TIDMPLAZ
RNS Number : 2038U
Plaza Centers N.V.
31 March 2021
31 March, 2021
PLAZA CENTERS N.V.
RESULTS FOR THE YEARED 31 DECEMBER 2020
Plaza Centers N.V. ("Plaza" / "Company" / "Group") today
announces its results for the year ended 31 December 2020.
Financial highlights:
-- Reduction in total assets by EUR43.6 million to EUR12.5
million mainly due to decrease in Trading Properties as detailed
below.
-- Reduction of app. EUR40.4 million in the book value of the
Company's trading properties due to decrease of the full value of
Casa Radio project, Romania (refer to Note 5(4) in the annual
consolidated financial statements) and due to disposal of the land
plot in Brasov, Romania.
-- Consolidated cash position as of December 31, 2020 increased
by circa EUR0. 6 million to app. EUR 1.7 million (December 31,
2019: EUR1.1 million).
-- Revenue from disposal of Trading properties totaled EUR1.5
million (December 31, 2019: EUR3.7 million), which is in line with
the Company's disposal program.
-- EUR25.4 million loss recorded at an operating level (December
31, 2019: EUR4.4 million loss) mainly due to write-down of Trading
Property.
-- General & Administrative Expenses reduced to EUR1.1
million in 2020 mainly due to cost cutting of professional services
and manpower (December 31, 2019: EUR1.6 million).
-- Recorded loss of EUR33.5 million (December 31, 2019: EUR21.2
million), mainly due to finance expenses on bonds and write-down of
Trading Property.
-- Basic and diluted loss per share of EUR4.89 (31 December 2019: loss per share of EUR3.09).
Impact of the Covid-19
During 2020, the Covid-19 global health and economic crisis was
severely affecting business, leading to supply chain disruptions,
cash flow problems and, more generally, a sharp drop in its
activity. Many countries are taking significant steps in trying to
prevent the spread of the virus, such as restrictions on civilian
movements, gatherings, border closures and the like. The Company
monitors the consequences of the event and the actions taken in
countries in which it operates and assesses the risks and exposures
arising from these consequences. At this stage, the impact of the
effect of the COVID 19 included a write off of its assets (refer to
Note 6(1) and 6(2) in the annual consolidated financial
statements). In addition, caused Elbit Plaza India Real Estate
Holdings Limited (an equity accounted investee held by the Company
(50%) and Elbit Imaging Ltd. (50%)) ("EPI") to postpone the closing
of the sale of 100% stake in the SPV (subsidiary of EPI) (refer to
Note 6(b)(2) in the annual consolidated financial statements). In
addition, it caused a delay in the legal procedures against the
purchaser of the SPV which owns the plot in Bangalore India (refer
to Note 6(b)(1) in the annual consolidated financial statements).
Other than the above mentioned, at this stage, the Company is not
able to estimate the full future impact of COVID 19. However, the
Company assumes the demand of interested buyers is expected to be
smaller, which can have a material impact on the ability of the
Company to complete the sale of the plots it owns.
Material events during the period:
Update on disposal of a plot of land in Brasov, Romania :
On February 14, 2020 an indirect subsidiary completed the sale
of the plot in Brasov, Romania and signed the definitive agreement
for a total consideration of EUR 620,000 following which it
received the last instalment of EUR 570,000 (the Company already
received a down payment of EUR 50,000 in 2019).
Appointment of the Chairman of the Board of Directors:
On March 23, 2020 Mr. David Dekel was appointed as the
non-executive Chairman of the Board of Directors following a
meeting of the board held on that date.
Sale agreement of plot in Bangalore, India:
Regarding the criminal cases filed for dishonor of the cheques
which were given as security for payment of certain instalments
refer to Note 6(b)(1) in the annual consolidated financial
statements.
Until the approval of the financial statements the Purchaser
paid to EPI approximately EUR 11.2 million (INR 87.00 crores)
(Plaza part INR 43.5 crores (approximately EUR 5.6 million) out of
a total consideration of INR 356 crores (approximately EUR 41.16
million) (Plaza part INR 178 crores (approximately EUR 20.58
million) the SPV should have been received as of the said date as
per the Agreement.
At this stage, there is no clarity on payment of the remaining
amount based on the Agreement. Accordingly, 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.
Environmental update on Bangalore project - India :
Regarding Environmental update on Bangalore project and the
implications on the net realizable value refer to Note 6 (1) in the
annual consolidated financial statements.
Sale agreement of plot in Chennai, India:
On February 18, 2020, the Company announced that Elbit Plaza
India Real Estate Holdings Limited (an equity accounted investee
held by the Company (50%) and Elbit Imaging Ltd. (50%)) ("EPI") has
received approximately EUR 2.1 million (Plaza part EUR 1.05
million) from the SPV (subsidiary of EPI) which owns the 74.7 acre
plot in Chennai, India.
On March 8, 2020 the Company announced that EPI and the
Purchaser have reached a revised understanding regarding the
amendment of the agreement according to which the Purchaser paid
further INR 5 crores (approximately EUR 0.625 million) and get
additional three months to complete the closing before June 3,
2020, which may be extended by another three months upon payment by
the Purchaser of an additional deposit of INR 7.5 crores
(approximately EUR 0.92 million).
On June 2, 2020 the Company announced that in light of the
ongoing lockdown due to COVID-19, the Purchaser has sought
additional time for closing (currently set for June 2, 2020) and
the parties have reached to a revised understanding the Purchaser
requests and gets an extension of 3 months to complete the closing
(i.e. up to September 2, 2020) without an additional payment of INR
7.5 crores (approximately EUR 0.9 million). The Purchaser will have
an option to extend this period of time by another 3 months (i.e.,
up to December 2, 2020) upon paying additional deposit of INR 7.50
crores (approximately EUR 0.9 million) (Plaza part INR 3.75 crores
(approximately EUR 0.45 million)).
On August 31, 2020 the Company announced further to revised
understanding regarding the amendment agreed by the parties on June
2, 2020 and due to the COVID 19 negative impact on the economic
situation in India, the Purchaser has sought additional time for
closing of the transaction (currently set for September 2, 2020),
and the parties have reached a revised understanding as follows:
(i) The Purchaser will deposit INR 1 crore (approximately EUR 0.115
million) and agrees to deposit additional INR 0.50 crore
(approximately EUR 0.0575 million) by December 1, 2020; (ii) The
Purchaser gets additional seven months to complete the closing (up
to 1, April 2021), which may be extended by another three months
(up to June 30, 2021) upon payment by the Purchaser of an
additional deposit of INR 7.5 crores (approximately EUR 0.861
million)
Accordingly, the Purchaser has deposited INR 1.50 crore (Plaza
part INR 0.75 crores (approximately EUR 0.086 million) in
accordance with his obligation in connection with the revised
understandings to the Agreement as agreed on August 31, 2020.
On March 31, 2020 the Company announced further to revise
understanding regarding the amendment agreed by EPI and the
Purchaser ("The Parties"), on August 31, 2020 The Parties have
reached a revised understanding (the "Revised Understandings") as
follows:
a. The Purchaser will deposit INR 7.5 crore (approximately EUR
0.861 million (Plaza part is approximately EUR 0.43 million)).
b. The Purchaser can complete the closing by April 30, 2021 at a
revised consideration of 96.50 crores (approximately EUR 11.6
million (Plaza part is approximately EUR 5.8 million)).
c. If the Purchaser fails to complete the closing by April 30,
2021 then the Purchaser gets additional two months to complete the
closing by June 30, 2021 but at the initial consideration of INR
108 crores (approximately EUR 13 million (Plaza part is
approximately EUR 6.5 million)).
d. According to the SPA, 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.
e. Following the deposit of the INR 7.5 crore (approximately EUR
0.861 million (Plaza part is approximately EUR 0.43 million)) by
the purchaser as agreed in the Revised Understanding stated above,
as of this date, the Purchaser has deposited a total of INR 34
crores (approximately EUR 4.1 million (Plaza part is approximately
EUR 2.05 million)).
At this stage, there is no certainty that the SPA closing will
occur.
Lawsuit against entities involved in the sale of U.S. shopping
centers in 2011:
In March 2018, a shareholder of the Company (hereinafter: " the
Plaintiff ") filed a motion with the Economic Department of the
District Court in Tel-Aviv to reveal and review internal documents
of the Company and of Elbit Imaging Ltd. (hereinafter: " Elbit ")
(hereinafter: " the Motion "), in which the Court was asked to
instruct the Company and Elbit (hereinafter together: " the
Respondents ") to provide the plaintiff with certain documents of
the respondents in connection with the sale of the U.S. Shopping
Centers in 2011 and with another project of the company in
Romania.
In February 2020, an agreement was reached between the Plaintiff
and the Respondents according to which the motion will be dismissed
by consent and the plaintiff and the respondents (hereinafter: "
the Parties ") will jointly examine the feasibility of the lawsuit
in connection with the above events.
In light of the aforesaid, an agreement was signed between the
Plaintiff, the Respondents and First Libra Israel Ltd.
(hereinafter: " Libra ") according to which Libra will finance all
the expenses of filing and managing of a new lawsuit by the
Respondents against certain parties (certain officers in the
Respondents, a portion of the heirs of Motti Zisser (the former
controlling shareholder of the Respondents and other parties) who
were involved in the Respondents' transaction for the sale of real
estate in the United States in 2011 and for which funds (brokerage
fees) were allegedly illegally transferred to private companies
controlled by the late Mr. Motti Zisser (hereinafter: " Financing
Agreemen t" and " New Lawsuit ", respectively).
The parties to the Financing Agreement agreed, inter alia, that
any consideration received as a result of the New Lawsuit (to the
extent received) (hereinafter: " the Lawsuit Funds ") will first be
used to reimburse Libra's expenses for the New Lawsuit (plus
interest and VAT) and the balance after deduction of such expenses
(hereinafter: " the Balance of the Lawsuit Funds ") will be divided
among all those involved in the New Lawsuit, so that each of the
Company and Elbit will be entitled to circa 20.75% of the Balance
of the Lawsuit Funds.
In order to ensure the distribution of the Lawsuit Funds as
stated above, both the Company and Elbit signed lien documents in
favor of Libra, the Plaintiff and the attorneys representing them
(hereinafter collectively: " the Eligibles ") with respect to the
reimbursement of expenses and their portion in the Lawsuit Funds
(hereinafter: " the Lien ").
On October 18, 2020 the parties filed the New Lawsuit (in the
amount of circa NIS 60 million (approximately EUR 15 million)).
The Final Price adjustment of Belgrade Plaza:
On June 8, 2020 the Company together with a fully owned
subsidiary signed a final settlement and waiver agreement with the
purchaser of the SPV holding the shopping and entertainment center
in Belgrade (the "Purchaser", the "Settlement" and the "Project",
accordingly) according to which the Purchaser will pay a final
amount (including the last payment for the stands and signage) of
EUR 830,000 (the "Settlement Amount") which will be the final
amount that should be paid to the Company under the share purchase
agreement between the parties for the sale of the Project, dated
January 26, 2017 (the "SPA").
The Settlement amount was paid to the Company on June 15,
2020.
Deferral of payment of Debentures and partial interests'
payment:
Refer to the below in Liquidity & Financing.
Dutch statutory auditor:
Refer to Note 16 (b)(10) in the annual consolidated financial
statements.
Annual General Meeting and the Meeting of Independent
Shareholders:
Annual general meeting of the Shareholders of the Company was
held on July 29, 2020, all the proposed resolutions were
passed.
Meeting of Independent Shareholders of the Company was held on
July 29, 2020, all the proposed resolutions were passed.
Key highlights since the period end:
Update regarding a change in Elbit Imaging Ltd holdings:
On January 11, 2021 the Company announced that since August 5,
2020 and up to January 10, 2021, Elbit Imaging Ltd. ("Elbit
Imaging") sold about 160 thousand shares of the Company, which are
held in escrow account, for an average price of NIS 0.99 and for a
total consideration of approximately NIS 159 thousand, thus, Elbit
Imaging holdings in the Company have diminished from 44.9% to 42.6%
of the Company's issued and paid-up capital.
On January, 11 2021, Elbit imaging sold about 180 thousand
shares of the Company, which are held in escrow account, for an
average price of NIS 0.60 and for a total consideration of
approximately NIS 110 thousand, thus, Elbit Imaging holdings in the
Company have diminished from 42.6% to 39.9% of the Company's issued
and paid-up capital.
On January 12, 2021, Elbit Imaging sold about 319 thousand
shares of the Company, which are held in escrow account, for an
average price of NIS 0.61 and for a total consideration of
approximately NIS 194 thousand, thus, Elbit Imaging holdings in the
Company have diminished from 39.9% to 35.3% of the Company's issued
and paid-up capital.
On January 13, 2021, Elbit Imaging sold about 442 thousand
shares of the Company, which are held in escrow account, for an
average price of NIS 0.66 and for a total consideration of
approximately NIS 291 thousand, thus, Elbit Imaging holdings in the
Company have diminished from 35.3% to 28.8% of the Company's issued
and paid-up capital.
On February 24, 2021 the Company announced that since it last
announcement, Elbit Imaging sold about 120 thousand shares of the
Company, which are held in escrow account, for an average price of
NIS 0.76 per share and for a total consideration of approximately
NIS 91 thousand, thus, Elbit Imaging holdings in the Company have
diminished from 28.8% to 27.1% of the Company's issued and paid-up
capital.
Commenting on the results, executive director Ron Hadassi
said:
"Our active focus has continued to center on asset disposals,
which were left in Romania and India, generating cash flows,
further cost cutting, tight budget control and the optimization of
the business with the aim of satisfying our obligations to our
bondholders. On the Casa Radio project, despite many efforts done
in order to receive a Government Decision confirming the transfer
of the shares to AFI Europe N.V. as well as amendment of the PPP
Agreement in line with the agreement signed with AFI Europe N.V.,
no major breakthrough was achieved. Due to the above, on November
2, 2020, the Company, Dambovita NL and AFI Europe N.V. ("AFI", and
together with the Company, the "Parties") entered into an addendum
to the pre-sale pursuant to which the Parties agreed to extend the
Long Stop Date, which is the date on which the parties will execute
a share purchase agreement, subject to the satisfaction of the
conditions precedent (the "SPA" ( . Until the date of the approval
of the consolidated financial reports, the Company and AFI continue
with their efforts to receive the authority's approval in order to
be able to execute the SPA. Still, there have been no progress
since the pre-sale agreement has been signed. In light of the above
the Company is exploring all its options in order to obtain
progress, including among others its legal options. Due to the
above, there can be no certainty that the SPA will eventually be
executed and/or that the transaction will be completed over the
coming months.
In addition, we intend to request the bondholders' approval to
postpone the repayment of the bonds from July 1, 2021 (the final
redemption date) in order to allow us to continue with the
realization of the Company' objectives."
For further details, please contact:
Plaza
Ron Hadassi, Executive Director 972-526-076-236
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.
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.
MANAGEMENT STATEMENT
During 2020 the management's focus has been on executing of cash
proceeds on signed SPA for the sale of Chennai project in India. In
the Bangalore project the Company together with Elbit continued to
protect its interest in the project, including, by sending notice
letters to the Partner, and filing a motion with Court in order to
collect checks received by the partner (refer also to Note 6(b)(1)
in the annual consolidated financial statements). The Company also
continued the disposals of plots of land in CEE and cost reductions
and partial repayments to its bondholders.
Because of the abovementioned issues surrounding the
satisfaction of the condition's precedent in the pre-sale
agreement, it is currently not certain whether the sale agreement
as contemplated in the pre-sale agreement would be entered into and
whether therefore the transaction with AFI would proceed. As such
the Company, Dambovita NL and AFI Europe N.V. agreed to extend the
Long Stop Date until December 31, 2021. Still, there is an
uncertainty that either the conditions precedent in the Pre-Sale
Agreement as detailed above will be met, or that the Sale Agreement
will be executed and/or that the transaction will be consummated as
presented above or at all.
