Archived decisions


	31 March 2007		31 March 2008
	Adjusted Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
	£'000	£'000	£'000	£'000
Public Works Loan Board	235,478	249,574	250,748	277,282
Lender's option/borrower's option loans	64,877	66,083	74,034	75,884

	300,355	315,657	324,782	353,166

In accordance with the Code of Practice, from 2007/08, accrued interest is added to the value
of the loan outstanding. The 2007 carrying amounts have been adjusted to include accrued
interest of £3.4m in order to provide comparative figures on the same basis as 2008.
The fair value is more than the carrying amount because the Authority's portfolio of loans
includes a number of fixed rate loans where the interest rate payable is higher than
the rates that would be applied to calculate the premiums if the loans were repaid on
the balance sheet date. This commitment to pay interest above the current market
rates increases the amount that the Authority would have to pay if it repaid the
loans early.

Debt rescheduling in 2007/08
Where premiums and discounts have been charged to the income and expenditure
account, regulations allow the impact on the General Fund balance to be spread
over future years. The Authority has a policy of spreading losses arising from
premiums over the term of the loan modifications. In 2007/08, the Authority
prematurely repaid a £10m PWLB loan at 9.875% which was originally due
for repayment in 2018, incurring a premium of £3.9m. Modification loans of
£10m in total were taken out at an average interest rate of 4.74% maturing between
2035 and 2037. The amount charged to the income and expenditure account
in 2007/08 arising from the rescheduling of debt is £76,426.

Borrowing repayable within one year

These loans are due to be repaid within a year and as such, their amortised cost in the
balance sheet is a reasonable asessment of their fair value.
		31 March	31 March	31 March
		2007	2007	2008
		as stated	as adjusted *
		£'000	£'000	£'000

Long-term borrowing repayable within one year		-8,000	-8,094	-4,108
Temporary deposits by Hampshire Pension Fund and		-68,765	-68,765	-52,440
Hampshire Police Authority
Other short-term borrowing		-8,568	-8,568	-9,381

		-85,333	-85,427	-65,929

* In accordance with the Code of Practice, from 2007/08, accrued interest is added to the value
of the loan outstanding. The 2007 carrying amounts have been adjusted to include accrued
interest of £0.1m in order to provide comparative figures on the same basis as 2008.

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Liquidity risk
As the Authority has ready access to borrowing through the Public Works Loan
Board, there is no significant risk that it will be unable to raise finance to meet
its commitments under financial instruments. Instead, the risk is that the Authority
will be bound to replenish a significant proportion of its borrowings at a time of
unfavourable interest rates.

The Authority mitigates this risk by its policy of taking out its long-term borrowing
requirements reasonably evenly from one year to the next.

		31 March	31 March
		2007	2008
An analysis of loans by maturity is:		£'000	£'000

Maturing between one and two years		-4,108	-3,871
Maturing between two and five years		-13,395	-17,894
Maturing between five and 10 years		-35,367	-39,653
Maturing between 10 and 25 years		-154,338	-135,326
Maturing in 25 or more years		-93,147	-128,038

		-300,355	-324,782


Interest rate risk
The Authority is exposed to risk in terms of its exposure to interest rate movements
on its borrowings. The Authority has £74m of lender's option/borrower's option (LOBOs)
loans with banks at interest rates ranging between 3.5% and 5.0%. Under this
arrangement, the banks have the option to increase the interest rate on specified call
dates. If the banks increase the interest rate, the Authority has the right to repay the
loan without penalty. If the banks did exercise their option, it is likely that the
Authority would have to pay a higher rate of interest if it chose to replace the loan.

The remainder of the Authority's borrowing consists of fixed rate PWLB debt at interest
rates ranging between 3.85% and 9.875%. Borrowings are not carried at fair value,
so nominal gains and losses on fixed rate borrowings will not impact on the income
and expenditure account. In real terms, the value of the debt will be substantially
eroded through the remainder of its term by inflation.

Foreign exchange risk
The Authority has no financial liabilities denominated in foreign currencies
and thus has no exposure to loss arising from movements in exchange rates.






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