21. Debt and capital lease obligations

Short-term Debt

Borrowings

Short-term debt of € 287 million and € 729 million at December 31, 2009 and 2008, respectively, consisted of € 138 million borrowed by certain subsidiaries of the Fresenius Group under lines of credit with commercial banks and € 149 million outstanding short-term borrowings under the accounts receivable facility described in the following. The average interest rates on these borrowings (excluding the accounts receivable facility) at December 31, 2009 and 2008 were 5.03 % and 5.17 %, respectively.

Accounts receivable facility

Fresenius Medical Care has an asset securitization facility (accounts receivable facility), which was extended to October 15, 2010 and increased by US$ 100 million to US$ 650 million in November 2009. Under the accounts receivable facility, certain receivables are sold to NMC Funding Corp. (NMC Funding), a wholly-owned subsidiary of Fresenius Medical Care. NMC Funding then assigns percentage ownership interests in the accounts receivable to certain bank investors. Under the terms of the accounts receivable facility, NMC Funding retains the right, at any time, to recall all the then outstanding transferred interests in the accounts receivable. Consequently, the receivables remain on Fresenius Medical Care’s consolidated statement of financial position and the proceeds from the transfer of percentage ownership interests are recorded as short-term debt.

At December 31, 2009, there were outstanding short-term borrowings under the accounts receivable facility of US$ 214 million (€ 149 million). NMC Funding pays interest to the bank investors, calculated based on the commercial paper rates for the particular tranches selected. The average interest rate during 2009 was 2.90 %. Annual refinancing fees, which include legal costs and bank fees (if any), are amortized over the term of the facility.

Long-term debt and capital lease obligations

As of December 31, long-term debt and capital lease obligations consisted of the following:

in million € 2009 2008
Fresenius Medical Care 2006 Senior Credit Agreement 2,445 2,419
2008 Senior Credit Agreement 1,602 1,896
Euro Notes 800 800
European Investment Bank Agreements 424 309
Capital lease obligations 45 42
Bridge Credit Agreement 0 467
Other 173 214
Subtotal 5,489 6,147
less current portion 261 431
Long-term debt and capital lease obligations, less current portion 5,228 5,716

in million € 2009 2008
Fresenius Medical Care 2006 Senior Credit Agreement 2,445 2,419
2008 Senior Credit Agreement 1,602 1,896
Euro Notes 800 800
European Investment Bank Agreements 424 309
Capital lease obligations 45 42
Bridge Credit Agreement 0 467
Other 173 214
Subtotal 5,489 6,147
less current portion 261 431
Long-term debt and capital lease obligations, less current portion 5,228 5,716

Maturities of long-term debt and capital lease obligations are shown in the following table:

in million € up to
1 year
1 to 5
years
more than
5 years
Fresenius Medical Care 2006 Senior Credit Agreement 93 2,352 0
2008 Senior Credit Agreement 110 1,492 0
Euro Notes 0 800 0
European Investment Bank Agreements 8 376 40
Capital lease obligations 12 22 11
Other 38 85 50
Long-term debt and capital lease obligations 261 5,127 101

in million € up to
1 year
1 to 5
years
more than
5 years
Fresenius Medical Care 2006 Senior Credit Agreement 93 2,352 0
2008 Senior Credit Agreement 110 1,492 0
Euro Notes 0 800 0
European Investment Bank Agreements 8 376 40
Capital lease obligations 12 22 11
Other 38 85 50
Long-term debt and capital lease obligations 261 5,127 101

Aggregate annual repayments applicable to the above listed long-term debt and capital lease obligations for the five years subsequent to December 31, 2009 are:

for the fiscal years in million €
2010 261
2011 1,523
2012 1,510
2013 727
2014 1,367
Subsequent years 101
Total 5,489

for the fiscal years in million €
2010 261
2011 1,523
2012 1,510
2013 727
2014 1,367
Subsequent years 101
Total 5,489

Fresenius Medical Care 2006 Senior Credit Agreement

Fresenius Medical Care, Fresenius Medical Care Holdings, and certain other subsidiaries of Fresenius Medical Care that are borrowers and / or guarantors thereunder, including Fresenius Medical Care Deutschland GmbH, entered into a US$ 4.6 billion syndicated credit facility (Fresenius Medical Care 2006 Senior Credit Agreement) with Bank of America, N.A. (BofA); Deutsche Bank AG New York Branch; The Bank of Nova Scotia; Credit Suisse, Cayman Islands Branch; JP Morgan Chase Bank, National Association; and certain other lenders (collectively the Lenders) on March 31, 2006 which replaced a prior credit agreement.