Over the coming months, the Company will maintain its focus on
executing the agreement signed for the sale of Chennai project in
India and to take necessary steps to protect its interest in the
project in Bangalore India. And to also continue to take all the
necessary steps to execute the agreement with AFI Europe N.V.
Due to the board and management estimation that the Company is
unable to serve its entire debt according to the current redemption
date (July 1, 2021) in its current liquidity position, the Company
intends to request from the bondholders of both series (Series A
and Series B) postponement of the repayment of the remaining
balance of the bonds.
Results
During the year, Plaza recorded a EUR33.5 million loss
attributable to the shareholders of the Company. This is an
increase compared to the losses reported in 2019 (loss of EUR21.2
million). The losses were mainly from the Net Finance Costs which
were decreased to EUR8.1 million in 2020, from EUR16.6 million in
2019 mainly due to interests' expenses accrued on the debentures
(partly due to penalty interest calculated on the deferred
principal); and from EUR 39.8 million write-down in trading
properties and EUR15.8 million of reversal of provision (relating
to change in provision in respect to PAB) in Casa Radio project,
Romania.
Total result of operations excluding finance income and finance
cost was a loss of EUR25.4 million in 2020 compared to the reported
loss of EUR4.4 million in 2019, mainly due to the increase in the
write down of trading property as described above.
The consolidated cash position (cash on standalone basis as well
as fully owned subsidiaries) as of 31 December 2020 was EUR1.7
million (31 December 2019: EUR1.1 million).
Liquidity & Financing
Plaza ended the period with a consolidated c ash position of
circa EUR1.7 million, compared to EUR1.1 million at the end of
2019.
As of December 31, 2020, the Group's outstanding obligation to
bondholders (including accrued interests) are app. EUR97.8
million.
As disclosed by the Company in Note 8I to its annual
consolidated financial statements, the Company was not able to meet
its final redemption obligation to its (Series A and Series B)
bondholders, due on July 1, 2020, and on May 4, 2020, the
bondholders approved: (i) to postpone the final redemption date to
January 1, 2021; (ii) that on July 1, 2020 the Company will pay to
its bondholders a partial interest payment in the total amount of
EUR 250,000.
Following receiving the Settlement Amount (see Note 16(b)(9) in
the annual consolidated financial statements), and in light of the
potential negative impact of the Covid-19 on the possibility to
receive future proceeds from the Comp'ny's plots in India, the
Company decided to increase the amount to be paid to the
bondholders on July 1, 2020, from EUR 250,000 to EUR 500,000.
On November 12, 2020, the bondholders of Series A and Series B
approved: (i) to postpone the final redemption date to July 1, 2021
of all the scheduled Principal; (ii) that on January 1, 2021 the
Company will pay to its bondholders a partial interest payment in
the total amount of EUR 200,000 and to deferral all other unpaid
scheduled Interest payment.
Due to the board and management estimation that the Company is
unable to serve its entire debt according to the current bonds
repayment schedule in its current liquidity position, the Company
intends to request the bondholders of both series for postponement
of the repayment of the remaining balance of the bonds. However,
there is an uncertainty if the bondholders will approve the
request. 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.
Strategy and Outlook
The Company's priorities are focused on efforts to execute the
SPA with AFI, to execute the sale of Chennai project in India and
getting further proceeds for Bangalore project. The Company also
intends to seek for bondholders' approval for postponement of the
repayment of the bonds. In addition, the Company intends to
continue the cost-cutting of its operational cost.
OPERATIONAL REVIEW
Over the course of the year to date, Plaza has continued to make
progress against its operational and strategic objectives. The
Company's current assets are summarized in the table below (as of
balance sheet date):
Asset/ Location Nature of Size Plaza's Status
Project asset sqm (GLA) effective
ownership
%
Casa Radio Bucharest, Mixed-use 467,000 75 An addendum to the
Romania retail, hotel (GBA including Pre-sale agreement
and leisure parking was signed (refer to
plus office spaces) note 5 (3) in the annual
scheme consolidated financial
statements)
------------ ---------------- ---------------- ----------- --------------------------
Amended revised agreement
in place (refer to
note 6(b)(1) in the
annual
Bangalore, Residential consolidated financial
Bangalore India Scheme 218,500 25 statements)
------------ ---------------- ---------------- ----------- --------------------------
JDA and term sheet
terminated;
SPA signed (refer to
note 6(b)(2) in in
Chennai, Residential the annual consolidated
Chennai India Scheme 302,400 50 financial statements)
------------ ---------------- ---------------- ----------- --------------------------
FINANCIAL REVIEW
Results
In 2020, the Revenue for the period derived from the disposal of
trading properties amounted to EUR1.5 million, compared to EUR3.7
million in 2019. The proceeds received in 2020 were related to the
sale of land plot in Brasov, Romania and income for the final
settlement amount in Belgrade Plaza. The proceeds received in 2019
were related to the sale of two plots (land plot in Lodz, Poland
and land plot in Miercurea Ciuc, Romania) and income for the stands
and signage in Belgrade Plaza.
In 2020, the general & administrative expenses amounted to
EUR1.1 million, a decrease compare to EUR1.6 million in 2019. The
decrease was a result of a material scale down of the Company's
activities, mainly in respect of salaries and related expenses and
professional services.
The write down of trading properties increased from EUR0.5
million loss in 2019 to EUR24 million loss in 2020.
The 2019 relates to the net change in the cost of Casa Radio
property (the change in the value of the asset minus the change in
the provision of the PAB) decreased by partial reversal of write
downs of plots in Romania. The 2020 loss relates to net write down
of Casa Radio property value in amount of EUR39.8 million minus
EUR15.8 million of reversal of provision in respect to the
construction of the Public Authority Building.
Finance income of EUR2.1 million in 2020 was mainly due to
foreign exchange movements on the debentures, which did not occur
in the end of December 31, 2019.
Finance costs decreased from EUR16.6 million in 2019 to EUR10.2
million in 2020. The main components of finance costs were
interests' expenses accrued on the debentures which includes also
penalty interest calculated on the deferred principal.
In 2020 there were no tax benefit or expenses. As of December
31, 2019, the Company recognized EUR0.07 million tax cost due to
withholding tax.
As a result, the loss for the period amounted to circa EUR33.5
million in 2020, representing a basic and diluted loss per share
for the period of EUR4.89 (2019: EUR3.09 loss).
Balance sheet and cash flow
The balance sheet as of 31 December 2020 showed total assets of
EUR12.5 million compared to total assets of EUR56.1 million at the
end of 2019, mainly as a result of the net write down of the full
value of Casa Radio, disposal of land plot in Romania resulting
payment of circa EUR0.6 million in February 2020, administrative
expenses and costs of operations which amounted to EUR1.1 million
for the 12 months of 2020 and payment of interests for bonds in
total amount of circa EUR0.7 million in 2020.
The consolidated cash position (cash on standalone basis as well
as fully owned subsidiaries) as of 31 December 2020 increased to
EUR1.7 million (31 December 2019: EUR1.1 million).
The value of the Company's trading properties decreased from
EUR40.4 million as of 31 December 2019 to nil at the end of 31
December 2020 following the disposal of land plot in Brasov, in
Romania and write down of the value of the Casa Radio project,
Romania.
Investments in equity accounted investee companies has decreased
by EUR3.7 million to circa EUR10.7 million (31 December 2019:
EUR14.4 million) mainly as a result of cash distribution of EUR1.1
million (31 December 2019: EUR0.8 million).
As of 31 December 2020, Plaza has a balance sheet liability of
EUR87.1 million from issuing bonds on the Tel Aviv Stock Exchange.
Additionally, Plaza recorded provision for interests on bonds as of
December 31, 2020, in amount of EUR10.7 million (31 December 2019:
EUR3.8 million).
As detailed above, due to the decrease of the full value of Casa
Radio project (Bucharest Romania), the provision created with
respect to the obligation connected to Casa Radio project (for the
construction of the Public Authority Building) was reversed in the
amount of EUR15.8 million.
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 report"
("Projected Cash F"ow").
The Material uncertainty related to going concern was included
in the independent auditors' report and in Note 1(b) in the
consolidated financial statements as of December 31, 2020. In light
of the material uncertainty that the SPA between the Company and
AFI Europe N.V. will eventually be executed and/or that the
transaction will be consummated as presented above or at all.,
(refer to Note 5 in the consolidated financial statements as of
December 31, 2020) as well as the default of purchaser of Bangalore
project to meet payments schedule according to the signed amendment
agreement (refer to Note 6(b)(1) in the consolidated financial
statements as of December 31, 2020), the board and management
estimates that the Company is unable to serve its entire debt
according to the due date the bond holders approved to postpone the
final redemption date. Accordingly, 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 providing projected cash
flow for the period of 24 months following for the coming two
years.
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.
On November 22, 2018 the Company announced based on its current
forecasts, that the Company expected to pay the accrued interest on
Series A and Series B Bonds on December 31, 2018, in accordance
with the repayment schedule determined in the Company's
Restructuring Plan and Settlement Agreement with Series A and
Series B Bondholders from 11 January 2018 (the "Settlement
Agreement"). The Company noted that it will not meet its principal
repayment due on December 31, 2018 as provided for in the
Settlement Agreement. On February 18, 2019 the Company paid
principal of circa EUR 250,000 and Penalty interest on arrears of
EUR 150,000 following the bondholder's approval to defer principal
repayment to July 1, 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
February 18, 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 June 19, 2019, and
the payment date was fixed as of July 1, 2019. The company paid on
the said date a total amount of circa EUR 1.17 million, which is
only 42% of the full amount of interest.
On July 11, 2019, the Company announced that its Romanian
subsidiary had signed a binding agreement to sell a land in Romania
(refer to Note 5(2)(c) of the consolidated financial statements as
of December 31, 2019), 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.
On November 17, 2019, the bondholders of Series A and Series B
approved a deferral of all the scheduled Principal payment and app.
87% of deferral of the scheduled Interest payment, both, as of
December 31, 2019 to July 1, 2020.
On May 4, 2020, the bondholders of Series A and Series B
approved: (i) to postpone the final redemption date to January 1,
2021 of all the scheduled Principal; (ii) that on July 1, 2020 the
Company will pay to its bondholders a partial interest payment in
the total amount of EUR 250,000 and to deferral all other unpaid
scheduled Interest payment.
Following receiving the Settlement Amount (refer to Note
16(b)(9) of these Annual Consolidated Financial Statements), and in
light of the potential negative impact of the Covid-19 on the
possibility to receive future proceeds from the Company's plots in
India, the Company decided to increase the amount to be paid to the
bondholders on July 1, 2020, from EUR 250,000 to EUR 500,000. The
amount reflected 6.74% of accrued interest as of that date.
On November 12, 2020, the bondholders of Series A and Series B
approved: (i) to postpone the final redemption date to July 1, 2021
of all the scheduled Principal; that on January 1, 2021 the Company
will pay to its bondholders a partial interest payment in the total
amount of EUR 200,000 and to deferral all other unpaid
scheduled Interest payment. The amount reflected 1.84% of accrued interest as of that date.
The materialization, 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 realization of the Company's
assets and investments or realization 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.
In EUR millions 2021 2022
Cash - Opening Balance (2) 1.71 0.94
Cash flow from equity companies in India
(3) 0.8 4.3
Total Sources 2.51 5.24
Debentures - principal - -
Debentures - interest (3) - 3
Other operational costs (4) 0.30 -
G&A expenses (including property maintenance)
(5) 1.27 1.20
Total Uses 1.57 4.20
Cash - Closing Balance (2) 0.94 1.04
(1) The above cash flow is subject to the approval of the
bondholders of both series to postponement of the repayment of the
remaining balance of the bonds which are due on July 1, 2021.
(2) Total cash on standalone basis as well as fully owned subsidiaries.
(3) In 2021, the Company assumed a reception of EUR 0.8 million
which is part of the cash balances of the Chennai Project SPV. As
detailed in note 6 (b)(2) of the Consolidated Financial Statements
as of December 31, 2020) Elbit Plaza India Real Estate Holdings
Limited (an equity accounted investee held by the Company (50%)
("EPI") and the purchaser ("The Parties") signed on a revised
understanding based on which the Purchaser can complete the closing
by April 30, 2021 at a revised consideration of 96.50 crores
(approximately EUR 11.6 million (Plaza part is approximately EUR
5.8 million), but If the Purchaser fails to complete the closing by
April 30, 2021 then the Purchaser gets additional two months to
complete the closing by June 30, 2021 but at the initial
consideration of INR 108 crores (approximately EUR 13 million
(Plaza part is approximately EUR 6.5 million). Due to the
uncertainty that the closing date will occur at April 30, 2021 the
company assumed the closing date will occur during 2022 hence the
proceed it will receive will be based on the initial consideration
of INR 108 crores (approximately EUR 13 million (Plaza part is
approximately EUR 6.5 million). As mentioned above, in case the
purchaser will complete the closing by April 30, 2021 the total
proceeds the company will receive will decreased by app. EUR 0.7
million, Accordingly, the proceeds which will be repaid to the
bondholders will decreased in the same amount.
(4) Includes provision for legal costs/Arbitrations.
(5) Total general and administrative expenses includes both cost
of the Company and of all the subsidiaries.
(6) The Company didn't include any proceeds from pre-sale
agreement signed with AFI, due to the uncertainty as to the
fulfilment of the conditions set out in the preliminary agreement
as mentioned in Note 5(3)(f) of the consolidated financial
statements as of 31.12.2020, thus there can be no certainty an SPA
will eventually be executed and/or that the Transaction will be
completed.
(7) The Company didn't include any proceeds from its holding in
an indirect subsidiary (50%) which holds a property in Bangalore,
India due to the recent default of purchaser of Bangalore project
to meet payments schedule according to the signed amendment
agreement (as detailed in Note 6(1) of the Consolidated Financial
Statements as of December 31, 2020) as there can be no certainty
that the agreement will be completed, hence no resources are
expected to be available in foreseeable future at this time.
Ron Hadassi
Executive Director
31 March 2021
PLAZA CENTERS N.V.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
IN 000 EUR
CONTENTS
Page
Independent Auditors' report 2 - 6
Consolidated statement of financial position 7
Consolidated statement of profit or loss 8
Consolidated statement of comprehensive income 9
Consolidated statement of changes in equity 10
Consolidated statement of cash flows 11
Notes to the consolidated financial statements 12 - 68
- - - - - - - - - - - - - - - - - - - - - -
Kost Forer Gabbay Tel: +972-3-6232525
& Kasierer Fax: +972-3-5622555
144 Menachem Begin ey.com
Road
Tel-Aviv 6492102,
Israel
Report on the Audit of the Consolidated Financial Statements
Independent Auditors' Report
To the shareholders of Plaza Centers N.V.
Opinion
We have audited the consolidated financial statements of Plaza
Centers N.V. and its subsidiaries ("the Company"), which comprise
the consolidated statement of financial position as at December 31,
2020 and the consolidated statements of profit or loss,
comprehensive income, changes in equity and cash flows for the year
then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as at December 31,
2020, and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Basis for Opinion
As mentioned in note 2(a) in the consolidated financial
statements, these consolidated financial statements, with our
report included, are not intended for Netherlands statutory filing
purposes.
We conducted our audit in accordance with International
Standards on Auditing. Our responsibilities under those standards
are further described in the Auditors' Responsibilities for the
Audit of the Consolidated Financial Statements section of our
report. We are independent of the Company in accordance with the
International Code of Ethics for Professional Accountants
(including International Independence Standarts) ("IESBA Code"),
and we have fulfilled our other ethical responsibilities in
accordance with the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material Uncertainty Related to Going Concern
We draw your attention to Note 1(b) in the consolidated
financial statements which discloses the Company's financial
position and board and management's future plans to meet its
financial liabilities.
The board and management estimate that the Company is unable to
serve its entire debt according to the current repayment schedule
(total payments of EURO 97.8 million (current balance as of
December 31, 2020) due to bondholders on July 1, 2021) and the
Company is dependent on the bondholders' approval for any
postponement of payments. In addition, the Company is not in
compliance with the main Covenants as defined in the restructuring
plan (for more details refer also to Note 8), hence in default
which could trigger early repayment by the bondholders.
