NOTE F18 Proceeds from bond issuance classified as equity and capital increase
- 12 NOTE F12 Depreciation, amortization and impairments
- 13 NOTE F13 Other non-operating and non-cash items
- 14 NOTE F14 Income taxes
- 15 NOTE F15 Changes in working capital
- 16 NOTE F16 Changes in provisions
- 17 NOTE F17 Cash flows from investing activities – acquisition/disposal of assets and investments
- 18 NOTE F18 Proceeds from bond issuance classified as equity and capital increase
- 19 NOTE F19 Other cash flows from financing activities
- 20 NOTE F20 Cash flow from discontinued operations
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issuance of new share capital are directly recognized in equity as a deduction, net of tax, from the equity issuance proceeds.
The reserves include:
- treasury shares;
- perpetual hybrid bonds that qualify as equity absent any unavoidable contractual obligation to repay the principal and interest of the perpetual hybrid bonds (no maturity, interest is payable annually but can be deferred indefinitely at the issuer’s discretion);
- retained earnings;
- impact of hyperinflation accounting;
- currency translation differences from the consolidation process relating to the translation of the financial statements of foreign operations prepared in a functional currency other than the euro;
- the impacts of the fair value remeasurement of available-for-sale financial assets;
- the impacts of the fair value remeasurement of financial instruments documented as hedging instruments in cash flow hedges; and
- actuarial gains and losses related to defined benefit plans.
These represent the share of non-controlling interests in the net assets and comprehensive income of subsidiaries of the Group. This share represents the interests in subsidiaries that are not held by the Company or its subsidiaries.
To strengthen its capital structure, Solvay issued undated deeply subordinated perpetual bonds (“perpetual hybrid bonds”) of respectively € 1.2 billion in 2013 following the acquisition of Chemlogics and € 1.0 billion (net of issuance costs € 991 million) in December 2015 to finance the acquisition of Cytec.
Both perpetual hybrid bonds are classified as equity in the absence of any unavoidable contractual obligation to repay the principal and interest of the perpetual hybrid bonds, specifically:
- no maturity, yet the issuer has a call option at every reset date to redeem the instrument;
- at the option of the issuer, interest payments can be deferred indefinitely.
The coupons related to the perpetual hybrid bonds are recognized as equity transactions and are presented as dividends upon declaration (see consolidated statement of changes in equity):
- amounting to € 57 million in 2016 (€ 57 million in 2015) for the 2013 € 1.2 billion issuance (€ 700 million NC5.5 at 4.199% and € 500 million NC10 at 5.425%); and
- amounting to € 27 million in 2016 for the December 2015 € 1.0 billion issuance. It corresponds to the first payment of coupon made in June 2016. Every payment in June thereafter will amount to € 55 million until first call options (€ 500 million NC5.5 at 5.118% and € 500 million NC8.5 at 5.869%).
If Solvay has deferred any interest under the terms of the perpetual hybrid bonds, such deferred interest shall become due upon the declaration or payment of any dividend to the holders of ordinary shares.
In December 2015, Solvay increased its capital by € 1.5 billion (net of equity issuance costs paid at December 31, 2015 € 1,477 million), issuing 21,175,283 new shares at € 70.83 per share with preference rights. This rights issue was launched to complete the financing of the Cytec acquisition.