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Financial position – results4Notes to the parent company financial statementsNote 15 - Treasury management – financial instrumentsDebtAt 31 December 2012, net debt recorded in the parent companyfinancial statements stood at €32 million, compared with€84 million at end-2011. Movements in net debt during theyear are analysed in the statement of cash flows (see Note 11 –Statement of cash flows).Liquidity and maturity of debtSequana’s gross debt was €24.2 million at 31 December 2012(down from €36.4 million in 2011) and is financed by a confirmedcredit facility with a top-ranking bank. It was signed inJune 2006 for an initial five-year period and extended throughFebruary 2012 based on amendments signed in June andSeptember 2011.On 30 April 2012, this bilateral credit line was extended for afurther two-year period through to 30 June 2014 for an amountof €36 million.The agreement provides for amortisation payments of €1.2 millionin 2012 and 2013 and additional repayments in the eventthat Sequana carries out any capital increases. €11 million waspaid down on this credit line following the July 2012 increase incapital. At 31 December 2012, the line had been drawn down infull for its maximum amount of €24.2 million.The agreement also stipulates that Sequana must comply withseveral financial covenants that will be tested on a regular basisand are described below. The income and cash flow indicatorsused for the covenants are all calculated over a rolling 12-monthperiod. These ratios are defined in the “Preliminary remarks” sectionof chapter 1 and in the “Liquidity risk” section of chapter 3:■■Consolidated net debt/consolidated EBITDA (leverage):at 30 June 2012 < 6.00at 31 December 2012 < 5.00at 30 June 2013 < 4.75at 31 December 2013 < 4.00■■Consolidated net debt/consolidated equity (gearing):at 30 June 2012 ≤ 1.3at 31 December 2012 ≤ 1.2at 30 June 2013 ≤ 1.2at 31 December 2013 ≤ 1.1■■Consolidated EBITDA/consolidated net interest expense excludingdeferred interest expense (interest cover):Tested half yearly. Must be ≥ 3.0.The Company complied with all of the ratios specified by thesecovenants at the test dates in 2012 (30 June and 31 December).Interest on amounts drawn down is calculated at the variableEuribor rate plus an annual margin of 4.5%Sequana has also negotiated overdraft facilities of up to €5 millionwith another top-ranking bank, of which €1.6 million hadbeen used at end-December 2012. This facility was confirmedand renewed through to 30 June 2014. The agreement providesfor amortisation payments of €0.12 million in 2012 and 2013and additional repayments in the event that Sequana carries outany capital increases. €1.5 million was paid down following theJuly 2012 capital increase. At 31 December 2012, the maximumpermissible overdraft was €3.4 million.Under the terms of the agreement extending this facility, theCompany’s consolidated equity must be above €110 million.The interest rate on amounts drawn down was reset at 3%.In order to ensure the stability of its credit facilities, whetherdrawn or undrawn, the Company’s policy is to strictly limitcovenants in financing contracts that enable lenders to requirechanges to the contracts’ financial terms. In particular, ratingtrigger clauses are excluded.Risk management(interest rates, foreign currency)Option sales for purposes other than hedging are prohibited.Group policy is to not carry out transactions in financial marketsfor speculative purposes. Derivatives are put in place when theGroup is exposed – or almost certain to be exposed – to a particularrisk.Interest rate riskAlthough it is exposed to interest rate risk on its external debt,given the general pattern of falling interest rates that beganin 2008, Sequana has decided not to set up any interest ratehedges. This policy will be reviewed in the light of economicdevelopments.Foreign exchange riskSequana has contracted a one-year loan for an amount ofGBP 1,030,000 with its subsidiary, Arjo Wiggins AppletonInsurance Ltd, to fund cash pooling arrangements with itssubsidiaries.Sequana | 2012 Document de référence (English version) | 175