Moreover, due to recent developments related to the COVID-19
virus epidemic there is additional uncertainty as to the effect of
the short-term impacts on economic growth, business activity and
including even severe and sustained slowdown in the markets in
which the Company operates. This could also affect the ability of
the Company to complete the sale of the plots it owns.
The 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. Our
opinion is not modified in respect of this matter.
Emphasis of Matters
We draw your attention to Note 5(3)(c) which discloses the risk
that the public authorities may seek to terminate the Public
Private Partnership Agreement ("PPP Agreement") and/or relevant
permits and/or could seek to impose delay penalties on the basis of
perceived breaches of the Company's commitments under the PPP
Agreement.
Our opinion is not modified in respect of these matters.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements for the year ended December 31,
2020. In addition to the matter described in the Material
Uncertainty Related to Going Concern section, we have determined
the matters described below to be the key audit matters to be
communicated in our report. These matters were addressed in the
context of our audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements section of our report, including in relation
to these matters. Accordingly, our audit included the performance
of procedures designed to respond to our assessment of the risks of
material misstatement of the consolidated financial statements. The
results of our audit procedures, including the procedures performed
to address the matters below, provide the basis for our audit
opinion on the accompanying consolidated financial statements.
The Key Audit Matter we identified is:
Key Audit Matter Our Response
Valuation of trading properties Our procedures in relation to the
We have identified the measurement management's fair value assessment
of trading properties (included of trading properties included:
in the joint venture, EPI, * Evaluation of the objectivity, independence,
as disclosed in Note 6(b)) expertise of the external valuators;
at net realizable value in
the aggregate amount of EUR
33.1 million, as a significant * Reviewed the reports prepared by the external
audit matter due to their valuators and held discussions with them in order to
size and the complexity and gain an understanding of their methodology and the
judgement required in the key assumptions which they used in performing the
valuation of trading properties. valuations.
The valuations of these properties
as of December 3 1 , 2 020
, involved significant judgements * Using our own real estate specialists to assess the
and assumptions such as capitalization methodologies used the assumptions that were made and
and discount rates, and forecasts the appropriateness of the key estimates used in the
of future rents, occupancy calculation of the fair value of the trading
levels, construction costs properties based on their knowledge of the local
and developer profits, made economic, legal, political environment, and other
by management, in reliance specific circumstances, used to analyse the
on external valuators. In appropriateness of valuations.
the context of properties
which are not yet developed,
these estimates contain further * Checked on a sample basis, the appropriateness and
risks in regards to success consistency with other information available to us of
in obtaining permits, market the inputs used by the valuators. We also assessed
condition and political environment, the appropriateness of the disclosures relating to
required to forecast all circumstances the assumptions, as we consider them important to
through and beyond project users of the financial statements.
completion.
The Company's accounting policies
regarding trading properties
are disclosed in Note 2(c)
and 2(m) to the consolidated
financial statements. The
significant estimates involved
in the valuation are disclosed
in Note 6(b).
Other information included in The Company's 2020 Annual
Report
Other information consists of the information included in the
Annual Report, other than the financial statements and our
auditor's report thereon. Management is responsible for the other
information.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon. In connection with our audit of the financial statements,
our responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this
regard.
Responsibilities of Management and the Board of Directors for
the Consolidated Financial Statements
Management is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with International Financial Reporting Standards, as adopted by the
European Union, and for such internal control as management
determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, management
is responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
The board of directors is responsible for overseeing the
Company's financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditors' report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit
conducted in accordance with International Standards on Auditing
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with International Standards
on Auditing, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by management.
-- Conclude on the appropriateness of management's use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditors' report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors' report. However, future
events or conditions may cause the Company to cease to continue as
a going concern.
-- Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with the board of directors regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the board of directors with a statement that we
have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with the board of directors, we
determine those matters that were of most significance in the audit
of the consolidated financial statements for the year ended
December 31, 2020, and are therefore the key audit matters. We
describe these matters in our auditors' report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The partner in charge of the audit resulting in this independent
report is Mr. Itay Bar-Haim.
March 31, 2021 KOST FORER GABBAY & KASIERER
Tel Aviv, Israel A member of Ernst & Young
Global
CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN '000 EUR
December 31,
--------------------
Note 2020 2019
------- --------- ---------
ASSETS
Cash and cash equivalents 3 1,709 1,126
Prepayments and other receivables 4 90 181
Total current assets 1,799 1,307
--------- ---------
Trading properties 2,5 - 40,375
Equity - accounted investees 6 10,737 14,419
Total non-current assets 10,737 54,794
--------- ---------
Total assets 12,536 56,101
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bonds at amortized cost 8 87,137 86,506
Accrued interests on bonds 8 10,684 3,846
Trade payables 58 94
Other liabilities 7 409 477
--------- ---------
Total current liabilities 98,288 90,923
--------- ---------
Provisions 5(3)(e) - 15,825
Total non-current liabilities - 15,825
--------- ---------
Share capital 10 6,856 6,856
Translation reserve 10 (31,292) (29,677)
Other reserves (19,983) (19,983)
Share based payment reserve 10 35,376 35,376
Share premium 10 282,596 282,596
Accumulated deficit (359,305) (325,815)
--------- ---------
Total equity (85,752) (50,647)
--------- ---------
Total equity and liabilities 12,536 56,101
========= =========
The notes are an integral part of the consolidated financial
statements.
March 31, 2021
--------------------- ----------------- ---------------------
Ron Hadassi David Dekel
Date of approval of Executive Officer
the Chairman of the Board
financial statements of Directors
CONSOLIDATED STATEMENT OF PROFIT OR LOSS IN '000 EUR
Year ended
December 31,
------------------
Note 2020 2019
---- -------- --------
Revenues and gains
Revenue from disposal of trading properties 5 1,452 3,684
Total revenues 1,452 3,684
-------- --------
Gains and other
Other income 33 78
-------- --------
Total gains 33 78
Total revenues and gains 1,485 3,762
-------- --------
Expenses and losses
Cost of trading properties disposed 5 (580) (3,463)
Cost of operations (85) (207)
Write-down of trading properties 5 (24,000) (500)
Share in results of equity-accounted
investees 6 (1,084) (2,396)
Administrative expenses 13 (1,100) (1,577)
Other expenses (46) (67)
-------- --------
(26,895) (8,210)
Finance income 14 2,096 -
Finance costs 14 (10,176) (16,648)
(34,975) (24,858)
-------- --------
Loss before income tax (33,490) (21,096)
Income tax expense - (71)
Loss for the year (33,490) (21,167)
-------- --------
Loss attributable to:
Equity holders of the Company (33,490) (21,167)
======== ========
Earnings per share
Basic and diluted loss per share (EUR) 11 (4.89) (3.09)
======== ========
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN '000 EUR
Year ended
December 31,
------------------
2020 2019
-------- --------
Loss for the year (33,490) (21,167)
Other comprehensive income
Items that are or may be reclassified to profit
or loss:
Foreign currency translation differences - foreign
operations (Equity accounted investees) (1,615) (79)
Other comprehensive loss for the year, net of
income tax (1,615) (79)
Total comprehensive loss for the year (35,105) (21,246)
======== ========
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN '000 EUR
Capital reserve
from acquisition
Share based of
Share Share payment Translation non-controlling Accumulated
capital Premium reserves Reserve interests deficit Total
-------- -------- ----------- ----------- ---------------- ----------- --------
Balance on
January 1, 2019 6,856 282,596 35,376 (29,598) (19,983) (304,648) (29,401)
Comprehensive
income for the
year
Net loss for the
year - - - - - (21,167) (21,167)
Foreign currency
translation
differences - - - (79) - - (79)
Total
comprehensive
loss for the
year - - - (79) - (21,167) (21,246)
-------- -------- ----------- ----------- ---------------- ----------- --------
Balance on
December 31,
2019 6,856 282,596 35,376 (29,677) (19,983) (325,815) (50,647)
Comprehensive
income for the
year
Net loss for the
year - - - - - (33,490) (33,490)
Foreign currency
translation
differences - - - (1,615) - - (1,615)
-------- -------- ----------- ----------- ---------------- ----------- --------
Total
comprehensive
loss for the
year - - - (1,615) - (33,490) (35,105)
-------- -------- ----------- ----------- ---------------- ----------- --------
Balance on
December 31,
2020 6,856 282,596 35,376 (31,292) (19,983) (359,305) (85,752)
-------- -------- ----------- ----------- ---------------- ----------- --------
The notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR
Year ended
December 31,
------------------
2020 2019
-------- --------
Cash flows from operating activities
Loss for the year (33,490) (21,167)
Adjustments necessary to reflect cash flows used
in operating activities
Depreciation and impairment of property and equipment - 19
Net finance costs 8,080 16,648
Share of loss of equity-accounted investees, net
of tax 1,084 2,396
Income tax expense - 71
Trading properties, net 24,550 3,962
224 1,929
-------- --------
Changes in:
Trade receivables 6 (6)
Other receivables 85 (5)
Trade payables (36) 41
Other liabilities, related parties' liabilities
and provisions (68) (88)
(13) (58)
-------- --------
Interest paid (699) (2,682)
Net cash used in operating activities (488) (811)
-------- --------
Cash from investing activities
Distribution received from Equity Accounted Investees 983 782
Net cash provided by investing activities 983 782
-------- --------
Cash from financing activities
Repayment of debentures - (250)
Net cash used in financing activities - (250)
-------- --------
Increase (Decrease) in cash and cash equivalents
during the year 495 (279)
Effect of movement in exchange rate fluctuations
on cash held 88 -
Cash and cash equivalents as of January 1(st) 1,126 1,405
-------- --------
Cash and cash equivalents as of December 31(st) 1,709 1,126
======== ========
The notes are an integral part of the consolidated financial
statements.
NOTE 1: - CORPORATE INFORMATION
a. 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 centres, 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's 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 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 (please
refer to note 18 (a) regarding the sale of app. 17.8% of the
Company's shares held by EUL).
b. Going concern and liquidity position of the Company:
As of December 31, 2020, the Company's outstanding obligations
to bondholders (including accrued interests) are app. EUR 97.8
million with due date that was postponed to July 1, 2021 (the
"Current Due date") (please refer to note 8).
Due to the above the Company's primary need is for liquidity.
The Company's current and future resources include the
following:
1. Cash and cash equivalents (including the cash of fully owned
subsidiaries) of approximately EUR 1.709 million.
2. The Company's part (50%) in the proceeds from the cash
balances of the Chennai Project SPV. And, from any additional
proceeds Elbit Plaza India Real Estate Holdings Limited (an equity
accounted investee held by the Company (50%) ("EPI") will receive
based on revised understanding EPI and the purchaser singed on
March 31, 2021 (As detailed in note 6 (b)(2) of the Consolidated
Financial Statements as of December 31, 2020).
Still, there is an uncertainty if and when the SPA closing will
occur
3. In addition, as detailed in note 5(3)(f), the Company and AFI
Europe N.V. entered into an addendum to the pre-sale agreement
entered into between the Parties in connection with the sale of its
subsidiary (the "SPV") which holds 75%
NOTE 1: - CORPORATE INFORMATION (Cont.)
in the Casa Radio Project (the "Project") (the "Addendum" and
the "Agreement",
respectively) pursuant to which the Parties agreed to extend the
Long Stop Date, which is the date on which the parties will execute
a share purchase agreement, subject to the satisfaction of
conditions precedent (the "SPA" ( , until December 31, 2021. The
addendum was approved by the bondholders meeting held on November
12, 2020. 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.
4. Following the default of purchaser of Bangalore project to
meet payments schedule according to the signed amendment agreement
(refer to Note 6(b)(1)) there can be no certainty that the
agreement will be completed, hence at this time no resources are
expected to be available in the foreseeable future.
As of December 31, 2020, the Company is not in compliance with
the main Covenants as defined in the restructuring plan (for more
details refer also to Note 8), hence constituting an event of
default which could also trigger early repayment demand by the
bondholders.
Due to the abovementioned and due to the board and management
estimation that the Company is unable to serve its entire debt on
the Current due date, the Company intends to request the
bondholders of both series an additional postponement of the
repayment of the remaining balance of the bonds. However, there is
an uncertainty if the bondholders will approve the request. 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
basis.
Due to the abovementioned conditions, a material uncertainty
exists that casts significant doubt about the Company's ability to
continue as a going concern.
c. Impact of the Covid-19
During 2020, the Covid-19 global health and economic crisis was
severely affecting
business, leading to supply chain disruptions, cash flow
problems and, more generally, a sharp drop in its activity. Many
countries are taking significant steps in trying to prevent the
spread of the virus, such as restrictions on civilian movements,
gatherings, border closures and the like. The Company monitors the
consequences of the event and the actions taken in countries in
which it operates and assesses the risks and exposures arising from
these consequences. At this stage, the impact of the effect of the
COVID 19 included a
write off of its assets (refer to note 5(3) and note 6(b)(1) and
6(b)(2)). In addition, caused Elbit Plaza India Real Estate
Holdings Limited (an equity accounted investee held by the Company
(50%) and Elbit Imaging Ltd. (50%)) ("EPI") to postpone the closing
of the sale of 100% stake in the SPV (subsidiary of EPI) (refer to
Note 6(b)(2)). In addition, it caused a delay in the legal
procedures against the purchaser of the SPV which owns the plot in
Bangalore India (refer to Note 6(b)(1)). Other than the above
mentioned, at this stage, the Company is not able to estimate the
full future impact of COVID 19. However, the Company assumes the
demand of interested buyers is expected to be smaller, which can
have a material impact on the ability of the Company to complete
the sale of the plots it owns.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of these financial statements:
The following accounting policies have been applied consistently
in the financial statements for all periods presented, unless
otherwise stated.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS"), as adopted by the European Union ("EU").
The consolidated financial statements have been prepared on the
historical cost basis.
These consolidated financial statements are not intended for
statutory filing purposes. The Company is required to file
consolidated financial statements prepared in accordance with the
Netherlands Civil Code.
At the date of approval of these financial statements the
Company had not yet submitted consolidated financial statements for
the year ended December 31, 2019 and December 31, 2020 in
accordance with the Netherlands Civil Code (for more details refer
to Note 16(b)(10)).
The consolidated financial statements were authorized to be
issued by the Board of Directors on March 31, 2021.
b. Functional and presentation currency:
These consolidated financial statements are presented in EURO
("EUR"), which is the Company's functional currency. All financial
information presented in EUR has been rounded to the nearest
thousand, unless otherwise indicated.
c. Investment property vs. trading property classification:
The Group has designated all its properties for sale. The
Company is actively seeking buyers and does not hold the properties
with the intention to gain from capital appreciation. Therefore,
management also believes that these are appropriately classified as
trading properties.
d. Functional and presentation currency
The EUR is the functional currency for Group companies (with the
exception of Indian companies - in which the functional currency is
the Indian Rupee - INR) since it is the currency of the economic
environment in which the Group operates. This is because the EUR
(and in India the INR) is the main currency in which management
determines its pricing with potential buyers and suppliers,
determine its financing activities and budgets and assesses its
currency exposures.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
e. Operating cycle determination:
The Group is unable to clearly identify its actual operating
cycle with respect to trading properties. As such, the Group's
operating cycle relating to trading properties and corresponding
liabilities is 12 months. Trading properties and liabilities
associated therewith are presented as non-current assets and
non-current liabilities, respectively.
f. Use of estimates and judgments:
The preparation of the consolidated financial statements in
conformity with IFRS as adopted by the EU requires management to
make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgments about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment
within the next financial year are included in the following
notes:
- Note 5 - key assumptions used in determining the net
realisable value of trading properties;
- Notes 5,16 - recognition and measurement of provisions and
contingencies: key assumptions about the likelihood and magnitude
of an outflow of resources.
g. Basis of consolidation:
1. Subsidiaries:
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity
and has the ability to affect those returns through its power
over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date on
which control commences until the date on which control ceases.
Where necessary, adjustments are made to the financial statements
of the subsidiaries in order to bring the accounting policies used
in line with the ones used by the Group in the consolidated
financial statements.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2. Interests in equity-accounted investees:
The Group's interests in equity-accounted investees comprise
interests in associates and joint ventures.
