19. LOANS AND FINANCING

d) Interest and guarantees

The total debt in Reais is subject to interest based on the Long-term Interest Rate (TJLP) and the Interbank Deposit Certificate (CDI). In the year ended December 31, 2010 these rates were 4,24% p.a. (7,19% p.a. in December 31, 2009).

The U.S. dollar loans at December 31, 2010 are subject to annual weighted interest rates of 5,89% p.a. (4,52% p.a. at December 31, 2009) and the Euro loans are subject to annual weighted interest rates of 2,23% p.a. (1,5% at December 31, 2009).

The effective rates on the foreign currency financing, which includes the financial structuring costs incurred and already paid, result in an average effective weighted rate equivalent to LIBOR plus 3.13% p.a. at December 31, 2010 (LIBOR plus 1.65% p.a. in December 31, 2009).

Real estate, machinery, equipment, commercial pledges and bank guarantees totaling US$111.8 were pledged as collateral for loans.

• Restrictive clauses
The long-term financing agreements are subject to restrictive clauses, in line with normal market practices, which establish control over the degree of leverage through the ratio of total consolidated indebtedness/EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), as well as limits for debt service cover based on the EBITDA/net financial expense ratio. Agreements include a clause that establishes a minimum amount for the Company's net equity and customary restrictions on the creation of new encumbrances on assets, change of control, sale of assets and payment of dividends in excess of the minimum mandatory dividend in the event of default on financing and transactions with affiliated companies.

As of December 31, 2010, the parent company and subsidiaries were in compliance with all the restrictive clauses.


• Bond issue
In October, 2006, the Company's wholly-owned finance subsidiary Embraer Overseas Limited issued US$400.0 6.375% Guaranteed Notes due 2017 in an offering subsequently registered with the U.S. SEC for which the Company provides a full and unconditional guarantee.

In October 2009, Embraer Overseas Limited issued US$500.0 6.375% guaranteed Notes due 2020 and, as of December 31, 2010, US$502.8 was outstanding (US$7.3 in current liabilities), including principal and accrued interest. Interest is payable semiannually. The Notes are fully and unconditionally guaranteed by the Company and have been registered with the SEC and Listed on the NYSE.