18 Net borrowings

a) Analysis of net borrowings

Other borrowings include: Unsecured £350 million (2006 – £350 million) 6¾% bond maturing in 2019 less unamortised issue costs of £4 million (2006 – £4 million), unsecured £325 million (2006 – £325 million) 7% bond maturing in 2012 less unamortised issue costs of £nil (2006 – £nil) and secured term loans of £39 million (2006 – £40 million). These secured term loans include £30 million (2006 – £30 million) debenture stocks of Westland Group plc, which are secured by a floating charge on the undertaking and net assets including financial assets of £88 million (2006 – £100 million) of that company and certain of its subsidiaries and guaranteed by GKN Holdings plc, and £9 million (2006 – £10 million) secured by way of a fixed and floating charge on certain Aerospace fixed assets.

Notes

i) Denotes borrowings at fixed rates of interest until maturity. All other borrowings and cash and cash equivalents are at variable interest rates.

ii) The average interest rate on short term bank deposits was 5.48% (2006 – 5.16%). These deposits had an average maturity from 31 December 2007 of 2 days (2006 – 4 days).

iii) Finance lease obligations gross of finance charges fall due as follows; £2 million within one year (2006 – £3 million), £8 million in one to five years (2006 – £8 million) and £12 million in more than five years (2006 – £12 million).

iv) £18 million (2006 – £25 million) of the Group’s cash and cash equivalents are held by the Group’s captive insurance company. In the normal course of events these funds are held by the captive insurance company to maintain solvency requirements and as collateral for Letters of Credit issued to the Group’s principal external insurance providers. These funds, therefore, are not circulated within the Group on demand.

b) Fair values of borrowings and cash and cash equivalents

The following methods and assumptions were used in estimating fair values for financial instruments:

Unsecured bank loans, overdrafts, other short term bank borrowings, bank balances and cash and short term bank deposits approximate to book value due to their short maturities. For other borrowings and finance lease obligations carrying fixed rates of interest, the repayments which the Group is committed to make have been discounted at the relevant interest rates applicable at 31 December 2007. Bonds included within other borrowings have been valued using quoted closing market value.