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22 Loans and borrowings

The Group has in the year ended 31 December 2020, via some of its subsidiaries, issued senior unsecured Euro-denominated notes and entered into new senior unsecured credit facilities. The senior unsecured credit facilities consist of one Euro-denominated term loan and a multi-currency revolving credit facility. The Group repaid its existing Euro-denominated secured term loans, mainly using the proceeds received from the refinancing transactions. The credit agreement covering the new senior unsecured credit facilities was negotiated with a new loan syndicate. Liabilities under lease contracts where SIG is the lessee are also included in loans and borrowings.

Composition of loans and borrowings

The below table shows the carrying amount of the Group’s loans and borrowings.

(In € million)

 

As of
31 Dec. 2020

 

As of
31 Dec. 2019

Senior secured credit facilities

 

 

39.0

Lease liabilities

 

24.0

 

11.8

Current loans and borrowings

 

24.0

 

50.8

Senior unsecured notes

 

992.2

 

Senior unsecured credit facilities

 

544.5

 

Senior secured credit facilities

 

 

1,500.2

Lease liabilities

 

123.0

 

41.7

Non-current loans and borrowings

 

1,659.7

 

1,541.9

Total loans and borrowings

 

1,683.7

 

1,592.7

The following table presents the components of the carrying amount of the loans and borrowings.

(In € million)

 

As of
31 Dec. 2020

 

As of
31 Dec. 2019

Principal amount

 

1,000.0

 

Deferred transaction costs

 

(7.8)

 

Senior unsecured notes

 

992.2

 

Principal amount (including repayments)

 

550.0

 

1,560.9

Deferred original issue discount

 

(1.4)

 

(11.2)

Deferred transaction costs

 

(4.1)

 

(10.5)

Senior unsecured/secured credit facilities

 

544.5

 

1,539.2

Lease liabilities

 

147.0

 

53.5

Total loans and borrowings

 

1,683.7

 

1,592.7

Notes – 2020 refinancing

On 18 June 2020, SIG Combibloc PurchaseCo S.à r.l. issued €1,000 million aggregate principal amount of senior unsecured notes. The proceeds from the issue of notes were, together with the proceeds from the new term loan and available cash, used to repay the existing secured term loans. The notes are traded on the Global Exchange Market of Euronext Dublin.

The below table provides a summary of the main terms of the senior unsecured notes.

 

 

Principal amount

 

Maturity date

 

Interest rate

2023 notes

 

€450 million

 

18 June 2023

 

1.875%

2025 notes

 

€550 million

 

18 June 2025

 

2.125%

Interest on the notes is paid semi-annually. The notes can be redeemed in whole or in part prior to 18 March 2023 for the 2023 notes, and prior to 18 March 2025 for the 2025 notes, at par plus a make-whole premium. The notes can be redeemed in whole or in part on or after 18 March 2023 for the 2023 notes, and on or after 18 March 2025 for the 2025 notes, at a price equal to 100% of their respective principal amounts.

Directly attributable transaction costs in the form of arrangement and advisory fees relating to the issue of notes totalled €9.1 million are being amortised over the maturity of the respective notes issue, using the effective interest method.

The obligations under the notes are guaranteed on a senior subordinated basis by Group subsidiaries in Austria, Brazil, Germany, Luxembourg, Switzerland, the United Kingdom and the United States. The indenture governing the notes contains customary restrictive covenants. It also contains customary events of default. The Group was in compliance with all covenants and there were no events of default as of 31 December 2020.

Senior unsecured credit facilities – 2020 refinancing

Certain subsidiaries, including SIG Combibloc PurchaseCo S.à r.l., have in June 2020 entered into new senior unsecured credit facilities, consisting of one Euro-denominated term loan and a multi-currency revolving credit facility. The proceeds from the new term loan were, together with the proceeds from the issue of notes and available cash, used to repay the existing secured term loans.

The below table provides a summary of the main terms of the new unsecured term loan and the revolving credit facility.

 

 

Principal amount

 

Maturity date

 

Interest rate

Term loan

 

€550 million

 

June 2025

 

Euribor +1.00%, with a Euribor floor of 0.00%

Revolving credit facility

 

€300 million

 

June 2025

 

Euribor +1.00%, with a Euribor floor of 0.00%

Interest on the term loan is paid semi-annually. The margin of 1.00% will be subject to half-yearly adjustments based on the Group’s net leverage (as defined in the credit agreement). The margin will also be subject to a maximum 0.05% per annum increase or decrease based upon the achievement of certain annual sustainability-linked targets (greenhouse gas emissions, or “GHG” emissions, and rankings per the EcoVadis Report). No repayments of the term loan are due prior to maturity. The Group has the right to repay the term loan in whole or in part without premium or penalty.

Directly attributable transaction costs in the form of arrangement and advisory fees for the term loan amounted to €4.6 million and are, together with an original issue discount of €1.5 million, being amortised over the term of the loan, using the effective interest method.

