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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