The following table shows the available and outstanding amounts under the Fresenius Medical Care 2006 Senior Credit Agreement at December 31:

  Maximum amount available Balance outstanding
in million US$ 2009 2008 2009 2008
Revolving Credit 1,000 1,000 595 305
Term Loan A 1,373 1,491 1,373 1,491
Term Loan B 1,554 1,570 1,554 1,570
Total 3,927 4,061 3,522 3,366

  Maximum amount available Balance outstanding
in million US$ 2009 2008 2009 2008
Revolving Credit 1,000 1,000 595 305
Term Loan A 1,373 1,491 1,373 1,491
Term Loan B 1,554 1,570 1,554 1,570
Total 3,927 4,061 3,522 3,366

In addition, at December 31, 2009, US$ 97 million and at December 31, 2008, US$ 112 million were utilized as letters of credit which are not included as part of the balances outstanding at those dates.

The Fresenius Medical Care 2006 Senior Credit Agreement consists of:

  • A five-year US$ 1 billion revolving credit facility (of which up to US$ 250 million is available for letters of credit, up to US$ 300 million is available for borrowings in certain non-US currencies, up to US$ 150 million is available as swing line loans in US dollars, up to US$ 250 million is available as a competitive loan facility and up to US$ 50 million is available as swing line loans in certain non-US currencies, the total of which cannot exceed US$ 1 billion which will be due and payable on March 31, 2011.
  • A five-year term loan facility (Term Loan A) of US$ 1,850 million, also scheduled to mature on March 31, 2011. The Fresenius Medical Care 2006 Senior Credit Agreement requires 19 quarterly payments on Term Loan A of US$ 30 million each that permanently reduce the term loan facility which began June 30, 2006 and continue through December 31, 2010. The remaining amount outstanding is due on March 31, 2011. As a result of the voluntary repayment made in July 2007 from the proceeds of the issuance of Senior Notes, which reduced the principal balance outstanding, the quarterly payments were reduced to US$ 29 million beginning with the payment for September 30, 2008.
  • A seven-year term loan facility (Term Loan B) of US$ 1,750 million scheduled to mature on March 31, 2013. The terms of the Fresenius Medical Care 2006 Senior Credit Agreement require 28 quarterly payments on Term Loan B that permanently reduce the term loan facility. The repayment began June 30, 2006. The first 24 quarterly payments are US$ 4.4 million and payments 25 through 28 are US$ 411 million with the final payment of the remaining balance due on March 31, 2013, subject to an early repayment requirement on March 1, 2011 if the Trust Preferred Securities due June 15, 2011 are not repaid or refinanced or their maturity is not extended prior to that date. As a result of the voluntary repayment made in July 2007 from the proceeds of the issuance of senior notes, the balance of the remaining payments of US$ 4.4 million was reduced to US$ 4.0 million beginning with the September 30, 2008 payment and payments 25 through 28 were reduced to US$ 379 million.

Interest on these facilities will be, at Fresenius Medical Care’s option, depending on the interest periods chosen, at a rate equal to either LIBOR plus an applicable margin or the higher of (a) BofA’s prime rate or (b) the Federal Funds rate plus 0.5 %, plus an applicable margin.

The applicable margin is variable and depends on Fresenius Medical Care’s consolidated leverage ratio which is a ratio of its consolidated funded debt (less up to US$ 30 million cash and cash equivalents) to consolidated EBITDA (as these terms are defined in the Fresenius Medical Care 2006 Senior Credit Agreement).

