TIDMPLAZ
RNS Number : 7934K
Plaza Centers N.V.
30 August 2019
30 August 2019
PLAZA CENTERS N.V.
RESULTS FOR THE SIX MONTHSED 30 JUNE 2019
Plaza Centers N.V. ("Plaza" / "Company" / "Group") today
announces its results for the six months ended 30 June 2019. The
below results have not been audited nor reviewed by auditor.
Financial highlights:
-- Reduction in total assets to EUR60 million as a result of the
Company's portfolio repositioning and deleveraging strategy
(December 31, 2018: EUR62 million)
-- Book value of the Company's Trading properties decrease by
EUR0.5 million to EUR42.1 million over the period, due to disposal
(land plot in Poland) in line with the restructuring plan and
increase of the value of the plot land in Miercurea Ciuc, Romania
by EUR0.5 million
-- Consolidated cash position as at June 30, 2019 decreased to
circa EUR0.6 million (December 31, 2018: EUR1.4 million) and
current cash position of circa EUR1.1 million
-- Revenue from disposal of trading properties totalled EUR0.9
million (June 30, 2018: EUR0.2 million) in line with the Company's
disposal program
-- EUR0.4 million loss recorded at an operating level (June 30,
2018: EUR5.5 million) including partial reversal of write down
which increase the trading properties value by EUR0.5 million and
significant decrease in administrative expenses
-- Administrative expenses reduced to EUR0.7 million in 2019 due
to cost cutting of professional services and manpower (June 30,
2018: EUR1.5 million)
-- Recorded loss of EUR10.9 million (June 30, 2018: EUR9.8
million), mainly due to finance expenses on bonds
-- Basic and diluted loss per share of EUR1.59 (30 June 2018: loss per share of EUR1.43)
Material events during the period:
Pre-Agreement for the sale of a Plot of Land in Brasov,
Romania:
On February 5, 2019 the Company signed a Pre-Agreement for the
sale of a plot in Brasov, Romania for a total gross amount of EUR
620,000 (the "Transaction). The consummation of the Transaction
(which will take place not later than January 15, 2020) is subject
to the fulfilment of certain conditions, including, inter alia:
(i) the former financing bank of the Project did not exercise
its right to purchase the Property until December 6, 2019; (ii)
successful conclusion by the potential purchaser of its due
diligence investigations; and (iii) the execution of definitive
agreement.
During the period commencing on the date of the execution of the
Pre-Agreement and ending on the earlier of: (i) January 15, 2020,
or (ii) the date of the termination of the Pre-Agreement, the
Company and its representatives have undertaken to refrain from
negotiating with any other third party other than the Purchaser
(and other than the bank as mentioned above) for the purpose of
selling its Plot of land.
As of the date hereof, there can be no certainty that a
definitive agreement will be signed and/or that the Transaction
will be consummated.
Sale agreement of plot in Bangalore, India:
In March, 2008 Elbit Plaza India Real Estate Holdings Limited (a
subsidiary held by the Company (50%) and Elbit Imaging ltd.(50%))
("EPI") entered into a share subscription and framework agreement
(the "Agreement"), with a third-party local developer (the
"Partner"), and a wholly owned Indian subsidiary of EPI which was
designated for this purpose ("SPV"), to acquire together with the
Partner, through the SPV, up to 440 acres of land in Bangalore,
India (the "Project") in certain phases as set forth in the
Agreement. As of June 30, 2019, the Partner has surrendered sale
deeds to the SPV for approximately 54 acres (the "Plot"). In
addition, under the Agreement the Partner has also been granted
with 10% undivided interest in the Plot and have also signed a
Joint Development Agreement with the SPV in respect of the
Plot.
On December 2, 2015 EPI has signed an agreement to sell 100% of
its interest in the SPV to the Partner (the "Sale Agreement"). The
total consideration upon completion of the transaction was INR 321
crores (approximately EUR 40.2 million) which should have been paid
no later than September 30, 2016 (" Long Stop Date"). On November
15, 2016, the Partner informed EPI that it will not be able to
execute the advance payments.
As a result of the foregoing, the Company has received from the
escrow agent the sale deeds in respect of additional 8.7 acres (the
"Additional Property") which has been mortgaged by the Partner in
favor of the SPV in order to secure the completion of the
transaction on the Long Stop Date. The Additional Property has not
yet been registered in favor of the SPV for cost-benefit reasons.
In addition, as per the Sale Agreement, the Company took actions in
order to get full separation from the Partner with respect to the
Plot and specifically the execution of the sale deed with respect
of the 10% undivided interest, all as agreed in the Sale
Agreement.
As a result of the failure of the Partner to complete the
transaction under the Sale Agreement and in accordance with the
provisions thereto, EPI has 100% control over the SPV and the
partner is no longer entitled to receive the 50% shareholding.
In light of the above, and after lengthy negotiations between
the parties, new understandings were formulated and the parties
signed a revised agreement that substantially altered the outline
of the original transaction (and this agreement was amended several
more times, the last of which in April 2019), and concluded that:
(i) the closing date for the transaction will be extended to
November 2019, and may be further extended to August 2020 (the
"Closing Date"). It should be clarified that the postponement of
the closing date to August 2020 is subject to receipt of payments
due by November 2019 (approximately Eur 12 million) and subject to
mutually agreed payment terms; and (ii) the consideration will be
increased to INR 356 crores (approximately Eur 45.1 million) (Plaza
part approximately Eur 22.6 million) (the "Consideration").
On July 25, 2019, the Company announced that the Partner paid
Eur 0.127 million (INR 1 crore) (Company part approximately EUR
0.063 million) and thereby having paid Euro 0.76 million (INR 6
crores) out of the approximately EUR 3.05 million (INR 24 crores)
to be paid until the end of July 2019, and that the Partner seeks
more time without committing to a schedule for payment of the
remaining amount. During august 2019 the Partner paid ad additional
INR 1 crore (EUR 0.125 million).
At this stage, there is no clarity on payment of the remaining
amount and the Company is taking necessary steps to protect its
interest.
As of this date, the Partner paid EPI approximately EUR 11.1
million (INR 87 crores) (Company part approximately EUR 5.57
million) on account of the Consideration (which EPI is entitled to
forfeit if the Partner does not close the transaction as per the
agreement), instead of a total of INR 1,100 crores (approximately
Euro 14 million) that should have been received by this date. A
total of approximately Euro 5.4 million (INR 43 crores) should be
paid in unequal monthly installments until the Closing Date; and a
total of approximately Euro 28.5 million (INR 226.6 crores) should
be paid upon Closing Date.
Regarding Environmental update on Bangalore project and the
implications on the net realisable value refer to Note 7 (1) in the
interim condensed consolidated financial statements as of June 30,
2019 and information below.
Environmental update on Bangalore project - India:
On May 4, 2016, the National Green Tribunal ("NGT"), an Indian
governmental tribunal established for dealing with cases relating
to the environment, passed general directions with respect to areas
that should be treated as "no construction zones" due to its
proximity to water reservoirs and water drains ("Order"). The
restrictions in respect of the "no construction zone" are
applicable to all construction projects.
The government of Karnataka had been directed to incorporate the
above conditions in respect of all construction projects in the
city of Bangalore including the Company's project which is adjacent
to the Varthur Lake and have several storm-water crossing it.
An appeal was filed before the Supreme Court of India against
the Order. On March 2019, the Supreme Court has set aside the Order
thereby restoring the position as it existed before the Order was
passed by NGT.
Sale agreement of plot in Chennai, India:
In July 2018, Elbit Plaza India Real Estate Holdings Limited
("EPI"), has signed a term sheet with its local partner ("Buyer"),
relating to the sale of EPI's Indian subsidiary ("SPV") that holds
74.7-acre plot in Chennai, India ("Term Sheet"). Under the terms of
the Term sheet, the Buyer shall have 60 (sixty) days to conduct due
diligence only with respect to the SPV, following which definitive
agreements, for the sale of the SPV in consideration of
approximately EUR13.2 million (INR 1,060 million, the Company's
share approximately EUR6.6 million), (subject to adjustment with
respect to the previous deposit that was placed and the existing
cash in the SPV level), shall be signed and closing shall take
place on the same day. The closing of the transaction was expected
in February 2019. As the transaction was not completed the Term
Sheet was terminated by EPI.
In February 2019 the Chennai Project SPV issued notice to the
buyer terminating the Joint Development Agreement ("JDA") due to
its failure to obtain the access road. The said termination of JDA
has been disputed by the Buyer. Therefore, the Chennai Project SPV
has initiated arbitration proceeding against the Buyer in
accordance with the Arbitration Rules of the Singapore
International Arbitration Centre, in accordance with the JDA
Agreement to protect its rights.
In June 2019, the parties have signed a share purchase agreement
("SPA") according to which:
a. The Purchaser has paid a deposit of INR 5 crores
(approximately Euro 0.625 million) in order to provide the
Purchaser with an additional six months to complete the closing,
which may be extended by another month upon payment by the
Purchaser of an additional deposit of INR of 5 crores. As of this
date, the Purchaser has deposited a total of INR 15 crores
(approximately Euro 1.875 million) (the "Deposits").
b. If the Purchaser is unable to complete the closing within the
aforesaid time periods, then the parties will mutually appoint an
international real estate consulting firm for the purpose of
identifying a third-party buyer within a period of six months.
c. If the Purchaser is unable to complete the closing and no
third-party buyer is found within the aforesaid time periods, both
the JDA and SPA shall be terminated, subject to the Purchaser
receiving the Deposits. However, the Purchaser will not be entitled
to reimbursement of expenses incurred by it under the JDA.
d. Any final price received from a third-party buyer above the
Consideration will be shared 67% by the Purchaser and 33% by EPI.
The Consideration is subject to adjustment with respect to the
Deposits and the existing cash in the SPV.
e. The Consideration will be remitted in Euro at the base rate
already agreed upon by the parties. Foreign exchange loss arising
due to change in conversion rate from INR to euro will be borne by
the Purchaser and gain will be credited to the account of EPI.
f. The parties withdraw the arbitration proceedings and other notices.
At this stage, there is no certainty that the SPA closing will
occur.
Update on the sale of the Company's indirect shareholdings in
the Dambovita Center Project ("CASA RADIO"):
On February 11, 2019 the Company signed a non-binding Letter of
Intent ("LOI") with AFI Europe N.V. (the "Purchaser", and together
with the Company, the "Parties"), for the sale of its entire
indirect shareholdings (75%) in the Casa Radio Project, for a
maximum consideration of EUR60 million, subject to the fulfilment
of certain conditions. The Parties have agreed to extend the time
period for executing the Pre-Sale agreement for the sale of the
Project until no later than July 5, 2019.
On 3 July 2019, the Company's wholly owned subsidiary Dambovita
Center Holding B.V ("Dambovita NL") as seller, the Company as
guarantor and AFI Europe as buyer entered into a pre-sale agreement
for the sale of the shareholding in Dambovita Center S.R.L
("Dambovita RO") (Pre-Sale Agreement). Below are the principal
changes made in the Agreement compared to the non-binding Letter of
Intent, as detailed in the Company announcement dated February 11,
2019:
-- The Purchaser's due diligence review period was extended to
no later than September 5, 2019, following which, subject to the
satisfaction of the condition's precedent, the Parties will have 15
months to execute a share purchase agreement (the "SPA").
-- The payment schedule was changed as follows:
Stage Payment Amount Comments
Down Payment EUR 200,000 The down payment is refundable upon
(upon satisfactory completion of due the occurrence of any of the
diligence) following (i) cancellation
of the PPP Agreement; (ii)
initiation of SPV's dissolution due
to negative equity requirements;
or (iii) the existence of elements
of criminal investigation against
the SPV beyond the information
disclosed to the Purchaser as of
this date; or, if against the SPV's
directors or employees,
in case such elements would trigger
a significant impact on the Project.
-------------------------------------- -------------------------------------
Execution of the SPA EUR 20,000,000
-------------------------------------- -------------------------------------
Issuance of Building Permit for Phase EUR 22,000,000 "Phase 1" was defined as the
1. development of any of the elements
of Component A under the PPP
Agreement, i.e., a shopping mall
and/or an office park, excluding the
development of the Public
Authority building.
