34 Commitments and contingencies (continued)
Ahold Annual Report 2012 136
Ahold at a glance
Our strategy
Our performance
Governance
Financials
Investors
Notes to the consolidated
financial statements
Contingent liabilities
Guarantees
Guarantees to third parties issued by Ahold can be summarized as follows:
December 30,
January 1,
million
2012
2012
Lease guarantees
579
686
Lease guarantees backed by letters of credit
78
94
Corporate and buyback guarantees
52
49
Loan guarantees
5
6
Total
714
835
The amounts included in the table above are the maximum undiscounted amounts the Group could be forced to settle under the arrangement for the full guaranteed amount, if that amount
is claimed by the counterparty to the guarantee. As part of the divestment of U.S. Foodservice in 2007, Ahold received an irrevocable standby letter of credit for $216 million (€163 million),
which was reduced to $103 million (€78 million) as of December 30, 2012. As part of the divestment of Ahold's Polish retail operations, Ahold received a guarantee from Carrefour for
€1 52 million in June 2007, which matured during 2012.
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, which extend through 2040. The amounts of the lease guarantees exclude the cost of common area maintenance and real estate taxes; such amounts may vary in time, per region,
and per property. Of the €579 million in the undiscounted lease guarantees, €282 million relates to the BI-LO Bruno's divestment and €220 million to the Tops divestment. On a discounted
basis those lease guarantees amount to €485 million and €552 million as of December 30, 2012, and January 1, 2012, respectively.
On February 5, 2009, and March 23, 2009, Bruno's Supermarkets, LLC and BI-LO, LLC, respectively, filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the filings). As a
result of the filings, Ahold has made an assessment of its potential obligations under the lease guarantees based upon the remaining initial term of each lease, an assessment of the possibility
that Ahold would have to pay under a guarantee and any potential remedies that Ahold may have to limit future lease payments. Consequently, in 2009, Ahold recognized provisions of
€1 09 million and related tax benefit offsets of €47 million within results on divestments.
On May 12, 2010, the reorganized BI-LO exited bankruptcy protection, 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 201 0. Since the end of the second quarter of 201 0, 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 2012, the remaining provision relating to BI-LO and Bruno's was €35 million (201 1: €61 million) with a related tax benefit offset of €15 million (2011€26 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 201 7.
