Notes: 9
126
Ahold Annual Report 2003
Financial Statements
on April 27, 2000, a USD 38 loan, bearing interest per annum at LIBOR plus a margin of 100 basis points,
maturing on April 28, 2001, subject to extensions for additional one-year terms, and secured by a pledge
of 156 shares of DAIH owned by VRH;
on June 9, 2000, a USD 28 loan, bearing interest per annum at LIBOR plus a margin of 100 basis points,
maturing on June 9, 2001, subject to extensions for additional one-year terms, and secured by a pledge
of 117 shares of DAIH owned by VRH;
on June 12, 2001, a USD 30 loan, bearing interest per annum at LIBOR plus a margin of 125 basis points,
maturing on December 14, 2002, subject to one two-year extension, and secured by a pledge of 122 shares
of DAIH owned by VRH; and
on May 23, 2002, a USD 24 loan (the "May 2002 Loan"), bearing interest per annum at LIBOR plus a margin
of 100 basis points, maturing on May 23, 2005, subject to prepayment under certain circumstances, and
secured by a pledge of 302 shares of DAIH owned by VRH.
A portion of the proceeds of the Secured Bank Loans was used to finance VRH's share of capital investments in
DAIH. At the time of each Secured Bank Loan, Ahold agreed with the relevant Lender that, if an event of default
occurred in respect of that Secured Bank Loan, Ahold would purchase or cause one of its designated affiliates to
purchase from VRH the DAIH shares pledged in connection therewith at a specified price: USD 260,000 per share
in the case of all of the Secured Bank Loans except for the May 2002 loan, and USD 82,500 per share in the
case of the May 2002 Loan. It was agreed that the proceeds would be paid by Ahold or its designated affiliate
to the relevant Lender under the related Secured Bank Loan for amounts owed by VRH to that Lender there under.
On March 5, 2002, Ahold provided a USD 5 unsecured loan to VRH (the "USD 5 Loan").
No accrual was made in Ahold's 2000 financial statements for the contingent liabilities relating to the foregoing
arrangements since the likelihood that VRH would default was considered to be remote at the time. Shortly after the
end of 2001, there were indications that VRH and the Velox Group were facing financial difficulties as a result of the
deteriorating political and economic situation in Argentina. Based on an evaluation of the positive and negative
evidence available to assess the likelihood of a default of VRH as of April 9, 2002, the date of the filing of Ahold's
2001 annual report on Form 20-F, Ahold concluded at the time that it was reasonably possible but not probable that
VRH would default. The negative evidence included:
a) the deterioration of the Argentine economy in the latter half of 2001, followed by the enactment of certain
economic policies in Argentina in 2002, including a policy under which certain debts denominated in US
dollars within the banking sector were adjusted to fix the loans as peso loans on a one-to-one mandatory
conversion basis. The Company believes this policy especially affected the Peirano family, whose holdings
included Argentine banking assets; and
b) communications from a member of the Peirano family and from VRH management in 2002 indicating the
existence of liquidity problems.
The positive evidence included:
indications that certain financial institutions were providing support to the Peirano family; and
confirmations received from a member of the Peirano family indicating an ability and intent to avoid default
and remain a long-term partner in DAIH.
