19. DEBT AND LIABILITIES FROM CAPITAL LEASE OBLIGATIONS
SHORT-TERM BORROWINGS
Borrowings
Short-term borrowings of €362 million and € 330 million at December 31, 2007, and 2006, respectively, consisted of € 304 million borrowed by certain subsidiaries of the Fresenius Group under lines of credit with commercial banks and € 58 million outstanding short-term borrowings under the accounts receivable facility described below. The average interest rates on these borrowings (excluding the accounts receivable facility) at December 31, 2007 and 2006 were 5.15% and 4.45%, respectively.
Accounts receivable facility
Fresenius Medical Care has an asset securitization facility (accounts receivable facility), which is typically renewed in October of each year and was renewed most recently in October 2007. The accounts receivable facility currently provides borrowings up to a maximum of US$ 650 million (€ 442 million). Under the accounts receivable facility, certain receivables are sold to NMC Funding Corp. (NMC Funding), a wholly-owned subsidiary of Fresenius Medical Care. NMC Funding then assigns percentage ownership interests in the accounts receivable to certain bank investors. Under the terms of the accounts receivable facility, NMC Funding retains the right to recall all transferred interests in the accounts receivable assigned to the banks under the facility. As Fresenius Medical Care has the right at any time to recall the then outstanding interests, the receivables remain on the consolidated balance sheet and the proceeds from the transfer of percentage ownership interests are recorded as short-term borrowings.
At December 31, 2007, there were outstanding short-term borrowings under the accounts receivable facility of US$ 85 million (€ 58 million). NMC Funding pays interest to the bank investors, calculated based on the commercial paper rates for the particular tranches selected. The average interest rate at December 31, 2007 was 5.44%. Annual refinancing fees, which include legal costs and bank fees (if any), are amortized over the term of the facility.LONG-TERM DEBT AND LIABILITIES FROM CAPITAL LEASE OBLIGATIONS
As of December 31, long-term debt and liabilities from capital lease obligations consisted of the following:
| in million € | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Medical Care 2006 Senior Credit Agreement | 2,151 | 2,707 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Euro Notes | 440 | 366 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| European Investment Bank Agreements | 169 | 164 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital lease obligations | 42 | 39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 200 | 219 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | 3,002 | 3,495 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| less current portion | 115 | 265 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt and liabilities from capital lease obligations, less current portion |
2,887 | 3,230 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities of long-term debt and liabilities from capital lease obligations are shown in the following table:
| in million € | up to 1 year | 1 to 5 years | more than 5 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Medical Care 2006 Senior Credit Agreement |
45 | 1,848 | 258 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Euro Notes | 40 | 300 | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| European Investment Bank Agreements | 8 | 32 | 129 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital lease obligations | 8 | 21 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 14 | 176 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt and liabilities from capital lease obligations |
115 | 2,377 | 510 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aggregate annual repayments applicable to the above listed long-term debt and liabilities from capital lease obligations for the five years subsequent to December 31, 2007 are:
| for the fiscal years | in million € | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2008 | 115 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2009 | 462 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2010 | 141 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 895 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2012 | 879 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subsequent years | 510 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 3,002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fresenius Medical Care 2006 Senior Credit Agreement
Fresenius Medical Care entered into a US$ 4.6 billion syndicated credit agreement (Fresenius Medical Care 2006 Senior Credit Agreement) with Bank of America, N.A. (BofA); Deutsche Bank AG New York Branch; The Bank of Nova Scotia; Credit Suisse, Cayman Islands Branch; JP Morgan Chase Bank, National Association; and certain other lenders (collectively the Lenders) on March 31, 2006 which replaced a prior credit agreement.
The following table shows the available and outstanding amounts under the Fresenius Medical Care 2006 Senior Credit Agreement at December 31:
| Maximum amount available | Balance outstanding | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| in million US$ |
2007 | 2006 | 2007 |
2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revolving Credit | 1,000 | 1,000 | 38 | 68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loan A | 1,550 | 1,760 | 1,550 | 1,760 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loan B | 1,578 | 1,737 | 1,578 | 1,737 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 4,128 | 4,497 | 3,166 | 3,565 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Fresenius Medical Care 2006 Senior Credit Agreement consists of:
- A 5-year US$ 1 billion revolving credit facility (of which up to US$ 250 million is available for letters of credit, up to US$ 300 million is available for borrowings in certain non-US currencies, up to US$ 150 million is available as swing line loans in US dollars, up to US$ 250 million is available as a competitive loan facility and up to US$ 50 million is available as swing line loans in certain non-US currencies, the total of which cannot exceed US$ 1 billion which will be due and payable on March 31, 2011.
- A 5-year term loan facility (Term Loan A) of US$ 1,850 million, also scheduled to mature on March 31, 2011. The Fresenius Medical Care 2006 Senior Credit Agreement requires 19 quarterly payments on Term Loan A of US$ 30 million each that permanently reduce the term loan facility which began June 30, 2006 and continue through December 31, 2010. The remaining amount outstanding is due on March 31, 2011.
- A 7-year term loan facility (Term Loan B) of US$ 1,750 million scheduled to mature on March 31,
2013. The terms of the Fresenius Medical Care 2006 Senior Credit Agreement require 28 quarterly
payments on Term Loan B that permanently reduce the term loan facility. The repayment
began June 30, 2006. The first 24 quarterly payments will be equal to one quarter of one percent
(0.25%) of the original principal balance outstanding, payments 25 through 28 will be equal to
twenty-three and one half percent (23.5%) of the original principal balance outstanding with the
final payment due on March 31, 2013, subject to an early repayment requirement on March 1,
2011 if the Trust Preferred Securities due June 15, 2011 are not repaid or refinanced or their
maturity is not extended prior to that date.
Interest on these facilities will be, at Fresenius Medical Care’s option, depending on the interest periods chosen, at a rate equal to either LIBOR plus an applicable margin or the higher of (a) BofA’s prime rate or (b) the Federal Funds rate plus 0.5%, plus an applicable margin.
The applicable margin is variable and depends on Fresenius Medical Care’s consolidated leverage ratio which is a ratio of its consolidated funded debt (less up to US$ 30 million cash and cash equivalents) to consolidated EBITDA (as these terms are defined in the Fresenius Medical Care 2006 Senior Credit Agreement).
In addition to scheduled principal payments, indebtedness outstanding under the Fresenius Medical Care 2006 Senior Credit Agreement will be reduced by mandatory prepayments utilizing portions of the net cash proceeds from certain sales of assets, securitization transactions other than Fresenius Medical Care’s existing accounts receivable facility, the issuance of subordinated debt other than certain intercompany transactions, certain issuances of equity and excess cash flow.
The obligations under the Fresenius Medical Care 2006 Senior Credit Agreement are secured by pledges of capital stock of certain material subsidiaries in favor of the lenders.
The Fresenius Medical Care 2006 Senior Credit Agreement contains other affirmative and negative covenants with respect to Fresenius Medical Care and its subsidiaries and other payment restrictions. Certain of the covenants limit indebtedness of Fresenius Medical Care and investments by Fresenius Medical Care, and require Fresenius Medical Care to maintain certain financial ratios defined in the agreement. Additionally, the Fresenius Medical Care 2006 Senior Credit Agreement provides for a limitation on dividends and other restricted payments which is US$ 260 million for dividends paid in 2008, and increases in subsequent years. Fresenius Medical Care paid dividends of US$ 188 million (€ 137 million) in May of 2007 which was in compliance with the restrictions set forth in the Fresenius Medical Care 2006 Senior Credit Agreement. In default, the outstanding balance under the Fresenius Medical Care 2006 Senior Credit Agreement becomes immediately due and payable at the option of the Lenders. As of December 31, 2007, Fresenius Medical Care was in compliance with all financial covenants under the Fresenius Medical Care 2006 Senior Credit Agreement.
Fresenius Medical Care incurred fees of approximately US$ 86 million in conjunction with the Fresenius Medical Care 2006 Senior Credit Agreement which are being amortized over the life of this agreement.On July 2, 2007, Fresenius Medical Care voluntarily repaid portions of the term loans outstanding utilizing a portion of the proceeds from the issuance of senior notes (see Note 20, Senior Notes). Under the terms of the Fresenius Medical Care 2006 Senior Credit Agreement, advance payments on the term loans are applied first against the next four quarterly payments due with any amounts in excess of the four quarterly payments applied on a pro-rata basis against any remaining payments. As a result of the advance payments on the Term Loans, no payments will be made or will be due for either Term Loan A or B until the third quarter of 2008.
In June 2007, the Fresenius Medical Care 2006 Senior Credit Agreement was amended in order to enable Fresenius Medical Care to issue US$ 500 million in Senior Notes (see Note 20, Senior Notes). Furthermore, on January 31, 2008, it was amended to increase certain types of permitted borrowings and to remove all limitations on capital expenditures.
