a LIBOR 3-m onth floating rate for the 7-year term hedging instrument The G roup designated and documented this
transaction as a fair value hedge.
interest rate
Finally, in N ove m ber 2012, D elhaize Group issued €400 million senior notes (see Note 18.1) with a 3.125% fixed
due 2020 hedged item exposing the Group to changes in the fair value due to changes in market interest rates hedged
risk"). D el h aize G roup pa rti ally hedged this exposure through an interest rate s w ap (3 months EURIBOR floating rate) with a
nominal of €100 million and a maturity equal to the maturity of the bond. The G roup designated and documented this transaction
as a fair value hedge.
Hedge effectiveness for fair value hedges is tested using regression analysis. Credit risks are not part of the hedging
relationships. The testing did not result in any material ineffectiveness. Changes in fair values on the hedging instruments and
hedged items were recognized in the income statement as finance costs as follows (see Note 29.1):
December 31,
;,n mm,ons of
Note
2012
2011
2010
osses (gains) on
Interest rate swaps ("hedging instruments")
29.1
(6)
5
3
Related debt instruments hedged risks
29.1
3
(5)
(3)
Total (3)
Following the refinancing transaction in April 2012, the G roup entered into an interest rate s w ap maturing in 2014 in order to
offset the changes in future interest cash flows on a notional amount of €191 million on which the Group pays a fixed interest rate
of 1.80% and receives a floating interest rate EURIBOR 3-m onth plus 0.94%, resulting from the hedging instrument entered into
in 2007 see above).
Discontinued cash flow hedges,
In 2001 the G roup recorded a deferred loss ($16 million) on the settlement of a hedge agreement related to securing financing
for the Hannaford acquisition by Delhaize America. In 2007, as a result of the debt refinancing and the consequent
discontinuance of the hedge accounting, Delhaize Group recorded a deferred gain (€2 million). Both the deferred gain/loss were
recorded in OCI ("discontinued cash flow hedge reserve") and amortized to finance costs over the term of the underlying debt,
which matures in 2031 and 2017, respectively.
Currency Swaps
The Group uses currency swaps to manage some of its currency exposures.
Cash flow hedge,
Delhaize Group issued in 2009 a $300 million bond with a 5.875% fixed interest rate and a 5- year term ("hedged item"), exposing
Delhaize Group to currency risk on dollar cash flows ("hedged risk"). In order to hedge that risk, Delhaize Group swapped 100%
of the proceeds to a euro fixed rate liability with a 5-year term ("hedging instrument"). The maturity dates, the dollar interest rate,
the interest payment dates, and the dollar flows (interest and principal) of the hedging instrument, match those of the underlying
debt. The transactions w ere designated and qualified for hedge accounting in accordance with IAS 39, and were documented
and historically reflected in the financial statements of Delhaize Group as a cash flow hedge. Delhaize Group tested
effectiveness by comparing the movements in cash flows of the hedging instrument with those of a "hypothetical derivative"
representing the "perfect hedge." The terms of the hedging instrument and the hypothetical derivative were the same, with the
exception of counterpa rty credit risk, which was closely monitored by the Group.
During 2012 a tota l credit of €4 million, net of taxes (2011: debit of €3 million; 2010: credit of €5 million), was recognized in the
"Cash flow hedge reserve" (see Note 16) of which €2 million was reclassified into profit or loss during the year. In 2012, following
the refinancing and exercise of early redemption option on the $300 million senior notes due 2014 (see N ote 18.1), the Group
prospectively discontinued hedge accounting. The outstanding amount from the cash flow hedge reserve related to those
tra nsactions of €2 million was recycled to profit and loss (see Note 29.1).
Economic hedges,
Delhaize Group entered into other currency swap contracts, which are not designated as cash flow, fair value or net investment
hedges. Those contracts are generally entered into for periods consistent with currency transaction exposures where hedge
accounting is not necessary, as the transactions naturally offset the exposure hedged in profit or loss. Consequently, the Group
does not designate and document such transactions as hedge accounting relationships.
In April 2012, and simultaneously to entering into interest rate swaps for the 4.125% s enior notes due 2019 (see above), the
Group also entered into cross-currency swaps, exchanging the principal amount ($300 million fo r €225 million) and interest
payments (both variable), to cover the foreign currency exposure of these senior notes. In 2007, Delhaize Group's U.S.
DELHAIZE GROUP FINANCIAL STATEMENTS '12 125
