Mirland Development Corporation PLC Re: situation in Russia and Financing Update (2504A)
December 19 2014 - 2:00AM
UK Regulatory
TIDMMLD
RNS Number : 2504A
Mirland Development Corporation PLC
19 December 2014
19 December 2014
MirLand Development Corporation plc
("MirLand" or the "Company")
Response to the economic situation in Russia and Financing
update
Further to the 3(rd) Quarter Results released on 12 November
2014, which provided detailed commentary on the economic situation
in Russia and its impact on MirLand, the Company is providing
further commentary now following recent developments in the
economic situation in Russia and the extreme fluctuations in the
currency exchange rate of the Rouble relative to the US dollar.
In recent months there has been a significant deterioration of
the economic situation in Russia due to various macroeconomic
factors which resulted from, inter alia, the accelerated
depreciation of the Rouble exchange rate against the US dollar. The
exchange rate at the beginning of the year was approximately 32.72
Roubles to the US dollar; in late September the Rouble exchange
rate stood at approximately 39.39 Roubles to the US dollar; in
recent weeks the Rouble exchange rate dropped to a minimum of
approximately 80 Roubles to the US dollar, and at the date of this
report the Russian currency is trading at approximately 60 Roubles
to the US dollar. In addition, the base interest rate in Russia
rose sharply from 5.5% in January of this year up to 17% as of this
announcement, with the last interest rate increase being 6.5%,
carried out on 16 December 2014.
The situation is due to, as detailed in Note 25B to the
financial statements of the Company released on 12 March 12 2014,
events that occurred and that may further develop between Russia
and Ukraine, and since the beginning of the year, the imposition of
various economic sanctions on Russia which was also accompanied by
a sharp drop in global oil prices.
Commercial investments
Most of the income of the Company's subsidiaries comes from the
leasing of commercial centres and office complex which are in
Rouble and linked to the US dollar on the date of payment. The
financing agreements of the subsidiaries that lease commercial
properties and office complex, with the domestic banking system in
Russia of pledged assets are also in US dollars, while most of the
income of the tenants is in Rouble, therefore, the extreme currency
devaluation may have severe implications on the ability of tenants
to meet their obligations and thus affect the Company's financial
results and liquidity.
The Company and management are in ongoing regular contact with
tenants of our commercial properties and office complex on an
individual basis and are providing discounts for certain specific
and fixed-term periods (typically, for three months) to try to deal
with the extreme changes being experienced by the economy in Russia
to allow them to continue to meet their financial obligations to
the Company, as well as holding discussions with the Company's
subsidiaries' financing banks. Due to the high volatility in the
Russian currency rate, the Company is unable to assess the extent
of the decrease in income of the Company earned from the
rentals.
Residential developments
With regard to the Company's residential developments, the
Company's financing agreements are in Roubles and the proceeds from
the sale of apartments and payments to various suppliers relating
to the St. Petersburg project are also made in the Russian Rouble
currency.
As of the date of this announcement, the delivery of Phase II of
the project in St. Petersburg is currently underway, and 615
apartments out of a total of 630 were sold.
Additionally, as of the date of this announcement marketing of
Phase III of the project is currently underway with approximately
800 apartments out of a total of 1,346 sold, while completion is
expected in the first quarter of 2016.
Furthermore, it should be noted that as of the date of this
announcement the Company has begun construction of Phase IV of the
project and has entered into an agreement to finance the
development with the SberBank of Russia, but has not begun to
market this phase therefore the Company has no current commitment
to a completion date.
Bonds
Yesterday, meetings were called for all holders of debentures,
issued in Israel, of the Company for 22 December 2014, by the
trustees of the debentures in order to discuss the status of the
Company and potential actions in relation to some of the debenture
series. As such, and in light of the fact that some of bond holders
addressed the Company, the Company has decided to delay, at this
stage, the repayment of the principal and interest to the holders
of debentures series A and B set for 31 December 2014.
As such, Midroog, a subsidiary of Moody's Investor Services, the
credit rating agency has downgraded the credit rating for Mirland's
Series A, B, D, E and F Bonds to B1 on a local Israeli scale while,
Standard & Poor's Maalot, a subsidiary of Standard & Poor's
Rating Services, the credit rating agency, has downgraded the
credit rating of Mirland, and its Series A, B, C and D Bonds to
ilCC on a local Israeli scale.
Outlook
The Company, including the Board of Directors, is closely
examining developments in the economic situation in Russia, and
continues to focus acutely on the business' strategy as it works to
actively deal with the consequences of the macro economic pressures
in Russia.
It should be noted that as of the date of this announcement the
Company has not received any notice of infringement and / or
non-compliance regarding the ability of its subsidiaries to meet
their liabilities to the domestic banks in Russia as they fall
due.
MirLand Development Corporation +7 495 787 49
plc 62
Roman Rozental +7 499 130 31
roman@mirland-development.com 09
FTI Consulting
Dido Laurimore / Nick Taylor/Ellie
Sweeney +44 20 3727 1000
Investec Bank plc
Jeremy Ellis / David Anderson +44 20 7597 4000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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