21. Debt and capital lease obligations

SHORT-TERM DEBT

The Fresenius Group had short-term debt of €606 million and €287 million at December 31, 2010 and December 31, 2009, respectively. As of December 31, 2010, these consisted of €224 million borrowed by certain subsidiaries of the Fresenius Group under lines of credit with commercial banks and €382 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, 2010 and 2009 were 5.14% and 5.03%, respectively.

In September 2010, the asset securitization facility (accounts receivable facility) of Fresenius Medical Care was extended to September 27, 2011 and increased by US$50 million to US$700 million. 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 the consolidated statement of financial position and the proceeds from the transfer of percentage ownership interests are recorded within short-term debt.

At December 31, 2010, there were outstanding short-term borrowings under the accounts receivable facility of US$510 million (€382 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 2010 was 1.86%. Annual refinancing fees, which include legal costs and bank fees, 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 millions 2010 2009
Fresenius Medical Care 2006 Senior Credit Agreement 2,211 2,445
2008 Senior Credit Agreement 1,484 1,602
Euro Notes 800 800
European Investment Bank Agreements 531 424
Capital lease obligations 54 45
Other 259 173
Subtotal 5,339 5,489
less current portion 420 261
Long-term debt and capital lease obligations, less current portion 4,919 5,228

€ in millions 2010 2009
Fresenius Medical Care 2006 Senior Credit Agreement 2,211 2,445
2008 Senior Credit Agreement 1,484 1,602
Euro Notes 800 800
European Investment Bank Agreements 531 424
Capital lease obligations 54 45
Other 259 173
Subtotal 5,339 5,489
less current portion 420 261
Long-term debt and capital lease obligations, less current portion 4,919 5,228

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

€ in millions up to 1 year 1 to 5 years more than 5 years
Fresenius Medical Care 2006 Senior Credit Agreement 102 2,109 0
2008 Senior Credit Agreement 194 1,290 0
Euro Notes 0 800 0
European Investment Bank Agreements 8 491 32
Capital lease obligations 10 26 18
Other 106 91 62
Long-term debt and capital lease obligations 420 4,807 112

€ in millions up to 1 year 1 to 5 years more than 5 years
Fresenius Medical Care 2006 Senior Credit Agreement 102 2,109 0
2008 Senior Credit Agreement 194 1,290 0
Euro Notes 0 800 0
European Investment Bank Agreements 8 491 32
Capital lease obligations 10 26 18
Other 106 91 62
Long-term debt and capital lease obligations 420 4,807 112

Aggregate annual repayments applicable to the above listed long-term debt and capital lease obligations for the years subsequent to December 31, 2010 are:

for the fiscal years € in millions
2011 420
2012 1,708
2013 1,709
2014 1,366
2015 24
Subsequent years 112
Total 5,339

for the fiscal years € in millions
2011 420
2012 1,708
2013 1,709
2014 1,366
2015 24
Subsequent years 112
Total 5,339

Fresenius Medical Care 2006 Senior Credit Agreement

Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA), Fresenius Medical Care Holdings, Inc. (FMCH), and certain other subsidiaries of FMC-AG & Co. KGaA that are borrowers and/or guarantors thereunder, including Fresenius Medical Care Deutschland GmbH (FMC D-GmbH), entered into a US$4.6 billion syndicated credit facility (Fresenius Medical Care 2006 Senior Credit Agreement) with several banks and institutional investors (the Lenders) on March 31, 2006 which replaced a prior credit agreement.

Since entering into the 2006 Senior Credit Agreement, Fresenius Medical Care arranged several amendments and effected voluntary prepayments of the Term Loans, which led to a change in the total amount available under this facility. Pursuant to an amendment together with an extension arranged on September 29, 2010, the Revolving Credit Facility was increased from US$1,000 million to US$1,200 million and the Term Loan A facility by US$50 million to US$1,365 million. The maturity for both tranches was extended from March 31, 2011 to March 31, 2013. Additionally, the early repayment requirement for Term Loan B, which stipulated that Term Loan B was subject to early retirement if the Trust Preferred Securities due June 15, 2011 were not paid, refinanced or extended prior to March 1, 2011, has been removed. The definition of Fresenius Medical Care’s consolidated leverage ratio was amended to allow for the reduction of up to US$250 million (increased from US$30 million) of cash and cash equivalents from consolidated funded debt. In addition, the amendment includes increases in certain types of permitted borrowings outside of the amended Fresenius Medical Care 2006 Senior Credit Agreement and provides further flexibility for certain types of investments. Furthermore, the parties agreed to change the limitation on dividends and other restricted payments from US$300 million for dividends in 2010 for up to US$330 million in 2011. Thereafter, these limitations increase by US$30 million each year through 2013.

