TIDMOCH
RNS Number : 6015R
Orchid Developments Group Ltd
20 November 2012
20 November 2012
Orchid Developments Group Ltd.
("Orchid", the "Company" or the "Group")
Replacement Announcement
The following amendments have been made to the 'Open Offer'
announcement released on 20 November 2012 at 07.00 under RNS No
5115R.
The Ex-entitlement date for the Open Offer is 8.00 a.m. on 20
November 2012.
The Open Offer Entitlements and Excess CREST Open Offer
Entitlements enabled in CREST and credited to stock accounts of
Qualifying DI Holders as soon as possible thereafter at 8.00 a.m.
on 21 November 2012.
The Company's contact number is +359 52 953301.
All other details remain unchanged.
Open Offer of 93,966,260 new Ordinary Shares to raise up to
GBP2,114,240.85
Capitalisation of Bellport Fees and
Notice of Extraordinary General Meeting
Further to the announcement of 12 November 2012 and the ongoing
suspension of Group's shares, Orchid (AIM: OCH), the Bulgarian
focused property developer and investor, announces that it proposes
to:
(i) raise up to GBP2,114,240.85 (approximately EUR2.64 million)
(gross) by way of an Open Offer on the basis of 1 (one) Offer Share
for each Existing Ordinary Share held; and
(ii) capitalise GBP671,621 (approximately EUR839,526) of fees
due to Bellport by the issue of 29,849,813 Ordinary Shares.
The issue price for the Offer Shares and the Capitalisation
Shares is 2.25 pence per share (being a premium of 20 per cent. to
the closing price on 21 September 2012, being the last dealing day
prior to the announcement of the suspension of the Company's
shares).
The Open Offer and capitalisation of GBP671,621 of fees by
Bellport is conditional upon, amongst other things, the Directors
obtaining appropriate Shareholder authorities at the EGM to:
(i) increase the authorised share capital of the Company;
(ii) disapply pre-emption rights which would otherwise apply to the Capitalisation Shares; and
(iii) waive the requirements of article 144(C) of the Articles,
as well as the lifting of the Suspension and Admission.
The lifting of the Suspension will only occur once the Open
Offer has completed and the Interim Results have been published and
shall occur on the same day as Admission.
The Offer Shares are being made available to Qualifying
Shareholders and Qualifying DI Holders, who have the right to
subscribe for their pro rata Open Offer Entitlements, together with
a right to subscribe for additional Offer Shares pursuant to the
Excess Application Facility, each in accordance with the terms of
the Open Offer. It is expected that the Existing Ordinary Shares
will be re-admitted, that Admission will (subject to the Minimum
Subscription having been achieved) become effective and that
dealings in the Offer Shares and the Capitalisation Shares will
commence on 17 December 2012.
Guy Meyohas and Ofer Miretzky, the Joint Chief Executive
Officers of the Company, have committed to invest up to GBP1.36
million (EUR1.7 million), being the Minimum Subscription, as part
of the Proposals.
Accordingly and pursuant to an irrevocable undertaking from Guy
Meyohas, Ofer Miretzky and Bellport, ("the Concert Party") has
conditionally agreed to:
(i) take up their respective Open Offer Entitlements;
(ii) subscribe for up to a further 32,281,756 Offer Shares to
the extent that such Offer Shares are not subscribed by Existing
Shareholders under the Open Offer in order that the Minimum
Subscription is met;
(iii) extinguish GBP671,621 (approximately EUR839,526) of fees
due to Bellport by the issue of the Capitalisation Shares; and
(iv) accept the Potential Further Capitalisation Shares or to
defer payment of such amounts (together with interest accruing
daily at a rate of 5 per cent. per annum), until the earlier of a
sale of assets of the Group following which the Company has
sufficient surplus cash to make the repayment and 31 December 2013,
if there is insufficient cash to pay the Future Fees due to
Bellport.
The Concert Party will hold, in aggregate, 39.34 per cent. of
the voting rights of the Company if the Open Offer is taken up in
full or 63.84 per cent. of the voting rights of the Company if no
one takes up the Open Offer other than the Concert Party and the
Concert Party subscribes more than its pro rata entitlement in
accordance with the Irrevocable Undertaking. Without an ordinary
resolution of the Independent Shareholders waiving the requirements
of article 144(C) of the Articles, the Concert Party would be
required to make a general offer under that article to acquire all
of the Ordinary Shares not already owned by them. A proposed waiver
of the obligations of the Concert Party to make an offer pursuant
to article 144(C) of the Articles is set out in the Waiver
Resolution. The Irrevocable undertaking is conditional, amongst
other things, on the Waiver Resolution being passed by
Shareholders.
A shareholder circular, containing information about the
background to and the reasons for, amongst other things, the Open
Offer and the Capitalisation ("the Proposals"), explain why the
Directors consider the Proposals to be in the best interests of the
Company and its shareholders as a whole and why the Independent
Directors recommend that you vote in favour of the Resolutions to
be proposed at the EGM, will be published and sent to shareholders
today and, when published, will be available on the Company's
website www.orchid-dev.com, the ("Shareholder Circular").
An Extraordinary General Meeting of shareholders to approve the
Proposals will be held at 11.00 a.m. on 14 December 2012, notice of
which will be set out at the end of the Shareholder Circular.
Shareholders should note that, if the Resolutions are not
approved at the Extraordinary General Meeting, the Minimum
Subscription will not be received by the Company and the
Capitalisation will not occur. If this were to happen, the Company
would not have sufficient working capital to continue to trade,
would need to cease to trade and would most likely be placed into
liquidation.
Set out below are extracts from the Shareholder Circular,
including the Letter from the Chairman, which is set out in full,
in addition to certain other information. Shareholders attention is
drawn to the statements on working capital set out in paragraph 3
of Part I of the Shareholder Circular. Shareholders are advised to
read the Shareholder Circular in its entirety and not just the
information reproduced in this announcement.
All defined terms in this announcement shall have the same
meaning as ascribed to them in the Shareholder Circular.
Guy Meyohas, Chief Executive Officer of Orchid, said:
"We are pleased to launch this initiative as a Board and for the
Group to be taking a step closer to having its shares
readmitted.
We believe there is significant value in Orchid's asset base,
especially the Grand Mall which is exhibiting significant
investment potential. This is why Ofer and I have committed to
invest up to GBP1.36 million to ensure the Minimum Subscription is
met.
We hope shareholders will vote in favour of the proposals to
allow us the best chance to maximise and return value to all our
shareholders."
OPEN OFFER STATISTICS
Number of Ordinary Shares in issue
as at the date of this document 93,966,260
Number of Offer Shares being offered
pursuant to the Open Offer 93,966,260
Issue Price 2.25 p
Number of Capitalisation Shares to
be issued to Bellport by way of the
Capitalisation 29,849,831
Number of Ordinary Shares in issue
following Admission (assuming full
subscription under the Open Offer)* 219,071,221
Number of Ordinary Shares in issue
following Admission (assuming no
take up under the Open Offer other
than pursuant to the Irrevocable
Undertaking)* 185,549,405
Number of Offer Shares and Capitalisation 56.52 per cent.
Shares as a percentage of the enlarged
Ordinary Share capital of the Company
following completion of the Open
Offer (assuming full subscription
under the Open Offer)
Number of Offer Shares and Capitalisation 48.66 per cent.
Shares as a percentage of the enlarged
Ordinary Share Capital of the Company
following completion of the Open
Offer (assuming no take up under
the Open Offer other than pursuant
to the Irrevocable Undertaking)
Estimated gross proceeds receivable GBP1.36 million
by the Company from the Open Offer
and Minimum Subscription (assuming
no take up under the Open Offer other
than pursuant to the Irrevocable
Undertaking)
In calculating currency conversions from amounts in EUR to GBP
(and vice versa) in Parts I and IV of the Shareholder Circular, an
exchange rate of EUR 1.25 : GBP1 has been used.
