Vodafone 2010 Annual Report Download - page 46

44 Vodafone Group Plc Annual Report 2010
Financial position and resources continued
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. This is in addition to the rights of lenders to cancel their commitment if we
commit 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 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 2010 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 our Turkish operating company spend less than the equivalent
of €0.8 billion on capital expenditure, we 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 our Italian operating company spend less than the equivalent of €1.5 billion
on capital expenditure, we will be required to repay the drawn amount of the facility
that exceeds 18% of the capital expenditure.
The loan facility agreed on 15 September 2009 provides up to €0.4 billion of seven
year term finance for the Group’s virtual digital subscriber line (‘VDSL’) project in
Germany. The facility is available for drawing up until 15 March 2011. The terms and
conditions are similar to those of the US$9.1 billion committed bank facilities with the
addition that should the Group’s German operating company spend less than the
equivalent of €0.8 billion on VDSL related capital expenditure, the Group will be
required to repay the drawn amount of the facility that exceeds 50% of the VDSL
capital expenditure.
The Group entered into an export credit agency loan agreement on 29 September
2009 for US$0.7 billion. The terms and conditions of the facility are similar to those
of the US$9.1 billion committed bank facilities with the addition that the Company is
permitted to draw down under the facility based on the eligible spend with Ericsson
up until the f inal drawdown date of 30 June 2011. Quarterly repayments of any drawn
balance commence on 30 June 2010 with a final maturity date of 16 September 2018.
Furthermore, certain of our subsidiaries 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 2010 Vodafone India had facilities of INR 257 billion (£3.8 billion) of which
INR 169 billion (£2.5 billion) is drawn. Vodafone Egypt has a partly drawn EGP 1 billion
(£120 million) syndicated bank facility of EGP 4.0 billion (£478 million) that matures
in March 2014 and Vodacom had fully drawn facilities of ZAR 10.8 billion (£1 billion),
US$103 million (£68 million) and TZS 54 billion (£26 million).
In aggregate we have committed facilities of approximately £15,057 million, of which
£8,457 million was undrawn and £6,601 million was drawn at 31 March 2010.
We believe that we have sufficient funding for our 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 2010 are
included in note 22 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 22 to the
consolidated financial statements. Details of our treasury management and policies
are included within note 21 to the consolidated financial statements.
Option agreements and similar arrangements
Potential cash outflows
In respect of our 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 our interest. However we also
have the right to contribute further capital to the Verizon Wireless partnership in
order to maintain our percentage partnership interest. Such amount, if contributed,
would be US$0.8 billion.
Our aggregate direct and indirect interest in Vodafone Essar Limited, our Indian
operating company, is 57.59% at 31 March 2010. We have call options to acquire
shareholdings in three companies which indirectly own a further 9.39% interest in
Vodafone Essar Limited. The shareholders of these companies also have put options
which, if exercised, would require us to purchase the remaining shares in the
respective company. If these options were exercised, which can only be done in
accordance with Indian law prevailing at the time of exercise, we would have a direct
and indirect interest of 66.98% in Vodafone Essar Limited.
We also 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 Limited for US$5 billion or to sell
up to US$5 billion worth of Vodafone Essar Limited shares at an independently
appraised fair market value.
Off-balance sheet arrangements
We do 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 28 and 29 to the consolidated financial
statements for a discussion of our commitments and contingent liabilities.
Quantitative and qualitative disclosures about market risk
A discussion of our financial risk management objectives and policies and the
exposure of the Group to liquidity, market and credit risk is included within note 21 to
the consolidated financial statements.