Orco Property Group: Ten years business plan

le
0

Ten years business plan

The main guiding principle of OPG’s strategy over the coming years involve generating the short and medium-term investment capacity required to create and realize the long-term value required for settlement of its liabilities.

1. Objectives

The Company’s chief objectives business plan are:

In the short term, to complete its profitable projects in order to generate rapid cash;In the short to medium term, to take advantage of the progressive thaw in the institutional property markets to sell non-strategic or mature assets, particularly in Germany, and to undertake the investments required for the plan’s terminal value creation and realization;In the short to long term, to generate sufficient cash inflows to service the rescheduled debtIn the long term, to position the Company for further growth, while providing superior shareholder returns

Assuming the successful implementation of this business plan, the Company shall have:

Restructured its balance sheet though debt repayment and further capital increase Managed its risk profile through portfolio and geographical diversificationSecured a strong revenue stream, which is sustainable throughout various market cyclesFully capitalized on its potential (highly-skilled and experienced team, excellent market exposure, significant landholdings, strong rental portfolio)

2 Business plan assumptions

OPG, the Group’s holding company, does not directly own any real estate assets, which are instead owned by dedicated subsidiaries. However, all the cash derived from the subsidiaries’ transactions is centralized at OPG level, which also distributes it among its subsidiaries. This is why this business plan incorporates all cash flow forecasts of wholly owned subsidiaries. Financial flows between the Company and its not wholly owned subsidiaries or partnerships which are recorded are, for cash outflows, the funding requirements, or for cash inflows, distributions (repayment of interest , dividends and disposals flow).

The business plan assumes:

The valorization of existing assets and existing land as well as the development of new projects to create medium and long-term value, thus ensuring repayment in full of the bond debt;

The implementation of a conservative strategy which stabilizes the Group on its land business platform and generates recurring income;

The adjustment of the maturity of the Group’s - primarily bond-based - liabilities to the Group income expectations which have been postponed by the crisis.

The Company’s business plan thus assumes continuing generating investment capacity whose equity flows, subject to the deferral that alone can ensure the settlement of its liabilities. The required investment capacity can be fuelled by:

· The recurring net income derived from the Group’s investment property,

· The margin earned on residential and commercial property development,

· The sale of mature investment assets,

· Repayment of the funds granted by OPG to its partners (AIG, GE, Molcom etc.) and receipt of dividends (from ORCO Germany, Molcom etc.).

The above investment capacity may eventually be reinforced by equity contributions (not included in the present business plan):

· A share capital increase subscribed to by one or more new investor(s) and/or by the existing shareholders. In this respect, it should be noted that ORCO has considerable experience of raising capital in the market,

· Exercise of the existing share subscription options, whether spontaneously or under the Company’s impetus.

Raising additional capital would be likely to enable – among others - the acquisition of new land reserves or new investment properties with upside, paving the way for greater prospects of growth for the development business than those forecasted in the business plan.

3 Implementation

The business plan is based on two main pillars:

- Commercial and Investment Properties: consists in the acquisition of existing assets with value-added potential ie high vacancy ratios, structural works requirements, and/or lease engineering potential. A full investment cycle is divided into three parts (i) acquisition : 2-3 years (ii) active asset management : 3-4 years (iii) maturity when 10-15% of the portfolio is disposed every year to redeploy capital in higher yielding and non-mature projects : 2-3 years;

- Development: consists in acquisition of land, obtaining all administrative documents needed, construction, letting and /or sale of residential or commercial properties.

The business plan will be implemented in three successive phases between 2010 and 2020.

Phase 1: 2010- 2013:

Finalization of current projects (both commercial and residential) and dynamic management of non-mature assets (reduction of vacancy, structural works, lease engineering) ;

Sale of mature assets of the rental portfolio;

Orderly sale of non-core activities;

Sale of current residential stock;

Investment of free cash in (i) development of the existing (mostly residential) land bank (ii) creation of a new Commercial and Investment Properties portfolio.

Phase 2: 2014- 2016:

Commercial and Investment Properties: reduction of the investment intensity to a lower long-term average in order to concentrate on asset management of assets acquired over the course of the previous phase. First sale opportunities (up to 10% of the portfolio) for assets acquired in 2010-2013.

