Our performance in 2009 - Sappi

Following this refinancing, we have a much improved liquidity position with cash of US$770 million
available at the end of September 2009 and no major debt maturities before 2012. We are of the
opinion that it is prudent to maintain an increased cash balance as a cushion in times of economic
uncertainty. Our finance costs have increased significantly and at current interest rates we expect
our net finance costs for 2010 to increase to approximately US$250 million. In order to continue
reducing our net debt we will focus on cash generation and will manage our capital expenditures
tightly but at a level which ensures that we maintain our assets in good condition and meet our
commitments to health, safety and environmental standards.
The major elements of the refinancing are discussed below.
2009 annual report 57
US$ million 2009 2008
Long-term debt 2,726 1,681
RCF drawn – 151
Securitised debtors 400 362
Overdrafts, commercial paper 125 315
Short-term position of long-term debt 95 170
Less: Cash (770) (274)
Net short-term debt (150) 724
Total net debt 2,576 2,405
Revolving credit facility
In June 2005, we entered into a r600 million revolving credit facility with a consortium of banks
– the maturity date of this facility was 31 May 2010. This facility was cancelled in August 2009
and replaced with a new secured revolving credit facility, providing for up to r209 million of
borrowing availability in Euros or US Dollars. This facility remains undrawn. The facility terminates
on 31 May 2012 and the annual interest rate on drawings is calculated based on Euribor plus a
margin varying between 3.00% and 6.50% (currently 4.50%), depending on the credit rating
assigned to Sappi Papier Holding’s secured debt rating. Sappi Papier Holding is the holding
company for all of the group’s assets outside of Southern Africa. A commitment fee of 45% of
the margin referred to above is payable to the extent the facility is undrawn.
OeKB syndicated credit facility
In May 2003, Sappi Papier Holding entered into a term loan facility with the Oesterreichische
Kontrollbank (OeKB) and a group of banks, which provided a r500 million borrowing facility for
the purpose of refinancing the purchase price of the 2002 Cloquet acquisition in the USA. The
fully utilised loan had a first repayment of r100 million in December 2004 and a final repayment
of r400 million scheduled for 31 December 2010. The r400 million outstanding was refinanced
in August 2009 by the OeKB and a group of banks with a secured five-year amortising facility,
terminating on 30 June 2014. The annual interest rate is calculated based on Euribor, plus a
margin varying between 4.00% and 7.50% (currently 5.5%), depending on the credit rating
assigned to Sappi Papier Holding’s secured debt rating, plus certain costs.
2009 Guaranteed notes
In July 2009, a subsidiary of Sappi Papier Holding issued US$300 million 12% secured guaranteed
notes due 2014 and r350 million 11.75% secured guaranteed notes due 2032 (together, the
‘2009 notes’). Interest on the notes is payable semi-annually.
The revolving credit facility, the OeKB facility and the 2009 notes are guaranteed by Sappi Limited
and certain material subsidiaries and share in a security package consisting of mortgage bonds
over certain property and plant, pledges of shares of certain material subsidiaries, pledges of
receivables under certain material intercompany loans and pledges of certain inventories at Sappi
Fine Paper North America.
Further information about security over our borrowings is contained in notes 20 and 24 to our
annual financial statements.
our performance