Notes to the consolidated financial statements
33 Commitments and contingencies continued
Contingent liabilities
Guarantees
31 www.ahold.com/reports2008
Financial statements
AHOLD ANNUAL REPORT 2008 I 102
Guarantees to third parties issued by Ahold, primarily covering liabilities and commitments of its subsidiaries, can be summarized
as follows:
December 28,
December 30,
million
2008
2007
Lease guarantees
1,096
1,329
Loan guarantees
13
12
Corporate and buy back guarantees
44
175
Total
1,153
1,516
Ahold is contingently liable for leases that have been assigned to third parties in connection with facility closings and asset
disposals. Ahold could be required to assume the financial obligations under these leases if any of the assignees are unable to fulfill
their lease obligations. The lease guarantees are based on the nominal value of future minimum lease payments of the assigned
leases. On a discounted basis the lease guarantees are EUR 787 million and EUR 985 million as of December 28, 2008 and
December 30, 2007, respectively. Of the EUR 1,096 million of lease guarantees, EUR 484 million relates to the BI-LO/Bruno's
divestment and EUR 370 million to the Tops divestment. The weakness of the banking sector in particular and the economies in
general in both the United States and Europe has led to a heightened likelihood that the Company may be required to assume a
material amount of these obligations. The Company has reviewed the status of its individual contingent liabilities and, given that
various remedies are available to Ahold, has determined that the financial guarantees are adequately recognized and measured at
their initial fair value less accumulated amortization in the amount of EUR 3 million (December 30, 2007: EUR 3 million). The
Company has guaranteed leases of Bruno's Supermarkets LLC ("Bruno's") with an outstanding amount totaling USD 17 million
(EUR 12 million). On February 5, 2009, Bruno's filed for protection under Chapter 11 of the U.S. Bankruptcy Code and stated that
its cash from operations will be enough to meet its normal business obligations. To date the Company is not able to determine the
amount of any liability on its part for payment under these guarantees in the future.
As part of the divestment of Ahold's Polish retail operations, Ahold received a guarantee from Carrefour for EUR 152 million in
June 2007 which was reduced to EUR 7 million as of December 28, 2008. As part of the divestment of U.S. Foodservice in 2007,
Ahold received an irrevocable stand by letter of credit for USD 216 million (EUR 154 million).
Loan guarantees relate to the principal amounts of certain loans payable by Ahold's franchisees, non-consolidated real estate
development entities and joint ventures. The term of most guarantees is equal to the term of the related loan. Ahold's maximum
liability under the guarantees equals the total amount of the related loans plus, in most cases, reasonable costs of enforcement
of the guarantee.
Ahold has provided corporate guarantees to certain suppliers of Ahold's franchisees or non-consolidated entities. Ahold would
be required to perform under the guarantee if the franchisee or non-consolidated entity failed to meet the financial obligations,
as described in the guarantee.
Buy back guarantees relate to Ahold's commitment to repurchase stores or inventory from certain franchisees at predetermined
prices. The buy back guarantee reflects the maximum committed repurchase value under the guarantee.
