Annual report (20-F) - Ono

needed before commercial launch of services. We estimated a different prematurity period for each
franchise depending on the size of that franchise area, density of population and planned network rollout
period.
As a consequence of the changes occurring in the telecommunications sector, as well as changes
in the circumstances of the Group, particularly at the end of year 2002, and considering our intention to
converge over time with International Financial Reporting Standards, we modified the accounting criteria
related to the depreciation of start-up costs during the year 2002, writing them off completely. This
change in accounting criteria resulted in an extraordinary charge of €139.9 million in 2002.
Impairment of assets
We evaluate the carrying value of all assets whenever events or circumstances indicate the
carrying value of assets may exceed their recoverable amounts. An impairment loss is recognized when
the estimated future cash flows expected to result from the use of an asset are less than the carrying value
of the asset.
B. Liquidity and Capital Resources
Our liquidity requirements arise primarily to meet our ongoing debt service obligations and to
fund our planned network build-out, working capital requirements and expected operating losses until the
time when we expect to achieve positive cash flow. We do not expect to achieve positive cash flow before
the end of 2006. Our principal source of funds is our cash flow from operations. In addition to cash flow
from our operating activities, our other sources of liquidity include short and long term debt facilities and
cash on hand. Subject to no material changes in our operations or in our operating environment, we
believe that our sources of funding will be sufficient to fund our liquidity requirements.
As of December 31, 2004 our total indebtedness was approximately €1,164.1 million. In
addition, we had available but undrawn funds of approximately €105.0 million and cash on hand of
approximately €4.1 million. We expect to incur additional indebtedness principally from drawdowns
under the 2005 senior bank facility to fund net losses (including, as necessary, interest on the 2005 senior
bank facility itself) and the build-out of our networks. The following table sets forth amounts available to
us but un-drawn as at December 31, 2004:
Source of financing
Amount available
(euro in
millions)
2001 senior bank facility 105.0
Other credit facilities 4.4
Total amount available 109.4
In February 2005, as part of our refinancing transactions, we entered into the 2005 senior bank
facility. The 2005 senior bank facility refinanced the 2001 senior bank facility and increased our financial
flexibility and the amount of funds that we can apply to the continued build-out of our network and the
development of our business.
Our Refinancing Transactions
In 2004, we started a series of transactions (the “Refinancing Transactions”), in order to extend
the maturity of our financing agreements, delay the commencement of debt amortizations, reduce our
interest burden and our foreign exchange risk exposure and gain financial flexibility.
1. During April and May 2004, ONO Finance accomplished the refinancing of part of its
debt relating to its 2009 Notes and the 2011 Notes together with the issue of the 2014
Notes. As part of these transactions:
• ONO Finance announced the Tender Offer on April 16, 2004. The final amount
of 2009 and 2011 Notes finally tendered and redeemed was (i) 75,095 2009
USD
Notes (81.5% of the outstanding 92,098 2009 USD Notes), (ii) 44,483 2009
EUR Notes (97.5% of the outstanding 45,628 2009 EUR Notes), (iii) 24,594
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