Universal Registration Document 2021

RISKS, LITIGATION, AND CONTROLS RISK FACTORS

INDEBTEDNESS

Risk identification

Risk monitoring and management

The risks related to indebtedness are managed by a close monitoring of the level of the Group’s debt and debt maturity schedule, and the compliance with all covenants and restrictions (including operational restrictions) in the Group’s debt documentation. This monitoring is part of the Group’s management of its liquidity risk. With specific regard to indebtedness, it consists of using the Group’s 13 week and monthly cash forecasts to project future leverage ratios, covenant ratios and respect of scheduled debt maturity payments. The result of this regular monitoring is reported regularly to the Chief Financial Officer, the Audit Committee and the Board of Directors and may lead the Group to take action such as reducing debt levels, refinancing or renegotiating its debt, or raising equity.

At December 31, 2021, the Group had €1,306 million of total gross nominal debt (corresponding to €1,235 million in IFRS, taking into account the fair value adjustment) comprising mainly the “New Money” debt and the “Reinstated Term Loans”, both issued in the framework of the Group’s financial restructuring in 2020, for a total nominal amount of €1,079 million (€1,008 million in IFRS) and lease liabilities for €192 million (see note 8.2 to the consolidated financial statements). The Group has a committed receivables facility with Wells Fargo (the “Committed Receivables Facility”) under which it may borrow up to $125 million on the basis of the amount of receivables available. For further information on the terms of these debt facilities and instruments, see Chapter 2: “Operating and Financial Review and Prospects”, section 2.3.3: “Financial Resources” of this Universal Registration Document and note 8 to the consolidated financial statements. The level of debt may have significant negative consequences for the Group and its shareholders. For example, the terms of its New Money debt require the Group to dedicate a large portion of any net proceeds from disposals, that is not used for reinvestment, towards repayment of outstanding principal, thereby reducing the availability of cash flow for other purposes. In 2021, there were no disposals that required mandatory debt repayment. In addition, the significant level of debt (€1,306 million) relative to the Group’s Free Cash Flow generation (€(100) million in 2021): increases the Group’s vulnerability to adverse general economic • conditions and industry developments; may limit the Group’s flexibility in planning for, or reacting to, • changes in the business and the industries in which the Group operates; may limit the Group’s ability to raise additional debt or equity • capital; may limit the Group’s ability to make strategic acquisitions and take • advantage of business opportunities; and may place the Group at a competitive disadvantage compared to • competitors with less debt. Any of the foregoing could limit the Group’s ability to grow its business. The financial loans documentation of the Group’s USD New Money debt and Reinstated Term Loans as well as its Committed Receivables Facility use the London Interbank Offered Rate (“LIBOR”) as a reference rate. LIBOR is scheduled to be phased out in 2023. When LIBOR ceases to exist, the Group will need to agree upon a replacement index with its lenders and such new rates may not be as favorable as those in effect previously. Failure to manage these risks effectively could adversely affect the financial condition and results of operations of the Group. The financial loans documentation of the Group’s debt as well as its credit facilities includes provisions which limit the Group’s flexibility in operating its business, a breach of which may (in certain cases following the expiration of a grace period) constitute a default hereunder.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2021