Euro Notes
As of December 31, 2007, Euro Notes (Schuldscheindarlehen) of the Fresenius Group consisted of the following:
| Maturity | Interest rate | Notional amount in million € |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Finance B.V. 2004/2008 | May 18, 2008 | variable | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Finance B.V. 2007/2012 | July 2, 2012 | 5.51% | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Finance B.V. 2007/2012 | July 2, 2012 | variable | 74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Finance B.V. 2007/2014 | July 2, 2014 | 5.75% | 38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius Finance B.V. 2007/2014 | July 2, 2014 | variable | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FMC Finance S.à.r.l. Luxembourg IV 2005/2009 | July 27, 2009 | 4.57% | 126 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FMC Finance S.à.r.l. Luxembourg IV 2005/2009 | July 27, 2009 | variable | 74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Euro Notes | 440 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In 2007, Fresenius Finance B.V., a wholly-owned subsidiary of Fresenius SE, issued Euro Notes of € 200 million. The Euro Notes were issued on July 2, 2007 and have five and seven year terms. They are guaranteed by Fresenius SE. The proceeds from the issuance of the Euro Notes were mainly utilized to refinance Euro Notes of € 126 million that were due in 2007 and for repayment of short-term debt.
The Euro Notes of FMC Finance S.à.r.l. Luxembourg IV are guaranteed by FMC-AG & Co. KGaA.
Interest of the floating-rate tranches of the Euro Notes is based on EURIBOR plus applicable margin. For a large portion of these tranches interest rate swaps have been arranged (see Note 27, Financial instruments). Only the floating-rate tranche of the Euro Notes of FMC Finance S.à.r.l. Luxembourg IV in an amount of € 74 million is exposed to the risk of interest rate increases.
European Investment Bank Agreements
Various subsidiaries of the Fresenius Group maintain credit facilities with the European Investment Bank (EIB). The EIB is the not-for-profit long-term lending institution of the European Union and loans funds at favorable rates for the purpose of capital investment and research and development projects. The facilities were granted to refinance certain research and development projects, to invest in expansion and the optimization of existing production facilities in Germany and for the construction of a hospital.
The following table shows the outstanding amounts under the EIB facilities as of December 31, 2007:
| Maximum amount available in million € |
Maturity | Balance outstanding |
Book value in million € |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresenius SE | 96 | 2013 | € 40 million | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FMC-AG & Co. KGaA | 221 | 2013/2014 | US$ 49 million | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HELIOS Kliniken GmbH | 96 | 2019 | € 96 million | 96 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans from EIB | 413 | 169 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repayment of the loan of HELIOS Kliniken GmbH already started in December 2007 and will continue through December 2019 with constant half-yearly payments.
Some advances under these agreements can be denominated in certain foreign currencies including US dollar. The above mentioned loans bear variable interest rates that change quarterly. The US dollar borrowings of Fresenius Medical Care had an interest rate of 4.92% as of December 31, 2007, the euro borrowings of Fresenius SE and of HELIOS Kliniken GmbH bore an interest rate of 4.93% as of December 31, 2007. To some extent, the borrowers may opt to convert those interest rates into fixed rates. The loans under these EIB Agreements are secured by bank guarantees and have customary covenants.
Capital lease obligations
Details of capital lease obligations are given below:
| in million € | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital lease obligations (minimum lease payments) | 49 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due within one year | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due between one and five years | 25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due later than five years | 15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest component included in future minimum lease payments | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due within one year | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due between one and five years | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due later than five years | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Present value of capital lease obligations (minimum lease payments) | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due within one year |
8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due between one and five years | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| due later than five years | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CREDIT LINES
In addition to the financial liabilities described before, the Fresenius Group maintains additional credit facilities which have not been utilized, or have only been utilized in part as of reporting date. As of December 31, 2007, the additional financial cushion resulting from unutilized credit facilities was more than € 1.5 billion.
Syndicated credit facilities accounted for € 944 million. This portion comprises the Fresenius Medical Care 2006 Senior Credit Agreement in the amount of US$ 875 million (€ 594 million) and a syndicated credit facility of Fresenius SE in the amount of € 350 million. The latter was arranged with a group of European banks in 2006 and has a term of five years. Furthermore, bilateral facilities of approximately € 620 million were available. They include the above mentioned credit facilities with the EIB and credit facilities which subsidiaries of the Fresenius Group have arranged with commercial banks. These credit facilities are used for general corporate purposes and are usually unsecured.
In addition, Fresenius SE has a commercial paper program under which up to € 250 million in short-term notes can be issued. As of December 31, 2007, no commercial papers were outstanding.
Additional financing of up to US$ 650 million can be provided using the Fresenius Medical Care accounts receivable facility which had been utilized by US$ 85 million as of December 31, 2007.