Our performance in 2009 - Sappi

144
Notes to the group annual financial statements continued
20. Interest-bearing borrowings continued
The analysis of the currency per debt is:
Local
currency
million US$ million
US$ 1,342 1,342
EUR 986 1,448
ZAR 3,981 537
(1) The value outstanding equals the total facility available.
(2) In terms of the agreement, limitations exist on liens, sale and leaseback transactions and mergers and consolidation. Sappi Limited must maintain a majority
holding in Sappi Papier Holding GmbH group.
(3) Sappi Papier Holding GmbH, Sappi Limited or Sappi International SA may at any time redeem the June 2012 and 2032 public bonds (the ‘Securities’) in whole
or in part at a redemption price equal to the greater of (i) 100% of the principal amount of the Securities to be redeemed and (ii) a make-whole amount based
upon the present values of remaining payments at a rate based upon yields of specified US treasury securities plus 25 basis points, with respect to the 2012
Securities, and 30 basis points, with respect to the 2032 Securities, together with, in each case, accrued interest on the principal amount of the securities to
be redeemed to the date of redemption.
(4) The financial covenant relates to the financial position of Sappi Manufacturing, a wholly-owned subsidiary of Sappi Limited.
(5) Financial covenants relate to the Sappi Limited group.
(6) The principal value of the loans/bonds corresponds to the amount of the facility, however, the outstanding amount has been adjusted by the discounts paid
upfront and the fair value adjustments relating to hedge accounting.
(7) US$ fixed rates have been swapped into Euro fixed rates. These swaps are subject to hedge accounting in order to reduce as far as possible the foreign
exchange exposure.
(8) The nature of the rates for the group bonds is explained in note 30 to the financial statements. The nature of the interest rates is determined with reference to
the underlying economic hedging instrument.
A detailed reconciliation of total interest-bearing borrowings has been performed in note 30.
Other restrictions
As is the norm for bank loan debts, a portion of Sappi Limited’s financial indebtedness is subject to cross default provisions.
Breaches in bank covenants in certain subsidiaries, if not corrected in time, might result in a default in group debt, and in
this case, a portion of Sappi Limited consolidated liabilities might eventually become payable on demand.
During fiscal 2009 and 2008, we were in compliance with the financial covenants relating to the material loans payable.
Regular monitoring of compliance with applicable covenants occurs. If there is a possible breach of a financial covenant in
the future, negotiations are commenced with the applicable institutions before such breach occurs.
Borrowing facilities secured by trade receivables
The group undertakes several trade receivable securitisation programmes due to the cost-effectiveness of such structures.
These structures, with the exception of the South African scheme, are treated as on balance sheet, with a corresponding
liability (external loan) being recognised and corresponding interest is recognised as finance cost.
The trade receivables are legally transferred, however, most of the market risk (foreign exchange risk and interest rate risk)
and the credit risk is retained by Sappi. As a consequence, based on the risks and rewards evaluation, these securitisations
do not qualify for derecognition under IAS 39.
Further detail of the value of trade receivables pledged as security for these loans is included in note 16 of the financial
statements.
Sappi Fine Paper North America
Sappi sells the majority of its US$ receivables to Galleon Capital LLC on a non-recourse basis. Credit enhancement includes
a 3% deferred purchase price plus a letter of credit in the amount of US$18 million that relates to the uninsured portion of
those obligors with concentrations above 3% (Sappi, as servicer of the receivables, is responsible for the collection of all
amounts that are due from the customer). The rate of discounting charged on the receivables is LIBOR (London Interbank
Offered Rate) plus a margin for receivables to customers located in OECD countries.
3,327