[30] Financial liabilities and shareholder loan

The financial liabilities reported by the KION Group essentially comprise interest-bearing liabilities to banks and capital market liabilities in connection with the corporate bond that was issued. The liabilities to banks stem largely from a loan agreement.

The table below shows the contractual maturity structure of the financial liabilities and the shareholder loan

Loan agreement

In connection with its acquisition of Linde AG's material-handling business the KION Group signed a loan agreement (a senior facilities agreement and a subordinated facility agreement, referred to below as 'SFA') for a total original amount of €3,300,000 thousand with the lead banks Barclays Bank Plc, Bayerische Hypo- und Vereinsbank AG, Credit Suisse (London branch), Goldman Sachs International Bank, Lehman Commercial Paper Inc. (UK branch) and Mizuho Corporate Bank Ltd. on 23 December 2006. The loans provided under the SFA carry variable interest rates. Transaction costs of €23,637 thousand (2011: €20,175 thousand) reduced the carrying amount of the loans as at the reporting date. These costs have been allocated pro rata to each of the tranches and expensed over their respective terms.

The following material amendments were made to the SFA in subsequent years:

• Under amendments made to the SFA on 8 March 2007 the subordinated facility agreement was totally replaced by a senior facilities agreement and unused credit lines totalling €200,000 thousand were returned, thereby reducing the total amount of the SFA to €3,100,000 thousand.
• Under amendments made to the SFA on 23 September 2009 the financial covenants applicable during the term of the loan were modified. At the same time, an additional credit line of €100,000 thousand and an increase in the collateral security provided for this facility were agreed. Furthermore, the interest rates payable on existing credit lines were raised by between 0.25 and 1.50 percentage points. The amounts of these interest-rate increases primarily fall due in the form of bullet payments at maturity (payments in kind, or PIKs). All the interest payable on the new credit line of €100,000 thousand falls due in the form of a bullet payment at maturity. The company making this credit line available is Superlift Funding S.à r.l., Luxembourg, which is a related party to the KION Group.

In July 2012 the KION Group amended its SFA loan again and extended it, thereby improving the maturity profile of existing loans. This included a significant part (€186,677 thousand) of the existing revolving credit line, whose maturity was extended from December 2013 to December 2016, and €966,638 thousand of loans under Loan Facilities B and C, whose maturities were extended from December 2014 (Loan Facility B) and December 2015 (Loan Facility C) to December 2017. In addition, the maturity of the €114,097 thousand loan agreed as part of Loan Facility G was extended from December 2016 to June 2018.

In connection with the extension of the loan facilities, additional lines of €113,323 thousand were granted for the revolving credit facility due in December 2016.

Under the terms of the extension of the loan facilities, it was also agreed to increase the interest margins by 1.0 to 1.5 percentage points. The accrued and unpaid interest (payment in kind, PIK) was capitalized for the extended loan facilities. In future, interest will be paid immediately for the extended loans under term loan facilities B2 and C2.

Until 31 December 2012 transaction costs of €12,899 thousand were incurred. These costs have been allocated pro rata to each of the tranches and expensed over their respective new terms. There were also transaction costs of €1,433 thousand in connection with the revolving credit facility. These are reported as prepaid expenses under current financial assets and are released over the residual term of the revolving credit facility, which is currently not being utilised.

Corporate bond

The KION Group issued a corporate bond for €500,000 thousand through the consolidated subsidiary KION Finance S.A., Luxembourg, in April 2011. Of the bond's total par value of €500,000 thousand, €325,000 thousand is repayable at a fixed interest rate of 7.875 per cent p.a., while €175,000 thousand carries a floating interest rate based on the three-month EURIBOR plus a margin of 4.25 percentage points. Interest on the fixed-rate tranche is paid semi-annually, while interest on the floating-rate tranche is paid quarterly. The bond's principal amount is redeemed as a bullet payment on maturity. Borrowing costs of €10,505 thousand (2011: €12,492 thousand) reduced the carrying amount of the bond as at the reporting date. These costs have been allocated pro rata to each of the tranches and are expensed over their respective terms. The corresponding liability is reported as a capital market liability.

Shareholder loan

KION Holding 1 GmbH and Superlift Holding S.à r.l., Luxembourg, signed an agreement on a shareholder loan for the amount of €500,000 thousand on 27 December 2006. The shareholder loan, amounting to €670,784 thousand (including accrued interest), was converted into equity with effect from 27 December 2012.

Changes in net financial debt

The KION Group uses “net financial debt” as a key performance indicator for analysing the changes in its financial liabilities. Net financial debt is defined as the difference between financial liabilities (excluding lease liabilities) and cash and cash equivalents.

The table below gives a breakdown of the KION Group's net financial debt as at 31 December 2012.

The Multicurrency Revolving Credit Facility (€137,604 thousand) drawn down in November 2011 was repaid in 2012. In addition, the Multicurrency Capex Restructuring and Acquisition Facility was reduced by €56,142 thousand. Term Loan Facility D was repaid in full (€202,252 thousand) in December 2012. The financial debt under Term Loan Facility B1 (denominated in euros) was reduced by €147,897 thousand and the financial debt under term loan facility B1 (denominated in US dollars) was reduced by €123,485 thousand. Repayment of Term Loan Facility B1 (denominated in US dollars) generated foreign currency exchange rate gains of €2,803 thousand, as a result of which the KION Group's total repayments in 2012 amounted to €664,577 thousand.

The table below gives details of the changes in financial debt and the applicable terms and conditions.

Term Loan Facilities B and C were split in connection with the adjustment and extension of the Loan Facilities: B1 and C1 represent the original conditions, while B2 and C2 represent the adjusted conditions.

Financial covenants

The SFA and the contractual terms and conditions governing the issuance of the corporate bond require among other things compliance with certain undertakings and covenants. The SFA also requires compliance with specific financial covenants during the term of the agreement. The financial covenants specify required ratios for the financial position and financial performance of the KION Group. The covenants are expressed in the form of key figures relating to leverage, available liquidity, EBITDA, interest paid as well as capital expenditures. If these requirements or financial covenants are breached, this may, for example, give lenders the right to terminate the SFA or permit bondholders to demand repayment of the corporate bond prior to its maturity date.

All financial covenants were complied with in the past financial year.

Loan collateral

Under the SFA, the KION Group is under an obligation to provide collateral for its obligations and liabilities. This obligation also includes the corporate bond (newly added SFA tranches H1a and H1b). By the reporting date a total of 26 (31 December 2011: 26) KION Group companies (guarantors) in five countries – Germany, the UK, France, Spain and Italy – had provided the necessary collateral.

The collateral includes guarantees, the assignment of shares in the guarantors (with the exception of shares in KION GROUP GmbH), the assignment of bank accounts and guarantor receivables, the assignment of claims arising from and in connection with the share purchase agreement between Linde Material Handling GmbH and Linde AG dated November 5, 2006, relating to the shares in the former KION GROUP GmbH, the assignment of shares in KION Information Management Services GmbH and assignments and transfers of title to intellectual property rights by guarantors in Germany. The statutory provisions in the United Kingdom and the agreements entered into require that all the assets of the UK guarantors are pledged as security.

The carrying amounts of the financial assets pledged as collateral amounted to €600,713 thousand as at the reporting date (31 December 2011: €791,985 thousand).

As had been the case at the end of 2011, no liabilities to banks were secured by pledges of real property at the end of 2012.