Reebok 2007 Annual Report Download - page 96

092
ANNUAL REPORT 2007 --- adidas Group GROUP MANAGEMENT REPORT - OUR FINANCIAL YEAR -- Group Business Performance - Treasury
CURRENCY MIX BROADLY UNCHANGED The majority of our
Group’s gross borrowings are denominated in euros and US
dollars. In an effort to minimize the level of short-term variable
interest rate borrowings, 2007 debt reduction was targeted at
euro-denominated instruments, which are mainly variable-rate
fi nancing arrangements. In addition, our US dollar- denominated
fi nancing declined in absolute terms mainly as a result of the
US dollar depreciation versus the euro. Consequently, the
currency split of our gross borrowings at the end of 2007 was
broadly unchanged versus the prior year. Gross borrowings
denominated in euros accounted for 51 % of total gross
borrowings (2006: 51 %). The share of gross borrowings held
in US dollars increased slightly to 45 % (2006: 44 %).
INTEREST RATE INCREASES The weighted average interest
rate on the Group’s gross borrowings rose 0.5 percentage
points to 5.3 % in 2007 (2006: 4.8%), mainly as a result of higher
interest rates in the Euro Zone. As a result, our debt reduction
in 2007 focused primarily on decreasing the Group’s variable
fi nancing arrangements to better protect against future interest
rates increases.  see Risk and Opportunity Report, p. 104 Long-term
fi xed-rate fi nancing amounted to around 70 % of the Group’s
total fi nancing at the end of 2007 (2006: around 65 %). Variable
fi nancing amounted to around 30 % of total fi nancing at the
end of the year (2006: around 35 %).
STANDARD FINANCIAL COVENANTS Under our committed
credit facilities we have entered into various covenants. These
covenants include limits on our disposal of fi xed assets and the
amount of debt secured by liens we may incur. In addition, our
fi nancial arrangements contain equity ratio covenants, mini-
mum equity covenants as well as net loss covenants. If we fail
to meet any covenant and are unable to obtain a waiver from
a majority of partner banks, borrowings would become due
and payable immediately. As at December 31, 2007, we were
in full compliance with all of our covenants. Going forward, we
are highly confi dent that we will continue to be compliant with
these covenants as we expect sustainable strong cash fl ows for
the foreseeable future.  see Outlook, p. 118 We currently believe
that cash generated by operations, together with access to
external sources of funds, will be suffi cient to meet our oper-
ating and capital needs in the foreseeable future.
GROSS BORROWINGS SIGNIFICANTLY REDUCED Gross
borrowings decreased by 17 % to € 2.146 billion at the end of
2007 from € 2.578 billion in the prior year. Bank borrowings
decreased 28 % to € 198 million from € 275 million in the prior
year. Our private placements in the USA, in Europe and in Asia
decreased 12 % to € 1.564 billion in 2007 (2006: € 1.784 billion).
The current value of the convertible bond increased 2 % to
€ 384 million in 2007 from € 375 million in the prior year,
refl ect ing the accrued interest on the debt component in
accordance with IFRS requirements. No commercial paper was
outstanding at the end of 2007 (2006: € 144 million).
ISSUED BONDS AT A GLANCE
€
in millions
Issued Bonds Volume Coupon Maturity
Asian Private Placement
Asian Private Placement
Asian Private Placement
Asian Private Placement
German Private Placement
French Private Placement
US Private Placement
US Private Placement
Convertible Bond
Other Private Placements
USD 218 variable 2009
JPY 3,000 fi xed 2009
EUR 26 variable 2010
AUD 16 variable 2010
EUR 150
fi xed/variable 2010
EUR 150 variable 2011 – 2012
USD 175 fi xed 2015
USD 1,000 fi xed 2009 – 2016
EUR 400 2.50 % 2018
EUR 399 fi xed/variable 2008 – 2012
200
7 2006
T
otal
2
,146 2,578
87
1,314
1,145
32
CURRENCY SPLIT OF GROSS BORROWINGS
€
in milli
o
n
s
JPY
5
USD 959
All others 90
EUR
1,
092