3 Financial position
GFKL Financial Services AG’s capital stock amounted to € 17.6 million as of the balance sheet date, remaining unchanged from the previous year’s reference date.
GFKL Financial Services AG handles central financing for the subsidiaries. GFKL Financial Services AG’s net borrowing during the reporting period included loans with a term of more than one year corresponding to a total of € 80 million. These comprise € 85 million of borrowed funds and the repayment of a single loan amounting to € 5 million.
The GFKL Group’s refinancing strategy differentiates between financing the leasing business and financing own investments and goods/services for operations. Because of the size of the leasing portfolio generated by its subsidiaries, the company is able to securitize its receivables via securitization vehicles comprising part of Asset-Backed Commercial Paper programs (ABCP programs) and/or ABS bonds. This basis is now also used to securitize receivables portfolios in the collection segment. In addition, the company holds general agreements relating to block forfeiting and various credit lines as well as emitting promissory note bonds. In this way, GFKL has been able to cut refinancing costs in recent years. Moreover, the holding company makes use of bilateral credit agreements, the funds from which serve to finance portfolio purchases for transfer to the subsidiaries (intercompany loans) and company acquisitions.
A large proportion of refinancing is carried out via ABS transactions and ABCP programs. GFKL has been participating in various ABCP programs since 2001. At present, there are four ABCP programs with a total refinancing volume of € 666.4 million as of December 31, 2007: the Compass program with WestLB, Tulip with the ABN AMRO Bank N.V., Acorn with the Royal Bank of Scotland and Galleon with State Street Global Market LLC. In March 2005, GFKL also emitted an ABS bond, “Fast 2005”, with an original total volume of € 450 million; as of December 31, 2007, a refinancing volume of approximately € 297.0 million had been utilized.
As regards real sales of receivables to credit institutions, the loan default risk is assumed by the purchasing credit institution. Only the false debt risk, i.e. the risk associated with the legal validity of the receivable, is retained by the leasing company. In connection with these receivables transfers, GFKL is therefore generally responsible for the existence and continued existence of the transferred receivables, the transferability of the receivables and for them being unencumbered by lessee or third-party rights. Moreover, GFKL is financing the acquisition of three portfolios of non-performing receivables by means of sale without recourse to Compass Exporec Limited, a purchase company managed by WestLB AG.
During the period under review, the reassessment of risks associated with securitized subprime US property loans (subprime crisis) only affected GFKL by bringing about moderate increases in the cost of refinancing via Commercial Paper programs. Considering the company’s refinancing situation as a whole, the consequences of these events were therefore limited.
