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charged in the income statement and the net interest paid in the statement of cash flows for<br />
2011 by £0.6 million (FY 2010: £0.1 million; FY 2009: £2.3 million). Similarly, for 2011, a<br />
100 basis point increase in market interest rates would result in a decrease of £10.9 million<br />
(FY 2010: £11.5 million; FY 2009: £3.2 million) in the fair value of <strong>Vesuvius</strong>’ net debt and<br />
a 100 basis point decrease in market interest rates would result in an increase of<br />
£11.7 million (FY 2010: £12.3 million; FY 2009: £3.3 million) in the fair value of<br />
<strong>Vesuvius</strong>’ net debt.<br />
(b) Liquidity risk<br />
Liquidity risk is the risk that <strong>Vesuvius</strong> might have difficulties in meeting its financial<br />
obligations. <strong>Vesuvius</strong> manages this risk by ensuring that it maintains sufficient levels of<br />
committed borrowing facilities and cash and cash equivalents to ensure that it can meet its<br />
operational cash flow requirements and any maturing financial liabilities, while at all times<br />
operating within its financial covenants. The level of operational headroom provided by<br />
<strong>Vesuvius</strong>’ committed borrowing facilities is reviewed at least annually as part of <strong>Vesuvius</strong>’<br />
three year planning process. Where this process indicates a need for additional finance, this<br />
is normally addressed 12 to 18 months in advance by means of either additional committed<br />
bank facilities or raising finance in the capital markets.<br />
As at 31 December 2011, <strong>Vesuvius</strong> had committed borrowing facilities of £883.7 million<br />
(FY 2010: £855.4 million; FY 2009: £876.2 million), of which £339.5 million (FY 2010:<br />
£350.0 million; FY 2009: £350.0 million) were undrawn. <strong>Vesuvius</strong>’ borrowing<br />
requirements were met by $440m of issued US Private Placement loan notes (“USPP”) and<br />
a multi-currency committed syndicated bank facility of £600 million (FY 2010: £573.2<br />
million; FY 2009: £674.9 million). The USPP loan notes were repayable $190 million in<br />
May 2012, $110 million in FY 2017, and $140 million in FY 2020. The syndicated bank<br />
facility comprises a £600 million revolving credit facility. The facility is repayable in April<br />
2016. The commitment will reduce from £600 million to £425 million from the date of the<br />
Demerger.<br />
The maturity analysis of <strong>Vesuvius</strong>’ gross interest-bearing borrowings is shown below.<br />
FY 2009<br />
Non-current<br />
FY 2010<br />
£m<br />
FY 2011<br />
Loans and overdrafts .................................. 442.8 389.9 421.8<br />
Obligations under finance leases ........................ 1.7 1.8 2.3<br />
Capitalised borrowing costs ............................ (2.9) (1.7) (3.1)<br />
Total borrowings, non-current ........................ 441.6 390.0 421.0<br />
Current<br />
FY 2009 FY 2010 FY 2011<br />
£m<br />
Loans and overdrafts .................................. 99.4 128.5 129.1<br />
Obligations under finance leases ........................ 1.6 1.6 1.4<br />
Capitalised borrowing costs ............................ (1.8) (1.4) (1.2)<br />
Total borrowings, current ............................ 99.2 128.7 129.3<br />
Total<br />
FY 2009 FY 2010 FY 2011<br />
£m<br />
Loans and overdrafts .................................. 542.2 518.4 550.9<br />
Obligations under finance leases ........................ 3.3 3.4 3.7<br />
Capitalised borrowing costs ............................ (4.7) (3.1) (4.3)<br />
Total interest-bearing borrowings ..................... 540.8 518.7 550.3<br />
131