127
34 Commitments and contingencies continued
Ahold
Annual Report 2011
Groupata glance
Performance
Governance
Investors
Notes to the consolidated financial statements continued
On May 12, 2010, the reorganized BI-LO exited bankruptcy protection and subsequently the existing $260 million (€204 million) in term
loans held by Ahold were repaid in full and Ahold repaid to Lone Star the funding of $130 million (€102 million). BI-LO assumed 149
operating locations that are guaranteed by Ahold. During the BI-LO bankruptcy, BI-LO rejected a total of 16 leases which are guaranteed
by Ahold and Ahold also took assignment of 12 other BI-LO leases with Ahold guarantees. Based on the foregoing developments, Ahold
recognized a reduction of €23 million in its provision, after tax, within results on divestments in the first half of 2010. Since the end of the
second quarter of 2010, Ahold has entered into settlements with a number of landlords relating to leases of former BI-LO or Bruno's stores
that are guaranteed by Ahold.
At the end of 2011, the remaining provision relating to BI-LO and Bruno's was €61 million (2010: €54 million) with a related tax benefit
offset of €26 million (2010: €23 million). This amount represents Ahold's best estimate of the discounted aggregate amount of the
remaining lease obligations and associated charges, net of known mitigation offsets, which could result in cash outflows for Ahold under
the various lease guarantees. Ahold continues to pursue its mitigation efforts with respect to these lease guarantee liabilities and to closely
monitor any developments with respect to Bruno's and BI-LO.
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 its financial obligations, as described in the
guarantee. Buyback guarantees relate to Ahold's commitment to repurchase stores or inventory from certain franchisees at predetermined
prices. The buyback guarantees reflect the maximum committed repurchase value under the guarantees. The last of the corporate and
buyback guarantees expire in 2017.
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, the last of which matures in
2016. 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.
Representations and warranties as part of the sale of Ahold's operations
Ahold has provided, in the relevant sales agreements, certain customary representations and warranties including, but not limited to,
completeness of books and records, title to assets, schedule of material contracts and arrangements, litigation, permits, labor matters, and
employee benefits and taxes. These representations and warranties will generally terminate, depending on their specific features, one to
seven years after the date of the relevant transaction completion date.
Closing date
Local currency
million
Contingent liability cap
million
Disco
November 12004
$151
121
BI-LO Bruno's
January 31, 2005
$33
25
Deli XL
September 12, 2005
€40
40
Poland (Ahold Polska Sp. Z o.o.)
July 2, 2007
€1082
1082
U.S. Foodservice
July 3, 2007
None3
None3
Tops Markets
December 3, 2007
$70
54
Tops' Wilson Farms Sugarcreek
December 3, 2007
$5
4
1 Ahold assesses the likelihood to be liable up to the amount of the contingent liability cap to be remote. The cap does not include Ahold's indemnification obligations relating to the
legal proceedings described below.
2 Including €33 million for the divestment of hypermarkets in 2005.
3 No cap on contingent liability, but Ahold has an indemnification obligation if a $40 million threshold is exceeded. The threshold was exceeded in 2009.
The most significant sales of operations are described below. In addition, specific, limited representations and warranties exist for certain of
Ahold's smaller divestments in 2004, 2005, 2006, and 2007. The aggregate impact of a claim under such representations and warranties
is not expected to be material.
