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16. COMMITMENTS AND CONTINGENCIES
Bunge is party to a large number of claims and lawsuits, primarily tax and labor claims in Brazil, arising in the normal course of business. Bunge records liabilities related to its general claims and lawsuits when the exposure item becomes probable and can be reasonably estimated. After taking into account the recorded liabilities for these matters, management believes that the ultimate resolution of such matters will not have a material effect on Bunge’s financial condition, results of operations or liquidity. Included in other non-current liabilities are the following accrued liabilities:
|
|
|
June 30, |
|
December 31, |
|
|
(US$ in millions) |
|
2011 |
|
2010 |
|
|
Tax claims (1) |
|
$ |
84 |
|
$ |
127 |
|
|
Labor claims |
|
83 |
|
78 |
|
|
Civil and other claims (1) |
|
92 |
|
114 |
|
|
Total |
|
$ |
259 |
|
$ |
319 |
|
(1) Pursuant to the terms of the 2009 Brazilian amnesty program to settle tax and other financial claims with the Brazilian government, certain of the tax and civil and other claims were settled during the six months ended June 30, 2011.
Tax Claims — The tax claims relate principally to claims against Bunge’s Brazilian subsidiaries, including primarily value-added tax claims (ICMS, IPI, PIS and COFINS). The determination of the manner in which various Brazilian federal, state and municipal taxes apply to the operations of Bunge is subject to varying interpretations arising from the complex nature of Brazilian tax law.
Labor Claims — The labor claims relate principally to claims against Bunge’s Brazilian subsidiaries. The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.
Civil and Other — The civil and other claims relate to various disputes with third parties, including suppliers and customers.
Guarantees — Bunge has issued or was a party to the following guarantees at June 30, 2011:
|
(US$ in millions) |
|
Maximum
Potential
Future
Payments |
|
|
Customer financing (1) |
|
$ |
80 |
|
|
Unconsolidated affiliates financing (2) |
|
53 |
|
|
Total |
|
$ |
133 |
|
(1) Bunge has issued guarantees to third parties in Brazil related to amounts owed to these third parties by certain of Bunge’s customers. The terms of the guarantees are equal to the terms of the related financing arrangements, which are generally one year or less, with the exception of guarantees issued under certain Brazilian government programs, primarily from 2006 and 2007, where terms are up to five years. In the event that the customers default on their payments to the third parties and Bunge would be required to perform under the guarantees, Bunge has obtained collateral from the customers. At June 30, 2011, Bunge had approximately $62 million of tangible property that had been pledged as collateral against certain of these refinancing arrangements. Bunge evaluates the likelihood of customer repayments of the amounts due under these guarantees based upon an expected loss analysis and records the fair value of such guarantees as an obligation in its condensed consolidated financial statements. Bunge’s recorded obligation related to these outstanding guarantees was $13 million at June 30, 2011.
(2) Bunge issued guarantees to certain financial institutions related to debt of certain of its unconsolidated joint ventures. The terms of the guarantees are equal to the terms of the related financings which have maturity dates in 2012, 2016 and 2018. There are no recourse provisions or collateral that would enable Bunge to recover any amounts paid under these guarantees. At June 30, 2011, Bunge’s recorded obligation related to these guarantees was $18 million.
In addition, Bunge Limited has provided full and unconditional parent level guarantees of the indebtedness outstanding under certain senior credit facilities and senior notes entered into, or issued by, its 100% owned subsidiaries. At June 30, 2011, debt with a carrying amount of $4,157 million related to these guarantees is included in Bunge’s condensed consolidated balance sheets. This debt includes the senior notes issued by two of Bunge’s 100%-owned finance subsidiaries, Bunge Limited Finance Corp. and Bunge N.A. Finance L.P. There are no significant restrictions on the ability of Bunge Limited Finance Corp., Bunge N.A. Finance L.P. or any other Bunge subsidiary to transfer funds to Bunge Limited. |