13.

Borrowings

Bank Facilities

As of December 31, 2012, the Company has outstanding liabilities of €28.1 (€29.6 including accrued interest) million ($37.1 million) from the term loans from Alfa-Bank, Bank Zenit and Raiffeisenbank drawn by Whitehall:

•

The loan agreement with Alfa-Bank, dated July 22, 2008, matures on October 18, 2014. The credit limit under this agreement is €20.0 million ($26.4 million). The loan, as of December 31, 2012, consists of eleven open tranches released between September 26, 2012 and December 27, 2012, and are repayable between March 26, 2013 and September 27, 2013. As of December 31, 2012, the Company had outstanding liability of €13.1 (€14.0 including accrued interest) million ($17.3 million) from this term loan.

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The loan agreement with Bank Zenit, dated August 16, 2012, matures on April 25, 2014. The credit limit under this agreement is €10.0 million ($13.2 million). The loan as of December 31, 2012 consists of four open tranches released between August 16, 2012 and October 26, 2012, and are repayable between January 25, 2013 and March 15, 2013. These tranches were repaid and new tranches were released after year end. As of December 31, 2012, the Company had outstanding liability of €10.0 (€10.3 including accrued interest) million ($13.2 million) from this term loan.

•

The loan agreement with Raiffeisenbank, dated October 26, 2012, matures on September 30, 2013. The credit limit under this agreement is €5.0 million ($6.6 million). This loans has financial covenants that need to be met. These financial covenants will be calculated once statutory financial statements are completed. There is a risk that financial covenants related to this loan have not been met as of December 31, 2012. The loan as of December 31, 2012 consists of four open tranches released between October 29, 2012 and November 20, 2012, and are repayable on September 30, 2013. As of December 31, 2012, the Company had outstanding liability of €5.0 (€5.3 including accrued interest) million ($6.6 million) from this term loan.

The aforementioned loans drawn by Whitehall are guaranteed by Whitehall companies. The loan agreement with Alfa-Bank and with Bank Zenit are secured by the Whitehall’s inventory. Total limit of bank debt for Whitehall companies under those loans is €28.0 ($36.9) million for Alfa-Bank and €30.0 ($39.6) for Raiffeisenbank. Limit for Alfa-Bank was exceeded by €0.1 ($0.13) million, however Alfa-Bank has not requested for payment of any part of this loan and the outstanding balance was reduced by Whitehall below the maximum allowable amount subsequent to December 31, 2012.

As of December 31, 2012, the Company has outstanding term loans of 2,696.1 (2,702.0 including accrued interest) million Russian rubles ($88.7 million) from MKB Bank, Alfa-Bank, Sberbank and Grand Invest Bank, all drawn by Russian Alcohol Group, as well as, an overdraft facility from Nomos-Bank and an overdraft facility from Sberbank drawn by Bravo Premium:

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The loan agreement with MKB Bank, dated July 19, 2012, matured on February 25, 2013 and was fully paid. As of December 31, 2012, the Company had outstanding liability of 900.0 (903.5 including accrued interest) million Russian rubles ($29.6 million) from this term loan. This loan was secured by inventory.

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The loan agreement with Alfa-Bank, dated July 25, 2012, matured on February 28, 2013 and was fully repaid. This loan has turnover clause that need to be met. As of December 31, 2012, the Company has outstanding liability of 724.0 (725.6 including accrued interest) million Russian rubles ($23.8 million) from this term loan.

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The two loan agreements with Grand Invest Bank, dated November 25, 2011 and December 19, 2012, mature on November 22, 2013. These loans have turnover clauses that need to be met. As of December 31, 2012, the Company has outstanding liability of 350.0 million Russian rubles ($11.5 million) from these term loans. Production plant of Parliament is a security for these loans.

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The loan agreement with Sberbank dated November 23, 2012, matures on November 22, 2013. As of December 31, 2012 outstanding debt is 248.0 (248.8 including accrued interest) million Russian rubles ($8.2 million). This loan is secured by property, land, guarantees and inventory. There are financial covenants related to this loan, and they were all met.

•

The overdraft agreement with Nomos-Bank, dated December 24, 2012 which matured on March 7, 2013 and was repaid. The credit limit under this agreement was 500.0 million Russian rubles ($16.4 million). As of December 31, 2012, the loan was utilized in the amount of 459.1 million Russian rubles ($15.1 million).

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The overdraft agreement with Sberbank, dated February 6, 2012, which matured on February 5, 2013 and was fully paid. The credit limit under this agreement is 60.0 million Russian rubles ($2.0 million). This loan is secured by fixed assets. As of December 31, 2012, the Company has outstanding liability in the amount of 15.0 million Russian rubles ($0.5 million).

