Annual Report 2006 ISS Global A/S

thus reduce or prevent dividend payments to FS
Funding.
FS Funding believes that ISS’s expected cash
flows, together with available borrowings, will be
sufficient to provide FS Funding with the ability to
service its indebtedness. There can be no assurance
that future borrowings will be available to FS
Funding or ISS in an amount sufficient to enable FS
Funding to pay its debt when due or to fund other liquidity
needs. If ISS’s future cash flows from operations
and other capital resources are insufficient for
FS Funding to pay its obligations as they mature or
to fund liquidity needs of FS Funding and its subsidiaries,
FS Funding and its subsidiaries may,
among other things be forced to:
� reduce or delay business activities and capital
expenditures;
� sell assets;
� obtain additional debt or equity capital;
� restructure or refinance all or a portion of their
debt on or before maturity; or
� forgo opportunities such as acquisitions of other
businesses.
There can be no assurance that any of these alternatives
can be accomplished on a timely basis or on
satisfactory terms, if at all. In addition, the terms of
FS Funding’s and its subsidiaries’ existing and future
debt, including the Medium Term Notes, the
High Yield Notes and the Senior Facilities, may limit
their ability to pursue any of these alternatives.
Restrictions in debt instruments may limit the
Group’s ability to operate its business
The Senior Facilities, the Medium Term Notes and
the High Yield Notes each contain covenants that
limit the discretion of management with respect to
certain business matters. For example, these covenants
will significantly restrict the ability of FS Funding
and certain of its subsidiaries to, among other
things:
� incur additional debt;
� pay dividends or distributions on, redeem or repurchase
the company’s shares;
� make certain payments and investments;
� create certain liens;
� transfer or sell assets;
� engage in sale and leaseback transactions;
� merge or consolidate with other entities;
� enter into transactions with affiliates; and
� provide security over assets.
These covenants could materially and adversely affect
FS Funding’s ability to finance the future operations
or capital needs of ISS or its subsidiaries or to
engage in other business activities that may be in
the best interests of ISS or its subsidiaries.
The failure by FS Funding or any of its subsidiaries
to comply with the terms of their respec-
ANNUAL REPORT 2006 / Risk Factors
tive debt instruments may result in acceleration
of such indebtedness as well as cross defaults
under other indebtedness, and FS Funding or its
subsidiaries may not have sufficient assets to
repay the accelerated indebtedness
If FS Funding or any of its subsidiaries, as the case
may be, does not comply with the covenants (including
financial tests) and restrictions of the Senior
Facilities, the Medium Term Notes or the High Yield
Notes and any future new credit facilities, FS Funding
could be in default under those agreements, and
the debt incurred under those agreements, together
with accrued interest, could then be declared immediately
due and payable. If a default occurs under
the Senior Facilities, the Medium Term Notes or the
High Yield Notes, the lenders under such indebtedness
could, subject to restrictions on enforcement
rights, cause all the outstanding debt obligations
thereunder to become due and payable, thereby requiring
FS Funding or ISS Global, as the case may
be, to apply cash to repay the debt thereunder
and/or prevent it from making debt service payments
on its other debt. In addition, any default under
the Senior Facilities, the Medium Term Notes or
the High Yield Notes could lead to an acceleration
of debt under other debt instruments that contain
cross acceleration or cross default provisions. If the
debt under the Senior Facilities, the Medium Term
Notes, the High Yield Notes or other debt instruments
is accelerated, FS Funding or ISS Global, as
the case may be, may not have sufficient assets to
repay amounts due thereunder. FS Funding’s ability
to comply with the provisions of the Senior Facilities,
the Medium Term Notes, the High Yield Notes and
agreements governing its other debt may be affected
by changes in economic or business conditions
or other events beyond its control.
ISS may not be able to raise the funds necessary
to refinance indebtedness at the maturity
date
In 2010, EUR 850 million of the Medium Term Notes
of ISS Global will mature and EUR 500 million of the
Medium Term Notes of ISS Global will mature in
2014. In addition, the Senior Facilities will mature in
2012 and 2013. Furthermore, FS Funding has High
Yield Notes in the amount of EUR 1,304 million that
will mature in 2016. ISS intends to repay the principal
amount of such indebtedness and the principal
amount of the notes at maturity using funds obtained
from other financing sources, rather than with
cash from operations. Although ISS expects to be
able to raise funds to repay such indebtedness as it
matures, and to repay the principal amount of the
notes at their maturity, through the use of other
sources of indebtedness, it may not be able to do so
on terms as favourable as its existing indebtedness,
if at all. The failure to pay the principal amount of
this indebtedness at maturity would constitute an
event of default under such indebtedness and would
result in a cross-default under the Group’s other financing
arrangements.
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