HSBC 2009 Annual Report Download - page 167

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spreads tightened again. At 31 December 2009,
HSBC had purchased from CDPCs credit protection
with a notional value of US$5.0 billion (2008:
US$6.4 billion) which had a fair value (essentially,
replacement cost) of US$0.3 billion (2008:
US$1.2 billion), against which a credit risk
adjustment (a provision) of US$0.1 billion was held
(2008: US$0.2 billion). At 31 December 2009,
83 per cent of exposure was to CDPCs with
investment grade ratings (2008: 100 per cent).
Leveraged finance transactions
Leveraged finance transactions include sub-
investment grade acquisition or event-driven
financing.
The following tables show HSBC’s gross
commitments and exposure to leveraged finance
transactions arising from primary transactions and
the movement in that leveraged finance exposure in
the year. HSBC’s additional exposure to leveraged
finance loans through holdings of ABSs from its
trading and investment activities is shown in the
table on page 159.
HSBC’s exposure to leveraged finance transactions
At 31 December
Funded
exposures21
Unfunded
exposures22
Total
exposures
US$m US$m US$m
2009
Europe .................................................................................................................. 3,790 368 4,158
Rest of Asia-Pacific ............................................................................................. 70 22 92
North America ..................................................................................................... 1,713 188 1,901
5,573 578 6,151
Held within:
– loans and receivables .................................................................................... 5,569 386 5,955
– fair value through profit or loss ................................................................... 4 192 196
2008
Europe .................................................................................................................. 3,554 480 4,034
Rest of Asia-Pacific ............................................................................................. 25 12 37
North America ..................................................................................................... 1,825 258 2,083
5,404 750 6,154
Held within:
– loans and receivables .................................................................................... 5,401 482 5,883
– fair value through profit or loss ................................................................... 3 268 271
For footnotes, see page 195.
Movement in leveraged finance exposures
Funded
exposures21
Unfunded
exposures22
Total
exposures
US$m US$m US$m
At 1 January 2009 ................................................................................................ 5,404 750
6,154
Additions .............................................................................................................. – 50 50
Fundings .............................................................................................................. 99 (99) –
Sales, repayments and other movements ............................................................ (34) (150) (184)
Write-backs .......................................................................................................... 104 27
131
At 31 December 2009 .......................................................................................... 5,573 578
6,151
For footnotes, see page 195.
Leveraged finance commitments held by HSBC
were US$6.5 billion at 31 December 2009 (2008:
US$6.6 billion), of which US$5.9 billion (2008:
US$5.8 billion) was funded.
As described on page 153, certain leveraged
finance loans were reclassified from held-for-trading
to loans and receivables. As a result, these loans are
held at amortised cost subject to impairment and
are not marked to market, and net gains of
US$1.2 billion (2008: net losses of US$1.3 billion)
were not taken to the income statement in 2009.
At 31 December 2009, HSBC’s principal
exposures were to companies in two sectors:
US$3.8 billion to data processing (2008: