registration document France Telecom 2009 - Orange.com

20 CONSOLIDATED
financial information concerning the issuer’s assets and liabilities, financial position and profits and losses
STATEMENTS
In addition, in respect of its 2005 bank fi nancing contracts,
ECMS must comply with the following covenant:
■ a net senior debt below 9.7 billion Egyptian pounds (net
senior debt as defi ned in the contracts with the banks).
At December 31, 2009, these ratios were fully compliant.
With regards to structured fi nancing contracts, several refund
scenarios are possible for France Telecom S.A.’s trade
receivables securitization programs: (i) standard repayment
scenarios on the contractual maturity date of the programs;
(ii) accelerated or adjusted payment, notably in the event that
France Telecom’s long-term rating is downgraded to BBor
Ba3. In the case of accelerated or adjusted payment, the
securitization conducts cease to participate in fi nancing new
receivables, and cash received on receivables previously sold is
used to repay holders of benefi cial interest progressively.
The Enterprise’s trade receivables securitization program refers
to a different kind of amortization: mandatory amortization
in the case that a treaty, provision of the law or regulation,
an instruction or a directive issued by an offi cial authority or
banking organization, or an interpretation or application thereof
issued or made by an offi cial authority or an organization of a
binding nature, were to call into question or be liable to call into
question one of the legal and/or fi nancial mechanisms of the
securitization transaction.
Under the terms of the Orange France trade receivables
securitization program, France Telecom S.A. is required to
hold 100% of Orange France’s share capital and voting rights,
directly or indirectly.
Commitments related to instances of default or
material adverse changes
Most of France Telecom’s fi nancing agreements, including in
particular the 8 billion euro syndicated credit facility set up on
June 20, 2005, as well as the bonds issued within the scope
of the EMTN program, are not subject to cross default or
prepayment arrangements in the event of a material adverse
change. When such arrangements exist, accelerated repayment
clauses do not automatically lead to immediate repayment of
other contracts.
28.5 Credit risk and counterparty risk
management
Financial instruments that could potentially subject France
Telecom to concentrations of counterparty risk consist primarily
of trade receivables, cash and cash equivalents, investments
and derivative fi nancial instruments.
France Telecom considers that it has limited exposure to
concentrations of credit risk with respect to trade accounts
receivable due to its large and diverse customer base
(residential, professional and large business customers)
operating in numerous industries and located in many French
regions and foreign countries. In addition, the maximum value
of the counterparty risk on these fi nancial assets is equal to
their recognized net book value. An analysis of credit risk on net
trade receivables past due is provided in Note 18, Loans and
receivables .
France Telecom’s policy is to invest its cash, cash equivalents
and marketable securities with fi nancial institutions and
industrial groups with a long-term rating of A-/A3 or above.
Some investments by subsidiaries are with counterparties with
a lower rating; the rating is then the highest available in the
country concerned.
France Telecom S.A. enters into interest rate and foreign
exchange contracts with leading fi nancial institutions.
Furthermore:
■ France Telecom also has collateralization agreements with
the main counterparties to which it has the highest exposures
These agreements may result in weekly or monthly amounts
payable to or receivable from certain banks, representing
the mark-to-market impact of all derivative instruments set
up with these banks. Consequently, the amount of this cash
collateral varies as the value of these operations changes
in line with interest and exchange rates, and the thresholds
set in the contracts. The amounts do not therefore change
on a linear basis or identically by instrument. For France
Telecom S.A., the amount of cash collateral paid amounted
to 758 million euros at December 31, 2009 compared with
238 million euros at December 31, 2008 and 788 million
euros at December 31, 2007 (see Note 18, Loans and
receivables ). The increase was due to a volume effect after
hedges on the pound sterling position and on the new US
dollar bonds issues in 2009, and by the increase in the
number of counterparties with which the company entered
into a collateralization agreement, together with the reduction
in thresholds set in the contracts. The increase was also due
to the fall in the market value of foreign exchange hedging
instruments, primarily owing to the fall in the value of the
dollar against the euro;
■ c ounterparties’ ratings are monitored;
■ l imits are set based on each fi nancial institution’s rating
and equity, as well as on periodic analyses carried out by
the Treasury and Financing Management Department. The
maximum commitment is then determined based on the
notional amounts of interest rate and foreign exchange
contracts outstanding, to which coeffi cients are applied that
take into account the remaining duration of the operation and
the type of transaction involved;
■ t hese ratios are monitored periodically to refl ect the risk. Limits
are monitored and reported daily to the Group treasurer and
head of dealing room.
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM