World Fuel Services 2008 Annual Report Download - page 40

In April 2008, the commercial paper issuer was placed into receivership. The commercial paper is no longer
highly liquid and an observable market does not exist, therefore a readily determinable fair market value of the
investment is not available. On February 4, 2009, the High Court of Justice, Chancery Division, Companies
Court in the United Kingdom ruled that, based on the maturity date of the commercial paper held by us, we
should receive payment ahead of other holders of the commercial paper. The judgment is subject to appeal and
leave to appeal has been granted. We believe, based on discussions with our outside counsel, that we should
prevail against an appeal should one be filed.
As of December 31, 2008, the receiver for the issuer provided us with information regarding the issuer’s
estimated investments and debt obligations. The issuer’s net assets represent (1) the estimated market value of
the issuer’s investments using (i) the present value of future principal and interest payments receivable
discounted at rates considered to reflect current market conditions; and/or (ii) individual valuation estimates of
the underlying collateral using multiple indicators of value less (2) the issuer’s estimated debt obligations.
In order to estimate the fair market value of our investment in the commercial paper, we gave primary
consideration to the court judgment noted above as well as consideration of the probabilities of repayment from
the issuer’s net assets under various liquidation scenarios based on the issuer’s estimated investments and debt
obligations. The results of the commercial paper valuation yielded a range of estimated fair market values of
approximately $4.7 million to $10.0 million. Based on the above, we believe the adjusted cost basis of our
commercial paper is $8.1 million at December 31, 2008.
The estimated fair market value of our commercial paper could change significantly based on future market
conditions, and the ultimate settlement of our commercial paper could be for amounts materially different from
our current estimate of fair market value. As a result, additional impairment charges may be required in the
future.
Credit Facility. Our Credit Facility permits borrowings of up to $475.0 million with a sublimit of $125.0
million for the issuance of letters of credit and bankers’ acceptances. Under the Credit Facility, we have the right
to request increases in available borrowings up to an additional $75.0 million, subject to the satisfaction of
certain conditions. We had no outstanding borrowings under our Credit Facility at December 31, 2008 and $40.0
million at December 31, 2007. Our issued letters of credit under the Credit Facility totaled $50.2 million and
$55.1 million at December 31, 2008 and 2007, respectively. No bankers’ acceptances had been issued under our
Credit Facility at December 31, 2008 and 2007. We had $424.8 million of availability under our Credit Facility at
December 31, 2008. The Credit Facility expires on December 21, 2012.
Based on information available to us, all of the financial institutions participating under our syndicated
Credit Facility are able to fulfill their commitments as of our filing date. However, there can be no assurance that
the financial institutions will continue to fulfill their funding obligations under the Credit Facility in the future.
Outstanding borrowings under our Credit Facility, our cash and cash equivalents and short-term investments
fluctuate primarily based on operating cash flow, most significantly, the timing of receipts from our customers
and payments to our suppliers. Higher interest rates can have a negative effect on our liquidity due to higher costs
of borrowing under our Credit Facility.
Our Credit Facility contains certain operating and financial covenants with which we are required to
comply. Our failure to comply with the operating and financial covenants contained in our Credit Facility could
result in an event of default. An event of default, if not cured or waived, would permit acceleration of any
outstanding indebtedness under the Credit Facility, trigger cross-defaults under other agreements to which we are
a party and impair our ability to obtain working capital advances and letters of credit, which would have a
material adverse effect on our business, financial condition and results of operations. As of December 31, 2008,
we were in compliance with all covenants contained in our Credit Facility.
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