As of December 31, 2012, Bols Hungary had overdraft facility dated August 2, 2012, which matures on August 1, 2013. The credit limit under this agreement is 500.0 million Hungarian forint ($2.3 million). As of December 31, 2012, the loan was utilized in the amount 449.9 million Hungarian forint ($2.1 million). The loan is secured by inventory and receivables.

The table below presents the amount of outstanding lines of credit for short-term financing and the weighted average interest rate on those short term borrowings:


	December 31, 2012					December 31, 2011
	Amount outstanding		Weighted average interest rate			Amount outstanding		Weighted average interest rate

Overdraft facilities	$	17,585		10.8	%	$	13,616		6.7	%

Other short-term borrowings	$	110,270		10.3	%	$	64,683		8.6	%

As of December 31, 2012 and 2011, the liabilities from factoring with recourse amounted to 8.6 million Polish zlotys ($2.8 million) and 23.0 million Polish zlotys ($7.5 million), respectively and are included in the short term bank loan in the balance sheet as described in Note 4.

2013 Notes

On March 7, 2008, the Company completed the issuance of $310 million aggregate principal amount of 3% Convertible Senior Notes due 2013. Interest is due semi-annually on the 15th of March and September, beginning on September 15, 2008. The 2013 Notes are convertible in certain circumstances into cash and, if applicable, shares of our common stock, based on an initial conversion rate of 14.7113 shares per $1,000 principal amount, subject to certain adjustments. Upon conversion of the notes, the Company will deliver cash up to the aggregate principal amount of the notes to be converted and, at the election of the Company, cash and/or shares of common stock in respect to the remainder, if any, of the conversion obligation. The proceeds from the 2013 Notes were used to fund the cash portions of the acquisition of Copecresto Enterprises Limited and Whitehall.

In the period from May to December of 2012, the Company repurchased $52.1 million principal amount of Convertible Notes in six tranches for $50.2 million.

As of December 31, 2012 the Company had accrued interest of $2.1 million related to the 2013 Notes, with the next coupon due for payment on March 15, 2013, which was not settled. Total obligations under the 2013 Notes are shown net of deferred finance costs, amortized over the life of the borrowings using the effective interest rate method as shown in the table below:


	December 31, 2012			December 31, 2011
2013 Notes	$	257,858		$	310,000
Unamortized debt discount		(148	)		(1,070	)
Debt discount		(788	)		(4,285	)

Total	$	256,922		$	304,645

The fair value of the 2013 Notes as of December 31, 2012 and 2011 was $138.1 million and $248.0 million, respectively.

The ASC Topic 470-20 requires the issuer of convertible debt instruments with cash settlement features to separately account for the liability ($290.3 million as of the date of the issuance of the 2013 Notes) and equity components ($19.7 million as of the date of the issuance of the 2013 Notes) of the instrument. The debt component was recognized at the present value of its cash flows discounted using a 4.5% discount rate, borrowing rate at the date of the issuance of the 2013 Notes for a similar debt instrument without the conversion feature. The equity component, recorded as additional paid-in capital, was $12.8 million, which represents the difference between the proceeds from the issuance of the 2013 Notes and the fair value of the liability, net of deferred taxes of $6.9 million as of the date of the issuance of the 2013 Notes. ASC Topic 470-20 also requires an accretion of the debt discount over the expected life of the 2013 Notes, which is March 7, 2008 to March 15, 2013. For the year ended December 31, 2012, December 31, 2011 and December 31, 2010, the additional pre-tax non-cash interest expense recognized in the consolidated statement of operations was $3.5 million, $4.3 million and $4.1 million, respectively. Accumulated amortization related to the debt discount was $18.9 million and $15.4 million as of December 31, 2012 and December 31, 2011, respectively. The annual pre-tax increase in non-cash interest expense on consolidated statements of operations and comprehensive loss to be recognized until 2013, the maturity date of the 2013 Notes, amounts to $0.8 million. On March 15, 2013 the Company failed to pay $257.9 million principal due on its 2013 Notes. The 2013 Notes are governed by an Indenture (the “2013 Notes Indenture”) dated March 7, 2008 between the Company and The Bank of New York, as Trustee, as amended and supplemented by the First Supplemental Indenture dated March 7, 2008. Under the terms of the 2013 Notes Indenture, the failure to pay principal when do constitutes an Event of Default (as defined in the 2013 Notes Indenture). The Company addressed the default under 2013 Notes through the Plan of Reorganization as described in Note 1.

