Note 27
27 FINANCE LEASE LIABILITIES
As of January 1, 2006, Ahold has not drawn any loans (other than letters of credit) under the May 2005 Credit Facility. Should
Ahold have drawn loans exceeding EUR 1,000, then Ahold would have had to pay a utilization fee of 10 basis points on the
principal amount of loans outstanding under the credit facility (excluding letters of credit) exceeding 50% of the total
commitments under the May 2005 Credit Facility.
Covenants
The May 2005 Credit Facility contains customary covenants that place restrictions on disposals, mergers, acquisitions,
investments and the incurrence of debt by Ahold's subsidiaries. The facility is subject to a leverage covenant, which falls
away, along with the restrictions with respect to acquisitions and disposals, as well as a part of the restriction to incur financial
indebtedness, when Ahold's corporate rating is BBB/Baa2 or better. The leverage covenant requires Ahold not to exceed a
maximum ratio, as defined in the May 2005 Credit Facility, of consolidated net borrowings to consolidated earnings before
interest, tax, depreciation, amortization and exceptional and/or extraordinary items of 4.28:1.
Events of default Ranking
The May 2005 Credit Facility contains customary events of default, amongst others, non-payment, misrepresentations,
covenant breaches, cross-default and insolvency. If an event of default was to occur and remain outstanding in excess of any
applicable remedy period, it is expected that all amounts outstanding under the Credit Facility would immediately become due
and payable. The May 2005 Credit Facility ranks at least pari passu with all existing unsecured third-party payment
obligations, except for obligations mandatorily preferred by law.
January 1,
2006
January 2,
2005
Total finance lease liabilities
1,362
1,164
Current portion
(64)
(87)
Non-current portion of finance lease liabilities
1,298
1,077
Liabilities payable after 5 years
1,056
1,011
Finance lease liabilities are principally for buildings. Terms range from 10 to 25 years and include renewal options if it
is reasonably certain, at the inception of the lease, that they will be exercised. At the time of entering into finance lease
agreements, the commitments are recorded at their present value using the interest rate implicit in the lease, if this is
practicable to determine; if not the interest rate applicable for long-term borrowings is used. As of January 1, 2006, the
finance lease liabilities are recorded at their present value at an average interest rate of 9.2% (January 2, 2005: 9.9%).
During 2005, interest expense on finance lease liabilities was EUR 119 (2004: EUR 111). The aggregate amounts of
minimum finance lease liabilities to third parties, under non-cancelable finance lease contracts for the next five years and
thereafter are as follows:
AHOLD ANNUAL REPORT 2005 155