Residential and commercial development: Overlapping succession of investments and sale of stocks on short term cycles (3 years for residential, 3-4 years for commercial). Acquisition of new land bank as the existing reserve was been developed in the previous cycle;

Bubny: investments in the planning authorization process as well as infrastructure works and first residential and office phases.

Phase 3: 2017-2020:

Commercial and Investment Properties: maturity/arbitrage/ sale phase for the stock of assets acquired in 2010-2015 (up to 15%) for years 2018-2020. Selective re-investments of proceeds in new buildings to be managed;

Residential and commercial development : same succession of 3-4 years phase of investment-development-sale as the previous phase;

Bubny reaches its full potential with the combined effect of (i) the investments of the previous cycles that created the offer for 2017-2020 (ii) continued investments in Office, retail and residential, land development projects either directly or by the means of joint ventures.

4. Estimated cashflow

The debt rescheduling plan

The debt rescheduling plan is a key component of the Group’s overall restructuring plan. Under the sauvegarde proceedings, the Commercial Court has the ability to decide at its sole discretion whether to approve a rescheduling of liabilities up to 10 years.

The financial restructuring plan involves rescheduling OPG’s liabilities – essentially OPG bonds - so as to enable the Group to generate the investment capacity required to pursue – cycle by cycle – the value creation needed for it to repay its creditors in full.

The company’s debt structure has two major components: debt to bondholders and debt to other creditors. The sections below set forth the intended repayment approach for both categories, including the conditions and timeline.

1 Debt to bondholders

Between 2005 and 2007, OPG issued several bonds listed on various markets (referred to as "Bonds"). The holders of these bonds ("bondholders") represent the most important creditors of OPG.

During the preparation of the debt rescheduling proposal plan, the Company has been led to calculate the maximum amount that could be due to bondholders, including all reimbursements premium, 10 years of interests, no equitization or payment through the BSAR. This maximum bond liability that would be due over 10 years would amount to EUR 614.278.348,02

Type of bond

Aggregate principal amount

Bond issue 18 November 2005

50 272 605,30 EUR

Bond issue 3 February 2006

300 000 000,00 CZK (10 991 024,00 EUR)

Bond issue 30 June 2005

24 169 193,39 EUR

Bond issue 17 May 2006

149 999 928,00 EUR

Bond issue 22 March 2007

175 000 461,60 EUR

NB. OG BSAR issue, issued by Orco Germany SA, is not part of the Sauvegarde restructuring limited to liabilities of OPG SA only.

The bonds are divided into two categories: Bonds with access to OPG equity and bonds without access to OPG capital.

Bonds without access to OPG equity

Bond issue: 6 January 2006 (" 2011 Bonds")

Floating Rate Bonds

Issue date: 3 February 2006

Aggregate principal amount: CZK 300.000.000,00 (EUR 10.991.024,00 according to the EUR/CZK exchange rate applicable as of March 25, 2009)

Total recognized liability: EUR 16.451.846,62

Maturity date: 3 February 2011

Listed in bearer form on the secondary market of "Prague Stock Exchange" (ISIN: CZ0000000195)

Representative : Ceska Sporitelna

Applicable jurisdiction : Czech

Bond issue: 30 June 2005 ("Bonds 2012")

Convertible bonds into Suncani Hvar shares

Issue date: 30 June 2005

Aggregate principal amount: EUR 24.169.193,39

Total recognized liability: EUR 38.796.339,62

Maturity date: 30 juin 2012

Listed in bearer form on Euro MTF, Luxembourg (ISIN : XS0223586420)

Representative : Maître Benoît E. Diouf

Applicable jurisdiction: Luxembourg

Bonds providing access to OPG equity

Bond issue : 14 November 2005 ("Bonds 2010")

Bonds with warrants attached.

Issue date: 18 November 2005

Aggregate principal amount: EUR 50.272.605,30

Total recognized liability: EUR 83.538.551,43

Maturity date: 18 novembre 2010

Listed in nominative form on Eurolist market of Euronext Paris SA (ISIN: FR0010249599)

Representative : Mr Luc Leroi, replacing Mrs. Bertrand-Leroi

Applicable jurisdiction: Luxembourg

Bond issue : 17 May 2006 ("Bonds 2013")

Convertible bonds into OPG shares

Issue date: 1 June 2006

Aggregate principal amount: EUR 149.999.928,00

Total recognized liability: EUR 222.919.184,32

Maturity date: 31 mai 2013

Each bond was issued with 10 warrants attached; each warrant allowed conversion in exchange of one OPG share (BSA 2012.

