Mirland Development Corporation PLC The economic situation in Russia (2046A)
December 18 2014 - 08:52AM
UK Regulatory
TIDMMLD
RNS Number : 2046A
Mirland Development Corporation PLC
18 December 2014
18 December 2014
MirLand Development Corporation plc
("MirLand" or the "Company")
Mirland's response to the economic situation in Russia
Following the developments in the economic situation in Russia
and the recent extreme fluctuations in the currency exchange rate
of the Ruble relative to the US dollar, the Company reports as
follows:
In recent months there has been a radical deterioration in the
economic situation in Russia due to various macroeconomic factors
which resulted from, inter alia, the accelerated depreciation of
the Ruble exchange rate against the US dollar. The exchange rate at
the beginning of the year was approximately - 32.72 rubles to the
US dollar, in late September the ruble exchange rate stood at
approximately 39.39 rubles to the US dollar, in recent weeks the
ruble exchange rate dropped to a minimum of approximately 80 rubles
to the US dollar, and at the date of this report the Russian
currency is trading at approximately 60 rubles 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 the date hereof, when the
last interest rate hike was 6.5% and was carried out on 16
December, 2014.
The situation is due to, as further described in Note 25B to the
financial statements of the Company released on March 12, 2014
(Reference No. 2014-01-012024), events that occurred and that may
further develop between Russia and Ukraine, and since the beginning
of the year, western countries have started to impose various
sanctions on Russia's economy which was accompanied by a sharp drop
in global oil prices.
Most of the income of the Company's subsidiaries comes from
leasing in commercial centers and office complex which are in the
Ruble and linked to the US dollar on the date of payment. The
financing agreements of the subsidiaries that lease commercial
properties and office complexes, with the domestic banking system
in Russia of pledged assets are also in US dollars, while most of
the income of the tenants are in Ruble, therefore, the extreme
currency devaluation may have severe implications on the ability of
tenants to meet their obligations and thus affect the Company's
results and liquidity.
Subsidiaries of the Company and their management are in ongoing
contact with tenants in the commercial properties and office
complexes 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 undergone by the
economy in Russia and allow them to meet their obligations and pay
their bills to the subsidiaries of the Company, as well as holding
discussions with the Company's subsidiaries' financing banks. Due
to the very 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.
With regard to the residential sector, the Company's financing
agreements are in Rubles and the proceeds from the sale of
apartments and payments to various suppliers, in the St. Petersburg
project are also made in the Russian Ruble currency. In this
respect, it should be noted that due to the early sale of the
units, the funding level of the Company's subsidiary as of the date
of this report amounts to approximately 12 million US dollars in
respect to phases III and IV of the project.
As of the date of this report, the marketing of Phase II of the
project in St. Petersburg, is currently underway, and about 615
apartments out of a total of 630 were delivered.
Additionally, as of the date of this report marketing for Phase
III of the project, which upon completion, is expected to deliver
in the first quarter of 2016 approximately 800 apartments out of a
total of 1,346.
Furthermore, it should be noted that as of the date of this
report the Company has begun construction of Phase IV of the
project and has entered into an agreement to finance the
development with the bank SberBank of Russia, but has not yet begun
to market and therefore cannot commit to the purchasers a date of
completion.
The Company, including the Board of Directors, is closely
examining the developments in the economic situation in Russia,
developments which are outside the Company's control and are not
dependent on it, and are working to reduce its exposure as much as
possible. The exposure to the economic situation and the level of
extreme volatility makes it difficult for decision-making and
drawing the necessary conclusions.
It should be noted that as of the date of this report the
Company has not received any notice of infringement and / or
non-compliance regarding the liabilities of the subsidiaries to the
domestic banks in Russia.
The information set forth above in this immediate report
regarding the Company's estimated timetables for the various stages
of the projects, expected expenses and consequences of the economic
situation, is forward-looking information because it is based, in
part, on estimates, forecasts and work plans of the Company at the
date of this report. A part of the Company's estimates may be
realized in practice in a different way due to factors beyond the
Company's control, such as increased costs of construction and
marketing, obtaining the necessary approvals and the causes of
macroeconomic changes such as economic policy, the economic
situation in Russia in general and real estate in particular,
especially in view of the recent extreme upheavals in the Russian
economy, as mentioned above, and the like.
MirLand Development Corporation plc
Roman Rozental +7 495 787 49 62
roman@mirland-development.com +7 499 130 31 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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