Amendment and Extension of Credit Facilities
On 31 July 2012, the amended and restated Senior Facilities Agreement became effective. Lenders strongly supported the commercial, technical and documentary changes which the company had proposed on 8 June 2012.
KION has also successfully extended a substantial portion of its Senior Facilities, including extending Revolving Credit Facility (RCF) commitments from December 2013 to December 2016 in an amount which (together with approximately €113 million of new RCF commitments received) totals €300 million, and extending approximately €800 million and approximately $200 million of Term Loan B (TLB) and Terms Loan C (TLC) from December 2014 (TLB) and December 2015 (TLC) to December 2017, respectively. The extended TLB, TLC and RCF will each carry an all cash margin, the level of which will vary depending on the leverage ratio from time to time. At the current leverage ratio the extended TLB and TLC margin will be 4.75% and the extended RCF margin will be 3.75%.
The documentary changes include a moderate increase in the acquisitions basket and increased flexibility to repay the existing second lien loan when leverage is below 4:1. In addition, the changes provide that following an IPO, KION will have additional flexibility to pay dividends and that certain financial covenants will cease to apply while a 3:1 leverage ratio is maintained.
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Maturity profile after "Amend to Extend" as at 30/09/2012 and including new RCF commitments in €m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Maturities of total outstanding financial debt in €m |
Margin | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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2012 |
2013 |
2014 |
2015 |
20161) |
20171) |
2018 |
Cash5) |
PIK5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan B1 (€) |
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286 |
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E + Margin |
Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan B2 (€) |
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411 |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan B1 ($301m) |
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2342) |
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E + Margin |
Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan B2 ($105m) |
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822) |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan C1 (€) |
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286 |
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E + Margin |
Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan C2 (€) |
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383 |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan C1 ($298m) |
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2322) |
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E + Margin |
Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan C2 ($108m) |
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842) |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan D (2nd Lien) |
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202 |
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E + Margin |
Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan G (Shareholder Loan) |
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115 |
– |
E + Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Capex Facility |
28 |
18 |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan H1a (Fixed)3) |
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325 |
7.875% |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Term Loan H1a (Floating)4) |
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175 |
3-M-E + 4,25% |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total outstanding financial debt |
28 |
18 |
520 |
518 |
202 |
960 |
615 |
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Revolving Credit Facility 16) |
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113 |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revolving Credit Facility 26) |
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300 |
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E + Margin |
– | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Restructuring and Redesign
In Q3/2012 we continued to implement long-term structural and efficiency measures going forward. The closing of our plants in Bari, Italy, and in Montataire, France, will result in additional consolidation of our European production facilities. The production capacity of these plants has already been partially integrated into our other existing facilities, which we expect will increase our capacity utilisation levels in our European production facilities.
Financial Services Segmentation
In Q1-3/2012, we have pursued the roll-out of our financial services segmentation. For the time being, in addition to our current reporting structure we will continue to include selected voluntary information regarding the results of our financial services segment as an annex to our Quarterly Reports. This additional reporting excludes our financial services activities from our reporting segments of LMH, STILL and Other, and presents such activities as a separate segment. The new reporting model which has been extended to include the financial services segment is based on the current reporting methodology for our leasing and rental business. Under this reporting framework, our financial services segment acts as an internal finance partner for our operating segments. The financial services segment generates its income from an agreed interest margin resulting from the leasing contracts. Any surplus achieved by the financial services segment above the agreed interest margin is allocated to the operating profit generated by the LMH and STILL segments. The LMH and STILL segments and the financial services segment are reported separately. Transactions between each of the segments are presented on an arm’s-length basis. For more information, see section 4.3 of the 2011 Management Report and the respective Note [36].
Procurement Price Volatility
In 2012 commodity prices evolved in different directions. Whereas oil prices were higher by 10% compared to the first nine months of 2011, steel prices were lower by 11%, steel bars lower by 10%, and aluminium lower by 10%. Scrap and copper prices weakened slightly by 5% to 6% versus 2011. In general, approximately 26% of the cost of materials required to manufacture our industrial trucks is directly impacted by commodity price movements, including steel, scrap and copper. Raw material price changes become effective with a time delay and will gradually impact our cost of materials going forward.
Procurement, Suppliers and Purchasing
In Q3/2012, we experienced certain supply limitations due to operational and financial problems of very few suppliers in Europe. Those are closely managed by our purchasing organisation with our own staff at those suppliers in order to ensure continued supply to KION Group.