Annual Review 2012 - Luxottica

Consolidated financial statements - NOTES
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f) Default risk: negative pledges and financial covenants
The financing agreements of the Group (see note 21) require compliance with negative
pledges and financial covenants, as set forth in the respective agreements, with the
exception of our Bond issues dated November 10, 2010 and March 19, 2012, which require
compliance only with negative pledges.
With regard to negative pledges, in general, the clauses prohibit the Company and
its subsidiaries from granting any liens or security interests on any of their assets in
favor of third parties without the consent of the lenders over a threshold equal to 30
percent of the Group consolidated stockholders’ equity. In addition, the sale of assets
of the Company and its subsidiaries is limited to a maximum threshold of 30 percent
of consolidated assets.
Default with respect to the above mentioned clauses - and following a grace period
during which the default can be remedied - would be considered a material breach of the
contractual obligations pursuant to the financing agreement of the Group.
Financial covenants require the Group to comply with specific levels of financial ratios. The
most significant covenants establish a threshold for the ratio of net debt of the Group to
EBITDA (Earnings before interest, taxes, depreciation and amortization) as well as EBITDA
to financial charges and priority debt to share equity. The covenants are reported in the
following table:
Net Financial Position/Pro forma EBITDA
EBITDA/Pro forma financial charges
Priority Debt/Share Equity
5 x