*Includes 1,288,888 Ordinary Shares to be issued in lieu of
certain fees, at the Issue Price, on completion of the
Fundraising
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for entitlements 5p.m. on 14 November
under the Open Offer 2012
Announcement of Open Offer 7.00 a.m. on 20 November
2012
Publication of this Circular 20 November 2012
and dispatch of the Application
Forms, Forms of Proxy and Forms
of Direction
Ex-entitlement date for the 8.00 a.m. on 20 November
Open Offer 2012
Open Offer Entitlements and 8.00 a.m. on 21 November
Excess CREST Open Offer Entitlements 2012
enabled in CREST and credited
to stock accounts of Qualifying
DI Holders as soon as possible
thereafter
Recommended latest time for 4.30 p.m. on 7 December
requesting withdrawal of Open 2012
Offer Entitlements and Excess
CREST Open Offer Entitlements
from CREST
Latest time for depositing 3.00 p.m. on 10 December
Open Offer Entitlements and 2012
Excess CREST Open Offer Entitlements
into CREST
Latest time and date for receipt 11.00 a.m. on 11 December
of Forms of Direction from 2012
Qualifying DI Holders for the
Extraordinary General Meeting
Latest time and date for splitting 3.00 p.m. on 11 December
Application Forms (to satisfy 2012
bona fide market claims only)
Latest time and date for receipt 11.00 a.m. on 12 December
of Forms of Proxy from Qualifying 2012
Shareholders for the Extraordinary
General Meeting
Latest time for receipt of 11.00 a.m. on 13 December
completed Application Forms 2012
and payment in full under the
Open Offer or settlement of
relevant CREST instruction
(as appropriate)
Extraordinary General Meeting 11.00 a.m. on 14 December
2012
The results of the Extraordinary By 2.00 p.m. on 14
General Meeting announced through December 2012
a Regulatory Information Service
Anticipated publication of 7.00 a.m. on 17 December
the Interim Results 2012
Anticipated lifting of the 7.30 a.m. on 17 December
Suspension 2012
Re-admission of Existing Ordinary 8.00 a.m. on 17 December
Shares and Admission and commencement 2012
of dealings in the Fundraising
Shares on AIM
CREST stock accounts credited 8.00 a.m. on 17 December
with Depository Interests representing 2012
Fundraising Shares as soon
as possible thereafter
Dispatch of share certificates By 2 January 2013
for the new shares in certificated
form
For further information please contact
Orchid Developments www.orchid-dev.com
Guy Meyohas +359 52 953301
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
IMPORTANT NOTICE
This announcement has not been approved by the UK Financial
Services Authority or by any other regulatory authority. This
announcement does not constitute the Shareholder Circular and
investors should not subscribe for or purchase any securities
referred to in this announcement except on the basis of information
provided in the Shareholder Circular to be published by the Company
in due course. This announcement does not constitute an offer to
sell, or a solicitation of an offer to subscribe for, the
securities in any jurisdiction in which such offer or solicitation
is unlawful.
The distribution of this announcement and/or the prospectus
and/or securities into jurisdictions other than the United Kingdom
may be restricted by law. Persons into whose possession this
announcement comes should inform themselves about and observe any
such restrictions. Any failure to comply with these restrictions
may constitute a violation of the securities laws of any such
jurisdiction.
In particular, this announcement is not for distribution,
directly or indirectly in, or into the United States (including its
territories and dependencies, any State of the United States and
the District of Columbia), Australia, Canada, Japan or South
Africa. This announcement does not constitute or form a part of any
offer or solicitation to purchase or subscribe for securities in
the United States. The securities have not been, and will not be,
registered under the US Securities Act of 1933, as amended (the
"Securities Act"). The securities mentioned herein may not be
offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the
Securities Act. There will be no public offer of such securities in
the United States.
The securities have not been or will not be registered under the
relevant laws of any state, province or territory of Australia,
Canada, Japan or South Africa and may not be offered, sold, taken
up, exercised, resold, renounced, transferred or delivered,
directly or indirectly, within Australia, Canada, Japan, South
Africa or the Republic of Ireland except pursuant to an applicable
exemption.
Neither the content of the Orchid website nor any website
accessible by hyperlinks on the Orchid website is incorporated in,
or forms part of, this announcement.
Shore Capital and Corporate Limited, which is authorised and
regulated in the United Kingdom by the Financial Services
Authority, is acting as nominated adviser to the Company in
relation to the Open Offer. The responsibilities of Shore Capital
and Corporate Limited as the Company's nominated adviser under the
AIM Rules for Nominated Advisers are owed solely to London Stock
Exchange and are not owed to the Company, to any Director or to any
person. Shore Capital Stockbrokers Limited, which is a member of
London Stock Exchange plc and is authorised and regulated by the
Financial Services Authority, is acting as the broker to the
Company. Persons reading this announcement and receiving the
Shareholder Circular should note that Shore Capital Stockbrokers
Limited will not be responsible to anyone other than the Company,
for providing the protections afforded to its clients or for
advising any other person on the arrangements described in the
Shareholder Circular. Neither Shore Capital and Corporate Limited
nor Shore Capital Stockbrokers Limited has authorised the contents
of, or any part of, the Shareholder Circular and no liability
whatsoever is accepted by either of them for the accuracy of any
information or opinions contained the Shareholder Circular or for
the omission of any information.
This announcement has been issued by and is the sole
responsibility of Orchid. No representation or warranty, express or
implied, is or will be made as to, or in relation to, and no
responsibility or liability is or will be accepted by Shore Capital
and Corporate Limited or Shore Capital Stockbrokers Limited,
together being ("Shore Capital"), or its affiliates as to, or in
relation to, the accuracy or completeness of this announcement or
any other written or oral information made available to or publicly
available to any interested party or its advisers, and any
responsibility or liability therefore whether arising in tort,
contract or otherwise is expressly disclaimed.
Shore Capital is not underwriting the Open Offer. Save as
required or imposed by the UK Financial Services and Markets Act
2000, no representation or warranty, express or implied, is made by
Shore Capital as to the accuracy, completeness or fairness of any
information in this announcement and Shore Capital accept no
responsibility or liability for this announcement and accordingly
they disclaim all and any liability, whether arising in tort,
contract or otherwise, which they might otherwise be found to have
in respect of this announcement.
This announcement includes forward-looking statements that
reflect the current views of Orchid's management with respect to
future events. These forward-looking statements include all matters
that are not historical facts. They include, but are not limited
to, statements regarding the Company's intentions, beliefs or
current expectations concerning, inter alia, the Company's results
of operations and financial position, and the development of the
markets and the industry in which the Group operates.
Forward-looking statements are based on current plans, estimates
and projections, and therefore too much reliance should not be
placed upon them. Such statements are subject to risks and
uncertainties, most of which are difficult to predict and are
generally beyond the Company's control. Orchid cautions you that
forward-looking statements are not guarantees of future performance
and that if risks and uncertainties materialise, or if the
assumptions underlying any of these statements prove incorrect, the
Company's actual results of operations and financial position, and
the development of the markets and the industry in which the Group
operates may materially differ from those made in, or suggested by,
the forward-looking statements contained in this announcement. In
addition, even if the results of operations and financial position,
and the development of the markets and the industry in which the
Group operates, are consistent with the forward-looking statements
contained in this announcement, those results or developments may
not be indicative of results or developments in future
periods..
LETTER FROM THE CHAIRMAN
ORCHID DEVELOPMENTS GROUP LIMITED
(incorporated under the laws of the Cayman Islands with Number
CR-136434)
Directors: Registered office:
Joseph Georg Drescher (Non-Executive Paget-Brown Trust
Director and Chairman) Company Ltd
Mark Holdsworth (Non-Executive Boundary Hall
Director and Deputy Chairman)
Ofer Miretzky (Joint Chief Executive Cricket Square
Director)
Guy Meyohas (Joint Chief Executive PO Box 1111
Director)
Amir Rosentuler (Non-Executive Grand Cayman KY1-1102
Director)
Cayman Islands
British West Indies
20 November 2012
To the Existing Shareholders and for information purposes only,
holders of options to subscribe for Ordinary Shares.
