Creditor Relations

Financing principles

Conservative financing structures constitute the central and basic idea of Vossloh's financing strategies. In the management of its capital structure, Vossloh focuses on the key data for companies with an investment grade rating. Financing and the provision of liquidity of the group of companies typically take place centrally through Vossloh AG as the Group holding company. High creditworthiness of contracting parties plays just as significant a role as our commitment to building and maintaining long-term relationships with our lending partners. Vossloh only uses derivative financial instruments to hedge specific risks from existing or expected future underlying transactions.

Financial position

In July 2017, Schuldschein loans with terms of four years amounting to €135 million and seven years amounting to €115 million were issued by Vossloh AG. The agreed interest rate is fixed at 0.988 percent for the four-year maturities for an amount of €85 million, and variable at an amount of €50 million with a margin of 85 basis points above Euribor. For the seven-year maturities, a partial amount of €90 million has a fixed interest rate of 1.763 percent and the remaining amount of €25 million, 120 basis points above Euribor. A floor of 0.0 percent is respectively applicable to the reference value.

At the end of November 2017, Vossloh AG concluded a new €150 million syndicated loan with eight banks, definitively replacing the syndicated loan which had been in place since 2015 and was scheduled to expire in April 2018. The financing agreement now has a term until November 2024 after exercising the option to extend it by one year respectively in November 2018 and 2019. In April 2019, the volume of the loan was increased by €80 million to €230 million. If necessary, it can be increased by up to a further €70 million during the term of the loan. The funds are available to the Company in the form of a revolving line of credit that can be flexibly accessed. Compliance with a covenant in the form of the ratio of net financial debt to EBITDA was agreed here. If the agreed threshold of this key figure is breached, this will allow the lending banks to terminate the agreement ahead of time. At the same time, the amount of the key figure in question determines the interest (basis points above Euribor). This is currently 1.8 percent. As of the balance sheet date, the credit line had been utilized in the amount of €102.3 million via cash, lines of credit available to subsidiaries, and guarantees (previous year: €56.2 million). Compliance with the covenant must be proven every six months. The review scheduled for June 30, 2019 was skipped on the basis of an amendment to the contract. Evidence of compliance with the covenant was in place on the reporting date. The existing liability stemming from this syndicated loan is reported under noncurrent financial liabilities as required by the terms of the contract and not, as in the previous year, under current financial liabilities; the change properly reflects the actual arrangement.

The net financial debt of the Vossloh Group (calculated as financial liabilities minus cash and cash equivalents and short-term securities) increased slightly from €307.3 million at the end of 2018 to €321.3 million at the end of the 2019 fiscal year when excluding the effects related to the first-time application of IFRS 16. When the total of €49.1 million related to the effects of the first-time application of IFRS 16 is included, net financial debt at the end of 2019 comes to €370.4 million. Dividends, interest payments and negative free cash flow in 2019 pushed the figure up, while the proceeds of the capital increase and the sale of the U.S. activities in the Customized Modules division served to reduce net financial debt.

Financial liabilities amounted to €427.1 million at the end of the 2019 fiscal year, and were thus higher than the corresponding figure for the previous year of €356.5 million. Current financial liabilities totaled €41.3 million at the end of 2019 (previous year: €32.5 million). Noncurrent financial liabilities went up, largely due to the first-time application of IFRS 16 and the greater use of available credit lines. When added together, the sum total of cash and cash equivalents and short-term securities from continuing operations came to €56.7 million at the end of 2019 (previous year: €49.2 million).

Breakdown of financial liabilities

€ million20192018
Other noncurrent liabilities to banks348.3319.8
Noncurrent liabilities from leases37.54.2
Noncurrent financial liabilities385.8
324.0
Current liabilities to bank24.0
30.2
Current notes payable11.60.8
Current liabilities for outstanding dividend payments4.20.0
Interest payable1.51.5
Current notes payable0.00.0
Current financial liabilities41.332.5
Financial liabilities427.1356.5

Financial liabilities are principally measured at amortized cost. Financial lease liabilities stem from the lease liabilities to be accounted for under IFRS 16.

For the reconciliation of the IFRS 9 valuation categories, see pages 145 et seq. of the 2019 Annual Report, “Additional information on financial instruments.”