Notes to the
consolidated
financial statements
continued
34 Commitments and contingencies continued
Disco
Overview
Business review
Governance
Financials
Investors
On May 12, 2010, the reorganized BI-LO exited bankruptcy protection and BI-LO assumed 149 operating locations that are guaranteed by Ahold
Delhaize. During the BI-LO bankruptcy, BI-LO rejected a total of 16 leases that are guaranteed by Ahold Delhaize and Ahold Delhaize also
took assignment of 12 other BI-LO leases with Ahold Delhaize guarantees. Based on the foregoing developments, Ahold Delhaize 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 Delhaize 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 Delhaize.
At the end of 2016, the remaining provision relating to BI-LO and Bruno’s was €15 million (2015: €19 million) with a related tax benefit offset of
€6 million (2015: €8 million). This amount represents Ahold Delhaize’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 Delhaize under the
various lease guarantees. Ahold Delhaize continues to monitor any developments and pursue its mitigation efforts with respect to these lease
guarantee liabilities.
Sweetbay, Harveys, Reid’s and Bottom Dollar Food Divestment
As a result of the merger, Ahold Delhaize has made an assessment of its potential obligations under lease guarantees considering the remaining
term of each lease, re-let potential of the property if the acquirer were to default on the lease, and the credit position of the counter party.
Ahold Delhaize recognized a liability of €20 million which represents the estimated fair value of the lease guarantees.
Other
Ahold Delhaize has provided corporate guarantees to certain suppliers of its franchisees or non-consolidated entities. Ahold Delhaize 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 Delhaize’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 2022.
Representations and warranties as part of the sale of Ahold Delhaize’s operations
Ahold Delhaize has provided, in the relevant sales agreements, 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, a number of
years after the date of the relevant transaction completion date.
Ahold Delhaize is required to indemnify the buyers of Disco S.A. (Disco) and Disco for certain claims made by alleged creditors of certain
Uruguayan and other banks, with a contingent liability cap of €15 million. Ahold Delhaize assesses its likelihood to be liable up to the amount of
the contingent liability gap to be remote. The cap does not include Ahold Delhaize’s indemnification obligation relating to the Uruguayan litigation
described in the Legal proceedings section of this Note. Ahold Delhaize’s indemnification obligation relating to this litigation is not capped at a
certain amount nor restricted to a certain time period.
The most significant sales of operations are described below. In addition, specific, limited representations and warranties exist for a number of Ahold
Delhaize’s smaller divestments. The aggregate impact of claims, if any, under such representations and warranties is not expected to be material.
Ahold Delhaize Annual Report 2016 ^0^
