Annual Report 2011

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 credit.

Commercial paper

In August 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 on the commercial paper. The programme is guaranteed by Adecco S.A. As of December 31, 2011 and December 31, 2010, EUR 145 and EUR 151, respectively, were outstanding under the programme, with maturities of up to six months. The weighted-average interest rate on commercial paper outstanding was 1.31% as of December 31, 2011 and 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, uncommitted lines of credit amounting to EUR 477 and EUR 452 as of December 31, 2011 and December 31, 2010, respectively. As of December 31, 2011 and December 31, 2010, bank overdrafts and borrowings outstanding under these lines of credit amounted to EUR 15 and EUR 17, respectively. As of December 31, 2011, 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 2.8% and 9.1% as of December 31, 2011 and December 31, 2010, respectively.

Long-term debt

The Company’s long-term debt as of December 31, 2011 and December 31, 2010 consists of the following:

in EUR

Principal at maturity

Maturity

Fixed
interest rate

31.12.2011

31.12.2010

 

 

 

 

 

 

7-year guaranteed Euro medium-term notes

EUR 500

2018

4.75%

489

 

5-year guaranteed Euro medium-term notes

EUR 356

2014

7.625%

358

500

Fixed rate guaranteed notes

EUR 333

2013

4.5%

341

516

Medium-term loan, payable in instalments by 2012

 

 

 

76

119

Other

 

 

 

2

2

 

 

 

 

1,266

1,137

Less current maturities

 

 

 

(76)

(49)

Long-term debt, less current maturities

 

 

 

1,190

1,088

Exchange and tender offers for outstanding notes and issuance of new 7-year guaranteed Euro medium-term notes

In April 2011, Adecco International Financial Services BV, a wholly owned subsidiary of the Company, completed tender and exchange offers for the outstanding EUR 500 5-year guaranteed Euro medium-term notes due 2014 (“5-year notes”) and EUR 500 fixed rate guaranteed notes due 2013 (“fixed rate notes”), collectively “old notes” and issued new EUR 500 7-year unsubordinated fixed rate notes guaranteed by Adecco S.A. due April 14, 2018 (“7-year notes”). The purpose of the transaction was to lengthen the Company’s debt maturity profile and to take advantage of favourable market conditions.

The 7-year notes were issued within the framework of the Euro Medium-Term Note Programme and trade on the London Stock Exchange. The notes were issued at a price of 99.453%. The interest on the 7-year notes is paid annually in arrears at a fixed annual rate of 4.75%.

The exchange and tender were priced at 103.06% for the fixed rate notes and at 111.52% for the 5-year notes. In relation to the tender of the old notes, the Company recognised a loss of EUR 11, included in other income/(expenses), net. In addition, a loss of EUR 10 relating to the exchange transaction is deferred and will be amortised to interest expense over the life of the 7-year notes.

5-year 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 5-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 were used for general corporate purposes. The interest is paid annually in arrears at a fixed annual rate of 7.625%.

In April 2011, EUR 71 nominal value of outstanding 5-year notes were exchanged for the 7-year notes and EUR 73 nominal value of outstanding 5-year notes were tendered for cash. This transaction reduces the nominal value of the outstanding principal of the 5-year notes to EUR 356.

The Company has entered into fair value hedges of the 5-year notes, which are further discussed in Note 11.

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%.

In April 2011, EUR 84 nominal value of outstanding fixed rate notes were exchanged for the 7-year notes and EUR 83 nominal value of outstanding fixed rate notes were tendered for cash. This transaction reduces the nominal value of the outstanding principal of the fixed rate notes to EUR 333.

The Company has entered into fair value hedges of the fixed rate notes, which are further discussed in Note 11.

Medium-term loan from Adecco Investment

As of December 31, 2011, the Company had a Swiss Franc denominated loan payable of EUR 76 (CHF 92), including EUR 4 (CHF 5) representing capitalised interest on the loan from inception to the last roll-over date, to its wholly owned non-consolidated subsidiary, Adecco Investment (for further details refer to Note 1). As of December 31, 2010, the Swiss Franc denominated loan payable by the Company to Adecco Investment amounted to EUR 119 (CHF 148), including EUR 2 (CHF 2) capitalised interest on the loan from inception to the last roll-over date. The subordinated loan carries interest rate of 3-month CHF LIBOR plus 1.5% per annum. During 2011 and 2010, the Company repaid instalments of EUR 48 (CHF 59) and EUR 21 (CHF 30), respectively. The remaining loan balance is repayable in instalments of EUR 49 (CHF 59) and EUR 27 (CHF 33) on June 1, 2012 and November 26, 2012, respectively.

Payments of long-term debt are due as follows:

in EUR

2012

2013

2014

2015

2016

Thereafter

Total

 

 

 

 

 

 

 

 

Payments due by year

76

342

358

1

 

489

1,266

Other credit facilities

Committed multicurrency revolving credit facility

In October 2011, the Company renegotiated the existing EUR 550 multicurrency revolving credit facility. The new five-year revolving credit facility of EUR 600 contains two 1-year extension options at the discretion of the lender and 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 0.6% and 1.3% per annum, depending on certain debt-to-EBITDA ratios. Utilisation fee of 0.25% and 0.5% applies on top of the interest rate, if drawings exceed 33.33% and 66.67% of total commitment, respectively. The letter of credit fee equals the applicable margin, and the commitment fee equals 35% of the applicable margin. As of December 31, 2011 and December 31, 2010, there were no outstanding borrowings under the credit facility. As of December 31, 2011, the Company had EUR 529 available under the facility after utilising EUR 71 in the form of letters of credit. 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.