30. Loans and borrowings

Loans and borrowings 31 December 2013 31 December 2012
Short-term liabilities 245,994 275,608
Long-term liabilities 239,889 592,003
Total 485,883 867,611

Change in loans and borrowings liabilities

for the year ended
31 December 2013 31 December 2012
Loans and borrowings as at 1 January 867,611 1,205,185
Loans and borrowings assumed through acquisition of entities 24,854 96,818
Repayment of capital (431,117) (453,324)
Repayment of interest and commissions (40,043) (90,828)
Interest accrued 64,578 109,760
Loans and borrowings as at 31 December 485,883 867,611

The Group has made two prepayments of a principal of the Term Facility Loan: on 28 June 2013 the Company has pre-paid a principal in the amount of PLN 100,000 and on 10 September 2013 has pre-paid a principal in the amount of PLN 100,000. On 29 August 2012 the Group has partly pre-paid a principal of its Term Facility Loan in the amount of PLN 200,000. The repayment was executed using the cash generated from operations.

Conclusion of a Senior Facilities Agreement and Bridge Facility Agreement

In connection with the acquisition of Telewizja Polsat S.A., on 31 March 2011 the Group, concluded a Senior Facilities Agreement with a syndicate of Polish and international banks led by: Citibank, N.A., London Branch, Bank Handlowy w Warszawie S.A., Crédit Agricole CIB, The Royal Bank of Scotland plc. (“the Bookrunners”).

The Senior Facilities Agreement provided for a term facility loan of up to PLN 1,400,000 and a revolving facility loan of up to PLN 200,000. The interest rate applicable for both, the term facility and revolving facility loan, was agreed as variable rates comprising WIBOR, for the relevant interest periods, and the applicable margin. The term facility loan will be repaid in quarterly instalments in varying amounts commencing 30 June 2011. Both facilities expire on 31 December 2015. As at 31 December 2013 the revolving facility was not used.

Mandatory prepayments

The facilities will be cancelled and the outstanding balance, together with accrued interest, shall become immediately due and payable upon loss of control by Mr Zygmunt Solorz-Żak (or party related with him) over the Company or loss of control by the Company over Telewizja Polsat. The facilities shall also become immediately due upon sale of all or substantially all of the Group or the assets of the Group.

Mandatory prepayments are also required in the following amounts:

  • in the amount equal to 65% of excess cashflow for any financial year of the Company or equal to 25% if total net debt to EBITDA ratio of the Company is less than 2.0 for the last day of each of the last two Financial Quarters,
  • in the amount of disposal proceeds for transaction exceeding PLN 10 million (not in thousands) in respect of any one disposal or PLN 40 million (not in thousands) in aggregate at any time before the facilities are repaid in full
  • in the amount of debt proceeds or equity proceeds if total net debt to EBITDA ratio of the Company exceeds 2.0 for the last day of each of the last two Financial Quarters.

In addition, voluntary High Yield Notes (i.e. Senior Notes) repayment is allowable only if accompanied by a repayment of term and revolving facilities.

Financial covenants

The loan agreement imposed on the Group the obligation to maintain financial ratios at a certain level. The Debt Service Cover shall be at least 1.5 for a given Period. The Interest Cover shall be at least 3.5 for a given Period. The Total leverage shall not exceed 3.0 for a given Period. Financial covenants shall be tested on each quarter date and shall be reported on by an auditor on annual basis. Financial covenants were maintained in years 2011-2013.

Further, restrictions which are imposed on the Group include the following:

  • restrictions relating to mergers, acquisitions, joint venture transactions
  • restrictions related to disposal of assets and substantial change of business
  • restrictions related to incurring additional financial indebtedness and share capital issue
  • restrictions relating to cash out transactions (inter alia dividend and other distribution payments, repayment of principal and interest of financial indebtedness, management/advisory fee payments, advance or similar kind of payment to related parties).

Additionally, the Group inter alia has the following obligations:

  • provide the banks with any material documents and information concerning the financial standing of the Group,
  • hedge against interest rate and foreign exchange rate fluctuations in respect of the amounts outstanding under the term facility and notes payable
  • all bank accounts shall be opened and maintained with the lending banks
  • use, for the purpose of financial statements’ audit, only the services of the auditors specified in the agreement or the services of other auditors if approved by the banks.

Agreement with Bank Pekao S.A.

On 7 May 2009 the Group signed an agreement with Bank Pekao S.A. defining rights and obligations of the parties should the Group order the bank to issue a guarantee or a letter of credit. Bank’s total commitment regarding the issued guarantees and letters of credit may not exceed PLN 20,000. As at 31 December 2013 the bank issued guarantees in the total amount of PLN 4.333 and EUR 1.143.