Eurazeo / 2019 Universal Registration Document

Risk management Risk factors

Risks relating to thedebtmarket 4.2.3.3.3

HIGH Risk that changes to the debtmarket worsens theconditions and financing terms of portfoliocompanyacquisitions. Eurazeo'sprivateequitybusinessrequires it to secure LBO debt ( i.e. leverage) to finance part of its acquisitions. In such cases,Eurazeo generally acquires stakes through a holding company formed specially to house the investment, acquired through acquisition financing. Depending on fluctuations in debt marketswhich can retract occasionally, the Companymaybe required to adapt and adjustthemeansof financing its acquisitions. With regard to the financing already in place in olderinvestments,and in viewof the prevailingmarket conditions, teams work upstream atan early stage,dependingon the projectandfinancing maturities, to monitor the renegotiation f financing, the engineering of alternativefinancing sources and/or the preparation of exit timetables (initialpublicofferings,sale, etc.). In early2020, trendsconfirmed a very active market both in Franceandthe United States. The propagation ofCovid-19 andthe uncertainties surrounding its impacts on the globaleconomy have since reversed these trendsandpartially closed the debt markets. Accessing these marketswill be possible onceagain after the crisis has stabilized, although, initially, the termsproposedwill probably be less favorableto issuers. Potentialeffects Increased margins • Limited flexibility ofinancingdocumentation • One-off closureof certain markets • Examples of risk mitigation measures Long finance maturity • Eurazeo team dedicated to financing andmarketmonitoring • Available cash on Eurazeo’s balancesheet • Eurazeo'scounterparty risk with respect to its liquid assets andmarketablesecurities islimited to well-known andrespected banks; its liquid investments are timed in accordance with its projected needs. Notwithstanding these caveats,short-terminvestments mustcomply with limits, reviewed regularly,in termsof bothcreditrisk andthe volatilityof investment supports.Counterpartyrisksare reviewedeachmonth bythe Treasury Committee.Eurazeowasnot affected byany counterparty defaults in 2019. In managingits cashbalances, Eurazeo monitors risk diversification on a permanent basis. Itinvestsits availablecashchiefly in swappable negotiable debt securities, shares of mutualfunds, termaccounts anddemandaccounts. Threelevels ofprudentialrulesaimed at protecting investments from interestrateandcounterpartyrisks (default) have been established: selection ofbanksand issuers(minimumrating ofA2/P2 unless approved by the TreasuryCommittee); • natureof authorizedinvestments; • investment ratio for UCITS: maximum of5%of issuer's outstandings (unless approved by the TreasuryCommittee); • maximum maturityof 6 months(unlessapproved bythe TreasuryCommittee); • liquidityof investments. • Potentialeffects Short-term investments: loss of capital,liquidityissues • Examples of risk mitigation measures Prudentialrulesto select banks/issuers andmaterials • MonthlyCash Committee • Counterparty risk 4.2.3.3.4 MODERATE Eurazeois exposed tocounterparty risk for financialinstitutions(particularly banks) which theyuse for theirfinancing and investment activities.

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2019 UNIVERSAL REGISTRATION DOCUMENT