Open Offer to raise up to GBP2,114,240.85
Capitalisation of Bellport Fees
and
Notice of Extraordinary General Meeting
1. introduction
On 24 September 2012, the Company announced that the Existing
Ordinary Shares had been suspended pending clarification of the
Group's financial position. The Company now proposes to: (i) raise
up to GBP2.1 million (approximately EUR2.64 million) (gross) by way
of an Open Offer on the basis of 1 (one) Offer Share for each
Existing Ordinary Share held; and (ii) capitalise GBP671,621
(approximately EUR839,526) of fees due to Bellport by the issue of
29,849,813 Ordinary Shares. The issue price for the Offer Shares
and the Capitalisation Shares is 2.25 pence per share (being a
premium of 20 per cent. to the Closing Price). The Fundraising is
conditional upon, amongst other things, the Directors obtaining
appropriate Shareholder authorities at the EGM to: (i) increase the
authorised share capital of the Company; (ii) disapply pre-emption
rights which would otherwise apply to the Capitalisation Shares;
and (iii) waive the requirements of article 144(C) of the Articles,
as well as the lifting of the Suspension and Admission. The lifting
of the Suspension will only occur once the Open Offer has completed
and the Interim Results have been published and shall occur on the
same day as Admission.
The Offer Shares are being made available to Qualifying
Shareholders and Qualifying DI Holders, who have the right to
subscribe for their pro rata Open Offer Entitlements, together with
a right to subscribe for additional Offer Shares pursuant to the
Excess Application Facility, each in accordance with the terms of
the Open Offer. It is expected that the Existing Ordinary Shares
will be re-admitted, that Admission will (subject to the Minimum
Subscription having been achieved) become effective and that
dealings in the Offer Shares and the Capitalisation Shares will
commence on 17 December 2012.
Guy Meyohas and Ofer Miretzky, the Joint Chief Executive Offices
of the Company, have committed to invest up to GBP1.36 million
(EUR1.7 million), being the Minimum Subscription, as part of the
Proposals. Accordingly and pursuant to an irrevocable undertaking
from Guy Meyohas, Ofer Miretzky and Bellport, the Concert Party has
conditionally agreed to: (i) take up their respective Open Offer
Entitlements; (ii) subscribe for up to a further 32,281,756 Offer
Shares to the extent that such Offer Shares are not subscribed by
Existing Shareholders under the Open Offer in order that the
Minimum Subscription is met; (iii) extinguish GBP671,621
(approximately EUR839,526) of fees due to Bellport by the issue of
the Capitalisation Shares; and (iv) in respect of the Future Fees
due to Bellport, to accept the Potential Further Capitalisation
Shares or to defer payment of such amounts (together with interest
accruing daily at a rate of 5 per cent. per annum), until the
earlier of a sale of assets of the Group following which the
Company has sufficient surplus cash to make the repayment and 31
December 2013. The Concert Party will hold, in aggregate, 39.34 per
cent. of the voting rights of the Company if the Open Offer is
taken up in full or 63.84 per cent. of the voting rights of the
Company if no one takes up the Open Offer other than the Concert
Party and the Concert Party subscribes more than its pro rata
entitlement in accordance with the Irrevocable Undertaking. Without
an ordinary resolution of the Independent Shareholders waiving the
requirements of article 144(C) of the Articles, the Concert Party
would be required to make a general offer under that article to
acquire all of the Ordinary Shares not already owned by them. A
proposed waiver of the obligations of the Concert Party to make an
offer pursuant to article 144(C) of the Articles is set out in the
Waiver Resolution. The Irrevocable undertaking is conditional,
amongst other things, on the Waiver Resolution being passed by
Shareholders.
The purpose of the Shareholder Circular is to provide you with
information about the background to and the reasons for the Open
Offer and the Capitalisation, explain why the Directors consider
the Open Offer and Capitalisation to be in the best interests of
the Company and its shareholders as a whole and why the Independent
Directors recommend that you vote in favour of the Resolutions to
be proposed at the EGM, notice of which is set out at the end of
the Shareholder Circular.
You should note that, if the Resolutions are not approved at the
Extraordinary General Meeting, the Minimum Subscription will not be
received by the Company and the Capitalisation will not occur. If
this were to happen, the Company would not have sufficient working
capital to continue to trade, would need to cease to trade and
would most likely be placed into liquidation.
Your attention is drawn to the statements on working capital set
out in paragraph 3 of this Part I of the Shareholder Circular.
Shareholders are advised to read the Shareholder Circular in its
entirety and not just this Part I.
2. INFORMATION ON ORCHID
Orchid is a Cayman incorporated company quoted on AIM and,
together with its subsidiaries, is an owner-manager and developer
of commercial and residential property primarily in Bulgaria.
The Group has three main projects in which it is investing and
managing. These are the Grand Mall retail centre in Varna, the
Orchid Gardens multi-use commercial and residential complex in
Varna and the Orchid Hills residential complex, also in Varna.
On 13 January 2012, the Company posted a circular to
Shareholders convening an extraordinary general meeting of the
Company for 15 February 2012 (February 2012 EGM), in which the
Board said that its primary focus for the immediate and medium term
was to maximize shareholder value and returns, to which end the
Group may, if market conditions permit and realistic valuations
could be achieved, dispose of the Group's assets. At the February
2012 EGM, the Company's Articles were amended, by the insertion of
a new article 141 A, to include a provision that an extraordinary
general meeting will be called on or before 31 December 2013 where
resolutions will be put to shareholders to allow them to decide
whether the Company should realise its assets at that time, defer
such decision for a year, or continue in its current form. The
Concert Party agreed that during the term of the management
services agreement between Bellport and the Company dated 30 June
2005 (as amended) they would abstain from voting on such
resolutions.
Copies of the Shareholder Circular and further background on the
Company can be found on the Company's website
(http://www.orchiddev.com/).
3. BACKGROUND TO AND REASONS FOR THE FUNDRAISING
The global financial crisis has had a considerable impact on
Bulgaria's economy. The major challenges the crisis has presented
for the Group include a reduction in the availability of debt
financing available for real estate investments on the domestic and
European markets and inactivity in the residential and commercial
property markets resulting from poor financing and economic
uncertainty, reducing the number of potential buyers for Group
assets. High levels of unemployment in the domestic market and GDP
per capita remaining persistently low also has a detrimental effect
on transaction volume.
As a consequence of these challenges, the quantum of free cash
flow which the Group is able to generate in the short to medium
term from the sales of apartments and other assets, is
unpredictable. In addition, in July 2012 the Company was in very
late stage negotiations to sell the Golden Yavor Hotel, an asset
which would generate significant free cash flow in the context of
the Company's working capital requirements, when there was a
terrorist attack in Bulgaria which targeted tourists, following
which the buyer withdrew from the transaction. On 24 September the
Company's shares were suspended pending clarification of the
Group's financial position. The Company has not published its
Interim Results due to its inability to give a going concern
statement. If the Resolutions are passed, the Company will be in a
position to release the Interim Results. Set out in Part III of the
document is certain financial and operational information which,
but for the going concern issue, would have been released to the
market in relation to the period to 30 June 2012. Shareholders
attention is drawn to the information in Part III of the
Shareholder Circular which should be read in full prior to applying
under the Open Offer.
The announcement of the Suspension and the Company's financial
position has resulted in further financial pressure on the Group as
it is seen as a forced seller of assets. Bellport has now made a
bridge finance facility available to the Company, secured by way of
a charge over stage two of Sofia Hills as announced on 12 November
2012. Following the Suspension, the Board has determined that it
needs to raise further funds to (i) enable it to pursue the
strategy of realising assets to maximise shareholder returns; and
(ii) meet the Group's working capital requirements which it
estimates to be a minimum of GBP1.36 million (approximately EUR1.7
million) for the period through to 30 November 2013 (on the
assumption that the Bellport Fees are capitalised pursuant to the
Capitalisation and that Future Fees due to Bellport are capable of
being deferred or capitalised). In the opinion of the Directors,
having made due and careful enquiry, the Minimum Subscription
(after the elimination of the Bellport Fees and the arrangements in
respect of Future Fees due to Bellport) will be sufficient for its
present requirements, that is for the twelve month period from 1
December 2012 to 30 November 2013, but it should be noted that the
Minimum Subscription is not expected to be sufficient to fund the
Company beyond 30 November 2013 unless the Company is successful in
selling one or more of its assets to generate free cash flows.