These warrants are listed on Euronext Paris (ISIN: FR 0010333302)

Representative : Mr Luc Leroi, replacing Mrs. Bertrand-Leroi

Applicable jurisdiction: Luxembourg

Bond issue : 22 March 2007 ( "Bonds 2014")

Bonds providing access to OPG capital based on attached warrants

Issue date : 28 March 2007

Aggregate principal amount: EUR 175.000.461,60

Total recognized liability: EUR 252.571.926,03

Maturity date: 28 mars 2014

Listed in nominative form on Euronext Bruxelles (ISIN : XS0291838992)

Warrants : each bond was issued with 15 warrants attached, each of them allowing conversion in exchange of one OPG share ("BSA 2014").

These warrants are listed on Euronext Bruxelles and Euronext Paris (ISIN: XS0290764728 and XSO291838992).

Instrument comprising one bond and five warrants are listed under ISIN XS0291840626.

Representative : Mr Luc Leroi, replacing Mrs. Bertrand-Leroi

Applicable jurisdiction: Luxembourg

2 Debt to other creditors

The Company’s non-bond creditors have submitted their claims to the creditor representative appointed by the Paris Commercial Court (subject to verification and validation) for a total debt of EUR 862.6 Million, mainly comprising contingent liabilities in respect of certain commitments of subsidiaries guaranteed by OPG and (residually) contingent liabilities in respect of the share subscription options maturing in 2014, as well as intercompany liabilities.

Creditors under guarantees provided by OPG

The Group’s property projects are undertaken by dedicated subsidiaries which have recourse to bank loans to finance the projects. OPG has guaranteed certain of its subsidiaries’ commitments under such loans. Certain creditors of OPG’s subsidiaries have therefore lodged claims relating to the potential application of these guarantees including pledges of certain of the subsidiaries’ shares. Subject to verification, total liabilities of EUR 710 Million are involved of which EUR 568 Million have been challenged.

Creditors in respect of the share subscription options maturing in 2014

The share subscription options maturing in 2014 issued by OPG on the basis of the prospectuses registered by the Commission de Surveillance du Secteur Financier on 22 March 2007 and 22 October 2007 (ISIN XS0290764728) could result in a liability for the Company in the event of any change in its control. Subject to verification, total liabilities of EUR 0.7 Million are involved.

Intercompany creditors

Subject to verification and validation, they represent total liabilities of EUR 151.7 Million. The maturity of these loans is posterior to the duration of the plan de sauvegarde.

3 Summary of debt restructuring proposals presented to creditors throughout the saveguard period

Since the opening of the Sauvegarde period, the Company has aimed to restructure its bond debt by engaging in talks with the largest possible number of Bondholders. The Company appreciated the need to find a middle ground between bondholders’ request and needs and proposed a mixed solution, consisting in an exchange of existing bonds for new convertible bond, new shares and new warrants.

This solution was proposed and rejected by the General Assembly of Bondholders held on the September 15, 2009 in Paris and the observation period was then subsequently extended for 6 additional months.

The major reason for rejecting the first proposed solution seemed to be the perceived compulsory entry to the Capital for Bondholders. That is why it has been contemplated to entice Bondholders could benefit from the “claims compensations” (pursuant to Bonds 2010 and Bonds 2014 conditions) which allow Bonds to be immediately due and used for exercise of warrants. This proposal had the advantage of being implementable on an individual basis, voluntary and therefore not binding. In January 2010, a majority of Bondholders of bonds 2010 and 2014 rejected the proposed resolution, thereby constraining the Bondholders, who had expressed the will, the ability to use their bonds for the exercise of warrants shares, which would have reduced OPG debt.

The Company has been prompted to develop and propose to its creditors, under the terms of the French Commercial Rules (“Code du Commerce”) a draft plan based on, the term out of its debt repayment at a pace which corresponds to its business and market cycles, which are intrinsically tied to long cycles needed to create value in real estate.

4 Debt rescheduling as part of the Company’s business plan

The following debt rescheduling proposal is subject to the Paris Commercial Court Approval. An audience is scheduled to take place by end of June 2010.

