Page 298 - 2012 Annual Report

298 VIVENDI l 2012 l Annual Report
FINANCIAL REPORT – CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE
CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS –
STATUTORY FINANCIAL STATEMENTS 4
4
III - CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 23 Financial instruments and management of financial risks
GROUP FINANCING POLICY
Vivendi’s financing policy consists of incurring long-term debt, mainly in
bond and banking markets, at a variable or fixed rate, in euros or in US
dollars, depending on general corporate needs and market conditions.
✱ Non-current financial debts are primarily raised by Vivendi SA, which
centralizes the group’s financing management, except for Activision
Blizzard and Maroc Telecom Group. In this context, in 2012, Vivendi
pursued its policy of disintermediation, having recourse in priority to
the bond market. Vivendi also sought to diversify its investor base
by issuing on the American bond market and pursued its policy of
maintaining the “economic” average term of the group’s debt above
4 years. In addition, Vivendi has a Euro Medium Term Notes program
on the Luxembourg Stock Exchange, which is renewed each year,
in order to take advantage of every euro bond market opportunity.
Vivendi’s bank counterparties must meet certain criteria of financial
soundness, reflected in their credit rating with Standard & Poor’s and
Moody’s. Moreover, to comply with the rating agencies’ prudential
regulations regarding liquidity management, Vivendi arranges to the
extent possible, the refinancing of all expiring bank credit facilities
or bonds one year in advance. As a result, in 2012, Vivendi made
three bond issuances in euro for a total amount of €2,250 million
(January, April and December 2012), and one issuance in US dollars
for $2,000 million (April 2012).
✱ Contractual agreements for credit facilities granted to Vivendi SA do
not include provisions that tie the conditions of the loan to its financial
ratings from rating agencies. They contain customary provisions
related to events of default and at the end of each half-year,
Vivendi SA is notably required to comply with a financial covenant
(please refer to Note 22.2). The credit facilities granted to group
companies other than Vivendi SA are intended to finance either the
general needs of the borrowing subsidiary or specific projects.
✱ In 2012, investments, working capital, debt service (including the
redemption of borrowings), and the payment of income taxes and the
dividend distribution, were financed by cash flow from operations, net,
asset disposals, and borrowing or share issuances (Direct 8 and Direct
Star). For the foreseeable future and based on the current financial
conditions on the financial market, subject to potential transactions
which may be implemented in connection with the group’s change
in scope, Vivendi intends to maintain this financing policy for its
investments and operations.
As of December 31, 2012:
✱ The group’s bond debt amounted to €10,888 million (compared to
€9,276 million as of December 31, 2011). In 2012, Vivendi issued
bonds in euros and in US dollars for a total amount of €3,758 million
and redeemed bonds for a total amount of €2,048 million (of
which $700 million (or €448 million) were early redeemed in April/
May 2012). The group’s bond debt represented 61% of the borrowings
in the Statement of Financial Position (compared to 59% as of
December 31, 2011).
✱ The total amount of the group’s confirmed credit facilities amounted to
€9,039 million (compared to €12,083 million as of December 31, 2011).
The group’s aggregate amount of credit facilities neither drawn nor
backed by commercial paper amounted to €3,361 million (compared
to €6,635 million as of December 31, 2011). The decrease in the
amount of credit facilities neither drawn nor backed by commercial
paper was notably due to the disintermediation policy, the increase
in the outstanding amount of commercial paper, and the financing of
the acquisition of EMI Recorded Music by drawing on credit facilities.
✱ Vivendi SA’s and SFR’s total confirmed credit facilities amounted
to €8,340 million as of December 31, 2012 (including €2 billion in
available swinglines), compared to €11,242 million as of December 31,
2011. All these credit facilities have a maturity greater than one
year. These credit facilities were drawn for €1,894 million as of
December 31, 2012. Considering the €3,255 million commercial paper
issued at that date and backed to bank credit facilities, these facilities
were available up to a maximum amount of €3,191 million.
✱ In connection with its appeal of the verdict rendered in the Liberty
Media Corporation litigation, Vivendi will shortly deliver a letter of
credit issued by Bank of America for the benefit of Liberty Media
Corporation, for €975 million (damages and interest, as well as
legal costs). The latter was guaranteed by a syndicate of fifteen
international banks with which Vivendi has signed a Reimbursement
Agreement which includes an undertaking by Vivendi to reimburse
the banks for any amounts paid out under the letter of credit. The
Reimbursement Agreement notably contains events of default
and acceleration clauses similar to those contained in Vivendi’s
credit facilities. In certain circumstances, these provisions could
cause Vivendi to have to post cash collateral for the benefit of the
banks. In the same way, if one of the 15 banks defaults in respect
of its obligations and was not able to issue a guarantee sufficient
enough to provide comfort to Bank of America, Vivendi could be
caused to substitute such bank with another bank or, as a last resort,
be obligated to post cash collateral in the amount of such bank’s
participation in the letter of credit.
✱ The short-term borrowings mainly included issued commercial paper.
The “economic” average term of the group’s debt was 4.4 years
(compared to 4.0 years as of December 31, 2011).
✱ Finally, there is no restriction on the use of the financial resources
which the group’s companies benefit (including Vivendi SA) that may
materially affect, directly or indirectly, the group’s activities.
On October 26, 2012, Standard & Poor’s removed the credit watch
negative that it had placed on Vivendi’s debt on July 4, 2012 and confirmed
the rating, with a negative outlook, of the BBB long-term debt and the
A-2 short-term debt rating, which is used as a reference for the issuance
program of commercial paper. Vivendi reaffirmed its commitment to
maintaining such credit rating.