The long term borrowings on our
balance sheet are related to a syndicated revolving credit facility. This
allows us to consciously avoid the risk of having to refinance short-term
bridge financing as well as having to issue equity in a secondary public offer.
We finance against floating interest rates since in an economic downturn, when
our earnings may be under pressure, interest rates will normally tend
downwards. Floating interest rates are considered a natural hedge against the
development in operational results. So far, this has paid off significantly.
In Q2 2014 we took advantage of the favorable market conditions and our aim to
have sufficient long-term committed financing in place, by amending and
extending the existing multi-currency credit facility.
The size of the revolving credit
facility had been increased to around € 1,800 million in 2014 with the initial maturity
set for mid-2019. There was the potential to extend the maturity to a maximum
of 7 years through the exercise of 2 extension options, which are at the banks'
discretion. During 2015 we extended the full amount by one year to July 2020, with
one extension option remaining. Randstad has agreed on financial covenants
comparable to the existing facility, which means a maximum leverage ratio of
3.5x EBITDA. In certain cases, we are now allowed to report a maximum leverage
ratio of 4.25x EBITDA for a limited amount of time (although we aim for a
leverage ratio of between 0 and 2, which is important for continuity). In
addition to this credit facility, Randstad has uncommitted credit and
guaranteed lines of roughly € 1.1 billion available.
To limit the risk of covenant
breach we use our managing through the cycle approach. In order to be
well-prepared for the event of very severe market circumstances, and to know
what steps to take to protect our financial position should such an event
arise, we have also tested scenarios in which the covenant could be at risk. As
a consequence of this policy, our debt covenants do not include an interest
cover ratio for tax planning and cash management purposes. The risks associated
with the cash balances are regularly and carefully analyzed by the Group
treasury department, ensuring that positions can be adjusted quickly.
The net debt position as of
year-end 2015 was € 173 million, compared to € 422 million at