Principle

It is proposed to repay 100% of the registered claims, subject to verification, over ten years (based on the following schedule) with effect from the first anniversary of the judgment materialising the Plan:

Year

1

2

3

4

5

% of the total liability

2%

5%

5%

5%

5%

Year

6

7

8

9

10

% of the total liability

5%

10%

14%

20%

29%

This repayment schedule is consistent with the timing of the Group’s property investment and development projects which the economic crisis has delayed well beyond the Group’s main bond maturities of 2013-2014.

The schedule is such as to cover the Group’s maximum cash outflows based on the following assumptions:

· The maximum liability under each bond issue, inclusive of bonds’ nominal amounts, repayment premium and all interest payable at the date of the judgment materialising the Plan and accruing throughout the duration of the Plan, assuming that no bonds with equity access are converted or surrendered in payment of the exercise price of share subscription options;

The maximum amount of the guarantees provided by OPG as surety for its subsidiaries’ commitments, estimated on the basis of the difference between the latest market value of each applicable property less a discount of 7%, plus 3% of selling costs (brokers, lawyers) and the balance remaining due under the corresponding guaranteed loan (see the table below).

It is important to stress that, at the date of the judgment materializing the Plan, the average weighted maturity of the Group’s bond issues as a whole will amount to three years.

Repayment of the Bond debt in line with the Plan de Sauvegarde

Bonds providing no equity access (repayable in 2011 and 2012)

The bonds repayable in 2011 and 2012 do not provide access to OPG’s share capital. The amount repayable in respect of these bonds is thus subject to no uncertainty and the annual amounts repayable under the Plan have been calculated on the basis of a recognized liability comprising the sum of the following items:

•The principal outstanding on the date of the judgment materializing the Plan;

•The interest payable at the date of the judgment materializing the Plan;

•All interest accruing throughout the duration of the Plan (calculated each year after adjustment for the progressive repayment of principal under the Plan)

Repayment Schedule of Bond 2011

Repayment Schedule of Bond 2012

Bonds providing equity access (repayable in 2010, 2013 and 2014)

The bonds issued in conjunction with share subscription options (repayable in 2010 and 2014)

The bonds repayable in 2010 and 2014 provide access to OPG’s share capital via the option (provided for in the issue contract) of using the bonds to pay the share subscription price (by offset) in the event of exercise of the Company’s share subscription options maturing in 2012 or 2014. The amounts of interest accruing after the date of offset, and of repayment premium, will thus remain uncertain until the date of expiry of the share subscription options maturing in 2012 and 2014 (namely 31 December 2019). Further, the repayment premium for the bond issue maturing in 2010 will only be recognized as a liability if OPG’s share price on 18 November 2010 proves lower than the exercise price for the share subscription options maturing in 2012.

Payments under the Plan have thus been calculated, for the bonds maturing in 2010 and 2014, on the basis of the recognized and certain liability for each year comprising the sum of the following items:

•The principal outstanding on the date of the judgment materializing the Plan;

•The interest payable at the date of the judgment materializing the Plan;

•All interest accruing from the date of the judgment materializing the Plan and due at the end of each applicable year;

•For the last year of the Plan, the repayment premium

The amount of recognized and certain liability thus increases year by year, for the bonds not subject to offset, given the continuing accrual of interest in favor of bondholders whose bonds remain outstanding (i.e. have not been offset).

On the assumption that no such offset of the bonds maturing in 2010 and 2014 takes place throughout the duration of the Plan, the cash outflows for settlement of the applicable liability may be calculated as follows

Repayment Schedule of Bond 2010

Repayment Schedule of Bond 2014

The convertible bonds maturing in 2013

The bonds maturing in 2013 provide access to OPG’s share capital via a share conversion option provided for in the issue contract. The amounts of interest accruing after the date of conversion and of repayment premium, will thus remain uncertain until the date of expiry of the contractual conversion period (namely 15 May 2013).

Basis of determination of the liabilities payable until 15 May 2013 inclusive

Payments under the Plan have thus been calculated until 15 May 2013, for the bond issue maturing in 2013, on the basis of the recognized and certain liability for each year (with effect from the first year of the Plan) comprising the sum of the following items:

•The principal outstanding on the date of the judgment materializing the Plan;

•The interest payable at the date of the judgment materializing the Plan;

•All interest accruing from the date of the judgment materializing the Plan and due at the end of each applicable year.

