[27] Financial liabilities and shareholder loan

The interest-bearing obligations of KION Group are reported in financial liabilities.

In the course of the acquisition of the KION Group, a loan agreement (senior facilities agreement and a subordinated facilities agreement hereafter referred to as 'SFA') with a total original volume of €3,300,000 thousand was entered into with the lead banks Barclays Bank Plc, Bayerische Hypo- und Vereinsbank AG, Credit Suisse London Branch, Goldman Sachs International Bank, Lehman Commercial Paper Inc. – U.K. Branch and Mizuho Corporate Bank Ltd. on 23 December 2006.

Following a reduction of unused lines of credit of €200,000 thousand and the early repayment of a further €50,000 thousand, a supplementary agreement to the SFA dated 8 March 2007, lowered the total volume to €3,050,000 thousand.

A further supplementary agreement to the SFA dated 23 September 2009, adjusted the terms and conditions of the loan and increased the total loan amount by €100,000 thousand to a nominal amount of €3,150,000 thousand. Specifically, the adjustments related to an increase in interest rates between 0.25 and 1.5 percentage points, an extension of the collateral for the lenders to cover the new terms and conditions and the new total amount, and adjustments to the financial covenants imposed on the KION Group for the term of the loan. The interest increases are primarily in the form of bullet payments due at maturity (payments in kind 'PIK'). The interest on the new tranche of €100,000 thousand is payable exclusively in the form of a bullet payment. The capex credit line was reduced by €28,560 thousand in 2010.

The transaction costs of €31,578 thousand incurred in connection with the loan negotiations are allocated to the individual tranches on a pro rata basis and deducted from the carrying amounts of the liabilities in accordance with IAS 39.

Among other things, the SFA requires compliance with certain requirements, or undertakings and certain financial covenants during the term of the agreement. The financial covenants specify required ratios for the financial position and financial performance of the KION Group. The covenants are expressed in the form of key figures relating to leverage, available liquidity, EBITDA, interest paid and capital expenditures. If the Group fails to meet these requirements and financial covenants, the loan agreement may be terminated by the lending banks.

All the financial covenants were met in the past financial year.

As a portion of the senior term loan (€600,000 thousand) was converted into US dollars, the total volume is now dependent on the euro/US dollar exchange rate. As at the reporting date, the total volume was €3,143,969 thousand, which includes accrued interest (payment in kind 'PIK'), although it is possible that €7,332 thousand less than the total principal may be distributed, which we believe is contrary to the contractual agreement.

Under the SFA, the KION Group is under an obligation to provide collateral for its obligations and liabilities. As at the reporting date, a total of 21 (31 December 2009: 21) Group companies (guarantors) in five countries, which include Germany, U.K., France, Spain and Italy, had provided corresponding collateral.

The collateral includes guarantees, the assignment of shares in the guarantors (with the exception of shares in KION GROUP GmbH), the assignment of bank accounts and guarantor receivables, the assignment of claims arising from and in connection with the share purchase agreement between Linde Material Handling GmbH and Linde AG dated November 5, 2006, relating to the shares in the former KION GROUP GmbH, the assignment of shares in KION Information Management Services GmbH and assignments and transfers of title to intellectual property rights by guarantors in Germany . The statutory provisions in the United Kingdom and the agreements entered into require that all the assets of the U.K. guarantor are pledged as security.

The carrying amounts of the financial assets pledged as collateral amounted to €709,051 thousand as at the reporting date (31 December 2009: €898.325 thousand).

In addition, liabilities to banks amounting to €125 thousand (2009: €144 thousand) are secured by encumbrances on real property.

As at the reporting date, the weighted average interest rate for liabilities to banks was 4.6 per cent (31 December 2009: 4.3 per cent). Due to the fact that approximately 40 per cent of the variable interest exposure of the SFA was transformed into fixed interest obligations through the use of interest rate swaps the KION Group only benefited to a limited extent from the lower market interest rates in 2010. An additional 44 per cent of the interest rate exposure of the SFA is hedged by means of interest-rate caps against one-month Euribor rising above 1.75 per cent per annum.

The following table shows the contractual maturity structure of the financial liabilities:

The liabilities to banks include €100,000 thousand (plus capitalised interest) received by the KION Group from investment funds advised by Kohlberg Kravis Roberts & Co. L.P. ('KKR') and Goldman Sachs Capital Partners via Superlift Funding S.à r.l., Luxembourg, following a supplementary agreement signed on 6 October 2009 to the loan agreement dated 23 September 2009.

The terms of the syndicated loan are as follows: