Notes to the financial statements
20 Borrowings
| Group 2008 £m |
Group 2007 £m |
Company 2008 £m |
Company 2007 £m |
|
|---|---|---|---|---|
| Short-term borrowings | ||||
| Bank overdrafts | 118 | 363 | 88 | 259 |
| B shares liability | - | 10 | - | 10 |
| 118 | 373 | 88 | 269 | |
Long-term borrowings |
||||
| Secured loans | ||||
| Loan due 2018 | 1,133 | 1,142 | - | – |
| Loan due 2036 | 902 | 897 | - | – |
Unsecured loans |
||||
| Obligations under finance leases | 49 | 51 | - | – |
| 2,084 | 2,090 | - | – | |
| Total borrowings | 2,202 | 2,463 | 88 | 269 |
Bank overdrafts
Bank overdrafts are repayable on demand and carry floating rates of interest.
B shares liability
Preference B shares were issued on 12 July 2004 as part of a return of share capital in that financial year. All remaining B shares were redeemed on 18 July 2007 at the book value of £10 million. Total preference dividends paid in respect of B shares amounted to £0.2 million (2007: £0.4 million).
A reconciliation of B shares liability for the 52 weeks to 22 March 2008 is shown below:
| 2008 shares million |
2007 shares million |
2008 £m |
2007 £m |
|
|---|---|---|---|---|
| Beginning of year | 27 | 34 | 10 | 12 |
| B shares redemption | (27) | (7) | (10) | (2) |
| End of year | - | 27 | - | 10 |
Secured loans
The Group’s long-term financing, secured on 127 of its supermarket properties (note 11), comprises loans from two finance companies:
- a fixed rate loan with an outstanding principal value of £1,159 million (2007: £1,186 million) at a weighted average rate of 4.97 per cent stepping up to 5.36 per cent from April 2013 (effective interest rate of 5.20 per cent and carrying amount of £1,133 million (2007: £1,142 million)) repayable over ten years; and
- an inflation linked loan with an outstanding principal value of £867 million (2007: £863 million) at a fixed rate of 2.36 per cent where principal and interest are uplifted annually by RPI subject to a cap at five per cent and floor at nil per cent (effective interest rate of 6.52 per cent and carrying amount of £902 million (2007: £897 million)) repayable over 28 years.
The Group has entered into three interest rate swaps to convert £602 million (2007: £782 million) of the £1,159 million (2007: £1,186 million) loan due 2018 from fixed to floating rates of interest. These transactions have been accounted for as fair value hedges (note 30). During the year, £180 million of the £782 million swaps outstanding as at March 2007 were terminated at a cost of £7 million which represented the fair value of these instruments at the termination date. The fair value of the debt previously hedged by these swaps will be amortised over the remaining life of the loans, resulting in an amortisation charge to the income statement in the current financial year of £136,000 (2007: £nil).
Obligations under finance leases
| Minimum lease payments 2008 £m |
Minimum lease payments 2007 £m |
Present value of minimum lease payments 2008 £m |
Present value of minimum lease payments 2007 £m |
|
|---|---|---|---|---|
| Amounts payable under finance leases: | ||||
| Within 1 year | 3 | 3 | - | – |
| Within 2 to 5 years inclusive | 12 | 13 | 1 | 1 |
| After 5 years | 188 | 198 | 48 | 50 |
| 203 | 214 | 49 | 51 | |
| Less: future finance charges | (154) | (163) | ||
| Present value of lease obligations | 49 | 51 | ||
Disclosed as: |
||||
| Current | - | – | ||
| Non-current | 49 | 51 | ||
| 49 | 51 |
Finance leases have effective interest rates of 4.30 per cent to 8.50 per cent (2007: 4.30 per cent to 8.50 per cent). The average remaining lease term is 77 years (2007: 78 years).
Borrowing facilities
The Group maintains a £400 million committed revolving credit facility which matures in February 2012. As at 22 March 2008, there were £nil drawings under this facility (2007: £nil drawings).
On 9 May 2008 the Group entered into a new three year £163 million committed revolving loan facility syndicated via the Group’s relationship banks and a new 12-month £35 million bilateral committed facility.