ANNUAL INTEGRATED REPORT 2021
ANNUAL INTEGRATED REPORT 2021 | AXTEL
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(ii.)
Interest rate and cash flow risk
The Company's interest rate risk arises from long-term loans. Loans at
variable rates expose the Company to interest rate risks in cash flows
that are partially offset by cash held at variable rates. Loans at fixed
rates expose the Company to interest rate risk at fair value.
As of December 31, 2021, 7% of Axtel's total debt generates variable
interest rates while the remaining 93% generates fixed interest rates.
The Company analyzes its exposure to interest rate risk on a dynamic
basis. Several scenarios are simulated, taking into account the
refinancing, renewal of existing positions, financing and alternative
coverage. Based on these scenarios, the Company calculates the
impact on the annual result of a change in the interest rate defined
for each simulation, using the same change in the interest rate for
all currencies. The scenarios are produced only for liabilities that
represent the main positions that generate the highest interest.
Axtel's results and cash flows can be impacted if additional financing
is required in the future when interest rates are high in relation to the
Company's current conditions.
As of December 31, 2021, if the interest rates on variable rate loans
were increased or decreased by 100 basis points, the interest expense
would affect the results and stockholders' equity by $8,805 and
$(8,805), respectively.
Credit risk
Credit risk represents the risk of financial loss for the Company, if
a customer or counterpart of a financial instrument defaults on its
contractual obligations, mainly in connection with accounts receivable
from customers, as well as from investment instruments.
Account receivables
The Company evaluates and aggregates groups of clients that share a
credit risk profile, in accordance with the service channel in which they
operate, in line with business management and internal risk management.
The Company is responsible for managing and analyzing the credit
risk for each of its new customers prior to establishing the terms
and conditions of payment to offer. Credit risk arises from exposure
of credit to customers, including accounts receivable. If there is
no independent rating in place, the Company evaluates the credit
risk pertaining to its customers, taking into account the financial
position, past experience and other factors such as historical lows,
net recoveries and an analysis of accounts receivable balances aging
with reserves that are usually increased to the extent the accounts
receivable increases in age. The credit risk concentration is moderate
due to the number of unrelated clients.
Axtel determines its allowance for impairment of accounts receivable
taking into account the probability of recovery, based on past
experiences, as well as current collection trends and overall economic
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