14   Borrowings

Maturity of the financing (capital lock-up at nominal values)

The financial liabilities of the Allreal group consist of bank loans secured by mortgage (fixed advances and fixed-rate mortgages), a convertible bond and a bond issue. The bank loans in the form of fixed advances are extended on a rolling basis. Apart from the 2.50% bond issue and the 2.125% convertible bond, only bank loans with contractually agreed remaining terms to maturity greater than twelve months are reported as long-term financial liabilities.

Long-term borrowings include a 2.50% bond issued in 2011 and a 2.125% convertible bond issued in 2009:

2.50% bond 2011–2016

As at the balance sheet date, the 2.50% bond issue is recognised at CHF 149.2 million in long-term borrowings and during the period under review CHF 0.2 million was spent on the amortisation of issuing costs. In addition to the actual interest rate of 2.50% to be paid, the expense, which corresponds to an effective interest rate of 2.71%, is also deferred to the income statement.

2.125% convertible bond 2009–2014

Until 19 September 2014, each bearer bond at CHF 5 000 nominal can be converted into 3 679 447 registered shares of Allreal Holding AG. The bond may be redeemed early, and the bond terms customary for such capital market instruments shall apply. Specifically, this includes options for premature redemption either at any time at par, including accrued interest, provided more than 85% of the original principal amount has been converted and/or redeemed, or if the registered share of Allreal Holding AG closes at no lower than CHF 176.65 on 20 trading days within a period of 30 consecutive trading days. As at 30 June 2013 the conditions for premature redemption had not been met.

As at the balance sheet cut-off date, the 2.125% convertible bond is recognised as follows:

This means that during the period under review CHF 1.5 million was charged to financial expense for the amortisation of the difference between the debt component and the redemption amount.

The difference of CHF 5.6 million between the debt component (CHF 194.3 million) and the redemption amount (CHF 199.925 million) as at 30 June 2013 is amortised over the remaining term to maturity of the convertible bond until 2014 using the effective interest method.

Deferred tax liabilities at the consolidated tax rate of 22% are recognised on the difference between the tax value of the convertible bond and the book value of the debt component, plus proportionate issuing costs, and are written back to income over the term of the convertible bond. In the first half-year 2013 deferred taxes amounting to CHF 0.4 million were eliminated in favour of the tax expense.

In addition to the actual interest rate of 2.125% to be paid, the expense, which corresponds to an effective interest rate of 3.79%, is also deferred to the income statement.

Maturity of interest rates (interest lock-in period at nominal values)

The classification of financial liabilities by interest lock-in periods is done on the basis of the actual date of maturity of the underlying fixed advances and mortgages and the maturity of the bond issue and convertible bond. In calculating the capital lock-up and interest lock-in periods, the respective outstanding par values of the bonds and their 2.50%/2.125% coupons were taken.

As at 30 June 2013, fixed advances amounting to CHF 1 354.3 million and fixed-rate mortgages amounting to CHF 67.7 million (at nominal values) are in place, all of which were taken out with Swiss banks or insurance companies.

In the next twelve months, two interest rate swaps will mature with a value of CHF 50 million at 2.80% in August 2013 and CHF 120 million at 1.81% in February 2014.

The average interest rate of all financial liabilities as at 30 June 2013 is 1.96% (31 December 2012: 2.13%).

The average interest lock-in period for all financial liabilities as at 30 June 2013 is 43 months (31 December 2012: 54 months).