For a large portion of the floating rate borrowings under the Fresenius Medical Care 2006 Senior Credit Agreement, interest rate hedges have been arranged (see note 30, Financial instruments).

In addition to scheduled principal payments, indebtedness outstanding under the Fresenius Medical Care 2006 Senior Credit Agreement will be reduced by mandatory prepayments utilizing portions of the net cash proceeds from certain sales of assets, securitization transactions other than Fresenius Medical Care’s existing accounts receivable facility, the issuance of subordinated debt other than certain intercompany transactions, certain issuances of equity and excess cash flow.

The obligations under the Fresenius Medical Care 2006 Senior Credit Agreement are secured by pledges of capital stock of certain material subsidiaries in favor of the Lenders.

The Fresenius Medical Care 2006 Senior Credit Agreement contains affirmative and negative covenants with respect to Fresenius Medical Care and its subsidiaries and other payment restrictions. Certain of the covenants limit indebtedness of Fresenius Medical Care and require Fresenius Medical Care to maintain certain financial ratios defined in the agreement. Additionally, the Fresenius Medical Care 2006 Senior Credit Agreement provides for a limitation on dividends and other restricted payments which is US$ 300 million (€ 208 million) for dividends paid in 2010, and increases in subsequent years. Fresenius Medical Care paid dividends of US$ 232 million (€ 173 million) in May of 2009 which was in compliance with the restrictions set forth in the Fresenius Medical Care 2006 Senior Credit Agreement. In default, the outstanding balance under the Fresenius Medical Care 2006 Senior Credit Agreement becomes immediately due and payable at the option of the Lenders. As of December 31, 2009, Fresenius Medical Care was in compliance with all covenants under the Fresenius Medical Care 2006 Senior Credit Agreement.

Fresenius Medical Care incurred fees of approximately US$ 86 million in conjunction with the Fresenius Medical Care 2006 Senior Credit Agreement which are being amortized over the life of this agreement.

On January 31, 2008, the Fresenius Medical Care 2006 Senior Credit Agreement was amended to increase certain types of permitted borrowings and to remove all limitations on capital expenditures.

During the fourth quarter of 2008, one of the participating banks defaulted on its obligation to provide funds under the terms of the revolving facility of the Fresenius Medical Care 2006 Senior Credit Agreement. As Fresenius Medical Care deemed the amount in default immaterial, it took no action to amend the Fresenius Medical Care 2006 Senior Credit Agreement to replace the defaulting bank. Fresenius Medical Care believes it has enough availability under this agreement and other credit facilities to meet its immediate needs.

2008 Senior Credit Agreement

In connection with the acquisition of APP, the Fresenius Group entered into a US$ 2.45 billion syndicated credit agreement (2008 Senior Credit Agreement) on August 20, 2008. The following table shows the available and outstanding amounts under the 2008 Senior Credit Agreement at December 31, 2009:

  Maximum amount available Balance outstanding
    in million €   in million €
Revolving Credit Facilities US$ 550 million 382 US$ 0 million 0
Term Loan A US$ 925 million 642 US$ 925 million 642
Term Loan B (in US$) US$ 1,117 million 775 US$ 1,117 million 775
Term Loan B (in €) € 185 million 185 € 185 million 185
Total   1,984   1,602

  Maximum amount available Balance outstanding
    in million €   in million €
Revolving Credit Facilities US$ 550 million 382 US$ 0 million 0
Term Loan A US$ 925 million 642 US$ 925 million 642
Term Loan B (in US$) US$ 1,117 million 775 US$ 1,117 million 775
Term Loan B (in €) € 185 million 185 € 185 million 185
Total   1,984   1,602

The 2008 Senior Credit Agreement consists of:

