enters into derivative financial instruments with various counterparties, principally financial institutions with investment
grade credit ratings. The calculation of fair values for derivative financial instruments depends on the type of instruments:
Derivati v e interest rate contracts, the fair value of derivative interest rate contracts (e.g., interest rate swap agreements) is
estimated by discounting expected future cash flows using current market interest rates and yield curve over the remaining
term of the instrument.
Derivati v e currency contracts, the fair value of forward foreign currency exchange contracts is based on forward exchange
rate s
Derivative cross-currency contracts, the fair value of derivative cross-currency contracts is estimated by discounting
expected future cash flows using current market interest rates and yield curve over the remaining term of the instrument,
translated at the rate prevailing at measurement date.
The fair values of derivative assets and liabilities are summarized below:
December 31,
2012
2011
2010
(in millions of
Assets Liabi.it
es
Assets Liabil
ities
Assets Liabilities
Interest rate swaps
60
4
57
61 -
Cross-currency swaps
1
10
1
20
5 16
Tota l
61
14
58
20
66 16
As described in Note 2.3, Delhaize Group does not enter into derivative financial
trading, but for hedging (both economic and accounting) purposes only. As the Grc
settlement has been agreed, the following table indicates the contractually agreed
payments associated with derivative financial instruments (assets and liabilities) at D
instrument arrangem
iup currently holds no
(undiscounted) gross
ecember 31, 201 2:
ents for speculation
derivatives where net
interest and principal
CO
3
n
nths 4 - 12 months
2014
2015 and beyond
(in millions of Principal
Interest Principal In
ter
est
Principal I,
t tere st
Principal Interest
Interest rate swaps being part of a
fair value hedge relationship
Inflows
1
22
25
- 61
Outflows
(3) -
(8)
(9)
- (38)
Interest rate swaps without a
designated hedging relationship
Inflows
1 -
18
18
Outflows
(1) -
(6)
(5)
Cross-currency interest rate swaps
without a designated hedging
Inflows 107
6 -
9
500
9
227 27
Outflows (108)
(9) -
(9)
(508)
(8)
(225) (23)
Total Cash Flows (1)
(5) -
26
(8)
30
2 27
Interest Rate Swaps
Fair value hedges,
In 2007, D elhaize Group issued €500 million senior notes with a 5.625% fixed interest rate and a 7-year term, exposing the
Group to changes in the fair value due to changes in market interest rates (see Note 18.1). In order to hedge that risk, Delhaize
America, LLC swapped 100% of the proceeds to a EURIBOR 3-m onth floating rate for the 7-year term. The maturity dates of
these interest rate swap arrangements ("hedging instrument") match those of the underlying debt ("hedged item"). The
transactions were designated and qualify for hedge accounting in accordance with IAS 39, and were documented as a fair value
hedge. The aim of the hedge is to transform the fixed rate notes into variable interest debt ("hedged risk"). In April 2012 and
December 2012, D elhaize G roup refinanced in total €285 million of these €500 million senior notes see Note 18.1). The G ro u p
prospectively and proportionally discontinued the hedge accounting for the tendered amounts.
In April 2012, Delhaize G roup issued $300 million senior notes (see Note 18.1) with a 4.125% fixed interest rate due 2019
("hedged item"), exposing the G roup to changes in the fair value due to changes in m arket interest rates ("hedged risk") In order
to hedge that risk, Delhaize Group entered into matching interest rate swaps and swapped 100% of the proceeds of the bond to
124 DELHAIZE GROUP FINANCIAL STATEMENTS'12