-------------------------------------- -------------------------------------
Obtaining of all permits required for The balance between the Purchase The Purchase Price is defined in the
the operation of any of the Price and the payments made by that Agreement as Euro 60 million minus
components (buildings) of time (see above). 75% of the SPV's liabilities
Phase I, namely for the office computed based on the closing
building or for the shopping mall, accounts (as defined in the
including the fire permit Agreement) and excluding the
and the operation permit. inter-company
loan granted to the SPV; plus 75% of
the SPV's available cash and other
current assets as
shown in the closing accounts (as
defined in the Agreement) and minus,
if applicable, the
amount agreed upon by the Parties to
be reduced from the Purchase Price
if the 49-year lease
period shall commence before 2012.
-------------------------------------- -------------------------------------
-- The conditions precedent for the consummation of the
Transaction were broadened to include also the receipt of the
Company's shareholders' and bondholders' approval for the
Transaction as well as no material adverse change, as defined in
the Agreement.
-- The Company undertook to indemnify the Purchaser against all
losses, charges, costs and expenses (including reasonable attorney
fees) which the Purchaser sustained or incurred by reason of breach
of the warranties set forth in the Agreement.
On July 30, 2019 at the bondholders' meeting of Bonds series A
and Bonds Series B it was decided to authorize the company to enter
into an agreement and execute the transaction contained therein,
despite the Company's failure to comply with the minimum coverage
ratio (as defined in the Trust Deed) and notwithstanding the
provision of section 4.6 of the Trust Deed. In addition, an
extraordinary general meeting of the Shareholders of the Company
held on 29 August 2019 approved the transaction as detailed in the
Notice of EGM.
There can be no certainty that the SPA will eventually be
executed and/or that the Transaction will be consummated as
presented above or at all. For additional detailed information
refer to Note 6 in the condensed consolidated financial
statements.
Update on disposal of land plot in Miercurea Ciuc, Romania:
Further to the Company's announcement dated October 17, 2018
regarding signing the pre-agreement for the sale of land plot in
Mercuria Ciuc, Romania, the Company grant an option for the
purchase of the Plot till mid-April 2019 for a total consideration
of EUR 0.11 million which was paid in installments. In March 2019,
following negotiations with the purchaser, the parties agreed that
(i) the signing date of a definitive agreement will be postponed by
3 months to mid-July 2019, (ii) the receipt of non-refundable
advance payments of EUR 250,000 in two tranches by the end of April
2019, and; (ii) the sale price will be increased by EUR 30,000. The
company signed a definitive sale agreement after the balance sheet
date.
Disposal of land plot in Lodz, Poland:
On June 13, 2017, the Company announced that it has signed a
preliminary sale agreement for the disposal of a 13,770 sqm plot at
its second land holding in Lodz, Poland, (representing 22% of this
holding) to a retail developer, for EUR 1.15 million. As part of
the agreement, the purchaser paid an immediate installment of EUR
0.035 million followed by an installment of EUR 0.073 million paid
in 2018 after obtaining environmental permit for investing in the
access road to the plot.
During February 2019 the Company has signed conditional sale
agreement for which the remaining balance less 50% of the sum
invested in the road (up to maximum amount of circa EUR 0.19
million) will be paid once the final agreement is signed after the
municipality confirms that it will not exercise pre-emptive
rights.
On March 26, 2019 the Company has signed definitive sale
agreement, under terms of which the purchaser paid the rest of
consideration (circa EUR 0.84 million) by April 2019.
Preliminary Agreement for the sale of remaining land plot in
Lodz, Poland:
In May 2019, the Company has signed a Preliminary Agreement (the
"Preliminary Agreement") for the sale of its remaining holdings in
the Plot (circa 47,860 sqm) to a local developer (the "Purchaser")
for a total gross consideration of approximately EUR 1.10 million
(the "Consideration").
Under the terms of the Preliminary Agreement: (i) a conditional
sale agreement will be signed until September 3, 2019 (the "Closing
Date") following due diligence. The Purchaser has the right to
withdraw from the transaction until the Closing Date; (ii) a
definitive agreement will be signed not later than October 15, 2019
; (iii) 10% of the Consideration was deposited on notarial deposit
upon signing the Preliminary Agreement and will be released upon
signing a definitive agreement following municipality's
confirmation that it will not exercise preemptive rights (the
"Confirmation"); (iiii) 40% of the Consideration will be paid upon
signing a definitive agreement and subject to obtaining the
Confirmation; and (v) 50% of the Consideration will be paid not
later than December 10, 2019. This payment will be secured by a
mortgage on the Plot.
Motion to reveal and review internal documents:
In March 2018, a Shareholder of the Company has filed a motion
with the Financial Department of the District Court in Tel-Aviv to
reveal and review internal documents of the Company and of Elbit
Imaging Ltd., with respect to events surrounding certain agreements
executed in connection with the Casa Radio Project in Romania and
the sale of the US commercial centers (the "Motion"). Such events
were previously announced by the Company and are detailed in notes
5(4)(d) and 17(5) of 2018 annual financial statements. In July
2018, the Company filed its response to the relevant court. On
January 13, 2019, a Court hearing was held following which the
judge decided that the board of directors of each of the Company
and Elbit Imaging Ltd. would examine the relevant facts and decide
whether or not they should file a lawsuit against any of its
officers. The Company and Elbit Imaging Ltd. are required to submit
their conclusion to both the court and the plaintiff not later than
September 5, 2019 (following an agreed upon extension to the
original date of submission) and thereafter the plaintiff will
notify the Court whether or not he wishes to continue with the
Motion.
Request to reveal documents:
An indirect subsidiary of the Group in Romania (which holds plot
of land outside Bucharest) received a request from Romanian
authorities to reveal documents regarding the years in 2007-2011 as
part of an ongoing investigation procedure. The company has
submitted all relevant documents in respect of the said years.
During 2019 another indirect subsidiary of the group (which was
liquidated) was ordered to a court hearing.
A criminal investigation carried out regarding the commission of
the money laundering and fiscal evasion offenses against legal
representative (directors) of certain companies in which the
company had indirect holdings through JV in the past. The
prosecutor closed the case and the chief prosecutor denied the
complaint of National Agency for Fiscal Administration as tardy.
Against the prosecutor's disposition to close the case, the
National Agency for Fiscal Administration filed a complaint in
court. The court hearing has been postponed to October 3, 2019.
Interest and principal Payments:
Following Note 8(c) to the consolidated financial statements in
which the company announced it will not meet its principal
repayment due on December 31, 2018 as provided for in the
settlement agreement with Series A and Series B Bondholders from 11
January 2018 (the "Settlement Agreement"), the bondholders approved
the deferral of payment to July 1, 2019 and the company paid
principal of circa EUR 250,000 and Penalty interest on arrears of
EUR 150,000 on February 2019.
In addition, during June 2019 the bondholders approved the
deferral of the full payment of principal due on July 1, 2019 and
of 58% ("deferred interest amount") of the sum of interest
(consisting of the total interest accrued for the outstanding
balance of the principal, including interest for part of the
principal payment which was deferred as of February 18, 2019, plus
interest arrears for part of the principal which was fixed on
18.2.2019 and was not paid by the company and all in accordance
with the provisions of the trust deed; "the full amount of
interest"), the effective date of which is 19.6.2019, and the
payment date was fixed as of 1.7.2019. The company paid on the said
date a total amount of circa EUR 1.17 million EUR of which is only
42% of the full amount of interest.
Key highlights since the period end:
Disposal of land plot in Miercurea Ciuc, Romania:
On July 11, 2019, the Company has signed a definitive agreement
for the sale (on an "as is" basis) of its plot, for a total amount
of EUR 1.58 million (out of which EUR 0.36 million has already been
received as non-refundable advance payments as of balance sheet
date).
Belgrade Plaza:
On January 26, 2017, the Company signed a binding share purchase
agreement with BIG Shopping Centers Ltd ("BIG"), for the sale of
the SPV holding Belgrade Plaza shopping and entertainment center.
The final agreed value of Belgrade Plaza, which comprise circa
32,300 sqm of GLA, will be calculated based on a general cap rate
of 8.25% as well as the sustainable NOI after 12 months of
operation, which the Company estimated in the range of EUR 6.2-6.5
million per annum.
Further installments will be due to the Company during the first
year of operation based on this 12-month figure. The NOI will be
re-examined again after 24 months and 36 months of operation, which
may lead to an upward adjustment of the final purchase price. The
Company did not record a gain from expected future purchase price
adjustments at the sale date.
During July 2019 (the second adjustment date) the Second
purchase price adjustment was examined and accordingly no
additional proceed was made.
On July 20, 2019, BIG paid EUR 108,375 for the stands and
signage at the Belgrade Plaza.
In addition, BIG further informed the Company that they intend
to hold an additional EUR 1 million until an orderly engineering
examination of the mall's technical conditions is completed as part
of the final Price adjustment to be performed in May 2020. The
Company is currently evaluating its options regarding BIG's
intention to hold the EUR 1 million which was not recorded in the
consolidated financial statements due to uncertainty related to
receipt of such amount.
Sale agreement of plot in Bangalore, India:
Refer to the above section regarding the SPA signed and steps
taken by the Company.
Interest Payments
On July 11, 2019, Company announced that its Romanian subsidiary
had signed a binding agreement to sell land in Romania (refer to
Note 8(d)), and that the Company would use part of the proceeds now
received by it EUR 0.75 million (hereinafter: "the amount
payable"), in order to make a partial interest payment to the
bondholders (Series A) and (Series B) issued by the Company. The
payment required changes in the repayment schedule and amendments
of the trust deeds which was approved unanimously by the
Bondholders. The amount payable was paid on August 14, 2019 and
reflects 30% of accrued interest as of that date.
Dutch statutory auditor
The Company has not yet been in the position to engage a Dutch
statutory auditor for the book year 2019, which is due to the fact
that in the Netherlands, the choice of audit firms that are
entitled to audit public interest entities (the Company qualifies
as such an entity) is extremely limited. The Company has done all
efforts to engage an auditor and has even sent a formal letter to
the Dutch Ministry of Finance to get out of the deadlock situation.
At this moment it is not yet clear what the outcome will be.
Commenting on the results, Executive Director Avi Hakhamov,
said:
"Our main goal has continued to centre on asset disposals with
the aim of satisfying our obligations to our stakeholders, as
reflected by signing of the Casa Radio Pre-Sale Agreement as
approved by the bondholders and our shareholders, signing SPA to
sell Chennai, considerable efforts that are made to collect the
proceed from Bangalore sale and signing preliminary agreements for
rest of the plots in CEE. This remains our absolute priority for
the second of half of the year."
"After a long and challenging tenure, please be informed that I
intend to retire at the end of the year. I am pleased and
privileged to have devoted 13 years to Plaza in a variety of roles.
I want to express my gratitude to all of my colleagues at Plaza
during this period, while I also want to thank the Board for giving
me the opportunity to take the helm".
For further details, please contact:
Plaza
Avi Hakhamov, Executive Director + 361 6104523
Notes to Editors
Plaza Centers N.V. (www.plazacenters.com) is listed on the Main
Board of the London Stock Exchange, as of 19 October 2007, on the
Warsaw Stock Exchange (LSE: "PLAZ", WSE: "PLZ/PLAZACNTR") and, on
the Tel Aviv Stock Exchange. Plaza Centers has been active in real
estate development in emerging markets for over 23 years.
Forward-looking statements
This press release may contain forward-looking statements with
respect to Plaza Centers N.V. future (financial) performance and
position. Such statements are based on current expectations,
estimates and projections of Plaza Centers N.V. and information
currently available to the company. Plaza Centers N.V. cautions
readers that such statements involve certain risks and
uncertainties that are difficult to predict and therefore it should
be understood that many factors can cause actual performance and
position to differ materially from these statements. Plaza Centers
N.V. has no obligation to update the statements contained in this
press release, unless required by law.
