Insuring the balance sheet

DACT Treasury Beurs

Noordwijk

November 5th, 2009

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Contents

• Setting the scene

• Options

• Receivables solution

• Q&A

• Lessons learned

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Setting the scene

• Take over of Vedior

• EUR 2.7 bn 5 year syndicated facility• 1 covenant: leverage below 3.5

• 31 banks

• Sharp decline in EBITDA due to downturn, future uncertain• LTM EBITDA 2008Q3: EUR 1,000 mio

• LTM EBITDA 2009Q3: EUR 500 mio

• Conservative leverage policy• Internal policy: Leverage below 2

• Zero risks on breach syndicated facility

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What were we looking for?

• Secure solution• No umbrella for sunny days

• At least 12 moths, preferably up to 18-24 months

• Cost effective solution• Should be significantly less expensive than a covenant breach

• Standby solution / option on solution• Possibility of ever needing it was and is very small

• For receivables: avoiding operational hassle and transfer of credit risk

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Options considered• Cash flow improvements

• Dividend 2008 skipped

• VAT relief in the Netherlands

• Return of EUR 175 mio in Corporate Income Tax

• Temporary relief of covenant• Very hard to achieve at reasonable costs and conditions

• Selling assets• Other than small divestments and receivables no significant assets on our balance sheet

• Equity issue• Expensive

• Very hard to get on “standby” basis

• Permanent solution for temporary problem

• Subordinated (convertible) debt• Very hard to get on “standby” basis

• Expensive

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Receivables solution

• Things to consider

• What made it easier and harder for Randstad?

• Off balance under IFRS

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Things to consider (I)

• Do you want to inform the clients?• At time of selling

• When overdue for a certain amount of time

• Do you want the money to be paid into your bank accounts?• Pledge of accounts

• Percentage risk coverage• 100% makes it very straightforward (also for IFRS) but also more expensive

• Higher percentage increases available amount

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Things to consider (II)

•Dilution• Disputes, discounts etc

•Right versus obligation to sell (once in active phase)

• How do you control counterparty limits/eligable debtors?• Especialy when a credit insurer is involved/needed

• Termination clauses

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What made it easier for Randstad?• Single country and single currency strategy

• Belgium has friendly legislation on this subject

• NL, GE, and UK also

• Diversified portfolio with very limited concentration risk

• Standardized procedure • Use of shared service center

• Selling entity has very strong balance sheet• Commingling risk

• Dilution risk

• Solid banking partners with long relations• Trust factor

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What made it harder for Randstad?• Commitment for longer period

• Right to sell / obligation to buy

• Standby mode• Pricing for extremely unsure situation

• Preference for dealing with only one counterparty

• Selling including VAT• Especially with credit-insurers

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Off balance under IFRS

• Transfer of significantly all risks and rewards• Credit risk

• Late payment risk

• Claw backs• Objective formulas

• Company has right to terminate

• Dilution

• Changes in IFRS are expected• Control based vs risk/rewards based?

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Questions

• Please feel free to ask

BUT

• Please respect that have agreed with our banks that we will not discuss pricing levels

• Please respect that we are not at liberty to disclose all elements of the agreement

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Lessons learned

• Allow sufficient time• Especially when off balance is desired

• Involve internal and external parties early in the process• Accounting, legal, tax, (local) operations, credit mgt dept, auditors, legal advisors

• Selling receivables (off balance) is not just a variation of borrowing with collateral

• Make sure that when a word or definition is used everybody understands the same thing

• Be aware that it is very hard to cater for all situations and exceptions in the contract