Associates are those entities in which the Group has significant
influence, but not control or joint control, over the financial and
operating policies. A joint venture is an arrangement in which the
Group has joint control, whereby the Group has rights to the net
assets of the arrangement, rather than rights to its assets and
obligations for its liabilities.
Interests in associates and the joint venture are accounted for
using the equity method. They are recognised initially at cost,
which includes transaction costs. Subsequent to initial
recognition, the consolidated financial statements include the
Group's share of the profit or loss and other comprehensive income
of equity-accounted investees, until the date on which significant
influence or joint control ceases.
When the equity attributable to the owners of an associate
changes as a result of the associate selling or buying shares of
its subsidiaries (that are consolidated in its financial
statements) to third parties while retaining control in those
subsidiaries, the balance of the investment in the associate that
is presented on the Company's books
on the equity basis changes. The Company has chosen the
accounting policy of recognizing the change in the balance of the
investment in these cases directly in profit or loss.
3. Loss of control:
When the Group loses control over a subsidiary, it derecognises
the assets and liabilities of the subsidiary, and any related NCI
and other components of equity.
Any resulting gain or loss is recognised in profit or loss. Any
interest retained in the former subsidiary is measured at fair
value when control is lost.
4. Transactions eliminated on consolidation:
Intra-group balances and transactions, and any unrealised income
and expenses
arising from intra-group transactions, are eliminated.
Unrealised gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of
the Group's interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
h. Foreign currency:
1. Foreign currency transactions:
Transactions in foreign currencies are translated to the
respective functional currencies of Group companies at exchange
rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies are translated to the
functional currency at the exchange rate at the reporting date.
Non-monetary assets and liabilities that are measured at fair value
in a foreign currency are translated to the functional currency at
the exchange rate when the fair value was determined.
Foreign currency differences are generally recognised in profit
or loss. Non-monetary items that are measured based on historical
cost in a foreign currency are translated at the exchange rate at
the date of the transaction. Foreign currency differences are
generally recognised in profit or loss.
2. Foreign operations:
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated into euro at the exchange rates at the reporting date.
The income and expenses of foreign operations are translated into
euro at the exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive
income, and accumulated in the translation reserve, except to the
extent that the translation difference is allocated to
non-controlling interest.
When a foreign operation is disposed of in its entirety or
partially such that control, significant influence or joint control
is lost, the cumulative amount in the translation reserve related
to that foreign operation is reclassified to profit or loss as part
of the gain or loss on disposal.
If the Group disposes of part of its interest in a subsidiary
but retains control, then the relevant proportion of the cumulative
amount is reattributed to non-controlling interest.
When the Group disposes of only part of an associate or joint
venture while retaining significant influence or joint control, the
relevant proportion of the cumulative amount is reclassified to
profit or loss.
If the settlement of a monetary item receivable from or payable
to a foreign operation
is neither planned nor likely to occur in the foreseeable
future, then foreign currency differences arising from such item
form part of the net investment in the foreign operation.
Accordingly, such differences are recognised in other comprehensive
income and accumulated in the translation reserve.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
3. Index-linked monetary items:
Monetary assets and liabilities linked to the changes in the
Israeli Consumer Price Index ("Israeli CPI") are adjusted at the
relevant index at each reporting date according to the terms of the
agreement.
i. Cash equivalents:
Cash equivalents are considered as highly liquid investments,
including unrestricted short-term bank deposits with an original
maturity of three months or less from the date of investment or
with a maturity of more than three months, but which are redeemable
on demand without penalty and which form part of the Group's cash
management.
j. Financial instruments:
1. Financial assets:
Financial assets are measured upon initial recognition at fair
value plus transaction costs that are directly attributable to the
acquisition of the financial assets, except for
financial assets measured at fair value through profit or loss
in respect of which transaction costs are recorded in profit or
loss.
Debt instruments are measured at amortized cost when:
The Company's business model is to hold the financial assets in
order to collect their contractual cash flows, and the contractual
terms of the financial assets give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding. After initial recognition, the
instruments in this category are measured according to their terms
at amortized cost using the effective interest rate method, less
any provision for impairment.
2. Impairment of financial assets:
The Company evaluates at the end of each reporting period the
loss allowance for financial debt instruments which are not
measured at fair value through profit or loss .
3. De-recognition of financial assets:
A financial asset is derecognized only when:
- The contractual rights to the cash flows from the financial asset has expired; or
- The Company has transferred substantially all the risks and
rewards deriving from the contractual rights to receive cash flows
from the financial asset or has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset; or
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
- The Company has retained its contractual rights to receive
cash flows from the financial asset but has assumed a contractual
obligation to pay the cash flows in full without material delay to
a third party.
4. Financial liabilities:
a) Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value
less transaction costs that are directly attributable to the issue
of the financial liability.
After initial recognition, the Company measures all financial
liabilities at amortized cost using the effective interest rate
method.
5. De-recognition of financial liabilities:
A financial liability is derecognized only when it is
extinguished, that is when the obligation specified in the contract
is discharged or cancelled or expires. A financial liability is
extinguished when the debtor discharges the liability by paying in
cash, other financial assets, goods or services; or is legally
released from the liability.
6. Offsetting financial instruments:
Financial assets and financial liabilities are offset and the
net amount is presented in the statement of financial position if
there is a legally enforceable right to set off the recognized
amounts and there is an intention either to settle on a net basis
or to realize the asset and settle the liability
simultaneously.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k. Fair value measurement
A number of the Group's accounting policies and disclosures
require the measurement of fair value, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
Group uses market observable
data as far as possible. The Company's finance department
reviews significant unobservable inputs and valuation adjustments.
If third party information, such as broker quotes, is used to
measure fair values, then the finance department assesses the
evidence obtained from the third parties to support the conclusion
that such valuations meet the requirements of IFRS, including the
level in the fair value hierarchy in which such valuations should
be classified. Fair values are categorized into different levels in
a fair value hierarchy based on the inputs used in the valuation
techniques as follows:
- Level 1 : quoted prices (unadjusted) in active markets for
identical assets or liabilities.
- Level 2 : inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
- Level 3 : inputs for the asset or liability that are not based
on observable market data (unobservable inputs)
Further information about the assumptions made in measuring fair
values is included in the following notes:
Note 15 - Financial instruments
l. Share capital:
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of ordinary shares and share options
are recognized as a deduction from equity. Income tax relating to
transaction costs of an equity transaction is accounted for in
accordance with IAS 12. Costs attributable to listing existing
shares are expensed as incurred.
m. Trading properties:
Trading properties are being designated for sale in the ordinary
course of business and as such are classified as trading properties
(inventory) and measured at the lower of cost and
net realizable value.
Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs to complete
construction and selling expenses. If net realizable value is less
than the cost, the trading property is written down to net
realizable value.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In each subsequent period, a new assessment is made of net
realizable value. When the circumstances that previously caused
trading properties to be written down below cost no longer exist or
when there is clear evidence of an increase in net realizable value
because of changed economic circumstances, the amount of the
write-down is reversed so that the new carrying amount is the lower
of the cost and the revised net realizable value.
The amount of any write-down of trading properties to net
realisable value and all losses of trading properties are
recognised as a write-down of trading properties expense in the
period the write-down or loss occurs. The amount of any reversal of
such write-down arising from an increase in net realizable value is
recognized as a reduction in the expense in the period in which the
reversal occurs.
Costs comprise all costs of purchase, direct materials, direct
labor costs, subcontracting costs and other direct overhead costs
incurred in bringing the properties to their present condition.
Borrowing costs directly attributable to the acquisition or
construction of a qualifying asset are capitalized as part of the
costs of the asset. A qualifying asset is an asset that necessarily
takes a substantial period of time to get ready for its intended
use or sale. Other borrowing costs are recognized as an expense in
the period in which they incurred.
n. Impairment of non-financial assets:
The Company evaluates the need to record an impairment of
non-financial assets whenever events or changes in circumstances
indicate that the carrying amount is not recoverable. If the
carrying amount of non-financial assets exceeds their recoverable
amount, the assets are reduced to their recoverable amount. The
recoverable amount is the higher of fair value less costs of sale
and value in use. In measuring value in use, the expected future
cash flows are discounted using a pre-tax discount rate that
reflects the risks specific to the asset. The recoverable amount of
an asset that does not generate independent cash flows is
determined for the cash-generating unit to which the asset belongs.
Impairment losses are recognized in profit or loss.
An impairment loss of an asset is reversed only if there have
been changes in the estimates used to determine the asset's
recoverable amount since the last impairment loss was recognized.
Reversal of an impairment loss, as above, shall not be increased
above the lower of the carrying amount that would have been
determined had no impairment loss been recognized for the asset in
prior years and its recoverable amount. The reversal of impairment
loss of an asset presented at cost is recognized in profit or
loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following criteria are applied in assessing impairment of
these specific assets:
Investment in associate or joint venture:
After application of the equity method, the Company determines
whether it is necessary to recognize any additional impairment loss
with respect to the investment in associates or joint ventures. The
Company determines at each reporting date whether there is
objective evidence that the carrying amount of the investment in
the associate or the joint venture is impaired. The test of
impairment is carried out with reference to the entire investment,
including the goodwill attributed to the associate or the joint
venture.
o. Provisions:
Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to
the liability. The unwinding of the discount is recognized as
finance cost.
Warranties
A provision for warranties is recognized when the underlying
products or services are sold, based on historical warranty data
and a weighting of possible outcomes against their associated
probabilities.
Legal claims :
A provision for claims is recognized when the Group has a
present legal or constructive obligation as a result of a past
event, it is more likely than not that an outflow of resources
embodying economic benefits will be required by the Group to settle
the obligation and a reliable estimate can be made of the amount of
the obligation.
p. Revenue recognition:
Revenue from contracts with customers is recognized when the
control over the goods or services is transferred to the customer.
Revenues from trading properties are taken into account at the
moment the trading property is sold. The company considers the
moment of sale being the latest of a) receiving the payment for the
trading property; or b) the transfer of the deed at the public
notary. The transaction price is the amount of the consideration
that is expected to be received based on the contract terms,
excluding amounts collected on behalf of third parties (such as
taxes).
In determining the amount of revenue from contracts with
customers, the Company evaluates whether it is a principal or an
agent in the arrangement. The Company is a principal when the
Company controls the promised goods or services before transferring
them to the customer.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In these circumstances, the Company recognizes revenue for the
gross amount of the consideration. When the Company is an agent, it
recognizes revenue for the net amount of the consideration, after
deducting the amount due to the principal.
Variable consideration:
The Company determines the transaction price separately for each
contract with a customer. When exercising this judgment, the
Company evaluates the effect of each variable amount in the
contract, taking into consideration discounts, penalties,
variations, claims, and non-cash consideration. In determining the
effect of the variable consideration, the Company normally uses the
"most likely amount" method described in the Standard. Pursuant to
this method, the amount of the consideration is determined as the
single most likely amount in the range of possible consideration
amounts in the contract.
Variable consideration is included in the transaction price only
to the extent that it is highly probable that a significant
reversal in the amount of revenue recognized will not occur when
the uncertainty associated with the variable consideration is
subsequently resolved.
q. Finance income and cost:
Interest income and expense which are not capitalized are
recognized in the income statement as they accrue, using the
effective interest method.
r. Income tax:
Income tax expense comprises current and deferred tax. It is
recognized in profit or loss.
Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to tax
payable or receivable in respect of previous years. It
is measured using tax rates enacted or substantively enacted at
the reporting date.
Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Deferred tax
Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax assets are recognized for unused tax losses, unused
tax credits and deductible Temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized. Such
reduction is reversed when the probability of future taxable
profits improved.
Unrecognized deferred tax assets are reassessed at each
reporting date and recognized to the extent that it has become
probable that future taxable profits will be available against
which they can be used.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences.
When they reverse, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
s. Employee benefits:
1. Bonuses:
The Group recognizes a liability and an expense for bonuses,
which are based on agreements with employees or according to
management decisions based on Group performance goals and on
individual employee performance. The Group recognizes a liability
where contractually obliged or where past practice has created a
constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be
estimated reliably.
2. Share-based payment transactions:
The fair value of options granted to employees to acquire shares
of the Company is recognized as an employee expense or capitalized
if directly associated with development of trading property, with a
corresponding increase in equity. The fair value is measured at
grant date and spread over the period during which the employees
become unconditionally entitled to the options. The amount
recognized as an expense is adjusted to reflect the actual number
of share options that vest.
Where the terms of an equity-settled award are modified, the
minimum expense recognized is the expense as if the terms had not
been modified. An additional expense is recognized for any
modification, which increases the total fair value of the
share-based payment arrangement or is otherwise beneficial to the
employees as
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
measured at the date of modification. The fair value of the
amount payable to employees in respect of share-based payments,
which may be settled in cash, at the option of the holder, is
recognized as an expense, with a corresponding increase in
liability, over the period in which the employees become
unconditionally entitled to payment. The fair value is re-measured
at each reporting date and at settlement date.
Any changes in the fair value of the liability are recognized as
an additional cost in salaries and related expenses in the income
statement.
t. Changes in accounting policies - initial adoption of new
financial reporting and accounting standards and amendments to
existing financial reporting and accounting standards:
1. Amendment to IFRS 3, "Business Combinations":
In October 2018, the IASB issued an amendment to the definition
of a "business" in IFRS 3, "Business Combinations" ("the
Amendment").
The Amendment clarifies that in order to meet the definition of
a "business", an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create output.
The Amendment also clarifies that a business can exist without
including all of the inputs and processes necessary to create
outputs. The Amendment includes an optional concentration test that
permits a simplified assessment of whether an acquired set of
activities and assets is not a business, with no need for other
assessments.
The Amendment is to be applied to business combinations and
asset acquisitions for which the acquisition date is on or after
January 1, 2020.
The initial application of the Amendment did not have a material
effect on the Company's financial statements.
u. Disclosure of new standards in the period prior to their adoption:
1. Amendments to IFRS 10 and IAS 28 regarding sale or transfer
of assets between an investor and its associate or joint
venture:
In September 2014, the IASB issued amendments to IFRS 10 and IAS
28 ("the Amendments") regarding the accounting treatment of the
sale or transfer of assets (an asset, a group of assets or a
subsidiary) between an investor and its associate or joint
venture.
According to the Amendments, when the investor loses control of
a subsidiary or a group of assets that are not a business in a
transaction with its associate or joint venture, the gain will be
partially eliminated such that the gain to be recognized is the
gain from the sale to the other investors in the associate or joint
venture. According to the Amendments, if the remaining rights held
by the investor represent a financial asset as defined in IFRS 9,
the gain will be recognized in full.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
If the transaction with an associate or joint venture involves
loss of control of a subsidiary or a group of assets that are a
business, the gain will be recognized in full.
The Amendments are to be applied prospectively. A mandatory
effective date has
not yet been determined by the IASB but early adoption is
permitted.
2. Amendment to IAS 37, "Provisions, Contingent Liabilities and Contingent Assets":
In May 2020, the IASB issued an amendment to IAS 37, regarding
which costs a company should include when assessing whether a
contract is onerous ("the Amendment"). According to the Amendment,
costs of fulfilling a contract include both the incremental costs
(for example, raw materials and direct labor) and an allocation of
other costs that relate directly to fulfilling a contract (for
example, depreciation of an item of property, plant and equipment
used in fulfilling the contract).
The Amendment is effective for annual periods beginning on or
after January 1, 2022 and applies to contracts for which all
obligations in respect thereof have not yet been fulfilled as of
January 1, 2022. Early application is permitted.
The Company estimates that the application of the Amendment is
not expected to have a material impact on the financial
statements.
3. Annual improvements to IFRSs 2018-2020:
In May 2020, the IASB issued certain amendments in the context
of the Annual Improvements to IFRSs 2018-2020 Cycle. The main
amendment is to IFRS 9, "Financial Instruments" ("the Amendment").
