TIDMOCH

RNS Number : 8353Q

Orchid Developments Group Ltd

12 November 2012

12 November 2012

Orchid Developments Group Ltd.

("Orchid" or the "Group")

Further re: Suspension

Update on financial position and short term loan

Orchid (AIM: OCH), the Bulgarian focused property developer and investor, announces the following update on its financial position and operations.

Financial position update

On 24 September 2012, the Group announced that its ordinary shares had been suspended from trading on AIM ("Suspension") pending clarification of the Group's financial position.

Following the Suspension, the Board has completed a review of the best way to address its financing needs and accordingly, it is intended that the Group undertakes a fundraising by means of an open offer to all existing shareholders ("Open Offer") and a separate subscription of new shares ("Subscription") should there be any shortfall in the required fund raising ("Minimum Subscription"). The fundraising will be conditional, amongst other things, on shareholders of the Group approving the requisite resolutions ("Resolutions") at an extraordinary general meeting. Certain directors of Orchid intend to take up their pro rata entitlements to subscribe for ordinary shares under the Open Offer and also to conditionally participate in the Subscription so as to ensure that the Minimum Subscription is met. It is also intended that shareholders will be given the opportunity to make excess applications under the Open Offer (i.e. beyond their pro rata share) if they wish.

The Group is in the process of finalising the necessary documentation in order for the Open Offer to be made and a further announcement will be made in due course. The Suspension would be lifted upon completion of the Open Offer (including achievement of the Minimum Subscription) and publication of the Group's half yearly report for the 6 month period ended 30 June 2012.

Short term loan

In order to fund the day to day operations of the Company until the anticipated completion of the Open Offer, the Company has entered into a secured bridge loan with Bellport Corporation, a vehicle owned and controlled by Guy Meyohas and Ofer Miretzky, for a term of up to 60 days (the "Facility"). The Facility is for a principal amount of EUR 207,000, EUR 110,000 of which is being drawn down by the Group immediately and the remaining EUR 97,000 will be available to be drawn down at the election of the Group subject to the Resolutions not having been voted down by shareholders at the time the drawdown notice is given by the Group.

The Company is obliged to repay all amounts borrowed by it under the Facility and accrued interest thereon by 7 January 2013 or within five business days of admission of any shares issued under the Open Offer or within two business days following a sale of any assets the net proceeds of which are sufficient to repay all amounts borrowed under the Facility. The Group will also be required to pre-pay part of the loan out of the net proceeds of sale of any asset. Amounts drawn down under the Facility will accrue interest at the rate of five per cent. per annum. Where repayment is overdue, interest on the outstanding amount shall accrue at an additional rate of 1 per cent. per month for each day which such amount remains outstanding.

As security for all amounts drawn down under the Facility (including any accrued interest), a first ranking mortgage will be established in favour of Bellport Corporation over Regulated Land Plot XIV - 1190, situated in the city of Sofia, Region Studentski, quarter 7, area Vitosha VEZ Simeonovo, which comprises the land designated by the Company for the future development of phase 2 of Orchid Hills Sofia. The Company is not currently in negotiations over this plot of land with any potential buyer.

The entry into of the Facility by the Group constitutes a related party transaction under Rule 13 of the AIM Rules for Companies. With the exception of Guy Meyohas and Ofer Miretzky who are, through their control of Bellport Corporation, involved in the transaction as related parties, the directors of the Group consider, having consulted with Shore Capital, the Group's nominated adviser, that the terms of the short term loan are fair and reasonable insofar as the Group's shareholders are concerned.

Guy Meyohas, Chief Executive Officer of Orchid, said:

"The Board remains focused on resolving its financing needs. Additional capital will not only strengthen the Group's balance sheet but also will undoubtedly strengthen the position of the Group in negotiating the disposal of its assets in order to deliver shareholder value.

"The Board continues to manage the business to improve its cash flow. Marketing activity to let more commercial space and sell apartments continues. The Group also continues to review opportunities to dispose of its projects as whole. Progress to date on these initiatives will take time given the economic circumstances. Further announcements will be made as and when appropriate."

Ends

 
 Contacts: 
 Orchid Developments            www.orchid-dev.com 
  Guy Meyohas                      +41 798 200 200 
 Shore Capital and Corporate 
  Limited 
  Bidhi Bhoma / Toby Gibbs        +44 20 7408 4090 
 MHP Communications 
  Reg Hoare / Tim McCall 
  / Vicky Watkins                 +44 20 3128 8100

Notes to Editors:

Orchid Developments Group Ltd (OCH.L), which listed on the AIM market in June 2005, was established with the aim of generating value for shareholders by investing in real estate and leisure business opportunities initially in Bulgaria.

The company is active in all principal sub-sectors of the Bulgarian real estate and leisure markets and currently holds three residential and six commercial property developments in Sofia and Varna. Its principal investment is Grand Mall Varna, one of Bulgaria's leading shopping malls.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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