The amount of recognized and certain liability thus evolves year by year, until 15 May 2013, based on the number of any bonds converted. Adjustments will be made each year, for payments made prior to 15 May 2013, in favor of bondholders not exercising their conversion rights and in order to recognize the ensuing full amount of their recognized and certain liability.

Basis of determination of the liabilities payable with effect from 15 May 2013

With effect from 15 May 2013, the amount of liability under the bonds maturing in 2013 is no longer subject to uncertainty and therefore reflects both the repayment premium and full amount of interest remaining to be accrued on the bonds that remain outstanding. From that date, the Plan payments have been calculated on the basis of a bond liability comprising the sum of the following items

•The principal outstanding on the date of the judgment materializing the Plan;

•The interest payable at the date of the judgment materializing the Plan;

•The sum of interest accruing from the date of the judgment materializing the Plan and until 15 May 2013, and accruing until the final year of the Plan (calculated for each applicable year on the outstanding principal after taking account of prior repayments under the Plan);

•The repayment premium

On the assumption that no offset of the bonds maturing in 2013 takes place throughout the duration of the Plan, the cash outflows for settlement of the applicable liability may be calculated as follows

Repayment Schedule of Bond 2013

Modification of the bases of equity access

As provided for by section L. 228-106 of the French code of commercial law, the Plan requires modification of the bond issue agreements in order to adjust the offset or conversion ratios applicable to the bonds maturing in 2010, 2013 and 2014 in line with the progressive repayment of the nominal amount of the bonds scheduled under the Plan.

Special cases

Creditors benefiting from guarantees provided by OPG

The creditors benefiting from guarantees provided by OPG only have a conditional right to payment for so long as the debt of OPG’s subsidiaries towards them has not become due. In the event of such a creditor claiming payment, during the period of performance of the Plan, of any sum become due by the main debtor and thereby by OPG, the said creditor would be eligible for the benefit of the Plan with effect from the applicable due date of payment.

Bearers of the share subscription options maturing in 2014

Certain bearers of the share subscription options maturing in 2014 have declared contingent receivables based on compensation that might be due in the event of any change in the Company’s control.

But no such compensation is payable until any change in the Company’s control has become effective. In the event of any bearer of the share subscription options maturing in 2014 claiming payment, during the period of performance of the Plan, of any sum become due in this respect, the said creditor would be eligible for the benefit of the Plan with effect from the applicable due date of payment.

Intercompany liabilities

Loans to OPG by subsidiaries are to be reimbursed in fine after the maturity of the Plan. The final repayment date of these loans is typically the 31st of December 2020.

Risk analysis, approval and materialization of the Plan

Risk analysis

The Board of Directors estimates that a rescheduling of its debt is highly probable within the safeguard framework.

The ‘circularisation’ (i.e. the written submission for consideration to creditors by the Court-appointed Creditor Representative ) of proposals to creditors might lead to a negative opinion of the majority of the Creditors about the Company proposals. However the ‘circularisation’ is consultative only, and the Court is able to judge a rescheduling without approval from creditors.

The above presented amortization schedules might be modified by the Paris Commercial Court, provided that the payment of annuities is possible under the Business Plan.

While deemed extremely unlikely given the financial situation of the Company, the quality of its restructuring plan and business plan, reviewed by the independent consultant Grant Thornton in Paris, the Paris Commercial Court could decide to send into ‘redressement judiciaire’ whereby the Court appoint a Receiver to restructure, sell or liquidate the Company.

It is also possible that the Plan could be adopted by the Tribunal and later challenged at Court by some creditors.

Approval and materialization of the Plan

The approval of the draft Plan, and the decision of the Paris Commercial Court to materialize the Recovery Plan, will have the effect of prohibiting OPG’s creditors from demanding the application of any stipulation contained in any agreements or undertakings, whether oral or written, to which they may be a party and relating to the payment of OPG’s liabilities, since all of OPG’s creditors will be bound to respect the provisions of the Recovery Plan.


Valeur associée
  Libellé Bourse Dernier Var. Vol.
Vous devez être membre pour ajouter des commentaires.
Devenez membre, ou connectez-vous.
Aucun commentaire n'est disponible pour l'instant