25. BORROWINGS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Amounts owed to banks and other financial institutions can be broken down as follows:

The item bonds refers to the unrated bond placed by Pirelli & C. S.p.A. on the Eurobond market for an aggregate nominal amount of euro 500 million. The bond has the following characteristics:

• issuer: PIRELLI & C. S.p.A.
• guarantor: PIRELLI Tyre S.p.A.
• amount: euro 500 million
• settlement date: February 22, 2011
• maturity date: February 22, 2016
• coupon: 5.125%
• issue price: 99.626%
• redemption price: 100%
• effective yield on maturity: 5.212%

The carrying value of the bond at December 31, 2011 was determined as follows:

Borrowings from banks refer mainly to:

• five loans granted by the European Investment Bank (EIB) in favour of Pirelli & C. S.p.A. and Pirelli Tyre S.p.A. for research and development projects and in favour of S.C. Pirelli Tyres Romania S.r.l. for local industrial investments. These loans total Euro 400,000 thousand, with utilisation of euro 390,000 thousand, of which euro 125,000 thousand classified as current bank borrowings and 265,000 thousand classified as non-current bank borrowings;
• euro 360,000 thousand for utilisation of the syndicated facility, granted to Pirelli & C. S.p.A., Pirelli Tyre S.p.A. and Pirelli International Limited for a total amount of euro 1,200,000 thousand, subscribed on November 30, 2010 and having a maturity of five years. These utilisations were classified as non-current bank borrowings due in 2015 (between 2 and 5 years).

At December 31, 2011 the Group had, besides cash and financial assets held for trading of euro 717,486 thousand, unused committed credit facilities of euro 840,000 thousand (euro 1,220,000 thousand at December 31, 2010), with the following maturities:

Please see note 10.1 “Finance leases” in regard to finance lease payables. The increase in finance lease payables from the previous year stems from the change in finance lease agreements in effect at December 31, 2011 as compared with the previous year.

Financial accrued expenses and deferred income, totalling euro 31,671 thousand, mainly include euro 21,974 thousand for the interest accrued but not yet paid on the bond.

Financial payables backed by secured guarantees (pledges and mortgages) totalled euro 26,738 thousand (euro 16,593 thousand at December 31, 2010).

For current payables, the carrying amount is considered approximate to their fair value. Current payables include the portion of non-current financial payables, totalling euro 284,900 thousand (euro 150,000 thousand at December 31, 2010), that will be settled within one year.

The fair value of non-current payables is shown below, compared with their carrying amount:

At December 31, 2011, the breakdown of payables by interest rate and by currency of origin of the debt is as follows:

The situation at December 31, 2010 was as follows:

The value of fixed-rate payables indicated above includes those established by contract as fixedrate payables and those established by contract as floating-rate payables to offset which hedging derivatives have been put in place.

The Group’s exposure to fluctuations in interest rates on financial payables, both in terms of the type of rate and their resetting date, are summarised below:

The average cost of debt in 2011 was 5.5% (4.42% in 2010).

In regard to the financial covenants and negative pledge clauses on utilised credit facilities (included in bank borrowings), the revolving credit line granted to PIRELLI & C. S.p.A., Pirelli Tyre S.p.A. and Pirelli International Limited for a total of euro 1,200,000 thousand, used for euro 360,000 thousand, envisages just one financial covenant: a certain ratio must be maintained between consolidated net indebtedness and gross operating profit. This parameter was fully satisfied at December 31, 2011. In regard to the negative pledges, the credit facility provides for a commitment not to grant secured guarantees, above a threshold defined as the greater of euro 100,000 thousand and 3% of Total Assets (as defined in the consolidated financial statements of PIRELLI & C. S.p.A.), with the exception of secured guarantees on the existing debt or debt to replace it, to be granted pursuant to law, relating to export finance, project finance and subsidised finance.

The other outstanding financial payables do not contain financial covenants.