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Gamma Holding: 2008 is successful year for Exotic Fabrics
Feb '09
The worldwide recession in 2008 had major repercussions for Gamma Holding, also in relation to the company's financing arrangements. The company was affected by a fall in demand from industrial customers and consumers, notably in the last quarter. In the first nine months of 2008 the group also had to contend with exchange rate fluctuations.

These two developments in the world market meant that 2008 was a difficult year for Gamma Holding, one which - after the deduction of restructuring expenses and impairment of goodwill and acquired intangible assets - was concluded with a loss. As a consequence, Gamma Holding will not distribute a dividend for the year under review.

Cost cutting and debt reduction:
In order to achieve a substantial reduction of production costs in Western Europe, Sleep Care Fabric's German site at Münchberg was closed in 2008. Meanwhile the last remaining production location - in Waregem, Belgium - is being cut back considerably.

In order to strengthen the financial position of Industrial Solutions, the workforce in this sector will also be reduced. At the same time, both production and fabrication will be further optimised and there will be a greater emphasis on marketing & sales and innovation.

To reduce debt, Gamma Holding is looking into the possibilities of selling organisational units. In that framework the process of selling Verseidag Ballistic Protection has now been resumed.

The aforementioned measures form part of a group programme of cost savings, divestments and restructurings. The implementation of this programme will mean the loss of approximately 10% of the jobs (about 800 employees) within the group, 275 of which have already been discharged in the fourth quarter of 2008. These discharges are expected to involve a once-only sum for restructuring expenses of EUR 34 million, of which EUR 23 million has already been accounted for as expenses in 2008. Ultimately the programme should yield, from 2010, annual savings of approximately EUR 45 million.

Amended financing:
The decline in income also had an impact on the financing of the company. In December 2008, Gamma Holding agreed with the existing syndicate of banks that it would not be necessary to fulfil the existing covenants at the end of 2008 and that further discussions would be held on financing, based on the extra measures to be taken.

On 18 February 2009, agreement was reached with the syndicate of banks on changes to the existing facilities until March 2010, thus bringing the total facilities available to the company to EUR 390 million (including EUR 36 million cash pool and guarantee facilities). For details of the agreed financing, please refer to the appendix.

In the opinion of the banking syndicate, Gamma Holding should attract risk-bearing capital to a minimum amount of EUR 45 million. Gamma Holding is therefore examining several scenariosfor strengthening the group's risk-bearing capital or balancing the equity ratios. In that respect, Gamma Holding is examining the possibilities of and is holding talks on a rights issue, the issue of a subordinated loan and the realisation of a public-to-private transaction.

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