RISK FACTORS AND INTERNAL CONTROL its compliance program is updated as needed and 2.1.3 Risks relating to the Rexel Group’s adequate actions are effectively implemented. financing As such, in order to mitigate these risks, the Group 2.1.3.1 Risks relating to indebtedness Rexel constantly enhances its compliance program, updates its policies and procedures as well as tools Risk for its implementation. As at December 31, 2017, the Rexel Group’s gross indebtedness amounted to €2,612.3 million and its 2.1.2.4 Risks relating to regulatory matters, net indebtedness amounted to €2,041.2 mil l ion. including environmental regulations In 2016 and 2017, Rexel issued bonds for a total Risk outstanding amount of €1,450.0 mi l l ion as of December 31, 2017. In light of the sectors in which it operates, the Rexel Subject to certain conditions, Group must ensure that its suppliers comply with Rexel and its applicable standards and directives in relation to subsidiaries may also incur or guarantee new products, the environment and safety. borrowings. The products that the Rexel Group distributes Rexel Group’s level of indebtedness may affect its are subject to numerous legal and regulatory financing capacity as wel l as the related financial requirements applicable in each of the jurisdictions costs. in which the Rexel Group operates. These products The Rexel Group may be required to devote a are also subject to quality and safety regulations and significant portion of its cash flow to service the inspections resulting from national and international principal amount and the interests of its debt, which standards. In particular, these regulations involve may result in a reduction of funds available to finance European Union Directives and standards adopted its operations, capital expenditures, organic growth by international organizations, such as the European initiatives or acquisitions. In particular, the Rexel Committee for Electrotechnical Standardization Group’s financial expenses may increase in the event and the International Electrotechnical Commission. of a material increase in interest rates, particularly in Changes in such laws and regulations and their relation to the unhedged portion of its debt. implementation may necessitate a change in the product offering or cause an increase in its The Rexel Group may thus be at a disadvantage distribution expenses. compared to competitors that do not have a similar level of indebtedness. Management of risk Furthermore, the Rexel Group’s abi l ity to meet The risk management mechanism implemented by its obl igations, in particular complying with the the Rexel Group with respect to product liability is restrictions and contractual obligations, contained in described in paragraph 1.8.1 “Product liability” of this certain of its credit agreements (in particular those Registration document. in connection with the Senior Credit Agreement, the 2016 Bonds and the 2017 Bonds or the securitization The Rexel Group must also endeavour to comply with programs, as described in note 22.1 of the Notes to local environmental regulations. The environmental the Rexel Group’s consolidated financial statements risk prevention and management mechanisms are for the year ended December 31, 2017 set forth in described in section 4.4 “Environmental information” section 5.2 “Consol idated Financial Statements” of this Registration document. of this Registration document), or to pay interest on its loans or to refinance or repay its loans in 2.1.2.5 Risks relating to pension plans accordance with the terms of its debt agreements will depend on the Rexel Group’s future operating Risks relating to pension plans and the performance, which may be affected by a number of corresponding risk management tool are described factors (general economic conditions, conditions in in note 21.7 of the Notes to the consol idated the debt market, legal and regulatory changes, etc.), financial statements of the Rexel Group for the some of which are beyond the Rexel Group’s control. year ended December 31, 2017, as set out in section 5.2 “Consolidated Financial Statements” of If at any time the Rexel Group has insufficient cash this Registration document. to service its debt, it may be forced to reduce or REXEL 2017 – REGISTRATION DOCUMENT 42