The Amendment clarifies which fees a company should include in the
"10% test" described in paragraph B3.3.6 of IFRS 9
when assessing whether the terms of a debt instrument that has
been modified or exchanged are substantially different from the
terms of the original debt instrument.
The Amendment is effective for annual periods beginning on or
after January 1, 2022. Early application is permitted. The
Amendment is to be applied to debt instruments that are modified or
exchanged commencing from the year in which the Amendment is first
applied.
4. Amendment to IAS 1, "Presentation of Financial Statements":
In January 2020, the IASB issued an amendment to IAS 1,
"Presentation of Financial Statements" ("the Amendment") regarding
the criteria for determining the classification of liabilities as
current or non-current.
The Amendment includes the following clarifications:
-- What is meant by a right to defer settlement;
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
-- That a right to defer must exist at the end of the reporting period;
-- That classification is unaffected by the likelihood that an
entity will exercise its deferral right;
-- That only if an embedded derivative in a convertible
liability is itself an equity instrument would the terms of a
liability not impact its classification.
The Amendment is effective for annual periods beginning on or
after January 1, 2023 and must be applied retrospectively.
The Company is evaluating the possible impact of the Amendment
on its current loan agreements.
NOTE 3:- CASH AND CASH EQUIVALENTS
December 31,
--------------
Bank deposits and cash denominated in 2020 2019
------------------------------------------- ------ ------
EUR - bank balances 1,338 1,044
United States Dollar (USD) - bank balances 265 9
New Israeli Shekel (NIS) 88 4
Polish Zlotys (PLN) - 9
Other currencies 18 60
1,709 1,126
====== ======
*) The balances are not bearing interest.
NOTE 4:- PREPAYMENTS AND OTHER RECEIVABLES
Prepayments and other receivables:
December 31,
--------------
2020 2019
------ ------
Tax receivables - 133
Prepayments and others 90 48
------ ------
90 181
====== ======
NOTE 5:- TRADING PROPERTIES
December 31,
-----------------
2020 2019
-------- -------
Balance as of 1 January 40,375 42,600
Increase in value (Write-down) of trading
properties, net (1) (39,825) 1,238
Trading properties disposed (2) (550) (3,463)
-------- -------
Balance as of 31 December - 40,375
======== =======
Trading properties designated for sale - 40,375
-------- -------
(1) Breakdown of write-downs (Increase in value) of trading
properties is presented in the table below:
Year ended
December 31,
-----------------
Project name (location) 2020 2019
-------- -------
Casa Radio (Bucharest, Romania)
(**) 39,825 (738)
Miercurea Ciuc (Miercurea Ciuc,
Romania) - (500)
-------- -------
39,825 (1,238)
-------- -------
Change in provision in respect to
PAB (*) (**) (15,825) 1,738
-------- -------
Net write-downs 24,000 500
-------- -------
(*) See also note 5(3)(e) below.
The 2020 write-downs were caused due to the following
factors:
(**) EUR 39.8 million of write-down in Casa Radio project,
Romania and EUR 15.8 million of reversal of provision (relating to
change in provision in respect to PAB) in Casa Radio project,
Romania (see Note 5(3)).
For detailed information with respect to the write down, refer
also to Note 5(4).
(2) Sale of assets in the reporting period:
a) Disposal of land plot in Brasov, Romania:
On February 5, 2019 an indirect subsidiary signed a
Pre-Agreement for the sale of a plot in Brasov, Romania for a total
gross amount of EUR 620,000.
NOTE 5:- TRADING PROPERTIES (Cont.)
On November 25, 2019 an indirect subsidiary signed Addendum no.
1 to the Pre-Agreement signed on February 5, 2019 and the Parties
agreed that the consummation of the Transaction will take place not
later than February 15, 2020.
On February 14, 2020 the sale of the plot in Brasov, Romania was
completed, a definitive agreement was signed for a total
consideration of EUR 620,000 which was received in full.
(3) Casa Radio:
(a) General:
In 2006 the Company entered into a PPP agreement with the
Government of Romania to develop the Casa Radio site in the city
center of Bucharest ("Project") and acquired 75% interest in the
joint venture company developing the Project ("Project SPV"). After
signing the PPP agreement, the Company holds indirectly 75% of the
shares in the Project SPV, the remaining shares are held by the
Romanian authorities (through CNI, a Romanian company ultimately
owned by the Romania authorities)(15%) and a third-party private
investor (10%).
Pursuant to the PPP agreement, the Project SPV was granted
development and exploitation rights in relation to the site for a
period of 49 years, starting December 2006 (35 years remaining at
the end of the reporting period). As part of its obligations under
the PPP agreement, the Project SPV has committed to construct a
public authority building ("PAB") measuring approximately 11.000
square meters for the Romanian Government at its own cost.
Large scale demolition, design and foundation works were
financed by loans given to the Project SPV by the Company. These
works were performed on site until 2010. Construction and
development were put on hold due to difficulties procuring further
financing because of the global financial crisis and later, as well
as, the lack of progress in the renegotiation of the PPP agreement
with the Romanian authorities, as detailed in subsection (c) below.
These circumstances (and mainly the bureaucratic deadlock with the
Romanian authorities to deal with the issues specified below)
caused the Project SPV not to meet the development timeline of the
Project as specified in the PPP agreement. However, management
believes that it had legitimate reasons for the delays in this
timeline, as discussed in subsection (c) below.
(b) Obtaining of the Detailed Urban Plan ("PUD") permit:
The Project SPV obtained the PUD for the Project in September
2012. On December 13, 2012, the Court took note of the waiver of
the claim submitted by certain plaintiffs and rejected the
litigation aiming to cancel the approval of the Zonal Urban Plan
("PUZ") for the Project. The Court decision is irrevocable.
NOTE 5:- TRADING PROPERTIES (Cont.)
(c) Discussions with the Romanian authorities:
Following the Court decision with respect to the PUZ, the
Project SPV was required to submit a request for building permits
within 60 days from the approval date of the PUZ/PUD and commence
development of the Project within 60 days after obtaining the
building permits. The building permits have not been obtained.
Due to substantial differences between the approved PUD and
stipulations in the PPP agreement and changes in EU law concerning
environmental considerations in buildings used by public bodies,
the Project SPV attempted to renegotiate the future development of
the Project with the Romanian authorities on items such as
timetable, structure, milestones and adaptation of the PAB
development to the current EU requirements. Despite many
notifications sent to the Romanian authorities, expressing a wish
to renegotiate the existing PPP agreement, no major breakthrough
has been achieved. The Company may be subject to significant delay
penalties under the terms of the PPP agreement if it is determined
that the Company was at fault in causing the delays.
Because of the failure of the Romanian authorities to cooperate,
negotiate and adjust the PPP agreement, the Project SPV was not
able to meet its obligations under the PPP agreement. This resulted
in a situation where the Project SPV could not "de facto" continue
the execution of the Project and created a risk that the Romanian
authorities could attempt to terminate the PPP agreement and/or to
impose penalties on the Company and the Project SPV. As of the date
of approval of these consolidated financial statements, the Project
SPV has not received any termination notification from the Romanian
authorities.
Still, in the case of termination of the PPP agreement, any
disputes regarding the relationship and compensation between the
parties is to be determined by way of arbitration. The management,
believes that, in the case of termination, the Company has a good
case to claim compensation for damages.
The Romanian authorities undertook to discuss in good faith the
restructuring of the Project and the PPP agreement in situations
where significant unexpected circumstances arise. Further, the
unresponsiveness of the Romanian authorities is a violation of the
general undertaking to support the Project SPV in the execution of
the Project as agreed in the PPP agreement.
Management has taken a number of steps in order to unblock the
development of the project and mitigate the risk of termination of
the PPP agreement, including
NOTE 5:- TRADING PROPERTIES (Cont.)
commencing a process to identify third party investors willing
and capable to join in the development of the Project and/or
potential buyers of the Company's interest in the Project.
Management believes that reputable investors with considerable
financial strength can enhance negotiation position vis-à-vis the
Romanian authorities and assist in advancing an amicable agreement
with the relevant authorities with respect to the development of
the Project. As a result of the Company's ongoing efforts, a
pre-sale agreement for the sale of its shareholding in the Project
SPV and its interests in the Project was signed on 3 July 2019 (see
(3)(f) in this Note).
(d) Co-operation with the Romanian Authorities regarding potential irregularities:
In 2015, the Board and Management became aware of certain issues
with respect to certain agreements that were executed in the past
in connection with the Project. In order to address this matter,
the Board appointed the chairman of the Audit Committee to
investigate the matters and independent law firms to analyze the
available alternatives in this respect. The chairman of the Audit
Committee did not conclude the investigation as the person with key
information was not available to answer questions. The Board, among
other steps, implemented a specific policy in order to prevent the
reoccurrence of similar issues and appointed the Chairman of the
Audit Committee to monitor the policy's implementation by the
Company's management. In addition, it was decided that in the
future certain agreements will be brought to the Board's approval
prior to signing.
The Company has approached and was co-operating fully with the
relevant Romanian Authorities regarding the matters that have come
to its attention and it has submitted its initial findings in March
2016 to the Romanian Authorities. On September 23, 2019, the
Romanian Prosecutor (the "Prosecutor") decided to close the
investigation considering that there is no evidence to indicate
that any bribery offense was committed in relation to the Project.
The Prosecutor decided that no money laundering exists and that the
evidence regarding a potential traffic of influence leads to the
conclusion that this may be considered a matter for civil
litigation and not a criminal offense.
(e) Provision in respect of PAB:
As mentioned in point (a) above, when the Company entered into
an agreement to acquire 75% interest in the Project SPV it assumed
a commitment to construct the PAB at its own costs for the benefit
of the Romanian Government. As detailed in note 5(4) below, the
carrying amount of the trading property was fully written off.
Accordingly, the Company also fully reduced the provision in
respect of the construction of the PAB (December 31, 2019: EUR 15.8
million).
(f) 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 N.V. as buyer entered into a
pre-sale agreement for the sale of the shareholding in
Dambovita
NOTE 5:- TRADING PROPERTIES (Cont.)
Center S.R.L ("Dambovita RO") (the "Pre-Sale Agreement").
Pursuant to the terms of the Pre-Sale Agreement, AFI Europe N.V.
shall carry out a due diligence review which 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 (the "SPA") and an intragroup loan
assignment/novation agreement.
Conditions precedent in the Pre-Sale Agreement comprise inter
alia (i) the satisfactory completion of a due diligence
investigation by AFI Europe N.V. by 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 N.V.(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 N.V.(vi);
amendment of the PPP Agreement in order to transfer the rights of
Elbit Imaging Limited and the Company to AFI Europe N.V.; (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
N.V. 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.
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. The fulfilment of the
Conditions precedent relating to the approval of the Company's
shareholders and bondholders as referred to above must occur no
later than 5 September 2019. On 30 July 2019, the bondholders of
Bonds series A and Bonds Series B decided to authorize the Company
to enter into the agreement and execute the transaction contained
therein. In addition, an extraordinary general meeting of
Shareholders of the Company held on 29 August 2019 approved the
transaction as detailed in the Notice of EGM.
NOTE 5:- TRADING PROPERTIES (Cont.)
On 5 September 2019 in accordance with the pre-sale agreement,
AFI has paid the down payment of EUR 200,000.
PRE-SALE AGREEMENT - SPECIFIC PROVISIONS
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).
Pursuant to the Pre-Sale Agreement, Dambovita NL will transfer
its interest in Dambovita RO and will assign the Intragroup Loans
to AFI Europe N.V. for the maximum consideration of EUR 60 million,
subject to the fulfilment of certain conditions (the "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).
Subject to fulfilment of the conditions precedent in the
Pre-Sale Agreement as detailed above which includes, among others,
the execution of the SPA, AFI Europe N.V. 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.
The Company, as guarantor under the Pre-Sale Agreement, will
undertake to indemnify AFI Europe N.V., jointly and severally,
against all losses, charges, costs and expenses (including
reasonable attorney's fees) which AFI Europe N.V. 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
NOTE 5:- TRADING PROPERTIES (Cont.)
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 N.V. in connection with the fulfilment 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 N.V.
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
(the "Company Guarantee").
On November 2, 2020, the Company, Dambovita NL and AFI Europe
N.V. ("AFI", and together with the Company, the "Parties") entered
into an addendum to the pre-sale pursuant to which the Parties
agreed to extend the Long Stop Date, which is the date on which the
parties will execute a share purchase agreement, subject to the
satisfaction of conditions precedent, until December 31, 2021.
The Parties have further agreed that in case of any litigation
and/or arbitration process to which the Company is a party, will
result in the loss of any of their rights under the PPP Agreement
with the Government of Romania to develop the Casa Radio site in
the city center of Bucharest, AFI shall no longer be bound by its
obligations under the Agreement and the company shall reimburse AFI
with the entire advance payment of EUR 200,000 already paid by AFI.
The prepayment of EUR 200,000 is included in Other Liabilities in
the consolidate statement of financial position.
The Addendum was subject to the approval of the Company's
bondholders which was obtained on 12 November 2020.
As of the date hereof, there can be no certainty that either the
conditions precedent in the Pre-Sale Agreement as detailed above
will be met, that the Sale Agreement will be executed and/or that
the Transaction will be consummated as presented above or at
all.
(4) Write-down of trading properties:
Trading properties are measured at the lower of cost and net
realizable value.
Determining net realizable value is inherently subjective as it
requires estimates of future events and takes into account special
assumptions in the valuations, many of which are difficult to
predict.
Actual results could be significantly different than the
Company's estimates and could have a material effect on the
Company's financial results.
NOTE 5:- TRADING PROPERTIES (Cont.)
These valuations become increasingly difficult as they relate to
estimates and assumptions for projects in the preliminary stage of
development.
Management is responsible for determining the net realizable
value of the Group's trading properties.
As detailed above, despite many notifications sent to the
Romanian authorities expressing a wish to renegotiate the existing
PPP agreement, no major breakthrough could be achieved, in
addition, the Romanian authorities have not cooperated
substantively with the Company's request to approve the transfer of
the Company's shares in the Project SPV and its interest in the
Project to AFI.
Because of the abovementioned issues surrounding the
satisfaction of the conditions precedent in the pre-sale agreement,
it is currently not certain whether the sale agreement as
contemplated in the pre-sale agreement would be entered into and
whether therefore the transaction with AFI would proceed. As such
the Company, Dambovita NL and AFI Europe N.V. agreed to extend the
Long Stop Date until December 31, 2021. Additionally, as the
external appraisers, in their opinion did not reflect the risk
related to the uncertainty in respect of fulfilment of the
conditions precedent set out in the pre-sale agreement, as
described above, the management has concluded that it can't measure
the net realizable value of the Project based on either the
pre-sale agreement or based on the residual value approach as the
management would need to assume that it would receive the Romanian
authorities approval to restructure and adjust the PPP agreement.
As a result, the value of the trading property of the Project was
fully reduced.
Still, the Company believes that despite this reduction there is
no change in the value of the Company's rights under the PPP
Agreement. In addition, management, believes that in case they will
decide to pursue it material economic damage, the Company has a
good case to claim compensation for such damages.
On the other hand, if the Company comes to an understanding with
the Romanian authorities, it will measure the Casa Radio NRV to
reflect its updated financial projections.
NOTE 6:- EQUITY ACCOUNTED INVESTEES
a. The Group has the following interest in the below joint ventures.
Interest of holding
(percentage)
as of December
31,
---------------------
Company name Country Activity 2020 2019
----------------------- -------- ------------- ---------- ---------
Elbit Plaza India Real Mixed-use
Estate Holdings Ltd. large-scale
("EPI") (*) Cyprus projects 47.5% 47.5%
(*) Though EPI is 47.5% held by the Company, the Company is
accounted for 50% of the results, as the third party holding 5% in
EPI is deemed not to participate in accumulated losses, hence Elbit
and the Company, the holders of the remaining 95% each account for
50% of the results of EPI.