2016 Notes

On December 2, 2009, the Company issued $380.0 million 9.125% 2016 Notes and €380.0 million ($491.1 million) 8.875% 2016 Notes in an unregistered offering to institutional investors. The Company used a portion of the net proceeds from the 2016 Notes to redeem the Company’s outstanding 2012 Notes, having an aggregate principal amount of €245.4 million ($323.7 million) on January 4, 2010. The remainder of the net proceeds from the 2016 Notes was used to (i) purchase Lion Capital’s remaining equity interest in Russian Alcohol by exercising the Lion Option and the Co-Investor Option, pursuant to the terms and conditions of the Lion Option Agreement and the Co-Investor Option Agreement, respectively (ii) repay all amounts outstanding under Russian Alcohol credit facilities; and (iii) repay certain other indebtedness.

On December 9, 2010, the Company issued an additional €50.0 million ($65.9 million) 8.875% 2016 Notes in an unregistered offering to institutional investors. The Company used the net proceeds from the additional 2016 Notes to repay its term loans and overdraft facilities with Bank Handlowy w Warszawie S.A and Bank Zachodni WBK S.A.

As of December 31, 2012 and December 31, 2011 the Company had accrued interest of $7.1 million and $7.0 million respectively, related to the Senior Secured Notes due 2016, with the next coupon due for payment on June 1, 2013.

Under Section 6.1(5)(a) of the Indenture (as amended, the “2016 Notes Indenture”) between, inter alia, CEDC Finance Corporation International, Inc. (“CEDC FinCo”), as Issuer, Deutsche Bank AG, London Branch, as Trustee, the Company and certain subsidiary guarantors of the Company, as amended and supplemented by the First Supplemental Indenture dated December 29, 2009, and the Second Supplemental Indenture dated December 8, 2010, the failure to pay principal when due on the 2013 Notes constitutes an Event of Default under the 2016 Notes Indenture. Under Section 6.2 of the 2016 Notes Indenture, if an Event of Default occurs and is continuing, then the Trustee or holders of not less than 25% of the aggregate principal amount of the outstanding 9.125% Senior Secured Notes due 2016 and 8.875% Senior Secured Notes due 2016 (together, the “2016 Notes”) may, and the Trustee upon request of such holders shall, declare the principal plus any accrued and unpaid interest on the 2016 Notes to be immediately due and payable. As a result the default on 2013 Notes caused the 2016 Notes to become callable on demand. The Company addressed the default under 2016 Notes through the Plan of Reorganization as described in Note 1.


	December 31, 2012			December 31, 2011
2016 Notes	$	947,127			935,296
Unamortized debt discount		(2,628	)		(3,207	)

Total	$	944,499		$	932,089

The fair value of the 2016 Notes as of December 31, 2012 and 2011 was $590.9 million and $702.7 million, respectively.

The list of assets serving as collateral for 2016 Notes is described in Note 10.

Debt Security

As described in Note 3 above, on May 7, 2012, the Company issued $70 million principal amount of senior notes due March 18, 2013, bearing an interest rate of 3.00% to Russian Standard Bank. Pursuant to the Amended SPA, upon approval of the Company’s shareholders, and after the satisfaction of certain other conditions including the receipt of certain Polish regulatory waivers, Roust Trading would have purchased such number of shares of common stock at a purchase price of $5.25 per share sufficient to repay the then-outstanding principal amount of the Debt Security, totaling approximately 13.3 million shares of common stock and sold to CEDC the entire principal amount of the Debt Security. In addition, interest payable on the Debt Security prior to the Second Closing would have, at the option of Roust Trading and after the Second Closing, been effectively paid in shares of common stock at a price $3.44 per share of common stock. Pursuant to the Amended SPA, the final maturity date for the Debt Security was to be extended to July 31, 2016. The final maturity date was not extended, but the Company did not settle the obligations under Debt Security on the original due date, as described in Note 1.


	December 31, 2012		December 31, 2011
Debt Security	$	70,000		0

Total	$	70,000	$	0

The fair value of the Debt Security as of December 31, 2012 was $70.4 million.

As of December 31, 2012, the Company had accrued interest of $0.6 million, related to the Debt Security, with the next coupon due for payment on March 18, 2013, which was not settled. The Company addressed this default through the Plan of Reorganization as described in Note 1.

Debt issuance cost and future principal repayments

Debt issuance cost balance related to the Company’s debt was $13.6 million and $16.5 million as of December 31, 2012 and December 31, 2011, respectively.

The following is a schedule by years of the future principal repayments for borrowings as of December 31, 2012:


	December 31, 2012
Principal repayments for the following years
2013	$	1,402,076
2014		0
2015		0
2016		0
2017 and beyond		0

Total	$	1,402,076