Reebok 2013 Annual Report Download - page 214

adidas Group
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2013 Annual Report
Consolidated Financial Statements
210
2013
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04.8
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Notes
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Notes to the Consolidated Statement of Financial Position
The Group’s outstanding financings are unsecured and may include standard financial covenants, which are
reviewed on a quarterly basis. These covenants may include limits on the disposal of fixed assets, the maximum
amount of debt secured by liens, cross default provisions and change of control. In addition, certain financial
arrangements contain equity ratio covenants, minimum equity covenants as well as net loss covenants.
As at December 31, 2013, and December 31, 2012, shareholders’ equity was well above the amount of the
minimum equity covenant. Likewise, the relevant amount of net income clearly exceeded net loss covenants.
The amounts disclosed as gross borrowings represent outstanding borrowings under the following
arrangements with aggregated expiration dates as follows:
Gross borrowings as at December 31, 2013
(€ in millions) Up to
1 year
Between
1 and 3 years
Between
3 and 5 years
Total
Bank borrowings 126 — — 126
Private placements 55 193 — 248
Eurobond 500 — — 500
Convertible bond — — 460 460
Total 681 193 460 1,334
The above table includes a Eurobond issued on July 6, 2009 in a nominal amount of € 500 million and with a
maturity of five years. The Eurobond with an annual coupon of 4.75% was issued in denominations of € 1,000
each and was priced with a spread of 200 basis points above the respective euro mid-swap. The issue was fixed
at 99.865%.
In addition, gross borrowings include a convertible bond for an aggregate nominal amount of € 500 million
divided into denominations of € 200,000 which was issued on March 21, 2012. The bond has a maximum maturity
(including prolongation options) until June 14, 2019. The coupon of the bond amounts to 0.25% and is payable
annually, commencing on June 14, 2013. The bond is, at the option of the respective holder, convertible at any
time from and including May 21, 2012, up to and including June 5, 2019, into up to 6.02 million new or existing
adidas AG shares. The convertible bond has a conversion premium of 40% above the reference price of € 59.61,
which resulted in an initial conversion price of € 83.46 per share. As a consequence of contractual provisions
relating to dividend protection, the conversion price was adjusted to € 83.10 per share. This adjustment became
effective on May 9, 2013. On June 14, 2017, the bondholders have the right to call the bond at nominal value plus
interest accrued on the nominal amount. adidas AG is entitled to redeem the remaining bonds in whole if, at any
time, the aggregate principal amount of bonds outstanding falls below 15% of the aggregate principal amount of
the bonds that were initially issued. Furthermore, as of July 14, 2017, adidas AG is entitled to redeem the bonds in
whole if on 20 of 30 consecutive trading days, the share price of adidas AG exceeds the current conversion price
of € 83.10 by at least 30%.
According to IAS 32 “Financial Instruments: Presentation”, the conversion right represented in the convertible
bond constitutes a financial instrument which is covered in the capital reserve in an amount of € 55 million after
deduction of the issuance cost. The initial liability component amounted to € 441 million after deduction of the
issuance cost and is shown within long-term borrowings. The initial difference of € 59 million compared to the
nominal amount of € 500 million is accrued as interest expense of the financial liability over the expected maturity
of the convertible bond using the “effective interest method”. As at December 31, 2013, the financial liability
amounted to € 460 million.
Gross borrowings as at December 31, 2012
(€ in millions) Up to
1 year
Between
1 and 3 years
Between
3 and 5 years
Total
Bank borrowings 59 — — 59
Private placements 221 145 114 480
Eurobond — 499 — 499
Convertible bond — — 449 449
Total 280 644 563 1,487
For further details on future cash outflows
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SEE RISK AND OPPORTUNITY REPORT, P. 158.