The movement in equity accounted investees (in aggregation) was
as follows:
2020 2019
------- -------
Balance as of 1 January 14,419 17,676
Distribution received from equity-accounted
investees (983) (782)
Share in results of equity-accounted
investees, net of tax (1) (1,084) (2,396)
Effect of movements in exchange rates (1,615) (79)
Balance as of 31 December 10,737 14,419
======= =======
(1) Breakdown of the Group's share of increase (write-downs) of
trading properties projects held by equity accounted investees is
as follows:
Year ended
December 31
----------------
Project name (holding company 2020 2019
name)
------- -------
Bangalore (held by EPI) (*) (434) (1,809)
Chennai (held by EPI) (*) (526) (472)
Other expenses (123) (115)
(1,084) (2,396)
======= =======
(*) Refer to the below paragraphs b(1) and b(2) regarding the properties' write downs.
(2) Repayment of loan granted to the Company by EPI from
proceeds received from the Partner in Bangalore property. See b (1)
below.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
b. Material joint ventures:
The summarized financial information of the material joint
venture EPI (due to holding of major schemes in Bangalore and
Chennai) is as follows:
2020 2019
-------- --------
Current assets (*) 1,106 2,994
Trading properties-non current 33,090 39,354
Other current liabilities (12,722) (13,510)
Net assets (100%) 21,474 28,838
Group share of net asset (50%) (**) 10,737 14,419
Carrying amount of interest in joint
venture 10,737 14,419
======== ========
(*) Including cash and cash equivalents in the amount of EUR 910
thousand (2019 - EUR 2,816 thousand);
(**) Refer to remark on EPI holding rate in section a above.
2020 2019
------- -------
write-downs of trading properties (1,921) (4,472)
Other expenses (247) (320)
Total loss (100%) (2,168) (4,792)
Group share of loss (50%) (1,084) (2,396)
Total results from investees (1,084) (2,396)
======= =======
(1) Bangalore:
In March, 2008 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 December 31, 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 35.75 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.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
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. 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 November 2019 and August 2020 was subject to
receipt of payments as agreed in the Sale Agreement and subject to
mutually agreed payment terms; and (ii) the consideration was
increased to INR 356 crores (approximately EUR 41.16 million)
(Plaza part approximately EUR 20.58 million) (the
"Consideration").
After August 2019, the Partner was unable to pay any further
amounts nor was able to give firm commitment on payment of the
remaining amount. In the absence of clarity on payment of the
remaining amount, the SPV initiated:
i) insolvency proceedings against the Partner for recovery of
the amounts due on which notice was issued to the Partner.
Arguments on the case has been completed and the matter is reserved
for order on the admission of the insolvency application
ii) criminal cases for dishonor of the cheques aggregating INR
15 crores which
were given as security for payment of certain installments, the
Court has issued arrest warrants and the local police is on the
lookout for the accused persons.
Until the date of approval of the financial statements, the
Partner paid to EPI approximately EUR 11.2 million (INR 87.00
crores) (Plaza part INR 43.5 crores (approximately EUR 5.6
million)) out of a total consideration of INR 356 crores (EUR 41.16
million) (Plaza part INR 178 crores (approximately EUR million))
the SPV should have received as of the said date as per the
Agreement.
All the payment were done during 2017-2019 thus no payments were
done in 2020. Further, the Partner has mortgaged approximately 8.7
acres of plots as security for completion of the transaction as
noted above.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
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.
On July 1, 2020, the proposed revised Master Plan under which it
was proposed to change the zoning of most of the plot from
residential to open space/ parks/ recreation zone has been
withdrawn by the Government of Karnataka.
Net realizable value measurement of Bangalore project:
As of December 31, 2020 and 2019 the Group measured the net
realizable value of the project. The net realizable value of the
project based on the comparable Method is INR 198 crores (EUR 2 2 .
1 million); 2019 - INR 206 crores (EUR 25.8 million) . Due to
decrease in value of the plot EPI recognized a write down in the
amount of app. EUR 0.8 million (the Company part (50%) app. EUR 0.4
million) .
The evaluation Value in INR Value in EUR
method million million
------------------ ------------ ------------
Comparable Method 1,983 22.1
------------ ------------
DCF Method 1,890 21.0
------------ ------------
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
Company recorded the value of the plot as of December 31, 2020 at
the value of INR 198 crores (EUR 22.1 million) (the Company part
(50%) app. EUR 11 million).
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, impact of COVID pandemic, and the non-contiguous
land
parcel and the petition / application filed with NCLT against the partner.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
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) 95
-------------
Applicable FSI value (INR / Sq. ft) 1,081
-----------
Total land value (INR Mn) 5,185
-----------
Discount on account of Revised Master Plan
2015 Buffer zone norms (%) -25%
-----------
Land Value after discount for RMP 2015
Buffer zone Norms (INR Mn /acre) 72
-----------
Presence of minority shareholder -20%
-----------
Applicable Land Value after discount (INR
Mn /acre) 57
-----------
Total land value (INR Mn) 3,111
-----------
Discount on account of the petition / application
filed with NCLT -25%
-----------
Total land value (INR Mn) 2,333
-----------
Marketability discount on account of COVID-19
situation -15%
-----------
Total land value (INR Mn) 1,983
--------------------------------------------------- -----------
(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").
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 December 31, 2020, 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 legal heirs of the landowners of the Property, who wish to
recognize them as owners of 2.5% the Property.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
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.
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
. In June, 2019 the aforesaid dispute was amicably resolved, the
arbitration proceedings withdrawn and the JDA restored.
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 EUR 0.625 million) in order to provide the Developer
with an additional six months to complete the closing, which may be
extended by another three months upon payment by the Developer of
an additional deposit of INR of 5 crores (approximately EUR 0.625
million). (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 Developer 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 EUR 13 million (INR 108 crores) (the "Consideration")
will be shared 67% by the Developer and 33% by EPI. 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 of
the Company; (vii) and of the Company and Elbit Imaging Ltd. as
guarantor under the SPA, undertake EPI will transfer to the
Developer 100% of the rights in SPV. The liability in connection
with the guarantee as stated here in on standalone bases (and not
together) and limited to an amount not exceeding 200% of the
updated consideration and for a period not exceeding 5 years from
the date of the transaction under the SPA being concluded .
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
On December 5, 2019 the Company announced that EPI and the
Developer have reached a revised understanding regarding the
amendment of the agreement according to which: (i) The Developer
further paid the Chennai Project SPV INR 5 crores (approximately
EUR 0.625 million) and received a three months extension to
complete the closing (i.e., until March 3, 2020). This closing may
be extended for an
additional three months period (i.e., until June 3, 2020), for
an additional payment of INR 5 crores, to be paid by the Developer.
(ii) Out of the payments received from the Developer (as detailed
above) EPI is entitled to receive a total of INR 17 crores (Plaza
part INR 8.5 crores (approximately EUR 1.05 million).
Accordingly, on February 18, 2020 the Company announced that EPI
has received INR 17 crores (approximately EUR 2.1 million (the
Company's part EUR 1.05 million)) from the Chennai Project SPV.
On March 8, 2020 the Company announced that EPI and the
Developer have reached a revised understanding regarding the
amendment of the agreement according to which: (i) The Purchaser
paid further INR 5 crores (approximately EUR 0.625 million) and get
additional three months to complete the closing until June 3, 2020,
which may be extended by another three months upon payment by the
Purchaser of an additional deposit of INR of 7.5 crores
(approximately EUR 0.9 million) .
On June 2, 2020 the Company announced that in light of the
ongoing lockdown due to COVID-19, the Developer has sought
additional time for closing (currently set for June 2, 2020) and
the parties have reached to a revised understanding as follows: (i)
The Developer requests and gets an extension of 3 months to
complete the closing (i.e. up to September 2, 2020) without an
additional payment of INR 7.5 crores (approximately EUR 0.9
million). The Developer will have an option to extend this period
of time by another 3 months (i.e., up to December 2, 2020) upon
paying additional deposit of INR 7.50 crores (approximately EUR 0.9
million) (Plaza part INR 3.75 crores (approximately EUR 0.45
million)).
On August 31, 2020 the Company announced further to revised
understanding regarding the amendment agreed by the parties on June
2, 2020 and due to the COVID 19 negative impact on the economic
situation in India, the Purchaser has sought additional time for
closing of the transaction (currently set for September 2, 2020),
and the parties have reached a revised understanding as follows:
(i) The Purchaser will deposit INR 1 crore (approximately EUR 0.115
million) and agrees to deposit additional INR 0.50 crore
(approximately EUR 0.0575 million) by December 1, 2020 ; (ii) The
Purchaser gets additional seven months to complete the closing (up
to 1, April 2021), which may be extended by another three months
(up to June 30, 2021) upon payment by the Purchaser of an
additional deposit of INR 7.5 crores (approximately EUR 0.861
million) ;
Accordingly, the Purchaser has deposited INR 1.50 crore
(approximately EUR 0.172
million) in accordance with his obligation in connection with
the revised understandings to the Agreement as agreed on August 31,
2020.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
On March 31, 2020 the Company announced further the revision of
the understanding regarding the amendment agreed by EPI and the
Purchaser ("The Parties"). On August 31, 2020 the Parties have
reached a revised understanding (the "Revised Understandings") as
follows:
a. The Purchaser will deposit INR 7.5 crore (approximately EUR 0.861 million (Plaza part is approximately EUR 0.43 million)).
b. The Purchaser can complete the closing by April 30, 2021 at a
revised consideration of 96.50 crores (approximately EUR 11.6
million (Plaza part is approximately EUR 5.8 million)).
c. If the Purchaser fails to complete the closing by April 30,
2021 then the Purchaser gets additional two months to complete the
closing by June 30, 2021 but at the initial consideration of INR
108 crores (approximately EUR 13 million (Plaza part is
approximately EUR 6.5 million)).
d. According to the SPA, 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 .
e. Following the deposit of the INR 7.5 crore (approximately EUR
0.861 million (Plaza part is approximately EUR 0.43 million)) by
the purchaser as agreed in the Revised Understanding stated above,
as of this date, the Purchaser has deposited a total of INR 34
crores (approximately EUR 4.1 million (Plaza part is approximately
EUR 2.05 million)).
At this stage, there is no certainty that the SPA closing will
occur.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
Net realizable value measurement of Chennai project
Following signing of SPA (as described above) and in spite of
the uncertainty on the ability of the developer to complete the
closing within the aforesaid time periods (as detailed above), the
management and the board of EPI decided in order to measure the
value of the property, to compare between the Consideration (INR
1,082 million) which were agreed between the parties in the SPA to
the value in the valuation prepared by an external appraisal based
on the land comparable method.
Accordingly, since the appraiser valued the property in the
valuation based on the comparable method in the value of INR 988
million (app. EUR 11.0 million) which is lower than the
consideration, the Company recorded the value of the plot as of
December 31, 2020, in the value of INR 988 million (app. EUR 11.0
million) out of which the Company's part in financial reports were
EUR 5.5 million. Due to decrease in value of the plot EPI
recognized a write down in the amount of app. EUR 1 million (the
Company part (50%) app. EUR 0.5 million).
The evaluation Value in INR million Value in EUR million
method
Comparable Method 988 11.0
--------------------- ---------------------
DCF Method 1,078 12.0
--------------------- ---------------------
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) 17,74
-------------
Total land value (INR Mn) 1,292
-----------
Time delay for project and JDA exit formalities
for prospective buyer (%) -10%
-----------
Total land value (INR Mn) 1,163
-----------
Marketability discount on account of COVID-19
situation -15%
-----------
Total land value (INR Mn) 988
------------------------------------------------- -----------
NOTE 7:- OTHER LIABILITIES
December 31,
--------------
2020 2019
------ ------
Prepayments (*) 200 250
Salaries and related expenses (**) 20 50
Accrued expenses 189 177
Total 409 477
====== ======
(*) Including EUR 200 thousand payable due to down payment in
regard to pre-sale agreement for the sale of Casa Radio Project
(refer to note 5(3)(f)).
(**) Refer to Note 18.
NOTE 8:- BONDS
a. Composition:
Carrying amounts
Effective as at
interest Contractual Principal December 31
rate interest rate final maturity 2020
--------- -------------- --------------- ----------------
Series A Bonds 11.58% CPI+8%(*) 2021 35,966
Series B Bonds 13.83% CPI+8.9%(*) 2021 51,171
87,137
================
(*) Including 2% interest on arrears
b. Mandatory repayments subsequent to the reporting date (without early repayments):
2021 87,137
87,137
======
(1) Pursuant to the Company's Restructuring Plan, the Company
will assign 78% of the net proceeds received from the sale or
refinancing of any of its assets as early repayment.
(2) Approved amendment to an early prepayment term under the Restructuring Plan
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
NOTE 8:- BONDS (Cont.)
principal payments originally due in 2016 and 2017 were deferred
for a period of one year.
During the first three months of 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 382,000,000 (approximately EUR 98 million)) and
thus obtained a deferral of one year for the remaining contractual
obligations of the bonds.
In addition to the above, the following terms were approved by
the bondholders:
(a) Casa radio proceeds - If the Company shall sell the Casa
radio project located in Romania (hereinafter: the "Project") to a
third party, including by way of selling its holdings in any of the
entities through which the Company holds the project (and said sale
shall be carried out before the full repayment of the bonds and
until no later than December 31, 2019, and for an amount which
exceeds EUR 45 million net (i.e. after brokerage fees (if any),
taxes, fees, levies or any other obligatory payment due to any
authority in respect to the said sale) which shall actually be
received by the Company, then the holders of bonds shall be
eligible for a one-time payment (which shall come in addition to
the principal and interest payments in accordance with the
repayment schedule), in certain amounts specified in tranches.
(b) Registering of Polish bonds for trade - the Company has
committed to undertake best efforts to admit the Polish bonds for
trading on the Warsaw Stock Exchanges and proceeding in this
respect are ongoing.
(c) Deferred debt ratio of Series B bonds - were reduced to 68.24% from 70.44%
following the cancellation of the treasury bonds. The ratio has
been changed for Series B bonds in order to maintain a distribution
ratio between the three series.
(c) Settlement agreement with Bondholders of Israeli Series of Bonds:
In January 2018, a settlement agreement was signed by and among
the Company and the two Israeli Series of Bonds ("Settlement
Agreement"). In the Settlement Agreement it was agreed, inter alia,
to approve:
- New repayment ratios between the two Israeli Series of Bonds
(new ratio: Bond A- 39% Bond B- 61%);
- An increase in the level of the mandatory early repayments
from 75% to 78% of the relevant net income;
- New repayment schedule;
- An increase in the compensation to be paid to the Bondholders
in the event of successful disposal of Casa Radio Project;
- A waiver of claims to the Company and its directors and officers; and
NOTE 8:- BONDS (Cont.)
- To waive the request for publication of quarterly financial reports by the Company.
As a result of settlement agreement signing, Series A
Bondholders withdraw their request for immediate repayment.
It is clarified that the Settlement Agreement is a separate
agreement among the parties thereto with respect to the Company's
restructuring plan, and as such has no effect on the Polish
Bondholders.
On January 31, 2018 the Company paid the bondholders a total
amount of principal and interest of EUR 38,487 thousand.
(1) The net cash flow received by the Company following an exit
or raising new financial indebtedness (except if taken for the
purpose of purchase, investment or development of real estate
asset) or refinancing of real estate assets after the full
repayment of the asset's related debt that was realized or in
respect of a loan paid in case of debt recycling (and in case where
the exit occurred in the subsidiary - amounts required to repay
liabilities to the creditors of that subsidiary) and direct
expenses in respect of the asset (any sale and tax costs, as
incurred), will be used for repayment of the accumulated interest
till that date in all of the series (in case of an exit which is
not one of the four shopping centres only 50% of the interest) and
78% of the remaining cash (following the interest payment) will be
used for an early repayment of the close principal payments for
each of the series (A, B, Polish) each in accordance with its
relative share in the deferred debt. Such prepayment will be real
repayment and not in bond purchase.
(2) On November 22, 2018 the Company announced based on its
current forecasts, the Company expected to pay the accrued interest
on Series A and Series B Bonds on December 31, 2018, in accordance
with the repayment schedule determined in the Company's
Restructuring Plan and Settlement Agreement with Series A and
Series B Bondholders from 11 January 2018 (the "Settlement
Agreement"). The Company noted that it will not meet its principal
repayment due on December 31, 2018 as provided for in the
Settlement Agreement. The Company may be able to partially pay the
said principal depending, among other things, on the actual sale of
assets and taking into consideration the cash needs in accordance
with the scope of the forecasted activity.