The Minimum Subscription will principally be used, together with
any amount in excess of the Minimum Subscription raised under the
Open Offer, to:
-- provide operating cash support to complete existing projects
(particularly for repayment of remaining debts);
-- assist in the re-zoning of specific elements of the land bank
with a view to generating increased value;
-- provide employee compensation and benefits packages (particularly for senior staff);
-- pay executive and non-executive directors fees due;
-- repay the bridge finance facility to Bellport referred to above; and
-- pay professional fees associated with the Open Offer and
related costs in relation to the Company's ongoing admission to
trading on AIM.
In addition to the above, the Fundraising will, if completed,
provide the Directors with enhanced negotiating power with respect
to the sale of the Company's assets and also a 12 month period in
which to progress such sales.
In relation to Future Fees due to Bellport, the Board has agreed
with Bellport that if the Company does not have sufficient funds
available to pay the management fee due in respect of a particular
calendar month (the "Relevant Monthly Fee"), Bellport shall elect
either: (i) that it will accept in satisfaction of the Relevant
Monthly Fee such number of Ordinary Shares as is derived from
converting the Relevant Monthly Fee into sterling at the spot rate
as shown in the Financial Times on the last business day of the
month and dividing the resultant sterling amount by the lower of
the closing price on the last Business Day of the relevant month
and 2.5 pence; or (ii) to defer the payment of the Relevant Monthly
Fee (together with interest which shall accrue on such amount at a
rate of 5 per cent. per annum accruing daily on the basis of a 360
day year) until the earlier of the date upon which the board of
directors of the Company (excluding Guy Meyohas and Ofer Miretzky)
determines the Company has sufficient free cash following a sale of
assets to repay the Relevant Monthly Fee (together with accrued
interest) and 31 December 2013.
The Group is in the process of restructuring its facility loans
in some of its projects. Project finance facilities are secured at
a local company level such that there is no recourse or debt at
Company level. The Directors believe that the debts in the
subsidiaries will be met and/or in certain instances, based on
previous experience, will be subject to further restructuring. In
particular, it should be noted that the Company's subsidiary,
Orchid Gardens Varna EOOD ("Orchid Gardens"), which is developing a
project of the same name, has certain loan facilities which are
described more fully in Part IV of the Shareholder Circular. As at
the date of the Shareholder Circular, certain principal and
interest payments will become due within the 12 month period from 1
December 2012 to 30 November 2013 which Orchid Gardens may not be
able to meet. Whilst the Board expects to be able to refinance the
facilities in question (as it has been able to do on previous
occasions), if these payments are not met, the lender in question
will have the right to enforce its security over Orchid Gardens.
Orchid Gardens has ring fenced financing so while any such action
would result in a reduction of NAV for the Group, the lender would
have no direct right of recourse against any other company other
than Orchid Gardens.
The Group continues to pursue measures to realise value from the
Group's assets including reviewing and streamlining its undeveloped
portfolio for development realisation. The Group has consolidated
its efforts and focus on the leveraging of its existing portfolio
with the aim of realising these assets in the short to medium term
in order to strengthen the Group's cash flow position. In adopting
this approach, the Group is increasing occupancy within its
flagship assets and has succeeded in attracting international
retailers including H&M and Carrefour.
Existing Shareholders should be aware that, if the Resolutions
are not approved at the Extraordinary General Meeting, the Minimum
Subscription will not be received by the Company and the
Capitalisation will not occur. If this were to happen the Company
would not have sufficient working capital to continue to trade,
would need to cease to trade, and would most likely be placed into
liquidation.
4. THE PROPOSALS
The Open Offer
The Open Offer is being made to (i) Qualifying Shareholders,
being holders of Existing Ordinary Shares as set out on the
register of members of the Company on the Record Date, and (ii)
Qualifying
DI Holders, being holders of Depository Interests representing
Existing Ordinary Shares as set out on the register of Depository
Interest Holders maintained by the Depository on the Record
Date.
Qualifying Shareholders and Qualifying DI Holders are hereby
invited to apply to subscribe for Offer
Shares, subject to the terms and conditions below (and in the
case of Qualifying Shareholders, in the
Application Form), at a price of 2.25 pence each payable in full
on application and free of expenses, on the following basis:
1 (one) Offer Share for each Existing Ordinary Share
held by them or as DIs representing Existing Ordinary Shares, in
each case registered in the names of Qualifying Shareholders, or in
respect of which Qualifying DI Holders are registered in the DI
register, at the Record Date, and so on in proportion for any other
number of Existing Ordinary Shares or Depository Interests then
registered.
Applications by Qualifying Shareholders and Qualifying DI
Holders will be satisfied in full up to the amount of their
individual Open Offer Entitlements. Qualifying Shareholders and
Qualifying DI Holders will also be entitled, provided they
subscribe for their Open Offer Entitlement in full, to apply for
additional Offer Shares in excess of their Open Offer Entitlements
through the Excess Application Facility. If applications under the
Excess Application Facility are received for more than the total
number of Offer Shares available following subscription for Open
Offer Entitlements, such applications will be scaled back pro rata
to each subscriber for such additional Offer Shares under the
Excess Application Facility, based on their Record Date holding and
any decision by the Board in respect of such scale back shall be
final.
Pursuant to the Irrevocable Undertaking, the Concert Party has
conditionally upon the passing of the
Resolutions, the lifting of the Suspension and Admission, agreed
(amongst other things) to: (i) take up their respective Open Offer
Entitlements; and (ii) subscribe for up to a further 32,281,756
Offer Shares to the extent that the Minimum Subscription is not
subscribed by Existing Shareholders under the Open Offer. Apart
from the Minimum Subscription of GBP1.36 million, the Open Offer is
not underwritten.
The Issue Price represents a premium of 20 per cent. to the
Closing Price.
Further details of the Open Offer are set out in Part IV of the
Shareholder Circular.
The Capitalisation
The Company has also conditionally agreed with Bellport to issue
the Capitalisation Shares to Bellport in satisfaction of Bellport's
Fees. The issue price for the Capitalisation Shares is 2.25 pence
per share being the same as the issue price for the Offer Shares.
The Capitalisation is conditional, amongst other things, on the
Resolutions being passed, the Minimum Subscription being raised,
lifting of the Suspension and Admission.
The Potential Further Capitalisation
In relation to Future Fees due to Bellport, the Board has agreed
with Bellport that if the Company does not have sufficient funds
available to pay the Relevant Monthly Fee, Bellport shall elect
either: (i) that it will accept in satisfaction of the Relevant
Monthly Fee such number of Ordinary Shares as is derived from
converting the Relevant Monthly Fee into sterling at the spot rate
as shown in the Financial Times on the last business day of the
month and dividing the resultant sterling amount by the lower of
the closing price on the last Business Day of the relevant month
and 2.5 pence; or (ii) to defer the payment of the Relevant Monthly
Fee (together with interest which shall accrue on such amount at a
rate of 5 per cent. per annum accruing daily on the basis of a 360
day year) until the earlier of the date upon which the board of
directors of the Company (excluding Guy Meyohas and Ofer Miretzky)
determines the Company has sufficient free cash following a sale of
assets to repay the Relevant Monthly Fee (together with accrued
interest) and 31 December 2013.
Shareholders should note that the Resolutions are
inter-conditional and, if either one is not passed, the Proposals
described in this circular will not proceed.
Settlement and Dealings
Application will be made to the London Stock Exchange for the
Offer Shares and the Capitalisation Shares to be admitted to
trading on AIM. It is expected that, subject to the passing of the
Resolutions and the publication of the Interim Results, the
Existing Ordinary Shares will be re-admitted, Admission will become
effective and dealings in the Offer Shares and Capitalisation
Shares will commence on 17 December 2012. The Offer Shares and
Capitalisation Shares to be issued pursuant to the Open Offer and
Capitalisation will be issued fully paid and will rank equally in
all respects with the Existing Ordinary Shares.
5. BOARD PARTICIPATION IN THE FUNDRAISING
Pursuant to the Fundraising and conditional on, amongst other
things, the passing of the Resolutions, Guy Meyohas and Ofer
Miretzky, together with Bellport have agreed to subscribe for Offer
Shares. Bellport will also receive the Capitalisation Shares to
extinguish the Bellport Fees as set out in paragraph 6 of the Part
I of the Shareholder Circular.
