28.1 Borrowings

Borrowings as at December 31st 2012, by currency and by maturity

Borrowings as at December 31st 2011, by currency and by maturity

Repayment of the above facilities is secured with:

• power of attorney over bank accounts
• registered pledge over bank accounts
• registered pledge over inventories
• registered pledge over existing and future movables
• mortgage
• transfer of title to property, plant and equipment
• assignment of rights under inventory insurance agreement
• assignment of rights under inventory storage agreements
• assignment of rights to compensation from the State Treasury due in the event of the requirement to sell stocks below market price
• assignment of rights under agreements for the implementation and management of the 10+ Programme
• assignment of rights under insurance agreements relating to the Gdańsk refinery
• assignment of licence agreements
• assignment of agreements for sale of products
• assignment of rights under oil sale contracts
• shares in subsidiaries
• representation on voluntary submission to enforcement
• blank promissory note
• bank guarantees

The credit facilities bear interest based on:

• 1M, 3M or 6M LIBOR (USD), depending on the interest period selected at a given time - in the case of USD-denominated facilities,
• 1M or 3M EURIBOR - in the case of EUR-denominated facilities,
• O/N, 1M or 3M WIBOR - in the case of PLN-denominated facilities.

The bank margins applicable to the contracted facilities are within the range of 0.30pp. – 4.00pp.

As at December 31st 2012, the average effective interest rate for the USD- and EUR-denominated facilities was approximately 2.47 % (2.44% as at December 31st 2011). The average effective interest rate for PLN-denominated facilities (excluding the syndicated facilities of the Parent) was approx. 4.81 % (5.81% as at December 31st 2011).

Borrowings by lender

Bank borrowings contracted by the Parent

As at December 31st 2012, the amount drawn by the Company (in nominal terms) under the investment facilities granted by Bank Syndicate (2) and  Bank Syndicate (3) was USD 1,423.7m  (PLN 4.412,8 m, translated at the USD/PLN mid-exchange rate quoted by the National Bank of Poland for December 31st 2012). As at December 31st 2011, it was  USD 1,510.6 (PLN 5,162.4m translated at the USD/PLN mid-exchange rate quoted by the National Bank of Poland for December 31st 2011).

The working capital facility was made available to Grupa LOTOS S.A. by Bank Syndicate (4) in the form of overdraft facilities which are used by the Company on an as-needed basis.

On October 10th 2012, Grupa LOTOS S.A. entered into a facility agreement for the refinancing and financing of inventories with a syndicate of five banks (Bank Syndicate (7)), comprising:

• Pekao S.A. of Warsaw,
• BRE Bank S.A. of Warsaw,
• ING Bank Śląski S.A. of Katowice,
• Nordea Bank AB of Stockholm,
• Société Générale S.A of Paris,

The agreement provides for a revolving credit facility of up to USD 400m (PLN 1,268m, translated at the USD/PLN mid-exchange rate quoted by the National Bank of Poland for October 10th 2012). The agreement was concluded to refinance the previous inventory-financing facility under an agreement of December 20th 2007, as amended, executed with a syndicate of four banks (Bank Syndicate (1)), comprising:

• Pekao S.A. of Warsaw,
• PKO BP S.A. of Warsaw,
• BRE Bank S.A. of Warsaw,
• Nordea Bank Polska S.A. of Gdynia.

As at December 31st 2012, the amount drawn under the credit facility for the refinancing and financing of inventories, advanced by Bank Syndicate (7), amounted to USD 300m ( PLN 929.9m, translated at USD mid-exchange rate quoted by the National Bank of Poland for December 31st 2012). The amount was applied towards repayment of another credit facility advanced by Bank Syndicate (1), by way of settlements between the banks.  The remaining amount of USD 100m was repaid with funds of Grupa LOTOS S.A., which resulted in the recognition of a PLN 313.6m outflow in the consolidated statement of cash flows, under cash flows from financing activities.

In connection with the credit facilities referred to under  Bank Syndicate (2), Bank Syndicate (3), Bank Syndicate (4) and Bank Syndicate (7), as described above, Grupa LOTOS S.A. is required to meet a covenant of maintaining the Tangible Consolidated Net Worth at least at the level specified in the facility agreements.

In addition, in connection with the facility referred to under Bank Syndicate (7), the Company is also required to meet a financial covenant of maintaining the Loan to Pledged Inventory Value Ratio at a level not higher than specified in the facility agreement.

As at December 31st 2012 and December 31st 2011, the covenants were complied with.

28.2 Notes

In the year ended December 31st 2012, LOTOS Asfalt Sp. z o.o. issued short-term bearer notes under the Note Programme Agreement of July 27th 2010.

As part of the Note Programme, LOTOS Asfalt Sp. z o.o. may carry out numerous notes issues. The company's total liabilities under notes outstanding at any given time may not exceed PLN 300,000 thousand (based on the nominal value of the notes). The term of the programme is five years. The notes are denominated in the Polish złoty and are offered in private placements. The notes are issued as unsecured zero-coupon bearer notes in book-entry form and are redeemed at nominal values.

The issued notes were acquired by third-party investors as well as by the Group companies. The nominal value of notes issued to investors outside the Group in the years ended December 31st 2012 and December 31st 2011 is presented below:

In the year ended December 31st 2012, the proceeds from the notes issued by the Group to investors outside the Group were PLN 362,393 thousand, net of the issue expenses (December 31st 2011: PLN 572,752 thousand). In the year ended December 31st 2012, the Group's expenditure on redemption of the notes amounted PLN 364,000 thousand (December 31st 2011: PLN 628,000 thousand).

28.3 Finance lease liabilities

The Group uses finance leases to finance primarily rolling stock assets.