Chairman’s Letter
Notes
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Financial Statement
27. Financial liabilities
Financial liabilities comprise the following:
| Dec. 31, 2006 | Dec. 31, 2007 | |||
| € million | Total | of which current | Total | of which current |
| Bonds and notes | 11,852 | 2,137 | 10,411 | 190 |
| Liabilities to banks | 6,805 | 2,273 | 3,032 | 887 |
| Liabilities under finance leases | 384 | 69 | 358 | 30 |
| Liabilities from derivative financial instruments | 187 | 31 | 235 | 23 |
| Other financial liabilities | 573 | 568 | 162 | 157 |
| Total | 19,801 | 5,078 | 14,198 | 1,287 |
The maturities of financial liabilities were as follows:
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As in the previous year, there were no financial liabilities to associates.
U.S. dollar-denominated financial liabilities amounted to €1.2 billion (2006: €1.8 billion) and accounted for 8.3 percent (2006: 8.9 percent) of total financial liabilities.
Short-term borrowings (excluding the short-term portion of debentures) amounted to €1.1 billion (2006: €2.9 billion) with a weighted average interest rate of 3.2 percent (2006: 3.8 percent). The Bayer Group’s financial liabilities are primarily unsecured and – with the exception of a subordinated mandatory convertible bond with a face value of €2,300 million and a subordinated hybrid bond with a face value of €1,300 million – of equal ranking.
Further information on the accounting for liabilities from derivative financial instruments is given in Note [30].
The Bayer Group has issued the following bonds and notes:
U.S. dollar-denominated financial liabilities amounted to €1.2 billion (2006: €1.8 billion) and accounted for 8.3 percent (2006: 8.9 percent) of total financial liabilities.
Short-term borrowings (excluding the short-term portion of debentures) amounted to €1.1 billion (2006: €2.9 billion) with a weighted average interest rate of 3.2 percent (2006: 3.8 percent). The Bayer Group’s financial liabilities are primarily unsecured and – with the exception of a subordinated mandatory convertible bond with a face value of €2,300 million and a subordinated hybrid bond with a face value of €1,300 million – of equal ranking.
Further information on the accounting for liabilities from derivative financial instruments is given in Note [30].
The Bayer Group has issued the following bonds and notes:
| Effective interest rate | Stated rate | Nominal volume | Dec. 31, 2006 | Dec. 31, 2007 | |
| € million | € million | ||||
| Bayer AG | |||||
| 5.515% | 5.375% | Eurobonds 2002/2007 | EUR 2,137 million | 2,137 | - |
| 6.075% | 6.000% | Eurobonds 2002/2012 | EUR 2,000 million | 2,010 | 1,971 |
| 5.155% | 5.000% | Hybrid bonds 2005/2105 (2015) | EUR 1,300 million | 1,247 | 1,237 |
| Floating | Floating | Eurobonds 2006/2009 | EUR 1,600 million | 1,596 | 1,598 |
| 4.621% | 4.500% | Eurobonds 2006/2013 | EUR 1,000 million | 993 | 994 |
| 5.774% | 5.625% | Eurobonds 2006/2018 | GBP 250 million | 368 | 337 |
| 5.541% | 5.625% | Eurobonds 2006/2018 (increase) | GBP 100 million | 150 | 137 |
| Floating | Floating | Eurobonds 2007/2010 | EUR 300 million | - | 300 |
| 4.464% | 4.375% | Eurobonds 2007/2011 | EUR 200 million | - | 199 |
| 3.502% | 3.490% | Eurobonds (private placement) 2004/2008 | EUR 20 million | 20 | 20 |
| Bayer Capital Corp. B.V. | |||||
| 7.117% | 6.625% | Mandatory convertible bonds 2006/2009 | EUR 2,300 million | 2,276 | 2,285 |
| Bayer Corporation | |||||
| 7.180% | 7.125% | Notes 1995/2015 | USD 200 million | 144 | 135 |
| 6.670% | 6.650% | Notes 1998/2028 | USD 350 million | 263 | 236 |
| 6.210% | 6.200% | Notes 1998/2008 | USD 250 million | 190 | 170 |
| 4.043% | 3.750% | Eurobonds 2004/2009 | EUR 460 million | 458 | 459 |
| Bayer Holding Japan LLC | |||||
| 1.654% | 1.585% | Eurobonds 2007/2010 | JPY 10 billion | - | 61 |
| 2.006% | 1.955% | Eurobonds 2007/2012 | JPY 15 billion | - | 91 |
| Floating | Floating | Eurobonds 2007/2012 | JPY 30 billion | - | 181 |
| Total | 11,852 | 10,411 |
In June 2007, Bayer Holding Japan LLC launched bond issues under the multi-currency European Medium Term Note (EMTN) program. These comprised a three-year bond with a face value of JPY 10 billion and a coupon of 1.585 percent, a five-year bond with a face value of JPY 15 billion and a coupon of 1.955 percent, and a floating-rate note with a face value of JPY 30 billion. The latter has a maturity of five years and a coupon of three-month JPY Libor plus 26 basis points. These bonds are guaranteed by Bayer AG.