6. THE ARTICLES
Article 144
Transactions in the Company's Ordinary Shares are not subject to
the provisions of the UK City Code on Takeovers and Mergers (the
"Code"). However, the Company has incorporated key provisions,
which mirror certain elements of the Code into its Articles. The
proposed Fundraising gives rise to certain considerations under
article 144 of the Articles which reflects in certain respects rule
9 of the
Code.
Under article 144(C) of theArticles, where any person acquires,
whether by a series of transactions over a period of time or not,
an interest in shares which (taken together with shares already
held by him and an interest in shares held or acquired by persons
acting in concert with him) carry 30 per cent. or more of the
voting rights of the Company, that person is required to make a
general offer to all the holders of any class of equity share
capital or other class of transferable securities carrying voting
rights in the Company to acquire the balance of their interests in
the Company.
Article 144(C) of the Articles also provides that, among other
things, where any person who, together with persons acting in
concert with him, is interested in shares which in aggregate carry
not less than 30 per cent. but not more than 50 per cent. of the
voting rights of the Company, and such person, or any person acting
in concert with him, acquires an additional interest in shares
which increases the percentage of shares carrying voting rights in
which he is interested, then such person is normally required to
make a general offer to all the holders of any class of equity
share capital or other class of transferable securities carrying
voting rights of the Company to acquire the balance of their
interests in the Company.
An offer under article 144(C) of the Articles, must be in cash
(or with a cash alternative) and at the highest price paid within
the preceding 12 months for any shares in the Company by the person
required to make the offer or any person acting in concert with
him.
The Concert Party
Under the Articles, a concert party arises when persons who,
pursuant to an agreement or understanding (whether formal or
informal), co-operate through the acquisition by any of them of
shares in the Company, to obtain or consolidate control of the
Company. Under the Articles, control means a holding or aggregate
holdings of shares representing 30 per cent. or more of the voting
rights of the Company, irrespective of whether such interest or
interests give de facto control.
Guy Meyohas, Ofer Miretzky and Bellport are deemed to be acting
in concert for the purposes of article 144 of the Articles. The
Concert Party is currently beneficially interested in an aggregate
of 28,162,688 Ordinary Shares, representing approximately 29.97 per
cent. of the entire existing issued share capital of the
Company.
Pursuant to the Open Offer and the Capitalisation, the Concert
Party could acquire, in aggregate, and assuming full take up under
the Open Offer, up to 39.34 per cent. of the voting rights of the
Company, or if no one takes up the Open Offer other than the
Concert Party and it subscribes more than its pro rata entitlement
in accordance with the Irrevocable Undertaking, 63.34 per cent. of
the voting rights of the Company. Without a waiver of the
obligations under article 144(C) of the Articles, the Concert Party
would be obliged to make a general offer to Shareholders. The
Waiver Resolution which will be proposed at the EGM waives the
obligations on the Concert Party to make a general offer to
Shareholders both as a result of the Fundraising and as a result of
the issue of the Potential Further Capitalisation Shares to
capitalise Future Fees due to Bellport. Accordingly, only the
Independent Shareholders will be entitled to vote on this
Resolution.
Maximum
Maximum percentage
Minimum Minimum number of Ordinary
Ordinary Percentage number percentage of Ordinary Shares
Shares of Ordinary of Ordinary of Ordinary Shares held
held Shares Shares Shares to be after
prior held to be held acquired the
to prior acquired after pursuant Capitalisation,
Capitalisation to pursuant the to the Open
and Capitalisation to Capitalisation Capitalisation Capitalisation, Offer
Open and Open and Open and Open Open Offer and
Name Offer Offer Offer* Offer* and Subscription** Subscription**
Guy
Meyohas 11,196,344 11.92% 11,196,344 10.22% 11,196,344 12.07%
Ofer
Miretzky 11,196,344 11.92% 11,196,344 10.22% 11,196,344 12.07%
Bellport 5,770,000 6.14% 35,619,813 18.89% 67,901,569 39.70%
--------------- --------------- ------------------- --------------- ------------------- ----------------
28,162,688 29.97% 58,012,501 39.34% 90,294,257 63.84%
--------------- --------------- ------------------- --------------- ------------------- ----------------
* This is calculated on the basis that there is full take up
under the Open Offer.
**This percentage is calculated on the basis that only the Offer
Shares in respect of which the Company has received binding
commitments from the Concert Party are subscribed for.
Potential voting rights of the Concert Party
If the Waiver Resolution is passed at the Extraordinary General
Meeting and on the assumption that: (a) 90,294,257 Ordinary Shares
are issued pursuant to the Open Offer, the Capitalisation and the
Subscription; and (b) there are no other changes to the issued
share capital of the Company, the voting rights attributable to
Ordinary Shares held by the Concert Party following Admission,
would constitute approximately 64 per cent. of all the voting
rights in the Company. Shareholders should be aware that if the
Open Offer does not become unconditional or is terminated, the
Concert Party will not subscribe for Offer Shares or receive
Capitalisation Shares and the Concert Party will continue to hold
28,162,688 Ordinary Shares representing 29.97 per cent. of the
issued share capital of the Company but in these circumstances, the
Company will have to cease to trade and will likely be put into
liquidation or wound up.
Following completion of the Open Offer and the Capitalisation
and assuming some take up of the Open Offer other than by the
Concert Party, the Concert Party will be interested in Ordinary
Shares carrying more than 39.34 per cent. but less than 64 per
cent. of the Company's voting share capital. For so long as they
continue to be treated as acting in concert, any further increases
in their aggregate interest in shares above 30 per cent. but less
than 50 per cent., other than any issue of Potential Further
Capitalisation Shares to satisfy the Future Fees due to Bellport,
will be subject to the provisions of article 144 of the
Articles.
Under the Waiver Resolution, the Independent Shareholders will
be asked to waive the obligation of the Concert Party to make a
general offer that would otherwise arise as a result of the
Proposals. Accordingly, Resolution 1 is being proposed at the EGM
and will be taken on a poll. The Concert Party will not be entitled
to vote on Resolution 1.
7. INTENTIONS OF THE CONCERT PARTY
The Concert Party has confirmed that it would be its intention
that, following the increase in its proportionate shareholding as a
result of the participation in the Open Offer and the
Capitalisation, the business of the Company and its subsidiaries
would be continued in substantially the same manner as it is at
present, with no major changes. With this in mind, there will be no
repercussions on employment or the location of the Company's places
of business and no redeployment of the Company's fixed assets.
The Concert Party is also not intending to prejudice the
existing employment rights of any of the employees or management of
the Group nor to procure any material change in the conditions of
employment of any such employees or management.
8. APPROACH FROM THIRD PARTY
The Company was approached by a third party early in 2012 which
led to an announcement on 14 February 2012. The Company announced
on 17 February 2012 that the preliminary discussions did not lead
to an indicative offer for the Company and those discussions had
terminated. Following the Suspension, the same third party
approached the Board again with a view to combining the business
interests of the Group with its own corporate group or assets (such
approach did not constitute an indicative offer). The third party
has not provided the Board with any concrete proposals however, on
the basis of the minimal information supplied and of the indicative
valuation of the Company given so far, the Directors believe that
any such business combination or merger proposed by the third party
would leave Shareholders with an unacceptably low proportion of the
shares of the enlarged entity. Accordingly, as a result of the
potentially unacceptable level of dilution which Shareholders might
suffer and the unacceptable solution of the Company and its assets,
the Board believes that it is in the best interests of the Company
to proceed with the Proposals.
9. PROPOSED BOARD CHANGES
Conditional upon the Fundraising proceeding, I have agreed to
step down from my position as Chairman of the Company and Mark
Holdsworth has agreed to step down from his position as Deputy
Chairman, with effect from Admission. I will be replaced by Frank
Lewis, as Independent Non- Executive Chairman with effect from
Admission. There will be no replacement for Mark Holdsworth.
Brief details of the terms of the appointment letter pursuant to
which Frank Lewis will join the Board as set out in Part V.
Frank Lewis is aged 66. Frank Lewis has over 25 years of
experience in listed and unlisted companies. He has held a number
of board positions as chairman, non-executive director, chief
executive officer and finance director both in the UK and abroad
with growing mid-market companies. Frank Lewis currently holds
office as Independent Non-Executive Director on the board of China
Africa Resources Plc, Chairman of Asia Ceramic Holdings Plc and
Chairman of Zeo Medical Plc. Frank Lewis is a member of the South
African Institute of Chartered Accountants and a fellow of the
Institute of Chartered Accountants of England and Wales.
