Porsche 2011 Annual Report Download - page 111

Financial Services GmbH in July 2011. The tranches
have terms maturing in four and six years and most
have fixed yields. The debenture bond grants the
lender an extraordinary right of redemption only in the
event that other financial liabilities of significant enti-
ties of the Porsche Zwischenholding GmbH group fall
due on account of a breach of contract. The financial
services business of the Porsche Zwischenholding
GmbH group is financed primarily via securitization of
loan and leasing receivables (asset-backed securities
programs), sales and leaseback programs, bonds and
bank loans. In addition, two ABS backed by lease and
loan receivables were privately placed for the first
time in the US market (under SEC Rule 144a).
Risks arising from financial instruments
In its business activities the group is exposed
to risks arising from the non-derivative or derivative
financial instruments used. The primary aim of using
financial instruments is to limit the financial risk posi-
tion for the group’s ability to continue as a going
concern and its earnings power. In order to manage
these risks, the group has set out guidelines to en-
sure that transactions are concluded only in financial
instruments approved in advance, only with approved
counterparties and on the admissible scale. Without
using such instruments, the group would be exposed
to higher financial risks.
The financial instruments entered into for
hedging purposes lead to accounting risks in addition
to counterparty default risks. This risk of effects on
the presentation of results of operations in the income
statement is limited by way of hedge accounting.
Default risks in receivables are reduced by
means of a strict receivables management system.
Channeling excess liquidity into investments
exposes the group to further counterparty risks.
Partial or complete failure by a counterparty to per-
form its obligation to pay interest and repay principal
would have a negative impact on liquidity and accord-
ingly on the net assets, financial position and results
of operations. The group has set out clearly defined
guidelines to manage these default risks and to en-
sure that only approved financial instruments are
entered into with approved counterparties.
Interest rate risks arising from the refinancing
of the financial services business of Porsche Financial
Services are largely hedged through the use of suit-
able derivatives (e.g., interest swaps). In the case of
fixed-rate bonds of the Porsche Zwischenholding
GmbH group, there is no interest risk. For the syndi-
cated two lines of credit that fall due at the end of
2012 or optionally in March 2015, variable interest,
which is not hedged against increasing short-term
interest, is paid on the basis of a one to six-month
Euribor.
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