NOTE 8:- BONDS (Cont.)
2019
Following the announcement of the Company from January 2019, the
Company repaid in February 2019 circa EUR 400,000 (principal of
circa EUR 250,000 and penalty interests of circa EUR 150,000) to
its Series A and Series B. As provided for in the Settlement
Agreement, the bondholders approved the deferral of payment to July
1, 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 of which is only 42%
of the full amount of interest.
On July 11, 2019, the Company announced that its Romanian
subsidiary had signed a binding agreement to sell land in Miercurea
Ciuc, Romania, 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.
On November 17, 2019 the bondholders of Series A and Series B
approved a deferral of all the scheduled Principal payment and app.
87% of deferral of the scheduled Interest payment, both, as of
December 31, 2019 to July 1, 2020.
Accordingly, in December 2019, Company made a partial interest
payment in amount of circa EUR 0.6 million of which is only 13% of
the full amount of interest.
2020
On May 4, 2020, the bondholders of Series A and Series B
approved: (i) to postpone the final redemption date to January 1,
2021 of all the scheduled Principal; (ii) that on July 1, 2020 the
Company will pay to its bondholders a partial interest payment in
the total amount of EUR 0.25 million and to deferral all other
unpaid scheduled Interest payment.
Following receiving the Settlement Amount (refer to Note
16(b)(9)), and in light of the potential negative impact of the
Covid-19 on the possibility to receive future proceeds from the
Company's plots in India, the Company decided to increase the
amount to be paid to the bondholders on July 1, 2020, from EUR 0.25
million to EUR 0.5 million. The amount reflected 6.74% of accrued
interest as of that date.
On November 12, 2020, the bondholders of Series A and Series B
approved: (i) to postpone the final redemption date to July 1, 2021
of all the scheduled Principal; that on January 1,
NOTE 8:- BONDS (Cont.)
2021 the Company will pay to its bondholders a partial interest
payment in the total amount of EUR 0.2 million and to deferral all
other unpaid scheduled Interest payment. The amount reflected 1.84%
of accrued interest as of that date.
As detailed in Note 1(b) the Company expects that it will not be
able to meet its entire contractual obligations in the following 12
months.
Accordingly, it intends to request the bondholders of both
series to postponement of the repayment of the remaining balance of
the Bonds.
d. Covenants:
The bonds' covenants are detailed in Note 16(b)(1).
In respect of the Coverage Ratio Covenant ("CRC"), as defined in
the restructuring plan, as at December 31, 2020 the CRC is not in
compliance with 118% minimum ratio required.
e. Credit rating:
In January 2018, Standard & Poor's Maalot, the Israeli
credit rating agency which is a division of International Standard
& Poor's has discontinued tracking Plaza's rating at the
Company's request.
NOTE 9:- INCOME TAXES
a. Deferred taxes recognized are attributable to the following items:
Recognized
December in Profit December
31, or loss 31,
----------
Assets/(liabilities) 2020 2019 2020 2020
-------- ---------- --------
Bonds (628) 628 -
Tax value of carry-forwards
loss recognized (*) 628 (628) -
-------- ---------- --------
Deferred tax asset (liability),
net - - -
======== ========== ========
Recognized
December in Profit December
31, or loss 31,
----------
Assets/(liabilities) 2019 2018 2019 2019
-------- ---------- --------
Bonds (943) 315 (628)
Tax value of carry-forwards
loss recognized (*) 943 (315) 628
-------- ---------- --------
Deferred tax asset (liability),
net - - -
======== ========== ========
(*) Due to tax losses created at the Company level.
NOTE 9:- INCOME TAXES (Cont.)
b. Unrecognized deferred tax assets:
Deferred tax assets have not been recognized in respect of tax
losses in a total amount of EUR 107,717 thousand (2019: EUR 112,073
thousand).
Deferred tax assets have not been recognized in respect of these
items because it is not probable that future taxable profit will be
available against which the Group can utilize the benefits there
from. As of December 31, 2020, the expiry date status of tax losses
to be carried forward is as follows:
Total tax
losses carried After
forward 2021 2022 2023 2024 2025 2025
------ ------ ------ ------ ------ ------
107,717 12,555 25,228 18,488 14,647 23,737 13,062
Tax losses are mainly generated from operations in the
Netherlands. Tax settlements may be subject to inspections by tax
authorities. Accordingly, the amounts shown in the financial
statements may change at a later date as a result of the final
decision of the tax authorities.
c. Amounts recognized in profit or loss :
Year ended
December 31
--------------
20 20 2019
------- -----
Adjustment in respect of previous
years taxes (1) - (71)
Total - (71)
======= =====
(1) 2019 - result from withholding tax paid in Israel.
d. Reconciliation of effective tax rate:
2020 2019
-------- --------
Dutch statutory income tax rate 25% 25%
-------- --------
Loss from continuing operations before
income taxes (33,490) (21,096)
Tax benefit at the Dutch statutory
income tax rate (8,372) (5,274)
Effect of tax rates in foreign jurisdictions 158 (1,670)
Adjustment in respect of previous
years taxes - 71
Current year tax loss and other timing
differences for which no deferred
taxes are created (1) 8,087 6,329
Non-deductible expenses (exempt income) 127 615
Tax Expense - 71
======== ========
(1) 2020 and 2019 - Mainly due to write-down of trading property
not recognized for tax purposes.
NOTE 9:- INCOME TAXES (Cont.)
e. The main tax laws imposed on the Group companies in their countries of residence:
The Netherlands:
a. Companies resident in the Netherlands are subject to
corporate income tax at the general rate of 25%. The first EUR
200,000 of profits is taxed at a rate of 20%. Tax losses may be
carried back for one year and carried forward for nine years.
b. The Dutch participation exemption gives a full exemption from
corporation tax applies to benefits such as dividends and capital
gains derived from a qualifying participation. The participation
exemption generally applies if the parent Company holds at least 5
percent of the shares in the participation. The requirements to
meet the participation exemption are as follows:
1. The parent Company has an interest of at least 5 percent in the participation; and
2. At least one of the following three tests is met:
a) The parent Company's objective with respect to its
participation is to obtain a return that is higher than a return
that may be expected from normal active asset management ("Motive
Test"); or
b) The participation is subject to a "reasonable taxation"
according to Dutch tax standards ("Subject-to-Tax Test"); or
c) The direct and indirect assets of the participation generally
consist of less than 50 percent of 'low taxed free passive
investments' ("Asset Test").
NOTE 10:- EQUITY
December 31,
----------------------
2020 2019
---------- ----------
Remarks Number of shares
--------
Authorized ordinary shares of par
value EUR 1 each 10,000,000 10,000,000
========== ==========
Issued and fully paid 6,855,603 6,855,603
========== ==========
Translation reserve
The translation reserve comprises, as of December 31, 2020, all
foreign currency differences arising from the translation of the
financial statements of foreign operations in India.
NOTE 10:- EQUITY (Cont.)
Restriction of dividend
The Company shall not make any dividend distributions, unless
(i) at least 75% of the Unpaid Principal Balance of the Bonds has
been repaid and the Coverage Ratio on the last Examination Date
prior to such Distribution is not less than 150% following such
Distribution, or (ii) a Majority of the Plan Creditors consents to
the proposed Distribution.
Notwithstanding the aforesaid, in the event an additional
capital injection of at least EUR 20 million occurs, then after one
year following the date of the additional capital injection, no
restrictions other than those under the applicable law shall apply
to dividend distributions in an aggregate amount of up to 50% of
such additional capital injection.
NOTE 11:- EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") at December
31, 2020 was based on the loss attributable to ordinary
shareholders of EUR 33,490 thousand (2019: loss of EUR 21,167
thousand) and a weighted average number of ordinary shares
outstanding of 6,856 thousand (2019: 6,856 thousand).
Weighted average number of ordinary shares basic and
diluted:
In thousands of shares with a EUR 1 par
value December 31,
--------------
2020 2019
------ ------
Issued ordinary shares at 1 January 6,856 6,856
------ ------
Weighted average number of ordinary shares
at 31 December 6,856 6,856
====== ======
NOTE 12:- EMPLOYEE SHARE OPTION PLAN
Weighted Weighted
average average
exercise Number exercise Number
price (*) of options price of options
---------- ----------- --------- -----------
2020 2019
----------------------- ----------------------
GBP GBP
---------- ---------
Outstanding at the beginning
of the year 43 235,520 43 235,520
Forfeited during the period
- back to pool - -
Outstanding at the end of
the year 43 235,520 43 235,520
----------- -----------
Exercisable at the end of
the year 235,5200 235,5200
=========== ===========
(*) The options outstanding on 31 December 2020 have an exercise
price in the range of GBP 28 to GBP 54 (app. EUR 31.1 - EUR 60.1),
and have weighted average remaining contractual life of two
years.
The maximum number of shares issuable upon exercise of all
outstanding options as of the end of the reporting period is
357,774. The estimated fair value of the services received were
measured based on a binomial lattice model.
During 2020 and 2019 there were no employee costs for the share
options granted.
NOTE 13:- ADMINISTRATIVE EXPENSES
Year ended
December 31
--------------
2020 2019
------ ------
Salaries and related expenses 474 641
Professional services 573 748
Offices and office rent 32 95
Travelling and accommodation 3 24
Others 18 69
------ ------
Total 1,100 1,577
====== ======
NOTE 14:- FINANCE INCOME AND FINANCE COSTS
Year ended
December 31
------------------
2020 2019
-------- --------
Recognized in profit or loss
Foreign currency gain on bonds 2,096 -
-------- --------
Finance income 2,096 -
-------- --------
Interest expense on bonds (10,155) (8,099)
Foreign currency losses on bonds - (8,536)
Other finance expenses (21) (13)
Finance costs (10,176) (16,648)
-------- --------
Net finance costs (8,080) (16,648)
======== ========
NOTE 15:- FINANCIAL INSTRUMENTS
Financial Risk Management:
Overview
The Group has exposure to the following risks from its use of
financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
This Note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital.
The Board of Directors has established a continuous process for
identifying and managing the risks faced by the Group (on a
consolidated basis), and confirms that it is responsible to take
appropriate actions to address any weaknesses identified.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's
activities.
The Company's Audit Committee oversees how management monitors
compliance with the Group's risk management policies and procedures
and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
a. Credit risk:
Credit risk is the risk of financial loss to the Group if a
counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group's
financial instruments held in banks and from other receivables.
Management had a credit policy in place and the exposure to
credit risk is monitored on an ongoing basis.
Cash and deposits and other financial assets
The Group limits its exposure to credit risk in respect to cash
and deposits, by investing mostly in deposits and other financial
instruments with counterparties that have a credit rating of at
least investment grade from international rating agencies. Given
these credit ratings, management does not expect any counterparty
to fail to meet its obligations.
b. Liquidity risk:
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. For detailed
information refer to Note 1(b).
Liquidity risk
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the impact of netting agreements:
December 31, 2020
Non-derivative 6-12
financial Carrying Contractual 6 months months
liabilities amount cash flow or less (*)
-------------- ----------- -------- ---------
Bonds issued
(*) 97,821 (101,982) - (101,982)
Trade and
other payables 147 (147) (147) -
97,968 (102,129) (147) (101,982)
============== =========== ======== =========
December 31, 2019
Non-derivative
financial liabilities Carrying amount Contractual cash flow 6 months or less 6-12 months (*)
---------------- ---------------------- ----------------- ----------------
Bonds issued (*) 90,352 (96,512) - (96,512)
Trade and
other payables 144 (144) (144) -
90,496 (96,656) (144) (96,512)
================ ====================== ================= ================
(*) Refer to Note 8.
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
c. Market risk:
Currency risk :
Currency risk is the risk that the Group will incur significant
fluctuations in its profit or loss as a result of utilizing
currencies other than the functional currency of the respective
Group company.
The Group is exposed to currency risk mainly on borrowings
(Bonds issued in Israel) that are denominated in NIS.
The Company ceased the using of currency options effective
October 2015 in order to avoid liquidity risk. The Company can
carry out hedging transactions occasionally using derivatives
subject to limitation set by the Board.
The following exchange rate of EUR/NIS applied during the
year:
Reporting date
----------------
Average rate Spot rate
-------------- ----------------
EUR 2020 2019 2020 2019
------ ------ ------- -------
NIS 1 0.255 0.251 0.254 0.257
NIS denominated bonds - a change of 5 percent in EUR/NIS rates
at the reporting date would increase/decrease loss by EUR 4.36
million, as a result of having issued NIS linked Bonds.
This effect assumes that all other variables, in particular CPI
index, remain constant.
Interest Rate Risk (including inflation):
The Group's interest rate risk arises mainly from Bonds issued
at fixed interest rate expose the Group to changes in fair value,
if the interest is changing. As the Israeli inflation risk is
diminishing to a level that management believes is acceptable
(Israeli CPI 2020 - (0.6%); 2019 - 0.8%) and due to liquidity
constraints, the Company has stopped using hedging of CPI in recent
years.
Sensitivity analysis - effect of changes in Israeli CPI on
carrying amount of NIS bonds
A change of 3 percent in Israeli Consumer Price Index ("CPI") at
the reporting date (and in 2019) would have increased (decreased)
profit or loss by the amounts shown below. This analysis assumes
that all other variables, in particular foreign currency rates,
remain constant.
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
Profit (loss) effect
------------------------------
For the year ended Carrying amount CPI increase CPI
December 31, of bonds effect decrease effect
------------------- --------------- ------------ ----------------
2020 87,137 (2,614) (2,614)
2019 86,506 (2,595) 2,595
Shareholders' equity management:
Refer to Note 10 in respect of shareholders equity components in
the restructuring plan including dividend policy. The Company's
Board of Directors is updated on any possible equity issuance, in
order to assure (among other things) that any changes in the
shareholders equity (due to issuance of shares, options or any
other equity instrument) is to the benefit of both the Company's
bondholders and shareholders.
Fair values:
The table below is a comparison between the carrying amount and
fair value of the Company's financial instruments that are
presented in the financial statements not at fair value:
Carrying amount Fair value (*)
----------------- ----------------
2020 2019 2020 2019
------ --------- ------- -------
Bonds A at amortized
cost - Israeli bonds 35,996 35,824(1) 5,887 7,184
Bonds B at amortized
cost - Israeli bonds 51,171 50,682(2) 7,086 10,340
(1) includes amortization cost of EUR 918 million as of December
31, 2019
(2) includes amortization cost of EUR 1,593 million as of
December 31, 2019
(*) The fair value is based on Level 1 in fair value hierarchy
and measured based on market quote.
Management believes that the carrying amount of cash,
receivables and trade payables approximate their fair value due to
the short-term maturities of these instruments.
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS
a. Contingent liabilities and commitments to related parties:
1. The Company entered into an indemnity agreement with all of
the Company's directors and senior management- the maximum
indemnification amount to be granted by the Company to the
directors shall not exceed 25% of the shareholders' equity of the
Company based on the shareholders' equity set forth in the
Company's last consolidated financial statements prior to such
payment. No consideration was paid by the Company in this respect
since the agreement was signed.
2. The Company maintains Directors' and Officers' liability
cover, presently at the maximum amount of USD 20 million for a term
of 12 months commencing on May 1, 2020. Pursuant to the terms of
this policy, all the Directors and Senior Managers are insured. The
new policy does not exclude past public offerings and covers the
risk that may be incurred by the Directors through future public
offerings of equity up to the amount of USD 20 million.
b. Contingent liabilities and commitments to others:
1. As part of the completion of the restructuring plan (refer
also to Note 8), the Group has taken the following commitments and
collaterals towards the creditors:
a) Restrictions on issuance of additional bonds - The Company
undertakes not to issue any additional bonds other than as
expressly provided for in the Restructuring Plan.
b) Restrictions on amendments to the terms of the bonds - The
Company shall not be entitled to amend the terms of the bonds, with
the exception of purely technical changes, unless such amendment is
approved under the terms of the relevant series and the applicable
law and the Company also obtains the approval of the holders of all
other series of bonds issued by the Company by ordinary majority.
