Table:
| FINANCE COSTS | Years ended December 31 |  |  |
| --- | --- | --- | --- |
| (In millions of dollars) | 2019 | 2018 | %Chg |
| Interest on borrowings 1 | 746 | 709 | 5 |
| Interest on post-employment benefits liability | 11 | 14 | (21) |
| Loss on repayment of long-term debt | 19 | 28 | (32) |
| (Gain) loss on foreign exchange | (79) | 136 | n/m |
| Change in fair value of derivative instruments | 80 | (95) | n/m |
| Capitalized interest | (19) | (20) | (5) |
| Other | 21 | 21 | - |
| Finance costs before interest on lease liabilities | 779 | 793 | (2) |
| Interest on lease liabilities 2 | 61 | - | n/m |
| Total finance costs | 840 | 793 | 6 |
Paragraphs:
1 Interest on borrowings includes interest on short-term borrowings and on long-term debt. 2 See “Accounting Policies” for more information.
The 6% increase in finance costs this year was a result of: • interest on lease liabilities as a result of our adoption of IFRS 16; and • higher outstanding debt as a result of our debt issuances in April 2019, in large part to fund our acquisition of 600 MHz spectrum licences (see “Managing Our Liquidity and Financial Resources”); partially offset by • a $21 million loss on discontinuation of hedge accounting on certain bond forward derivatives recognized in 2018.
Interest on borrowings Interest on borrowings increased this year as a result of the net issuance of senior notes throughout the year, partially offset by a higher proportion of borrowings under our lower-interest US CP program compared to 2018. See “Managing Our Liquidity and Financial Resources” for more information about our debt and related finance costs.
Loss on repayment of long-term debt This year, we recognized a $19 million loss (2018 – $28 million loss) on repayment of long-term debt, reflecting the payment of redemption premiums associated with our redemption of $900 million (2018 – US$1.4 billion) of 4.7% senior notes in November 2019 that were otherwise due in September 2020 (2018 – 6.8% senior notes in April 2018 that were otherwise due in August 2018).
Foreign exchange and change in fair value of derivative instruments We recognized $79 million in net foreign exchange gains in 2019 (2018 – $136 million in net losses). These gains and losses were primarily attributed to our US dollar-denominated commercial paper (US CP) program borrowings.
These foreign exchange gains (2018 – losses) were offset by the $80 million loss related to the change in fair value of derivatives (2018 – $95 million gain) that was primarily attributed to the debt derivatives, which were not designated as hedges for accounting purposes, we used to offset the foreign exchange risk related to these US dollar-denominated borrowings.
During the year ended December 31, 2018, we determined that we would no longer be able to exercise certain ten-year bond forward derivatives within the originally designated time frame. Consequently, we discontinued hedge accounting on those bond forward derivatives and reclassified a $21 million loss from the hedging reserve within shareholders’ equity to finance costs (recorded in “change in fair value of derivative instruments”). We subsequently extended the bond forwards to May 31, 2019, with the ability to extend them further, and redesignated them as effective hedges. During the year ended December 31, 2019, we exercised our remaining bond forwards.
See “Managing Our Liquidity and Financial Resources” for more information about our debt and related finance costs.
Question:
What caused the interest on borrowings in 2019?
Answer: net issuance of senior notes throughout the year