Asset Buyout Partners Annual Report 2020

Note 4 Capital structure and capital management The main purpose of the Group’s capital management is to maintain a reasonable balance between debt and equity. The Group has defined a target for the loan to value ratio of acquisitions of approximately 65% over the economic cycle. This target is set with consideration to value development in the Group and the opportunity to obtain the necessary financing. There are covenants on existing financing related to; loan to value, interest cover ratio and debt to EBITDA levels. Both during 2020, and at 31 December 2020, the Group was in compliance with all financial covenants, and the Group expects to be in compliance going forward. The table below specifies the Groups interest bearing debt at 31 December 2020. The Group’s financing holds different maturities from 1-3 years. Consequently, a share of total debt will be due within 12 months. The Group continuously refinances debt and considers both bank and bond market as funding sources. Figures in NOK 2020 2019 Interest bearing long-term debt 3 969 161 215 4 108 060 548 Interest bearing short-term debt 285 351 709 354 000 000 Unamortized borrowing costs 41 817 942 55 123 551 Principal amount of interest bearing loans and borrowings 4 296 330 866 4 517 184 099 External valuation of investment property 9 110 000 000 8 447 770 000 Loan to value ratio 47,16 % 53,47 % Note 5 Critical accounting estimates and judgements Preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect reported amounts in the consolidated financial statements. Uncertainty about these assumptions could result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities affected in future periods. Management estimates include assumptions on future events which by definition hold a significant risk related to estimation uncertainty. The following sections present the judgements which have the most significant effect on the amounts recognized in the consolidated financial statements: Fair value measurement A number of assets and liabilities included in the Group’s financial statements require measurement at, and/or disclosure of fair value. The fair value measurement of the Group’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the ‘fair value hierarchy’): · Level 1: Quoted prices in active markets for identical items (unadjusted) · Level 2: Observable direct or indirect inputs other than Level 1 inputs · Level 3: Unobservable inputs (i.e. not derived frommarket data). The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Fair value of investment properties Group management is responsible for the valuation of the investment properties, both when acquiring an investment property and for the valuation of the properties at year-end. The valuation process includes both preparing internal valuations and obtaining separate valuations from the external valuation expert, Cushman & Wakefield Realkapital (“C&W”). Internal valuations are performed when acquiring new properties and external valuations are performed for accounting purposes. The same method has been used for both the internal and the external valuations. C&W has valued the properties with the use of a discounted cash flow analysis. Different discount rates have been used depending on the risk associated with each segment of the cash flows. Asset Buyout Partners | Annual Report 2020 28