LOANS AND FINANCINGS

Composition by maturity year of long-term liabilities:

Abbreviations:
BNDES National Bank for Economic and Social Development
CCB Bank Credit Note
CDI Interbank Deposit Certificate
CER Reference Stabilization Ratio
FINAME Government Agency for Equipment and Machinery Financing
LIBOR London Interbank Offered Rate
TJLP Long-Term Interest Rate
IFC International Finance Corporation
NCC Commercial Credit Note

Loans and financings are guaranteed by promissory notes for the total financed amount considering the same agreed terms and conditions, except in the case of BNDES, which is guaranteed by collateral account ensuring liquidity of payment, and in the case of the financing of locomotives, which guarantee the financing.

Cash and cash equivalents and financial investments include collateral accounts in the subsidiary ALL Brasil amounting to R$25,576 on December 31, 2006 (December 31, 2005 – R$34,373).

For foreign currency financing contracted in Brazil, there are swaps protecting the Brazilian real against the US dollar, being translated at rates of 85% to 105% of CDI.

The loans obtained from BNDES and IFC, as above, are intended for investments and depend upon the compliance with certain financial liquidity ratios related to the net debt; shareholders’ equity; earnings before taxes, financial results, depreciation and amortization (EBITDA); debt service; short-term debt, among others, which have been complied with by the Company.

In 1H06, the parent company raised loans in the amount of R$700,000 recorded in current liabilities as bridge to the 6th issue of public debentures. As described in Note 28, these loans were settled on July 31, 2006 with funds arising from the public debentures (6th Issue).

For the subsidiaries of Brasil Ferrovias, in guarantees of loans and financings the following items were granted: (i) Pledge of the total shares issued of Ferronorte held by the parent company Brasil Ferrovias, (ii) Pledge of revenue on the product of the fee collection for the provision of the rail transportation services resulting from the work project of Ferronorte, (iii) Linkage of the revenue of service agreements, (iv) Promissory notes.

Some agreements have restrictive covenants establishing financial limits quarterly determined in each publication of the consolidated financial statements of the Issuer as follows:

The index corresponding to the ratio of the Net Debt by the Consolidated EBITDA of the last 12 months, in the maximum limit of:

Minimum limit of 1.3 times for the index corresponding to the division of the Consolidated EBITDA of the last 4 (four) quarters of the Issuer by its Consolidated Net Financial Expense.

DEBENTURES

Parent Company

• On February 1, 2003, the Company issued 5,500 debentures convertible into shares at unit par value of R$10 each (2nd issue);
• On June 1, 2004, the Company issued 12,000 debentures non-convertible into shares at unit par value of R$10 each (3rd issue);
• On October 1, 2004, the Company issued 13,500 debentures non-convertible into shares at unit par value of R$10 each (4th issue);
• On September 1, 2005, the Company issued 20,000 debentures non-convertible into shares at unit par value of R$10 (5th issue);
• On July 1, 2006, the Company issued 70,000 debentures non-convertible into shares at unit par value of R$10 (6th issue).

Subsidiary Brasil Ferrovias

• On October 31, 2001, the Company issued 71,700 debentures convertible into shares at unit par value of R$10 (2nd issue).

Indirect Subsidiary – Ferronorte

• On July 1, 1997, the Company issued 10,00 debentures convertible into shares at unit par value of R$10 (1st issue);
• On April 10, 2000, the Company issued 60,000,000 debentures convertible into shares at unit par value of R$1.00 (2nd issue);
• On January 14, 2002, the Company issued 40,000,000 debentures convertible into shares at unit par value of R$1.00 (3rd issue);
• On December 3, 2003, the Company issued 60,000 debentures non-convertible into shares at unit par value of R$10 (5th issue).

The issued series are as follows:

Events in the Parent Company:

• Payment of interest of fifth issue debentures on March 1, 2006 at the amount of R$18,583;
• Payment of interest of fourth issue debentures on April 1, 2006, at the amount of R$12,460;
• Payment of interest of third issue debentures on June 1, 2006, at the amount of R$10,863;
• A pproval of compensation change of these forth issue debentures on June 9, 2006, at the Debentureholders’ General Meeting, from 108% to 110% of CDI. This new compensation would become effective starting on June 16, 2006;
• Approval of compensation change of these fifth issue debentures on June 9, 2006, at the Debentureholders’ General Meeting, from CDI + 1.30% to CDI + 1.50%. This new compensation would become effective starting on June 16, 2006;
• Conversion of 2,750 second issue debentures on June 16, 2006, at the amount of R$30,674.
• Payment of interest of fifth issue debentures on September 1, 2006, at the amount of R$16,838;
• Payment of interest of forth issue debentures on October 2, 2006, at the amount of R$10,751;
• Payment of interest of third issue debentures on December 1, 2006, at the amount of R$9,211;

Events in the subsidiary – Brasil Ferrovias:

• On June 16, 2006 – conversion into shares of Brasil Ferrovias of 10,000 debentures of the first issuance at the amount of R$330,916;

Events in the subsidiary – Ferronorte:

• Approval of compensation change of these fifth issue debentures on July 26, 2006, at the Debentureholders’ General Meeting, from CDI + 5% to CDI + 1.50%. This new compensation would become effective starting on June 30, 2006;
• Repurchase of 799 debentures of fifth issue on July 28, 2006, at the amount of R$13,854;
• Payment of interest of fifth issue debentures on December 4, 2006, at the amount of R$21,668;
• Payment of interest of third issue debentures on December 4, 2006, at the amount of R$11,448;