Vodafone 2009 Annual Report Download - page 46

44 Vodafone Group Plc Annual Report 2009
Committed facilities
The following table summarises the committed bank facilities available to the Group
at 31 March 2009.
Committed bank facilities Amounts drawn
29 July 2008
US$4.1 billion revolving credit No drawings have been made against this
facility, maturing 28 July 2011 facility. The facility supports the Group’s
commercial paper programmes and may
be used for general corporate purposes,
including acquisitions.
24 June 2005
US$5 billion revolving credit No drawings have been made against this
facility, maturing 22 June 2012 facility. The facility supports the Group’s
commercial paper programmes and may
be used for general corporate purposes,
including acquisitions.
21 December 2005
¥258.5 billion term credit The facility was drawn down in full on
facility, maturing 16 March 2011, 21 December 2005. The facility is
entered into by Vodafone available for general corporate purposes,
Finance K.K. and guaranteed although amounts drawn must be on-lent
by the Company to the Company.
16 November 2006
€0.4 billion loan facility, The facility was drawn down in full on
maturing 14 February 2014 14 February 2007. The facility is available
for financing capital expenditure in the
Group’s Turkish operating company.
28 July 2008
€0.4 billion loan facility, The facility was drawn down in full on
maturing 12 August 2015 12 August 2008. The facility is available for
financing the roll out of a converged fixed
mobile broadband telecommunications
network in Italy.
Under the terms and conditions of the US$9.1 billion committed bank facilities,
lenders have the right, but not the obligation, to cancel their commitments and have
outstanding advances repaid no sooner than 30 days after notification of a change
of control of the Company. This is in addition to the rights of lenders to cancel their
commitment if the Company has committed an event of default; however, it should
be noted that a material adverse change clause does not apply.
The facility agreements provide for certain structural changes that do not affect the
obligations of the Company to be specifically excluded from the definition of a
change of control.
Substantially the same terms and conditions apply in the case of Vodafone Finance
K.K.’s ¥258.5 billion term credit facility, although the change of control provision is
applicable to any guarantor of borrowings under the term credit facility. Additionally,
the facility agreement requires Vodafone Finance K.K. to maintain a positive tangible
net worth at the end of each financial year. As of 31 March 2009, the Company was
the sole guarantor.
The terms and conditions of the €0.4 billion loan facility maturing on 14 February
2014 are similar to those of the US$9.1 billion committed bank facilities, with the
addition that, should the Group’s Turkish operating company spend less than the
equivalent of €0.8 billion on capital expenditure, the Group will be required to repay
the drawn amount of the facility that exceeds 50% of the capital expenditure.
The terms and conditions of the €0.4 billion loan facility maturing 12 August 2015 are
similar to those of the US$9.1 billion committed bank facilities, with the addition that,
should the Group’s Italian operating company spend less than the equivalent of
€1.5 billion on capital expenditure, the Group will be required to repay the drawn
amount of the facility that exceeds 18% of the capital expenditure.
Furthermore, two of the Group’s subsidiary undertakings are funded by external
facilities which are non-recourse to any member of the Group other than the
borrower, due to the level of country risk involved. These facilities may only be used
to fund their operations. At 31 March 2009, Vodafone India had facilities of INR 274.4
billion (£3.8 billion), of which INR 172.7 billion (£2.4 billion) is drawn. Vodafone Egypt
has a partly drawn EGP 2.6 billion (£327 million) syndicated bank facility of EGP 4.0
billion (£497 million) that matures in March 2014.
In aggregate, the Group has committed facilities of approximately £13,631 million, of
which £7,963 million was undrawn and £5,668 million was drawn at 31 March 2009.
The Group believes that it has sufficient funding for its expected working capital
requirements for at least the next 12 months. Further details regarding the maturity,
currency and interest rates of the Group’s gross borrowings at 31 March 2009 are
included in note 25 to the consolidated financial statements.
Financial assets and liabilities
Analyses of financial assets and liabilities, including the maturity profile of debt,
currency and interest rate structure, are included in notes 18 and 25 to the
consolidated financial statements. Details of the Group’s treasury management and
policies are included within note 24 to the consolidated financial statements.
Option agreements and similar arrangements
Potential cash outflows
In respect of the Group’s interest in the Verizon Wireless partnership, an option
granted to Price Communications, Inc. by Verizon Communications Inc. was exercised
on 15 August 2006. Under the option agreement, Price Communications, Inc.
exchanged its preferred limited partnership interest in Verizon Wireless of the East
LP for 29.5 million shares of common stock in Verizon Communications Inc. Verizon
Communications Inc. has the right, but not the obligation, to contribute the preferred
interest to the Verizon Wireless partnership, diluting the Group’s interest. However,
the Group also has the right to contribute further capital to the Verizon Wireless
partnership in order to maintain its percentage partnership interest. Such amount, if
contributed, would be US$0.9 billion.
As part of the Vodafone Essar acquisition, the Group acquired less than 50% equity
interests in Telecom Investments India Private Limited (‘TII’) and in Omega Telecom
Holdings Private Limited (‘Omega’), which in turn have a 19.54% and 5.11% indirect
shareholding in Vodafone Essar. The Group was granted call options to acquire 100%
of the shares in two companies which together indirectly own the remaining shares
of TII for, if the market equity of Vodafone Essar at the time of exercise is less than
US$25 billion, an aggregate price of US$431 million plus interest or, if the market
equity value of Vodafone Essar at the time of exercise is greater than US$25 billion,
the fair market value of the shares as agreed between the parties. The Group also has
an option to acquire 100% of the shares in a third company which owns the remaining
shares in Omega. In conjunction with the receipt of these options, the Group also
granted a put option to each of the shareholders of these companies with identical
pricing which, if exercised, would require Vodafone to purchase 100% of the equity
in the respective company. These options can only be exercised in accordance with
Indian law prevailing at the time of exercise.
The Group granted put options exercisable between 8 May 2010 and 8 May 2011 to
members of the Essar group of companies that, if exercised, would allow the Essar
group to sell its 33% shareholding in Vodafone Essar to the Group for US$5 billion or
to sell between US$1 billion and US$5 billion worth of Vodafone Essar shares to the
Group at an independently appraised fair market value.
Off-balance sheet arrangements
The Group does not have any material off-balance sheet arrangements, as defined
in item 5.E.2. of the SEC’s Form 20-F. Please refer to notes 32 and 33 to the
consolidated financial statements for a discussion of the Group’s commitments and
contingent liabilities.
Quantitative and qualitative disclosures about market risk
A discussion of the Group’s financial risk management objectives and policies and
the exposure of the Group to liquidity, market and credit risk is included within note
24 to the consolidated financial statements.
Strategy
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Financial position and resources continued