d. Interest Risk
In June 2002, the Company issued a bond for a nominal value of MEUR 100 with a repayment period of 6 years and a nominal interest rate of 6% p.a. For this bond an interest swap has been used to hedge the risk from the fixed interest rate of the bond. The interest swap changes the fixed interest rate for the whole period to a variable interest rate based on 1 month’s Euribor. In this way, there is the risk of a changing interest rate concerning the cash flows but the fair value of the bond is hedged.
In June 2006 the Company issued another bond for a nominal value of MEUR 200 with a repayment period of 7 years and nominal interest rate of 4.5% p.a. For this bond interest swaps have been used to hedge the risk from the fixed interest rate of the bond. The interest swaps change the fixed interest rate for the whole period to a variable interest rate based on 1 month’s Euribor. In this way, there is the risk of a changing interest rate concerning the cash flows but the fair value of the bond is hedged.
The Managing Board believes that the exposure to interest rate risk of remaining financial assets and liabilities is negligible. Consequently, additional derivative instruments for hedging of these interest risks are not used within the Group.
The weighted average interest rates at the balance sheet date were as follows:
| 2006 | 2005 | |
| Cash on current accounts | 1.9% | 1.5% |
| Short term deposits | 3.4% | 2.2% |
| Securities, short term | 7.0% | 3.5% |
| Securities, long term | 2.8% | 2.5% |
| Overdraft on current accounts | 5.2% | 3.3% |
| Short term loans | 10.7% | 3.3% |
| Long term loans | 5.3% | 4.5% |
| Bond | 4.3% | 3.2% |
rep06-en-average_interest_rates.xls (Download size 16 KB)
