The Group’s loans and borrowings mainly comprise its Euro denominated term loans. Liabilities under lease contracts where SIG is the lessee are also included in loans and borrowings.

In the third quarter of 2018, the Group repaid its existing Euro and US Dollar denominated term loans and redeemed its notes by using part of the proceeds received from the IPO and proceeds from the new senior secured credit facilities that were entered into in connection with the IPO. The difference between the carrying amount of the term loans and the notes as of the repayment/redemption date and the amount paid is presented as part of the net finance expense. The derivative instruments associated with the term loans and the notes were also derecognised.

Impact of new IFRS standards

As a result of the adoption of IFRS 16 Leases on 1 January 2019, the Group’s lease liabilities increased by €15.9 million. See further note 5.2.

Composition of loans and borrowings

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

(in € million)

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

Senior secured credit facilities

 

39.0

 

31.2

Lease liabilities

 

11.8

 

3.7

Current loans and borrowings

 

50.8

 

34.9

Senior secured credit facilities

 

1,500.2

 

1,533.7

Lease liabilities

 

41.7

 

22.8

Non-current loans and borrowings

 

1,541.9

 

1,556.5

Total loans and borrowings

 

1,592.7

 

1,591.4

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

(in € million)

 

As of
31 Dec. 2019

 

As of
31 Dec. 2018

Principal amount (including repayments)

 

1,560.9

 

1,592.2

Deferred original issue discount

 

(11.2)

 

(14.2)

Deferred transaction costs

 

(10.5)

 

(13.1)

Senior secured credit facilities

 

1,539.2

 

1,564.9

Lease liabilities

 

53.5

 

26.5

Total loans and borrowings

 

1,592.7

 

1,591.4

Senior secured credit facilities

The Group entered into new senior secured credit facilities in October 2018 consisting of two Euro denominated term loans (A and B) and a revolving credit facility.

The table below provides a summary of the main terms of the two term loans and the revolving credit facility.

(in € million)

 

Principal amount

 

Maturity date

 

Interest rate

Term loan A

 

€1,250 million

 

October 2023

 

Euribor +2.00% with a floor of 0.00%

Term loan B

 

€350 million

 

October 2025

 

Euribor +2.50% with a floor of 0.00%

Revolving credit facility

 

€300 million

 

October 2023

 

Euribor +1.75% with a floor of 0.00%

Interest on both term loans is paid on a quarterly basis. Term loan A will be repaid in quarterly instalments of 0.625% of the initial principal amount in the first two years and in quarterly instalments of 1.25% of the principal amount over the remaining term, with the remaining balance due at maturity. No repayments of the term loan B principal amount are due prior to maturity. The Group has the right to repay both the term loans in full or in part at the end of each interest period without premium or penalty.

Directly attributable transaction costs in the form of arrangement and advisory fees for the two term loans amounted to €14.9 million and are being, together with an original issue discount for the two term loans of €14.8 million, amortised over the respective terms of the loans, using the effective interest method.

The amount available under the multi-currency revolving credit facility is €297.4 million as of 31 December 2019 (€292.5 million as of 31 December 2018) due to €2.6 million in letters of credit being outstanding under an ancillary facility (€7.5 million as of 31 December 2018). The Group pays a fee for the undrawn revolver amount per year for the right to use the revolving credit facility (30% of the margin percentage on an annualised basis applied to the undrawn balance of the revolving credit facility).

The obligations under the senior secured credit facilities are guaranteed and secured by Group subsidiaries in Luxembourg, Switzerland, the United States, Germany, Brazil, Austria and the United Kingdom. The credit agreement contains customary affirmative 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 2019 and 31 December 2018.

