ANNUAL REPORT

Excluding Metaldyne, Asahi Tec’s effective interest rates on its
consolidated borrowings under its senior and subordinated
credit facilities at March 31, 2008 were 2.75% and 4.66%
respectively. Asahi Tec is likely to breach certain financial
covenants under its credit agreements in the course of the fiscal
year ending March 31, 2010. Asahi Tec is currently seeking a
waiver of covenants from its lenders. In the event that Asahi Tec
were not successful in obtaining such a waiver, it would be in
default of its obligations under its credit agreements, which
would cast significant doubt on Asahi Tec’s ability to operate as a
going concern.
25.1.3. HIT
At March 31, 2009, HIT had outstanding indebtedness of EUR
546.1 million (JPY 71,631 million) compared to EUR 467.5 million
(JPY 73,576 million) at March 31, 2008. The credit facilities at
March 31, 2009, included EUR 317.5 million senior and EUR 99.5
million mezzanine facilities, EUR 33.4 million revolving facility
and a EUR 90.8 million PIK (Payable in Kind) facility. On
December 29, 2008, HIT reached several agreements in view of
the liquidity shortfall that resulted from collapsing demand.
HIT’s lenders agreed to a standstill, originally until March 31,
2009, but extended twice. Furthermore, certain of HIT’s main
customers and a key supplier provided for additional liquidity of
EUR 30 million and compensation for reduced volumes. Finally,
RHJI provided secured financing up to EUR 20 million, in the
form of factoring -and sale and lease back arrangements.
During the standstill, the Company and a committee of HIT’s
senior lenders agreed to a capital restructuring proposal that
was approved by HIT’s lenders on May 25, 2009 and closed in
July 2009. As part of the restructuring, the Company invested
EUR 50 million in exchange for a controlling 51% stake in
Honsel. The remaining 49% of the group is held by Honsel’s
former senior term lenders following a debt-for-equity swap,
which resulted in HIT’s total outstanding secured term debt of
approximately EUR 507.8 million being reduced to EUR 140
million, consisting of EUR 110 million senior term loan and EUR
30 million mezzanine term loan, all of which are held by
Honsel’s former senior term lenders. Honsel’s existing EUR 40
million revolving credit facility, as well as EUR 50 million of
financing from the Company and certain of Honsel’s key
customers and suppliers, remained in place.
The interest rates on Honsel’s new senior term are determined
as Euribor plus 5%. According to the terms of the new senior
credit, Honsel must ensure that, during a period of three years
after the closing date, it has hedging arrangements in place to
cause at least 66 and 2/3% of the outstanding amounts under
the senior debt and the Customer Financing to bear interest at a
fixed or capped rate. The new mezzanine facility will pay Euribor
+ 5% cash interest and 5% PIK interest. Honsel may at any time
during the life of the Mezzanine Facility elect to have all interest
capitalized at the end of each interest period, provided that,
following the exercise of such election by the Company, interest
shall accrue at a fixed rate of 16.00% PIK per annum.
25.1.4. Niles
At March 31, 2009, Niles had JPY 28,326 million of indebtedness
outstanding on a consolidated basis, compared to JPY 27,741
million a year earlier. The credit facilities included senior term
loans (JPY 10,455 million), revolving loans (JPY 7,997 million), an
unsecured bullet loan (JPY 2,167 million), finance leases (JPY
2,245 million), a bullet loan secured by a cash deposit from RHJI
(JPY 2,500 million) and non-bank debt from a major stakeholder
(JPY 2,500 million).
On May 20, 2009, Niles bolstered its capital structure through a
total capital injection of JPY 6,000 million of which JPY 3,500
million was provided by the Company and JPY 2,500 million by
the major stakeholder that had provided financing of JPY 2,500
million previously. Part of the proceeds was used to repay JPY
2,500 million of short-term debt that was secured by a cash
deposit from RHJI, and the major stakeholder’s loan of JPY
2,500 million. Furthermore, syndicate lenders agreed on a
refinancing of the existing debt structure, of which JPY 7,566
million was outstanding at March 31, 2009, with new bullet loans
maturing in June 2011.
At March 31, 2009, the effective interest rate on Niles' senior
credit facilities amounted to 3.03%.
25.1.5. Phoenix Seagaia Resort
On September 29, 2008, Phoenix Seagaia Resort entered into an
agreement with its lenders to amend certain terms and
conditions of its existing credit facility of JPY 7,508 million. The
term of the amended loan is 3 years. The amendment provides
for quarterly repayments of JPY 195 million and a bullet
payment of JPY 5,497 million on September 30, 2011. In addition
to this amended loan agreement, the Company extended the
revolving credit facility from JPY 500 million to JPY 1,000 million
until September 30, 2011. The outstanding balance of this intragroup
loan at March 31, 2009 amounted to JPY 400 million. The
Company guarantees the quarterly repayments and the total
interest up to an aggregate amount of JPY 3,400 million. The
interest rate is based on the three month Libor plus a margin
ranging from 260 to 410 basis points, depending on the level of
reported EBITDA. At March 31, 2009, Phoenix Seagaia Resort
had already repaid JPY 390 million of the guaranteed principal,
and had outstanding financial indebtedness of JPY 7,144 million,
compared to JPY 7,777 at March 31, 2008.
The effective interest rate on Phoenix Seagaia Resort's credit
facility was 5.04% at March 31, 2009.
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