Avis 2009 Annual Report Download - page 100

Table of Contents
payments that the Company could be required to make under these guarantees, nor is the Company able to develop an estimate of the
maximum potential amount of future payments to be made under these guarantees as the triggering events are not subject to predictability.
With respect to certain of the aforementioned guarantees, such as indemnifications provided to landlords against third-party claims for the
use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates its potential exposure.
Other Guarantees
The Company has provided certain guarantees to, or for the benefit of, subsidiaries of Realogy, Wyndham and Travelport which, as
previously discussed, were disposed of during third quarter 2006. These guarantees relate to various real estate operating leases. The
maximum potential amount of future payments that the Company may be required to make under the guarantees relating to the various real
estate operating leases is estimated to be approximately $237 million. At December 31, 2009, the liability recorded by the Company in
connection with these guarantees was approximately $5 million. To the extent that the Company would be required to perform under any of
these guarantees, the Company is entitled to indemnification by Realogy, Wyndham and Travelport. The Company monitors the credit
ratings and other relevant information for Realogy, Wyndham and Travelport’s parent company in order to assess the status of the
payment/performance risk of these guarantees.
The Company has provided certain guarantees to, or for the benefit of, subsidiaries of PHH, which was spun-off during first quarter 2005.
These guarantees relate primarily to various real estate leases. The maximum potential amount of future payments that the Company may be
required to make under the guarantees relating to the various real estate leases is estimated to be approximately $10 million. At
December 31, 2009, the liability recorded by the Company in connection with these guarantees was less than $1 million. To the extent that
the Company would be required to perform under any of these guarantees, PHH has agreed to indemnify the Company.
In connection with the Company’s disposition of MSD, the Company agreed to provide certain indemnifications related to, among other
things, litigation matters related to various suits brought against MSD by individual consumers and state regulatory authorities seeking
monetary and/or injunctive relief regarding the marketing of certain membership programs and inquiries from state regulatory authorities
related to such programs. Such indemnification entitles the purchaser to reimbursement for a portion of the actual losses suffered by it in
regards to such matters. In addition, pursuant to a number of commercial arrangements entered into between certain of the Company’s
subsidiaries and MSD, the Company also agreed among other things to provide a minimum number of call transfers to certain MSD
subsidiaries, as well as retaining pre-existing guarantee obligations for certain real estate operating lease obligations on behalf of certain
MSD subsidiaries. The Company established a liability for the estimated fair value of these guarantees in the amount of approximately $100
million on the sale date, which reduced the gain on the transaction recorded within discontinued operations. The residual liability as of
December 31, 2009 was approximately $12 million. The maximum potential amount of future payments to be made under these guarantees
is approximately $40 million, excluding one litigation matter for which there is no limitation to the maximum potential amount of future
payments.
Realogy and Wyndham have agreed to assume responsibility for the Company’s potential liabilities relating to PHH and MSD (other than
the call transfer obligation). The Company monitors the credit ratings and other relevant information for Realogy and Wyndham in order to
assess the status of the payment/performance risk of these guarantees. The Company also has a letter of credit which covers Realogy’s
portion of these and certain other obligations.
F
-
38