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

  2010
  Maximum amount available Balance outstanding
  US$ in millions € in millions US$ in millions € in millions
Revolving Credit 1,200 898 81 61
Term Loan A 1,335 999 1,335 999
Term Loan B 1,538 1,151 1,538 1,151
Total 4,073 3,048 2,954 2,211

  2010
  Maximum amount available Balance outstanding
  US$ in millions € in millions US$ in millions € in millions
Revolving Credit 1,200 898 81 61
Term Loan A 1,335 999 1,335 999
Term Loan B 1,538 1,151 1,538 1,151
Total 4,073 3,048 2,954 2,211

  2009
  Maximum amount available Balance outstanding
  US$ in millions € in millions US$ in millions € in millions
Revolving Credit 1,000 694 595 413
Term Loan A 1,373 953 1,373 953
Term Loan B 1,554 1,079 1,554 1,079
Total 3,927 2,726 3,522 2,445

  2009
  Maximum amount available Balance outstanding
  US$ in millions € in millions US$ in millions € in millions
Revolving Credit 1,000 694 595 413
Term Loan A 1,373 953 1,373 953
Term Loan B 1,554 1,079 1,554 1,079
Total 3,927 2,726 3,522 2,445

In addition, at December 31, 2010 and December 31, 2009, US$122 million and US$97 million, respectively, were utilized as letters of credit which were not included as part of the balances outstanding at those dates.

As of December 31, 2010, the amended and extended Fresenius Medical Care 2006 Senior Credit Agreement consisted of:

  • A US$1,200 million Revolving Credit Facility (of which up to US$400 million is available for letters of credit, up to US$400 million is available for borrowings in certain non-U.S. currencies, up to US$150 million is available as swingline loans in U.S. dollars, up to US$250 million is available as a competitive loan facility, and up to US$50 million is available as swingline loans in certain non-U.S. currencies, the total of which cannot exceed US$1,200 million) which will be due and payable on March 31, 2013.
  • A Term Loan Facility (Term Loan A) of US$1,335 million, also scheduled to mature on March 31, 2013. Quarterly repayments on Term Loan A of US$30 million each permanently reduce the Term Loan Facility at the end of each quarter until December 31, 2012. The remaining balance outstanding is due on March 31, 2013.
  • A Term Loan Facility (Term Loan B) of US$1,538 million scheduled to mature on March 31, 2013 with five quarterly repayments of US$4 million followed by four quarterly repayments of US$379.4 million each due at the end of its respective quarter.

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$250 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 FMC-AG & Co. KGaA 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$330 million for dividends paid in 2011, and increases by US$30 million each year through 2013. Fresenius Medical Care paid dividends of US$232 million in May of 2010 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, 2010, FMC-AG & Co. KGaA and its subsidiaries were 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 and fees of approximately US$21 million in conjunction with the amendment and extension which will be amortized over the life of the credit agreement.

At December 31, 2010, the Revolving Credit and Term Loan A were shown in the position long-term debt and capital lease obligations due to the extension of the Fresenius Medical Care 2006 Senior Credit Agreement after being shown under short-term liabilities in the first half of 2010.

2008 Senior Credit Agreement

On August 20, 2008, in connection with the acquisition of APP Pharmaceuticals, Inc. (APP), the Fresenius Group entered into a syndicated credit agreement (2008 Senior Credit Agreement) in an original amount of US$2.45 billion.

Since that date, amendments and voluntary prepayments were made which resulted in a change of the total amount available under this facility. In December 2009 and February 2010, voluntary prepayments of Term Loan B were made which amounted to US$199.7 million and €33 million. Amendments of the 2008 Senior Credit Agreement related to the financial covenants as defined in the agreement, among other things. In addition, the amendment in March 2010 led to a replacement of Term Loan B by Term Loan C. Both Term Loan facilities merely differ in terms of the applicable interest rate. The minimum LIBOR or EURIBOR was set for 1.50% (previously Term Loan B: 3.25%).

