Consolidated Financial Statements and Consolidated Management ...

Liquidity risk
Exposure to adverse situations in debt or capital markets could hinder or prevent the Group from meeting the financial needs required for its operations and for
implementing its Strategic Plan.
Management of this risk is focused on thoroughly monitoring the maturity schedule of the Group’s financial debt, as well as on proactive management and
maintaining credit lines that allow any cash needs forecast to be met (see Note 30).
The Group’s liquidity position in 2011 is based on the following points:
- The group had cash and cash equivalents amounting to 95,626,000 euros available at 31 December 2011.
- Undrawn credit lines amounting to 22,043,000 euros were available at 31 December 2011.
- The Group’s business units have the capacity to generate cash flow from their operations in a recurrent and significant manner. Cash flow from operations
in 2011 amounted to 132,614,000 euros.
- The Group’s capacity to increase its financial borrowing; given that the financial leverage ratio stood at 0.75 at 31 December 2011 (see Note 16).
On 22 March 2010, NH Hoteles, S.A. entered into an agreement with Banco Bilbao Vizcaya Argentaria, S.A. aimed at increasing liquidity of shares in the subsidiary
company Sotogrande, S.A. and advertising them in the market. Thus, an undertaking was made to respond to purchase orders for shares in the above mentioned
company. Likewise, liquidity and advertising shares will be fostered when there are purchase or sale positions in the market.
Lastly, the Group makes cash position forecasts on a systematic basis for each business unit and geographic area in order to assess their needs. This liquidity
policy followed by the Group ensures payment undertakings are fulfilled without having to request funds at onerous conditions and allows its liquidity position
to be monitored on a continuous basis.
Market risks
The Group is exposed to risks connected with the evolution of the share price in listed companies. This risk is materialised in the remuneration schemes linked to
the listed value of shares in the Parent Company. In order to mitigate this market risk arising from an increase in listed prices, the Group entered into the equity
swap arrangement described in Note 20 of this consolidated annual report. Likewise, Note 19 mentioned above describes the sensitivity analysis of this financial
derivative with regard to changes of +/- 10% in Parent Company shares.
At 31 December 2011, 32% of its financial debt was pegged to a fixed rate (including the syndicated loan) and it had accounts receivable guaranteed through
credit insurance up to a limit of 50 million euros. In addition, the Company does not consider it necessary to implement an interest rate risk mitigation policy, as
its exposure to such risks is low. Nonetheless, it maintains loan agreements in several currencies as a natural hedge (US Dollar and Swiss Franc).
108 REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS