2013 Registration document and annual financial report - page 138

Registration Document 2013
136
Corporate Governance
3
Risk Management
None of Accor’s loan agreements include a cross default clause
requiring immediate repayment in the event of default on another
facility. Cross acceleration clauses only concern loans withmaturities
of at least three years; these clauses would be triggered only if
material amounts were concerned.
Accor’s ratings assigned by Standard & Poor’s and Fitch Ratings are as follows:
Rating agency
Long-term
debt
Short-term
debt
Most recent
rating update Outlook
Most recent
outlook update
Standard & Poor’s
BBB-
A-3
March 9, 2012
Stable
March 9, 2012
Fitch Ratings
BBB-
F3 December 19, 2013
Stable December 19, 2013
Counterparty and country risk
Exposure to counterparty risk relating to trade receivables and
payables is not material due to the breadth and geographic diversity
of the Group’s customer and supplier portfolio.
Counterparty risk does, however, arise in relation to financial
transactions.
This risk is managed by:
ƒƒ
carrying out transactions only with leading counterparties,
depending on country risks;
ƒƒ
diversifying the portfolio of counterparties;
ƒƒ
setting credit ceilings (amount and term) per counterparty; and
ƒƒ
using a monthly reporting procedure to track the different types
of counterparties and their credit quality (based on credit ratings
issued by rating agencies).
In view of the Group’s broad geographic footprint, country risk
is limited.
85% of cash investments are made in France with leading banks.
Currency and interest rate risks
A variety of financial instruments, including swaps, caps and forwards,
are used tomanage and hedge interest rate and currency risks arising
in the normal course of business. Financial instruments are used to
support Group investment, financing and hedging policies, to help
manage debt and to minimize the risks on business transactions.
A dedicated treasury management information system is used to
track the breakdown of debt by fixed/floating rate and currency,
as well as to generate reporting schedules.
Management of currency risks
Long-term investment policy
When Accor SA invests directly or indirectly in a foreign subsidiary,
the investment is generally made in the subsidiary’s local currency.
These are very long-term positions and so far, the policy has been
not to hedge the related currency risk.
Financing
An internationally recognized signature allows Accor to raise various
forms of financing either through banks or directly through private
placements and bond issues.
From time to time, the Group also takes advantage of market
opportunities to raise financing in a given currency and at a given
rate of interest and then use a swap to convert the facility into the
currency and interest rate required to finance business needs (see
note 29.3. to the consolidated financial statements, page 247).
Generally, the Group’s policy is to finance its assets and operating
requirements in the currency of the country concerned in order to
create a natural hedge and avoid any currency risk.
By using these instruments as well as its subsidiaries’ excess cash
the Group is able to optimize the cost of its resources without
taking any currency risks.
Other currency hedges
Currency hedges are rarely used other than for financing transactions
as revenues are generally denominated in the same currency as
the related operating costs.
The Group does not hedge currency translation risk.
At December 31, 2013, the volume of forward sales and purchases
of foreign currencies represented €56 million and €385 million
respectively. All of the related instruments expire in 2014.
Management of interest rate risks
After currency hedging, 91% of consolidated gross debt is
denominated in euros, with 92% at fixed rates and 8% at floating
rates. The average maturity of fixed-rate debt is 3.4 years. An
analysis of the Group’s exposure to interest rate risks before and
after hedging is provided in note 29.3. to the consolidated financial
statements on page 247.
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