Registration document 2007 - Total.com

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Borrowing requirements and funding
structure
The net-debt-to-equity ratio was 34% as of December 31, 2006,
compared to 32% at year-end 2005.
The Group’s policy for long-term debt is to borrow primarily at
variable rates, or at a fixed rate depending on the level of interest
rates at the time, in dollars or in euros based on the Group’s
general needs. Long-term rate and currency swaps may be used
in conjunction with debt issues and bonds to create a synthetic,
variable-rate debt. TOTAL may also enter into long-term interest
rate swaps in order to partially modify the rate structure of its
long-term debt.
Long-term financial debt in dollars are generally contracted for by
the Group’s treasury department, either directly in dollars or in
euros, or in currencies systematically exchanged for dollars or
euros, based on the Group’s general needs, through swaps.
Any bank counterparty with which the Group wishes to work in
market transactions must first be authorized after an assessment
of its financial position and its ratings from Standard & Poor’s and
Moody’s, which must be of high-quality.
An authorized aggregate limit is defined for each bank and
divided among the subsidiaries and the Group’s treasury
department based on needs for financial activities.
Condition for the use of external financing
The total amount of the confirmed lines of credit granted by
international banks to Group companies (including TOTAL S.A.)
was $11,638 million at December 31, 2006 (compared to
$9,978 million at December 31, 2005), $9,268 million of which
has not been used (vs. $8,414 million a year ago).
TOTAL S.A. has confirmed lines of credit granted by international
banks that allow the company to fund a significant cash reserve.
These credit lines totaled $7,701 million at December 31, 2006
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Management Report of the Board of Directors
Liquidity and capital resources
TOTAL – Registration Document 2006
($7,335 million at December 31, 2005), $7,649 million of which
has not been used ($7,293 million a year ago).
The contracts for the lines of credit granted to TOTAL S.A.
contain no provisions that tie the terms and conditions of the
loan to the Company’s financial ratios, to its financial ratings from
specialized agencies, or to the occurrence of events that could
have a material negative impact on its financial position.
The lines of credit granted to Group companies other than
TOTAL S.A. are not intended to finance the Group’s general
needs; they are intended to finance either the general needs of
the borrowing subsidiary or a specific project.
As of December 31, 2005, there was no restriction on the use of
the capital received by the Group’s companies (including TOTAL
S.A.) which could have a direct or indirect material impact on the
Group’s operations.
Anticipated sources of financing
In 2006, investments, working capital, dividend payments and
stock buybacks were financed essentially by the cash flow
generated from operating activities and, to a lesser extent, by
asset disposals and net borrowings.
For the coming years and based on the current financing
conditions, the Company intends to maintain this policy of
financing its investments and activities.