MANAGEMENT STATEMENT
During the first half of 2019 the management's focus has been on
executing preliminary agreement for the sale of Company's holding
in Casa Radio project, signing SPA for the sale of Chennai project
in India, receive cash proceed from the purchaser of Bangalore
project, disposals of plots of land in cee and cost reductions and
repayments to its bondholders. This disposal and cost cutting
process is evidenced by the sale of plot of land in Poland,
preliminary agreements for sale of plots left in CEE and
significant reduction of administrative expenses. The repayments to
its bondholders is evidence by certain payments during the period
and after balance sheet date following asset sales.
In addition, following several years of efforts to promote the
development of the Casa Radio project, a number of serious
proposals were received during the course of 2018 from serious and
experienced real estate investors which were examined by management
and the board. The management and the board of directors came to
the conclusion that the proposed price and terms of LOI are optimal
and reasonable considering the Company's current status and decided
to sign a LOI with AFI Europe in 2019 followed by a pre-sale
agreement signed after balance sheet date, and which was approved
by the Company's bondholders and shareholders. This is a
significant milestone in efforts to promote the development of the
project.
In India, the Company focus its efforts to bring cash flows from
Bangalore project in accordance with the signed sale agreement
simultaneously with steps taken to protect its rights due to
default of the purchaser. In addition the company signed SPA for
the sale of its 50% stake in a 74.7-acre plot in Chennai, India
with cash deposit.
As a result of this activity, our total portfolio now comprises
five assets in three countries, including one plot in Poland, two
plots in Romania and two plots in India (under JV with Elbit).
Over the coming months, the Company will maintain its focus on
and commitment to the portfolio rationalisation and continuous
deleveraging of the balance sheet.
Results
During the first half of the year, Plaza recorded a EUR10.9
million loss attributable to the shareholders of the Company. This
is a 12% increase compared to the losses reported in the first half
of 2018 (EUR9.8 million).
Total result of operations excluding finance cost was loss of
EUR0.5 million in 2019 and EUR5.5 reported in the first half of
2018. In 2018 losses were generated mainly from write down of
trading properties and in 2019 a partial reversal of write down
cause an increase of the value of the plot in Romania in amount of
EUR0.5 million.
The consolidated cash position as at 30 June 2019 was EUR0.6
million (31 December 2018: EUR1.4 million) and the current cash
position is circa EUR1.1 million.
Liquidity & Financing
Plaza ended the period with a consolidated cash position of
circa EUR0.6 million, compared to EUR1.4 million at the end of
2018. An additional cash balance of EUR 0.15 million (Plaza Part)
is being held in its 50% subsidiary ("EPI").
As at June 30, 2019 the Group's outstanding obligations to
bondholders' total EUR87.5 million.
Information concerning the Group's obligations and commitments
to make future payments under contracts, such as debt agreements in
the 18 months starting 1 July 2019, is aggregated in the following
table.
Total Payment Due by period
(in TEUR)
----------------------------- ------------
Liquidity Requirements Within 1 year Within 1-1.5
year
------------------------------------ ----------------------------- ------------
Bonds including current portion and
interest (*) 93,638 -
General & administrative 1,700 800
----------------------------- ------------
Total liquidity requirements 95,338 800
Total Sources (**) 3,830 6,500
----------------------------- ------------
Total surplus (deficit) (91,508) 5,700
----------------------------- ------------
(*) Bonds payment schedule presented according to trust deeds.
An accrued interest amount of Circa EUR 0.75 million was repaid by
the date of approval of these interim condensed consolidated
financial statements of this press release following the balance
sheet date.
(**) The Company expects to increase the amount of its liquid
balances during the 18 months starting July 1, 2019, by sale of
plots of lands and price adjustments (including Chennai Project and
excluding Bangalore Project due to steps taken to protect the
company Rights (INR 80 million assumed to be received till end of
2019 by EPI); Casa Radio is not included at the above period
(except of EUR 0.2 million), excluding cash balances as of the date
of signing the financial statements of this press release.
Management acknowledges that the above expected cash flows are
based on forward-looking plans and estimations which rely on the
information known to management at the time of the approval of
these interim condensed consolidated financial statements. The
materialization of the above forecast is not certain and is subject
to factors beyond the Company's control.
Therefore, delays in the realization of the Group's assets and
investments or realization at lower price than expected by
management could have an adverse effect on the Group's liquidity
position and its ability to meet its contractual obligations on a
timely manner.
Management further acknowledges that the Company is exposed to
foreign currency risk derived from borrowings denominated in
currency other than the functional currency of the Group, more
specifically a further devaluation of the EUR against the NIS can
significantly increase the remaining contractual obligation to
bondholders.
The board and management estimate that the Company is unable to
serve its entire debt according to the current repayment schedule.
Moreover, following the recent default of purchaser of Bangalore
project to meet payments schedule according to the signed amendment
agreement (refer to Note 7(1)), and the SPA signed with the
purchaser of Chennai Project (refer to Note 7(2)), it is expected
that the Company will not be able to meet its entire contractual
obligations in the following 12 months.
As of 30 June, 2019 the Company is not in compliance with the
Coverage Ratio Covenant ("CRC") as defined in the restructuring
plan. This may entitle the bondholders to declare that all or a
part of their respective (remaining) claims become immediately due
and payable.
Strategy and Outlook
Plaza's main focus is on its portfolio disposal programme and
efforts made to receive proceeds from Bangalore project sale with
the aim of meeting the obligations to our bondholders, as far as
possible, followed by continuous cost-cutting.
OPERATIONAL REVIEW
Over the course of the year to date, Plaza has continued to make
progress against its operational and strategic objectives. The
status of the nine projects is outlined in the table below.
The Company's current assets are summarised in the table below
(as of balance sheet date):
Asset/ Location Nature of asset Size Plaza's Status
Project sqm (GLA) effective
ownership
%
Casa Radio Bucharest, Mixed-use retail, 467,000 (GBA 75 Pre-sale
Romania hotel and leisure including agreement
plus office scheme parking spaces) signed
----------------- ------------------------ ----------------- ----------- ----------------
Pre-sale
Retail & entertainment agreement
Lodz Plaza Lodz, Poland scheme 47,860 100 signed
----------------- ------------------------ ----------------- ----------- ----------------
Definitive
Miercurea sale agreement
Ciuc, Retail & entertainment signed in
Csiki Plaza Romania scheme 36,500 100 July, 2019
----------------- ------------------------ ----------------- ----------- ----------------
Retail & entertainment Preliminary
Brasov Brasov, Romania scheme 67,000 100 sale agreement
----------------- ------------------------ ----------------- ----------- ----------------
Amended
revised
Bangalore, agreement
Bangalore India Residential Scheme 218,500 25 in place
----------------- ------------------------ ----------------- ----------- ----------------
JDA and
term sheet
Chennai, terminated;
Chennai India Residential Scheme 302,400 50 SPA signed
----------------- ------------------------ ----------------- ----------- ----------------
FINANCIAL REVIEW
Results
Revenue for the period derived from proceeds received from the
disposal of Trading properties amounted to EUR0.9 million, compared
to EUR0.2 million in the first half of 2018. The proceed received
in 2018 was related to earn-out payment for the sale of Torun Plaza
reduced by NAV adjustment, whilst the revenue of 2019 included the
sale of the plot in Lodz, Poland.
Administrative expenses decreased from EUR1.5 million in the
first half of 2018 to EUR0.7 million as result of a material scale
down of the Company's activities, mainly in respect of salaries and
related expenses and professional services.
Finance income is nil in the first 6 months of 2019 comparing to
EUR0.1 million for 6 months ended June 30, 2018.
Finance costs increased considerably from EUR4.4 million to
EUR10.4 million (30 June 2018 and 30 June 2019, respectively). The
main components were:
-- Foreign exchange movements (NIS-EUR) - the effect on the
debentures totalled EUR5.5 million in expenses (30 June 2018 -
EUR2.7 million expense).
-- Interest expenses booked on all series of bonds totalled
EUR2.9 million (30 June 2018 - EUR3 million expenses recorded).
-- EUR2.0 million expenses recorded associated with amortization
of discount on debentures (30 June 2018 - EUR1.3 million
income).
As a result, the loss for the period amounted to circa EUR10.9
million in H1 2019, representing a basic and diluted loss per share
for the period of EUR1.59 (H1 2018: EUR1.43 loss).
Balance sheet and cash flow
The balance sheet as at 30 June 2019 showed total assets of
EUR60 million compared to total assets of EUR62 million at the end
of 2018, mainly as a result of payment of principals and interests
for bonds in total amount of circa EUR1.6 million in 2019, disposal
of land plot in Poland resulting payment of circa EUR 0.84 million
in March 2019, the receipt of advance payment of EUR 0.25 million
for the plot in Miercurea Ciuc, administrative expenses and costs
of operations which amounted to EUR 0.8 million for the six months
of 2019.
Plaza's consolidated cash position as at 30 June 2019 decreased
to EUR0.6 million (31 December 2018: EUR1.4 million) and the
current cash position is circa EUR1.1 million. An additional cash
balance of EUR 0.15 million (Plaza Part) is being held in its 50%
subsidiary ("EPI").
The value of the Company's trading properties decreased from
EUR42.6 million as at 31 December 2018 to EUR41.1 million at the
end of 30 June 2019 following the disposal of 22% of the plot known
as "Lodz Mall" in Poland and a reversal of write down of the value
of the plot in Miercurea Ciuc, Romania.
Investments in equity accounted investee companies has decreased
by EUR0.7 million to circa EUR17 million (31 December 2018: EUR17.7
million) mainly as a result of cash distribution of EUR0.8 million
(31 December 2018: EUR2.5 million).
As at 30 June 2019, Plaza has a balance sheet liability of
EUR83.9 million (with an adjusted par value of circa EUR85.9
million) from issuing bonds on the Tel Aviv Stock Exchange. These
bonds are presented at amortised cost under current liabilities.
Additionally, Plaza recorded provision for interests on bonds as of
June 30, 2019, in amount of EUR1.6 million.
Provision was created with respect to the obligation connected
to Casa Radio project (Bucharest Romania) in the amount of EUR14.1
million (2018: EUR14.1 million) for the construction of the Public
Authority Building.
Disclosure in accordance with Regulation 10(B)14 of the Israeli
Securities Regulations (periodic and immediate reports),
5730-1970
1. General Background
According to the abovementioned regulation, upon existence of
warning signs as defined in the regulation, the Company is obliged
to attach its report's projected cash flow for a period of two
years, commencing with the date of approval of the reports
("Projected Cash Flow").
The Material uncertainty related to going concern was included
in the independent auditors' report of 2018 financial statements
and in view of the management's plans for asset disposals and also
in respect of material uncertainty related to Casa Radio project,
as described in Notes 6 of these condensed Consolidated Financial
Statements in this press release. The board and management
estimates that the Company is unable to serve its entire debt
according to the current repayment schedule. Moreover, following
the recent default of purchaser of Bangalore project to meet
payments schedule according to the signed amendment agreement
(refer to Note 7(1) of the financial statements), and the SPA
signed with the purchaser of Chennai Project (refer to Note 7(2)),
it is expected that the Company will not be able to meet its entire
contractual obligations in the following 12 months.
With such warning signs, the Company is required to provide
projected cash flow for the period of 24 months following the
reporting period, and also provide explanations on differences
between previously disclosed estimated projected cash flows with
actual cash flows.
2. Projected cash flow
The Company has implemented the restructuring plan that was
approved by the Dutch court on July 9, 2014 (the "Restructuring
Plan"). Under the Restructuring Plan, principal payments under the
bonds issued by the Company and originally due in the years 2013 to
2015 were deferred for a period of four and a half years, and
principal payments originally due in 2016 and 2017 were deferred
for a period of one year. During first three months 2017, the
Company paid to its bondholders a total amount of NIS 191.7 million
(EUR 49.2 million) as an early redemption. Upon such payments, the
Company complied with the Early Prepayment Term (early redemption
at the total sum of at least NIS 382 million) and thus obtained a
deferral of one year for the remaining contractual obligations of
the bonds.
In January 2018, a settlement agreement was signed by and among
the Company and the two Israeli Series of Bonds (refer to section
"Liquidity and financing").
