154
CDL
HOSPITALITY TRUSTS
27 FINANCIAL RISK MANAGEMENT (CONT’D)
Interest rate risk
The Stapled Group’s exposure to changes in interest rates relate primarily to interest-earning financial assets and
interest-bearing financial liabilities. At the reporting date, the interest rate profile of the interest-bearing financial
instruments was:
HBT Group
H-REIT Group
Stapled Group
2014
2013
2014
2013
2014
2013
$’000
$’000
$’000
$’000
$’000
$’000
Fixed rate instruments
Financial assets
3,952
339
71,182
55,468
75,134
55,807
Financial liabilities
–
– (219,233)
(285,048)
(219,233)
(285,048)
Interest rate swap
–
– (100,311)
(105,353)
(100,311)
(105,353)
3,952
339 (248,362)
(334,933)
(244,410)
(334,594)
Variable rate instruments
Financial liabilities
–
– (557,515)
(405,045)
(557,515)
(405,045)
Interest rate swap
–
–
100,311
105,353
100,311 105,353
–
– (457,204)
(299,692)
(457,204)
(299,692)
The H-REIT Manager’s strategy to manage the risk of potential interest rate volatility may be through the use of
interest rate hedging instruments and/or fixed rate borrowings. The H-REIT Manager will regularly evaluate the
feasibility of putting in place the appropriate level of interest rate hedges, after taking into account the prevailing
market conditions.
Derivative financial instruments are used to manage exposures to interest rate risks arising from financing and
investment activities. Derivative financial instruments are not used for trading purposes. However, derivatives that
do not qualify for hedge accounting are accounted for as trading instruments.
Fair value sensitivity analysis for fixed rate instruments
The Stapled Group do not account for any fixed rate financial assets and liabilities at fair value through profit or loss.
The H-REIT Group and the Stapled Group do not designate interest rate swap as hedging instruments under a
fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect
total return.
Cashflow sensitivity analysis for variable rate instruments
A change of 100 basis points (bp) in interest rate at the reporting date would increase/(decrease) total return
and unitholders’ funds (before any tax effects) by the amounts shown below. This analysis assumes that all other
variables, remain constant.
NOTES TO THE FINANCIAL STATEMENTS
