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Adecco Group –
Notes to consolidated financial statements
in millions, except share and per share information

Note 7 • Financing arrangements

Short-term debt

The Company’s short-term debt consists of borrowings under the French commercial paper programme and under other lines of credits.

Commercial paper

On August 30, 2010, Adecco International Financial Services BV, a wholly-owned subsidiary of the Company, established a French commercial paper programme (“Billet de Trésorerie programme”). Under the programme, Adecco International Financial Services BV may issue short-term commercial paper up to a maximum amount of EUR 400, with maturity of individual paper of 365 days or less. The proceeds are used to fund short-term working capital and borrowing requirements. The paper is usually issued at a discount and repaid at nominal amount at maturity. The discount represents the interest paid to the investors in the commercial paper. The programme is guaranteed by Adecco S.A. As of December 31, 2010, EUR 151 was outstanding under the programme, with maturities of up to three months. The weighted-average interest rate on commercial paper outstanding was 1.09% as of December 31, 2010.

Other short-term debt

To support short-term working capital and borrowing requirements, the Company had available, in certain countries where it operates, lines of credit amounting to EUR 452 and EUR 435 as of December 31, 2010 and December 31, 2009, respectively, excluding the committed multicurrency revolving credit facility discussed below and the commercial paper programme. As of December 31, 2010 and December 31, 2009, bank overdrafts and borrowings outstanding under the lines of credit amounted to EUR 17 and EUR 14, respectively. As of December 31, 2010, the uncommitted lines of credit are in various currencies, have various interest rates, and have maturities of up to one year. The weighted-average interest rate on borrowings outstanding was 9.1% and 5.3% as of December 31, 2010 and December 31, 2009, respectively.

Long-term debt

The Company's long-term debt as of December 31, 2010, and December 31, 2009 consist of the following:

in EUR

Principal at
maturity

Maturity

Fixed
interest rate

31.12.2010

31.12.2009

 

 

 

 

 

 

Guaranteed Euro medium-term notes

EUR 500

2014

7.625%

500

499

Committed multicurrency revolving credit facility

EUR 550

2013

 

 

 

Fixed rate guaranteed notes

EUR 500

2013

4.5%

516

514

Medium-term loan, payable back in instalments by 2012

 

 

 

119

118

Guaranteed zero-coupon convertible bond, called/put in 2010

 

 

 

 

422

Other

 

 

 

2

3

 

 

 

 

1,137

1,556

Less current maturities

 

 

 

(49)

(442)

Long-term debt, less current maturities

 

 

 

1,088

1,114

Guaranteed Euro medium-term notes

On April 28, 2009, Adecco International Financial Services BV, a wholly-owned subsidiary of the Company, issued EUR 500 unsubordinated notes guaranteed by Adecco S.A., due April 28, 2014. The five-year notes were issued within the framework of the Euro Medium-Term Note Programme and trade on the London Stock Exchange. The proceeds further increased the Company’s financial flexibility with respect to the refinancing of the guaranteed zero-coupon convertible bond and are also used for general corporate purposes. The interest is paid annually in arrears at a fixed annual rate of 7.625%. The Company has entered into fair value hedges of the guaranteed Euro medium-term notes, which are further discussed in Note 11.

Committed multicurrency revolving credit facility

In 2008, the Company renegotiated the existing multicurrency revolving credit facility. The current five-year revolving credit facility of EUR 550 is used for general corporate purposes including refinancing of advances and outstanding letters of credit. The interest rate is based on LIBOR, or EURIBOR for drawings denominated in Euro, plus a margin between 0.4% and 0.7% per annum, depending on certain debt-to-EBITDA ratios. The letter of credit fee equals the applicable margin, and the commitment fee equals 33% of the applicable margin. As of December 31, 2010 and December 31, 2009, there were no outstanding borrowings under the credit facility. As of December 31, 2010, the Company had EUR 470 available under the facility after utilising EUR 80 in the form of letters of credit. As of December 31, 2009, the Company had EUR 471 available under the facility after utilising EUR 79 in the form of letters of credit.

