Loan notes mainly represent the following outstanding balances in the Car Rental segment, due by Avis Finance Company plc:
2005 2004
Issued Currency Principal Maturing Issued Currency Principal Maturing (in million) (in million)
June 1998 - - - June 1998 USD 57.5 2005
August 2000 USD 150.0 2007, 2010 August 2000 USD 150.0 2007, 2010 November 2001 EUR 25.0 2006 November 2001 EUR 25.0 2006 March 2002 EUR 25.0 2007 March 2002 EUR 25.0 2007 June 2002 EUR 26.8 2012 June 2002 EUR 26.8 2012 July 2002 EUR 120.0 2007 July 2002 EUR 120.0 2007 June 2004 USD 240.0 2011, 2012, 2014 June 2004 USD 240.0 2011, 2012, 2014 June 2004 EUR 65.0 2012 June 2004 EUR 65.0 2012 The USD loan notes bear interest at an average fixed rate of 6.8%. The euro denominated loan notes bear interest at an average fixed rate of 6.1%. The Group runs two commercial paper programmes in Belgium:
- s.a. D’Ieteren Services n.v., a wholly owned subsidiary of the Parent, runs a EUR 300.0 million (2004: EUR 300.0 million) programme guaranteed by the Parent. The weighted average cost over 2005 was 2.3%. Medium term notes can also be drawn from this programme. The weighted average cost of these notes was 4.5%.
- Avis Finance Company plc, an indirect wholly owned subsidiary of Avis Europe plc, runs a programme guaranteed by Avis Europe plc, which provides the Car Rental segment with borrowings of up to EUR 200.0 million (2004: EUR 200.0 million). Commercial paper bears interest at 2.6%.
Amounts currently borrowed under these programmes are repayable in less than one year.
Deferred consideration represents amounts still due arising on the acquisition of Avis Europe Investment Holdings Limited (a wholly owned subsidiary of Avis Europe plc) from Avis Inc. in 1997, and payable in annual instalments of GBP 1.9 million including interest. The deferred consideration is denominated in GBP and bears an interest rate of 8.0% fixed for 32 years.
Inter-segment financing items are amounts lended by the Automobile Distribution segment to the Car Rental and Vehicle Glass segments, at arm’s length conditions.
Current borrowings are due for settlement within one year.
Non-current borrowings are due for settlement after more than one year, in accordance with the maturity profile set out below:
in EUR million 2005(1) 2004(2)
Between one and five years 894.7 846.7
After more than five years 505.8 474.3
Non-current borrowings 1,400.5 1,321.0
(1) After implementation of IAS 32 and 39. (2) Before implementation of IAS 32 and 39.
The exposure of the Group’s borrowings to interest rate changes and the repricing dates (before the effect of the debt derivatives) at the balance sheet date are as follows:
in EUR million 2005(1) 2004(2)
Less than one year 1,124.0 1,083.1
Between one and five years 346.4 339.2
After more than five years 505.8 474.2
Borrowings 1,976.2 1,896.5
(1) After implementation of IAS 32 and 39. (2) Before implementation of IAS 32 and 39.
Note 31: BorrowINGs (continued)
The interest rate and currency profiles of borrowings are as follows (including the debt derivatives disclosed in note 32):
in EUR million 2005(1) 2004(2)
Fixed Floating Total Fixed Floating Total Currency rate rate rate rate
EUR 418.2 1,004.0 1,422.2 281.2 864.5 1,145.7
GBP 33.8 135.4 169.2 32.1 275.0 307.1
USD 363.4 26.2 389.6 413.6 - 413.6
Other 2.8 46.5 49.3 2.8 27.3 30.1
Total 818.2 1,212.1 2,030.3 729.7 1,166.8 1,896.5
(1) After implementation of IAS 32 and 39. (2) Before implementation of IAS 32 and 39.
When the effects of the other debt derivatives are taken into account, the interest rate and currency profiles of borrowings are as follows:
in EUR million 2005(1) 2004(2)
Fixed Floating Total Fixed Floating Total Currency rate rate rate rate
EUR 1,181.0 621.7 1,802.7 939.8 696.1 1,635.9
GBP 96.5 17.7 114.2 136.1 63.5 199.6
USD 2.9 26.1 29.0 - - -
Other 35.2 49.2 84.4 30.1 30.9 61.0
Total 1,315.6 714.7 2,030.3 1,106.0 790.5 1,896.5
(1) After implementation of IAS 32 and 39. (2) Before implementation of IAS 32 and 39.
