DLLR » Topics » Cross-Currency Interest Rate Swaps

These excerpts taken from the DLLR 8-K filed Nov 20, 2009.
Cross-Currency Interest Rate Swaps
 
In December 2006, we entered into cross-currency interest rate swaps to hedge against the changes in cash flows of our U.K. and Canadian term loans denominated in a currency other than our foreign subsidiaries’ functional currency.
 
In December 2006, our U.K. subsidiary, Dollar Financial U.K. Limited, entered into a cross-currency interest rate swap with a notional amount of GBP 21.3 million that was set to mature in October 2012. Under the terms of this swap, Dollar Financial U.K. Limited paid GBP at a rate of 8.45% per annum and Dollar Financial U.K. Limited received a rate of the three-month EURIBOR plus 3.00% per annum on EUR 31.5 million. In December 2006, Dollar Financial U.K. Limited also entered into a cross-currency interest rate swap with a


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notional amount of GBP 20.4 million that was set to mature in October 2012. Under the terms of this cross-currency interest rate swap, we paid GBP at a rate of 8.36% per annum and we received a rate of the three-month LIBOR plus 3.00% per annum on US$40.0 million.
 
On May 7, 2009, our U.K. subsidiary, executed an early settlement of its two cross-currency interest rate swaps hedging variable-rate borrowings. As a result, we discontinued prospectively hedge accounting on these cross-currency swaps. In accordance with the provisions of SFAS 133, we will continue to report the net gain or loss related to the discontinued cash flow hedge in other comprehensive income and will subsequently reclassify such amounts into earnings over the remaining original term of the derivative when the hedged forecasted transactions are recognized in earnings.
 
In December 2006, our Canadian subsidiary, National Money Mart Company, entered into cross-currency interest rate swaps with aggregate notional amounts of C$339.9 million that mature in October 2012. Under the terms of the swaps, National Money Mart Company pays Canadian dollars at a blended rate of 7.12% per annum and National Money Mart Company receives a rate of the three-month LIBOR plus 2.75% per annum on $295.0 million.
 
On a quarterly basis, the cross-currency interest rate swap agreements call for the exchange of 0.25% of the original notional amounts. Upon maturity, these cross-currency interest rate swap agreements call for the exchange of the remaining notional amounts. We have designated these derivative contracts as cash flow hedges for accounting purposes. We record foreign exchange re-measurement gains and losses related to the term loans and also record the changes in fair value of the cross-currency swaps each period in corporate expenses in our consolidated statements of operations. Because these derivatives are designated as cash flow hedges, we record the effective portion of the after-tax gain or loss in other comprehensive income, which is subsequently reclassified to earnings in the same period that the hedged transactions affect earnings. As of June 30, 2009, amounts related to cross-currency interest rate swaps amounted to an increase in stockholders’ equity of $20.7 million, net of tax. The aggregate fair market value of the cross-currency interest rate swaps at June 30, 2009 is a liability of $10.2 million and is included in fair value of derivatives on the balance sheet. During fiscal 2009, we recorded $45 thousand in earnings related to the ineffective portion of these cash flow hedges.


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Cross-Currency Interest Rate Swaps
 
The Company entered into cross-currency interest rate swaps to protect against changes in cash flows attributable to changes in both the benchmark interest rate and foreign exchange rates on its foreign denominated variable rate term loan borrowing under the Company’s credit agreement. Under the terms of these swaps, the Company pays a fixed rate and receives a variable rate.
 
Consistent with the debt payments, on a quarterly basis, all of the cross-currency interest rate swap agreements call for the exchange of 0.25% of the original notional amounts. Upon maturity, these cross-currency interest rate swap agreements call for the exchange of the remaining notional amounts. The Company has designated these derivative contracts as cash flow hedges for accounting purposes. The Company records foreign exchange re-measurement gains and losses related to the term loans and also records the changes in fair value of the cross-currency swaps each period in corporate expenses in the Company’s consolidated statements of operations. Because these derivatives are designated as cash flow hedges, the Company records the effective portion of the after-tax gain or loss in other comprehensive income, which is subsequently reclassified to earnings in the same period that the hedged transactions affect earnings.
 
On May 7, 2009, the Company executed an early settlement of its two cross-currency interest rate swaps hedging variable-rate borrowings at its foreign subsidiary in the United Kingdom. As a result, the Company discontinued prospectively hedge accounting on these cross-currency swaps. In accordance with the provisions of SFAS 133, the Company will continue to report the net gain or loss related to the discontinued cash flow hedge in the other comprehensive income section of stockholders’ equity and will subsequently reclassify such amounts into earnings over the remaining original term of the derivative as the originally hedged forecasted transactions are recognized in earnings.
 
