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PSA Peugeot Citroën (2009)

Half-Year Financial Report 2009 [extract]

17.2. REFINANCING TRANSACTIONS [extract]

– EIB loan

In April 2009, Peugeot Citroën Automobiles S.A. obtained a 400 million 4-year bullet loan from the European Investment Bank (EIB). Interest on the loan is based on the 3-month Euribor plus 179 bps. At June 30, 2009 the government bonds (OATs) given by Peugeot S.A. as collateral for all EIB loans to Group companies had a market value of 160 million. In addition, 4,695,000 Faurecia shares held by Peugeot S.A. were pledged to the EIB as security for the loans. The interest rate risk on the new EIB loan has not been specifically hedged.

This new loan is at a reduced rate of interest. The difference between the market rate of interest for an equivalent loan at the inception date and the rate granted by the EIB has been recognised as a government grant in accordance with IAS 20. The grant was originally valued at 38 million and was recorded as a deduction from the capitalized development costs financed by the loan. It is being amortised on a straight-line basis over the life of the underlying projects. The loan is measured at amortised cost, in the amount of 362 million at June 30, 2009. The effective interest rate is estimated at 5.90%.

This will also affect the manner in which arrangements that are similar in substance to loans are accounted for. Governments sometimes allow entities to retain sums that they collect on behalf of the government (e.g. value added taxes) to be retained until a future event, as in the following example: