12 Short-term financial liabilities, long-term financial liabilities and short-term portions of long-term financial liabilities

Short-term financial liabilities, amounting to €1,185 million (€1,497 million at 31 December 2016), and long-term financial liabilities, including short-term portions of long-term liabilities totalling €10,019 million (€9,593 million at 31 December 2016), break down as follows:

Short-term financial liabilities

Short-term financial liabilities, amounting to €1,185 million (€1,497 million at 31 December 2016), relate mainly to uncommitted variable-rate credit lines (€1,177 million). The decrease compared with 31 December 2016 (€312 million) is mainly due to net utilisations of uncommitted lines of bank credit (€289 million).

There are no short-term financial liabilities denominated in currencies other than the Euro.

The market value of short-term financial liabilities is the same as their book value.

Long-term financial liabilities and short-term portions of long-term financial liabilities

Long-term financial liabilities, including short-term portions of long-term liabilities, amounted to €10,019 million (€9,593 million at 31 December 2016) including €965 million relating to short-term portions and €9,054 relating to long-term portions.

The increase compared with 31 December 2016, equal to €426 million, is due mainly to the issuing of three bond loans, involving: (i) a bond loan of a nominal amount of €500 million, issued on 25 January 2017 due on 25 January 2025 at a fixed rate; (ii) a variable rate bond loan³⁵ for a nominal amount of €300 million, issued on 21 February 2017 due on 21 February 2022; (iii) an interest-free convertible bond loan for a nominal value of €400 million, issued on 20 March 2017, due on 20 March 2022³⁶. These effects were partly offset by the repayment of a bond loan due on 30 June 2017 for a nominal amount of €506 million, and the repayment of a term bank loan of €200 million.

The breakdown of bond loans (€8,246 million), indicating the issuing company, the year of issue, the currency, the average interest rate and the maturity, is provided in the following table.

Payables for bank loans (€1,772 million) relate to term loans, of which €1,171 million concern European Investment Bank (EIB) funding.

There are no other long-term bank loans denominated in currencies other than the euro.

The weighted average interest rate on bank loans used (excluding loan contracts with the EIB) was 0.28% (0.38% for the first half of 2016).

There were no breaches of loan agreements as at the reporting date.

Snam has unused committed and uncommitted credit lines of €3.2 billion and €1.6 billion, respectively.

Financial covenants and negative pledge commitments

As at 30 June 2017, Snam has unsecured bilateral and syndicated loan agreements in place with banks and other financial institutions. Some of these agreements include, inter alia, compliance with typical international practice commitments, some of which are subject to specific threshold values, such as, for example: (i) negative pledge commitments pursuant to which Snam and its subsidiaries are subject to limitations concerning the pledging of real property rights or other restrictions on all or part of the respective assets, shares or merchandise; (ii) pari passu and change-of-control clauses; and (iii) limitations on certain extraordinary transactions that the Company and its subsidiaries may carry out; (iv) limits on the debt of subsidiaries.

The bonds issued by Snam as at 30 June 2017 provide for compliance with covenants that reflect international market practices regarding, inter alia, negative pledge and pari passu clauses.

Failure to meet these covenants, and the occurrence of other events, for example cross-default events, may result in Snam’s failure to comply and could trigger the early repayment of the relative loan. Exclusively for the EIB loans, the lender has the option to request additional guarantees if Snam’s credit rating is lower than BBB (Standard & Poor’s/Fitch Ratings Limited) or Baa2 (Moody’s) for at least two of the three ratings agencies.

The occurrence of one or more of the aforementioned scenarios could have negative effects on Snam Group’s operations, results, balance sheet and cash flow, creating additional costs and/or liquidity problems. There are no covenants among these commitments that involve compliance with ratios of an economic and/or financial nature.

At 30 June 2017, the financial debt subject to these restrictive clauses amounted to approximately €1.8 billion.

Failure to comply with the covenants established for these loans – in some cases only when this non-compliance is not remedied within a set time period – and the occurrence of other events, such as cross-default events, some of which are subject to specific threshold values, may result in Snam’s failure to comply and could trigger the early repayment of the relative loan.

Bonds, with a nominal value of €8.2 billion, refer mainly to securities issued under the Euro Medium Term Notes programme³⁷. The covenants set for the programme’s securities reflect international market practices and relate, inter alia, to negative pledge and pari passu clauses. Specifically, under the negative pledge clause, Snam and its significant subsidiaries are subject to limitations in relation to the creation or maintenance of restrictions on all or part of their own assets or inflows to guarantee present or future debt, unless this is explicitly permitted.

Failure to comply with these covenants – in some cases only when this non-compliance is not remedied within a set time period – and the occurrence of other events, such as cross-default events, some of which are subject to specific threshold values, may result in Snam’s failure to comply and could trigger the early repayment of the relative loan.

Breakdown of net financial debt

The breakdown of net financial debt, showing related-party transactions, is provided in the following table: