Notes to the financial statements

In June 2005 the Group issued $225m of guaranteed subordinated loan notes repayable in 2015. The issue consisted of $32m floating rate notes and a further $193m of notes with a fixed coupon of 5.84% for the first five years and LIBOR plus 1.95% thereafter. In June 2007 the Group redeemed the floating rate notes at par. The fair value of the loan notes is £94m. The fair value of the amortising term loan is not materially different from its book value.

In April 2008 the Group entered into a 364-day, £150m term loan with The Royal Bank of Scotland to finance the acquisition of Link (note 13). The Group has subsequently restructured the loan into an amortising term loan. The new facility, which is for £135m, commenced on 17 November 2008 and runs until 31 January 2011, with repayments of £10m after 12, 18 and 24 months. The loan is priced at LIBOR plus 3.0%, with a step-up to LIBOR plus 3.5% after 12 months. The weighted average effective interest rate for the year was 6.0%. In the event that any one of the Company’s senior credit ratings fall below BBB-/Baa3 the margin increases by 2% to LIBOR plus 5% and 5.5% after 12 months.

In June 2008, as part of its long-term objective to diversify its sources of debt capital, the Group obtained investment grade ratings from Fitch Ratings Limited (Fitch) and Moodys Investor Services Inc (Moodys) and put in place a £1 billion Global Medium Term Note programme. At 31 March 2009 the programme remained unutilised. As at 31 March 2009, the Company was rated BBB+ by Fitch and Baa2 by Moodys. On 30 April 2009, the rating from Fitch was reaffirmed.

Short-term borrowings and overdrafts

In March 2008 the Group refinanced its existing £175m credit facility and $328m term loan into a new three year unsecured revolving credit facility of which £473m is available for general corporate purposes including the financing of acquisitions, with the remaining $94m to meet margin calls. The short-term revolving credit facility as at 31 March 2009 of £277m (2008 – £327m) is net of capitalised fees of £2m (2008 – £1m). To take advantage of lower short-term interest rates, the amounts drawn as at 31 March 2009 were for a one-week period and have been included within short-term borrowings. The facility carries a floating interest rate of LIBOR plus 0.45% with an additional 0.10% payable dependent on the debt to earnings ratio. The weighted average effective interest rate for the year was 3.5% (2008 – 6.1%).

In May 2008, the Group entered into a £75m 364-day unsecured revolving credit facility with Lloyds TSB Bank plc which was subsequently extended on 19 December 2008. The facility, which is committed, is available for general corporate purposes, including the financing of acquisitions, and carries a floating interest rate of LIBOR plus 2.25%. The facility remained undrawn throughout the period and will expire on 30 June 2010.

During March 2009, the Group put in place a £500m European Commercial Paper programme to provide access to short-term liquidity to provide an alternative mechanism to finance the Group’s working capital and margin requirements. At 31 March 2009 the programme was undrawn.

Bank overdrafts are for short-term funding and are repayable on demand, and are generally repaid within a very short time period.

The Group’s bank facilities contain a number of customary financial and operational covenants. The Group remained in compliance with the terms of these covenants throughout the year ended 31 March 2009.

The fair value of the short-term borrowings is not materially different from their book values.

Maturity of undrawn committed borrowing facilities

The interest rate, currency and maturity profiles of borrowings together with discussion on risk management are included in note 23.

Under the terms of the Group’s bank financings, the Company is required to remain as the ultimate holding company in the Group. A change in ownership of the Company could result in the Group’s three-year unsecured revolving credit facility, amortising term loan and £75m unsecured revolving credit facility becoming repayable.

In March 2009, the Company’s obligations in respect of the Group’s bank facilities were novated to its wholly-owned subsidiary company, ICAP Group Holdings Limited.