Following Note 8(c) to the annual consolidated financial
statements in which the company announced it will not meet its
principal repayment due on December 31, 2018 as provided for in the
settlement agreement with Series A and Series B Bondholders from 11
January 2018 (the "Settlement Agreement"), the bondholders approved
the deferral of payment to July 1, 2019 and the company paid
principal of circa EUR 250,000 and Penalty interest on arrears of
EUR 150,000 on February 2019. In addition, during June 2019 the
bondholders approved the deferral of the full payment of principal
due on July 1, 2019 and of 58% ("deferred interest amount") of the
sum of interest (consisting of the total interest accrued for the
outstanding balance of the principal, including interest for part
of the principal payment which was deferred as of February 18,
2019, plus interest arrears for part of the principal which was
fixed on 18.2.2019 and was not paid by the company and all in
accordance with the provisions of the trust deed; "the full amount
of interest"), the effective date of which is 19.6.2019, and the
payment date was fixed as of 1.7.2019. The company paid on the said
date a total amount of circa EUR 1.17 million EUR of which is only
42% of the full amount of interest. On July 11, 2019, Company
announced that its Romanian subsidiary had signed a binding
agreement to sell land in Romania (refer to Note 8(d)), and that
the Company would use part of the proceeds now received by it EUR
0.75 million (hereinafter: "the amount payable"), in order to make
a partial interest payment to the bondholders (Series A) and
(Series B) issued by the Company. The payment required changes in
the repayment schedule and amendments of the trust deeds which was
approved unanimously by the Bondholders. The amount payable was
paid on August 14, 2019 and reflects 30% of accrued interest as of
that date.
The materialisation, occurrence consummation and execution of
the events and transactions and of the Assumptions on which the
projected cash flow is based, including with respect to the
proceeds and timing thereof, although probable, are not certain and
are subject to factors beyond the Company's control as well as to
the consents and approvals of third parties and certain risks
factors. Therefore, delays in the realisation of the Company's
assets and investments or realisation at a lower price than
expected by the Company, as well as any other deviation from the
Company's Assumptions (such as additional expenses due to
suspension of trading, delay in submitting the statutory reports
etc.), could have an adverse effect on the Company's cash flow and
the Company's ability to service its indebtedness in a timely
manner.
H2/2019 H1/2020 H2/2020
Cash - Opening Balance 0.75 1.03 0.78
Proceeds from selling trading
properties (1) (2) 1.98 1.85 6.50
Total Sources 2.73 2.88 7.28
Bonds - principal (3) - - -
Bonds - interests (3) 0.80 1.30 5.48
Operational expenses and property
maintenance 0.90 0.80 0.80
Total Uses 1.70 2.10 6.28
Cash - Closing Balance 1.03 0.78 1.00
(1) Comprised of the sale of plots: Miercurea Ciuc, Lodz Mall,
Brasov and Bangalore (Company's share 50%), price adjustment from
Belgrade Plaza during 2019 and 2020, Chennai project;
(2) Including Chennai Project and excluding Bangalore Project
due to steps taken to protect the company Rights (INR 80 million
assumed to be received till end of 2019 by EPI); Casa Radio is not
included at the above period except of EUR 0.2 million
(3) Payment of principal and interest are only estimation. The
mandatory final principal repayment is July 1, 2020
Below is a summary table of the comparison between forecasted
and actual cash flows, with explanations on the differences
published for the 6-month period ending 30 June 2019.
In EUR millions Forecast Actual
H1/2019 H1/2019
--------- --------
Cash - Opening Balance 1.48 1.48
--------- --------
Proceeds from sales transactions, price
adjustments and other income (1) 4.16 2.05
--------- --------
Total Sources 5.64 3.53
--------- --------
Cash outflow from operating activity
--------- --------
Administrative expenses including property
maintenance (2) 1.00 1.20
--------- --------
Cash outflow from financing activity
--------- --------
Principal repayment to bondholders 0.25 0.25
--------- --------
Interest repayment to bondholders (3) 3.03 1.33
--------- --------
Total Uses 4.28 2.78
--------- --------
Cash - Closing Balance 1.36 0.75
--------- --------
1 Forecast included proceeds from: Belgrade Plaza (EUR 0.13 m),
Miercurea Ciuc (EUR0.25 m), Lodz Plaza (EUR 0.84 m), Bangalore (EUR
2.94 m).
Actual included proceeds: Miercurea Ciuc (EUR0.36 m), Lodz Plaza
(EUR 0.84 m), Bangalore (EUR 0.94 m).
2 Increase mainly as a result of payment for audit cost related
to 2018, for which provision was booked in 2018 (EUR 0.10 m),
upfront payment for perpetual usufruct fee in Poland for 2019 (EUR
0.04 m) and insurance costs (EUR 0.04 m).
3 Including penalty interest on arrears of EUR 0.15 m paid on February 2019
Avi Hakhamov
Executive Director
30 August 2019
PLAZA CENTERS N.V.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2019
NOT AUDITED AND NOT REVIEWED
IN '000 EUR
CONTENTS
Interim condensed consolidated statements of financial
position
Interim condensed consolidated statements of profit or
loss
Interim condensed consolidated statements of comprehensive
income
Interim condensed consolidated statements of changes
in equity
Interim condensed consolidated statements of cash flows
Notes to interim condensed consolidated financial statements
- - - - - - - - - - -
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
December
June 30, 31,
2019 2018
------------- --------
EUR '000 EUR '000
Not audited Audited
Not reviewed
ASSETS
Cash and cash equivalents 569 1,405
Prepayment and Other receivables 235 240
Total current assets 804 1,645
------------- --------
Trading properties 42,145 42,600
Equity accounted investees 17,034 17,676
Property and equipment 17 19
Total non-current assets 59,196 60,295
------------- --------
Total assets 60,000 61,940
============= ========
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
December
June 30, 31,
2019 2018
------------- ---------
EUR '000 EUR '000
Not audited Audited
Not reviewed
LIABILITIES AND EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
Bonds at amortized cost 83,883 76,698
Accrued interests on Bonds 1,607 -
Trade payables 55 53
Related parties' liabilities - 3
Other liabilities 403 500
------------- ---------
Total current liabilities 85,948 77,254
------------- ---------
Provisions 14,087 14,087
Total non-current liabilities 14,087 14,087
------------- ---------
Share capital 6,856 6,856
Translation reserve (29,335) (29,598)
Other reserves (19,983) (19,983)
Share based payment reserve 35,376 35,376
Share premium 282,596 282,596
Retained losses (315,545) (304,648)
------------- ---------
Total equity (40,035) (29,401)
------------- ---------
Total equity and liabilities 60,000 61,940
============= =========
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
August 29, 2019
--------------------- ------------------ -----------------------
Avi Hakhamov David Dekel
Date of approval of Executive Director
the Director and Chairman
financial statements of the Audit Committee
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Six months ended
June 30,
---------------------------
2019 2018
EUR '000 EUR '000
(except per (except per
share data) share data)
Not audited Unaudited
Not reviewed
Revenues and gains
Revenue from disposal of trading properties 930 210
------------- ------------
Total revenues 930 210
Gains and other
Other income 48 237
------------- ------------
Total gains 48 237
------------- ------------
Total revenues and gains 978 447
------------- ------------
Expenses and losses
Cost of trading properties disposed (955) -
Cost of operations (160) (128)
Write-down of trading properties 500 (3,401)
Share in results of equity-accounted investees (107) (397)
Administrative expenses (669) (1,485)
Other expenses (23) (520)
------------- ------------
Finance income - 144
Finance costs (10,348) (4,430)
------------- ------------
(11,762) (10,217)
------------- ------------
Loss before income tax (10,784) (9,770)
Income tax expense (113) (1)
------------- ------------
Loss for the period (10,897) (9,771)
============= ============
Earnings per share
Basic and diluted loss per share (in EURO) (1.59) (1.43)
============= ============
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
Six months ended
June 30,
---------------------------
2019 2018
------------- ------------
EUR '000 EUR '000
(except per (except per
share data) share data)
Not audited Unaudited
Not reviewed
Loss for the period (10,897) (9,771)
Other comprehensive income
Items that are or may be reclassified to profit
or loss:
Foreign currency translation differences -
foreign operations (Equity accounted investees) 263 (805)
------------- ------------
Other comprehensive gain (loss) for the period 263 (805)
------------- ------------
Total comprehensive loss for the period (10,634) (10,576)
============= ============
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
Capital reserve
from acquisition
Share based of
Share Share payment Translation non-controlling Retained
capital Premium reserves Reserve interests losses Total
-------- -------- ----------- ----------- ----------------- --------- --------
Balance at January
1, 2019 6,856 282,596 35,376 (29,598) (19,983) (304,648) (29,401)
-------- -------- ----------- ----------- ----------------- --------- --------
Comprehensive
loss for
the period
Net loss for the
period - - - - - (10,897) (10,897)
Foreign currency
translation
differences - - - 263 - - 263
Total
comprehensive
loss
for the period - - - 263 - (10,897) (10,634)
-------- -------- ----------- ----------- ----------------- --------- --------
Balance at June
30, 2019
(Not audited, not
reviewed) 6,856 282,596 35,376 (29,335) (19,983) (315,545) (40,035)
-------- -------- ----------- ----------- ----------------- --------- --------
Share based
Share Share payment Translation Retained
capital Premium reserves Reserve Other reserves losses Total
-------- -------- --------------- ----------- -------------- --------- --------
Balance at
January 1, 2018 6,856 282,596 35,376 (28,800) (19,983) (267,682) 8,363
-------- -------- --------------- ----------- -------------- --------- --------
Adjustments on
initial
application of
IFRS 9 - - - - - 1,399 1,399
Comprehensive
loss for
the period
Net loss for the
period - - - - - (9,771) (9,771)
Foreign currency
translation
differences - - - (805) - - (805)
-------- -------- --------------- ----------- -------------- --------- --------
Total
comprehensive
loss
for the period - - - (805) - (9,771) (10,576)
Balance at June
30, 2018
(Not audited) 6,856 282,596 35,376 (29,605) (19,983) (276,054) (814)
-------- -------- --------------- ----------- -------------- --------- --------
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
June 30,
--------------------------
2019 2018
------------- -----------
EUR '000 EUR '000
Not audited Not audited
Not reviewed
Cash flows from operating activities:
Loss for the period (10,897) (9,771)
Adjustments necessary to reflect cash flows used
in operating activities
Depreciation of property and equipment 1 156
Net finance costs 10,348 4,286
Share of loss of equity-accounted investees 107 397
Income tax expense 113 1
------------- -----------
(328) (4,931)
------------- -----------
Changes in:
Trade receivables 1 17
Other receivables (109) 458
Trading properties 454 3,401
Trade payables 2 26
Other liabilities, related parties' liabilities
and provisions (88) (839)
------------- -----------
260 3,063
------------- -----------
Interest paid (1,317) (3,000)
Taxes paid - (1)
------------- -----------
Net cash used in operating activities (1,385) (4,869)
------------- -----------
Cash from investing activities
Proceeds from sale of property and equipment 1 1
Distribution received from equity accounted investees 798 2,115
Net cash provided by investing activities 799 2,116
------------- -----------
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
June 30,
-----------------------------------
2019 2018
------------- --------------------
EUR '000 EUR '000
Not audited Not audited
Not reviewed
Cash from financing activities
Repayment of debentures (250) (40,053)
Net cash used in financing activities (250) (40,053)
------------- --------------------
Effect of exchange fluctuations on cash held - (790)
Decrease in cash and cash equivalents during
the period (836) (43,596)
Cash and cash equivalents as at January 1(st) 1,405 44,844
------------- --------------------
Cash and cash equivalents as at June 30 569 1,248
============= ====================
The accompanying notes are an integral part of the interim
condensed consolidated financial statements.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: - CORPORATE INFORMATION
Plaza Centers N.V. ("the Company" and together with its
subsidiaries, "the Group") was incorporated and is registered in
the Netherlands. The Company's registered office is at
Pietersbergweg 283, 1105 BM, Amsterdam, the Netherlands. In past
the Company conducted its activities in the field of establishing,
operating and selling of shopping and entertainment centers, as
well as other mixed-use projects (retail, office, residential) in
Central and Eastern Europe (starting 1996) and India (from 2006).