In the previous five years, Frank Lewis has also been chairman
of China Evoline Plc, Welconstruct Group Limited and Lloyds British
Testing Plc and has been a Non-Executive Director of, Formjet Plc
(now VSA Capital Group plc) Polymer Logistics NV, Creat Resources
Holdings Limited (formerly Zeehan Zinc Ltd) and Image Metrics Ltd.
Frank Lewis is a former member of the AIM Advisory Group
established by the London Stock Exchange.
Frank Lewis resigned from his position with Welconstruct Group
Limited on 10 September 2009, when the company was placed into
administration. On 10 August 2010 the company changed its name to
WGL Realisations 2010 Limited. On 27 August 2010 the joint
administrators sought a Court Order to enable a distribution in the
administration and move the company into a Creditors Voluntary
Liquidation. At that date the statement of affairs showed a deficit
of GBP8,370,000 (this deficit has since been increased to
GBP9,832,000). The joint administrators had achieved realisations
in excess of the amounts due to secured and preferential creditors,
but the quantum and timing of a distribution to unsecured creditors
is unknown.
Frank Lewis was appointed a Non-Executive Director of Telephone
Maintenance Group plc on 20 October 2006 and resigned three months
later on 25 January 2007. The Company went into administrative
receivership on 26 September 2007 and was dissolved on 26 February
2011. The deficit to unsecured creditors was GBP1,650,000. Frank
Lewis was also a Non-Executive Director of The Industry Limited
when it went into receivership on 4 December 2003. The statement of
affairs had a deficit of GBP4,950,000 and there was a shortfall of
GBP1,140,000 to unsecured creditors. Frank Lewis was a nonexecutive
director of the company representing a private equity house for a
period of less than 8 months. Frank Lewis resigned on 4 December
2003, being the date on which the receiver was appointed.
Frank Lewis has no unspent convictions in relation to indictable
offences nor has he filed for bankruptcy or entered into any
individual voluntary arrangement.
10. EXTRAORDINARY GENERAL MEETING
Set out at the end of the Shareholder Circular is a notice
convening the Extraordinary General Meeting to be held on 14
December 2012 at the offices of Orrick, Herrington & Sutcliffe
(Europe) LLP (107 Cheapside, London EC2V 6DN) at which the
Resolutions will be proposed for the purposes of implementing the
Proposals. The Resolutions can be summarised as follows:
-- Resolution 1 is theWaiver Resolution. This resolution will be
taken on a poll of the Independent Shareholders voting in person
and by proxy at the EGM.
-- Resolution 2, which will be proposed as a special resolution,
is conditional upon the passing of Resolution 1, seeks the approval
of the following:
o the increase to the authorised share capital of the Company
from EUR1,250,000 to EUR2,500,000 by the creation of 125,000,000
Ordinary Shares;
o the grant of authorisation to the Directors to generally allot
Ordinary Shares or rights to acquire Ordinary Shares; and
o the disapplication of Article 4(D) and the grant of
authorisation to the Directors to issue and allot for cash,
otherwise than on a pre-emptive basis, Ordinary Shares to, amongst
other things, implement the Proposals and issue 888,888 Ordinary
Shares to Shore Capital in lieu of professional fees and 400,000
Ordinary Shares to Frank Lewis (in each case conditional upon
Admission).
Shareholders should note that Resolutions 1 and 2 are
inter-conditional and, if either one is not passed, the Proposals
described in this circular will not proceed. Shareholders should
note that, if the Resolutions are not approved at the Extraordinary
General Meeting, the Minimum Subscription will not be received by
the Company and the Capitalisation will not occur. If this were to
happen, the Company would not have sufficient working capital to
continue to trade, would need to cease to trade, and would most
likely be placed into liquidation.
11. FURTHER INFORMATION
Your attention is drawn to the additional information set out in
Parts II to V of the Shareholder Circular.
12. ACTION TO BE TAKEN
-- If you are a Qualifying Shareholder and you wish to accept
the Open Offer, you should complete the Application Form in
accordance with the instructions printed on it and the information
provided in the Shareholder Circular and sign and return it as soon
as possible. Completed Application Forms should be posted, along
with a cheque or banker's draft drawn in the appropriate form, in
the accompanying pre-paid envelope (for use within the UK only) or
returned by post or by hand (during normal business hours only), to
Capita Registrars, Corporate Actions, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU (who will act as Receiving Agent in
relation to the Open Offer) so as to be received by Capita
Registrars not later than 11.00 a.m. on 13 December 2012, after
which time Application Forms will not be valid.
-- If you are a Qualifying DI Holder and you wish to accept the
Open Offer, you should follow the instructions set out in paragraph
5 of Part IV of the Shareholder Circular entitled "Procedure for
application and payment for Qualifying DI Holders" of Part IV:
"Terms and Conditions of the Open Offer" of the Shareholder
Circular. Persons who hold Depository Interests representing
Existing Ordinary Shares through a CREST member should be informed
by the CREST member through which they hold their Depository
Interests representing Existing Ordinary Shares of the number of
Offer Shares for which they are entitled to subscribe under the
Open Offer and should contact them should they not receive this
information.
To vote on the Resolutions
-- If you are a Shareholder, whether or not you intend to be
present at the Extraordinary General Meeting, you are requested to
complete the Form of Proxy (white) in accordance with the
instructions printed on it, sign and return the form by post or by
hand (during normal business hours only) so as to be received by
PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as soon as
possible and, in any event, so as to arrive not later than 11.00
a.m. on 12 December 2012. Completion and return of the Form of
Proxy will not prevent you from attending the Extraordinary General
Meeting and voting in person if you wish.
-- If you are a DI Holder, whether or not you intend to be
present at the Extraordinary General Meeting, you are requested to
complete the Form of Direction (blue) to instruct the Depository to
vote the number of Ordinary Shares in Orchid represented by your
Depository Interests, as per your instruction, in relation to the
Resolutions and in accordance with the instructions printed on it,
sign and return the form by post or by hand (during normal business
hours only) and in any case, so as to be received by Capita IRG
Trustees Limited, The Registry, PXS, 34 Beckenham Road, Beckenham,
Kent BR3 4TU, as soon as possible and, in any event, so as to
arrive not later than 11.00 a.m. on 11 December 2012. If you hold
your Depository Interest via the Depository Interest arrangement
and would like to attend the Extraordinary General Meeting, please
contact the Depository on the contact details set out on page
6.
Shareholder helpline
If you have any questions, please contact the Capita Registrars
helpline, details of which are set out on page 6.
13. RECOMMENDATION
The Directors believe that should Shareholders not vote in
favour of the Proposals, or should the Proposals not proceed for
any other reason, the Group will not have adequate working capital
to continue to trade. As Guy Meyohas and Ofer Miretzky are
interested in the arrangements with Bellport, they have not taken
part in the Board's deliberations in relation to the Capitalisation
nor in relation to the Waiver Resolution. The Independent
Directors, who have consulted with Shore Capital and Corporate
Limited, the Company's nominated adviser, which has taken into
account the Independent Directors commercial assessment of the
Proposals, consider that the Proposals, and the Resolutions to be
proposed at the EGM, are fair and reasonable in so far as
Shareholders are concerned. The Independent Directors unanimously
recommend Shareholders to vote in favour of the Resolutions.
Bellport, Guy Meyohas and Ofer Miretzky have undertaken to vote in
favour of Resolution 2 and to abstain from voting on Resolution
1.
Yours faithfully
Joseph Drescher
Chairman
FINANCIAL INFORMATION AND CURRENT TRADING
On 24 September 2012, the Company announced that the Directors
considered that it was in the Company's best interests to complete
the equity fundraising and debt capitalisation prior to publishing
its Interim Results. It is intended that the Company will publish
its Interim Results following the EGM and on the basis that the
Resolutions are approved by shareholders and the Minimum
Subscription achieved.
However, set out below are the material matters to be disclosed
in the Interim Results and also a summary of current trading.
