Registration Document 2005 - Total.com

3
Management Report of the Board of Directors
Liquidity and capital resources
Borrowing requirements and funding structure
The net-debt-to-equity ratio was 32% as of December 31, 2005,
compared to 30.7% at year-end 2004.
The Group’s policy for long-term debt is to borrow primarily at
variable rates, or at a fixed rate depending on the level of interest
rates at the time, in US dollars or in euros based on the Group’s
general needs. Long-term rate and currency swaps may be used
in conjunction with debt issues and bonds to create a synthetic,
variable-rate debt. TOTAL may also enter into long-term interest
rate swaps in order to partially modify the rate structure of longterm
debt.
Long-term financial debt in dollars are generally contracted for by
the treasury department, either directly in dollars or in euros, or in
currencies systematically exchanged for dollars or euros, based on
the Group’s general needs, through swaps.
Any bank counterparty with which the Group wishes to work in
market transactions must first be authorized after an assessment
of its financial position and its ratings from Standard & Poor’s and
Moody’s, which must be first-tier.
An authorized aggregate limit is defined for each bank and divided
among the subsidiaries and the Group treasury unit based on
needs for financial activities.
72 TOTAL - Registration Document 2005
Condition for the use of external financing
The total amount of the confirmed lines of credit granted by
international banks to Group companies (including TOTAL S.A.)
was 9,778 million dollars at December 31, 2005, 8,414 million
dollars of which has not been used.
TOTAL S.A. has confirmed lines of credit granted by international
banks that allow the company to fund a significant cash reserve.
These credit lines totaled 7,335 million dollars at December 31, 2005,
7,293 million dollars of which has not been used.
The contracts for the lines of credit granted to TOTAL S.A. contain
no provisions that tie the terms and conditions of the loan to the
Company’s financial ratios, to its financial ratings from specialized
agencies, or to the occurrence of events that could have a material
negative impact on its financial position.
The lines of credit granted to Group companies other than
TOTAL S.A. are not intended to finance the Group’s general
needs; they are intended to finance either the general needs of the
borrowing subsidiary or a specific project.
As of December 31, 2005, there was no restriction on the use of
the capital received by the Group’s companies (including TOTAL
S.A.) which could have a direct or indirect material impact on the
Group’s operations.
Anticipated sources of financing
In 2005, investments, working capital, dividend payments and
stock buybacks were financed essentially by the cash flow
generated from operating activities and, to a lesser extent, by asset
disposals and net borrowings.
For the coming years and based on the current financing
conditions, the Company intends to maintain this policy of financing
its investments and activities.