  • five-year Term Loan A Facilities (Term Loan A) in the aggregate principal amount of US$ 1 billion (of which US$ 500 million is available to Fresenius US Finance I, Inc., a wholly-owned subsidiary of Fresenius SE, and US$ 500 million is available to APP Pharmaceuticals, LLC). Term Loan A amortizes and is repayable in ten unequal semi-annual installments that commenced on June 10, 2009 with a final maturity date on September 10, 2013;
  • six-year Term Loan B Facilities (Term Loan B) in the aggregate principal amount of US$ 1 billion (of which US$ 502.5 million is available to Fresenius US Finance I, Inc. and US$ 497.5 million is available to APP Pharmaceuticals, LLC). Term Loan B amortizes and is repayable in eleven substantially equal semi-annual installments that commenced on June 10, 2009 with a final bullet payment on September 10, 2014; and
  • five-year Revolving Credit Facilities in the aggregate principal amount of US$ 450 million (of which US$ 150 million is available to APP Pharmaceuticals, LLC and US$ 300 million is available as multicurrency facility to Fresenius Finance I S.A., a wholly-owned subsidiary of Fresenius SE).

In December 2009, US$ 78.7 million and € 13 million were used to voluntarily prepay parts of the existing Term Loan B.

In October 2008, the 2008 Senior Credit Agreement was amended to increase Term Loan B available to Fresenius US Finance I, Inc. by US$ 210.5 million and € 200 million. The proceeds were used for the repayment of the bridge credit agreement described in the following. In November 2008, Fresenius SE agreed with the lenders upon an increase of the revolving credit facility available to Fresenius Finance I S.A. by US$ 100 million.

The interest rate on each borrowing under the 2008 Senior Credit Agreement is a rate per annum equal to the aggregate of (a) the applicable margin (as described below) and (b) LIBOR or, in relation to any loan in euros, EURIBOR for the relevant interest period, subject, in the case of Term Loan B, to a minimum LIBOR or EURIBOR of 3.25 %. The applicable margin for Term Loan A and the Revolving Credit Facilities is variable and depends on the Leverage Ratio as defined in the 2008 Senior Credit Agreement.

To hedge part of the interest rate risk connected with the floating rate borrowings under the 2008 Senior Credit Agreement, the Fresenius Group entered into interest rate hedges.

In addition to scheduled principal payments, indebtedness outstanding under the 2008 Senior Credit Agreement will be reduced by mandatory prepayments in some events. This means especially portions of the net cash proceeds from certain sales of assets, incurrence of additional indebtedness, equity issuances and certain intercompany loan repayments.

The 2008 Senior Credit Agreement is guaranteed by Fresenius SE, Fresenius ProServe GmbH and Fresenius Kabi AG. The obligations of APP Pharmaceuticals, LLC under the 2008 Senior Credit Agreement that refinanced outstanding indebtedness under the former APP credit facility are secured by the assets of APP and its subsidiaries and guaranteed by APP’s subsidiaries on the same basis as the former APP credit facility. All lenders also benefit from indirect security through pledges over the shares of certain subsidiaries of Fresenius Kabi AG and pledges over certain intercompany loans.

The 2008 Senior Credit Agreement contains a number of customary affirmative and negative covenants and other payment restrictions. These covenants include, among others, limitations on liens, sale of assets, incurrence of debt, investments and acquisitions and restrictions on the payment of dividends. The 2008 Senior Credit Agreement also includes financial covenants – as defined in the agreement – that require Fresenius SE and its subsidiaries (other than Fresenius Medical Care and its subsidiaries) to maintain a maximum leverage ratio, a minimum fixed charge coverage ratio, a minimum interest coverage ratio and limits amounts spent on capital expenditure. As of December 31, 2009, Fresenius SE was in compliance with all covenants under the 2008 Senior Credit Agreement.

Bridge Credit Agreement

On August 20, 2008, the Fresenius Group entered into a Bridge Credit Agreement of US$ 1.3 billion to fund part of the purchase price of APP. The Bridge Credit Agreement was fully drawn down on September 10, 2008. In October 2008, the Bridge Credit Agreement was reduced to US$ 650 million using the proceeds of the increase of Term Loan B under the 2008 Senior Credit Agreement and funds obtained under other existing credit facilities.

On January 21, 2009, the residual amount of the Bridge Credit Agreement was redeemed using the proceeds of new Senior Notes (see note 22 Senior Notes).

