27. Financial liabilities

Financial liabilities comprise the following:

	Dec. 31, 2007		Dec. 31, 2008
	Total	Of which current	Total	Of which current
	€ million	€ million	€ million	€ million
Bonds and notes	10,411	190	10,729	4,355
Liabilities to banks	3,032	887	4,438	1,409
Liabilities under finance leases	358	30	535	44
Liabilities from forward commodity contracts	219	49	223	77
Liabilities from other derivatives	235	23	612	104
Other financial liabilities	162	157	333	267
Total	14,417	1,336	16,870	6,256

The increase in current bonds is partly attributable to a mandatory convertible bond with a nominal value of €2,300 million issued by Bayer Capital Corp. B.V. in April 2006, which matures in June 2009. In addition to a €460 million Eurobond issued by Bayer Corporation under the EMTN program, which matured in January 2009, a floating rate Eurobond with a nominal value of €1,600 million issued by Bayer AG in May 2006 under the EMTN program matures in May 2009. Both bonds are recognized as current financial liabilities.

Liabilities from commodity forward contracts are reflected in financial liabilities for the first time in 2008. In the past they were included in other liabilities. The previous year’s figures are restated accordingly.

The maturities of financial liabilities were as follows:

Maturity	Dec. 31, 2007	Maturity	Dec. 31, 2008
	€ million		€ million
Up to 2008	1,336	Up to 2009	6,256
Up to 2009	4,742	Up to 2010	771
Up to 2010	518	Up to 2011	1,967
Up to 2011	1,566	Up to 2012	2,740
Up to 2012	2,455	Up to 2013	1,465
Up to 2013 and later	3,800	Up to 2014 and later	3,671
Total	14,417	Total	16,870

Bayer sold a registered usufructuary right to real estate with a residual carrying amount of €164 million to a leasing company and leased it back immediately under an agreement that includes a right of repurchase upon expiration of the lease. This transaction, which is accounted for as a secured loan, does not restrict the operational use of the real estate. The Bayer Group’s other financial liabilities are mostly unsecured and – with the exception of the subordinated mandatory convertible bond with a nominal value of €2,300 million and a subordinated hybrid bond with a nominal value of €1,300 million – are of equal priority.

Further information on the accounting for liabilities from derivatives is given in Note [30].

The Bayer Group has issued the following bonds and notes:

Effective interest rate	Stated rate		Nominal volume	Dec. 31, 2007	Dec. 31, 2008
				€ million	€ million
		Bayer AG
6.075%	6.000%	Eurobonds 2002/2012	EUR 2,000 million	1,971	2,025
5.155%	5.000%	Hybrid bonds 2005/2105 (2015)	EUR 1,300 million	1,237	1,245
Floating	Floating	Eurobonds 2006/2009	EUR 1,600 million	1,598	1,599
4.621%	4.500%	Eurobonds 2006/2013	EUR 1,000 million	994	995
5.774%	5.625%	Eurobonds 2006/2018	GBP 250 million	337	259
5.541%	5.625%	Eurobonds 2006/2018 (increase)	GBP 100 million	137	106
Floating	Floating	Eurobonds 2007/2010	EUR 300 million	300	300
4.464%	4.375%	Eurobonds 2007/2011	EUR 200 million	199	200
4.038%	4.000%	Eurobonds (private placement) 2008/2011	EUR 200 million	-	200
3.502%	3.490%	Eurobonds (private placement) 2004/2008	EUR 20 million	20	-
		Bayer Capital Corp. B.V.
7.117%	6.625%	Mandatory convertible bonds 2006/2009	EUR 2,300 million	2,285	2,296
		Bayer Corporation
7.180%	7.125%	Notes 1995/2015	US$ 200 million	135	162
6.670%	6.650%	Notes 1998/2028	US$ 350 million	236	249
6.210%	6.200%	Notes 1998/2008	US$ 250 million	170	-
4.043%	3.750%	Eurobonds 2004/2009	EUR 460 million	459	460
		Bayer Holding Ltd.
1.654%	1.585%	Eurobonds 2007/2010	JPY 10 billion	61	79
2.006%	1.955%	Eurobonds 2007/2012	JPY 15 billion	91	119
Floating	Floating	Eurobonds 2007/2012	JPY 30 billion	181	237
Floating	Floating	Eurobonds 2008/2013	JPY 10 billion	-	79
3.654%	3.575%	Eurobonds 2008/2018	JPY 15 billion	-	119
		Total		10,411	10,729

In December 2008 Bayer AG issued a bond with a nominal value of €200 million under the multi-currency European Medium Term Note (EMTN) program. It has a coupon of 4% and matures on January 27, 2011.

