At 31 December 2019, NH had a total of 30,371 thousand euros in economic or financial bank guarantees issued by various banks (37,353 thousand euros in 2018).
The reduction in the balance of bank guarantees at 31 December 2019 compared to that at 31 December 2018 is mainly due to the cancellation of the 6,000 thousand euro guarantee on obligations related to cash pooling contracts or centralised treasury management with one bank entity.
Of the 30,371 thousand euros in bank guarantees, 24,327 thousand euros guarantee leasing contract obligations and others related to the Group’s usual operations in various countries, and 6,044 thousand euros issued in relation to public bodies.
At 31 December 2019, 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 NH Group company which at 31 December 2019 had an outstanding principal of 15,742 thousand euros (equivalent to 17,685 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 group’s company is a shareholder, under which, if the company were to receive a purchase offer for 100% of its shares at market price, the group’s company could be required to transfer the shares. However, the group’s company will have preferential acquisition rights over the shares. At year-end, this group’s company has granted its partner a purchase option of up to 5% of the share capital.
– Within the framework of new development projects in the normal course of business, in which NH Group 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 16).
Claims in process
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 Ms María Ángeles de la Riva Zorrilla, with the aim of reclaiming the 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 claim filed by the owner, both in the first instance and on appeal, was dismissed in full. The same owner has instituted fresh court proceedings alleging a change of control situation in 2018, which is pending resolution.
– A claim has been filed against NH Group company in Germany due to the termination of two lease agreements and claiming specific amounts, including damages.
– A claim has been filed against a NH Group 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, although it is in judicial review currently in progress.
– A NH Group company in Italy has been sued with damages under a service provision contract requested.
– 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. The procedure from both first instance and appeal has been resolved by setting an amount lower than the one claimed, however, a judicial review has been filed, which is pending a hearing.
– 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., NH Group 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.
- Respondent in the process of claiming amounts from a real estate development due to construction defects.
- 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. 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 shareholder of the NH Group has requested the annulment of certain resolutions adopted by the Board of Directors, and the proceedings are currently in progress.
– With regard to the disputed amounts linked to an eventual indemnity due to the resolution of the agreement with the previous Chief Executive Officer, amounts that have been entirely provisioned during fiscal year 2019, it has been definitely resolved for an amount below the provisioned.
– As part of the contractual liability assumed by the NH Group in the 2013 hotel purchase contract, the buyers informed the Group of the requirement to pay the Dutch Capital Transfer Tax. At 31 December 2019, the total amount of this tax, plus the corresponding default interest, was 11,900 thousand euros. The purchasers submitted an appeal to the Dutch Treasury that was rejected and an appeal has been filed with the Courts that is still pending resolution. The NH Group and the purchasers have reached an agreement whereby NH assumes control of the judicial procedure and has agreed to pay 275,000 euros in compensation to the purchasers for the tax advice expenses they incurred.
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.