The amount available under the multi-currency revolving credit facility is €299.4 million as of 31 December 2020 due to €0.6 million in letters of credit being outstanding under an ancillary facility. The Group pays a fee for the undrawn revolver amount per year for the right to use the revolving credit facility (35% of the margin percentage on an annualised basis applied to the undrawn balance of the revolving credit facility).

The obligations under the senior unsecured credit facilities are guaranteed by Group subsidiaries in Austria, Brazil, Germany, Luxembourg, Switzerland, the United Kingdom and the United States. The credit agreement contains customary positive and negative covenants. It also contains customary events of default. The Group was in compliance with all covenants and there were no events of default as of 31 December 2020.

Senior secured credit facilities – pre 2020 refinancing

In June 2020, the Group fully repaid its secured term loans existing as of that time without premium or penalty by using available cash and the proceeds from its new term loan and issue of notes.

The difference between the carrying amount of the secured term loans as of the repayment date and the amount paid is presented as part of the net finance expense. The derivatives associated with the secured term loans were also derecognised. See also note 23.

The below table provides a summary of the main terms of the repaid secured term loan and the revolving credit facility.

 

 

Principal amount

 

Maturity date

 

Interest rate

Term loan A

 

€1,250 million

 

October 2023

 

Euribor +2.00%, with a Euribor floor of 0.00%

Term loan B

 

€350 million

 

October 2025

 

Euribor +2.50%, with a Euribor floor of 0.00%

Revolving credit facility

 

€300 million

 

October 2023

 

Euribor +1.75%, with a Euribor floor of 0.00%

Up until the final repayment of term loan A, the Group made repayments in quarterly instalments of 0.625% of the initial principal amount. No repayments of term loan B were due prior to maturity.

The obligations under the senior secured credit facilities were guaranteed and secured by Group subsidiaries. The credit agreement contained customary affirmative and negative covenants. It also contained customary events of default. The Group was in compliance with all covenants and there were no events of default as of 31 December 2019.

The amount available under the multi-currency revolving credit facility was €297.4 million as of 31 December 2019 due to €2.6 million in letters of credit being outstanding under an ancillary facility.

Lease liabilities

A maturity analysis of the Group’s lease liabilities is included below.

 

 

Contractual undiscounted cash flows

 

Interest

 

Lease liabilities

(In € million)

 

2020

 

2019

 

2020

 

2019

 

2020

 

2019

Less than 1 year

 

31.2

 

13.8

 

7.2

 

2.0

 

24.0

 

11.8

Between 1 and 5 years

 

70.3

 

32.1

 

27.3

 

5.8

 

43.0

 

26.3

More than 5 years

 

142.1

 

26.3

 

62.1

 

10.9

 

80.0

 

15.4

 

 

243.6

 

72.2

 

96.6

 

18.7

 

147.0

 

53.5

The Group’s lease liabilities mainly relate to leases of office buildings, production-related buildings and equipment, warehouses and cars (see also note 13). The increase of lease liabilities in the current year is largely attributable to the commencement of the 20-year lease of the Group’s second sleeves manufacturing facility in China. As of 31 December 2020, €60.0 million of the total lease liabilities related to this new lease. The remaining increase in lease liabilities between the years is mainly related to an increased number of leases of production equipment for closures in the current year.

Note 13 includes information about lease contracts to which the Group has committed but where the lease has not yet commenced.

Changes in liabilities arising from financing activities

The following tables present changes in liabilities arising from financing activities, including changes arising from both cash flows and non-cash changes. The main transactions in the year ended 31 December 2020 relate to the issuance of senior unsecured notes and the entering into of new senior unsecured credit facilities as well as the repayment of the secured term loans.

 

 

1 Jan. 2020

 

Cash flows from/(used in):

 

Net effect of early repayment of loans

 

Fair value changes and other non-cash move­ments

 

Effect of move­ments in exchange rates

 

31 Dec. 2020

(In € million)

 

 

Financing activities

 

Operating activities

 

 

 

 

Principal amount1

 

1,560.9

 

(10.9)

 

 

 

 

 

1,550.0

Transaction costs

 

(10.5)

 

 

(13.0)

 

9.5

 

2.1

 

 

(11.9)

Original issue discount

 

(11.2)

 

 

(1.5)

 

10.0

 

1.3

 

 

(1.4)

Loans and borrowings, excl. lease liabilities

 

1,539.2

 

(10.9)

 

(14.5)

 

19.5

 

3.4

 

 

1,536.7

Lease liabilities

 

53.5

 

(16.1)

 

 

 

112.3

 

(2.7)

 

147.0

Total loans and borrowings

 

1,592.7

 

(27.0)

 

(14.5)

 

19.5

 

115.7

 

(2.7)

 

1,683.7

Capitalised cost for revolving credit facility

 

(0.8)

 

(0.8)

 

(0.9)

 

0.7

 

0.3

 

 

(1.5)

Interest: accrued/paid

 

6.2

 

 

(38.4)

 

 

38.1

 

 

5.9

 

