NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Issuance of Senior Notes
The table below provides a summary of the senior notes that we issued in 2013 and 2012.
Date Issued Principal amount Due date Interest rate
Discount at
issuance
Total gross
proceeds 1
Transaction costs
and discounts2
2013 Issuances
March 7, 2013 US $ 500 2023 3.00% 99.845%
March 7, 2013 US $ 500 2043 4.50% 99.055%
Subtotal US $ 1,000 Cdn $1,030 Cdn $15
October 2, 2013 US $ 850 2023 4.10% 99.813%
October 2, 2013 US $ 650 2043 5.45% 99.401%
Subtotal US $ 1,500 Cdn $1,548 Cdn $20
2012 Issuances
June 4, 2012 Cdn $ 500 2017 3.00% 99.921%
June 4, 2012 Cdn $ 600 2022 4.00% 99.600%
Subtotal Cdn $1,100 Cdn $1,100 Cdn $ 9
1 Gross proceeds before transaction costs and discounts.
2 Transaction costs and discounts are included as deferred transaction costs in the carrying value of the long-term debt, and recognized in net income using the effective interest
method.
Each of the above senior notes are unsecured and guaranteed by RCP,
ranking equally with all of RCI’s other senior notes and debentures,
bank credit and letter of credit facilities. We use derivatives to hedge
the foreign exchange risk associated with the principal and interest
components of all our US dollar denominated senior notes and
debentures (see note 20).
Repayment of Senior Notes and Related Derivative Settlements
In June 2013, we repaid or bought the entire outstanding principal
amount of our US $350 million ($356 million) senior notes due 2013.
At the same time, the associated Debt Derivatives were also settled at
maturity. See note 20 for more information about our Debt Derivatives.
Principal Repayments
The table below shows the principal repayments on our long-term debt
due in each of the next five years and thereafter as at December 31, 2013.
2014 $ 1,170
2015 883
2016 1,000
2017 500
2018 1,489
Thereafter 8,394
$ 13,436
Foreign Exchange
We recorded $23 million in foreign exchange losses in 2013 (2012 –
$9 million gain) in finance costs in the consolidated statements of
income. These were related to the translation of long-term debt that
was not hedged on an accounting basis.
Weighted Average Interest Rate
Our effective weighted average rate on all debt and short-term borrowings,
as at December 31, 2013, including the effect of all of the associated Debt
Derivative instruments (see note 20), was 5.5% (2012 – 6.1%).
Terms and Conditions
The provisions of our $2.0 billion bank credit facility described above
impose certain restrictions on our operations and activities, the most
significant of which are leverage related maintenance tests.
The 8.75% debentures due in 2032 contain debt incurrence tests and
restrictions on additional investments, sales of assets and payment of
dividends, all of which are suspended in the event the public debt
securities are assigned investment grade ratings by at least two of three
specified credit rating agencies. As at December 31, 2013, these public
debt securities were assigned an investment grade rating by each of the
three specified credit rating agencies and, accordingly, these restrictions
have been suspended as long as the investment grade ratings are
maintained. Our other senior notes do not have any of these
restrictions, regardless of the related credit ratings.
The repayment dates of certain debt agreements can also be
accelerated if there is a change in control of RCI.
At December 31, 2013 and 2012, we were in compliance with all
financial covenants, financial ratios and all of the terms and conditions
of our long-term debt agreements.
NOTE 19: CAPITAL RISK MANAGEMENT
Our objectives in managing capital are to ensure we have sufficient
liquidity to meet all of our commitments and to execute our business
plan. We define capital that we manage as shareholders’ equity
(including issued capital, share premium, retained earnings, hedging
reserve and available-for-sale financial assets reserve) and indebtedness