Group financial review continued
Liquidity and cash flows
Overview
Business review Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
A significant number of union employees
in the United States are covered by multi
employer plans. With the help of external
actuaries, we have updated the most recent
available information that these plans
have provided (generally as of January
1, 2015) for market trends and conditions
through the end of 2016. We estimate our
proportionate share of the total net deficit
to be $910 million (€865 million) at year-end
2016 (2015: $873 million or €804 million).
These amounts are not recognized on our
balance sheet. While this is our best estimate
based on the information available to us, it is
imprecise and not necessarily reliable. For more
information see Note 23 to the consolidated
financial statements.
Our defined benefit plans showed a net deficit
of €659 million at year-end 2016 compared
to a net deficit of €389 million at year-end
2015. This increase was primarily driven by a
€473 million loss due to changes in financial
assumption and a €150 million increase due
to the merger with Delhaize Group. This was
partially offset by the positive investment
results on the plan assets.
Liquidity
Ahold Delhaize views available cash balances
and funds from operating activities as its
primary sources of liquidity, complemented
with access to external sources of funds when
deemed to be required. Ahold Delhaize
manages short-term liquidity based on
projected cash flows. As of January 1, 2017,
the Company’s liquidity position primarily
consisted of €3,134 million of cash (including
short-term deposits and similar instruments
and current portion of assets available-for-
sale, adjusted for cash held under a notional
cash pooling arrangement), and the fully
undrawn €1 billion revolving credit facility.
Based on the current operating performance
and liquidity position, the Company believes
that cash provided by operating activities
and available cash balances will be sufficient
for working capital, capital expenditures,
interest payments, dividends and scheduled
debt repayment requirements for the next
12 months and the foreseeable future.
Group credit facility
Ahold Delhaize has access to a €1.0 billion
committed, unsecured, multi-currency and
syndicated credit facility that was amended
and extended in February 2015, whereby the
Company reduced the size of the credit facility
from €1.2 billion to €1.0 billion (providing for
the issuance of $275 million in letters of credit).
At the same time, the facility was extended
to 2020 with two potential extensions after 12
and 24 months that would take the facility to
2021 and 2022 respectively. In February 2016,
the first extension was successfully agreed with
the lenders. In February 2017, the Company
requested that the lenders consent to a
second extension.
As of January 1, 2017, a standby letters of
credit facility for a total amount of $226 million
(€214 million) was issued and fully drawn to
guarantee self-insurance-related obligations.
The credit facility contains customary
covenants and is subject to a financial
covenant that requires Ahold Delhaize, in the
event that its corporate rating from Standard
Poor’s and Moody’s is lower than BBB
Baa2, respectively, not to exceed a maximum
leverage ratio of 4.0:1. During 2015 and 2016,
the Company was in compliance with these
covenants. As of January 1, 2017, there were
no outstanding borrowings under the facility.
Delhaize Group’s €400 million committed
credit facility was terminated as a result of
the merger.
Credit ratings
Maintaining solid investment grade credit
ratings is a cornerstone of Ahold Delhaize’s
strategy because such ratings serve to
lower the cost of funds and facilitate
access to a variety of lenders and markets.
Ahold Delhaize’s current credit ratings from
the solicited rating agencies are as follows:
Standard Poor’s: corporate credit rating
BBB with a stable outlook as of June 2009
(previous rating BBB- assigned in 2007)
Moody’s: issuer credit rating Baa2 as of
August 2015 (previous rating Baa3 assigned
in 2007). The outlook was revised from
stable to positive in August 2016
