2006 20-F - Sappi

June 2010. The OeKB A tranche and the OeKB B tranche attract interest at an agreed fixed rate of 4.53%.
Interest is payable quarterly in arrears on both tranches. The proceeds were used to pay for Sappi’s equity
participation in the Jiangxi Chenming joint venture.
In June 2005 SPH raised a new revolving credit facility of €600 million, with a maturity date of
June 2010. The previous syndicated loan facility of €562.5 million raised in 2001, at our disposal until
July 2006, was replaced with this new facility. The early replacement of the syndicated loan facility,
12 months prior to maturity, was undertaken to improve the terms and conditions of the replacement
facility, specifically pricing of the margin and the commitment fee, and also to ensure continuity in the
long-term nature of this facility. The funding margin under the new revolving credit facility is determined
by a rating grid and based on our current credit rating attracts a margin between 60 and 67.5 basis points
over EURIBOR, depending on the level of utilisation. This new revolving credit facility is to be used for
general corporate purposes and was utilized to the extent of US$131.9 million at the end of 2006
(unutilised at the end of 2005).
Sappi Manufacturing took up a public bond of ZAR1 billion (approximately US$129 million) during
fiscal 2006, at a fixed rate of 9.34%, repayable in June 2013. The bond was raised primarily to replace other
maturing debt.
In previous years our banking covenants were calculated at the combined level of SPH and Sappi
International S.A. During 2005 this was changed to measure the covenants at the consolidated Sappi
Limited level, following the issuance in 2005 of a Sappi Limited guarantee for the long-term borrowings of
the SPH/Sappi International S.A. group. Accordingly, it is more appropriate to measure the covenants at
the consolidated group level. Covenants that exist for Sappi Manufacturing (Pty) Ltd have not been
affected and remain at that level.
We presently meet all the financial ratios and covenants that apply to our major credit agreements.
The covenants are not subject to any rating triggers, however ratings impact our interest rates.
The Group has adequate cash on hand and short and long-term banking facilities to meet its shortterm
commitments. At the end of 2006, Sappi’s divisions had aggregate unused borrowing facilities
available of US$1,069 million (US$134 million in South Africa, US$935 million in Europe) (2005:
US$1,229 million) of which US$654 million is committed (2005: US$753 million). In addition, at the end of
September 2006 the group had cash and cash equivalents on hand of US$224 million (2005: US$367
million).
There are at present some limitations on our ability to utilise facilities in any one of our divisions to
finance activities, or refinance indebtedness of any other division due to covenant restrictions and South
African exchange control regulations. These limitations have been significantly reduced following the
refinancing of our various North American debt instruments. These restrictions include limitations on our
ability to significantly increase the borrowings of our subsidiaries. A constraint applicable to South African
companies is the application of exchange controls, which may inhibit the free flow of funds from South
Africa. See “—south African Exchange Controls”. This affected the geographic distribution of our
borrowings. As a result, our acquisitions in the United States and Europe were financed initially with
indebtedness incurred by companies in these Regions. We now have access to and have extensively utilised
long-term borrowings of generally unsecured nature (except in the case of asset-linked finance). Interest
rates reflect long-term rates for the currencies being borrowed. Short-term borrowings are generally freely
available at commercial rates in all countries in which we operate and are mainly to finance working
capital.
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