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21. Debt and capital lease obligations

SHORT-TERM DEBT

The Fresenius Group had short-term debt of €171 million and €606 million at December 31, 2011 and December 31, 2010, respectively. As of December 31, 2011, this debt consisted of borrowings by certain subsidiaries of the Fresenius Group under lines of credit with commercial banks. The average interest rates on these borrowings at December 31, 2011 and 2010 were 6.62% and 5.14%, respectively.

At December 31, 2010, the accounts receivable facility of Fresenius Medical Care was classified as short-term debt. During the third quarter of 2011, the accounts receivable facility was renewed for a period of three years. As a result, it has been classified as long-term debt at December 31, 2011. At December 31, 2011, there were no outstanding short-term borrowings under the accounts receivable facility (December 31, 2010: €382 million).

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

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

€ in millions 2011 2010
Fresenius Medical Care 2006 Senior Credit Agreement 2,161 2,211
2008 Senior Credit Agreement 1,326 1,484
Euro Notes 800 800
European Investment Bank Agreements 527 531
Accounts receivable facility of Fresenius Medical Care 413 0
Capital lease obligations 53 54
Other 349 259
Subtotal 5,629 5,339
less current portion 1,852 420
Long-term debt and capital lease obligations, less current portion 3,777 4,919

€ in millions 2011 2010
Fresenius Medical Care 2006 Senior Credit Agreement 2,161 2,211
2008 Senior Credit Agreement 1,326 1,484
Euro Notes 800 800
European Investment Bank Agreements 527 531
Accounts receivable facility of Fresenius Medical Care 413 0
Capital lease obligations 53 54
Other 349 259
Subtotal 5,629 5,339
less current portion 1,852 420
Long-term debt and capital lease obligations, less current portion 3,777 4,919

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 976 1,185 0
2008 Senior Credit Agreement 243 1,083 0
Euro Notes 461 339 0
European Investment Bank Agreements 8 495 24
Accounts receivable facility of Fresenius Medical Care 0 413 0
Capital lease obligations 10 32 11
Other 154 162 33
Long-term debt and capital lease obligations 1,852 3,709 68

€ in millions up to 1 year 1 to 5 years more than 5 years
Fresenius Medical Care 2006 Senior Credit Agreement 976 1,185 0
2008 Senior Credit Agreement 243 1,083 0
Euro Notes 461 339 0
European Investment Bank Agreements 8 495 24
Accounts receivable facility of Fresenius Medical Care 0 413 0
Capital lease obligations 10 32 11
Other 154 162 33
Long-term debt and capital lease obligations 1,852 3,709 68

Aggregate annual repayments applicable to the above listed long-term debt and capital lease obligations for the years subsequent to December 31, 2011 are:

for the fiscal years € in millions
2012 1,852
2013 1,795
2014 1,833
2015 49
2016 32
Subsequent years 68
Total 5,629

for the fiscal years € in millions
2012 1,852
2013 1,795
2014 1,833
2015 49
2016 32
Subsequent years 68
Total 5,629

Fresenius Medical Care 2006 Senior Credit Agreement

Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA) and several of its subsidiaries 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 with the Lenders 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 at the time of the amendment. The maturity for both tranches was extended from March 31, 2011 to March 31, 2013. Furthermore, the parties agreed to new limitations on dividends and other restricted payments for 2011, 2012 and 2013. In addition, this amendment and subsequent amendments have included increases in certain types of permitted borrowings outside of the Fresenius Medical Care 2006 Senior Credit Agreement, provide further flexibility for certain types of investments and acquisitions and included changes in the definition of Fresenius Medical Care’s consolidated leverage ratio, which is used to determine the applicable margin.

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

  2011
  Maximum amount available Balance outstanding
  US$ in millions € in millions US$ in millions € in millions
Revolving Credit 1,200 927 59 46
Term Loan A 1,215 939 1,215 939
Term Loan B 1,522 1,176 1,522 1,176
Total 3,937 3,042 2,796 2,161

  2011
  Maximum amount available Balance outstanding
  US$ in millions € in millions US$ in millions € in millions
Revolving Credit 1,200 927 59 46
Term Loan A 1,215 939 1,215 939
Term Loan B 1,522 1,176 1,522 1,176
Total 3,937 3,042 2,796 2,161

  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

In addition, at December 31, 2011 and December 31, 2010, Fresenius Medical Care had letters of credit outstanding in the amount of US$181 million and US$122 million, respectively, which were not included above as part of the balance outstanding at those dates but which reduce available borrowings under the Revolving Credit Facility.

As of December 31, 2011, after consideration of all amendments and repayments to date, the Fresenius Medical Care 2006 Senior Credit Agreement consisted of:

  • A US$1,200 million Revolving Credit Facility (with specified sub-facilities for letters of credit, borrowings in certain non-U.S. currencies, and swing line loans in U.S. dollars and certain non-U.S. currencies, with the total outstanding under those sub-facilities not exceeding US$1,200 million) which will be due and payable on March 31, 2013.
  • A Term Loan Facility (Term Loan A) of US$1,215 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$1,522 million scheduled to mature on March 31, 2013 with the next quarterly repayment 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) Bank of America’s prime rate or (b) the U.S. 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 all cash and cash equivalents) to consolidated EBITDA (as these terms are defined in the Fresenius Medical Care 2006 Senior Credit Agreement).

For a 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 was US$330 million for 2011 and is US$360 million and US$390 million for 2012 and 2013, respectively. Fresenius Medical Care paid dividends of US$281 million in May of 2011 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, 2011, 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.

