22 Loans and borrowings
Since a refinancing transaction in June 2020, the Group’s loans and borrowings mainly consist of senior unsecured Euro-denominated notes and senior unsecured credit facilities. The senior unsecured credit facilities consist of one Euro-denominated term loan and a multi-currency revolving credit facility. Since March 2021, the Group’s loans and borrowings also consist of an unsecured credit facility. It has been used to repay external loans of one of the former joint ventures in the Middle East, but has subsequently been repaid. Liabilities under lease contracts where the Group is the lessee are also included in loans and borrowings.
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 the issue of notes and its new term loan. 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 (see note 23). The derivatives associated with the secured term loans were also derecognised.
Composition of loans and borrowings
The below table shows the carrying amount of the Group’s loans and borrowings.
(In € million) |
|
As of |
|
As of |
---|---|---|---|---|
Lease liabilities |
|
29.4 |
|
24.0 |
Current loans and borrowings |
|
29.4 |
|
24.0 |
Senior unsecured notes |
|
994.5 |
|
992.2 |
Senior unsecured credit facilities |
|
545.7 |
|
544.5 |
Lease liabilities |
|
153.0 |
|
123.0 |
Non-current loans and borrowings |
|
1,693.2 |
|
1,659.7 |
Total loans and borrowings |
|
1,722.6 |
|
1,683.7 |
The following table presents the components of the carrying amount of the loans and borrowings.
(In € million) |
|
As of |
|
As of |
---|---|---|---|---|
Principal amount |
|
1,000.0 |
|
1,000.0 |
Deferred transaction costs |
|
(5.5) |
|
(7.8) |
Senior unsecured notes |
|
994.5 |
|
992.2 |
Principal amount (including repayments) |
|
550.0 |
|
550.0 |
Deferred original issue discount |
|
(1.1) |
|
(1.4) |
Deferred transaction costs |
|
(3.2) |
|
(4.1) |
Senior unsecured credit facilities |
|
545.7 |
|
544.5 |
Lease liabilities |
|
182.4 |
|
147.0 |
Total loans and borrowings |
|
1,722.6 |
|
1,683.7 |
Notes
On 18 June 2020, SIG Combibloc PurchaseCo S.à r.l. issued €1,000 million aggregate principal amount of senior unsecured notes. 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 and 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. The indenture governing the notes contains customary restrictive covenants and customary events of default. The Group was in compliance with all covenants and there were no events of default as of 31 December 2021 and 31 December 2020.
Senior unsecured credit facilities (term loan and revolving credit facility)
Certain subsidiaries, including SIG Combibloc PurchaseCo S.à r.l., entered in June 2020 into new senior unsecured credit facilities, consisting of one Euro-denominated term loan and a multi-currency revolving credit facility.
The below table provides a summary of the main terms of the 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 €294.2 million as of 31 December 2021 (€299.4 million as of 31 December 2020) due to €5.8 million (€0.6 million as of 31 December 2020) 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. The credit agreement contains customary positive and negative covenants as well as customary events of default. The Group was in compliance with all covenants and there were no events of default as of 31 December 2021 and 31 December 2020.
Unsecured credit facility
In March 2021, the Group accessed an unsecured credit facility of €100.0 million. Cash from the new credit facility was drawn in two tranches of €50.0 million each on 31 March 2021 (at an interest rate lower than the applicable interest rate on the revolving credit facility). The two tranches were, as per the agreement, repaid in September and December 2021.
The amounts drawn in March 2021 were, together with available cash, used to repay external loans of one of the former joint ventures in the Middle East in the total amount of €139.5 million. The difference of €3.7 million between the carrying amount of the loans as of the repayment date and the amount paid is presented as part of the net finance expense (see note 23).
The amount available under the unsecured credit facility is €100.0 million as of 31 December 2021. The Group does not pay a fee for any undrawn amount for the right to use the credit facility.
Lease liabilities
A maturity analysis of the Group’s lease liabilities is included below.
|
|
Contractual undiscounted cash flows |
|
Interest |
|
Lease liabilities |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
(In € million) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Less than 1 year |
|
37.9 |
|
31.2 |
|
8.5 |
|
7.2 |
|
29.4 |
|
24.0 |
Between 1 and 5 years |
|
105.4 |
|
70.3 |
|
29.8 |
|
27.3 |
|
75.6 |
|
43.0 |
More than 5 years |
|
133.3 |
|
142.1 |
|
55.9 |
|
62.1 |
|
77.4 |
|
80.0 |
|
|
276.6 |
|
243.6 |
|
94.2 |
|
96.6 |
|
182.4 |
|
147.0 |
The Group’s lease liabilities mainly relate to leases of office buildings, production-related buildings and equipment, warehouses and cars. The increase in lease liabilities since 31 December 2020 is impacted by the full consolidation of the former joint ventures in the Middle East in 2021. The recognition of the twelve-year remaining lease of the sleeves production plant of the former joint venture in Saudi Arabia resulted in a lease liability of €23.4 million as of the acquisition date. See also notes 13 and 27.
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 two 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 2021 relate to the drawing and subsequent repayment of two tranches under a new credit facility as well as the repayment of external loans of one of the former joint ventures in the Middle East. The main transactions in the year ended 31 December 2020 related to the issuance of senior unsecured notes and the entering into of new senior unsecured credit facilities as well as the repayment of the former secured term loans.
|
|
1 Jan. 2021 |
|
Cash flows from/ |
|
Effect of business combination2 |
|
|
Effect of movements in exchange rates |
|
31 Dec. 2021 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In € million) |
|
|
Financing activities |
|
Operating activities |
|
|
|
|
|||||||||||
Principal amount1 |
|
1,550.0 |
|
(139.5) |
|
– |
|
139.5 |
|
– |
|
– |
|
1,550.0 |
||||||
Transaction costs |
|
(11.9) |
|
– |
|
– |
|
– |
|
3.2 |
|
– |
|
(8.7) |
||||||
Original issue discount |
|
(1.4) |
|
– |
|
– |
|
– |
|
0.3 |
|
– |
|
(1.1) |
||||||
Loans and borrowings, excl. lease liabilities |
|
1,536.7 |
|
(139.5) |
|
– |
|
139.5 |
|
3.5 |
|
– |
|
1,540.2 |
||||||
Lease liabilities |
|
147.0 |
|
(26.7) |
|
– |
|
26.7 |
|
21.7 |
|
13.7 |
|
182.4 |
||||||
Total loans and borrowings |
|
1,683.7 |
|
(166.2) |
|
– |
|
166.2 |
|
25.2 |
|
13.7 |
|
1,722.6 |
||||||
Capitalised cost for revolving credit facility |
|
(1.5) |
|
– |
|
– |
|
– |
|
0.3 |
|
– |
|
(1.2) |
||||||
Interest: Accrued/paid |
|
5.9 |
|
– |
|
(40.6) |
|
2.7 |
|
38.8 |
|
0.1 |
|
6.9 |
||||||
Total (assets)/liabilities from financing activities and cash/ |
|
1,688.1 |
|
(166.2) |
|
(40.6) |
|
168.9 |
|
64.3 |
|
13.8 |
|
1,728.3 |
||||||
|
|
|
1 Jan. 2020 |
|
Cash flows from/ |
|
Net effect of early repayment of loans |
|
Fair value changes and other |
|
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/ |
|
1,600.7 |
|
(27.8) |
|
(56.5) |
|
19.7 |
|
154.7 |
|
(2.7) |
|
1,688.1 |
||||
|
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 loan) 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 normally 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).