NOTES TO THE FINANCIAL STATEMENTS continued
18. Borrowings:// CONTINUED
Policies
Borrowings are initially recorded at fair value, net of transaction costs. After initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in interest costs in profit or loss over the period of the borrowing using the effective interest rate method. The carrying value of borrowings includes the principal converted at contract rates (face value), unamortised costs and a fair value adjustment for the component of the risk that is hedged. The fair value is calculated by discounting the future contractual cash flows at current market interest rates that are available for similar financial instruments. The fair value of all borrowings, calculated for disclosure purposes, are classified as level 2 on the fair value hierarchy, explained further in Note 20.
Bank facilities
Four new floating rate bank facilities were added to replace the three facilities that matured in February 2018. The new facilities mature in February 2021.
Capital bonds
Capital bonds of $307.2 million are unsecured, subordinated bonds with the next election date set as 15 June 2022. The interest rate was fixed at 5.7% at the previous election date of 15 June 2017.
Wholesale bonds
In June 2018, Vector issued a further $140.0 million of fixed rate wholesale bonds to the existing $100.0 million wholesale bonds. The bonds have a fixed rate of 4.996% and mature in March 2024.
Senior notes
In October 2017, a total of $415.8 million (USD 300.0 million) of USD senior notes were issued. $277.2 million (USD 200.0 million) matures in October 2027 and $138.6 million (USD 100.0 million) matures in October 2029. The $350.0 million floating rate notes are credit wrapped by MBIA Insurance Corporation. In October 2017, $400.0 million of floating rate notes were repaid and replaced by the October 2017 senior notes issue.
Floating rate notes
Medium term notes
The $285.6 million medium term notes are due to be repaid in January 2019. Vector has sufficient undrawn facilities to provide liquidity cover for the refinancing.
Covenants
All borrowings are unsecured and are subject to negative pledge arrangements and various lending covenants. These have all been met for the years ended 30 June 2018 and 30 June 2017.
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Vector://AR 18
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