110
29.- EVENTS AFTER THE REPORTING PERIOD
On 2 February 2015 the conditions were met for the effectiveness of the binding agreement signed by NH Hotel Group, S.A. to acquire a majority
stake, representing 80.77% of the share capital, in Hoteles Royal, S.A. (“HR”), a Colombian entity which is the head company of the Latin American
hotel management group Hoteles Royal, present mainly in Colombia, Chile and Ecuador.
As part of the agreements reached with the vendors, NH undertook to make an offer to buy the remaining 19.73% share capital of HR from the other
shareholders. The offer made was substantially similar to the terms agreed by NH and the vendors of 80.77% of the share capital of HR.
As a result of this operation, and after the recent sale in Colombia of the hotel NH Bogotá Parque 93 in January 2015, NH has strengthened its
presence in these countries, going from 2 to 21 hotels, and from 259 to 2,379 rooms under management.
The net amount to be paid for 100% of the share capital of HR, discounting the €21.5 million received for the sale of the NH Bogotá Parque 93, is
€65.6 million, of which (i) €48.18 million will be paid directly by NH on the formal acquisition of the shares (“Closing Date”) and financed with part of
the funds obtained from the sale of Sotogrande in November 2014; and (ii) €17.42 million will be deferred, to be paid over two years from the Closing
Date, while also being retained as security, as is customary in this type of transaction.
The conditions which were met for the binding agreement mentioned above to become effective include an agreement between NH, the Carlson
Rezidor Hotel Group and the HR Group, in which the HR Group and Carlson Rezidor agree, among other matters, to dissolve the master franchise
agreement which initially granted a subsidiary in the HR Group the exclusive franchise rights to the Radisson brand until 2018 for much of Latin
America, and to dissolve the international franchise contracts of most of the hotels that had been managed by the HR Group under the Radisson
brand which would remain in HR and be managed in the future under NH brands.
The Closing Date was on 4 March 2015, which was object of the appropriate communication to the market. The Group has yet to allocate the
difference on first consolidation, which will be significantly affected by the exchange rate.
These operations give NH a more appropriate presence in Colombia, and consolidate a substantial presence in certain markets it has identified as
priority markets, acquiring the management of assets in excellent locations, and making considerable progress towards the goals of its Strategic
Plan.
30.- INFORMATION ON ENVIRONMENTAL POLICY
The Group had not allocated any provisions for environmental contingencies and claims at year-end 2014.
The Group has no activities which require specific information to be shown in the environmental policy.
The environmental policy expressed through the management of the water cycle in the Sotogrande residential complex and its surrounding area,
which included waste water treatment in order to minimise environmental impact, is no longer associated with the Group due to the sale of
Sotogrande S.A.
31.- EXPOSURE TO RISK
The Group financial risk management is centralised at the Corporate Finance Division. This Division has put the necessary measures in place to
control exposure to changes in interest and exchange rates on the basis of the Group’s structure and financial position, as well as credit and liquidity
risks. If necessary, hedges are made on a case-by-case basis. The main financial risks faced by the Group’s policies are described below:
Credit risk
The Group’s main financial assets include cash and cash equivalents (see Note 14), as well as trade and other accounts receivable (see Note 13). In
general terms, the Group holds its cash and cash equivalents in entities with a high credit rating and part of its trade and other accounts receivable
are guaranteed by deposits, bank guarantees and advance payments by tour operators.
The Group has no significant concentration of third-party credit risk due to the diversification of its financial investments as well as to the distribution
of trade risks with short collection periods among a large number of customers.
Interest rate risk
The Group’s financial assets and liabilities are exposed to fluctuations in interest rates, which may have an adverse effect on its results and cash flows.
In order to mitigate this risk, the Group has established policies and has refinanced its debt at fixed interest rates through the issuance of convertible
bonds and guaranteed convertible senior notes. At 31 December 2014, approximately 65% of the gross borrowings was tied to fixed interest rates.
In accordance with reporting requirements set forth in IFRS 7, the Group has conducted a sensitivity analysis on possible interest-rate fluctuations
in the markets in which it operates, based on these requirements. In November 2013, the Group closed its debt refinancing process by issuing
convertible bonds, guaranteed senior notes and a new syndicated loan, together totalling €700 million (Note 16).
Aside from the impact any changes in the interest rates could have on the financial assets and liabilities forming the net cash position, changes
could arise in the valuation of the financial instruments contracted by the Group. The effects of changes in the interest rates on efficient derivatives
are recognised in equity, while the effects of inefficient derivatives are recognised in the consolidated comprehensive profit and loss statement. The
Group has chosen to exclude the temporary value of designating hedges in order to improve their efficiency.
Lastly, the long-term financial assets set out in Note 11 of this annual report are also subject to interest-rate risks.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
