NOTES TO THE FINANCIAL STATEMENTS CONTINUED S S 23 FINANCIAL INSTRUMENTS TR23 FINANCIAL INSTRUMENTS CONTINUED TR Group A Borrowings A The Group's principal financial instruments comprise cash and cash equivalents, Senior Secured Notes (“SSNs”), a Revolving Credit Facility (“RCF”), a finished TEThe following table analyses Group borrowings: TE G G I I vehicle financing facility, a bilateral RCF, loan assets, derivative options, and forward currency contracts. Additionally, the Group has trade payables and C C trade receivables which arise directly from its operations. Included in trade and other payables is a liability relating to an inventory repurchase arrangement. R2023 2022 R £m £m E E These short-term assets and liabilities are included in the currency risk disclosure. The main risks arising from the Group's financial instruments are credit PCurrent P O O risk, interest-rate risk, currency risk and liquidity risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk R R management framework. The Group's risk policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and TBank loans and overdrafts 89.4 107.1 T controls, and monitor adherence to limits. The Board of Directors oversees how management monitor compliance with the Group risk management policies Non-current Senior Secured Notes 980.3 1,104.0 and procedures and reviews the adequacy of the risk management framework in relation to specific risks faced by the Group. G G O Total borrowings 1,069.7 1,211.1 O Credit risk VE VE The Group sells vehicles through a global dealer network. Dealers outside of North America are required to pay for vehicles in advance of their despatch or R R use the wholesale financing scheme (see note 18). Credit risk on receivables purchased by CAAB under the wholesale finance facilities is borne by CAAB. NANTotal borrowings are denominated in the following currencies, in sterling at the year-end exchange rates: NAN The Group has no credit risk associated with the CAAB facility. The Group’s remaining vehicle sales to territories where there is currently no wholesale C 2023 2022 C financing are made on credit terms ranging from 30 to 180 days. The Group manages the default risk of such sales via a credit risk insurance policy. Dealers E £m £m E within North America are allowed ten-day credit terms from the date of invoice. In certain circumstances, after thorough consideration of the credit history Sterling 89.4 107.1 US dollar 980.3 1,104.0 of an individual dealer, the Group may sell vehicles outside of the credit risk insurance policy or on deferred payment terms. Parts sales, which represent a F F I I smaller element of total revenue, are made to dealers on net 30-day credit terms. Servicing receivables are due for payment on collection of the vehicle. NANTotal borrowings 1,069.7 1,211.1 NAN Trade and other receivables are only written off when the Group has exhausted all options to recover the amounts due and provided for in full when there is C C no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, among others, the failure of the debtor to IALCurrent borrowings IAL engage in a repayment plan with the Group and a failure to make contractual payments. An expected credit loss provision is then calculated on the SThe Group has a RCF attached to the SSNs (see Non-current borrowings below). The carrying amount net of unamortised arrangement fees included in S T T remaining trade and other receivables. The expected credit loss related to default of other receivables (note 18) is assessed as zero. Acurrent borrowings relating to the RCF at 31 December 2023 was £89.4m (2022: £77.1m). At 31 December 2023 £90.0m of the £99.6m RCF was drawn as A T T E cash (2022: £78.5m of the £90.6m facility). E In generating the expected credit loss provision for trade receivables, historical credit loss rates for the preceding five years are calculated, including M M E E N At 31 December 2022, the Group had entered into a bilateral revolving credit facility with HSBC Bank plc (“HSBC”), whereby Chinese Renminbi were N consideration given to future factors that may affect the ability of customers to settle receivables, and applied to the trade and other receivable ageing T T buckets at the year end. The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all Sdeposited in a restricted account with HSBC in China in exchange for a £30.0m Sterling overdraft facility with HSBC Bank plc in the United Kingdom. The S trade receivables. The Group has no material contract assets. restricted cash was revalued at 31 December 2022 to £32.8m and is shown in the cash and cash equivalents. At 31 December 2022, the facility of £30.0m was shown within borrowings in current liabilities on the Statement of Financial Position. During the year ended 31 December 2023, the bilateral revolving F F U credit facility was repaid, but remains available. U R R T T As at 31 December 2023 As at 31 December 2022 HNon-current borrowings H E E Expected Gross carrying Loss Expected Gross carrying Loss R R loss rate amount allowance loss rate amount allowance INFIn December 2020, the Group took out First Lien and Second Lien SSNs at $1085.5m and $335.0m, respectively. All SSNs are secured by fixed and floating INF % £m £m % £m £m charges over certain assets of the Group. In March 2021, the Group issued an additional £70.7m equivalent of 10.5% First Lien SSNs with a nominal value of OR OR Current * 180.1 – * 129.1 – $98.5m at a premium of £6.3m. Transaction costs of £1.7m and the premium are amortised using the effective interest rate. In October 2022, the Group M M 1 – 30 days past due * 28.2 – * 5.8 – repurchased $40.3m of First Lien SSNs and $143.8m of Second Lien SSNs. The portion of unamortised fees and the redemption premium was charged to the A A T T 31 – 60 days past due * 3.7 – * 1.7 – Consolidated Income Statement at the point of redemption as an accelerated charge and presented within adjusting items (note 5). Transaction costs of I I ON £1.9m relating to the repurchase are included in adjusting items (note 5). The US dollar amounts have been converted to sterling equivalents for reporting ON 61+ days past due 52.2% 8.8 4.6 93.8% 6.5 6.1 220.8 4.6 143.1 6.1 purposes. * The expected loss rates for these specific ageing categories are not disclosed, as no material loss allowance is generated when applied against the gross carrying value. The expected loss rate At 31 December 2023, the Group held £980.3m of SSNs (2022: £1,104.0m) comprising First Lien SSNs of $1,143.7m (2022: $1,143.7m) at 10.5% cash has reduced following the settlement of previously provided receivables. interest and Second Lien SSNs of $121.7m (2022: $229.1m) at 8.89% cash interest and 6.11% Payment in Kind (“PIK”) interest respectively. The Second Lien Notes were issued at a 2% discount and include detachable share warrants (see below). The First Lien Notes are repayable in November 2025 and the Second Lien Notes in November 2026. Transaction costs and discounts on issuance are amortised using the effective interest rate. Early repayments of both 2023 2022 First and Second Lien SSNs in the year ended 31 December 2022 and Second Lien SSNs in the year ended 31 December 2023 resulted in one off premium £m £m costs and the acceleration of transaction costs and discounts (see note 5). Opening loss allowance as at 1 January 6.1 24.6 (Reduction)/increase in loss allowance recognised in the Income Statement – administrative and other operating expenses (1.3) 0.6 Derivative option over own shares Receivables written off during the year as uncollectible (0.2) (19.2) The Second Lien SSNs include detachable warrants enabling the warrant holders to subscribe for a number of ordinary shares in the Company at the subscription price of £1.67 (previously £10 per share prior to the rights issue in September 2022). The warrant holders have the right to exchange their Effect of foreign exchange – 0.1 warrant options for a reduced number of warrant shares, resulting in no cash being paid to receive the shares. The ratio at which this exchange can be At 31 December 4.6 6.1 transacted is determined by the share price at execution of the options. A derivative option liability was initially recorded at 31 December 2020 due to the uncertain number of shares which will be issued under the agreement, which is subsequently remeasured at fair value through the Consolidated Income Statement. ASTON MARTIN LAGONDA ANNUAL REPORT AND ACCOUNTS 2023 177