Poland

Accounting aspects of
investing in the Real Estate
market
Company B disclosed a table showing the loan covenants and the level of compliance as at
31 December 2012:
Financing Ratios/covenants Limit (1) 12/31/2012 12/31/2011
Syndicated
loans and
bilateral
loans
Klepierre SA
Bond issues
Klepierre SA
Net debt/Value of holdings (Loanto-Value)
≤ 60% 43.6% 45.8%
EBIT DA/Net interest expenses ≥ 2.0 2.6 2.5
Secured debt/Value of holdings ≤ 20% 15.7% 14.5%
Value of holdings, group share ≥ €6 Bn €13.1 Bn €13.2 Bn
Ratio of financings of subsidiaries
(excluding Steen & Strom) over
total gross financial debt
Secured debt/Revalued Net Asset
Value (excluding Steen & Strom) (2)
≤ 30% 3.6% 7.9%
≤ 50% 9.0% 9.2%
(1) Most constraining contract limit.
(2) NAV including transfer duties after deferred tax.
Kleppiere 2012 Annual Report
Additional disclosure that is not required
by IFRS 7 (as presened above) but is
considered to be good practice is sensitivity
analysis with respect to the applicable
covenants. It is recommended to include
information about impact of a rational
change in the operating ratios (e.g. fair
value of properties) on the financial
covenants as well as a terminal values of
these rations, that would lead to breach of
covenants.
Below we present the sample disclosure
that give the information about headroom
between the entity’s operating ratios and its
minimum financial covenants:
„The Group tested its compliance with its
financial covenants regularly and operated
comfortably within these limits throughout
201X. Property values could decline by
50% at the balance sheet date before there
would be a breach of financial covenants.
In case of breaching one or more covenants
the entity’s management would be
required to disclose additional information
as described in point 18 (b) and 19 of
IFRS 7. If breaches in meeting the financial
covenants permit the bank to immediately
call loans and borrowings, the company
is obliged to present that part of a loan
as a current liability in its statement of
financial position as at year end. The
current or non-current classification of
loans may directly impact the perceived
and real liquidity of the entity, especially
where loan covenants are breached. That
is why the management should determine
that appropriate waivers are obtained
prior to year-end to support any current
Poland. The real state of real estate | 167