MRM - 2018 Registration document

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Risk factors

Market risks – Financial risks

Market risks – Financial risks

2.3

Foreign exchange risk

At the date of this Registration Document, M.R.M. engages in no business which could expose it to any foreign exchange risks.

Interest rate risk

As of 31 December 2018, 85% of the Company’s bank loans were contracted at fixed rates. A 1% rise in interest rates would impact the Group’s financial expenses by €99 thousand. In addition, the Group has an interest-rate cap in place to reduce the interest rate risk on its variable-rate debt. The main characteristics of the Group’s financial instruments are

described in Note 4.8 to the consolidated financial statements for the financial year ended 31 December 2018, presented in Section 3.7 of this Registration Document. As such, as of 31 December 2018, 70% of variable-rate bank debt was hedged by way of an interest rate cap (based on the 3-month Euribor at a strike rate of 1.25%).

Liquidity risk

These covenants define the thresholds to be respected for a number of ratios, in particular the LTV ratio (loan to value ratio), defined as the ratio of the amount of the loan to the market value of the property financed, the ICR ratio (interest coverage rate, representing the coverage rate of interest expenses by rents) and the DSCR (debt service coverage ratio, representing the coverage rate of debt repayments and interest expenses by rents). Covenants relating to the LTV ratios set maximum thresholds of between 47.3% and 65%. Covenants relating to ICR and DSCR ratios set minimum thresholds of between 130% and 300%. It is at the level of Group subsidiaries, which own the property assets financed, that the covenants are tested. The frequency of reporting on covenants to M.R.M.’s financial partners differs for the various credit lines, and can be quarterly, half-year or annual. As of 31 December 2018, the Group complied with all commitments in respect of the LTV, ICR and DSCR covenants agreed with its banking partners. All of the Group’s financial liabilities, by nature and expiry date, are set out in Note 4.12 to the consolidated financial statements presented in Section 3.7 of this Registration Document.

The Company performed a special study of its liquidity risk and it considers that it can meet its current obligations. In fact, following the Company’s recapitalisation in May 2013, which was conditional on restructuring the Group’s bank and bond liabilities, its financial position is sound, its level of debt is considerably lower and its cash flow is healthy again. As a result of the aforementioned capital and financial restructuring, the Company is now in a position to meet all of its short-term and medium-term financial deadlines. The Company’s level of leverage could affect its capacity to take out further loans. The Group’s liquidity policy is to ensure that the total amount of rents is at all times higher than its working capital requirements to cover operating expenses, interest and repayment of its entire existing debt and the leverage it seeks to implement its investment programme. Certain loan agreements entered into or that may be entered into by the Group or its subsidiaries contain or may in the future contain standard early repayment clauses and covenants.

M.R.M. 2018 REGISTRATION DOCUMENT

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