Financial liabilities 31 December 2008 rose mainly as a result of EEMS Italia drawing on ABN credit lines for 47,500 thousand euros. During 2008 the subsidiary EEMS Asia drew down further amounts on the same credit line for 14,315 thousand euros.
With regard to the Asian subsidiaries:
- EEMS Test drew down a new loan on the lines obtained in 2008 with United Overseas Banks, for US$ 1,439 thousand (Euro 1,034 thousand);
- EEMS Suzhou in 2008 refunded credit lines with the Agricultural Bank of China for US$ 5,000 thousand (Euro 3,592 thousand).
Current financial liabilities
The increase in current financial liabilities over the preceding year is related to the short-term portion of loans drawn down on the ABN credit line, for 23,938 thousand euros. The remainder relates to the short-term portion of loans received by the Asian subsidiaries.
Non-current financial liabilities
With regard to leasing liabilities, the reduction in the short- and long-term principal portions is the result of the settlement of amounts falling due during the year.
At 31 December 2008 the book value of floating-rate financial liabilities reasonably approximated fair value.
The following tables present maturity analyses of the Group’s financial liabilities (at nominal value) subject to interest-rate risk on the basis of the relative servicing schedules issued by the credit
Floating rate Maturity Total
The fair value of liabilities under fixed-rate leasing agreements 31 December 2008 is negative for 2,008 thousand euros.
Details of amounts owing to banks by the EEMS Group are shown, at nominal value, in the following table.
(in thousands of euros) 31.12.2008 31.12.2007
EEMS real estate mortgage loan, comprising: 2,106 3,414
Current portion 1,384 1,308
Non-current portion 722 2,106
EEMS ITALIA ABN loan, comprising: 57,500 28,396
Current portion 19,167 -
Non-current portion 38,333 28,396
EEMS ASIA ABN loan, comprising: 14,370 -
Current portion 4,791 -
Non-current portion 9,579 -
EEMS Suzhou loan, including: 27,304 29,209
Current portion 17,963 6,793
Non-current portion 9,341 22,416
EEMS Test loan, including: 6,151 7,646
Current portion 3,123 2,708
Non-current portion 3,028 4,938
TOTAL AMOUNTS OWING TO BANKS 107,431 68,665
including:
- Classified with current financial liabilities 46,428 10,809
- Classified with non-current financial liabilities 61,003 57,856
TOTAL 107,431 68,665
- Real estate mortgage loan: syndicated loan of original amount 10,329 thousand euros, coordinated and managed by MPS Merchant Bank, (formerly Mediocredito Toscano). It was issued on 12 June 2000 and is secured by a first-level mortgage over the Cittaducale factory. The interest rate is the six-month Euribor, plus a variable spread of between 0.80% and 1%, determined on the basis of the net financial debt / EBITDA ratio; duration 10 years expiring on 31 May 2010. Compared with 31 December 2007, this loan has fallen by 1,308 thousand euros as a result of the refund of principal falling due in 2008.
- Syndicated loan managed by ABN AMRO. The loan agreement provides for:
- a revolving credit line (“Facility A”) of 47,500 thousand euros serving the traditional activity in
- a revolving credit line (“Facility B”) of 57,500 thousand euros for the production of photovoltaic cells and panels whose manufacture by Solsonica S.p.A is in the growth stage.
The availability period is up to 31 December 2008 and refund will be made following a three-year servicing schedule with half-year instalments as from 30 June 2009.
Both lines can be used in euros, US dollars and British pounds. The interest rate will be pegged to Euribor for euros and to Libor for US dollars plus a spread:
- for Facility A of between 0.50% and 1.25%;
- for Facility B of between 0.75% and 1.50%.
With regard to Facility A, up to 31 December 2007 the spread was 1.00%, whereas for Facility B it was 1.25%. Subsequently, the spread varies in accordance with the leverage ratio, that is, the ratio between the Group’s net financial debt and EBITDA (how these figures are calculated is defined in the loan agreement). In case of default, the interest rate is increased by 1.00%.
For the entire duration of the loan, EEMS shall pay a commission on the undrawn portion of 50% of the applicable spread, which however will not exceed 0.45%, on available amounts not drawn down.
EEMS shall on a quarterly basis respect the following covenants calculated on the basis of the consolidated financial statements of the “Restricted Group”, that is, the Group to the exclusion of Solsonica SpA and future joint ventures:
(i) Net book value of non-current assets / total assets (Solvency Coverage Ratio);
(ii) Net financial debt / EBITDA (Leverage Ratio);
(iii) EBITDA / interest expense (Interest Coverage Ratio);
(iv) Operating cash flow net of cash used for investment assets / Debt servicing as per the servicing schedule inclusive of interest (Debt Service Coverage Ratio).