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 entering into the 2008 Senior Credit Agreement, amendments and voluntary prepayments have been made which have resulted in a change of the total amount available under this facility. In March 2011, after negotiations with the lenders, Fresenius SE & Co. KGaA again improved the conditions of the 2008 Senior Credit Agreement. The amendments led to a reduction of the interest rate of Term Loan C (new: Term Loan D). The new interest rate is a rate equal to the money market interest rate (LIBOR and EURIBOR) with a minimum of 1.00% (previously: 1.50%) and a current margin of 2.50% (previously: 3.00%). An earlier amendment in March 2010 had already led to a replacement of Term Loan B by Term Loan C and an improvement of the applicable interest rate.

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

  2011
  Maximum amount available Balance outstanding
    € in millions   € in millions
Revolving Credit Facilities US$550 million 425 US$0 million 0
Term Loan A US$537 million 415 US$537 million 415
Term Loan D (in US$) US$971 million 751 US$971 million 751
Term Loan D (in €) €160 million 160 €160 million 160
Total   1,751   1,326

  2011
  Maximum amount available Balance outstanding
    € in millions   € in millions
Revolving Credit Facilities US$550 million 425 US$0 million 0
Term Loan A US$537 million 415 US$537 million 415
Term Loan D (in US$) US$971 million 751 US$971 million 751
Term Loan D (in €) €160 million 160 €160 million 160
Total   1,751   1,326

  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

As of December 31, 2011, 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$537 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 D) in the aggregate principal amount of US$971.4 million and €160.5 million (of which US$572.2 million and €160.5 million are available to Fresenius US Finance I, Inc. and US$399.2 million is available to APP Pharmaceuticals, LLC). Term Loan D 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 D, a minimum LIBOR or EURIBOR was set for 1.00%.

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, 2011, 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 2011 2010
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 2011 2010
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

The Euro Notes issued by Fresenius Finance B.V. in the amounts of €200 million and €100 million, which are due on April 2, 2012 and on July 2, 2012, respectively, are shown as current portion of long-term debt and capital lease obligations in the consolidated statement of financial position. The Euro Notes issued by FMC-AG & Co. KGaA of €155 million, which are due on October 27, 2012, are also shown as current portion of long-term debt and capital lease obligations in the consolidated statement of financial position.

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 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.

As of December 31, 2011, the Fresenius Group was in compliance with all of its covenants under the Euro Notes.

European Investment Bank Agreements

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

    Maximum amount available
€ in millions
Book value
€ in millions
  Maturity 2011 2010 2011 2010
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 2711 2671 2631
HELIOS Kliniken GmbH 2019 64 72 64 72
Loans from EIB   531 539 527 531

    Maximum amount available
€ in millions
Book value
€ in millions
  Maturity 2011 2010 2011 2010
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 2711 2671 2631
HELIOS Kliniken GmbH 2019 64 72 64 72
Loans from EIB   531 539 527 531

The majority of the loans are denominated in euros. The U.S. dollar denominated borrowings of FMC-AG & Co. KGaA amounted to US$165 million (€127 million) at December 31, 2011.

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.

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. The 2009 loan of Fresenius SE & Co. KGaA is guaranteed by Fresenius Kabi AG and Fresenius ProServe GmbH. All credit agreements with the EIB have customary covenants. As of December 31, 2011, the Fresenius Group was in compliance with the respective covenants.

Capital lease obligations

Details of capital lease obligations are given below:

€ in millions 2011 2010
Capital lease obligations (minimum lease payments) 65 68
due within one year 12 12
due between one and five years 37 32
due later than five years 16 24
Interest component included in future minimum lease payments 12 14
due within one year 2 2
due between one and five years 5 6
due later than five years 5 6
Present value of capital lease obligations (minimum lease payments) 53 54
due within one year 10 10
due between one and five years 32 26
due later than five years 11 18

€ in millions 2011 2010
Capital lease obligations (minimum lease payments) 65 68
due within one year 12 12
due between one and five years 37 32
due later than five years 16 24
Interest component included in future minimum lease payments 12 14
due within one year 2 2
due between one and five years 5 6
due later than five years 5 6
Present value of capital lease obligations (minimum lease payments) 53 54
due within one year 10 10
due between one and five years 32 26
due later than five years 11 18

Accounts receivable facility of Fresenius Medical Care

In August 2011, the asset securitization facility (accounts receivable facility) of Fresenius Medical Care was renewed to July 31, 2014 and increased by US$100 million to US$800 million.

As the accounts receivable facility was renewed annually in the past, it has historically been classified as a short-term debt. Since the recent renewal extended the due date to 2014, the accounts receivable facility has been reclassified into long-term debt. At December 31, 2011, there were outstanding borrowings under the accounts receivable facility of US$535 million (€413 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 as long-term debt.

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 2011 was 1.29%. Refinancing fees, which include legal costs and bank fees, are amortized over the term of the facility.

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. At December 31, 2011, the additional financial cushion resulting from unutilized credit facilities was approximately €2 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$960 million (€742 million) and the 2008 Senior Credit Agreement in the amount of US$550 million (€425 million). Furthermore, bilateral facilities of approximately €850 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, 2011, no commercial papers were outstanding.

Additional financing of up to US$800 million can be provided using the Fresenius Medical Care accounts receivable facility which had been utilized by US$535 million as of December 31, 2011.

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22. Senior Notes

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