2014 Registration Document and Annual Financial Report - page 129

Risk management
Accor’s ratings assigned by Standard & Poor’s and Fitch Ratings are as follows:
Rating agency
Most recent
rating update
Most recent outlook
Standard & Poor’s
February 24, 2010
March 9, 2012
Fitch Ratings
July 2, 2009
May 25, 2011
Standard & Poor’s and Fitch Ratings confirmed Accor’s ratings
and outlooks on June 17, 2014 and October 27, 2014 respectively.
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:
carrying out transactions only with leading counterparties,
depending on country risks;
diversifying the portfolio of counterparties;
setting credit ceilings (amount and term) per counterparty; and
continuously monitoring the different types of counterparties
and their credit quality (based on credit ratings issued by rating
In view of the Group’s broad geographic footprint, country risk is
Over 85%of cash investments aremade in Francewith leading banks.
Currency and interest rate risks
A variety of financial instruments, including swaps and forward
purchases and sales of foreign currencies, are used to manage
and hedge interest rate and currency risks arising in the normal
course of business. The use of these instruments forms part of
the Group’s 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.
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.
An internationally recognized signature allows Accor to raise
various forms of financing, including through bond issues, private
placements and bank loans.
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 30.3 to the consolidated financial statements on page 232).
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 its subsidiaries’ excess cash as well as the financial
instruments described above, the Group is able to optimize the
cost of its resources while reducing currency risks.
Other currency hedges
Currency hedges are rarely used other than for financing transactions
because revenues are generally denominated in the same currency
as the related operating costs.
The Group does not hedge currency translation risk.
At December 31, 2014, the volume of forward sales and purchases
of foreign currencies represented €69 million and €222 million
respectively. All of the related instruments expire in 2015.
Management of interest rate risks
After currency hedging, 87% of consolidated gross debt is
denominated in euros, with 98% at fixed rates and 2% at floating
rates. The average maturity of fixed-rate debt is 4.5 years. An
analysis of the Group’s exposure to interest rate risks before and
after hedging is provided in note 30.3 to the consolidated financial
statements on page 232). Target breakdowns between fixed and
floating rate debt are determined separately for each currency, giving
due regard to anticipated trends in interest rates and to changes
in the composition of debt as a result of new borrowings and the
repayment of existing borrowings.
These target breakdowns are reviewed at regular intervals and new
targets are set for future periods by Executive Management. The
related financing strategy is implemented by the CorporateTreasury,
Financing and Credit Management Department.
In view of the average 4.7-month maturity, cash is invested at
variable rates.
The interest rate and currency instruments used by the Group are
contracted with banks based on the model recommended by the
French Banking Federation.
At December 31, 2014, the volume of interest rate hedges
represented €59 million.
Accor does not conduct any speculative transactions and has no
plans to engage in any financial transactions that are not connected
to the Group’s general requirements for its business. Neither the
parent company nor the Group has any open currency or interest rate
positions that would be likely to expose the Group to significant risks.
Registration Document 2014
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