NOTE 6. Commercial Commitments

In connection with certain investments or transactions, GATX has entered into various commercial commitments, such as guarantees and standby letters of credit, which could potentially require performance in the event of demands by third parties. Similar to GATX’s balance sheet investments, these guarantees expose GATX to credit, market and equipment risk; accordingly, GATX evaluates its commitments and other contingent obligations using techniques similar to those used to evaluate funded transactions.

The following table shows GATX’s commercial commitments as of (in millions):


	September 30		December 31
	2012		2011
Affiliate guarantees	$	42.0	$	42.0
Asset residual value guarantees		35.3		33.9
Lease payment guarantees		42.4		47.0
Performance bonds		1.3		1.3
Standby letters of credit		9.6		9.8

Total commercial commitments (a)	$	130.6	$	134.0

(a)

At September 30, 2012 and December 31, 2011, the carrying values of liabilities on the balance sheet for commercial commitments were $6.7 million and $6.4 million, respectively. The expirations of these commitments range from 2013 to 2022. GATX is not aware of any event that would require it to satisfy any of these commitments.

Affiliate guarantees generally represent GATX’s guarantee of repayment of a portion of the financing utilized by the affiliate to acquire or lease-in assets. These guarantees are in lieu of making direct equity investments in the affiliate and reduce the affiliate’s financing costs. GATX is not aware of any event that would require it to satisfy these guarantees and expects the affiliates to generate sufficient cash flow to satisfy their financing obligations.

Asset residual value guarantees represent GATX’s commitment to third parties that an asset or group of assets will be worth a specified amount at the end of a lease term. GATX earns an initial fee for providing these asset value guarantees, which is amortized into income over the guarantee period. Upon disposition of the assets, GATX receives a share of any proceeds in excess of the amount guaranteed. Such residual sharing gains are recorded in asset remarketing income. If, at the end of the lease term, the net realizable value of the asset is less than the guaranteed amount, any liability resulting from GATX’s performance pursuant to the residual value guarantee will be reduced by the value realized from disposition of the asset. Asset residual value guarantees include those related to assets of affiliated companies.

Lease payment guarantees represent GATX’s guarantee of third-party lease payments to financial institutions. Any liability resulting from GATX’s performance pursuant to these guarantees will be reduced by the value realized from the underlying asset or group of assets.

GATX and its subsidiaries are also parties to standby letters of credit and performance bonds primarily related to workers’ compensation and general liability insurance coverages. No material claims have been made against these obligations. At September 30, 2012, GATX does not expect any material losses to result from these off balance sheet instruments since performance is not anticipated to be required.