The carrying values of long-term debt (excluding finance leases), net of discounts and premiums, deferred transaction costs and hedge accounting fair value adjustments, can be summarized as follows:
The interest rate on long-term debt (excluding finance leases) was on average 5.1%, 5.7% and 5.6% at December 31, 2010, 2009 and 2008 respectively. These interest rates were calculated considering the interest rate swaps discussed in Note 19. Delhaize Group has a multi-currency treasury note program in Belgium. Under this treasury note program, Delhaize Group may issue both short-term notes (commercial paper) and medium-term notes in amounts up to EUR 500 million, or the equivalent thereof in other eligible currencies (collectively the “Treasury Program”). No notes were outstanding at December 31, 2010, 2009 and 2008.
Refinancing of Long-term Debts
In October 2010, Delhaize Group exchanged USD 533 million of the 9.00% debentures due 2031 and USD 55 million of the 8.05% Notes due 2027 (together the “Existing Securities”) issued in a private offering by the wholly-owned subsidiary Delhaize America, LLC, for USD 827 million, 5.70% Senior Notes due 2040 issued by Delhaize Group. The transaction qualified as a “debt modification” under IFRS and any costs or fees incurred adjusted the carrying amount of the Existing Securities, being the carrying amount of the new Senior Notes, and are amortized over the remaining term of the Senior Notes due 2040. In line with IFRS, the non-cash premium granted, being the difference between the principal amounts of the Existing Securities tendered and the principal amount of the new Senior Notes issued, has no immediate impact on the carrying amount of the New Notes and is also amortized over the remaining term of the Senior Notes, i.e. until 2040.
Repayment of Long-term Debts
On February 9, 2010, bonds of EUR 40 million issued in 2005 by Delhaize Group’s Greek subsidiary Alfa Beta matured and were repaid.
Defeasance of Hannaford Senior Notes
In 2003, Hannaford invoked the defeasance provisions of several of its outstanding Senior Notes and placed sufficient funds in an escrow account to satisfy the remaining principal and interest payments due on these notes. As a result of this defeasance, Hannaford is no longer subject to the negative covenants contained in the agreements governing the notes. As of December 31, 2010, 2009 and 2008, USD 11 million (EUR 8 million), USD 12 million (EUR 9 million) and USD 18 million (EUR 13 million) in aggregate principal amount of the notes was outstanding, respectively. Cash committed to fund the escrow and not available for general corporate purposes is considered restricted. At December 31, 2010, 2009 and 2008, restricted securities of USD 13 million (EUR 10 million),
USD 15 million (EUR 10 million) and USD 21 million (EUR 15 million), respectively, were recorded in investment in securities on the balance sheet.
Long-term Debt by Currency and contractually agreed payments
The main currencies in which Delhaize Group’s long-term debt (excluding finance leases) are denominated are as follows:
The following table summarizes the contractually agreed (undiscounted) interest payments and repayments of principals of Delhaize Group’s non-derivative financial liabilities, excluding any hedging effects and not taking premiums and discounts into account:
The variable interest payments arising from financial liabilities with variable coupons were calculated using the last interest rates fixed before year-end. In the event where a counterparty has a choice of when an amount is paid (e.g., on demand deposits), the liability is allocated to the earliest period in which the Delhaize Group can be required to pay. Delhaize Group is managing its liquidity risk based on contractual maturities.
Fair Value of Long-term Debt
The fair value of the Group’s long-term debt (excluding finance leases) is based on the current market quotes for publicly traded debt (multiplying the quoted price with the nominal amount). Fair values of non-public debt are estimated using rates currently available for debt of similar terms and remaining maturities offered to the Group and its subsidiaries.
Collateralization
The portion of Delhaize Group’s long-term debt that was collateralized by mortgages and security charges granted or irrevocably promised on Delhaize Group’s assets was EUR 17 million at December 31, 2010 and 2009 and EUR 4 million at December 31, 2008.
At December 31, 2010, 2009 and 2008, EUR 28 million, EUR 22 million and EUR 17 million, respectively, of assets were pledged as collateral for mortgages.
Debt Covenants for Long-term Debt
Delhaize Group is subject to certain financial and non-financial covenants related to the long-term debt instruments indicated above. While these long-term debt instruments contain certain accelerated repayment terms, as further described below, none contain accelerated repayment clauses that are subject solely to changes in the Group’s credit rating (“rating event”). Further, none of the debt covenants restrict the abilities of subsidiaries of Delhaize Group to transfer funds to the parent.
Indentures covering the Notes due in 2011 (USD), 2014 (USD and EUR), 2017 (USD), 2027 (USD) and 2040 (USD) and the Debentures due in 2031 (USD) contain customary provisions related to events of default as well as restrictions in terms of negative pledge, liens, sale and leaseback, merger, transfer of assets and divestiture. The 2014 (USD and EUR), 2017 (USD) and 2040 (USD) Notes also contain a provision granting their holders the right to early repayment for an amount not in excess of 101% of the outstanding principal amount thereof in the event of a change of control in combination with a rating event.
The Term Loan maturing in 2012 contains customary provisions related to events of default as well as a minimum fixed charge coverage ratio and a maximum leverage ratio, both based on non-GAAP measures.
The Bonds due in 2013 contain customary defined non-GAAP measure based minimum fixed charge coverage and maximum leverage ratios.
At December 31, 2010, 2009 and 2008, Delhaize Group was in compliance with all covenants for long-term debt, and headroom on financial covenants at December 31, 2010, was above 30% for all ratios.