 

1,598.1

 

(27.8)

 

(53.8)

 

20.2

 

154.1

 

(2.7)

 

1,688.1

Derivative (assets)/liabilities from financing activities

 

2.6

 

 

(2.7)

 

(0.5)

 

0.6

 

 

Total (assets)/liabilities from financing activities and cash/non-cash changes

 

1,600.7

 

(27.8)

 

(56.5)

 

19.7

 

154.7

 

(2.7)

 

1,688.1

1

The cash flow amount relating to the principal amount of loans and borrowings (excluding lease liabilities) shows the net effect of issuing notes (€1,000.0 million of cash inflow) and entering into a new unsecured term loan (€550 million of cash inflow) and repayment of debt (€1,560.9 million of cash outflow, split between quarterly repayments of €7.8 million relating to the secured term loan A and €1,553.1 million relating to the final repayment of the secured term loans A and B). For further information, see previous sections in this note and note 23.

 

 

1 Jan. 2019

 

Cash flows from/(used in):

 

Fair value changes and other non-cash move­ments

 

Effect of move­ments in exchange rates

 

31 Dec. 2019

(In € million)

 

 

Financing activities

 

Operating activities

 

 

 

Principal amount

 

1,592.2

 

(31.3)

 

 

 

 

1,560.9

Transaction costs

 

(13.1)

 

 

 

2.6

 

 

(10.5)

Original issue discount

 

(14.2)

 

 

 

3.0

 

 

(11.2)

Loans and borrowings, excl. lease liabilities

 

1,564.9

 

(31.3)

 

 

5.6

 

 

1,539.2

Lease liabilities

 

26.5

 

(5.8)

 

 

32.4

 

0.4

 

53.5

Total loans and borrowings

 

1,591.4

 

(37.1)

 

 

38.0

 

0.4

 

1,592.7

Capitalised cost for revolving credit facility

 

(1.1)

 

 

 

0.3

 

 

(0.8)

Interest: accrued/paid

 

3.3

 

 

(41.7)

 

44.6

 

 

6.2

 

 

1,593.6

 

(37.1)

 

(41.7)

 

82.9

 

0.4

 

1,598.1

Derivative (assets)/liabilities from financing activities

 

1.2

 

 

(1.3)

 

2.7

 

 

2.6

Total (assets)/liabilities from financing activities and cash/non-cash changes

 

1,594.8

 

(37.1)

 

(43.0)

 

85.6

 

0.4

 

1,600.7

Accounting policy

Loans and borrowings (the notes and the term loans) are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. Loans and other borrowings are classified as current or non-current liabilities depending on whether the Group has an unconditional right to defer settlement for at least twelve months after the reporting period.

The accounting for a change to the cash flows of a financial liability measured at amortised cost (such as the Group’s notes and term loans) depends on the nature of change. When a floating rate debt instrument is modified to change its interest rate, the modification is regarded as a repricing to the new market interest rate, which is accounted for prospectively by adjusting the effective interest over the remaining life of the debt instrument. A floating rate instrument is one whose original contractual terms contain a provision such that the cash flows will (or might) be reset to reflect movements in market rates of interest. If a change in cash flows arises due to renegotiation or other modifications (including modifications that do not reflect movements in market rates of interest), and the renegotiation or modification does not result in the derecognition of the financial liability, the gross carrying amount is recalculated and any gain or loss recognised in profit or loss as part of the net finance expense. If a renegotiation or modification represents a settlement of the original debt, it is accounted for as being extinguished.

A financial liability (or a part of it) is derecognised when it is extinguished, i.e. when the contractual obligations are discharged, cancelled, expired or replaced by a new liability with substantially modified terms. The difference between the carrying amount of the financial liability (or part of a financial liability) extinguished and the consideration paid is recognised in profit or loss as part of the net finance expense. Any costs or fees incurred are recognised as part of the gain or loss on extinguishment.

Lease liabilities

The Group’s lease liabilities are initially measured at the present value of the lease payments outstanding as of the commencement date of a lease, discounted at the interest rate implicit in the lease or, if that rate cannot be determined (which is generally the case), at the incremental borrowing rate. Lease payments included in the measurement of the lease liabilities include fixed lease payments and variable lease payments that depend on an index. Other variable lease payments are recognised in profit or loss. The Group does not separate non-lease components from lease components in its lease contracts. Extension, termination and purchase options that, at the commencement date of the lease, are reasonably certain to be exercised are considered when assessing the lease term and/or measuring the lease liability.

Subsequent to initial recognition, the lease liabilities are measured by increasing the carrying amount to reflect interest on the lease liability (applying the effective interest method); reducing the carrying amount to reflect lease payments made; and remeasuring the carrying amount to reflect any contract modifications or reassessments relating to for example changed future lease payments linked to changes in an index and changes in the assessment of whether an extension, termination or purchase option will be exercised.

When a lease liability is remeasured, the corresponding adjustment is generally made to the carrying amount of the related right-of-use asset (see note 13).