EX-99.4 8 y48736ex99-4.txt DISCLOSURES ABOUT MARKET RISK 1 EXHIBIT 99.4 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. MARKET RISK The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. The Company does not enter into derivative financial instruments for trading or speculative purposes. The Company has entered into derivative financial instruments to hedge exposure to movements in the British pound/U.S. dollar exchange rate. The counterparties are major financial institutions. FOREIGN EXCHANGE CONTRACTS To the extent that the Company obtains financing in U.S. dollars and incurs construction and operating costs in various other currencies, it will encounter currency exchange rate risks. At December 31, 2000, the Company had approximately $178.8 million in cash equivalents denominated in foreign currencies to reduce this risk. In addition, the Company's pounds sterling and Euro denominated notes also reduce this risk. Furthermore, the Company's revenues are generated in foreign currencies while its interest and principal obligations with respect to most of the Company's existing indebtedness are payable in U.S. dollars. In October 2000, the Company entered into cross currency swaps to hedge exposure to movements in the British pound to U.S. dollar exchange rate. The notional amount of the cross currency swaps was L135.0 million at December 31, 2000. INTEREST RATES The fair market value of long-term fixed interest rate debt and the amount of future interest payments on floating interest rate debt are subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The following table provides information about the Company's long-term fixed and floating interest rate debt and derivative financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates. 1 2
YEAR ENDING YEAR ENDING YEAR ENDING YEAR ENDING YEAR ENDING 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 ----------- ----------- ----------- ----------- ----------- (IN MILLIONS) Long-term Debt Including Current Portion U.S. dollars Fixed Rate -- -- -- $285.1 $808.8 Average Interest Rate 13.25% 12.09% U.K. pound Fixed Rate -- -- -- -- -- Average Interest Rate Average Forward Exchange Rate Euro Fixed Rate -- -- -- -- -- Average Interest Rate Average Forward Exchange Rate U.K. pound Floating Rate L4.8 L4.8 L4.8 L90.0 L2,187.2 Average Interest Rate LIBOR LIBOR LIBOR LIBOR LIBOR plus 2.04% plus 2.04% plus 2.04% plus 2.25% plus 2.25% Average Forward Exchange Rate 1.4988 1.4995 1.5001 1.5009 1.5014 Currency Swap Agreements Related to Long-term Debt Receipt of U.S. Dollars Notional U.K. Pound Amount L135.0 -- -- -- -- Average Contract Rate 1.4765 FAIR VALUE THEREAFTER TOTAL 12/31/00 ---------- -------- ---------- (IN MILLIONS) Long-term Debt Including Current Portion U.S. dollars Fixed Rate $5,972.1 $7,066.0 $5,505.1 Average Interest Rate 10.54% U.K. pound Fixed Rate L890.0 L890.0 L516.7 Average Interest Rate 10.09% Average Forward Exchange Rate 1.5097 Euro Fixed Rate E810.0 E810.0 E614.4 Average Interest Rate 10.10% Average Forward Exchange Rate .9717 U.K. pound Floating Rate -- L2,291.6 L2,291.6 Average Interest Rate Average Forward Exchange Rate Currency Swap Agreements Related to Long-term Debt Receipt of U.S. Dollars Notional U.K. Pound Amount -- L135.0 L(1.5) Average Contract Rate
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