Sale Of Accounts Receivable

12 Months Ended

Dec. 31, 2011

Sale Of Accounts Receivable

7. Sale of accounts receivable

On February 24, 2011, two subsidiaries of the Company, namely CEDC International sp. z o.o. (“CEDC International”) and Polmos Białystok S.A. (“Polmos Bialystok”), entered into factoring arrangements (“Factoring Agreements”) with ING Commercial Finance Polska (“ING Polska”) for the sale up to 290.0 million Polish zlotys (approximately $84.9 million) of receivables. The Factoring Agreements terminate on April 30, 2012 and provide for two types of factoring, recourse and non-recourse factoring. The Factoring Agreements are set for renewal on May 1, 2012. On January 1, 2012, the total limit under the Factoring Agreements was reduced from PLN 290 million ($84.9 million) to PLN 250 million ($73.2 million) and starting from March 1, 2012 it will be reduced to PLN 220 million ($64.4 million).

As of December 31, 2011 the total balance of receivables under factoring amounted to 279.3 million Polish zlotys (approximately $81.7 million) of the 290 million Polish zlotys limit available.

For the twelve months ended December 31, 2011, the Company sold receivables in the amount of 1,364.6 million Polish zlotys ($454.9 million) and recognized a loss on the sale in the statement of operations in the amount of 9.2 million Polish zlotys ($2.9 million) in respect of the non-recourse factoring. The Company has no continuing involvement with the sold non-recourse receivables.

On October 14, 2010, Russian Alcohol entered into a factoring agreement (“Factoring Agreement”) with Gazprombank OJSC (“GPB”) for the sale up to 1,022 million Russian rubles (approximately $36.5 million) of receivables. The Factoring Agreement is an ongoing agreement, which provides for factoring with recourse. However, due to changes in Russian legislation, the Company discontinued its factoring in Russia in September 2011.

During the year ended December 31, 2011, the Company sold receivables in the amount of 754.4 million Russian rubles (approximately $23.6 million), and recognized a loss on the sale in the statement of operations for the twelve months ended December 31, 2011 in the amount of 3.4 million Russian rubles (approximately $0.1 million). During 2010, the Company did not sell any receivables.

As of December 31, 2011, the liabilities from factoring with recourse amounted to $7.3 million and are included in the short term bank loans in the balance sheet. Corresponding receivables from factoring with recourse are presented under accounts receivable in the balance sheet.