Lease liabilities

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

 

 

Contractual undiscounted
cash flows

 

Interest

 

Lease liabilities

(In € million)

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

Less than 1 year

 

13.8

 

5.1

 

2.0

 

1.5

 

11.8

 

3.6

Between 1 and 5 years

 

32.1

 

18.0

 

5.8

 

5.2

 

26.3

 

12.8

More than 5 years

 

26.3

 

22.0

 

10.9

 

11.9

 

15.4

 

10.1

 

 

72.2

 

45.1

 

18.7

 

18.6

 

53.5

 

26.5

In the prior period, the lease liabilities only related to lease contracts accounted for as finance leases under IAS 17 Leases. Since the adoption of IFRS 16 Leases, the majority of the Group’s lease contracts that were previously accounted for as operating leases are also accounted for on-balance sheet. See further notes 5.2 and 13.

In the year ended 31 December 2018, the Group entered into a finance lease for its new SIG Tech Centre in China resulting in an initial lease liability of €14.8 million. The remaining balance was related to sale (at carrying amount) and leaseback transactions for production equipment and one of its facilities. Since 1 January 2019, the balance also includes leases of offices, production-related buildings and equipment, warehouses and cars.

Note 13 includes information about lease contracts to which the Group has committed but where the lease has not yet commenced, including the lease of a second sleeves manufacturing facility that is expected to commence in early 2021.

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 changes for the year ended 31 December 2018 relate to the repayment of the term loans and early redemption of the notes as well as the entering into of new term loans.

 

 

1 Jan. 2019

 

Cash flows
from/(used in):

 

Fair value changes and other non-cash move­ments

 

Effect of move­ments in

 

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

 

 

1 Jan. 2018

 

Cash flows
from/(used in):

 

Net effect of early redemption/repayment

 

Fair value changes and other non-cash move­ments

 

Effect of move­ments in exchange rates

 

31 Dec. 2018

(in € million)

   

Financing activities

 

Operating activities

 

Notes

 

Loans

     

(1)

The cash flow amount relating to the principal amount of loans and borrowings shows the net effect of entering into new term loans (€1,600.0 million of cash inflow) and repayment of debt (€2,637.0 million of cash outflow, split between €675.0 million for the redemption of the notes and €1,962.0 million relating to the final repayment of the pre-IPO term loans and quarterly repayments of pre- and post-IPO term loans). For further information, see the introductory section of this note and note 23.

Principal amount (1)

 

2,614.4

 

(1,037.0)

 

 

 

 

 

14.8

 

1,592.2

Transaction costs

 

(75.8)

 

 

(14.9)

 

19.7

 

46.1

 

12.6

 

(0.8)

 

(13.1)

Original issue discount

 

(6.3)

 

 

(14.8)

 

 

5.3

 

1.7

 

(0.1)

 

(14.2)

Embedded derivatives

 

12.0

 

 

 

(20.5)

 

10.2

 

(1.0)

 

(0.7)

 

Loans and borrowings, excl. finance lease liabilities

 

2,544.3

 

(1,037.0)

 

(29.7)

 

(0.8)

 

61.6

 

13.3

 

13.2

 

1,564.9

Finance lease liabilities

 

12.3

 

(0.4)

 

 

 

 

14.8

 

(0.2)

 

26.5

Total loans and borrowings

 

2,556.6

 

(1,037.4)

 

(29.7)

 

(0.8)

 

61.6

 

28.1

 

13.0

 

1,591.4

Capitalised cost for revolving credit facility

 

(3.6)

 

(1.1)

 

 

 

2.7

 

0.9

 

 

(1.1)

Interest: Accrued/paid

 

20.1

 

 

(133.5)

 

 

 

116.7

 

 

3.3

Early redemption fee (notes)

 

 

 

(26.2)

 

26.2

 

 

 

 

 

 

2,573.1

 

(1,038.5)

 

(189.4)

 

25.4

 

64.3

 

145.7

 

13.0

 

1,593.6

Derivative (assets)/liabilities from financing activities

 

(56.5)

 

 

0.5

 

57.1

 

(6.8)

 

6.9

 

 

1.2

Deferred option premium

 

2.6

 

 

 

 

(1.2)

 

(1.4)

 

 

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

 

2,519.2

 

(1,038.5)

 

(188.9)

 

82.5

 

56.3

 

151.2

 

13.0

 

1,594.8

Accounting policy

Loans and borrowings (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 12 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 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, 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 other 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).