The agreement also contains a number of agreed limits within which the covenants must be kept during the loan period. Should such limits not be respected ABN can, on the request of a majority of the lenders: (i) cancel the remaining balance of the available credit lines; (ii) request settlement of the total (or part) of the sums used, inclusive of accrued interest and all other amounts due; (iii) exercise the established guarantees.
At 31 December 2008 all the covenants were honoured.
As mentioned in the section of these notes dealing with going concern, as a result essentially of the drop in the semiconductors market, on the basis of information available to the Directors, one may consider that the Group may not be able to honour these obligations. The Directors have taken action to remedy this eventuality, which is described in the section referred to above.
In this connection, on entering into this loan agreement, the Company pledged in favour of ABN AMRO Bank NV its entire holding in the subsidiaries Solsonica S.p.A. and EEMS Asia Pte. Ltd which has pledged its entire holding in EEMS Test Singapore Pte. Ltd. and its entire indirect holding in EEMS Suzhou Co. Ltd.
As already reported, at 31 December 2008 there were undrawn amounts on the said credit lines for 71,870 thousand euros. As at the same date the availability period had expired, so that the portion no longer usable is 33,130 thousand euros.
- EEMS Suzhou loans:
EEMS Suzhou at 31 December 2008 had drawn down a total of US$ 38,000 thousand, equal to Euro 27,304 thousand, on credit lines made available by the Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank. These lines provide for refund on expiry date and interest rates pegged to Libor plus a spread of between 0.25% and 0.80%. The total loan is made up as follows:
- Industrial and Commercial Bank: US$ 9,000 thousand;
- China Construction Bank: US$ 9,000 thousand;
- Agricultural Bank of China: US$ 20,000 thousand.
These loans are unsecured and are refundable within 3 years.
- EEMS Test loans:
As already reported, the company obtained new credit lines with United Overseas Bank for US$ 2,850 thousand (Euro 2,047 thousand). During 2008 the company drew down US$ 1,439 thousand (Euro 1,034 thousand) against investment in machinery. This loan has a duration of 4 years, will be refunded in 48 monthly instalments starting from the month subject to drawdown, bears a floating interest rate and is secured over a machine and by a guarantee issued by EEMS Asia.
At 31 December 2008 the total debt owing to United Overseas Bank amounted to US$ 5,621 thousand (Euro 4,039 thousand).
In addition, EEMS Test from a credit line granted in 2007 by DBS Bank had drawn down a total of US$ 4,474 thousand (Euro 3,215 thousand). This loan has a 3 year duration, with monthly refunds starting from the month subsequent to drawdown, bears a floating interest rate of between 6% and 8%, and is secured over 4 machines. At 31 December 2008 the outstanding debt amounted to US$ 2,939 thousand (Euro 2,112 thousand).
- EEMS Asia loans:
During 2008, EEMS Asia drew down US$ 20,000 thousand (Euro 14,370 thousand) on the ABN credit line described above.
Derivatives
Notional amount Fair value
(in thousands of euros) 31.12.2008 31.12.2007 31.12.2008 31.12.2007
Cash flow hedge rates US dollars for the purchase of solar cells for the period 2009-2011. To neutralise the exchange rate risk, on 19 December 2008 the Company made forward agreements for the purchase of US currency related to future cash disbursements to be made by the Company in accordance with the monthly payment schedule, as a non-speculative exchange risk hedge. Specifically, the Company made 37 hedge agreements for a notional total of US$ 73,201 thousand. The hedge for the payment flows at the various due dates has been realised through negotiating a forward knock-in portfolio containing an optional component which modifies the payment profile on due date (payout). These agreements can be seen as a combination of two options: a US$ call option purchased and a US$ put option sold with a knock-in
clause (that is, a barrier which comes into effect if the sale put option becomes active only on a certain
“threshold amount” in the euro/ US dollar exchange rate being exceeded). Against these instruments the Company on the due dates collects the US$ amount negotiated and pays the counterparty the value in euros in the amount fixed in the agreement. The fair value of the agreements at 31 December 2008 was negative for Euro 149 thousand and has been recorded with non-current financial liabilities. The effective component of the hedging arrangement has been recorded in the amount of Euro 132 thousand in a specific equity reserve (cash flow hedge reserve). Such component corresponds to the lower of the fair value of the forward purchase agreements made and the change in the value of future payments flows covered by the hedging strategy (for the portion subject to hedging) connected with the exchange difference. The ineffective component of the hedging arrangement has been taken for Euro 17 thousand to profit and loss under financial charges.