These excerpts taken from the DLLR 10-K filed Aug 29, 2008.
Cross-Currency Interest Rate Swaps
 
The Company entered into cross-currency interest rate swaps to protect against changes in cash flows attributable to changes in both the benchmark interest rate and foreign exchange rates on its foreign-denominated variable rate term loan borrowing under the Company’s credit agreement. Under the terms of these swaps, the Company pays a fixed rate and receives a variable rate.
 
Consistent with the debt payments, on a quarterly basis, all of the cross-currency interest rate swap agreements call for the exchange of 0.25% of the original notional amounts. Upon maturity, these cross-currency interest rate swap agreements call for the exchange of the remaining notional amounts. The Company has designated these derivative contracts as cash flow hedges for accounting purposes. The Company records foreign exchange re-measurement gains and losses related to the term loans and also records the changes in fair value of the cross-currency swaps each period in corporate expenses in the Company’s consolidated statements of operations. Because these derivatives are designated as cash flow hedges, the Company records the effective portion of the after-tax gain or loss in other comprehensive income, which is subsequently reclassified to earnings in the same period that the hedged transactions affect earnings.
 
Cross-Currency
Interest Rate Swaps



 



The Company entered into cross-currency interest rate swaps to
protect against changes in cash flows attributable to changes in
both the benchmark interest rate and foreign exchange rates on
its foreign-denominated variable rate term loan borrowing under
the Company’s credit agreement. Under the terms of these
swaps, the Company pays a fixed rate and receives a variable
rate.


 



Consistent with the debt payments, on a quarterly basis, all of
the cross-currency interest rate swap agreements call for the
exchange of 0.25% of the original notional amounts. Upon
maturity, these cross-currency interest rate swap agreements
call for the exchange of the remaining notional amounts. The
Company has designated these derivative contracts as cash flow
hedges for accounting purposes. The Company records foreign
exchange re-measurement gains and losses related to the term
loans and also records the changes in fair value of the
cross-currency swaps each period in corporate expenses in the
Company’s consolidated statements of operations. Because
these derivatives are designated as cash flow hedges, the
Company records the effective portion of the after-tax gain or
loss in other comprehensive income, which is subsequently
reclassified to earnings in the same period that the hedged
transactions affect earnings.


 




This excerpt taken from the DLLR 10-K filed Sep 18, 2007.
Cross-Currency Interest Rate Swaps
 
In December 2006, certain of OPCO’s subsidiaries entered into cross-currency interest rate swaps to hedge against changes in cash flows of the Company’s U.K. and Canadian term loans denominated in a


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Table of Contents

 
DOLLAR FINANCIAL CORP.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
2.   Significant Accounting Policies (continued)
 

Derivatives (continued)
 
currency other than OPCO’s foreign subsidiaries’ functional currency.
 
In December 2006, OPCO’s U.K subsidiary, Dollar Financial U.K. Limited, entered into a cross currency interest rate swap with a notional amount of GBP 21.3 million that matures in October 2012. Under the terms of this swap, Dollar Financial U.K. Limited pays GBP at a rate of 8.45% per annum and it receives a rate of the three-month EURIBOR plus 3.00% per annum on EUR 31.5 million. In December 2006, Dollar Financial U.K. Limited also entered into a cross-currency interest rate swap with a notional amount of GBP 20.4 million that matures in October 2012. Under the terms of this swap, Dollar Financial U.K. Limited pays GBP at a rate of 8.36% per annum and it receives a rate of the three-month LIBOR plus 3.00% per annum on US$40.0 million.
 
In December 2006, OPCO’s Canadian subsidiary, National Money Mart Company, entered into cross currency interest rate swaps with a notional amount of C$339.9 million that matures in October 2012. Under the terms of this swap, National Money Mart Company pays Canadian dollars at a blended rate of 7.12% per annum and it receives a rate of the three-month LIBOR plus 2.75% per annum on US$295.0 million.
 
On a quarterly basis, the swap agreements call for the exchange of 0.25% of the original notional balance amounts. Upon maturity, these cross-currency interest rate swap agreements call for the exchange of the remaining notional amounts. The Company designated these derivative contracts as cash flow hedges for accounting purposes. The Company records foreign exchange re-measurement gains or losses related to these contracts and term loans, which are offsetting, in each period in corporate expenses in the Company’s consolidated statements of operations. Because these derivatives are designated as cash flow hedges, the Company records the effective portion of the net, after tax gain or loss in other comprehensive income and they are reclassified to earnings in the same period that the hedged transaction affects earnings. There was no ineffectiveness recorded related to these cash flow hedges for the year ended June 30, 2007. The aggregate fair market value of the cross currency interest rate swaps at June 30, 2007 is a payable of US$18.8 million and is included in accrued expenses and other liabilities on the balance sheet.
 
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