In June 2008 Bayer Holding Ltd. issued a floating-rate bond with a nominal value of JPY 10 billion under the EMTN program. The bond matures in five years and has a variable coupon comprising the three-month JPY Libor plus 56 basis points. In December Bayer Holding Ltd. also issued a bond with a nominal value of JPY 15 billion under this program. This bond has a coupon of 3.575% and matures on December 19, 2018.

In June 2007 Bayer Holding Ltd. launched bond issues under the EMTN program. These comprised a three-year bond with a nominal value of JPY 10 billion and a coupon of 1.585%, a five-year bond with a nominal value of JPY 15 billion and a coupon of 1.955%, and a floating-rate note with a nominal value of JPY 30 billion. The latter has a maturity of five years and a coupon comprising the three-month JPY Libor plus 26 basis points.

In April 2007, Bayer AG issued a floating rate bond with a maturity of three years and a nominal 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 nominal value of €200 million and a coupon of 4.375% was issued.

In May 2006 Bayer AG launched three further bond issues under its multi-currency EMTN program as part of the financing of the Schering acquisition. The first of these was a three-year floating rate note in a nominal amount of €1,600 million which bears interest at 22.5 basis points above the 3-month EURIBOR rate. The second issue, which has a nominal value of €1,000 million, has a coupon of 4.5% and a maturity of seven years. A third bond, denominated in sterling (GBP), was also issued with a nominal 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% 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 nominal value of €2,300 million as part of the financing of the acquisition of Schering AG, Berlin, Germany. This issue carries a 6.625% coupon and matures on June 1, 2009. Unless the issue has been converted, repurchased or canceled before the expiration date of June 1, 2009, all outstanding bonds will be converted into the corresponding number of Bayer AG shares at the mandatory conversion ratio on the maturity date. If the mandatory conversion ratio is within the band set for the fluctuation of the stock price, the number of shares per bond will be issued on the basis of this mandatory conversion ratio. If the share price exceeds or falls below the band, the bond will be converted into a fixed number of shares. Investors may convert the bond into shares before the maturity date as provided in the issue conditions. This bond is treated entirely as equity by Moody’s and Standard & Poor’s and therefore improves the Bayer Group’s rating-specific debt indicators.

In July 2005, Bayer AG issued a 100-year subordinated hybrid bond with a volume of €1,300 million. This issue matures in 2105 and has a fixed coupon of 5% 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 nominal value. The coupon is payable in arrears. This bond is treated as 75% equity by Moody’s and as 50% equity by Standard & Poor’s and therefore improves the Bayer Group’s rating-specific debt indicators.

In January 2004 Bayer Corporation issued a five-year bond with a nominal value of €460 million and a coupon of 3.75% under the EMTN program. In February 1998 Bayer issued notes with a total nominal value of US $600 million for eligible institutional investors. This comprised two separate issues. The first issue, with a nominal value of US $350 million, has a maturity of 30 years and a coupon of 6.65% with half-yearly interest payments. The second issue, with a nominal value of US $ 250 million, had 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. As contractually agreed with the lead manager in September 2007, it exercised its right to repurchase the notes from the investors in February 2008 and sold them back to Bayer Corporation.

The long-term liabilities to banks principally comprise a syndicated loan raised in 2006 of now €1.25 billion, 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.

Bayer AG guarantees all the bonds issued by its subsidiaries.

As of December 31, 2008 the Group had credit facilities at its disposal totaling €9.9 billion (2007: €7.9 billion), of which €4.4 billion (2007: €3.0 billion) was used and €5.5 billion (2007: €4.9 billion) was unused and thus available for borrowing on an unsecured basis.

Lease payments totaling €707 million (2007: €458 million), including €172 million (2007: €100 million) in interest, are to be made to the respective lessors in future years.

Leasing liabilities mature as follows:

	Dec. 31, 2007				Dec. 31, 2008
Maturity	Lease payments	Interest component	Liabilities under finance leases	Maturity	Lease payments	Interest component	Liabilities under finance leases
	€ million	€ million	€ million		€ million	€ million	€ million
2008	47	17	30	2009	70	26	44
2009	48	17	31	2010	60	25	35
2010	37	15	22	2011	59	23	36
2011	33	14	19	2012	51	22	29
2012	32	13	19	2013	207	18	189
2013 or later	261	24	237	2014 or later	260	58	202
Total	458	100	358	Total	707	172	535

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