What is the general basis for The Standardx's maximum exposure related to borrower default?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
c | $ | $ | | NetincomeattributabletoHyattHotelsCorporation—Diluted | $ | $ |
- (1) Our maximum exposure is generally based on a specified percentage of the total principal due upon borrower default.
- (2) Certain underlying debt agreements have extension periods which are not reflected in the year of guarantee expiration.
- (3) We have agreements with our unconsolidated hospitality venture partners or the respective third-party owners or franchisees to recover certain amounts funded under the debt repayment guarantee; the recoverability mechanism may be in the form of cash or HTM debt security.
- (4) Certain agreements give us the ability to assume control of the property if defined funding thresholds are met or if certain events occur.
At December 31, 2024, we are not aware, nor have we received any notification, that our third-party owners, franchisees, or unconsolidated hospitality ventures are not current on their debt service obligations where we have provided a debt repayment guarantee.
Other Guarantees—We may be obligated to fund up to $142 million related to certain guarantees as a result of the UVC Transaction (see Note 4). At December 31, 2024, we had $67 million of guarantee liabilities recorded in other long-term liabilities on our consolidated balance sheet associated with these guarantees.
Guarantee Liabilities Fair Value—We estimated the fair value of our guarantees to be $213 million and $148 million at December 31, 2024 and December 31, 2023, respectively. Based on the lack of available market dat
Source: Item 10 — OTHER ASSETS (FDD pages 132–156)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, their maximum exposure is generally based on a specified percentage of the total principal due upon borrower default. This indicates that The Standardx's risk is directly tied to the size of the loans they guarantee and the portion they are responsible for in case of a borrower's failure to pay. This exposure is further influenced by agreements The Standardx has with hospitality venture partners, third-party owners, or franchisees, which allow them to recover certain funded amounts through cash or HTM debt security.
These recovery mechanisms are crucial for mitigating potential losses. Additionally, certain agreements enable The Standardx to assume control of the property if specific funding thresholds are met or certain adverse events occur. This provides an additional layer of protection, allowing them to manage the asset directly and potentially recover their investment. The FDD states that as of December 31, 2024, The Standardx was not aware of any third-party owners, franchisees, or unconsolidated hospitality ventures being behind on their debt service obligations where The Standardx provided a debt repayment guarantee.
Furthermore, The Standardx may be obligated to fund up to $142 million related to certain guarantees as a result of the UVC Transaction. As of December 31, 2024, $67 million of guarantee liabilities were recorded in other long-term liabilities on their consolidated balance sheet associated with these guarantees. The fair value of these guarantees was estimated to be $213 million as of December 31, 2024, and $148 million as of December 31, 2023. These figures highlight the scale of potential financial obligations The Standardx undertakes through these guarantee arrangements.
For a prospective franchisee, this information is relevant because it provides insight into the financial risks The Standardx assumes and how they manage those risks. Understanding the basis of maximum exposure and the mechanisms in place to mitigate losses can help a franchisee assess the financial stability and risk management practices of The Standardx. It also highlights the potential impact of borrower defaults on The Standardx's financial health, which could indirectly affect franchisees.