Notes to the consolidated income statement and the balance sheet

On 22 November 2004, Vedior agreed a €800 million multicurrency revolving credit facility (‘the Facility’) with a syndicate of banks. The Facility is split into two parts:

• Tranche A, for €650 million, had an initial term of five years. This term could be extended twice (in 2005 and 2006) for a further one year each, with a final maturity no later than 2011. In 2005 all banks have granted the extension. In 2006 all banks, with the exception of one bank with a participation of €47 million granted the extension.
• Tranche B, for €150 million, has an initial term of three years. This term could be extended twice (in 2007 and 2008) for a further one year, with a final maturity no later than 2009. The extension in 2007 was granted by all banks.

The Company’s Facility contains a number of affirmative and negative covenants as well as two financial covenants. These financial covenants are measured quarterly, on a rolling aggregate basis for the immediately preceding four quarters and are:

• Interest cover: the ratio of EBITDA to net interest may not be less than 4 to 1;
• Leverage ratio: the ratio of average net debt to EBITDA may not be greater than 3.25 to 1.

The definitions of net debt and EBITDA (earnings before interest, taxes, depreciation and amortisation) in the Facility Agreement include certain adjustments, principally relating to acquisitions and disposals. At 31 December 2007, the relevant ratios were Interest cover 12.6 and Leverage 1.1 (2006: 10.4 and 1.7).

The Company’s failure to maintain these covenants would constitute an event of default under the Facility, entitling the lenders to accelerate the repayment obligations. The Company was in compliance with the covenants of the Facility throughout the year and as at 31 December 2007.

The interest margin for Tranche A is between 30 bps and 65 bps, linked to a leverage grid. For Tranche B the interest margin is between 27.5 and 62.5 bps, linked to a leverage grid. At 31 December 2007, the interest margin was 30 bps for Tranche A and 27.5 bps for Tranche B.

The Facility can be cancelled by the banks and become immediately due and payable in the event of a change of control of Vedior N.V.

In July 2006, the Company completed a senior note debt placement of USD 215 million with USA institutional investors. The debt comprises senior notes split into equal amounts with 7 and 10 year maturity dates and with fixed interest rates averaging 6.7%. Part of the debt has been swapped in other currencies and to floating interest rates.

The senior note agreement contains a number of affirmative and negative covenants which are similar to the covenants in the syndicated facility, including the two financial covenants, and further covenants which are common for a private placement in the USA.

The Company’s failure to maintain these covenants would constitute an event of default under the senior note agreement, entitling the lenders to accelerate the repayment obligations including a make-whole amount, being the difference between the discounted value of the remaining scheduled payments and the current obligation. The Company was in compliance with the covenants of the senior note agreement for the period 1 January 2007 until 31 December 2007.

The notes are repayable in full in the event of a change of control of Vedior N.V.

In 2006 and 2007, the Company entered into several medium term loans and committed medium term facilities with a number of banks for an amount of €77 million (2006: €89 million), of which €33 million (2006: €44 million) was outstanding as at 31 December 2007. These medium term loans and facilities are repayable over a two year period.

In addition to the facilities described above, the Company has a number of uncommitted short-term credit facilities amounting to some €304 million (2006: €293 million). These are primarily used to meet short-term liquidity requirements. At 31 December 2007, approximately €73 million (2006: €99 million) was drawn down under these facilities.

Contractual maturity analysis for interest bearing borrowings

This table includes the contractually agreed upon redemption of the notional amounts as well as the contractually agreed upon undiscounted interest payments.

The carrying amounts of Vedior’s borrowings are denominated in the following currencies:

Fair value of interest bearing loans and borrowings
The fair value is calculated based on discounted expected future principal and interest cash flows using market prices.

The fair value of the exercise price of the put options relating to minority interests is dependent on the timing of the exercise of the put option and on future results. As the put option has an indefinite lifetime, when determining the fair value, the moment of exercise is assumed to be within 3-8 years. When the timing of the exercise of the put option is known, this moment is used for calculating the fair value. The future results are based on budgets for the forthcoming year and management forecasts for the following 4 years. For the period thereafter a growth rate of 2% is used. As the exercise price and the timing are not preset, the actual settlement price may deviate from the fair value. The liability is contractually capped at a maximum of €428 million (2006: €351 million).