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Notes to the Financial Statements

For the year ended 30 June 2009

  • 24.

    INTEREST-BEARING LOANS AND BORROWINGS (continued)

    • (c)

      Leasing facilities

No separate security has been provided by the Consolidated Entity in relation to lease liabilities. The rights to the leased assets revert to the lessor in the event of default. The facility was due to mature on 30 September 2009. A renewed facility of $1,200,000

has been approved by its bankers for a further 12 months to 30 September 2010. Documentation is in the process of being completed and is expected to be signed within the next 2 weeks. The current interest rates on finance leases range from 6.52% to 10.14% (2008: 7.44% to 10.14%). The lease terms range between 12 and 36 months.

(d) Interest rate hedge instruments

The Consolidated Entity manages the cash flow effect of interest rate risk by entering into interest rate cap and interest rate swap contracts.

Interest rate cap contracts are entered into for a principal Australian Dollar amount by paying an upfront premium that covers a specific period. The strike rates for these contracts are benchmarked against the BBSY bid rate (Australian Bank Bill Swap Reference Rate – Average Bid Rate) on a monthly basis. Settlement occurs monthly, in favour of the Consolidated Entity, should

the BBSY bid rate be above the cap strike rate (movements in the variable rate are directly proportional to movements in the BBSY bid rate).

Under the interest rate swaps, at the end of every quarter, the Consolidated Entity and the counterparty agree to exchange the difference between the interest calculated by applying the fixed contract rates and that calculated by applying the BBSY bid rate to the principal Australian Dollar amounts.

As at 30 June 2009, the principal amounts, rates and terms of the interest rate caps and interest rate swaps are as follows:

Strike

Fixed

30 June

30 June

Rate

Rate

2009

2008

%

%

$’000

$’000

7.75

65,000

65,000

7.60

35,000

35,000

7.62

30,000

30,000

Type of derivative

Interest rate cap Interest rate swap Interest rate swap

Consolidated borrowings hedged

The Parent Entity has not entered into any derivative contracts.

AVJennings Limited ABN 44 004 327 771 67

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