Following debt restructuring plan approved in 2014 the Group main
focus is to reduce corporate debt by early repayments following
sale of assets and to continue with efficiency measures and cost
reduction where possible.
The condensed interim consolidated financial statements for each
of the periods presented comprise the Company and its subsidiaries
(together referred to as the "Group") and the Group's interest in
jointly controlled entities.
The Company is listed on the premium segment of the Official
List of the UK Listing Authority and to trading on the main market
of the London Stock Exchange ("LSE"), the Warsaw Stock Exchange
("WSE") and on the Tel Aviv Stock Exchange ("TASE").
The Company's immediate parent company was Elbit Ultrasound
(Luxemburg) B.V. / s.a.r.l ("EUL"), which held 44.9% of the
Company's shares, till December 19, 2018 when EUL informed that it
has signed a trust agreement according to which EUL will deposit
its shares of the Company with a trustee and no longer considers
itself to be the controlling shareholder of the Company.
NOTE 2: - BASIS OF PREPARATION
a. Basis of preparation of the interim condensed consolidated financial data:
The interim condensed consolidated financial data for the six
months period ended June 30, 2019 have been prepared in accordance
with the International Financial Reporting Standard IAS 34
("Interim Financial Reporting") as adopted by the European
Union.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual consolidated financial statements as at 31 December
2018. The interim condensed consolidated financial statements were
not reviewed by an Auditor.
Selected explanatory notes are, however, included to explain
events and transactions that are significant to understanding the
changes in the Group's financial position and performance since the
last annual consolidated financial statements as at and for the
year ended December 31, 2018.
The interim condensed consolidated financial statements as of
June 30, 2019 were authorized by the Board of Directors on 29
August 2019.
NOTE 2:- BASIS OF PREPARATION (Cont.)
b. New standards, interpretations and amendments adopted by the Group:
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2018, except for the adoption of new standards effective as of 1
January 2019. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
The Group applies, for the first time, IFRS 16 Leases. As
required by IAS 34, the nature and effect of these changes are
disclosed below.
Several other amendments and interpretations apply for the first
time in 2019, but do not have an impact on the interim condensed
consolidated financial statements of the Group.
Initial adoption of IFRS 16 "Leases":
IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives
and SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases and
requires lessees to account for all leases under a single
on-balance sheet model.
Lessor accounting under IFRS 16 is substantially unchanged under
IAS 17. Lessors will continue to classify leases as either
operating or finance leases using similar principles as in IAS 17.
Therefore, IFRS 16 did not have an impact for leases where the
Group is the lessor.
The Group adopted IFRS 16 using the modified retrospective
method of adoption with the date of initial application of 1
January 2019. Under this method, the standard is applied
retrospectively with the cumulative effect of initially applying
the standard recognised at the date of initial application. The
Group elected to use the transition practical expedient allowing
the standard to be applied only to contracts that were previously
identified as leases applying IAS 17 and IFRIC 4 at the date of
initial application. The Group also elected to use the recognition
exemptions for lease contracts that, at the commencement date, have
a lease term of 12 months or less and do not contain a purchase
option ('short-term leases'), and lease contracts for which the
underlying asset is of low value ('low-value assets').
The effect of adoption IFRS 16 as at 1 January 2019 did not have
a material effect on the financial statements.
a) Nature of the effect of adoption of IFRS 16
In an operating lease, the leased property was not capitalised and
the lease payments were recognised as rent expense in profit or
loss on a straight-line basis over the lease term. Any prepaid rent
and accrued rent were recognised under Prepayments and Trade and
other payables, respectively.
Upon adoption of IFRS 16, the Group applied a single recognition
and measurement approach for all leases, except for short-term leases
and leases of low-value assets. The standard provides specific transition
requirements and practical expedients, which has been applied by
the Group.
NOTE 2:- BASIS OF PREPARATION (Cont.)
Leases previously classified as finance leases
The Group did not change the initial carrying amounts of recognised
assets and liabilities at the date of initial application for leases
previously classified as finance leases (i.e., the right-of-use
assets and lease liabilities equal the lease assets and liabilities
recognised under IAS 17). The requirements of IFRS 16 was applied
to these leases from 1 January 2019.
The Group also applied the available practical expedients
wherein it:
-- Used a single discount rate to a portfolio of leases with reasonably similar characteristics
-- Relied on its assessment of whether leases are onerous
immediately before the date of initial application
-- Applied the short-term leases exemptions to leases with lease
term that ends within 12 months at the date of initial
application
-- Excluded the initial direct costs from the measurement of the
right-of-use asset at the date of initial application
-- Used hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
b) Summary of new accounting policies
Set out below are the new accounting policies of the Group upon
adoption of IFRS 16, which have been applied from the date of initial
application:
* Right-of-use assets
The Group recognises right-of-use assets at the commencement date
of the lease (i.e., the date the underlying asset is available for
use). Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes the
amount of lease liabilities recognised, initial direct costs incurred,
and lease payments made at or before the commencement date less
any lease incentives received. Unless the Group is reasonably certain
to obtain ownership of the leased asset at the end of the lease
term, the recognised right-of-use assets are depreciated on a straight-line
basis over the shorter of its estimated useful life and the lease
term. Right-of-use assets are subject to impairment.
* Lease liabilities
At the commencement date of the lease, the Group recognises lease
liabilities measured at the present value of lease payments to
be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on
an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised
by the Group and payments of penalties for terminating a lease,
if the lease term reflects the Group exercising the option to
terminate. The variable lease payments that do not depend on an
index or a rate are recognised as expense in the period on which
the event or condition that triggers the payment occurs.
NOTE 2:- BASIS OF PREPARATION (Cont.)
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification,
a change in the lease term, a change in the in-substance fixed
lease payments or a change in the assessment to purchase the underlying
asset.
* Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases of office
equipment that are considered of low value (i.e., below EUR5,000).
Lease payments on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis over the lease
term.
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised,
or any periods covered by an option to terminate the lease, if
it is reasonably certain not to be exercised.
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when
tax treatments involve uncertainty that affects the application
of IAS 12 Income Taxes. It does not apply to taxes or levies outside
the scope of IAS 12, nor does it specifically include requirements
relating to interest and penalties associated with uncertain tax
treatments. The Interpretation specifically addresses the following:
-- Whether an entity considers uncertain tax treatments separately
* The assumptions an entity makes about the examination
of tax treatments by taxation authorities
* How an entity determines taxable profit (tax loss),
tax bases, unused tax losses, unused tax credits and
tax rates
* How an entity considers changes in facts and
circumstances
An entity has to determine whether to consider each uncertain tax
treatment separately or together with one or more other uncertain
tax treatments. The approach that better predicts the resolution
of the uncertainty needs to be followed.
The Group applies significant judgement in identifying uncertainties
over income tax treatments. Since the Group operates in a complex
multinational environment, it assessed whether the Interpretation
had an impact on its consolidated financial statements.
Upon adoption of the Interpretation, the Group considered whether
it has any uncertain tax positions, particularly those relating
to transfer pricing. The Company's and the subsidiaries' tax filings
in different jurisdictions include deductions related to transfer
pricing and the taxation authorities may challenge those tax treatments.
The interpretation did not have an impact on the consolidated financial
statements of the Group.
NOTE 2:- BASIS OF PREPARATION (Cont.)
Amendments to IFRS 9: Prepayment Features with Negative Compensation
Under IFRS 9, a debt instrument can be measured at amortised cost
or at fair value through other comprehensive income, provided
that the contractual cash flows are 'solely payments of principal
and interest on the principal amount outstanding' (the SPPI criterion)
and the instrument is held within the appropriate business model
for that classification. The amendments to IFRS 9 clarify that
a financial asset passes the SPPI criterion regardless of an event
or circumstance that causes the early termination of the contract
and irrespective of which party pays or receives reasonable compensation
for the early termination of the contract. These amendments had
no impact on the consolidated financial statements of the Group.
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
The amendments to IAS 19 address the accounting when a plan
amendment,
curtailment or settlement occurs during a reporting period.
The amendments
specify that when a plan amendment, curtailment or settlement
occurs during
the annual reporting period, an entity is required to
determine the current
service cost for the remainder of the period after the plan
amendment,
curtailment or settlement, using the actuarial assumptions
used to remeasure
the net defined benefit liability (asset) reflecting the
benefits offered
under the plan and the plan assets after that event. An
entity is also
required to determine the net interest for the remainder of
the period
after the plan amendment, curtailment or settlement using the
net defined
benefit liability (asset) reflecting the benefits offered
under the plan
and the plan assets after that event, and the discount rate
used to remeasure
that net defined benefit liability (asset).
These amendments had no impact on the consolidated financial
statements
of the Group as it did not have any plan amendments,
curtailments, or
settlements during the period.
Amendments to IAS 28: Long-term interests in associates and joint
ventures
The amendments clarify that an entity applies IFRS 9 to long-term
interests in an associate or joint venture to which the equity
method is not applied but that, in substance, form part of the
net investment in the associate or joint venture (long-term interests).
This clarification is relevant because it implies that the expected
credit loss model in IFRS 9 applies to such long-term interests.
The amendments also clarified that, in applying IFRS 9, an entity
does not take account of any losses of the associate or joint venture,
or any impairment losses on the net investment, recognised as adjustments
to the net investment in the associate or joint venture that arise
from applying IAS 28 Investments in Associates and Joint Ventures.
These amendments had no impact on the consolidated financial statements
as the Group does not have long-term interests in its associate
and joint venture.
Annual Improvements 2015-2017 Cycle
* IFRS 3 Business Combinations
The amendments clarify that, when an entity obtains control of
a business that is a joint operation, it applies the requirements
for a business combination achieved in stages, including remeasuring
previously held interests in the assets and liabilities of the
joint operation at fair value. In doing so, the acquirer remeasures
its entire previously held interest in the joint operation.
NOTE 2:- BASIS OF PREPARATION (Cont.)
An entity applies those amendments to business combinations for
which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after 1 January 2019,
with early application permitted.
These amendments had no impact on the consolidated financial statements
of the Group as there is no transaction where a joint control is
obtained.
* IFRS 11 Joint Arrangements
A party that participates in, but does not have joint control of,
a joint operation might obtain joint control of the joint operation
in which the activity of the joint operation constitutes a business
as defined in IFRS 3. The amendments clarify that the previously
held interests in that joint operation are not remeasured.
An entity applies those amendments to transactions in which it
obtains joint control on or after the beginning of the first annual
reporting period beginning on or after 1 January 2019, with early
application permitted.
These amendments had no impact on the consolidated financial statements
of the Group as there is no transaction where a joint control is
obtained.
* IAS 12 Income Taxes
The amendments clarify that the income tax consequences of dividends
are linked more directly to past transactions or events that generated
distributable profits than to distributions to owners. Therefore,
an entity recognises the income tax consequences of dividends in
profit or loss, other comprehensive income or equity according
to where it originally recognised those past transactions or events.
An entity applies the amendments for annual reporting periods beginning
on or after 1 January 2019, with early application permitted. When
the entity first applies those amendments, it applies them to the
income tax consequences of dividends recognised on or after the
beginning of the earliest comparative period.
Since the Group's current practice is in line with these amendments,
they had no impact on the consolidated financial statements of
the Group.
* IAS 23 Borrowing Costs
The amendments clarify that an entity treats as part of general borrowings
any borrowing originally made to develop a qualifying asset when
substantially all of the activities necessary to prepare that asset
for its intended use or sale are complete.
The entity applies the amendments to borrowing costs incurred on
or after the beginning of the annual reporting period in which the
entity first applies those amendments. An entity applies those amendments
for annual reporting periods beginning on or after 1 January 2019,
with early application permitted.
Since the Group's current practice is in line with these amendments,
they had no impact on the consolidated financial statements of the
Group.
