These are recorded as financial liabilities measured at amortized cost, represented by non-derivative financial liabilities that are not usually traded before maturity.
Initially, it is recognized at fair value, and subsequently measured based on the effective interest rate method. The appropriation of financial expenses according to the effective interest rate method is recorded in the statement of income under caption “financial expenses”.
| Description | Currency | Charges | Maturity | 2017 | 2016 |
| BNDES (1) | URTJLP | TJLP to TJLP + 3.62%p.a. | Jul/18 to Jul/22 | 1,945,140 | 2,546,627 |
| BNDES (1) | UMIPCA | UMIPCA + 2.62% p.a. | Jul/17 | - | 36,552 |
| BNDES (1) | UM143 | SELIC + 2.52% p.a. | Jul/22 | 1,911,383 | 2,068,629 |
| BNDES (PSI) (1) | R$ | 2.50% to 4.50% p.a. | Jul/18 to Jan/21 | 263,972 | 444,847 |
| Banco BNP Paribas (3) | USD | Libor 6M + 2.53% p.a. | Dec/17 | - | 78,065 |
| Banco Europeu de Investimento (“BEI”) (2) | USD | Libor 6M + 0.941% to 1.32% p.a. | Aug/19 to Feb/20 | - | 622,980 |
| Bank of America (Res. 4131) (4) | USD | Libor 3M + 2.00% p.a. | Sep/18 | - | 324,860 |
| KFW (3) | USD | Libor 6M+ 1.35% p.a. | Apr/19 | 110,937 | 182,046 |
| KFW Finnvera (3) | USD | Libor 6M+ 0.75% p.a. | Jan/24 | 260,522 | 121,038 |
| Cisco Capital (4) | USD | 1.80% to 2.50% p.a. | Sep/18 to Dec/20 | 198,990 | 294,138 |
| Total | 4,690,944 | 6,719,782 | |||
| Current portion | (1,351,860) | (1,145,225) | |||
| Non-current portion |
3,339,084 |
5,574,557 |
Guarantees:
(1) Guaranteed by the Company and as collateral some receivables of TIM Celular
(2) Bank escrow and Company as guarantor.
(3) Guaranteed by the Company
(4) No guarantee
The parent company TIM Participações does not have any borrowing or financing as at December 31, 2017.
The financing arranged by TIM Celular with BNDES was raised for the purpose of expanding the mobile phone network. It included covenants requiring certain financial ratios to be met, calculated semiannually. The subsidiary TIM Celular has complied with these financial ratios.
In April 2017, the Company obtained new loan from KfW/Finnvera by amount of nearly R$149 million. For the purpose of eliminating any risk of changes in the foreign exchange rate, a swap transaction was contracted in advance.
In April 2017, the Company prepaid the financing agreement signed in 2011 with the European Investment Bank, totaling R$602 million. This line was originally expected to mature in August 2019 and February 2020.
In March 2017, the Company prepaid the existing loan granted by Bank of America (“BOA”), in the amount of R$315 million. The original maturity of this debt was estimated to occur in September 2018.
In December 2017, the Company prepaid R$800 million of the debt to BNDES, reducing the debt balance of the facility. The prepayment did not change the original payment schedule, the last installment of which matures in July 2022. In January 2018, a further R$500 million was settled in advance without, however, changing the payment schedule.
All prepayments made were intended to enable the Company’s effective management of indebtedness and cash.
The table below sets forth the status of the financing and credit facilities available:
| Amount used as at | ||||||
| Type | Currency | Date of Opening | Term | Total amount | undrown balance | December 31, 2017 |
| BNDES (1) | R$ | Dec/15 | Dec/17 | 60,995 | - | - |
| BNDES (1) | TJLP | Dec/15 | Dec/18 | 2,940 | 2,940 | - |
| Total R$ | 63,935 | 2,940 | - | |||
| KFW Finnvera (2) | USD | Dec/15 | Jun/18 | 150,000 | 51,094 | 93,088 |
Purpose:
(1) Financing of TIM’s Innovation Projects for the years 2016, 2017 and 2018. To date, the Company has opted not to draw down the credit facility available.
(2) Financing of purchases of imported equipment and services for the years 2015, 2016 and 2017. The amount of US$93 million was equivalent to R$310 million on the date of payment.
The PSI (Investment Sustainment Program) financing lines, obtained from BNDES, refer to specific programs of this institution and have interest rates lower than those used in BNDES’ ordinary operations. The balance as at December 31, 2017, corresponding to the adjustment of the subsidy granted by the BNDES for all the PSI lines is approximately R$89 million. This amount was recorded in “Deferred Revenue” under “Government Subsidies” (Note 22) line and deferred for the useful life of the asset being financed and appropriated to income in “Subsidy income” (Note 29).
The subsidiary TIM Celular has swap transactions to protect itself fully against any devaluation of the Brazilian currency against the US Dollar in relation to its borrowing and financing transactions. Nevertheless, this is not classified as hedge accounting.
The long term portions of borrowing and financing as at December 31, 2017, mature as follow:
| 2019 | 1,193,992 | |
| 2020 | 857,304 | |
| 2021 | 768,270 | |
| 2022 | 461,909 | |
| 2023 | 18,883 | |
| 2024 | 38,726 | |
| 3,339,084 |
The table below includes the schedule of nominal values of borrowing and financing estimated until the termination of the agreements.
| Nominal Value | ||
| 2018 | 1,673,562 | |
| 2019 | 1,429,560 | |
| 2020 | 1,007,078 | |
| 2021 | 847,626 | |
| 2022 | 477,307 | |
| 2023 | 20,129 | |
| 2024 | 39,170 | |
| 5,494,432 |
Borrowing and financing fair value
In Brazil there is no consolidated long term debt market with the characteristics of the BNDES facilities. In addition to the returns on long term debt, the institutions take into account the social benefits of each project for which financing is granted. For the purpose of fair value analysis, given the absence of a similar market and the requirement that the projects address governmental interests, the fair value of the borrowing is usually taken to be as shown in the accounting records.
The amounts of PSI credit lines are recorded at fair value as at the withdrawal date, and the fair value is calculated considering the CDI rate at the withdrawal date.
Another transaction contracted with extremely specific features is the loan obtained from KFW Finnvera. This transaction is secured by Finnvera, a Finnish agency that operates as a development institution. Given the features of this transaction, the Company believes that its fair value is equal to the amount shown in the Company’s balance sheet.
Regarding the funds raised with Cisco Capital and KFW, current market conditions do not indicate the existence of any factor that might lead to a fair value for these transactions different to that shown in the accounting records.