Hedge Accounting - gategroup Holding AG Annual Report 2025

4.6.2Hedge Accounting

The Group is exposed to foreign currency and interest rate risk resulting from its USD-denominated external borrowings. As part of its risk management strategy, the Group uses CCIRS to mitigate variability in EUR-equivalent cash flows arising from:

Changes in floating USD interest rates (SOFR + 425.0 bps), and
Movements in the USD/EUR exchange rate affecting both principal and interest.

The overall objective is to transform USD-denominated financing cash flows into synthetic EUR-denominated floating cash flows that align with the functional currency of the respective entity.

The hedge was designated on June 16, 2025. Quarterly settlements occur on a calendar-quarter basis. The hedge relationship covers both interest and principal amortizations in line with the terms of the underlying loan.

Cash Flow Hedge - Interest and Exchange Rate Component

Hedged item: Forecasted USD-denominated floating interest payments and principal repayments related to a USD 400.0m Term Loan.
Hedging instrument: CCIRS with receive leg in USD (SOFR + 425.0 bps) and pay leg in EUR (EURIBOR + 402.1 bps), including initial and final notional exchanges.
Risk hedged: Variability in the functional currency EUR equivalent of USD interest and principal cash flows.
Hedge designation: Cash flow hedge under IFRS 9.
Hedge ratio: 1:1 (notional of hedging instrument matches hedged item).
Hedge effectiveness testing: Hypothetical derivative method used prospectively and retrospectively at each reporting date.
Timing of cash flows: Quarterly interest settlements and notional amortization from June 2025 to June 2032.

Cash Flow Hedge

in EUR m	2025	2024	2023
Notional amount of CCIRS (hedging instrument)	339.1	-	-
Fair value of CCIRS asset (total derivative value)	(5.9)	-	-
Change in fair value of hedging instrument (OCI effective)	(7.3)	-	-
Amount recycled from OCI to income statement	0.0	-	-
Hedge ineffectiveness (recognized in income statement) (Note 4.2)	(0.5)	-	-

Hedge ineffectiveness arises primarily from:

Credit valuation adjustments and funding valuation adjustments not designated as part of the hedge relationship,
Foreign exchange basis spread differences between swap pricing and market curves,
Minor timing mismatches between the forecasted USD cash flows and the CCIRS reset schedule.

Reconciliation of Cash Flow Hedge Reserve (OCI)

in EUR m	2025	2024	2023
Opening balance	-	-	-
Effective portion of FV change (OCI)	(7.3)	-	-
Amount recycled to the income statement	0.0	-	-
Tax effect on cash flow hedges	0.1	-	-
Balance at December 31	(7.2)	-	-

Accounting Policy – Cash Flow Hedges

The Group applies hedge accounting under IFRS 9. The effective portion of changes in the fair value of derivatives that qualify as cash flow hedges is recognized in OCI and accumulated in the cash flow hedge reserve. Amounts accumulated in OCI are reclassified to profit or loss in the periods when the hedged item affects profit or loss (e.g. when interest payments occur).

Hedge accounting is discontinued when the hedging relationship ceases to meet hedge accounting criteria. At that time, any cumulative gain or loss in OCI remains in equity until the forecasted transaction occurs. If the hedged forecasted transaction is no longer expected to occur, the cumulative OCI balance is immediately reclassified to profit or loss.