Borrowing requirements and funding structure

The Group’s policy consists of incurring non-current debt primarily at a floating rate or, if the opportunity arises at the time of an issuance, at a fixed rate. Debt is incurred in dollars or euros according to general corporate needs. Long-term interest rate and currency swaps may be used to hedge bonds at their issuance in order to create a variable or fixed rate synthetic debt. In order to partially modify the interest rate structure of the long-term debt, TOTAL may also enter into long-term interest rate swaps.

The non-current debt is generally raised by the corporate treasury entities either directly in dollars or euros or in other currencies which are then exchanged for dollars or euros through swap issues to appropriately match general corporate needs.

The Group has established standards for market transactions under which bank counterparties must be approved in advance, based on an assessment of the counterparty’s financial soundness (multi-criteria analysis including a review of the market capitalization and of the Credit Default Swap (CDS), its ratings with Standard & Poor’s and Moody’s, which must be of high quality, and its overall financial condition).

An overall authorized credit limit is set for each bank and is allotted among the subsidiaries and the Group’s central treasury entities according to their needs.

To reduce the market values risk on its commitments, in particular for swaps set as part of bonds issuance, the Group also entered into margin call contracts with its significant counterparties.