In April 2007, Bayer AG issued a floatingrate bond with a maturity of three years and a face value of €300 million under the EMTN program. The coupon is the three-month Euribor rate plus 10 basis points. At the same time, a four-year bond with a face value of €200 million and a coupon of 4.375 percent was issued.
In May 2006, Bayer AG launched further bond issues under its EMTN program as part of the financing of the acquisition of Schering AG, Berlin, Germany. The first of these was a three-year floatingrate note in a nominal amount of €1,600 million which bears interest at 0.225 percent above the 3-month Euribor rate. The second issue, which has a face value of €1,000 million, has a coupon of 4.5 percent and matures in seven years. A third bond, denominated in sterling (GBP), was also issued with a face value of GBP 250 million. A second tranche of GBP 100 million was issued in the same year. This bond has a coupon of 5.625 percent and matures in 2018. The entire issue has been swapped into euros.
In April 2006, Bayer Capital Corp. B.V. issued a subordinated mandatory convertible bond with a face value of €2,300 million as part of the financing of the acquisition of Schering AG, Berlin, Germany. This issue carries a 6.625 percent coupon and matures on June 1, 2009. Investors may convert the bond into a variable number of Bayer AG shares up to the expiration date, depending on the movement of the share price within a set band. If the share price exceeds or falls below the band, the bond will be converted into a fixed number of shares. Conversion is mandatory after three years. This bond is treated entirely as equity by Moody’s and Standard & Poor’s and therefore significantly improves the Bayer Group’s rating-specific debt indicators.
In July 2005, Bayer AG issued a 100-year subordinated hybrid bond with an issue volume of €1,300 million. This issue matures in 2105 and has a fixed coupon of 5 percent in the first ten years. Thereafter, interest is calculated quarterly at a floating rate (three-month Euribor plus 280 basis points). After the first ten years, Bayer AG has a quarterly option to redeem the bonds at face value. The coupon is payable in arrears. Moody’s treats this hybrid bond as 75 percent equity while Standard & Poor’s treats it as 50 percent equity so it improves the Bayer Group’s rating-specific debt indicators.
In February 1998, Bayer Corporation issued notes of US$ 350 million with a coupon of 6.65 percent and notes of US$ 250 million with a coupon of 6.20 percent for eligible institutional investors. The first of these issues has a maturity of 30 years. The second issue has combined call and put options, giving the lead manager the right to repurchase the notes, and the investors the right to cash them, after ten years. In September 2007, it was contractually agreed with the lead manager that it would exercise its right to repurchase the notes from the investors and would sell the notes back to Bayer Corporation in February 2008. Interest on both issues is paid semi-annually.
The long-term liabilities to banks principally comprise a syndicated loan of €1.25 billion raised in 2006 in connection with the acquisition of Schering AG, Berlin, Germany. This credit facility is provided by a syndicate of eleven banks and bears a variable interest rate (Euribor plus a margin, which has been fixed at 20 basis points since July 2007). This credit facility has a fixed term until March 2011 but can be repaid in full or in part at any time on Bayer’s request.
As of December 31, 2007 the Group had credit facilities at its disposal totaling approximately €7.9 billion (2006: €11.7 billion), of which €3.0 billion (2006: €6.8 billion) was used and €4.9 billion (2006: €4.9 billion) was unused and thus available for borrowing on an unsecured basis.
