REC Silicon Annual Report 2019

61 Notes to the consolidated financial statements, REC Silicon Group REC Silicon Annual Report 2019 Movements in borrowing (USD INMILLION) INDEMNIFICATION LOAN USD SENIOR SECURED BOND TOTAL Balance at January 1, 2019 23.0 108.3 131.3 Change capitalized borrowing cost 0.0 0.3 0.3 Effect of changes in foreign exchange rates -0.2 0.0 -0.2 Balance at December 31, 2019 22.8 108.6 131.4 The indemnification loan is related to the bankruptcy of a former subsidiary in 2012. At December 31, 2019, the indemnification loan is NOK 200.0million (USD 22.8million) and can only be called when certain conditions are met. Once the loan is called, outstanding amounts will bear interest at a rate of NIBOR plus 0.5 percent. The Company has received a claim dated December 16, 2019 of NOK 150million fromNordea under the indemnification loan. According to the claim letter fromNordea, Nordea’s current claim for NOK 150million is based on an assumption that its loss will exceed said amount when the estates are concluded. However, the relevant bankruptcy estates have not yet been concluded. Therefore, the amount of loss suffered by Nordea as a result of the bankruptcy cannot be calculated at this time. Given this and other uncertainties concerning the basis for the claim, the Company has responded by denying the claim. The status and timing of the indemnification loan is subject to uncertainty. The Company and certain subsidiaries are jointly and severally liable for the USD Senior Secured Bond (REC04, ISIN NO0010820590). REC Silicon ASA, REC Silicon AS, REC Silicon, Inc., REC Solar Grade Silicon, LLC., REC Advance Silicon Materials, LLC., and REC Silicon Pte. Ltd. have provided a guarantee. In addition, the equity and substantially all of the tangible and intangible assets of REC Advanced Silicon Materials, LLC. have been pledged as security in the bond agreement. The net book value of net assets pledged as security was approximately USD 167million at December 31, 2019 and approximately USD 154million at December 31, 2018. Covenants imposed by the bond include a requirement to maintain minimum liquidity of USD 15million. In addition, the bond agreement provides limitations on borrowing, asset sales, and other transactions under certain conditions. The bond agreement includes a cross default clause should the Company default on any financial indebtedness above certain threshold amounts. Please see the registration document at www.recsilicon.com for additional details. At December 31, 2019 and 2018, the Company had complied with all financial covenants and other restrictions in the loan agreements.