debt facility.

debt facility

The long term borrowings on our balance sheet are related to a syndicated revolving credit facility. This allows us to consciously avoid the risk of having to refinance short-term bridge financing as well as having to issue equity in a secondary public offer. We finance against floating interest rates since in an economic downturn, when our earnings may be under pressure, interest rates will normally tend downwards. Floating interest rates are considered a natural hedge against the development in operational results. So far, this has paid off significantly, as over time floating interest rates are on average significantly lower than fixed interest rates.

In Q2 2014 we took advantage of the favorable market conditions and our aim to have sufficient long-term committed financing in place, by amending and extending the existing multi-currency credit facility.

In 2018, our net debt position decreased by € 41 million to € 985 million. Free cash flow of € 627 million (up € 41 million compared to 2017) outweighed our cash outflow, mainly with regard to dividends paid (€ 518 million). The leverage ratio (net debt divided by 12-month EBITDA) was 0.8 at year-end.

As at December 31, 2018, the Group had a € 1,850 million committed multi-currency syndicated revolving credit facility at its disposal (2017: € 1,850 million), which matures in July 2023 (2017: July 2022). The facility agreement contains a covenant with respect to the net debt to EBITDA ratio (leverage ratio), as well as a paragraph on material adverse changes; the net debt to EBITDA ratio has a limit of 3.5, and is calculated based on the results of the Group on a 12-month basis. In certain cases, Randstad is allowed to report a net debt to EBITDA ratio of 4.25x EBITDA for a limited period of time. The Group also has at its disposal a promissory note of € 150 million, ultimately maturing in December 2020, which bears an interest that is based on 6-month Euribor (with a floor of zero) increased by a fixed margin of 0.45% per annum, payable in June and December of each year. In addition, in 2018, the Group secured two loans of USD 200 million each. Both loans ultimately mature in October 2020, and have floating interest conditions that are based on 1-month LIBOR (with a floor of zero), increased by a variable margin that depends on the net debt to EBITDA ratio. Covenants of the promissory note and the loans are fully aligned with the committed multi-currency syndicated revolving credit facility.

The net debt position as of year-end 2018 was € 985 million, compared to € 1,026 million at year-end 2017.