Euro Notes

As of December 31, 2009, Euro Notes (Schuldscheindarlehen) of the Fresenius Group consisted of the following:

  Maturity Interest rate Book value /
nominal value
in million €
Fresenius Finance B.V. 2008 / 2012 April 2, 2012 5.59 % 62
Fresenius Finance B.V. 2008 / 2012 April 2, 2012 variable 138
Fresenius Finance B.V. 2007 / 2012 July 2, 2012 5.51 % 26
Fresenius Finance B.V. 2007 / 2012 July 2, 2012 variable 74
Fresenius Finance B.V. 2008 / 2014 April 2, 2014 5.98 % 112
Fresenius Finance B.V. 2008 / 2014 April 2, 2014 variable 88
Fresenius Finance B.V. 2007 / 2014 July 2, 2014 5.75 % 38
Fresenius Finance B.V. 2007 / 2014 July 2, 2014 variable 62
Fresenius Medical Care AG & Co. KGaA 2009 / 2012 Oct. 27, 2012 7.41 % 36
Fresenius Medical Care AG & Co. KGaA 2009 / 2012 Oct. 27, 2012 variable 119
Fresenius Medical Care AG & Co. KGaA 2009 / 2014 Oct. 27, 2014 8.38 % 15
Fresenius Medical Care AG & Co. KGaA 2009 / 2014 Oct. 27, 2014 variable 30
Euro Notes     800

  Maturity Interest rate Book value /
nominal value
in million €
Fresenius Finance B.V. 2008 / 2012 April 2, 2012 5.59 % 62
Fresenius Finance B.V. 2008 / 2012 April 2, 2012 variable 138
Fresenius Finance B.V. 2007 / 2012 July 2, 2012 5.51 % 26
Fresenius Finance B.V. 2007 / 2012 July 2, 2012 variable 74
Fresenius Finance B.V. 2008 / 2014 April 2, 2014 5.98 % 112
Fresenius Finance B.V. 2008 / 2014 April 2, 2014 variable 88
Fresenius Finance B.V. 2007 / 2014 July 2, 2014 5.75 % 38
Fresenius Finance B.V. 2007 / 2014 July 2, 2014 variable 62
Fresenius Medical Care AG & Co. KGaA 2009 / 2012 Oct. 27, 2012 7.41 % 36
Fresenius Medical Care AG & Co. KGaA 2009 / 2012 Oct. 27, 2012 variable 119
Fresenius Medical Care AG & Co. KGaA 2009 / 2014 Oct. 27, 2014 8.38 % 15
Fresenius Medical Care AG & Co. KGaA 2009 / 2014 Oct. 27, 2014 variable 30
Euro Notes     800

On April 27, 2009, Fresenius Medical Care issued new senior and unsecured Euro Notes in a total amount of € 200 million. They consist of four tranches having terms of 3.5 and 5.5 years with fixed and floating interest rate tranches. Proceeds were used to liquidate the balance of the existing Euro Notes of FMC Finance IV Luxembourg which were due in July 2009.

In April 2008, Fresenius Finance B.V., a wholly-owned subsidiary of Fresenius SE, issued Euro Notes in an amount of € 400 million in four tranches with four and six year terms. The proceeds from the issuance of the Euro Notes were mainly utilized to finance acquisitions as well as for the repayment of debt and to redeem Euro Notes of € 40 million that were due in May 2008.

The Euro Notes of Fresenius Finance B.V. are guaranteed by Fresenius SE. The Euro Notes of FMC-AG & Co. KGaA are guaranteed by Fresenius Medical Care Holdings, Inc. (FMCH) and Fresenius Medical Care Deutschland GmbH (FMC D-GmbH).

Interest of the floating rate tranches of the Euro Notes is based on EURIBOR plus applicable margin. For a large portion of these tranches, interest rate swaps have been arranged (see note 30 Financial instruments). Only the floating rate tranches of the Euro Notes of FMC-AG & Co. KGaA in an amount of € 149 million are exposed to the risk of interest rate increases.