Fixed rate guaranteed notes

On April 25, 2006, Adecco International Financial Services BV, a wholly-owned subsidiary of the Company, issued EUR 500 unsubordinated fixed rate notes guaranteed by Adecco S.A. due April 25, 2013. The proceeds were used to refinance the DIS acquisition and for general corporate purposes. Interest is paid on the fixed rate notes annually in arrears at a fixed annual rate of 4.5%. The Company has entered into fair value hedges of the EUR 500 fixed rate guaranteed notes, which are further discussed in Note 11.

Medium-term loan from Adecco Investment

As of December 31, 2010, the Company had a Swiss Franc denominated loan payable of EUR 119 (CHF 148), including EUR 2 (CHF 2) representing capitalised interest on the loan from inception to the last rollover date, to its wholly-owned non consolidated subsidiary, Adecco Investment (for further details refer to Note 1). As of December 31, 2009, the loan payable amounted to EUR 118 (CHF 176). The subordinated loan carries interest rate of 3-month CHF LIBOR plus 1.5% per annum. During 2010, the Company repaid the first instalment of EUR 21 (CHF 30). The remaining loan balance is repayable in instalments of EUR 49 (CHF 61), EUR 47 (CHF 59), and EUR 23 (CHF 28) on June 1, 2011, June 1, 2012, and November 26, 2012, respectively.

Guaranteed zero-coupon convertible bond

On August 26, 2003, Adecco Financial Services (Bermuda) Ltd., a wholly-owned subsidiary of the Company, issued CHF 900 unsubordinated bonds guaranteed by and convertible into shares of Adecco S.A., due August 26, 2013. The bonds were structured as zero-coupon, 10-year premium redemption convertible bonds with a yield to maturity of 1.5% per annum.

At any time from October 6, 2003 to August 12, 2013, at the option of the bondholder, the bonds were convertible into shares of Adecco S.A. at a conversion price of CHF 94.50 per share. If all bonds had been converted, Adecco S.A. would have issued 9,523,810 additional shares. In November 2007, the terms of the bond were amended. The amendment allowed the Company to deliver treasury shares held at the time of conversion instead of issuing shares of Adecco S.A. out of the approved conditional capital. Nevertheless, Adecco S.A. had to retain enough conditional capital to issue shares if required upon conversion.

Furthermore, bondholders had the option of putting the bonds on August 26, 2010, at the accreted principal amount. The Company had the possibility of calling the bonds at any time after the end of year seven (August 26, 2010) at the accreted principal amount or at any time after a substantial majority of the bonds had been redeemed, converted, or repurchased.

In 2010, 2009 and 2008, the Company repurchased bonds with a nominal amount of EUR 106 (CHF 154), EUR 191 (CHF 288) and EUR 27 (CHF 43) representing 1,624,339, 3,052,910 and 449,735 shares, respectively. The gains/losses of the repurchase amounted to a loss of less than EUR 1 in 2010 and to gains of EUR 4 and EUR 3 in 2009 and 2008, respectively, and were recorded in other income/(expenses), net. In August 2010, bonds with a nominal amount of EUR 287 (CHF 390), representing 4,127,196 shares were put by the bondholders. In November 2010, the Company called the remaining outstanding bonds with a nominal amount of EUR 19 (CHF 25), representing 269,630 shares.

In the second half of 2010 and in October 2009, Adecco Financial Services (Bermuda) Ltd. cancelled EUR 440 (CHF 600) and EUR 198 (CHF 300) nominal value of repurchased bonds, respectively. Thus, as of December 31, 2010, no bonds were outstanding. As of December 31, 2010, no conditional capital was retained in connection with this bond.

Payments of long-term debt are due as follows:

in EUR

2011

2012

2013

2014

2015

Thereafter

Total

 

 

 

 

 

 

 

 

Payments due by year

49

70

516

500

1

1

1,137