4.9.1.1
Borrowings

Other borrowings

In December 2016, Accell Group entered into a financing agreement for its Lapierre Experience Centre, which is a secured loan (mortgage) of € 1.5 million as at 31 December 2020 (2019: € 1.6 million). In April 2020, Lapierre borrowed € 5.0 million under the French COVID-19 relief programme for a tenor of one year. In September 2020 Wiener Bike Parts borrowed € 1.0 million under a German sustainability programme for a tenor of four years (at 31 December € 0.9 million). In addition, since 2017 Accell Group has maintained its Turkish revolving credit facilities, which qualify as carve-out and permitted financial indebtedness in the Group financing agreement of € 8.2 million (2019: € 10.1 million).

Borrowings under Group financing agreement

In 2017, Accell Group entered into a financing agreement with a syndicate of six banks for the financing of the group. The banks participating in the syndicate are ABN AMRO Bank, BNP Paribas, Deutsche Bank, HSBC, ING Bank and Rabobank. The financing is unsecured and at 31 December 2020 consisted of € 125 million in term loans and a revolving credit facility ("RCF") of € 275 million (working capital financing), of which € 100 million in a seasonal facility from December to July, for an initial period of five years. An optional (uncommitted) accordion facility for the remaining sum of € 100 million forms part of the existing financing agreement.

After Accell Group exercised the extension option in 2018 and 2019 the finance agreement expires in March 2024.

In March 2020, Accell Group increased the term loan facility by drawing € 50 million under the uncommitted accordion facility (increasing the term loan facility to € 125 million and reducing the accordion facility to € 100 million).
 
In June 2020, Accell Group entered into an amendment to the existing facilities agreement with its syndicate of banks. In addition, five syndicate banks provided Accell Group with an additional two-year amortising term loan facility of € 115 million for the period from 30 June 2020 through 30 June 2022. The facility was partly drawn in June 2020 (€ 60 million); the remainder is available for drawing till 1 April 2021. This additional facility of € 115 million (“GO-C facility”) is for 80% backed by a Dutch state guarantee in favour of the banks under the so-called GO-C scheme. Furthermore, the existing seasonal revolving credit facility of € 100 million, normally available from 1 December each year till 15 July next year, was amended so that it would remain available during the entire calendar year 2020.

Terms and conditions

The existing covenants have been partly waived and partly amended:

1. The term loan (including the GO-C facility) leverage ratio has been waived for five consecutive quarters, starting 30 June 2020 and ending and including 30 June 2021; this ratio shall not exceed:
    • 4.64 in the 12-month period expiring 30 September 2021;
    • 3.11 in the 12-month period expiring 31 December 2021;
    • 2.50 in each 12-month periods expiring after 31 December 2021 (which was the original ratio).
 
2. The solvency ratio has been amended; this ratio shall be greater than:
    • 15.0% for the testing dates 30 June 2020 and 31 December 2020;
    • 16.2% for the testing date 30 June 2021;
    • 18.6% for the testing date 31 December 2021;
    • 25.0% for the testing dates after 31 December 2021 (which was the original ratio; testing takes place on a half-yearly basis over the previous twelve months on 30 June and 31 December).
 
3. The borrowing reference remains in place and is unchanged. The borrowing reference states that the net debt, after deduction of the outstanding amounts under the term loan (including Schuldschein and GO-C facility), currently € 185 million and the working capital financing used for approved acquisitions, may not exceed the lowest of:
    a. The sum of:
        i. the highest of 50% of the carrying amount of the qualifying inventories minus the total trade creditors of Accell Group and zero; and
       ii. 65% of the carrying amount of the qualifying trade debtors;
    b. The revolving credit facility commitment made available under the financing agreement.

In addition, the following temporary covenants have been agreed upon:
 
1. Normalised EBITDA shall not be lower than:
    -/- € 30.0 million in the 12-month period expiring 30 June 2020;
    -/- € 58.9 million in the 12-month period expiring 30 September 2020;
    -/- € 70.6 million in the 12-month period expiring 31 December 2020;
    -/- € 51.4 million in the 12-month period expiring 31 March 2021;
    + € 5.6 million in the 12-month period expiring 30 June 2021.
 
2. The liquidity (cash and available, undrawn commitments) shall not be less than € 25 million during the period through 31 March 2022 and as long as any amount under the GO-C facility is outstanding is to be tested on a quarterly basis.

Term loan leverage ratio
The term loan leverage is determined by dividing the designated outstanding loans under the financing agreement by normalised EBITDA. The 'designated loans outstanding under the financing agreement' include the outstanding amounts under the € 125 million term loan (including Schuldschein), the € 60 million GO-C loan and the working capital financing insofar as used for the acquisition of companies (excluding acquired working capital). The latter is permitted with the approval of the bank syndicate.

EBITDA
EBITDA is the result from operating activities (EBIT) plus the amount of the amortisation and depreciations on assets and the share in the result of non-consolidated participating interests. Normalised EBITDA is, with respect to a certain period, the EBITDA in that period adjusted for:

• EBITDA of acquired companies during the relevant period for the part of that period prior to the time of acquisition;
• EBITDA attributable to a group company (or any part of Accell Group) sold during the relevant period for the part prior to the date of sale;
• any exceptional, one off, non-recurring and extraordinary items which represent gains or losses including those arising on: 
  • the restructuring of the activities of an entity and reversals of any provisions for the cost of restructuring;
  • disposals, revaluations, write downs or impairment of non-current assets or any reversal of any write down or impairment; and
  • disposals of assets associated with discontinued operations.

Accell Group complied with the financial covenants in the group financing agreement as of 31 December 2020 and as of all earlier test dates.

The margins on all existing facilities have been increased by 30 bps; an extra increase of 10 bps applies to the seasonal RCF. Depending on the fulfilment of certain conditions, the increase of 30 bps may be reduced or removed in the coming years.

According to the GO-C Facility, no cash dividend distributions shall be made, unless: (i) the GO-C facility is repaid and cancelled and the original financial covenants that applied prior to June 2020 are complied with; or (ii) each member of the bank syndicate consents to the distribution, such consent not to be unreasonably withheld (it being understood that the withholding of such consent will be deemed to be unreasonable where the GO-C facility is not repaid but the original financial covenants that applied prior to June 2020 are complied with, and Accell Group provides evidence that it has sufficient liquidity to meet its payment obligations in respect of the GO-C facility after the distribution).

The banking syndicate has a positive pledge on receivables (including trade and intercompany receivables), inventory, IP, brand names, bank accounts, and other assets of Accell Group's Dutch and German subsidiaries.

Reconciliation of movements IN borrowings to cash flows arising from financing activities 2020

Reconciliation of movements IN borrowings to cash flows arising from financing activities 2019

Accounting policy

Borrowings are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these borrowings are measured at amortised cost using the effective interest method. Revolving credit facilities, bank overdrafts and cash and cash equivalents are initially recognised at fair value and subsequently at amortised cost.