European Investment Bank Agreements

Various subsidiaries of the Fresenius Group maintain credit facilities with the European Investment Bank (EIB). The following table shows the outstanding amounts under the EIB facilities as of December 31, 2009:

  Maximum
amount available
in million €
Maturity Book value
in million €
Fresenius SE 196 2013 196
Fresenius Medical Care AG & Co. KGaA 271 2013 / 2014 148
HELIOS Kliniken GmbH 80 2019 80
Loans from EIB 547   424

  Maximum
amount available
in million €
Maturity Book value
in million €
Fresenius SE 196 2013 196
Fresenius Medical Care AG & Co. KGaA 271 2013 / 2014 148
HELIOS Kliniken GmbH 80 2019 80
Loans from EIB 547   424

The EIB is the not-for-profit long-term lending institution of the European Union and loans funds at favorable rates for the purpose of specific capital investment and research and development projects. The facilities were granted to finance certain research and development projects, to invest in expansion and the optimization of existing production facilities in Germany and for the construction of a hospital.

In December 2009, an additional loan agreement of € 50 million was entered by FMC-AG & Co. KGaA. This loan has a four-year term. The loan is guaranteed by FMCH and FMC D-GmbH.

In August 2009, Fresenius SE entered into an additional credit agreement with the EIB of € 100 million having a four-year term. Disbursement of the loan took place on September 10, 2009. The loan is guaranteed by Fresenius Kabi AG and Fresenius ProServe GmbH.

Some advances under these agreements can be denominated in certain foreign currencies including US dollars. Accordingly, the liabilities of FMC-AG & Co. KGaA comprise loans of US$ 84 million and € 90 million. FMC-AG & Co. KGaA borrowed this € 90 million loan under a credit agreement with the EIB which was entered into in December 2006. This facility was fully drawn down on February 1, 2008. The loan matures on February 1, 2014.

Repayment of the loan of HELIOS Kliniken GmbH already started in December 2007 and will continue through December 2019 with constant half-yearly payments.

The above mentioned loans bear variable interest rates which are based on EURIBOR or LIBOR plus applicable margin. These interest rates change quarterly. To some extent, the borrowers may opt to convert those interest rates into fixed rates. The loans under the EIB Agreements entered before 2009 are secured by bank guarantees. All credit agreements with the EIB have customary covenants.

Capital lease obligations

Details of capital lease obligations are given below:

in million € 2009
Capital lease obligations (minimum lease payments) 50
due within one year 13
due between one and five years 25
due later than five years 12
Interest component included in future minimum lease payments 5
due within one year 1
due between one and five years 3
due later than five years 1
Present value of capital lease obligations (minimum lease payments) 45
due within one year 12
due between one and five years 22
due later than five years 11

in million € 2009
Capital lease obligations (minimum lease payments) 50
due within one year 13
due between one and five years 25
due later than five years 12
Interest component included in future minimum lease payments 5
due within one year 1
due between one and five years 3
due later than five years 1
Present value of capital lease obligations (minimum lease payments) 45
due within one year 12
due between one and five years 22
due later than five years 11

Credit lines

In addition to the financial liabilities described before, the Fresenius Group maintains additional credit facilities which have not been utilized, or have only been utilized in part as of reporting date. As of December 31, 2009, the additional financial cushion resulting from unutilized credit facilities was approximately € 1.3 billion.

Syndicated credit facilities accounted for € 596 million. This portion comprises the Fresenius Medical Care 2006 Senior Credit Agreement in the amount of US$ 308 million (€ 214 million) and the 2008 Senior Credit Agreement in the amount of US$ 550 million (€ 382 million). Furthermore, bilateral facilities of approximately € 750 million were available. They include the already described credit facilities with the EIB and credit facilities which subsidiaries of the Fresenius Group have arranged with commercial banks. These credit facilities are used for general corporate purposes and are usually unsecured.

In addition, Fresenius SE has a commercial paper program under which up to € 250 million in short-term notes can be issued. As of December 31, 2009, no commercial papers were outstanding.

Additional financing of up to US$ 650 million can be provided using the Fresenius Medical Care accounts receivable facility which had been utilized by US$ 214 million as of December 31, 2009.

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22. Senior Notes

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