18  CONTINGENCIES

Guarantees
We issue guarantees to certain lenders and hotel owners primarily to obtain long-term management contracts. The guarantees generally have a stated maximum amount of funding and a term of three to 10 years. The terms of guarantees to lenders generally require us to fund if cash flows from hotel operations are inadequate to cover annual debt service or to repay the loan at the end of the term. The terms of the guarantees to hotel owners generally require us to fund if the hotels do not attain specified levels of operating profit. Guarantee fundings to lenders and hotel owners are generally recoverable as loans repayable to us out of future hotel cash flows and/or proceeds from the sale of hotels. We also enter into project completion guarantees with certain lenders in conjunction with hotels and Timeshare segment properties that we or our joint venture partners are building.

The maximum potential amount of future fundings for guarantees where we are the primary obligor and the carrying amount of the liability for expected future fundings at year-end 2009 are as follows:

The liability for expected future fundings at year-end 2009 in our Consolidated Balance Sheet is as follows: $8 million in the "Other current liabilities" line item and $30 million in the "Other long-term liabilities" line item.

Our guarantees of $279 million listed in the preceding table include $33 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties, $3 million of debt service guarantees that will not be in effect until the underlying debt has been funded, and $8 million of other guarantees.

The guarantees of $279 million in the preceding table do not include $171 million of guarantees that we anticipate will expire in the years 2013 and 2014, related to Senior Living Services lease obligations totaling $116 million and lifecare bonds of $55 million for which we are secondarily liable. Sunrise Senior Living, Inc. ("Sunrise") is the primary obligor of the leases and $8 million of the lifecare bonds, and CNL Retirement Properties, Inc. ("CNL"), which subsequently merged with Health Care Property Investors, Inc., is the primary obligor of $45 million of the lifecare bonds. Five Star is the primary obligor of the remainder of the lifecare bonds. Prior to our sale of the Senior Living Services business in 2003, these preexisting guarantees were guarantees by us of obligations of consolidated Senior Living Services subsidiaries. Sunrise and CNL have indemnified us for any guarantee fundings we may be called upon to make in connection with these lease obligations and lifecare bonds. While we currently do not expect to fund under the guarantees, according to recent SEC filings made by Sunrise there has been a significant deterioration in Sunrise's financial position and access to liquidity; accordingly, Sunrise's continued ability to meet these guarantee obligations cannot be assured.

The table also does not include lease obligations for which we became secondarily liable when we acquired the Renaissance Hotel Group N.V. in 1997, consisting of annual rent payments of approximately $6 million and total remaining rent payments through the initial term of approximately $62 million. Most of these obligations expire at the end of 2020. CTF Holdings Ltd. ("CTF") had originally made available €35 million in cash collateral in the event that we are required to fund under such guarantees (approximately €7 million ($9 million) remained at year-end 2009). Our contingent liability exposure of approximately $62 million will decline to the extent that CTF obtains releases from the landlords or these hotels exit the system. Since the time we assumed these guarantees, we have not funded any amounts and we do not expect to fund any amounts under these guarantees in the future.

In addition to the guarantees noted in the preceding table, we provided a project completion guarantee to a lender for a project with an estimated aggregate total cost of $586 million. Payments for cost overruns for this project will be satisfied by the joint venture through contributions from the partners, and we are liable on a several basis with our partners in an amount equal to our pro rata ownership in the joint venture, which is 34 percent. Our liability for this guarantee is included in our liability for anticipated project funding that we discuss in Footnote No. 20, "Timeshare Strategy – Impairment Charges," which represents our intention to provide ongoing financial support to ensure completion of the project. The preceding table also does not include a project completion guarantee that we provided to another lender for a project with an estimated aggregate total cost of CAD $466 million (USD $441 million). The joint venture will satisfy payments for cost overruns for this project through contributions from the partners or from borrowings, and we are liable on a several basis with our partners in an amount equal to our pro rata ownership in the joint venture, which is 20 percent. We do not expect to fund under the guarantee. At year-end 2009, the carrying value of the liabilities associated with this project completion guarantee was $3 million.

In addition to the guarantees described in the preceding paragraphs, in conjunction with financing obtained for specific projects or properties owned by joint ventures in which we are a party, we may provide industry standard indemnifications to the lender for loss, liability, or damage occurring as a result of the actions of the other joint venture owner or our own actions.

Commitments and Letters of Credit
In addition to the guarantees noted previously, as of year-end 2009, we had the following commitments outstanding:

• $4 million of loan commitments that we have extended to owners of lodging properties. We expect to fund approximately $2 million of these commitments in two to three years, and do not expect to fund the remaining $2 million of commitments, $1 million of which will expire in two to three years and $1 million of which will expire after six years.
  
• Commitments to invest up to $49 million of equity for noncontrolling interests in partnerships that plan to purchase North American full-service and limited-service properties or purchase or develop hotel-anchored mixed-use real estate projects. We expect to fund $1 million of these commitments in one to two years and $38 million within three years and $10 million after three years. If not funded, $29 million of these investment commitments will expire through 2012 and $20 million will expire through 2013.
  
• A commitment, with no expiration date, to invest up to $12 million in a joint venture for development of a new property that we expect to fund within three years.
  
• A commitment, with no expiration date, to invest up to $7 million in a joint venture that we do not expect to fund.
  
• A commitment, subject to certain conditions, to invest up to $50 million (€35 million) into a new fund, which we expect will be capitalized and launched within six to 12 months, to purchase or develop managed Marriott brand hotels in Western Europe that will be managed exclusively by us. After the initial closing of the fund, we expect that our commitment will expire after four years subject to a one-year extension option with funding occurring over time during that period.
  
• A commitment to invest up to $29 million (€20 million) in a joint venture in which we are a partner. We do not expect to fund under this commitment.
  
• We have two commitments aggregating to $139 million to purchase timeshare and fractional units upon completion of construction for use in our Asia Pacific points and The Ritz-Carlton Destination Club programs. We have already made deposits of $21 million in conjunction with these commitments, and we are contractually obligated to make the remaining payment of $118 million in 2010, though we expect to defer payment of approximately $100 million to 2011.
  
• $6 million (€5 million) of other purchase commitments to be funded over the next 5 years, as follows: $2 million in 2010 and $1 million in 2011, 2012, 2013 and 2014.

At year-end 2009, we also had $116 million of letters of credit outstanding, the majority of which related to our self-insurance programs. Surety bonds issued as of year-end 2009 totaled $361 million, the majority of which were requested by federal, state or local governments related to our lodging operations, including our Timeshare segment and self-insurance programs.

Investment in Leveraged Lease
Historically, we had a $23 million investment in an aircraft leveraged lease with Delta Air Lines, Inc. ("Delta Airlines"), which we acquired in 1994. The gross investment was comprised of rentals receivable and the residual value of the aircraft offset by unearned income. On September 14, 2005, Delta Airlines filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code and informed us that it wished to restructure the lease. As a result, our investment was impaired and we had recorded pretax charges of approximately $17 million in 2005 and $1 million in 2006. We recorded an additional $5 million loss related to this investment in fiscal 2007, and have no remaining exposure. In 2009, we reached final settlement with Delta Airlines and recorded a $3 million recovery of the investment previously reserved in the "General, administrative, and other" expense caption of our Consolidated Statements of Income.

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