Contingent assets and liabilities
The Group’s main contingent assets and liabilities on the date these consolidated financial statements were drawn up, are set out below:
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In 2008, a Group subsidiary in Italy terminated a service agreement with the construction company in charge of building a tourist complex
being developed by said subsidiary on the grounds of several breaches of contract. As a result of said termination, the construction company
filed a €15 million claim for damages against the Italian company.
The Group company in Italy has filed a counterclaim, affirming that the termination was due to breach of contract and for this reason,
compensation of approximately €33 million is being claimed from the construction company. The Court appointed a technical expert, who
quantified the damages in favour of the construction company at approximately €1.4 million, and the damages in favour of the Sotogrande
Group’s company at least €6.4 million. Subsequent to year-end 2012, the technical expert revised the previous estimate, increasing the
quantification of the damages in favour of both parties by the same amount. All parties are now waiting for the next hearing to take place,
which is scheduled on 10 May 2013.
As a result of the termination of the above-mentioned agreement, the Group company enforced a demand guarantee granted by Intesa
Sanpaolo, S.p.A. to construction company. Although Intesa initially refused to pay the guarantee, it did so after enforcement proceedings. On
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June 2012, the Court ratified its initial decision, ruling that the Group’s Italian subsidiary was not obligated to return the foregoing sum.
However, for reasons of prudence and given the financial situation of the Group, on 31 December 2012, the attached consolidated balance
sheet includes a liability for the sum of €6,771 thousand under the heading “Current provisions”.
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The owner of a tourist complex has initiated arbitration proceedings against a Group company in Italy, claiming damages for a delay in
construction works and demanding demolition of part of the works and the execution of some additional works. The Group company has filed
a counterclaim for, among other things, errors in the maps attached to the lease agreement, which gave rise to errors in the sizes of the plots.
The arbitration proceedings are currently in the conclusions stage.
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A hotel owner in Belgium has started arbitration proceedings against a Group company, claiming payment of rent.
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The owner of an establishment in France claimed compensation for eviction from a Group company; the Court agreed a compensation of €4
million. This decision has been appealed before the competent courts.
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NH Group has appeared in the insolvency proceedings of Viajes Marsans, S.A. and Tiempo Libre, S.A., belonging to Mr Gonzalo Pascual
Arias and Mr Gerardo Díaz Ferrán, and in the voluntary insolvency proceedings against Ms Maria Angeles de la Riva Zorrilla, in order to claim
outstanding amounts. A provision for this non-recoverable debt has been made in these consolidated financial statements.
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A Group company in Spain has served notice of termination of a lease agreement due to a breach of obligations on the part of the property
owners. The owners are claiming fulfilment of contractual obligations consisting in the payment of outstanding rent since the early termination
of the lease agreement. The Group has filed a counterclaim.
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The management agreements signed by Hoteles Hesperia, S.A. and the respective owners/lessees of Hesperia hotels establish that the
owners may opt to terminate the management agreement in the event NH Hoteles, S.A. is taken over. The owners are obliged to pay Hoteles
Hesperia, S.A. an amount equivalent to the Average Annual Remuneration, as set forth in said agreements.
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NH Group has signed agreements with the shareholders of Residential Marlin S.L. and Los Alcornoques de Sotogrande, S.L. Under these
agreements the personal characteristics of the shareholders are essential for the development of the projects, establishing that any change
of effective control in either the shareholders or the parent companies will enable the other shareholder to split off from the company with
entitlement to a reimbursement of their corporate assets plus any resulting damages.
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Sotogrande, S.A. has signed agreements with the shareholders of Corporación Hotelera Dominicana, S.A., Corporación Hotelera Oriental,
S.A., Inmobiliaria CHDOM, SA and Inmobiliaria CHDOR, S.A., under which Sotogrande, S.A. undertakes to maintain its holding in Capredo
Investments, GmbH, a company that currently holds a direct interest in the foregoing companies. A breach of this agreement will entitle local
shareholders to compensation for damages.
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A Dominican Republic financial institution has initiated real-estate enforcement proceedings for the property inventories of an associated
company in which the Group has a 25% stake on the grounds of non-payment of a loan granted to finance a property development in
the Caribbean. In February 2013, the financial institution held a public auction for the seized properties. However, the directors of the
subsidiary and their legal advisers have filed all the legal actions permitted under Dominican legislation to gain time and negotiate with the
aforementioned institution. At the time of writing, the directors were negotiating cancellation of the debt through dation in payment. The
final outcome of the proceedings is uncertain.
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Furthermore, in 2010 the Group filed a claim before the courts of Malaga against construction agents for construction faults and defects
in one of its developments, along with a claim against the insurance company underwriting the building works’ ten-year insurance policy,
claiming the cost of the repair works carried and pending on the development. The repairs carried out the housing units which form part
of this development cost €3,676 thousand (€17,389 thousand in 2011). These costs are booked under the “External services” item of the
attached consolidated comprehensive profit and loss statement for 2012. At 31 December 2012, the attached consolidated balance sheet
included under the “Current Provisions” liability item an estimated €1,008 thousand (€4,685 thousand at 31 December 2011) in costs pending
for this item. It also recognised a collection right against the insurance company for the amount of €10,850 thousand (€10,434 thousand at 31
December 2011) which has been booked under non-current assets in the heading “Loans and accounts receivable not available for trading -
Long-term loans”, based on the opinion of the Group’s lawyers.
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The Commercial Financing Agreement for €715,855,325 was signed on 29 March 2012 between various creditor institutions, NH Finance, S.A.,
and certain Group companies acting as guarantors. It contains an early repayment clause, applicable if circumstances give rise to change in
the control of the company NH Hoteles, S.A. It also includes the obligation to maintain control over 100% of NH Finance, S.A. and to maintain
control of its other Material Subsidiaries (as defined in the aforementioned Financing Agreement). A change in the control of the subsidiaries
takes place when NH Hoteles’ stake is less than 50.1%.
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The Group has been granted loans and credits with a combined limit of €35 million containing a clause establishing their early maturity in the
event of circumstances leading to a change in control of the company NH Hoteles, S.A.
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The owners of a hotel have filed a claim against NH for the fulfilment of certain contractual obligations. The Group company responded by
filing a counterclaim.
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The owners of a hotel have filed a claim against NH for unpaid rent. The Group company filed a claim for early termination of the lease agreement.
At 31 December 2012, other legal actions were brought by the Group which cannot be objectively quantified. The Directors of the Parent Company
consider that the hypothetical loss incurred by the Group as a result of such actions would not significantly affect the equity of the Group.
REPORT ON THE CONSOLIDATED
FINANCIAL STATEMENTS
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