1. FINANCIAL HIGHLIGHTS
-- Loss for the six months ended 30 June 2012 was EUR3.0 million
(2011 H1: profit EUR2.1 million), (2011 FY: loss EUR0.2
million):
o includes a fair value loss, relating to the investment
property items of EUR1.4 million (2011 H1: gain EUR4.7 million),
(2011 FY: gain EUR3.6 million).
-- Positive cash flow in the six months ended 30 June 2012
generated from operational activities of EUR3.1 million (2011 H1:
positive cash flow EUR1.0 million), (2011 FY: positive cash flow
EUR3.0 million).
-- Net asset value stood at EUR71.4 million, (2011 H1: EUR75.3
million), (2011 FY: EUR73.1 million) equating to a net asset value
per share of EUR 0.74 (2011 H1: EUR0.85), (2011 FY: EUR0.83),
equating to approximately GBP0.61 per Ordinary Share as at 30 June
2012.
-- Total revenues for the six months ended 30 June 2012 were
EUR5.9 million (2011 H1: EUR5.0 million), revenues from rent and
operations of the Grand MallVarna EUR4.2 million (2011 H1: EUR3.5
million.), (2011 FY: EUR8.0 million).
-- As announced on 11 April 2012, the Group extended term
agreements and completed the restructuring of the credit facility
with UniCredit Bulbank JSC (a division of UniCredit Group) for
EUR21.4 million relating to Orchid Gardens Varna Project.
2. OPERATIONAL HIGHLIGHTS
-- Gradual improvement in performance by Grand Mall Varna:
o current leased area is 81.3 per cent. (31 December 2011: 77.9
per cent.) of which 80 per cent. is occupied (31 December 2011:
72.9 per cent.) and 1.3 per cent. is to be occupied by the end of
the second half of 2012;
o a further 2,600 sqm (c.5.2 per cent.) of lettable space is
currently under negotiation with international brands;
o in the first half of 2012 3.5 million visitors entered the
Grand Mall Varna (2011 H1: 2.9 million visitors);
o strong take up by new tenants in the six months ended 30 June
2012, with 10 new lettings, among them:
-- BM Rialto, a local restaurants chain;
-- Bushman, the international fashion retailer; and
-- Inglot, the Polish cosmetic retailer; and
o International brands represented include Carrefour, Zara,
H&M, Bershka, Apple, Adidas, Nike, Puma and McDonalds, some of
them appearing for the first time in the local market.
-- Continuing progress at Orchid Gardens Varna:
o construction works at Orchid Gardens are expected to be
finished by the end of November 2012, occupancy permission expected
by the end of the year.
3. PORTFOLIO SUMMARY AS AT 30 JUNE 2012
EUR millions
Projects Grand Orchid Orchid Sofia Land Golden Business Total
L/V Mall Gardens Hills Hills Plts Yavor Park
ratio Varna Varna Varna Hotel Varna
(++) (++) (+)
Value 137 31.5 4.2 0.8 10.8 5.7 2.2 192.2
Short
term
bank
debt 2.4 8.8 0.92 - - - 3.1 15.22
Long
term
bank
debt 92.9 10.5 - - - - - 103.4
Total
debt 95.3 19.3 0.92 0 0 0 3.1 118.62
Net
Asset
Value 41.7 12.2 3.28 0.8 10.8 5.7 -0.90% 73.58
L/V
ratio 69.56% 61.20% 21.90% 0% 0% 0% 141% 67.71%
+ Construction halted due to financial crises
++ Cross collateral between the Bulgarian SPV's
The table above represents the value of the Group's principal
assets netted against liabilities to financing banks. All values
stated are based upon independent valuation reports save for Orchid
Hill Varna, Orchid Gardens Varna (save for the retail units
therein) and the Golden Yavor Hotel, whose values above are book
values.
The Group will continue to focus its efforts in the near future
on progressing the construction of its existing development, Orchid
Gardens Varna, letting the retail space and selling the available
apartments and offices following the completion of this project. In
addition the Group will focus on completing the letting of the
retail space in the Grand Mall, selling the remaining residential
units in Orchid Hills Varna and Orchid Hills Sofia. Furthermore,
the Board remains committed to its strategy to realise certain
assets within the Group, which will be used to maximise shareholder
value.
As stated in the past, due to the economic downturn and the lack
of funding available, the Group has narrowed its on-going
developments to three projects, which the Board believes have the
best prospects in terms of market demand and financing
availability. These projects are: the Grand Mall retail centre, the
Orchid Gardens Varna multi-use commercial and residential
development and the Orchid Hills Varna residential complex. The
Group's management will continue to focus their efforts to complete
successfully the Group's current projects under construction with a
plan to realise these assets over the course of the next two years.
Proceeds will be used to both strengthen the Group's cash position
and to return cash to Shareholders.
4. FINANCIAL REVIEW
The Group's net loss for the six months ended 30 June 2012 was
EUR3,029,000 (2011 H1: profit EUR2,060,000) (2011 FY: loss
EUR182,000). The significant change is attributable to the loss
from sale of apartments in the Group's residential projects (mainly
the Orchid Hills Varna project) in the amount of EUR0.6 million and
the decrease in fair value of the Grand Mall Varna (fair value
decrease of EUR0.9 million) and of the Orchid Gardens Varna project
(fair value decrease of EUR0.5 million) due to the revaluation of
these two assets by MBL, an independent specialist real estate
advisory firm which is part of the CBRE Affiliate Network. The main
factors, which have influenced these fair value adjustments are the
additional fit out works executed during the period for occupying
new shops in the Mall (mainly for H&M) and construction works
in the Orchid Gardens Varna project.
The Group recognises revenue and costs from the sale of
residential units on transfer of ownership. The Group recognises
rental income based on the straight-line method in accordance with
IAS 17. The revenue of EUR5.9 million (2011 H1: EUR5.0 million),
(2011 FY: EUR12.3 million) mainly consists of revenues from the
rent and operation of the Grand Mall (EUR4.2 million) and from
sales of completed apartment units in the Orchid Hills Sofia and
the Orchid Hills Varna residential projects (EUR1.5 million).
The majority of the operating expenses are attributable to the
costs of apartment units sold in the Orchid Hills Sofia and the
Orchid Hills Varna residential projects which increased to EUR1.8
million (H1 2011: EUR1.65 million) ( 2011 FY: EUR3.2 million) and
the operational costs of the Grand Mall. The level of hired
services expenses remained unchanged during the first half of 2012
amounting to EUR1.1 million (2011 H1: EUR1.1) (2011 FY: EUR2.4
million) as a result of efforts to cut and optimise the operational
cost of the Group despite of increase in the Mall's activity volume
during the period.
As at 30 June 2012, the Group's net asset value stood at EUR71.4
million (2011 H1: EUR75.3 million) (2011 FY: EUR73.1 million)
equating to a net asset value per share of EUR0.74 (2011 H1:
EUR0.85), (2011 FY: EUR0.83), equating to approximately GBP0.61 per
Ordinary Share as at 30 June 2012.
Non-current assets of EUR167.2 million increased from EUR166.9
million at the end of 2011 mainly due to increase in the deferred
tax assets of the Group and a small increase in fair value of the
Grand Mall. Current assets of EUR36.0 million (2011: EUR38.7
million) include mainly residential projects under development and
inventory of residential units for sale of EUR29.5 million (2011:
EUR29.7 million) that are recorded at the lower of cost and net
realisable value.
Long-term borrowing liabilities have increased to EUR103.4
million (2011: EUR102.6 million) as a result of borrowing primarily
in relation to the Orchid Gardens Varna project. Short-term
borrowing facilities of EUR2.1 million were repaid during the
period. Short-term borrowing liabilities of EUR15.3 million consist
mainly of credit facilities which should be repaid during the 12
month period to 30 June 2013 as follows:
-- EUR0.9 million by December 2012 (Orchid Hills Varna);
-- EUR1.2 million by the end of 2012 and EUR7.2 million by the
end of June 2012 (Orchid Gardens Varna) (amended as set out below),
EUR0.5 million of which has been deferred until September 2013
following new terms agreed with the financing bank;
-- EUR2.4 million in quarterly payments of EUR0.58 million,
EUR0.59 million, EUR0.60 million and EUR0.61 million during the
second half of 2012 and first half of 2013 (Grand Mall - Orchid
Multi Use Complex Varna) the amount of EUR2.4 million was deferred
for payment until June 2015 following new agreed terms with the
financing banks; and
-- EUR3.1 million overdue payment since October 2011 (Orchid
Centre Varna), currently being negotiated.
