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Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
Subsidiary Financing Options Taxes Swedcham 15 04 2010
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Subsidiary Financing Options Taxes Swedcham 15 04 2010

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The objective of our presentation about subsidiary financing is to kick-off an interesting discussion with you as represantatives of the Swedish industry in Brazil about this issue. The presentation …

The objective of our presentation about subsidiary financing is to kick-off an interesting discussion with you as represantatives of the Swedish industry in Brazil about this issue. The presentation includes the possible financing strategy from a company view, which is presented by Daniel Castro, Head of Treasury - Husqvarna Brazil.

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  • 1. Subsidiary Financing - Options & Taxes Husqvarna Brazil - Financing Strategy Study Case Summary ■ Husqvarna brief presentation and history ■ Risk Management and Financial Policies ■ Financing Strategy ■ Cross Border Funding ■ Pricing Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 1
  • 2. Subsidiary Financing - Options & Taxes Husqvarna brief presentation Net Sales 2009: SEK 34 billion (USD 5 billion) Nº of employees: 15.700 World wide presence: +100 countries Major brands: Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 2
  • 3. Subsidiary Financing - Options & Taxes Timeline Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 3
  • 4. Subsidiary Financing - Options & Taxes Timeline Spin Off Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 4
  • 5. Subsidiary Financing - Options & Taxes Risk Management and Financial Policies ■ Liquidity • 2,5% of last 12 months rolling Net Sales • Excess liquidity in interest bearing instruments with high liquidity and with long term rating not below A- (S&P) ■ Borrowings • Long-term borrowings average maturity >2 years • Net Debt/EBITDA < 2,5 on a four quaterly rolling basis ■ Currency risk • Borrowing in foreign currency should be hedged to local currency • Transactional currency risk should be hedged as follow: • 75-100% of forecasted flows up 6 months • 50-75% of forecasted flows between 6-12 months ■ Interest rate risk • % of CDI, or another index in acordance with sales ■ Balance sheet risk • Benchmark equity for each company and currency is calculated on the basis of its total assets less financial assets Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 5
  • 6. Subsidiary Financing - Options & Taxes Risk Management and Financial Policies ■ Financial counterparty risk • Long term rating not below A- (S&P) ■ Credit risk and Bank relations • Meet all the different requirements ■ Operational risk • Treasury shall stipulate routines and regulations to minimize financial related operational risks within respective areas Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 6
  • 7. Subsidiary Financing - Options & Taxes Financing Strategy Since the spin off Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 7
  • 8. Subsidiary Financing - Options & Taxes Intercompany Loan in USD or Cross Border Funding According to Double Taxation Treaty between Sweden & Brazil, Matching 6. +15% Credit in Sweden = 15 % of Interest Interest Swedish Tax Expenses Authorities 4. = 85% Interest Husqvarna + Tax receipts 5. Tax receipts 3. Customs Sweden - 15% of Brazil Interest Brazil 1. MUSD Loan 2. 100% Husqvarna Withholding Tax in Brazil = Interest Brazil 15% of Interest Expenses Payment * Definition of Withholding Tax: Income tax withheld and accounted for by a borrower on interest payments to a non-resident lender. Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 8
  • 9. Subsidiary Financing - Options & Taxes Pricing of intercompany loan / cross border funding One important point of the cross border funding is the hedge cost: USD spot x (1+idom)(n/252) Pre-fixed interest rate Curve USD Forward= (1+iint x n/360) LIBOR Curve Intercompany loan in USD: Interest rate in USD = WACCpc + Parent Company Margin Cross Border funding in USD: Interest rate in USD= LIBOR + Bank Margin Interest rate in BRL = interest rate in USD + hedge cost locally Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 9
  • 10. Subsidiary Financing - Options & Taxes Non-convertible Currency Loans 1. 20 MBRL Loan Agreement with Customer Customer in Brazil 10 2. Day 1: Disbursement M in USD Equivalent 20 MBRL* 20 MBRL* US D* Amount Converted at Brazilian Central Bank Fix via Brazilian Bank & Treasury 10 M 3. Day 90, 180, 360 US (Maturity): BRL to USD D* Brazilian Conversion at Spot Bank = Day 1 Rate = Day 90, 180, 360 * 20 MBRL = 10 MUSD example based on USD:BRL = 1:2 conversion rate Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 10
  • 11. Subsidiary Financing - Options & Taxes Thank you ! Daniel Brandão de Castro Phone: +55 (11) 2133-5074 Mobile: + 55 (11) 8963-2542 E-mail: daniel.castro@husqvarna.com.br Website: http://www.br.husqvarna.com Address: nº 1.400, Avenida Francisco Matarazzo Centro Empresarial Água Branca – CEP 05001-903 Torre Torino – 19º floor – São Paulo – SP – Brazil Husqvarna Brazil Financing Strategy Study Case – Daniel Castro – Financial Committee Swedcham – 15.04.2010 11

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