22.- THIRD-PARTY GUARANTEES AND CLAIMS IN PROGRESS

At 31 December 2017, NH had a total of 36,776 thousand euros in economic or financial bank guarantees issued by various banks (30,062 thousand euros in 2016).

Of these, 12,150 thousand euros guarantee obligations related to cash pooling contracts or centralised treasury management with several banks and, therefore, their execution would be linked to breach by NH of those contractual obligations.

Of the remainder, 22,426 thousand euros guarantee leasing contract obligations and others related to the Group’s usual operations in various countries, and 2,200 thousand euros guarantee tax and other obligations in relation to public bodies in Italy.

At 31 December 2017, the Group had taken out insurance policies to cover risks arising from damage to material goods, loss of profits and third-party liability. The capital insured sufficiently covers the assets and risks mentioned above.

Commitments to third parties

• A Group company currently acts as co-guarantor for a syndicated loan granted by two banks to a company with a minority shareholding in a Grupo NH company which at 31 December 2017 had an outstanding principal of 18,915 thousand euros (equivalent to 22,685 thousand US dollars) and final maturity on 22 January 2020.
• On 10 March 2006, the partnership agreement of the company which owns a hotel in the United Kingdom was signed, of which a Grupo NH company is a shareholder, under which, if the company were to receive a purchase offer for 100% of its shares at market price, the Grupo NH company could be required to transfer the shares. However, the Grupo NH company will have preferential acquisition rights over the shares. At year-end, this Grupo NH company has granted its partner a purchase option of up to 5% of the share capital.
• A Group company in which NH has an ownership interest granted to the other shareholders a call option on shares owned by NH in that company, in a sufficient number so that those shareholders, adding the shares to those which now belong to them, could acquire shares representing, in total, up to a maximum of 50% of the share capital.
• Under the agreements reached between Grupo NH and HNA Group regarding the joint venture, a right of “Tag-along” is recognised, in the sense that if one of the partners receives a takeover bid by a third party for 100% of the shares in the company, the other partner has the option to exercise their right of first refusal or may communicate its irrevocable offer to sell the shares it holds in the aforementioned joint venture, and under the conditions of sale supplied by the third party; if the third party does not accept the offer of the other partner to sell the rest of the shares in the company, the other partner is not allowed to sell its shares to the third party.
• Within the framework of new development projects in the normal course of business, in which Grupo NH subsidiaries act as lessees or operators, the Group’s parent company gives personal guarantees in favour of third parties to secure its contractual obligations, often issue spromissory notes in payment of said obligations and agrees penalty clauses in case of breach of contract.
• ALikewise, within the framework of the Group’s financing, personal and real guarantees have been granted to fulfil the obligations guaranteed under the financing agreements (see Note 15).

Claims in progress

The Group’s main contingent assets and liabilities on the date these consolidated financial statements were drawn up, are set out below:

• NH Group has appeared in the insolvency proceedings of Viajes Marsans, S.A. and Tiempo Libre, S.A., from the unsettled estate of Mr Gonzalo Pascual Arias and Mr Gerardo Díaz Ferrán, and in the voluntary insolvency proceedings against Ms María Ángeles de la Riva Zorrilla, in order to claim outstanding amounts. The Group also appears in the voluntary bankruptcy proceedings of Transhotel and Orizonia as well as in other proceedings both nationally and internationally, and provisions the credit balances in the consolidation annual accounts for the amounts considered unrecoverable.
• The owner of four properties in the Netherlands has claimed in court the payment of 2,723 thousand euros plus interest and costs to a Dutch subsidiary because there was allegedly a change of the control situation in the year 2014, which supposedly entitles him to claim a fine, according to the lease. The Court of First Instance dismissed in its entirety the claim brought by the owner. However, the owner has filed an appeal, the subsidiary has submitted its allegations and the proceedings are ongoing in the aforementioned court pending a decision.
• The owner of a property has filed a suit against a Group company, demanding compliance with certain contractual obligations. Following notification of the dismissal of the appeal, an appeal for review due to breach of procedure and an appeal in cassation were lodged, which have still not been resolved.
• A claim has been filed against a Grupo NH company in Germany due to the termination of a lease agreement and claiming specific amounts, including damages.
• A claim has been filed against a Grupo NH company in Italy due to the early termination of a lease agreement; the ruling was unfavourable to the company’s interests in the court of first instance and is currently being appealed.
• A claim has been filed against two of the Group’s companies seeking payment fees to rights management bodies from 1 January 2008 to 31 May 2013, in addition to an unspecified amount corresponding to the period thereafter until a judgment is issued, plus interest and costs. In its ruling on the case the Court of First Instance established an amount lower than that claimed. However, the NH Group companies have filed an appeal.
• On the occasion of the agreements reached in 2014 for the sale of the shares held by NH Hotel Group, S.A in the company Sotogrande, S.A., Grupo NH agreed to subrogate to the position of Sotogrande, S.A. for certain claims assuming all rights and obligations relating thereto, and are summarised as follows:
  • Plaintiff in the proceedings against construction agents for construction defects in twenty-five homes and contractual liability, as well as a claim against the insurer.
  • Defendant in the claim process for contractual breaches by a property developer.
  • The company may be subject to a claim for amounts derived from an eventual administrative claim.
• It filed an arbitration claim requesting the validity of the declaration of resolution to sell practised at fifteen premises in San Roque, the decision on which was in favour of the Company’s interests. To the contrary, it filed for annulment of the award, which has been dismissed. Currently, the debtor company has entered bankruptcy having requested the right to separate the premises of the business premises from the whole from the company which is currently in process.
• UA Grupo NH shareholder has requested that certain resolutions adopted at the General Shareholders’ Meeting be annulled; this has been dismissed in the first instance and is being appealed.
• TThere are amounts related to possible compensation for the termination of a certain service contract, which are under discussion and whose maximum amounts have been fully provisioned.
• Based on the specific tax liability undertaken by NH on the sale of a certain asset, the purchasers notified NH of the demand to pay a certain tax levied on the transfer. NH’s tax advisors consider that there are sufficient defence arguments, and therefore no provision has been set up in this regard.

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.