The following tables show the available and outstanding amounts under the 2008 Senior Credit Agreement at December 31:

  2010
  Maximum amount available Balance outstanding
    € in millions   € in millions
Revolving Credit Facilities US$550 million 411 US$0 million 0
Term Loan A US$782 million 586 US$782 million 586
Term Loan C (in US$) US$984 million 736 US$984 million 736
Term Loan C (in €) €162 million 162 €162 million 162
Total   1,895   1,484

  2010
  Maximum amount available Balance outstanding
    € in millions   € in millions
Revolving Credit Facilities US$550 million 411 US$0 million 0
Term Loan A US$782 million 586 US$782 million 586
Term Loan C (in US$) US$984 million 736 US$984 million 736
Term Loan C (in €) €162 million 162 €162 million 162
Total   1,895   1,484

  2009
  Maximum amount available Balance outstanding
  € in millions   € in millions
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

  2009
  Maximum amount available Balance outstanding
  € in millions   € in millions
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

As of December 31, 2010, the 2008 Senior Credit Agreement consisted of:

  • Revolving Credit Facilities in the aggregate principal amount of US$550 million (of which US$150 million is available to APP Pharmaceuticals, LLC and US$400 million is available as multicurrency facility to Fresenius Finance I S.A., a wholly-owned subsidiary of Fresenius SE & Co. KGaA) which will be due and payable on September 10, 2013.
  • Term Loan Facilities (Term Loan A) in the aggregate principal amount of US$782 million (of which equal shares are available to Fresenius US Finance I, Inc., a wholly-owned subsidiary of Fresenius SE & Co. KGaA, and to APP Pharmaceuticals, LLC). Term Loan A amortizes and is repayable in unequal semi-annual installments with a final maturity date on September 10, 2013.
  • Term Loan Facilities (Term Loan C) in the aggregate principal amount of US$983.5 million and €162.5 million (of which US$579.3 million and €162.5 million are available to Fresenius US Finance I, Inc. and US$404.2 million is available to APP Pharmaceuticals, LLC). Term Loan C amortizes and is repayable in equal semi-annual installments with a final bullet payment on September 10, 2014.

The interest rate on each borrowing under the 2008 Senior Credit Agreement is a rate 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. The applicable margin is variable and depends on the Leverage Ratio as defined in the 2008 Senior Credit Agreement. In the case of Term Loan C, a minimum LIBOR or EURIBOR was set for 1.50%.

To hedge large parts 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 the case of certain sales of assets, incurrence of additional indebtedness, equity issuances and certain intercompany loan repayments, with the amount to be prepaid depending on the proceeds which are generated by the respective transaction.

The 2008 Senior Credit Agreement is guaranteed by Fresenius SE & Co. KGaA, Fresenius ProServe GmbH and Fresenius Kabi AG. The obligations of APP Pharmaceuticals, LLC under the 2008 Senior Credit Agreement that refinanced 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 limitations on liens, sale of assets, incurrence of debt, investments and acquisitions and restrictions on the payment of dividends, among other items. The 2008 Senior Credit Agreement also includes financial covenants – as defined in the agreement – that require Fresenius SE & Co. KGaA 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, 2010, the Fresenius Group was in compliance with all covenants under the 2008 Senior Credit Agreement.

Euro Notes

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

  Book value/nominal value € in millions
  Maturity Interest rate 2010 2009
Fresenius Finance B.V. 2008/2012 April 2, 2012 5.59% 62 62
Fresenius Finance B.V. 2008/2012 April 2, 2012 variable 138 138
Fresenius Finance B.V. 2007/2012 July 2, 2012 5.51% 26 26
Fresenius Finance B.V. 2007/2012 July 2, 2012 variable 74 74
Fresenius Finance B.V. 2008/2014 April 2, 2014 5.98% 112 112
Fresenius Finance B.V. 2008/2014 April 2, 2014 variable 88 88
Fresenius Finance B.V. 2007/2014 July 2, 2014 5.75% 38 38
Fresenius Finance B.V. 2007/2014 July 2, 2014 variable 62 62
Fresenius Medical Care AG & Co. KGaA 2009/2012 Oct. 27, 2012 7.41% 36 36
Fresenius Medical Care AG & Co. KGaA 2009/2012 Oct. 27, 2012 variable 119 119
Fresenius Medical Care AG & Co. KGaA 2009/2014 Oct. 27, 2014 8.38% 15 15
Fresenius Medical Care AG & Co. KGaA 2009/2014 Oct. 27, 2014 variable 30 30
Euro Notes     800 800

