27 Long-term debt and current maturities of long-term debt

Long-term debt and current maturities of long-term debt of €23,137 million (€22,240 million at December 31, 2012) increased by €897 million. The increase comprised new issuance of €5,418 million net of repayments made for €4,669 million and currency translation differences relating foreign subsidiaries and debt denominated in foreign currency recorded by euro-reporting subsidiaries for €36 million.

Debt due to banks of €2,390 million (€4,016 million at December 31, 2012) included amounts against committed borrowing facilities for €3 million.

Debt due to other financial institutions of €356 million (€410 million at December 31, 2012) included €31 million of finance lease transactions (same amount as of December 31, 2012).

Eni entered into long-term borrowing facilities with the European Investment Bank. These borrowing facilities are subject to the maintenance of certain financial ratios based on Eni’s Consolidated Financial Statements or a minimum level of credit rating. According to the agreements, should the Company lose the minimum credit rating, new guarantees would be required to be agreed upon with the European Investment Bank. In addition, Eni entered into long and medium-term facilities with Citibank Europe Plc providing for conditions similar to those applied by the European Investment Bank. At December 31, 2013 and 2012, debts subjected to restrictive covenants amounted to €1,782 million and €1,994 million, respectively. A possible non-compliance with those covenants would be immaterial to the Company’s ability to finance its operations.

As of the balance sheet date, Eni was in compliance with those covenants.

Ordinary bonds of €18,151 million (€16,824 million at December 31, 2012) consisted of bonds issued within the Euro Medium Term Notes Program for a total of €13,945 million and other bonds for a total of €4,206 million.

The following table provides a breakdown of bonds by issuing entity, maturity date, interest rate and currency as of December 31, 2013:

As of December 31, 2013, ordinary bonds maturing within 18 months (€3,493 million) were issued by Eni SpA (€3,331) and Eni Finance International SA (€162 million). During 2013, new bonds for €3,096 million were issued by Eni SpA and Eni Finance International (€3,022 million and €74 million, respectively).

The following table provides a breakdown of convertible bonds by issuing entity, maturity date, interest rate and currency as of December 31, 2013:

A bond amounting to €1,237 million (nominal value of €1,250 million) is convertible into ordinary shares of Snam SpA. The underlying shares are €288.7 million ordinary shares, corresponding to approximately 8.54% of the current outstanding share capital of Snam at a strike price of approximately €4.33 a share, representing a 20% premium to market prices current at the date of the issuance.

A bond amounting to €1,003 million (nominal value of €1,028 million) is convertible into ordinary shares of Galp Energia SGPS SA. The underlying share are approximately 66.3 million ordinary shares of Galp, corresponding to approximately 8% of the current outstanding share capital of Galp at a strike price of approximately €15.50 a share, representing a 35% premium to market prices current at the date of the issuance.

Those convertible bonds are stated at amortized cost, while the call option embedded in the bonds is measured at fair value through profit. Changes in fair value of the shares underlying the bonds were reported through profit as opposed to equity based on the fair value option provided by IAS 39 from inception.

The following table provides a breakdown by currency of long-term debt and its current portion and the related weighted average interest rates.

As of December 31, 2013, Eni had undrawn long-term committed borrowing facilities of €4,719 million (€6,928 at December 31, 2012).

Those facilities bore interest rates and charges for unutilized facilities reflecting prevailing conditions on the marketplace.

Eni has in place a program for the issuance of Euro Medium Term Notes up to €15 billion, of which €13.7 billion were drawn as of December 31, 2013. The Group has credit ratings of A and A-1 respectively for long and short-term debt assigned by Standard & Poor’s and A3 and P-2 for long and short-term debt assigned by Moody’s. The outlook is negative in both ratings. Eni’s credit rating is linked in addition to the Company’s industrial fundamentals and trends in the trading environment to the sovereign credit rating of Italy. On the basis of the methodologies used by Standard & Poor’s and Moody’s, a potential downgrade of Italy’s credit rating may trigger a potential knock-on effect on the credit rating of Italian issuers such as Eni and make it more likely that the credit rating of the notes or other debt instruments issued by the Company could be downgraded.

Fair value of long-term debt, including the current portion of long-term debt amounted to €23,022 million (€24,937 million at December 31, 2012):

Fair value was estimated by discounting the expected future cash flows at discount rates ranging from 0.5% to 4.2% (0.4% and 3.3% at December 31, 2012). The fair value of convertible bonds was determined based on market prices. The fair value hierarchy is level 2.

At December 31, 2013, Eni did not pledge restricted deposits as collateral against its borrowings.

Analysis of net borrowings

The analysis of net borrowings, as defined in the “Financial review”, was as follows:

Financial assets held for trading of €5,004 million were maintained by Eni SpA. For further information see Note 8 – Financial assets held for trading.

Available-for-sale securities of €33 million (€34 million at December 31, 2012) were held for non-operating purposes. The Company held at the reporting date certain held-to-maturity and available-for-sale securities which were destined to operating purposes amounting to €282 million (€270 million at December 31, 2012), of which €202 million (€196 million at December 31, 2012) were held to hedge the loss reserve of Eni Insurance Ltd. Those securities are excluded from the calculation above.

Financing receivables of €126 million (€1,153 million at December 31, 2012) were held for non-operating purposes. The Company held at the reporting date certain financing receivables which were destined to operating purposes amounting to €998 million (€668 million at December 31, 2012), of which €595 million (€351 million at December 31, 2012) were in respect of financing granted to unconsolidated subsidiaries, joint ventures and affiliates which executed capital projects and investments on behalf of Eni’s Group companies and a €321 million cash deposit (€280 million at December 31, 2012) to hedge the loss reserve of Eni Insurance Ltd. Those financing receivables are excluded from the calculation above.