All of the Group's major projects under development are financed
by committed facilities at the project level. During the six month
period to 30 June 2012 (and as reflected above), the Group
finalised the renegotiation and signed an annex rescheduling the
repayment of the credit facility relating to Orchid Gardens Varna.
The repayment terms of the loan principal have been postponed to be
paid in instalments as follows:
-- EUR1.2 million by the end of November 2012;
-- EUR2.1 million by March 2013;
-- EUR5.1 million by June 2013;
-- EUR5.7 million by December 2013;
-- EUR5.7 million by June 2014; and
-- EUR1.6 million which will be paid in 38 monthly payments starting from July 2014.
The revolving VAT facility should be repaid by means of funds
from refunded VAT and it is expected that any sums due will be
repaid by 31 December 2012.
Since 30 June 2012, the Group has negotiated the credit facility
relating to Orchid Gardens Varna as follows:
-- EUR1.1 million to be paid by the end of January 2013;
-- EUR2.2 million to be paid by June 2013;
-- EUR5.0 million to be paid by September 2013;
-- EUR5.6 million to be paid by December 2013;
-- EUR5.7 million to be paid by June 2014; and
-- EUR1.7 million which will be paid in 40 instalments starting from July 2014 till August 2017.
The status of the borrowings of the Group as at 30 June 2012 can
be presented as follows:
Project Loan Financing 1 year 2 - 5 More Total
years than
5 years
EUR'000 EUR'000 EUR'000 EUR'000
Orchid Multi-Complex
Varna EOOD 2,399 11,355 81,580 95,334
Orchid Gardens
Varna EOOD 8,873 10,467 - 19,340
Orchid Center Varna
EOOD* 3,106 - - 3,106
Orchid Seaside
Apartments EOOD** 925 - - 925
------------ ------------- ------------ -------------
Total borrowings 15,303 21,822 81,580 118,705
------------ ------------- ------------ -------------
* The Group is presently renegotiating the repayment terms of
this short-term loan
** The project name for this Subsidary is Orchid Hills Varna
The status of the borrowings of the Group as of 16 November
2012, the last practicable date prior to the publication of the
Shareholder Circular can be presented as follows:
Project Loan Financing 1 year 2 - 5 More Total
years than
5 years
EUR'000 EUR'000 EUR'000 EUR'000
Orchid Multi-Complex
Varna EOOD - 13,754 81,580 95,334
Orchid Gardens
Varna EOOD 8,840 10,467 - 19,340
Orchid Center Varna
EOOD* 3,106 - - 3,106
Orchid Seaside
Apartments EOOD** 867 - - 867
-------- -------- --------- --------
Total borrowings 12,813 24,715 81,580 119,108
-------- -------- --------- --------
On 15 February 2012, the Group agreed with its executive
directors (via their management company Bellport) to postpone the
payment of EUR0.6 million relating to Directors' bonus payments
which arose in
2009. This amount is classified as a long-term liability and
bears 3 per cent. interest on an annual base. The amount is due to
be paid by the end of December 2013.
5. CURRENT TRADING
As previously stated the economic environment in which the Group
is operating in Bulgaria remains difficult and, with the continuing
crisis in the Eurozone, is likely to remain volatile for the
foreseeable future. The recession and lack of available credit have
had a negative effect on the ability of both local and
international retailers to expand and the Group estimates that this
climate will continue for the foreseeable future. Notwithstanding
the economic backdrop, the Group continues to focus on selling its
stock of remaining apartments. In addition, the completion of
Orchid Gardens Varna, which was delayed significantly during 2011,
is expected to occur before 31 December 2012.
At the February 2012 EGM, the Company's Articles were amended,
by the insertion of a new article 141 A, to include a provision
that an extraordinary general meeting will be called on or before
31 December 2013 where resolutions will be put to shareholders to
allow them to decide whether the Company should realise its assets
at that time, defer such decision for a year, or continue in its
current form. The Concert Party agreed that during the term of the
management agreement in place with the Group, they it would abstain
from voting on such resolutions.
In conjunction with the above, the Board remains committed to
closing the large gap between the Group's market capitalisation and
net asset value, in part through delivering on operational and
financial milestones and in part through improving the
understanding of Orchid's business and prospects.
The Directors believe that the Group would be able to continue
to operate within the proposed levels of funding in the immediate
and medium term. However, the quantum of free cash flow, which may
be generated in the medium term from the sales of apartments and
other assets, remains uncertain. The Directors have further
considered the Group's cash flow forecasts together with the
associated judgments and the uncertainties related to the
forecasted volumes of sales of residential units from the projects
Orchid Varna Hills and Orchid Gardens Varna, the rescheduling of
the loan payments in the subsidiary Orchid Center Varna EOOD.
It should be noted that the Group's forecasts include the
following assumptions:
-- the Group will be able to raise funds in the minimum amount
of GBP1.36 million (approximately EUR1.7 million) pursuant to the
Open Offer and to remove certain existing liabilities through the
Capitalisation;
-- the Group will be able to generate sufficient funds from the
sale of its residential units during the next 12 months or will be
able to restructure or refinance part of the future principal
payments on amounts due under loans (if sales of residential units
do not generate sufficient funds) in order to repay or defer (as
appropriate) debt in relation to Orchid Gardens Varna EOOD
(approximately EUR8.9 million) and in relation to Orchid Seaside
Apartments EOOD (approximately EUR0.9 million);
-- the Group will successfully renegotiate the repayment terms
of its short term loan of EUR3.1 million in the subsidiary Orchid
Center Varna EOOD; and
-- certain payments to suppliers and contractors can be postponed or renegotiated.
The matters mentioned above indicate the existence of a material
uncertainty that may cast significant doubt about the ability of
certain subsidiaries of the Group to continue as a going concern.
After reviewing the Group's budgets, analysing the possibilities of
selling certain of the Group's property or renegotiating payment
terms with suppliers and considering the assumptions and
uncertainties listed above, the Board has a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, it is expected
that, when the Interim Results are published, the financial
statements therein will have been prepared on a going concern
basis.
CURRENT LITIGATION
Orchid Sofia Hills EOOD ("OSH"), a wholly owned subsidiary of
the Company, is engaged in litigation with Consortium Remi Group
JCS ("Consortium Remi"), the general building contractor for the
Group's Orchid Hills development. The litigation, initiated in 2010
by Consortium Remi, related to the late payment by OSH of certain
invoices. The Sofia City Court found in favour of Consortium Remi
and awarded an amount of EUR213,000, of which EUR36,211 was seized
from the bank accounts of OSH. Details in relation to the court's
ruling have previously been announced. Sofia City Court has allowed
Consortium Remi to appoint a new bailiff in relation to the
outstanding claim and the bailiff, on behalf of Consortium Remi,
has sought to seize 17 apartments in Orchid Sofia Hills in order to
recover the amount of the debt outstanding; as five had already
been sold, the bailiff has taken possession of the remaining 12
apartments held for sale.
Orchid Management Bulgaria EOOD ("OMB") (also a wholly owned
subsidiary of the Company) which is owed the amount of 5,000
Bulgarian Lev by OSH under a promissory note has taken steps to
block the sale of the 12 apartments in respect of which the bailiff
has taken possession and has sought to seize a plot of land on the
Orchid Sofia Hills complex.
Consortium Remi filed a further claim against OSH in 2011 in
which it is seeking a declaration from the court that OSH is in
insolvency due to non-payment of 380,000 Bulgarian Lev outstanding
under a concluded construction contract. The first court hearing in
relation to this matter is scheduled for 23 November 2012 but may
be rescheduled to a later date.
OSH has initiated a counter-claim against Consortium Remi in
respect of low quality execution of works. The claim is for 100,000
Bulgarian Lev although there is a possibility that the claim may be
increased, based on estimated damages, up to 700,000 Bulgarian Lev.
No date has yet been scheduled for a court hearing.
Ends.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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