[30] Financial liabilities

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 €3,300.0 million 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. This loan agreement has been amended to reflect the KION Group’s changed financial circumstances on a number of occasions, particularly in connection with KION GROUP AG’s IPO in June 2013.

The liabilities to banks stem largely from the revolving credit facility agreed with a group of banks under the SFA. The revolving credit facility, originally for €1,045.0 million, has a variable interest rate and will mature in mid-2018. In connection with the repayment of two corporate bonds, the credit facility was increased by €198.0 million to a total of €1,243.0 million in 2014. This was achieved through bilateral lending agreements with a group of banks. These additional loans mature in April 2019 and have a variable interest rate. The transaction costs directly attributable to the increase in the revolving credit facility, which were incurred in 2014, came to €1.0 million. The transaction costs are recognised as prepaid expenses under current financial assets and expensed over the term of the credit facility.

As at 31 December 2015, an amount of €152.2 million had actually been drawn down from the revolving credit facility, which includes other loan liabilities and contingent liabilities (31 December 2014: €402.0 million). Of this total, €62.2 million had been drawn down on a short-term basis (31 December 2014: €204.0 million). In 2014, drawdowns from the credit facility amounting to €198.0 million had been used to repay the floating-rate tranche of the corporate bond issued in 2013, which was due to mature in 2020 and had a volume of €200.0 million, and were classified as long term. These drawdowns were reduced to €90.0 million in the reporting year.

There were also liabilities to banks of €83.2 million (31 December 2014: €63.9 million) that had been agreed with local banks for Group companies and are therefore not part of the SFA.

As at 31 December 2015, capital market liabilities consisted entirely – as they had a year earlier – of the fixed-rate tranche of the bond issued in 2013, which has a volume of €450.0 million and a maturity date of 2020. The fixed-rate tranche of the corporate bond issued in 2011, which was due to mature in 2018 and had a volume of €325.0 million, and the floating-rate tranche of the corporate bond issued in 2013, which was due to mature in 2020 and had a volume of €200.0 million, had been repaid early in full in 2014. Most (€523.0 million) of the funds used for the repayment were drawn down from the revolving credit facility. This credit facility has far lower interest rates than the two corporate bonds. An amount of €8.4 million representing the proportion of the related deferred borrowing costs relating to these bonds and a payment of €14.8 million representing early repayment charges had been recognised as financial expenses in 2014.

The KION Group uses its net financial debt as a key internal figure 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 2015: > TABLE 083

The table below gives details of the changes in financial debt and lists the applicable terms and conditions: > TABLE 084

The SFA and the contractual terms and conditions governing the issuance of the corporate bond require 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. Only the financial covenant for gearing (the ratio of net financial debt to EBITDA) currently applies to the KION Group. If undertakings or financial covenants are breached, this may, for example, give lenders the right to terminate the SFA or permit bondholders to call the corporate bond prior to its maturity date.

The financial covenants are reviewed every quarter. All the undertakings and financial covenants were complied with in the past financial year, as had been the case in 2014.

Under the SFA, the KION Group is under an obligation to provide collateral for its obligations and liabilities. This obligation also extends to the corporate bond (tranche H₂a). By the reporting date, a total of 25 (31 December 2014: 25) 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 Material Handling GmbH), the assignment of certain bank accounts and certain 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 5 November 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 mean that all the assets of the UK guarantors are pledged as security.

The carrying amounts of the financial assets pledged as collateral amounted to €279.7 million as at the reporting date (31 December 2014: €340.8 million).

As had been the case at the end of 2014, no material liabilities to banks were secured by mortgage charges at the end of 2015.

On 15 February 2016, the KION Group redeemed the corporate bond of €450.0 million that was still outstanding and all other remaining liabilities under the existing syndicated loan of 23 December 2006. The restructuring of the KION Group’s funding was decided upon in a resolution of the Executive Board of KION GROUP AG on 25 January 2016. The repayment resulting from this restructuring of the funding was made from funds drawn down under a new senior facilities agreement concluded on 28 October 2015 (see also note [50]).