STANDARD FINANCIAL COVENANTS
Under our committed
credit facilities we have entered into various covenants. These
covenants include limits on our disposal of fixed assets and the
amount of debt secured by liens we may incur. In addition, our
financial arrangements contain equity ratio covenants, minimum
equity covenants as well as net loss covenants. If we fail
to meet any covenant and are unable to obtain a waiver from
a majority of partner banks, borrowings would become due
and payable immediately. As at December 31, 2007, we were
in full compliance with all of our covenants. Going forward, we
are highly confident that we will continue to be compliant with
these covenants as we expect sustainable strong cash flows for
the foreseeable future. 
see Outlook We currently believe
that cash generated by operations, together with access to
external
sources of funds, will be sufficient to meet our operating
and capital needs in the foreseeable future.
GROSS BORROWINGS SIGNIFICANTLY REDUCED
Gross
borrowings
decreased by 17 % to € 2.146 billion at the end of
2007 from € 2.578 billion in the prior year. Bank borrowings
decreased 28 % to € 198 million from € 275 million in the prior
year. Our private placements in the USA, in Europe and in Asia
decreased 12 % to € 1.564 billion in 2007 (2006: € 1.784 billion).
The current value of the convertible bond increased 2 % to
€ 384 million in 2007 from € 375 million in the prior year,
reflecting
the accrued interest on the debt component in
accordance
with IFRS requirements. No commercial paper was
outstanding at the end of 2007 (2006: € 144 million).
|
CURRENCY SPLIT OF GROSS BORROWINGS € in millions |
|
 |
ISSUED BONDS AT A GLANCE
€ in millions
| Issued Bonds |
Volume |
Coupon |
Maturity |
| Asian Private Placement | USD 218 | variable | 2009 |
| Asian Private Placement | JPY 3,000 |
fixed |
2009 |
| Asian Private Placement | EUR 26 |
variable |
2010 |
| Asian Private Placement | AUD 16 |
variable |
2010 |
| German Private Placement | EUR 150 |
fixed/variable |
2010 |
| French Private Placement | EUR 150 |
variable |
2011 – 2012 |
| US Private Placement | USD 175 |
fixed | 2015 |
| US Private Placement |
USD 1,000 |
fixed | 2009 – 2016 |
| Convertible Bond | EUR 400 |
2,50 % | 2018 |
| Other Private Placements | EUR 399 |
fixed/variable | 2008 – 2012 |
CURRENCY MIX BROADLY UNCHANGED
The majority of our
Group’s gross borrowings are denominated in euros and US
dollars. In an effort to minimize the level of short-term variable
interest rate borrowings, 2007 debt reduction was targeted at
euro-denominated instruments, which are mainly variable-rate
financing arrangements. In addition, our US dollar-denominated
financing declined in absolute terms mainly as a result of the
US dollar depreciation versus the euro. Consequently, the
currency
split of our gross borrowings at the end of 2007 was
broadly unchanged versus the prior year. Gross borrowings
denominated
in euros accounted for 51 % of total gross
borrowings
(2006: 51 %). The share of gross borrowings held
in US dollars increased slightly to 45 % (2006: 44 %).
INTEREST RATE INCREASES
The weighted average interest
rate on the Group’s gross borrowings rose 0.5 percentage
points to 5.3 % in 2007 (2006: 4.8%), mainly as a result of higher
interest rates in the Euro Zone. As a result, our debt reduction
in 2007 focused primarily on decreasing the Group’s variable
financing
arrangements to better protect against future interest
rates increases. see Risk and Opportunity Report Long-term
fixed-rate financing
amounted to around 70 % of the Group’s
total financing at the end of 2007 (2006: around 65 %). Variable
financing amounted to around 30 % of total financing at the
end of the year (2006: around 35 %).