NOTE 3: - USE OF JUDGEMENT AND ESTIMATES
In preparing this interim condensed consolidated financial
information, management has made judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing this interim condensed consolidated financial
information, the significant judgments made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were principally the same as those that
applied to the consolidated financial statements as at and for the
year ended December 31, 2018, save for the changes highlighted
above. Refer also to Note 4 below for significant estimations
performed.
NOTE 4: - GOING CONCERN AND LIQUIDITY POSITION OF THE
COMPANY
The interim condensed consolidated financial statements have
been prepared on a going concern basis, which assumes that the
Group will be able to meet the mandatory repayment obligations of
its bonds and other working capital requirements.
The Group's primary need for liquidity is to repay its debts and
fund general corporate purposes. The Group has incurred losses and
experienced negative operating cash flows for the past several
years, and accordingly, it has taken a number of actions to
continue to support its operations and meet its obligations.
As at June 30, 2019 the Group's outstanding obligations to
bondholders are EUR 87.5 million.
Information concerning the Group's obligations and commitments
to make future payments under contracts such as debt agreements in
the 18 months starting July 1, 2019 is aggregated in the following
tables.
Total Payment Due by
period
(EUR '000)
------------------------------
Within Within 1-1.5
Liquidity Requirements 1 year year
------------------------------------ -------------- --------------
Bonds including current portion and
interest (*) 93,638 -
General & administrative, property
maintenance 1,700 800
-------------- ------------
Total liquidity requirements 95,338 800
Total Sources (**) 3,830 6,500
-------------- ------------
Total deficit (91,508) 5,700
-------------- ------------
(*) Bonds payment schedule presented according to trust deeds.
An accrued interest amount of Circa EUR 0.75 million was repaid by
the date of approval of these interim condensed consolidated
financial statements following the balance sheet date.
(**) The Company expects to increase the amount of its liquid
balances during the 18 months starting July 1, 2019, by sale of
plots of lands and price adjustments
(Including Chennai Project and excluding Bangalore Project due
to steps taken to protect the company Rights (INR 80 million
assumed to be received till end of 2019 by EPI); Casa Radio is not
included at the above period except of EUR 0.2 million), excluding
cash balances as of the date of signing the financial
statements.
NOTE 4: - GOING CONCERN AND LIQUIDITY POSITION OF THE COMPANY
(Cont.)
Management acknowledges that the above expected cash flows are
based on forward-looking plans and estimations which rely on the
information known to management at the time of the approval of
these interim condensed consolidated financial statements. The
materialization of the above forecast is not certain and is subject
to factors beyond the Company's control.
Therefore, delays in the realization of the Group's assets and
investments or realization at lower price than expected by
management could have an adverse effect on the Group's liquidity
position and its ability to meet its contractual obligations on a
timely manner.
Management further acknowledges that the Company is exposed to
foreign currency risk derived from borrowings denominated in
currency other than the functional currency of the Group, more
specifically a further devaluation of the EUR against the NIS can
significantly increase the remaining contractual obligation to
bondholders.
The board and management estimate that the Company is unable to
serve its entire debt according to the current repayment schedule.
Moreover, following the recent default of purchaser of Bangalore
project to meet payments schedule according to the signed amendment
agreement (refer to Note 7(1)), and the SPA signed with the
purchaser of Chennai Project (refer to Note 7(2)), it is expected
that the Company will not be able to meet its entire contractual
obligations in the following 12 months.
As of June 30, 2019, the Company is not in compliance with
Coverage Ratio Covenant ("CRC") as defined in the restructuring
plan. This may entitle the bondholders to declare that all or a
part of their respective (remaining) claims become immediately due
and payable.
The Company's financial statements as of December 31, 2018
include an auditor's opinion with emphasis of matter to going
concern uncertainty. As a result, there is a risk that the
bondholders could argue that there exists a substantial suspicion
with respect to the Company's ability to repay its obligations that
entitles them to immediate repayment.
In addition, based on trust deeds in case of material
deterioration in the Company's business and substantial suspicion
exists that the Company will not be able to repay the bonds on
time, the bondholders may declare immediate repayment of bonds.
In the case that the bondholders would declare their remaining
claims to become immediately due and payable, the Company would not
be in a position to settle those claims and would need to enter to
an additional debt restructuring or might cease to be a going
concern. As at the date of these condensed consolidated financial
statements the bondholders have not taken steps to assert their
rights.
A combination of the abovementioned conditions indicates the
existence of a material uncertainty that casts significant doubt
about the Company's ability to continue as a going concern.
NOTE 5: - FINANCIAL INSTRUMENTS
Carrying amounts and fair values
In respect to the Company's financial instruments assets not
presented at fair value, being mostly short-term market interest
bearing liquid balances, the Company believes that the carrying
amount approximates its fair value. In respect of the Company's
financial instruments liabilities:
Fair value of the quoted debentures is based on price quotations
at the reporting date and is classified as Level 1 in the fair
value hierarchy.
Carrying amount Fair value
------------------------ -----------------------
June 30, December June 30, December
31, 31
2019 2018 2019 2018
------------- --------- ------------- --------
Not audited Not audited
Not reviewed Audited Not reviewed Audited
------------- --------- ------------- --------
EUR '000 EUR '000 EUR '000 EUR '000
------------- --------- ------------- --------
Statement of financial position
Debentures A at amortized
cost - Israeli NIS bonds 34,876 31,767 10,004 9,388
Debentures B at amortized
cost - Israeli NIS bonds 49,007 44,931 12,521 14,365
Accrued interests on Bonds 1,607 - - -
The total contractual liability of the Debentures was EUR 87.5
million as at June 30, 2019.
NOTE 6: - CASA RADIO
a. Following Note 5(4)(d) to the annual financial statements
which discloses potential irregularities regarding to Casa Radio
project in Romania and their potential implications, there have
been no significant events since the publication of the annual
financial statement as of December 31, 2018.
b. Following Note 5(4)(c) to the annual financial statements
which discloses that the public authorities may seek to terminate
the Public Private Partnership Agreement and with respect to Casa
Radio asset and potential implications, there have been no
significant events since the publication of the annual financial
statements as of December 31, 2018.
c. Following Note 5(4)(f) to the annual consolidated financial
statements which discloses that the Company signed the non-binding
Letter of Intent ("LOI") with AFI Europe N.V. (the "Purchaser", and
together with the Company, the "Parties") for the sale of its
entire indirect shareholdings (75%) in the Casa Radio Project (the
"Project"), the Parties have agreed to extend the time period for
executing the Pre-Sale agreement for the sale of the Project until
no later than July 5, 2019.
On 3 July 2019, the Company's wholly owned subsidiary Dambovita
Center Holding B.V ("Dambovita NL") as seller, the Company as
guarantor and AFI Europe as buyer entered into a pre-sale agreement
for the sale of the shareholding in Dambovita Center S.R.L
("Dambovita RO") (Pre-Sale Agreement). Pursuant to the terms of the
Pre-Sale Agreement, AFI Europe shall carry out a due diligence
review which review shall be completed no later than 5 September
2019 following which, subject to the satisfaction of the other
conditions precedent in the Pre-Sale Agreement, the parties to the
Pre-Sale Agreement will execute a share purchase agreement in the
short form being Annex 3 to the Pre-Sale Agreement (SPA) and an
intragroup loan assignment/novation agreement.
NOTE 6: - CASA RADIO (Cont.)
The Company, as guarantor under the Pre-Sale Agreement, will
undertake to indemnify AFI Europe, jointly and severally, against
all losses, charges, costs and expenses (including reasonable
attorney's fees) which AFI Europe shall sustain or incur (i) by
reason of a breach of Dambovita NL's warranties under the Pre-Sale
Agreement in whole or in part (the aggregate liability of Dambovita
NL under claims for breach of Dambovita NL's warranties and any
other indemnification event under the Pre-Sale Agreement: (a)
occurring between the signing date of the Pre-Sale Agreement and
the Closing Date shall be limited to the costs and expenses
actually incurred by AFI Europe in connection with the fulfillment
of the conditions precedent and only after and subject to (i)
satisfactory due diligence and (ii) down payment; (b) arising after
the Closing date, shall not exceed EUR 60 million); and (ii) in
connection with a specific indemnity granted by Dambovita NL in the
Pre-Sale Agreement, whereby Dambovita NL expressly, irrevocably and
unconditionally undertakes to fully indemnify AFI Europe against
any losses related to or deriving from the investigation of the
Romanian National Anticorruption Directorate that is currently
pending against Dambovita RO and/or its current and former officers
or any other criminal investigation concerning Dambovita RO and/or
its current and/or former officers in relation to events occurring
prior to the Closing Date which specific indemnity is unlimited;
these guarantee obligations from the Company are not laid down in a
separate document but are incorporated in the Pre-Sale Agreement
(Company Guarantee).
Conditions precedent in the Pre-Sale Agreement comprise inter
alia (i) the satisfactory completion of a due diligence
investigation by AFI Europe the latest on 5 September 2019; (ii)
the Romanian competition council having issued competition approval
for the Transaction; (iii) publication of the contemplated sale of
the shares in Dambovita RO by Dambovita NL in the Official Gazette
of the Romanian Government and the lapse of a 30-day objection
period with no opposition being lodged; (iv) no pending or imminent
material adverse change (which includes insolvency of Dambovita RO,
termination of the PPP Agreement or a significant amendment of the
terms and conditions of the PPP Agreement rendering the fulfilment
thereof more onerous; (v) issuance of a Government Decision
confirming that Dambovita NL may transfer the shares to AFI Europe
(or any of its affiliates) and that the Company and Elbit Imaging
Ltd. may transfer their rights and obligations under the PPP
Agreement to AFI Europe (vi); amendment of the PPP Agreement in
order to transfer the rights of Elbit Imaging Limited and the
Company to AFI Europe; (vii) obtaining a written confirmation that
the 49 years term of the PPP Agreement shall be calculated, the
earliest, starting from 2012, however, in case the 49 years
concession term is calculated from any other previous date, the
parties to the Pre-Sale Agreement will try to find an amicable
compromise, discounting the Purchase Price (as defined below) to
reflect the shorter concession term; in case of such parties'
failure to reach an agreement with respect to the discounted
Purchase Price, AFI Europe has the right to consider this condition
precedent as not being fulfilled; and (viii) the receipt of
approval of the General Meeting and the Company's bondholders for
the Transaction.
The fulfilment of the condition's precedent relating to the
approval of the Company's shareholders and bondholders as referred
to above must occur no later than at 5 September 2019. The long
stop date as referred to in the Pre-Sale Agreement (i.e. the date
on which all conditions precedent must be fulfilled and closing of
the Transaction must occur) is 15 months after the lapse of the due
diligence period (5 September 2019).
On July 30, 2019 at the bondholders' meeting of Bonds series A
and Bonds Series B it was decided to authorize the company to enter
into an agreement and execute the transaction contained therein,
despite the Company's failure to comply with the minimum coverage
ratio (as defined in the Trust Deed) and notwithstanding the
provision of section 4.6 of the Trust Deed.
NOTE 6: - CASA RADIO (Cont.)
In addition, an extraordinary general meeting of the
Shareholders of the Company held on 29 August 2019 approved the
transaction as detailed in the Notice of EGM.
PRE-SALE AGREEMENT - SPECIFIC PROVISIONS
Pursuant to the Pre-Sale Agreement, Dambovita NL will transfer
its interest in Dambovita RO and will assign the Intragroup Loans
to AFI Europe for the maximum consideration of EUR 60 million,
subject to the fulfilment of certain conditions (Purchase
Price).
The Purchase Price is defined in the Pre-Sale Agreement as EUR
60 million minus 75% of Dambovita RO's liabilities computed based
on the closing accounts (being the financial statements of
Dambovita RO for the period from 1 January of the year in which the
closing of the Transaction will occur) and excluding the Intragroup
Loan, plus 75% of Dambovita RO's available cash and other current
assets as shown in the closing accounts (as referred to above) and
minus (insofar applicable) an amount agreed upon by the parties to
the Pre-Sale Agreement to be reduced from the Purchase Price if the
49-year PPP-rights period will be calculated from any date prior to
the year 2012. The loan assignment amount (as part of the Purchase
Price) will be calculated on the Closing Date as the balance
between the Purchase Price and the price for the shares sold (being
the nominal value of these shares RON 44,050,380, which is the
equivalent of USD 14,778,862).
