DCSIMG
20 Borrowings - Annual Report 2015 - DSM

20 Borrowings

Table 1

 
2015
2014
 
Total
Of which
current
Total
Of which
current
         
Debenture loans
2,541
-
2,041
497
Private loans
38
22
237
144
Finance lease liabilities
-
-
-
-
Credit institutions / commercial paper
231
231
502
502
         
Total
2,810
253
2,780
1,143

In agreements governing loans with a residual amount at year-end 2015 of €2,541 million, none of which is of a short-term nature (31 December 2014: €2,165 million, of which €624 million of a short-term nature), clauses have been included that restrict the provision of security.

The documentation of the €750 million bond issued in October 2007, the documentation of the €300 million bond issued in November 2013, the documentation of the €500 million bond issued in March 2014, the documentation of the €500 million bond issued in March 2015 and the documentation of the €500 million bond issued in September 2015 include a change-of-control clause. This clause allows the bond investors to request repayment at par if 50% or more of the DSM shares are controlled by a third party and if the company is downgraded below investment grade (< BBB-). In November 2015, Moody's changed the outlook for their A3 credit rating for DSM to negative. Standard & Poor's changed DSM's credit rating in August 2015 to A- with a stable outlook.

At 31 December 2015, there was €1,493 million in borrowings outstanding with a remaining term of more than five years (at 31 December 2014, there was €497 million with a remaining term of more than five years).

The schedule of repayment of borrowings (excluding debt to credit institutions and commercial paper) is as follows:

Table 2: Borrowings by maturity

Borrowings by maturity
 
2015
2014
     
2015
-
641
2016
22
43
2017
760
794
2018
4
3
2019 and 2020
300
300
After 2020
1,493
497
     
Total
2,579
2,278

A breakdown of the borrowings by currency (excluding debt to credit institutions and commercial paper) is given in the following table:

Table 3: Borrowings by currency

Borrowings by currency
 
2015
2014
     
EUR
2,542
2,042
USD
1
125
CNY
4
75
Other
32
36
     
Total
2,579
2,278

On balance, total borrowings increased by €30 million owing to the following changes:

Table 4: Movements borrowings

Movements borrowings
 
2015
2014
     
Balance at 1 January
2,780
2,566
     
Loans taken up
1,008
532
Repayments
(653)
(534)
Acquisitions/disposals
(121)
18
Changes in debt to credit institutions/commercial paper
(232)
240
Exchange differences
28
31
Cash facility associates
-
(73)
     
Balance at 31 December
2,810
2,780

The average effective interest rate on the portfolio of borrowings outstanding in 2015, including hedge instruments related to these borrowings, amounted to 3.41% (2014: 3.88%).

A breakdown of debenture loans is given below:

Table 5: Debenture loans

Debenture loans
 
2015
2014
         
EUR loan
4.00%
2005-2015
-
497
EUR loan
5.25%
2007-2017
748
747
EUR loan
1.75%
2013-2019
300
300
EUR loan
2.38%
2014-2024
497
497
EUR loan
1.00%
2015-2025
497
-
EUR loan
1.38%
2015-2022
499
-
         
Total
   
2,541
2,041

All debenture loans have a fixed interest rate.

At the end of 2015, an amount of €300 million (year-end 2014: €300 million) of the 5.25% EUR loan 2007-2017 was swapped into CHF to hedge the currency risk of net investments in CHF denominated subsidiaries. In 2006 and 2007, the loan had been partly pre-hedged (cash flow hedge) by means of forward starting swaps, leading to a lower effective fixed interest rate of 4.89% for the full loan.

The 2.375% EUR bond 2014-2024 of €500 million was pre-hedged by means of forward starting swaps, resulting in an effective interest rate for this bond at 3.97% including settlement of pre-hedge and DSM spread.

In March 2015, a new 1% EUR bond of €500 million was issued for a tenor of 10 years. In November 2011, pre-hedge contracts were concluded for an intended refinancing in 2015 of the maturing 4% EUR loan 2005-2015 at a 10-year interest rate of 3.20% excluding DSM spread. At the issue of the new bond this pre-hedge was settled. The effective interest rate for this bond amounts to 3.65% including settlement of pre-hedge and DSM spread.

In August 2015, pre-hedge contracts were concluded for an intended refinancing in 2017 of the 5.25% EUR loan 2007-2017. The pre-hedge was concluded for nominal of EUR 500 million by means of a collar on 10-year interest with a floor of 1% and capped at 1.97%, both excluding DSM spread. At year-end 2015, the fair value of this collar amounted to €1 million negative, completely representing the time value of the collar and reported in Other financial income and expense.

In September 2015, a new 1.375% EUR bond of €500 million was issued for a tenor of 7 years. The effective interest rate for this bond amounts to 1.40% including DSM spread.

A breakdown of private loans is given below:

Table 6: Private loans

Private loans
 
2015
2014
         
TWD loan
floating
(1 month)
2013-2018
31
31
CNY loan
floating
(12 months)
2008-2017
-
40
USD loan
5.61%
2003-2015
-
124
Other loans
7
42
         
Total
   
38
237

DSM’s policy regarding financial-risk management is described in note 24.