The floating rate borrowings bear interest at various rates set with reference to the prevailing EURIBOR or equivalent. The range of interest rates applicable for fixed rate borrowings outstanding at 31 December 2005 is as follows:
currency Min. Max.
EUR 2.7% 6.8%
GBP 4.0% 6.7%
USD 8.5% 8.5%
Other 6.0% 8.0%
The fair value of current borrowings approximates to their carrying amount. The fair value of non-current borrowings at 31 December 2005 is set out below:
in EUR million Fair Carrying
value amount
Bonds 208.5 200.0
Obligations under finance leases 7.9 7.9
Bank loans, loan notes and other loans 1,187.8 1,159.9
Deferred consideration 34.7 32.7
Non-current borrowings 1,438.9 1,400.5
The fair value of the bonds is determined based on their market prices. The fair value of the other borrowings is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
Note 32: Net deBt
Net debt is a non-GAAP measure, i.e. its definition is not addressed by IFRS. The Group does not represent net debt as an alternative to financial measures determined in accordance with IFRS.The Group uses the concept of net debt to reflect its indebtedness. Net debt is based on borrowings less cash, cash equivalents and current assets investments. It excludes the fair value of derivative debt instruments. The hedged borrowings (i.e. those that are accounted for in accordance with the hedge accounting rules of IAS 39) are translated at the contractual foreign exchange rates of the related cross currency swaps. The other borrowings are translated at closing foreign exchange rates.
in EUR million 31 december 2005(1) 1 January 2005(1) 31 december 2004(2)
Auto- Car Vehicle Group Auto- Car Vehicle Group Auto- Car Vehicle Group mobile Rental Glass mobile Rental Glass mobile Rental Glass
Distri- Distri- Distri- bution bution bution
Non-current borrowings 393.8 646.2 360.5 1,400.5 350.0 611.4 274.2 1,235.6 350.0 696.8 274.2 1,321.0 Current borrowings 144.4 390.6 40.7 575.7 116.0 414.6 44.1 574.7 116.0 415.4 44.1 575.5 Adjustment for hedged borrowings - 54.1 - 54.1 - 86.2 - 86.2 - - - -
Gross debt 538.2 1,090.9 401.2 2,030.3 466.0 1,112.2 318.3 1,896.5 466.0 1,112.2 318.3 1,896.5
Less: Cash and cash equivalents -1.4 -98.8 -18.5 -118.7 11.7 -39.3 -45.7 -73.3 11.7 -39.3 -45.7 -73.3 Less: Current financial assets - -15.0 -3.5 -18.5 - -75.1 - -75.1 - -75.1 - -75.1
Net debt 536.8 977.1 379.2 1,893.1 477.7 997.8 272.6 1,748.1 477.7 997.8 272.6 1,748.1
(1) After implementation of IAS 32 and 39. (2) Before implementation of IAS 32 and 39.
Note 33: Put oPtIoNs GraNted to mINorIty shareholders
The Group is committed to acquiring the minority shareholdings owned by third parties in Belron, should these third parties wish to exercise their put options. IAS 32 requires that the exercise price of such options granted to minority interest (EUR 170.3 million at 31 December 2005, of which EUR 64.3 million of put options with related call options, exercisable until 2014, and EUR 106.0 million of put options with no related call options, exercisable until 2009) be reflected as a financial liability in the consolidated balance sheet. As of this moment, there remains some uncertainty regarding the treatment of the difference between the exercise price of the options and the carrying value of the minority interest that must be presented within financial liabilities (EUR 100.6 million at 31 December 2005). In the absence of guidance from IFRIC, the Group has chosen to present such differences as additional goodwill (EUR 69.7 million). This goodwill is adjusted at period end to reflect the change in the exercise price of the options and the carrying value of minority interest to which they relate. This treatment reflects the economic substance of the transaction, and has no impact on the result attributable to equity holders of the Parent.
The exercise price of the put options takes into account estimates of the future profitability of Belron. Should the underlying estimates change, the value of the put options recognised in the balance sheet (and of the related goodwill) would be impacted (this would however have no impact on the income statement under the accounting treatment currently applied).