technicolor - 2019 Universal registration document

3 RISKS, LITIGATION, AND CONTROLS RISK FACTORS

Financial risks 3.1.3 GRI [102-15]

LIQUIDITY (CASH FORECASTING)

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Risk identification

Risk monitoring and management

Liquidity risk is the risk of not being able to raise funds to meet future financial obligations. This risk can arise if the Group’s financial position deteriorates limiting its access to financial markets or if suppliers reduce payment terms. In order to identify and quantify this risk the Group has put in place regular cash forecasting, on a short term 13 week basis as well as monthly cash forecasts covering longer periods. This forecasting allows the Group to compare its forecasted liquidity with its forecasted cash needs, in particular working capital requirements, investments and debt repayments. Liquidity risk has materialized due to the deterioration of the Group’s financial position and in particular due to its negative cash flow in 2018 and 2019. This has resulted in an increased liquidity risk for the Group.

To manage this risk, the Group’s treasury management is centralized. The central treasury team manages current and forecasted financing needs and has established policies aimed at securing continued and uninterrupted access to financial markets on reasonable terms. In particular, to meet liquidity needs the Group puts in place confirmed credit facilities and executes borrowings on the banking and financial markets and raises equity in the capital markets. In order to monitor the Group’s liquidity, the treasury department monitors the relative proportion of the Group’s debt and equity, its credit ratings (S&P: B- stable outlook / Moody’s: Caa1 stable outlook), the outlook for the financial markets and it uses the Group’s consolidated cash forecasts to track the ability to meet scheduled debt payments (see note 8.2.3 for the Group’s debt maturity schedule) and other future financing needs and to respect the covenants in its debt documentation. The results of this monitoring are reported regularly to the Chief Financial Officer, the Audit Committee and the Board of Directors. As a consequence of this monitoring the Group determined a need to strengthen its balance sheet and in line with its policies, announced on February 13, 2020, subject to conditions, a comprehensive financing plan including: a €300 million rights issue; • an 18 month extension of the RCF and the Wells Fargo facility; • and a new short-term credit facility in the amount of $110 million. • The successful conclusion of these operations will significantly reduce the Group’s liquidity risk. Nevertheless, the rights issue is subject to regulatory approvals and to market conditions and should it not be successful the Group would need to review other available options to strengthen its balance sheet.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2019