Mandarin Oriental International Limited - Mandarin Oriental Hotel ...
Mandarin Oriental International Limited - Mandarin Oriental Hotel ...
Mandarin Oriental International Limited - Mandarin Oriental Hotel ...
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Financial Review Continued<br />
Treasury activities continued<br />
The Group, excluding associates and joint venture,<br />
had committed borrowing facilities totaling<br />
US$804 million, of which US$661 million was drawn<br />
at 31st December 2008. The principal amounts are<br />
due for repayment as follows:<br />
Facilities Facilities Unused<br />
committed drawn Facilities<br />
US$m US$m US$m<br />
Within one year 12 7 5<br />
Between one and two years 120 117 3<br />
Between two and three years 39 3 36<br />
Between three and four years 4 4 –<br />
Between four and five years 10 10 –<br />
Beyond five years 619 520 99<br />
804 661 143<br />
At 31st December 2008, the Group had<br />
US$143 million of committed, undrawn facilities in<br />
addition to its cash balances of US$515 million. The<br />
average tenor of the Group’s borrowings was 5 years<br />
(2007: 5.9 years).<br />
Following major refinancings in 2007, no significant<br />
financings were undertaken in 2008, nor are any<br />
significant financings required in 2009.<br />
Principal risks and uncertainties<br />
A review of the principal risks and uncertainties facing<br />
the Group is set out on pages 83 to 84.<br />
Supplementary information<br />
The Group’s policy is to revalue all hotel properties<br />
regularly as it considers these properties to be long-term<br />
investments. Prior to 2003, all property investments,<br />
whether freehold or leasehold, were revalued and carried<br />
at fair market value. However, IFRS no longer permits<br />
the carrying of leasehold owner-occupied land at fair<br />
market valuation. The Group considers that the IFRS<br />
treatment does not reflect the economic substance of<br />
the underlying investments, particularly the Group’s<br />
999 year leases in respect of <strong>Mandarin</strong> <strong>Oriental</strong>,<br />
Hong Kong and The Excelsior.<br />
24 <strong>Mandarin</strong> <strong>Oriental</strong> <strong>International</strong> <strong>Limited</strong><br />
In its financial statements, the Group has presented<br />
leasehold land payments at cost less accumulated<br />
amortization over the period of the lease, which is the<br />
recommended IFRS treatment. However, as there is a<br />
significant difference between the fair market value of<br />
the Group’s two Hong Kong properties and their value<br />
as presented in the financial statements, the Group has<br />
also presented supplementary financial information<br />
which takes into account the fair market value of all its<br />
leasehold interests.<br />
The two key measurements affected by the recognition<br />
of the fair market value of these leasehold interests are<br />
net asset value per share and gearing. The necessary<br />
adjustment to shareholders’ funds/net assets is set<br />
out below:<br />
2008 2007<br />
Per share Per share<br />
US$m US$ US$m US$<br />
Shareholders’ funds/<br />
net assets 1,006 1.02 1,152 1.18<br />
Add revaluation<br />
surplus relating<br />
to leasehold land 1,043 1.06 1,127 1.16<br />
Adjusted shareholders’<br />
funds/net assets 2,049 2.08 2,279 2.34<br />
Net debt of US$146 million at 31st December 2008<br />
was 7% of adjusted shareholders’ funds, compared with<br />
net debt of US$185 million at 31st December 2007<br />
which was 8% of adjusted shareholders’ funds. On an<br />
IFRS basis, gearing was 15% at 31st December 2008<br />
(2007: 16%).<br />
John R Witt<br />
Chief Financial Officer<br />
5th March 2009