Page 54 - 2009_2010_Annual_Report

Basic HTML Version

Saskatchewan Indian Gaming Authority
NOTES TO THE FINANCIAL STATEMENTS
|
Year Ended March 31, 2010
52
18. CAPITAL DISCLOSURES
SIGA’s objectives when managing capital are to ensure adequate capital to support the operations and growth strategies of the
Corporation, and to ensure adequate returns to the shareholders.
SIGA funds its capital requirements through the $5,000,000 capital reserve from SLGA, internal operating activities and debt.
SIGA also has an available line of credit of $2,000,000 at a financial institution.
SIGA limits the amount of risk in proportion to its capital. The initial financing option of the Dakota Dunes, Living Sky, and Painted
Hand casino projects (“casino projects”) was limited to variable rate loans. SIGA entered into three interest rate swap agreements
to exchange the variable rate debt instruments to fixed rate loans to mitigate fluctuations in interest rates. SIGA also performs
environmental scanning to determine if any factors have the potential to change the capital structure of the organization. Risk
management reports are presented to the Audit and Finance Committee and Board of Directors on a quarterly basis.
SIGA entered into a credit agreement with financial institutions in order to obtain financing for the casino projects. The agreement
identified five financial covenants which are reported on a quarterly basis to the financial institutions. SIGA monitors its capital
structure using these covenants. The financial covenants are as follows:
(a) The senior fund debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio shall be less than
or equal to 2.5:1.0 for each fiscal quarter ending before or on December 31, 2008 and less than or equal to 2.0 to 1.0
for each fiscal quarter ending on or after December 31, 2008;
(b) The interest coverage ratio shall not be less than 5.0:1.0;
(c) The total debt service coverage ratio shall not be less than 2.0:1.0;
(d) The fixed charge coverage ratio shall not be less than 1.0:1.0; and
(e) The earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) coverage ratio shall not be less
than 2.0:1.0.
Ratios at year-end were 1.04, 7.10, 5.99, 1.56, and 4.54 respectively. In all instances during the year ended March 31, 2010,
SIGA was in compliance with the above covenants.
19. FINANCIAL RISK MANAGEMENT
SIGA, through its financial assets and liabilities, has exposure to a number of risks from its use of financial instruments. The
following analysis provides a measurement of these risks as at March 31, 2010.
CREDIT RISK
SIGA’s principal financial assets are cash, short-term investments, and accounts receivable, which are subject to credit risk. The
carrying amounts of financial assets on the balance sheet represents SIGA’s maximum credit exposure at the balance sheet date.
SIGA does not extend credit to its gaming customers. Credit risk is limited to its accounts receivable balance which consists
primarily of an insurance claim and credit extended to business entities for business functions held at the various casino locations.
The credit risk on cash and short-term investments is limited because the counterparties are chartered banks with high credit-
ratings assigned by national credit-rating agencies. Credit risk is not considered significant.
FOREIGN EXCHANGE RISK
SIGA faces exposure to the U.S./Canadian dollar exchange rate through the purchase of goods and services payable in the U.S.
dollar. The risk is not considered significant.