Liabilities under finance leases are recognized as financial liabilities if the leased assets are capitalized under property, plant and equipment. They are stated at the present values of the minimum future lease payments. Lease payments totaling €458 million (2006: €486 million), including €100 million (2006: €102 million) in interest, are to be made to the respective lessors in future years.
Leasing liabilities mature as follows:
In April 2007, Bayer AG issued a floatingrate bond with a maturity of three years and a face value of €300 million under the EMTN program. The coupon is the three-month Euribor rate plus 10 basis points. At the same time, a four-year bond with a face value of €200 million and a coupon of 4.375 percent was issued.
In May 2006, Bayer AG launched further bond issues under its EMTN program as part of the financing of the acquisition of Schering AG, Berlin, Germany. The first of these was a three-year floatingrate note in a nominal amount of €1,600 million which bears interest at 0.225 percent above the 3-month Euribor rate. The second issue, which has a face value of €1,000 million, has a coupon of 4.5 percent and matures in seven years. A third bond, denominated in sterling (GBP), was also issued with a face value of GBP 250 million. A second tranche of GBP 100 million was issued in the same year. This bond has a coupon of 5.625 percent and matures in 2018. The entire issue has been swapped into euros.
In April 2006, Bayer Capital Corp. B.V. issued a subordinated mandatory convertible bond with a face value of €2,300 million as part of the financing of the acquisition of Schering AG, Berlin, Germany. This issue carries a 6.625 percent coupon and matures on June 1, 2009. Investors may convert the bond into a variable number of Bayer AG shares up to the expiration date, depending on the movement of the share price within a set band. If the share price exceeds or falls below the band, the bond will be converted into a fixed number of shares. Conversion is mandatory after three years. This bond is treated entirely as equity by Moody’s and Standard & Poor’s and therefore significantly improves the Bayer Group’s rating-specific debt indicators.
In July 2005, Bayer AG issued a 100-year subordinated hybrid bond with an issue volume of €1,300 million. This issue matures in 2105 and has a fixed coupon of 5 percent in the first ten years. Thereafter, interest is calculated quarterly at a floating rate (three-month Euribor plus 280 basis points). After the first ten years, Bayer AG has a quarterly option to redeem the bonds at face value. The coupon is payable in arrears. Moody’s treats this hybrid bond as 75 percent equity while Standard & Poor’s treats it as 50 percent equity so it improves the Bayer Group’s rating-specific debt indicators.
In February 1998, Bayer Corporation issued notes of US$ 350 million with a coupon of 6.65 percent and notes of US$ 250 million with a coupon of 6.20 percent for eligible institutional investors. The first of these issues has a maturity of 30 years. The second issue has combined call and put options, giving the lead manager the right to repurchase the notes, and the investors the right to cash them, after ten years. In September 2007, it was contractually agreed with the lead manager that it would exercise its right to repurchase the notes from the investors and would sell the notes back to Bayer Corporation in February 2008. Interest on both issues is paid semi-annually.
The long-term liabilities to banks principally comprise a syndicated loan of €1.25 billion raised in 2006 in connection with the acquisition of Schering AG, Berlin, Germany. This credit facility is provided by a syndicate of eleven banks and bears a variable interest rate (Euribor plus a margin, which has been fixed at 20 basis points since July 2007). This credit facility has a fixed term until March 2011 but can be repaid in full or in part at any time on Bayer’s request.
As of December 31, 2007 the Group had credit facilities at its disposal totaling approximately €7.9 billion (2006: €11.7 billion), of which €3.0 billion (2006: €6.8 billion) was used and €4.9 billion (2006: €4.9 billion) was unused and thus available for borrowing on an unsecured basis.
Liabilities under finance leases are recognized as financial liabilities if the leased assets are capitalized under property, plant and equipment. They are stated at the present values of the minimum future lease payments. Lease payments totaling €458 million (2006: €486 million), including €100 million (2006: €102 million) in interest, are to be made to the respective lessors in future years.
Leasing liabilities mature as follows:
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Lease payments under operating leases in 2007 amounted to €204 million (2006: €187 million).
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