  Book value/nominal value € in millions
  Maturity Interest rate 2010 2009
Fresenius Finance B.V. 2008/2012 April 2, 2012 5.59% 62 62
Fresenius Finance B.V. 2008/2012 April 2, 2012 variable 138 138
Fresenius Finance B.V. 2007/2012 July 2, 2012 5.51% 26 26
Fresenius Finance B.V. 2007/2012 July 2, 2012 variable 74 74
Fresenius Finance B.V. 2008/2014 April 2, 2014 5.98% 112 112
Fresenius Finance B.V. 2008/2014 April 2, 2014 variable 88 88
Fresenius Finance B.V. 2007/2014 July 2, 2014 5.75% 38 38
Fresenius Finance B.V. 2007/2014 July 2, 2014 variable 62 62
Fresenius Medical Care AG & Co. KGaA 2009/2012 Oct. 27, 2012 7.41% 36 36
Fresenius Medical Care AG & Co. KGaA 2009/2012 Oct. 27, 2012 variable 119 119
Fresenius Medical Care AG & Co. KGaA 2009/2014 Oct. 27, 2014 8.38% 15 15
Fresenius Medical Care AG & Co. KGaA 2009/2014 Oct. 27, 2014 variable 30 30
Euro Notes     800 800

On April 27, 2009, Fresenius Medical Care issued 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 Euro Notes from 2005 which were due in July 2009.

The Euro Notes of Fresenius Finance B.V. are guaranteed by Fresenius SE & Co. KGaA. The Euro Notes of FMC-AG & Co. KGaA are guaranteed by FMCH and 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:

  Maximum amount available
€ in millions
Book value
€ in millions
  Maturity 2010 2009 2010 2009
1 Difference due to foreign currency translation
Fresenius SE & Co. KGaA 2013 196 196 196 196
Fresenius Medical Care AG & Co. KGaA 2013/2014 2711 271 2631 148
HELIOS Kliniken GmbH 2019 72 80 72 80
Loans from EIB   539 547 531 424

  Maximum amount available
€ in millions
Book value
€ in millions
  Maturity 2010 2009 2010 2009
1 Difference due to foreign currency translation
Fresenius SE & Co. KGaA 2013 196 196 196 196
Fresenius Medical Care AG & Co. KGaA 2013/2014 2711 271 2631 148
HELIOS Kliniken GmbH 2019 72 80 72 80
Loans from EIB   539 547 531 424

The majority of the loans are denominated in euros. The U.S. dollar denominated borrowings of FMC-AG & Co. KGaA amount to US$165 million (€123 million).

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 the expansion and optimization of existing production facilities in Germany and for the construction of a hospital.

In February 2010, a loan of €50 million was disbursed from the loan agreement FMC-AG & Co. KGaA entered into with the EIB in December 2009. The loan has a four-year term and is guaranteed by FMCH and FMC D-GmbH. In addition, FMC-AG & Co. KGaA drew down the remaining available balance of US$81 million on a revolving credit facility with the EIB in March 2010.

In September 2009, Fresenius SE (since January 28, 2011: Fresenius SE & Co. KGaA) drew down a loan with the EIB of €100 million having a four-year term. The loan is guaranteed by Fresenius Kabi AG and Fresenius ProServe GmbH.

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. 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 millions 2010 2009
Capital lease obligations (minimum lease payments) 68 50
due within one year 12 13
due between one and five years 32 25
due later than five years 24 12
Interest component included in future minimum lease payments 14 5
due within one year 2 1
due between one and five years 6 3
due later than five years 6 1
Present value of capital lease obligations (minimum lease payments) 54 45
due within one year 10 12
due between one and five years 26 22
due later than five years 18 11

€ in millions 2010 2009
Capital lease obligations (minimum lease payments) 68 50
due within one year 12 13
due between one and five years 32 25
due later than five years 24 12
Interest component included in future minimum lease payments 14 5
due within one year 2 1
due between one and five years 6 3
due later than five years 6 1
Present value of capital lease obligations (minimum lease payments) 54 45
due within one year 10 12
due between one and five years 26 22
due later than five years 18 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 the reporting date. As of December 31, 2010, the additional financial cushion resulting from unutilized credit facilities was approximately €2.0 billion.

Syndicated credit facilities accounted for €1.1 billion. This portion comprises the Fresenius Medical Care 2006 Senior Credit Agreement in the amount of US$997 million (€746 million) and the 2008 Senior Credit Agreement in the amount of US$550 million (€411 million). Furthermore, bilateral facilities of approximately €835 million were available. They include 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 & Co. KGaA has a commercial paper program under which up to €250 million in short-term notes can be issued. As of December 31, 2010, no commercial papers were outstanding.

Additional financing of up to US$700 million can be provided using the Fresenius Medical Care accounts receivable facility which had been utilized by US$510 million as of December 31, 2010.

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22. Senior Notes

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