Registration document 2007 - Total.com
Registration document 2007 - Total.com
Registration document 2007 - Total.com
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3<br />
Borrowing requirements and funding<br />
structure<br />
The net-debt-to-equity ratio was 34% as of December 31, 2006,<br />
<strong>com</strong>pared to 32% at year-end 2005.<br />
The Group’s policy for long-term debt is to borrow primarily at<br />
variable rates, or at a fixed rate depending on the level of interest<br />
rates at the time, in dollars or in euros based on the Group’s<br />
general needs. Long-term rate and currency swaps may be used<br />
in conjunction with debt issues and bonds to create a synthetic,<br />
variable-rate debt. TOTAL may also enter into long-term interest<br />
rate swaps in order to partially modify the rate structure of its<br />
long-term debt.<br />
Long-term financial debt in dollars are generally contracted for by<br />
the Group’s treasury department, either directly in dollars or in<br />
euros, or in currencies systematically exchanged for dollars or<br />
euros, based on the Group’s general needs, through swaps.<br />
Any bank counterparty with which the Group wishes to work in<br />
market transactions must first be authorized after an assessment<br />
of its financial position and its ratings from Standard & Poor’s and<br />
Moody’s, which must be of high-quality.<br />
An authorized aggregate limit is defined for each bank and<br />
divided among the subsidiaries and the Group’s treasury<br />
department based on needs for financial activities.<br />
Condition for the use of external financing<br />
The total amount of the confirmed lines of credit granted by<br />
international banks to Group <strong>com</strong>panies (including TOTAL S.A.)<br />
was $11,638 million at December 31, 2006 (<strong>com</strong>pared to<br />
$9,978 million at December 31, 2005), $9,268 million of which<br />
has not been used (vs. $8,414 million a year ago).<br />
TOTAL S.A. has confirmed lines of credit granted by international<br />
banks that allow the <strong>com</strong>pany to fund a significant cash reserve.<br />
These credit lines totaled $7,701 million at December 31, 2006<br />
70<br />
Management Report of the Board of Directors<br />
Liquidity and capital resources<br />
TOTAL – <strong>Registration</strong> Document 2006<br />
($7,335 million at December 31, 2005), $7,649 million of which<br />
has not been used ($7,293 million a year ago).<br />
The contracts for the lines of credit granted to TOTAL S.A.<br />
contain no provisions that tie the terms and conditions of the<br />
loan to the Company’s financial ratios, to its financial ratings from<br />
specialized agencies, or to the occurrence of events that could<br />
have a material negative impact on its financial position.<br />
The lines of credit granted to Group <strong>com</strong>panies other than<br />
TOTAL S.A. are not intended to finance the Group’s general<br />
needs; they are intended to finance either the general needs of<br />
the borrowing subsidiary or a specific project.<br />
As of December 31, 2005, there was no restriction on the use of<br />
the capital received by the Group’s <strong>com</strong>panies (including TOTAL<br />
S.A.) which could have a direct or indirect material impact on the<br />
Group’s operations.<br />
Anticipated sources of financing<br />
In 2006, investments, working capital, dividend payments and<br />
stock buybacks were financed essentially by the cash flow<br />
generated from operating activities and, to a lesser extent, by<br />
asset disposals and net borrowings.<br />
For the <strong>com</strong>ing years and based on the current financing<br />
conditions, the Company intends to maintain this policy of<br />
financing its investments and activities.