Peachtree 2015 Annual Report Download - page 98

Directors’ report continued
– Under a note purchase agreement dated 20 May 2013 relating to
US$50 million senior notes, Series D, due 20 May 2018, US$150 million
senior notes, Series E, due 20 May 2020, US$150 million senior notes,
Series F, due 20 May 2023 and US$50 million senior notes, Series G,
due 20 May 2025 between Sage Treasury Company Ltd and the
note holders and guaranteed by the Company, on a change of
control of the Company, the Company will not take any action that
consummates or finalises a change of control unless at least 15
business days prior to such action it shall have given to each holder of
notes wrien notice containing and constituting an offer to prepay all
notes on a date specified in such offer which shall be a business day
occurring subsequent to the effective date of the change of control
which is not less than 30 days or more than 60 days aer the date of
the notice of prepayments. Where a holder of notes accepts the offer
to prepay, the prepayment shall be 100% of the principal amount of
the notes together with accrued and unpaid interest thereon and
shall be made on the proposed prepayment date. No prepayment
under a change of control shall include any premium of any kind.
– Under a note purchase agreement dated 26 January 2015 relating to
€55 million senior notes, Series H, due 26 January 2022, €30 million
senior notes, Series I, due 26 January 2023 and US$200 million senior
notes, Series J, due 26 January 2025 between Sage Treasury Company
Limited and the note holders and guaranteed by the Company, on a
change of control of the Company, the Company will not take any
action that consummates or finalises a change of control unless at
least 15 business days prior to such action it shall have given to each
holder of notes wrien notice containing and constituting an offer
to prepay all notes on the date specified in such offer which shall
be a business day occurring subsequent to the effective date of
the change of control which is not less than 30 days or more than
60 days aer the date of notice of prepayments. Where a holder of
notes accepts the offer to prepay, the prepayment shall be 100% of
the principal amount of the notes together with accrued and unpaid
interest thereon and any applicable net loss and, in each case,
including the deduction of any applicable net gain and shall still
be made on the proposed payment date. No prepayment under
a change of control shall include any premium of any kind.
Under the terms of all four agreements above, a “change of control”
occurs if any person or group of persons acting in concert gains
control of the Company.
The platform reseller agreement dated 31 January 2015 relating to
the Company’s strategic arrangements with Salesforce.com EMEA
Limited contains a change of control right enabling Salesforce to
terminate the agreement in the event there is a change of control
in favour of a direct competitor of Salesforce.com EMEA Limited.
The agreement contains post termination requirements upon
Salesforce to support a transition for up to a specified period.
In respect of the platform reseller agreement with Salesforce.com
EMEA Limited, “change of control” occurs where a corporate
transaction results in the owners of the subject entity owning
less than 50% of the voting interests in that entity as a result of
the corporate transaction.
Financial risk management
The Group’s exposure to and management of capital, liquidity, credit,
interest rate and foreign currency risk are summarised below.
Capital risk
The Group’s objectives when managing capital (defined as net
debt plus equity) are to safeguard our ability to continue as a going
concern in order to provide returns to shareholders and benefits for
other stakeholders, while optimising return to shareholders through an
appropriate balance of debt and equity funding. The Group manages its
capital structure and makes adjustments to it with respect to changes
in economic conditions and our strategic objectives. The Group has set
a long-term minimum leverage target of 1x net debt to EBITDA and will
work to maintain this going forward.
Liquidity risk
The Group manages its exposure to liquidity risk by reviewing cash
resources required to meet business objectives through both short and
long-term cash flow forecasts. The Company has commied facilities
which are available to be drawn for general corporate purposes
including working capital. The Treasury function has responsibility
for optimising the level of cash across the business.
Credit risk
The Group’s credit risk primarily arises from trade and other receivables.
The Group has a very low operational credit risk due to the transactions
being principally of a high volume, low value and short maturity.
The Group has no significant concentration of operational credit
risk, with the exposure spread over a large number of counterparties
and customers.
The credit risk on liquid funds is considered to be low, as the
Board-approved Group treasury policy limits the value that can be
invested with each approved counterparty to minimise the risk of loss.
All counterparties must meet minimum credit rating requirements.
Interest rate risk
The Group is exposed to interest rate risk on floating rate deposits and
borrowings. The US private placement loan notes, which comprise 87%
of borrowings, are at fixed interest rates and bank debt, which comprises
13% of borrowings, are at floating interest rates. At 30 September 2015,
the Group had £263m (2014: £145m) of cash and cash equivalents.
The Group regularly reviews forecast debt, cash and cash equivalents
and interest rates to monitor this risk. Interest rates on debt and
deposits are fixed when management decides this is appropriate.
At 30 September 2015, the Group’s principal borrowings comprised
US private placement loan notes of £525m (2014: £432m), which
have an average fixed interest rate of 3.48%, and bank debt of £82m
(2014: £111m), which has an average floating interest rate of 0.93%.
Foreign currency risk
Although a substantial proportion of the Group’s revenue and profit
is earned outside the UK, operating companies generally only trade in
their own currency. The Group is therefore not subject to any significant
foreign exchange transactional exposure within these subsidiaries.
The Sage Group plc | Annual Report & Accounts 2015
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