Koninklijke Ahold Delhaize N.V. – Annual report – 1 January 2023
Industry: retail
34 COMMITMENTS AND CONTINGENCIES (extract)
Contingent liabilities (extract)
Guarantees
Guarantees to third parties issued by Ahold Delhaize can be summarized as follows:
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. For lease guarantees, this is based on the committed lease terms as communicated to Ahold Delhaize.
Lease guarantees
Ahold Delhaize or its subsidiaries may be contingently liable for leases that have been assigned and/or transferred to third parties in connection with facility closings and dispositions. Ahold Delhaize could be required to perform the financial obligations under these leases if any of the third parties are unable to fulfill their lease obligations. The lease guarantees are based on the nominal value of future minimum lease payments of the relevant leases, which extend through 2041 and are based on the committed lease terms as communicated to Ahold Delhaize. The amounts of the lease guarantees set forth in the table above exclude the cost of common area maintenance and real estate taxes; such amounts may vary in time, per region and per property. Certain amounts related to these leases are recognized as a provision or a financial liability; for more information see Note 23 and Note 25.
As of January 1, 2023, the €718 million in the undiscounted lease guarantees as presented in the table above mainly relates to divestments. The following table sets out the undiscounted lease guarantees by divestment:
On a discounted basis, these lease guarantees amount to €620 million and €584 million as of January 1, 2023, and January 2, 2022, respectively. If Ahold Delhaize is called upon to satisfy its obligations under the outstanding lease guarantees, it has several potential defenses to reduce the Company’s gross exposure.
Lease guarantees backed up by letters of credit
As part of the divestment of U.S. Foodservice in 2007, Ahold Delhaize received an irrevocable standby letter of credit for $216 million (€163 million), which was reduced to $17 million (€15 million) as of January 2, 2022, and which was released and terminated in 2022.
Buyback guarantees
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. From the outstanding buyback guarantees of €13 million, an amount of €10 million expires in 2023 and €2 million expires in 2048.
Indemnifications as part of divestments of Ahold Delhaize’s operations
In the relevant sales agreements, Ahold Delhaize has provided customary indemnifications, including for potential breach of representations and warranties, that often include, but are 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.
The most significant divestment of operations is, to the extent not already covered in the guarantee section above, described below. In addition, specific, limited indemnifications exist for a number of Ahold Delhaize’s smaller divestments. The aggregate impact of claims, if any, under such indemnification provisions is not expected to be material.
Disco divestment
As part of the divestment of Disco S.A. (“Disco”) in 2004, Ahold Delhaize is required to indemnify Disco and its buyers for the outcome of 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.
Accounts examples 