Tiscali 2013 Annual Report Download - page 62

Annual financial report as at 31 December 2013
Date
File Name
Status
Page
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Annual Report as at 31
December 2013
62
 the Group continued to focus on innovation:
o on 19 April 2013, the official launch took place for the search engine “Istella”, presented to
market operators and analysts. Istella is an innovative search engine dedicated to the
Italian language which facilitates the active contribution by users;
o Indoona (a rich communications service dedicated to smartphones, tablets and PCs),
which achieved more than 1.7 million downloads, confirms the historic positioning of Tiscali
as innovative operator in the sphere of internet services;
o Streamago was completely overhauled.
During the year, the Group also benefited from:
 the closure of a number of settlement transactions with the leading suppliers of network services
which had a positive effect for around EUR 8.5 million, and
 the improvement in the regulatory conditions on access services on the fixed network which
permitted a saving of around EUR 8 million (and which will permit savings also in coming years).
All the activities listed above made it possible to generate cash and cash equivalents from operating
activities for around EUR 32 million, contributing towards reducing the Group’s overall debt.
In detail, during the year the Group honoured the due dates relating to financial debt deriving from the
loan agreement taken out by the Group companies on 2 July 2009 (“Group Facility Agreement” or
“GFA”), both in terms of principal and interest. As envisaged by the GFA and reflected in the financial
plan, during 2013 the Group made payments to the related financing institutions amounting to EUR 9
million (of which EUR 1.5 million for interest).
As at 31 December 2013, however, certain of the financial parameters envisaged by the same GFA
were not observed. In accordance with the provisions of the GFA, these violations represent a so-
called Event of Default further to which the financing institutions could decide - with the favourable
vote of parties which overall hold more than two thirds of the debt deriving from the GFA - to declare
the entire amount of the loans due and collectable and therefore request the repayment of all that is
due as per the GFA. On the basis of the matters set forth above, the Directors, when evaluating the
existence of the conditions of the Group as a going concern in the current macro-economic context,
and in the current competitive scenario, identified the following factors which indicate the existence of
a number of significant uncertainties:
i. the unbalanced equity, financial and economic situation which the Group is headed into, as
shown by the negative consolidated shareholders’ equity for EUR 151.9 million, due mainly to
the negative economic performance and weight of the considerable debt;
ii. the afore-mentioned presence of a so-called Event of Default as per the GFA, deriving from the
violation of the financial parameters envisaged therein;
iii. the approach of the expiry date of Tranche A of the loan disbursed as per the GFA (i.e. 3 July
2014), when the Company should repay the entire residual amount of this tranche amounting to
around EUR 82.5 million for principal plus PIK interest accrued as of the date of 3 July 2014. At
31 December 2013, this interest amounted to EUR 22 million.
In light of these factors of uncertainty, the establishment of a balanced equity, financial and economic
situation for the Group over the long-term depends on the need to finalise a restructuring transaction
with the financing institutions for the Tiscali Group’s financial debt, which envisages amongst other
aspects: (1) the waiver by the financing institutions of availing themselves of the contractual remedies
envisaged by the GFA in the presence of the occurrence of the afore-mentioned Events of Default, (2)
the rescheduling of the debt deriving from the GFA currently falling due in July 2014 and July 2015, for
an amount of around EUR 104.9 million and EUR 26.9 million, respectively, (3) the redefinition of the
financial covenants on the basis of the results envisaged in the business plan, approved by the Board