Upon satisfactory completion of the due diligence to be carried
out by AFI Europe, there will be a down payment of EUR 200,000,
which shall be repaid upon the occurrence of (i) cancellation of
the PPP Agreement; (ii) initiation of Dambovita RO's dissolution
due to negative equity requirements; (iii) the existence of
elements of criminal investigation against Dambovita RO, beyond the
information as disclosed to AFI Europe or, if such investigation
would be held against Dambovita RO's directors of employees, in
case this would trigger a significant impact on the Dambovita
Project or (iv) Dambovita NL refuses to proceed to closing or is
not present at the closing date, although all the conditions
precedent were fulfilled or waived.
Upon execution of the SPA, AFI Europe is bound to make a payment
of EUR 20 million to Dambovita NL. A further EUR 22 million is to
be paid later upon the issuance by the competent authorities of a
building permit for the first stage of the Dambovita Project (the
development of the shopping mall or the office building, excluding
the public authority building as referred to above). The balance
between the Purchase Price and the payments already made, will be
paid out to Dambovita NL upon all permits required for the
operation of any of the components (office building or shopping
mall) of the first stage of the Dambovita Project including a fire
permit and the operation permit having been obtained.
At the moment, it is not possible to give a forecast in respect
of which monetary amounts will be received by Dambovita NL on the
Closing Date nor in respect of when the Closing Date will be.
There can be no certainty that the SPA will eventually be
executed and/or that the Transaction will be consummated as
presented above or at all.
NOTE 7:- EQUITY ACCOUNTED INVESTEES
Material events and updates during the reporting period:
(1) Bangalore:
In March, 2008 Elbit Plaza India Real Estate Holdings Limited (a
subsidiary held by the Company (50%) and Elbit Imaging ltd.(50%))
("EPI") entered into a share subscription and framework agreement
(the "Agreement"), with a third-party local developer (the
"Partner"), and a wholly owned Indian subsidiary of EPI which was
designated for this purpose ("SPV"), to acquire together with the
Partner, through the SPV, up to 440 acres of land in Bangalore,
India (the "Project") in certain phases as set forth in the
Agreement. As of June 30, 2019, the Partner has surrendered sale
deeds to the SPV for approximately 54 acres (the "Plot"). In
addition, under the Agreement the Partner has also been granted
with 10% undivided interest in the Plot and have also signed a
Joint Development Agreement with the SPV in respect of the
Plot.
On December 2, 2015 EPI has signed an agreement to sell 100% of
its interest in the SPV to the Partner (the "Sale Agreement"). The
total consideration upon completion of the transaction was INR 321
crores (approximately EUR 40.2 million) which should have been paid
no later than September 30, 2016 (" Long Stop Date"). On November
15, 2016, the Partner informed EPI that it will not be able to
execute the advance payments.
As a result of the foregoing, the Company has received from the
escrow agent the sale deeds in respect of additional 8.7 acres (the
"Additional Property") which has been mortgaged by the Partner in
favor of the SPV in order to secure the completion of the
transaction on the Long Stop Date. The Additional Property has not
yet been registered in favor of the SPV for cost-benefit reasons.
In addition, as per the Sale Agreement, the Company took actions in
order to get full separation from the Partner with respect to the
Plot and specifically the execution of the sale deed with respect
of the 10% undivided interest, all as agreed in the Sale
Agreement.
As a result of the failure of the Partner to complete the
transaction under the Sale Agreement and in accordance with the
provisions thereto, EPI has 100% control over the SPV and the
partner is no longer entitled to receive the 50% shareholding.
In light of the above, and after lengthy negotiations between
the parties, new understandings were formulated and the parties
signed a revised agreement that substantially altered the outline
of the original transaction (and this agreement was amended several
more times, the last of which in April 2019), and concluded that:
(i) the closing date for the transaction will be extended to
November 2019, and may be further extended to August 2020 (the
"Closing Date"). It should be clarified that the postponement of
the closing date to August 2020 is subject to receipt of payments
due by November 2019 (approximately Eur 12 million) and subject to
mutually agreed payment terms; and (ii) the consideration will be
increased to INR 356 crores (approximately Eur 45.1 million) (Plaza
part approximately Eur 22.6 million) (the "Consideration").
On July 25, 2019, the Company announced that the Partner paid
Eur 0.127 million (INR 1 crore) (Company part approximately EUR
0.063 million) and thereby having paid Euro 0.76 million (INR 6
crores) out of the approximately EUR 3.05 million (INR 24 crores)
to be paid until the end of July 2019, and that the Partner seeks
more time without committing to a schedule for payment of the
remaining amount. During august 2019 the Partner paid ad additional
INR 1 crore (EUR 0.125 million).
NOTE 7:- EQUITY ACCOUNTED INVESTEES (Cont.)
At this stage, there is no clarity on payment of the remaining
amount and the Company is taking necessary steps to protect its
interest, including, notice letters that were sent to the Partner,
and filing a motion with court in order to collect checks given by
the Partner to secure payments under the transaction, but were
dishonored.
As of this date, the Partner paid EPI approximately EUR 11.1
million (INR 87 crores) (Company part approximately EUR 5.57
million) on account of the Consideration (which EPI is entitled to
forfeit if the Partner does not close the transaction as per the
agreement), instead of a total of INR 1,100 crores (approximately
Euro 14 million) that should have been received by this date. A
total of approximately Euro 5.4 million (INR 43 crores) should be
paid in unequal monthly installments until the Closing Date; and a
total of approximately Euro 28.5 million (INR 226.6 crores) should
be paid upon Closing Date.
The company estimates that the procedures for separating from
the Partner and canceling his 10% undivided interest in the Plot,
will cost up to EUR 1 million and will required the time frame of
one year to four years. (The difference in costs and the length of
time associated with such separation process is depend on the legal
proceedings that EPI will take as well as whether or not the
Partner will seek to compromise during legal proceedings).
Environmental update on Bangalore project - India:
On May 4, 2016, the National Green Tribunal ("NGT"), an Indian
governmental tribunal established for dealing with cases relating
to the environment, passed general directions with respect to areas
that should be treated as "no construction zones" due to its
proximity to water reservoirs and water drains ("Order"). The
restrictions in respect of the "no construction zone" are
applicable to all construction projects.
The government of Karnataka had been directed to incorporate the
above conditions in respect of all construction projects in the
city of Bangalore including the Company's project which is adjacent
to the Varthur Lake and have several storm-water crossing it.
An appeal was filed before the Supreme Court of India against
the Order. On March 2019, the Supreme Court has set aside the Order
thereby restoring the position as it existed before the Order was
passed by NGT.
Net realizable value measurement of Bangalore project
As for December 31, 2018 and 2017, the net realizable value of
the project according the following methods is:
The evaluation Value in INR million Value in EUR million
method
Comparable Method 2,350 29.5
--------------------- ---------------------
DCF Method 2,190 27.49
--------------------- ---------------------
Mantri Deal Value 2,267 28.46
--------------------- ---------------------
NOTE 7:- EQUITY ACCOUNTED INVESTEES (Cont.)
In light of the Company's intention to sell the Plot to the
Partner or to any other third party (see above), and in light of
the uncertainty as to the completion of the transaction with the
Partner, the Company believes that the comparable method reliably
reflects the net realizable value of the Plot and therefore the
Property is included in the financial statements at the value of
EUR 14.73 million (50%).
The plot in Bangalore is still in land stage and therefore the
value of the plot has been derived using land comparable method.
The valuation of the property reflects the interest that the
partner still holds in the plot (10% as described above), the size
of the plot and the non-contiguous land parcel. The local
authorities have proposed a revised master plan for Bangalore under
which it is proposed to change the zoning of the Plot from
residential to open Space/ parks/ recreation zone which if given
effect might adversely affect the development prospects on the
Plot. It should be clarified that as long as the proposed change
has not been definitively approved, the land zoning remains intact
(residential zoning). However, there is no certainty as to the
response of the local authorities if and as a construction plan is
submitted to them during this period (before a final decision is
made as to whether or not to approve the change). The Company being
aggrieved by the proposed change was entitled to and has filed (as
well as other third parties) the necessary objections with the
concerned authorities (the period for submitting objections to the
revised master plan has expired) and believes that the current
zoning regulations will be maintained.
Management believes that the current discount rate used towards
this end is an appropriate estimation in the current
circumstances.
The following main parameters have been considered to arrive at
the land value of the subject property by land sale comparison
method:
Parameter Premium (Discount)
Applicable land value (INR Mn/acre) 96
---------------------
Discount on account of Revised Master
Plan 2015 Buffer zone norms (%) -25%
-------------------
Presence of minority shareholder -20%
-------------------
Discount on account of possible
change in zoning (open space/parks) -25%
-------------------
2) Chennai:
In December 2007, EPI executed agreements for the establishment
of a special purpose vehicle ("Chennai Project SPV") together with
a local developer in Chennai ("Local Partner"). The Chennai Project
SPV acquired 74.73 acres of land situated in the Sipcot Hi-Tech
Park in Siruseri District in Chennai ("Property").
NOTE 7:- EQUITY ACCOUNTED INVESTEES (Cont.)
On September 16, 2015, EPI has obtained a backstop commitment
from the Local Partner for the purchase of its 80% shareholding in
the Chennai SPV by January 15, 2016, for a net consideration of
approximately INR 161.7 Crores (EUR 21.1 million). Since the Local
Partner had breached its commitment, EPI exercised its rights and
acquired the Local Partner's 20% holdings in the Chennai Project
SPV. Accordingly, as of the balance sheet date EPI has 100% of the
equity and voting rights in the Chennai Project SPV (However, there
are two lawsuits (being filed in India) by plaintiffs claiming to
be descendants of the landowners of the Property, who wish to
recognize them as owners of 1.6% the Property).
During 2016, Chennai Project SPV has signed a Joint Development
Agreement with a local developer ("Developer" and "JDA",
respectively) with respect to the Property. Under the terms of the
JDA, the Chennai Project SPV granted the property development
rights to the Developer" who shall bear full responsibility for all
of the project costs and liabilities, as well as for the marketing
of the scheme. The JDA also stipulates specific project milestones,
timelines and minimum sale prices.
The JDA may be terminated in the event that the required
governmental approvals for establishment of access road to the
Property has not been achieved within 12 (twelve) months period
from the execution date of the JDA. The required approvals have not
yet been obtained at the target date. Upon such termination, the
Developer shall be entitled to the refund of the relevant amounts
paid as Refundable Deposit and any other cost related to such
access road or the title over the Property.
On July 5, 2018 EPI signed a term sheet ("Term Sheet") with the
Developer for the sale of the Property for a total consideration of
approximately Euro 13.2 million (INR 1,060 million). The closing of
the transaction was expected in February 2019. As the transaction
was not completed the Term Sheet was terminated by EPI.
In February 2019 the Chennai Project SPV issued notice to
Developer terminating the JDA due to its failure to obtain the
access road. The said termination of JDA has
been disputed by the Developer. Therefore, the Chennai Project
SPV has initiated arbitration proceeding against the Developer in
accordance with the Arbitration Rules of the Singapore
International Arbitration Centre, in accordance with the JDA
Agreement to protect its rights.
On June 13, 2019 the Company announced that EPI and the
Developer have signed a share purchase agreement ("SPA") according
to which: (i) the Developer has paid a deposit of INR 5 crores
(approximately Euro 0.625 million) in order to provide the
Developer with an additional six months to complete the closing,
which may be extended by another month upon payment by the
Developer of an additional deposit of INR of 5 crores. As of this
date, the Developer has deposited a total of INR 15 crores
(approximately Euro 1.875 million) (the "Deposits"); (ii) if the
Developer is unable to complete the closing within the aforesaid
time periods, then the parties will mutually appoint an
international real estate consulting firm for the purpose of
identifying a third-party buyer within a period of six months;
(iii) if the Developer is unable to complete the closing and no
third-party buyer is found within the aforesaid time periods, both
the JDA and SPA shall be terminated, subject to the Developer
receiving the Deposits. However, the Purchaser will not be entitled
to reimbursement of expenses incurred by it under the JDA; (iv) any
final price received from a third-party buyer above approximately
Euro 13.5 million (INR 108 crores) (the "Consideration") will be
shared 67% by the Developer and 33% by EPI.
