The Company has financing agreements (i.e., loan commitments), and outstanding commitments at the Date of Transition, March 31, 2013 and 2014 amounting to ¥23,440 million, ¥4,306 million and ¥6,028 million ($59 million), respectively.
Guarantees
The Company is a party to various agreements under which it has undertaken obligations resulting from the issuance of certain guarantees. The guarantees have been issued for the companies that are accounted for using the equity method, as well as for customers and suppliers of the Company.
Credit guarantees
The Company provided credit guarantees for certain customers and suppliers, and for the companies accounted for using the equity method, in the form of financial and performance guarantees.
The outstanding amount and the maximum potential amount of future payments under these credit guarantees as of the Date of Transition, March 31, 2013 and 2014 were as follows:
Millions of Yen U.S. DollarsMillions of
TransitionDate of 2013 2014 2014
Financial guarantees
Outstanding amount ¥319,311 ¥416,065 ¥482,434 $4,684
Maximum potential amount of future payments 441,416 700,701 823,797 7,998
Performance guarantees
Outstanding amount 49,033 316,813 279,881 2,717
Maximum potential amount of future payments 49,033 316,813 279,881 2,717
These credit guarantees enable the Company's customers, suppliers and the companies accounted for using the equity method to execute transactions or obtain desired financing arrangements with third parties. Most of these guarantees outstanding at March 31, 2014 will expire within 10 years, with certain credit guarantees expiring by the end of 2039. Should the customers, suppliers and the companies accounted for using the equity method fail to perform under the terms of the transaction or financing arrangement, the Company would be required to perform on their behalf.
The Company has set internal ratings based on various information, such as the guaranteed party's financial statements, and manages risks of credit guarantees by establishing limits on guarantees for each guaranteed party based on these internal ratings and requires collateral or reassurance as necessary.
At the Date of Transition, March 31, 2013 and 2014, the amounts of possible recoveries under recourse provisions from third parties or from collateral on pledged financial guarantees were ¥2,228 million, ¥1,812 million and ¥1,087 million ($11 million), respectively, and on performance guarantees were ¥14,469 million, ¥163,813 million and ¥154,390 million ($1,499 million), respectively.
The liabilities for these credit guarantees were ¥1,571 million, ¥2,286 million and ¥4,709 million ($46 million), at the Date of Transition, March 31, 2013 and 2014, respectively.
As of March 31, 2014, there were no credit guarantees with a high probability of a significant loss due to enforcement of the guarantee.
LNG project in Russia
In order to facilitate a $6,700 million financing for an LNG project in Russia, the Company, along with other shareholders, provided an agreement to indemnify the financing party from any loss that might be incurred due to the failure of the investee (10% owned by the Company) to register the title of the properties associated with this LNG project.
LNG project in Australia
An affiliated company of the Parent acquired a participating interest in a project to develop LNG in Australia (the "Project"). The affiliated company has obtained a $1,927 million line-of-credit from a bank to secure funding for the acquisition of the participating interest and for the future development of the Project. The Parent, along with another participant in the Project, provides a credit guarantee to the bank on the line-of-credit. The maximum potential amount of future payments of the Parent resulting from a default on the line-of-credit is $1,533 million, and is included in "Financial guarantees – Maximum potential amount of future payments" in the table above. As of March 31, 2014, the portion of the affiliated company's draw-down against the line-of-credit that the Parent is responsible for amounted to $490 million. The amount is included in "Financial guarantees – Outstanding amount" in the table above.
In addition, the Parent, along with other participants to the Project, provides a performance guarantee to the seller of the participating interest in the Project. The performance guarantee is a joint guarantee of the payments for the participating interest in this Project and for the future funding commitment in accordance with the joint venture agreement. The obligation from this performance guarantee is considered to arise at the execution of project agreements and the total guarantee as of March 31, 2014 is $2,107 million. The amounts are included in both "Performance guarantees – Maximum potential amount of future payments" and "Performance guarantees – Outstanding amount" in the table above.
The performance guarantee obligation encompasses future planned payments, which will be funded, in part, by the line of credit. Regarding the line item "Maximum potential amount of future payments", the amounts related to the performance guarantee will be reduced to the extent that the affiliated company makes cash call payments for participating interest and development funding, while the amount relating to the maximum potential amount of future payments of credit guarantee will remain the same. In this case, regarding the line item "Outstanding amount", the amount relating to this performance guarantee will be reduced as cash call payments are made, while the amount relating to the credit guarantee will increase.
Indemnification
In the context of certain sales or divestitures of business, the Company occasionally commits to indemnify contingent losses, such as environmental losses, or the imposition of additional taxes. Due to the nature of the indemnifications, the Company's maximum exposure under these arrangements cannot be estimated. No provisions have been recorded for such indemnifications as the Company's obligations under them are not probable and estimable, except for certain cases which already have been claimed. Litigation
The Company is a party to litigation arising in the ordinary course of business. In the opinion of management, the liability of the Company, if any, when ultimately determined from the progress of the litigation, will not have a materially adverse effect on the consolidated operating results or consolidated financial position of the Company.