At 31 December 2018, NH had a total of 37,353 thousand euros in economic or financial bank guarantees issued by various banks (36,776 thousand euros in 2017).

Of these, 6,000 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, 23,345 thousand euros guarantee leasing contract obligations and others related to the Group’s usual operations in various countries, and 8,008 thousand euros issued in relation to public bodies.

At 31 December 2018, 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 2018 had an outstanding principal of 17,268 thousand euros (equivalent to 19,685 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.

– ­­Within the framework of the sale of a hotel, NH as a seller agreed to undertake the extension of the aforementioned hotel, and agreed with the buyer a put option in favour of the buyer, NH being obliged to accept the exercise of that option provided that certain conditions are met and for a price agreed between both parties.

– ­­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 promissory notes in payment of said obligations and agrees penalty clauses in case of breach of contract.

– ­­Likewise, 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 appeared in the insolvency proceedings of Viajes Marsans, S.A. and Tiempo Libre, S.A., from the unsettled estate of Gonzalo Pascual Arias and Gerardo Díaz Ferrán, and in the voluntary insolvency proceedings against María Angeles 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 accounts receivable 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 compensation 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 same owner has instituted fresh court proceedings alleging a change of control situation in 2018, which is ongoing.

– ­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 with the Supreme Court, in relation to which a decision has been handed down that does not favour the interests of the Group, and it is currently at the claim settlement stage.

– ­A claim has been filed against a Grupo NH company in Germany due to the termination of two lease agreements 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 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, with which an out-of-court settlement has been reached.
• Defendant in the claim process for contractual breaches by a property developer, with an out-of-court settlement having been reached.
• The company may be subject to a claim for (i) amounts derived from an eventual administrative claim; (ii) and/or constructive defects.

– 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. The debtor company has entered into insolvency proceedings and the company has requested the right to separate the premises from the estate, and an agreement has been reached with the insolvency administration for the delivery of the aforementioned premises, which is in the execution phase.

– A former Grupo NH shareholder has requested that certain resolutions adopted at the General Shareholders’ Meeting be annulled. This claim was dismissed in the first instance and he withdrew it in the appeal phase, leading to the termination of the proceedings.

– A former shareholder of the NH Group, different from the previous one, has requested the annulment of certain resolutions adopted by the Board of Directors, and the proceedings are currently in progress.

– There 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.

– As part of the contractual liability assumed by NH in the 2013 hotel purchase contract, the buyers informed the Group of the requirement to pay the Dutch Capital Transfer Tax. At 31 December 2018, the total amount of this tax, including interest, was 11.5 million euros. The buyers filed an appeal with the Dutch tax authorities, which was recently rejected. An appeal to the Dutch courts is currently being considered. The Group’s tax advisers consider that NH has sound defence arguments and, consequently, no provision has been made for this.

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.