NOTE 7:- EQUITY ACCOUNTED INVESTEES (Cont.)
The Consideration is subject to adjustment with respect to the
Deposits and the existing cash in the Chennai Project SPV; (v) the
Consideration will be remitted in Euro at the base rate already
agreed upon by the parties. Foreign exchange loss arising due to
change in conversion rate from INR to euro will be borne by the
Developer and gain will be credited to the account of EPI; (vi) the
parties withdraw the arbitration proceedings and other notices.
Net realizable value measurement of Chennai project
The valuation of the property is based on the comparable method.
As for December 31, 2018 and 2017 the Group measured the net
realizable value of the project which was INR 1,351 million (EUR
16.93 million);
The evaluation Value in INR Value in Euro
method (Millions) (Millions)
Comparable Method 1,351 16.93
------------- ---------------------
DCF Method 1,233 15.45
------------- ---------------------
In light of the Company's intention to sell the Property to the
Developer or to any other third party (see above), the Company
believes that the Comparable Method reliably reflects the net
realizable value of the property and therefore the Property is
presented in the financial statements at the value of INR 1,351
million.
The following main parameters have been considered to arrive at
the land value of the subject property:
Parameter Premium (Discount)
Applicable Land Value INR million/acre 18.08
-------------------
Discount for shape and contiguity -20%
-------------------
Discount for size -10%
-------------------
Additional cost to be incurred
at the site due to illegal excavation -5%
-------------------
Other Discounts (including due
to negotiation, access road, topography,
FSI) -20%
-------------------
Total discount on account -55%
-------------------
NOTE 8:- MATERIAL EVENTS DURING THE REPORTING PERIOD
a. Pre-Agreement for the sale of a Plot of Land in Brasov, Romania
On February 5, 2019 the Company signed a Pre-Agreement for the
sale of a plot in Brasov, Romania for a total gross amount of EUR
620,000 (the "Transaction). The consummation of the Transaction
(which will take place not later than January 15, 2020) is subject
to the fulfilment of certain conditions, including, inter alia:
(i) the former financing bank of the Project did not exercise
its right to purchase the Property until December 6, 2019; (ii)
successful conclusion by the potential purchaser of its due
diligence investigations; and (iii) the execution of definitive
agreement.
During the period commencing on the date of the execution of the
Pre-Agreement and ending on the earlier of: (i) January 15, 2020,
or (ii) the date of the termination of the Pre-Agreement, the
Company and its representatives have undertaken to refrain from
negotiating with any other third party other than the Purchaser
(and other than the bank as mentioned above) for the purpose of
selling its Plot of land.
As of the date hereof, there can be no certainty that a
definitive agreement will be signed and/or that the Transaction
will be consummated.
b. Update regarding the transaction for the sale of Plot in Chennai and Bangalore in India
Please refer to Note 7.
c. Pre-sale agreement for the sale of the Company's indirect
shareholdings in the Dambovita Center Project ("CASA RADIO")
Please refer to Note 6.
d. Update on disposal of land plot in Miercurea Ciuc, Romania
Further to the Company's announcement dated October 17, 2018
regarding signing the pre-agreement for the sale of land plot
totaling approximately 37,000 sqm in Mercuria Ciuc, Romania, the
Company grant an option for the purchase of the Plot till mid-April
2019 for a total consideration of EUR 0.11 million. In March 2019,
following negotiations with the purchaser, the parties agreed that
(i) the signing date of a definitive agreement was postponed by 3
months to mid-July 2019, (ii) the receipt of non-refundable advance
payments of EUR 0.25 million in two tranches by the end of April
2019, and; (ii) the sale price will be increased by EUR 30,000. As
a result, the company recorded a gain in amount of EUR 0.5 million
due to partial reversal of write down.
On July 11, 2019, the Company has signed a definitive agreement
for the sale (on an "as is" basis) of its plot for a total amount
of EUR 1.58 million (out of which EUR 0.36 million has already been
received as non-refundable advance payments as of balance sheet
date). The advanced are included in Other liabilities.
e. Disposal of land plot in Lodz, Poland
On June 13, 2017, the Company announced that it has signed a
preliminary sale agreement for the disposal of a 13,770 sqm plot at
its second land holding in Lodz, Poland, (representing 22% of this
holding) to a retail developer, for EUR 1.15 million. As part of
the agreement, the purchaser paid an immediate installment of EUR
0.035 million followed by an installment of EUR 0.073 million paid
in 2018 after obtaining environmental permit for investing in the
access road to the plot.
NOTE 8:- MATERIAL EVENTS DURING THE REPORTING PERIOD (Cont.)
During February 2019 the Company has signed conditional sale
agreement for which the remaining balance less 50% of the sum
invested in the road (up to maximum amount of circa EUR 0.19
million) will be paid once the final agreement is signed after the
municipality confirms that it will not exercise preemptive
rights.
On March 26, 2019 the Company has signed definitive sale
agreement, under terms of which the purchaser paid the rest of
consideration (circa EUR 0.84 million) in two installments: EUR
0.76 million was paid at the date of the signing of the definitive
sale agreement and the remaining amount of EUR 0.09 million was
paid on April 29, 2019.
f. Preliminary Agreement for the sale of remaining land plot in Lodz, Poland
In May 2019, the Company has signed a Preliminary Agreement (the
"Preliminary Agreement") for the sale of its remaining holdings in
the Plot (circa 47,860 sqm) to a local developer (the "Purchaser")
for a total gross consideration of approximately EUR 1.10 million
(the "Consideration").
Under the terms of the Preliminary Agreement: (i) a conditional
sale agreement will be signed until September 3, 2019 (the "Closing
Date") following due diligence. The Purchaser has the right to
withdraw from the transaction until the Closing Date; (ii) a
definitive agreement will be signed not later than October 15, 2019
; (iii) 10% of the Consideration was deposited on notarial deposit
upon signing the Preliminary Agreement and will be released upon
signing a definitive agreement following municipality's
confirmation that it will not exercise preemptive rights (the
"Confirmation"); (iiii) 40% of the Consideration will be paid upon
signing a definitive agreement and subject to obtaining the
Confirmation; and (v) 50% of the Consideration will be paid not
later than December 10, 2019. This payment will be secured by a
mortgage on the Plot.
g. Motion to reveal and review internal documents
In March 2018, a Shareholder of the Company has filed a motion
with the Financial Department of the District Court in Tel-Aviv to
reveal and review internal documents of the Company and of Elbit
Imaging Ltd., with respect to events surrounding certain agreements
executed in connection with the Casa Radio Project in Romania and
the sale of the US commercial centers (the "Motion"). Such events
were previously announced by the Company and are detailed in notes
5(4)(d) and 17(5) of 2018 annual financial statements. In July
2018, the Company filed its response to the relevant court. On
January 13, 2019, a Court hearing was held following which the
judge decided that the board of directors of each of the Company
and Elbit Imaging Ltd. would examine the relevant facts and decide
whether or not they should file a lawsuit against any of its
officers. The Company and Elbit Imaging Ltd. are required to submit
their conclusion to both the court and the plaintiff not later than
September 5, 2019 (following an agreed upon extension to the
original date of submission) and thereafter the plaintiff will
notify the Court whether or not he wishes to continue with the
Motion.
h. Request to reveal documents:
An indirect subsidiary of the Group in Romania (which holds plot
of land outside Bucharest) received a request from Romanian
authorities to reveal documents regarding the years in 2007-2011 as
part of an ongoing investigation procedure. The company has
submitted all relevant documents in respect of the said years.
During 2019 another indirect subsidiary of the group (which was
liquidated) was invited to a court hearing.
NOTE 8:- MATERIAL EVENTS DURING THE REPORTING PERIOD (Cont.)
A criminal investigation carried out regarding the commission of
the money laundering and fiscal evasion offenses against legal
representative (directors) of certain companies in which the
company had indirect holdings through JV in the past. The
prosecutor closed the case and the chief prosecutor denied the
complaint of National Agency for Fiscal Administration as tardy.
Against the prosecutor's disposition to close the case, the
National Agency for Fiscal Administration filed a complaint in
court. The court hearing has been postponed to October 3, 2019.
i. Interest and principal Payments
Following Note 8(c) to the annual financial statements in which
the company announced it will not meet its principal repayment due
on December 31, 2018 as provided for in the settlement agreement
with Series A and Series B Bondholders from 11 January 2018 (the
"Settlement Agreement"), the bondholders approved the deferral of
payment to July 1, 2019 and the company paid principal of circa EUR
250,000 and Penalty interest on arrears of EUR 150,000 on February
2019.
In addition, during June 2019 the bondholders approved the
deferral of the full payment of principal due on July 1, 2019 and
of 58% ("deferred interest amount") of the sum of interest
(consisting of the total interest accrued for the outstanding
balance of the principal, including interest for part of the
principal payment which was deferred as of February 18, 2019, plus
interest arrears for part of the principal which was fixed on
18.2.2019 and was not paid by the company and all in accordance
with the provisions of the trust deed; "the full amount of
interest"), the effective date of which is 19.6.2019, and the
payment date was fixed as of 1.7.2019. The company paid on the said
date a total amount of circa EUR 1.17 million EUR of which is only
42% of the full amount of interest.
On July 11, 2019, Company announced that its Romanian subsidiary
had signed a binding agreement to sell land in Romania (refer to
Note 8(d)), and that the Company would use part of the proceeds now
received by it EUR 0.75 million (hereinafter: "the amount
payable"), in order to make a partial interest payment to the
bondholders (Series A) and (Series B) issued by the Company. The
payment required changes in the repayment schedule and amendments
of the trust deeds which was approved unanimously by the
Bondholders. The amount payable was paid on August 14, 2019 and
reflects 30% of accrued interest as of that date.
NOTE 9: - SUBSEQUENT EVENTS
a. Disposal of land plot in Miercurea Ciuc, Romania
Refer to note 7.
b. Belgrade Plaza
On January 26, 2017, the Company signed a binding share purchase
agreement with BIG Shopping Centers Ltd ("BIG"), for the sale of
the SPV holding Belgrade Plaza shopping and entertainment center.
The final agreed value of Belgrade Plaza, which comprise circa
32,300 sqm of GLA, will be calculated based on a general cap rate
of 8.25% as well as the sustainable NOI after 12 months of
operation, which the Company estimated in the range of EUR 6.2-6.5
million per annum.
NOTE 9: - SUBSEQUENT EVENTS (Cont.)
Further installments will be due to the Company during the first
year of operation based on this 12-month figure. The NOI will be
re-examined again after 24 months and 36 months of operation, which
may lead to an upward adjustment of the final purchase price. The
Company did not record a gain from expected future purchase price
adjustments at the sale date. During June 2018 (the first
adjustment date) the First purchase price adjustment was examined
and accordingly no additional proceed was made. During December
2018, BIG paid to the Company EUR 0.466 million for the stands and
signage recorded as Revenue
from disposal of trading property.
During July 2019 (the second adjustment date) the Second
purchase price adjustment was examined and accordingly no
additional proceed was made.
On July 20, 2019, BIG paid EUR 0.11 million for the stands and
signage at the Belgrade Plaza. In addition, BIG further informed
the Company that they intend to hold an additional EUR 1 million
until an orderly engineering examination of the mall's technical
conditions is completed as part of the final Price adjustment to be
performed in May 2020. The Company is currently evaluating its
options regarding BIG's intention to hold the EUR 1 million which
was not recorded in the consolidated financial statements due to
uncertainty related to receipt of such amount.
c. Partial Interest payment on Debentures
Refer to Note 7 (i).
- - - - - - - - - - -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SDLFWSFUSEFA
(END) Dow Jones Newswires
August 30, 2019 13:31 ET (17:31 GMT)
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