27. Loans and borrowings

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred. Loan and borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Transaction costs incurred during the (re)financing of loans and borrowings are capitalised and amortised over the estimated useful lives of the loans and borrowings. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan if it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. If it is not probable that some or all of the facility will be drawn down, the fee for the facility is capitalised and amortised over the period of the facility to which it relates. Loans and borrowings are presented net of transaction costs. Details on transaction cost amortisation and net gain or loss on loan modification are disclosed in note 10.

Loans and borrowings are classified as current liabilities unless TMF Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

TMF Group derecognises financial liabilities when, and only when, TMF Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the income statement.

TMF Group's primary source of finance is secured bank borrowings provided by a syndicate of banks. In January 2025, the repricing of senior loans consisting of New Facility B1 of €1,055 million and Facility B3 of $398 million was finalised. New facility B1 became Facility B5 of €1,055 million and Facility B3 became Facility B4 of $396 million. The interest rate for Facility B5 is 3.25% plus 3 or 6 month EURIBOR (floored at 0%). The interest rate for Facility B4 is 2.75% plus 3-month TERM SOFR CME. This modification did not result in a substantial change of terms. Accordingly, the loans were not derecognised, and the existing liabilities were adjusted to reflect the revised cash flows. The adjustment to the carrying amount of the financial liabilities resulted in the recognition of a modification gain of €24.7 million in profit or loss. This gain reflects the difference between the carrying amount of the loans before modification and the recalculated present value of the modified cash flows discounted at the original effective interest rate.

Subsequently, in February 2025, upsize agreement was finalised for Facility B4, resulting in additional funding of $100 million. There were no changes to other terms of the loan. The February upsize is considered to be a substantial modification of the existing Facility B4 loan and, as a result, extinguishment accounting is applied. Any difference in the carrying amount of the original liability and the fair value of the new, modified liability is recognised in the statement of profit or loss. The upsize resulted in extinguishment of the original loan liability, Facility B4, with a principal of $389 million and a loss on extinguishment of €5.6 million. The loss is reported as part of net finance costs in the income statement. 

The interest payable is, for a significant part, the three-month accrued interest for the senior bank borrowing. The senior bank borrowing is valued at amortised cost and this accrued interest is directly related to that amount.

Terms and repayment schedules

The terms and conditions of outstanding loans, excluding deferred consideration payables and transaction costs on loan notes, are as follows:

The financial covenants are tested each quarter. The Senior Secured Net Leverage Ratio must not exceed 9.50X EBITDA and is calculated by applying the Consolidated Senior Secured Net Debt and divided by the EBITDA. TMF Group has met the requirements in the facility agreement for the years covered by this Annual Report.

Each lender within the syndicate of banks can require TMF Group to repay the secured bank borrowings in the case of a change of ownership in TMF Group. The secured bank borrowings and revolving credit facility, including unpaid interest, are secured by a pledge over certain shares of several entities within TMF Group.

The effective interest rate of the Senior Secured Bank Loan - Facility B5 (EUR) - is 6.08%, and for the Senior Secured Bank Loan - Facility B4 (USD) - is 6.26%.

TMF Group's liabilities are measured as follows:

* Excluding deferred income, rent deposits, social security and other taxes.

Reconciliation of liabilities arising from financing activities

The following table details changes in the liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated cash flow statement as cash flows from financing activities.