Refer to Note 8 for recent amendments.
c) Coverage Ratio Covenant ("CRC") - the CRC is a fraction
calculated based on known Group valuation reports and consolidated
financial information available at each reporting period. The CRC
to be complied with by the Group is 118% ("Minimum CRC") in each
reporting period. For December 31, 2020 the calculated CRC is not
in compliance with Minimum CRC (also refer to Note 8(d) regarding
breach of covenant). In the event that the CRC is lower than the
Minimum CRC, then as from the first cut-off date on which a breach
of the CRC has been established and for as long as the breach is
continuing, the Company shall not perform any of the following: (a)
a sale, directly or indirectly, of a Real Estate Asset ("REA")
owned by the Company or a subsidiary, with the exception that it
shall be permitted to transfer REA's in performance of an
obligation to do so that was entered into prior to the said cut-off
date, (b) investments in new REA's; or (c) an investment that
regards an existing project of the Company or of a subsidiary,
unless it does not exceed a level of 20% of the construction cost
of such project (as approved by the lending bank of these projects)
and the certain
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
loan to cost ratio of the projects are met.
If a breach of the Minimum CRC has occurred and continued
throughout a period comprising two consecutive quarterly reports
following the first quarterly/year-end report on which such breach
has been established, then such breach shall constitute an event of
default under the trust deeds, and the Bondholders shall be
entitled to declare that all or a part of their respective
(remaining) claims become immediately due and payable.
d) Minimum Cash Reserve Covenant ("MCRC") - cash reserve of the
Company has to be greater than the amount estimated by the
Company's management required to pay all administrative and general
expenses and interest payments to the bondholders falling due in
the following six months, minus sums of proceeds from transactions
that have already been signed (by the Company or a subsidiary) and
closed and to the expectation of the Company's management have a
high probability of being received during the following six months.
MCRC is not maintained as of December 31, 2019 and 2020.
e) Negative Pledge on REA of the Company - The Company
undertakes that until the bonds have been repaid in full, it shall
not create any encumbrance on any of the REA, held, directly or
indirectly, by the Company except in the event that the encumbrance
is created over the Company's interests in a subsidiary as
additional security for financial indebtedness ("FI") incurred by
such subsidiary which is secured by encumbrances on assets owned by
that subsidiary.
f) Negative Pledge on the REA of Subsidiaries - The subsidiaries
shall undertake that until the bonds have been repaid in full, none
of them will create any encumbrance on any of REA except in the
event that:
(i) the subsidiary creates an encumbrance over a REA owned by
such subsidiary exclusively as security for new FI incurred for the
purpose of purchasing, investing in or developing such REA;
Notwithstanding the aforesaid, subsidiaries shall be entitled to
create an encumbrance on land as security for FI incurred for the
purpose of investing in and developing, but not for purchasing, an
REA held by a different Group company (hereinafter: a "Cross
Pledge"), provided the total value of the lands owned by the Group
charged with Cross Pledges after the commencement date of the plan
does not exceed EUR 35 million, calculated on the basis of book
value (the "Sum of Cross Pledges"). When calculating the Sum of
Cross Pledges, lands that were charged with Cross Pledges created
prior to the commencement date of the plan or created solely for
the purpose of refinancing an existing FI shall be excluded. The
Group did not have cross-pledge as of December 31, 2020.
(ii) The encumbrance is created over an asset as security for
new FI that replaces existing FI and such asset was already
encumbered prior to the
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
refinancing. Any excess net cash flow generated from such
refinancing, shall be subject to the mandatory early prepayment of
75%.
The encumbrance is created over interests in a Subsidiary as
additional security for FI incurred by such subsidiary which is
secured by encumbrances on assets owned by that subsidiary as
permitted by sub-section (i) above.
The encumbrance is created as security for new FI that is
incurred for purposes other than the purchase of and/or investment
in and development of a REA, provided that at least 75% of the net
cash flow generated from such new FI is used for mandatory early
prepayment.
g) Limitations on incurring new FI by the Company and the
subsidiaries - The Company undertakes not to incur any new FI
(including by way of refinancing an existing FI with new FI) until
the outstanding bonds debt (as of November 30, 2014) have been
repaid in full, except in any of the following events:
(i) the new FI is incurred for the purpose of investing in the
development of a REA, provided that: (a) the Loan To Cost ("LTC")
Ratio of the investment is not less than 50% (or 40% in special
cases); (b) the new FI is incurred by the subsidiary that owns the
REA or, if the FI is incurred by a different subsidiary, any
encumbrance created as security for such new FI is permitted under
the negative pledge stipulation above; and (c) following such
investment the consolidated cash is not less than the MCRC;
(ii) The new FI is incurred by a subsidiary for the purpose of
purchasing a new REA by such Subsidiary, provided that following
such purchase the cash reserve is not less than the MCRC.
(iii) At least 75% of the net cash flow resulting from the
incurrence of new FI is used for a 75% early prepayment of the
bonds. Subject to the terms of the plan, the Group may also
refinance existing FI if this does not generate net cash flow.
h) No distribution policy - The Company's ability to pay
dividend is limited unless certain conditions are met.
i) 75% mandatory early repayment - Refer to Note 8 and to other
sections in this note regarding changes in increase of repayment to
78%.
2. General commitments and warranties in respect of trading property disposals:
In the framework of the transactions for the sale of the Group's
real estate assets, the Group has provided indemnities which are
customary for such transactions to the respective purchasers.
Such indemnifications are limited in time and amount. No
indemnifications were
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
exercised against the Group till the date of the statement of
financial position
3. The Company is liable to the buyer of its previously owned
shopping centre in the Czech Republic ("NOVO") - sold in June 2006
- in respect to one of its tenants ("Tesco"). Tesco leased an area
within the shopping centre for a period of 30 years, with an option
to extend the lease period for an additional 30 years, in
consideration for EUR 6.9 million which was paid in advance.
According to the lease agreement, the tenant has the right to
terminate the lease agreement subject to fulfilment of certain
conditions as stipulated in the agreement.
In case Tesco leaves the mall before expiration of lease period
the Company will be liable to repay the remaining consideration in
amount of EUR 1.43 million as of balance sheet date, unless the
buyer finds another tenant that will pay higher annual lease
payment than Tesco. The management does not expect to bear a
material loss.
4. Contingent liabilities due to legal proceedings:
The Company is involved in litigation arising in the ordinary
course of its business. Although the final outcome of each of these
cases cannot be estimated at this time, the Company's management
believes, that the chances these litigations will result in any
material outflow of resources to settle them is remote, and
therefore no provision or disclosure is required.
5. Lawsuit against entities involved in the sale of U.S. shopping centers in 2011:
In March 2018, a shareholder of the Company (hereinafter: " the
Plaintiff ") filed a motion with the Economic Department of the
District Court in Tel-Aviv to reveal and review internal documents
of the Company and of Elbit Imaging Ltd. (hereinafter: " Elbit ")
(hereinafter: " the Motion "), in which the Court was asked to
instruct the Company and Elbit (hereinafter together: " the
Respondents ") to provide the plaintiff with certain documents of
the respondents in connection with the Casa Radio project in
Romania and with the sale of the U.S. Shopping Centers in 2011.
In February 2020, an agreement was reached between the Plaintiff
and the Respondents according to which the motion will be dismissed
by consent and the plaintiff and the respondents (hereinafter: "
the Parties ") will jointly examine the feasibility of the lawsuit
in connection with the above events.
In light of the aforesaid, an agreement was signed between the
Plaintiff, the Respondents and First Libra Israel Ltd.
(hereinafter: " Libra ") according to which Libra will finance all
the expenses of filing and managing of a new lawsuit by the
Respondents against certain parties (certain officers in the
Respondents, a portion of the heirs of Motti Zisser (the former
controlling shareholder of the Respondents and other parties)) who
were involved in the Respondents' transaction for the sale of real
estate in the United States in 2011 and for which funds (brokerage
fees) were allegedly illegally transferred to private companies
controlled by the late Mr. Motti Zisser (hereinafter: " Financing
Agreemen t" and " New Lawsuit ", respectively).
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
The parties to the Financing Agreement agreed, inter alia, that
any consideration received as a result of the New Lawsuit (to the
extent received) (hereinafter: " the Lawsuit Funds ") will first be
used to reimburse Libra's expenses for the New Lawsuit (plus
interest and VAT) and the balance after deduction of such expenses
(hereinafter: " the Balance of the Lawsuit Funds ") will be divided
among all those involved in the New Lawsuit, so that each of the
Company and Elbit will be entitled to circa 20.75% of the Balance
of the Lawsuit Funds.
In order to ensure the distribution of the Lawsuit Funds as
stated above, both the Company and Elbit signed lien documents in
favor of Libra, the Plaintiff and the attorneys representing them
(hereinafter collectively: " the Eligibles ") with respect to the
reimbursement of expenses and their portion in the Lawsuit Funds
(hereinafter: " the Lien ").
On October 18, 2020 the parties filed the New Lawsuit (in the
amount of circa NIS 60 million (approximately EUR 15 million)).
6. 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 procedures. The company is unaware
of the subject of investigation and any illegal acts or
irregularities which may cause investigation initiated. 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.
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.
In November 2019, the Court denied the National Agency for
Fiscal Administration complaint as unfounded. The Court's decision
is final.
7. For details on the Romanian Prosecutor decision to close the
investigation relating the Co-operation with the Romanian
Authorities regarding potential irregularities on the property Casa
Radio please refer to Note 5(3)(d).
8. For details on the notice which were issued to a local
investor in the Bangalore project - India and on
the Environmental status of the property in the project Please refer to Note 6(b)(1).
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
9. The Final Price adjustment of Belgrade Plaza:
On June 8, 2020 the Company together with a fully owned
subsidiary signed on a final settlement and waiver agreement with
the purchaser of the SPV holding the shopping and entertainment
center in Belgrade (the "Purchaser", the "Settlement" and the
"Project", accordingly) according to which the Purchaser will pay a
final amount (including the last payment for the stands and
signage) of EUR 830,000 (the "Settlement Amount") which will be the
final amount that should be paid to the Company under the share
purchase agreement between the parties for the sale of the Project,
dated January 26, 2017 (the "SPA").
The Settlement amount was paid to the Company on June 15,
2020.
10. Dutch statutory auditor:
As described in Note 2(a) these consolidated financial
statements are not intended for statutory filing purposes. The
Company is required to file consolidated financial statements
prepared in accordance with The Netherlands Civil Code. During 2019
the Company has been informed by the audit firm, Baker Tilly
(Netherlands) N.V., that they would cancel their license to audit
public interest entities (such as the Company) and that, as a
consequence, they are not in the position to provide the Company
with their audit services for the 2019 statutory annual accounts.
As a listed company, the Company needs to engage a Dutch audit firm
that is licensed to perform audits for public interest entities.
The choice for such firms in the Netherlands is very limited as
only six firms have the appropriate license.
Despite extensive effort of the Company to find a new Dutch
auditor, none of those six firms has been found prepared to accept
the Company as their client. The Company approached in writing the
Dutch Ministry of Finance, The Royal Dutch Institute of Chartered
Accountants, the Authority for the Financial Markets to indicate
the severe adverse consequences the Company would suffer if this
problem will not be solved but none of those authorities has been
able to find the solution. The Royal Dutch Institute of Chartered
Accountants has put considerable effort in helping the Company by
approaching audit firms and assessing their procedures for client
acceptance but has no legal possibilities at its disposal to force
audit firms to accept a specific client. This leaves the Company in
the awkward position of not being able to meet its obligations
regarding the statutory audit.
The Company has proposed to the authorities various alternative
solutions to get the annual accounts of 2019 audited. It appeared
that none of those are legally feasible and none of the addressees
came up with any alternatives. It is now time to emphasize that the
Company exhausted its sources to comply with the requirements of
mandatory Dutch law.
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Due to the above and in order to avoid an outright violation of
applicable stock exchange regulations, the Company decided to
engage EY Israel to audit its IFRS consolidated annual accounts and
to issue an auditor statement on that. The Company submitted the
annual consolidated financial statements as of December 31, 2019
which were filed to the London Stock Exchange, the Warsaw Stock
Exchange and the Tel Aviv Stock Exchange, to the Authority for the
Financial Markets and to other relevant Dutch authorities.
As of the date of approval of these consolidated financial
statements the company still didn't find any solution to get the
annual accounts of 2019 and 2020 audited therefore, it will submit
the annual consolidated financial statements as of December 31,
2020 that were filed to the London Stock Exchange, the Warsaw Stock
Exchange and the Tel Aviv Stock Exchange, to the Authority for the
Financial Markets and to any other relevant Dutch authorities.
NOTE 17:- RELATED PARTY TRANSACTIONS
Related party transactions
Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
Details of transactions between the Group and other related parties
are disclosed below.
During the year, Group entities had the following trading
transactions with related parties that are not members of the
Group:
Year ended
December 31,
--------------
2020 2019
------ ------
Costs and expenses
Recharges - Elbit Imaging Ltd. 29 24
Compensation to key management personnel
(2) 174 243
Performance linked benefits - management 28 29
Compensation to board members (1), (2) 230 265
The amounts disclosed in the table are the amounts recognised as
an expense during the reporting period related to key management
personnel.
(1) 2020 - two board members; 2019 - two board members
(Executive Director resigned in April 2019).
(2) There was no change in the number of Company share options
granted to key personnel in 2020. There are no other benefits
granted to directors.
On March 23, 2020 Mr. David Dekel was appointed as the
non-executive Chairman of the Board of Directors.
NOTE 17:- RELATED PARTY TRANSACTIONS (Cont.)
Year ended
December 31,
--------------
2020 2019
------ ------
Prepayments and other receivables
Elbit Imaging Ltd (*) - 139
Other liabilities
Elbit Imaging Ltd 13 -
Due amounts to directors and key management
personnel 19 42
As of December 31, 2019, Elbit Imaging Ltd owed the Company an
amount of EUR 0.133 million, which was paid during 2020.
As of December 31, 2020, the Company identified Davidson Kempner
Capital Management LLC ("DK") among the Company's related
parties.
DK holds 26.3% of the Company's outstanding shares of the
Company as of the reporting date, following the finalization of the
Restructuring plan. DK has no outstanding balance as of the
reporting date with any of the Group companies.
NOTE 18:- EVENTS AFTER THE REPORTING PERIOD
a. Update regarding a change in Elbit Imaging Ltd holdings
On January 11, 2021 the Company announced that since August 5,
2020 and up to January 10, 2021, Elbit Imaging Ltd. ("Elbit
Imaging") sold about 160 thousand shares of the Company, which are
held in escrow account, for an average price of NIS 0.99 and for a
total consideration of approximately NIS 159 thousand, thus, Elbit
Imaging holdings in the Company have diminished from 44.9% to 42.6%
of the Company's issued and paid-up capital.
On January, 11 2021, Elbit Imaging sold about 180 thousand
shares of the Company, which are held in escrow account, for an
average price of NIS 0.60 and for a total consideration of
approximately NIS 110 thousand, thus, Elbit Imaging holdings in the
Company have diminished from 42.6% to 39.9% of the Company's issued
and paid-up capital.
On January 12, 2021, Elbit Imaging sold about 319 thousand
shares of the Company, which are held in escrow account, for an
average price of NIS 0.61 and for a total consideration of
approximately NIS 194 thousand, thus, Elbit Imaging holdings in the
Company have diminished from 39.9% to 35.3% of the Company's issued
and paid-up capital.
On January 13, 2021, Elbit Imaging sold about 442 thousand
shares of the Company, which are held in escrow account, for an
average price of NIS 0.66 and for a total consideration of
approximately NIS 291 thousand, thus, Elbit Imaging holdings in the
Company have diminished from 35.3% to 28.8% of the Company's issued
and paid-up capital.
NOTE 18:- EVENTS AFTER THE REPORTING PERIOD
On February 24, 2021 the Company announced that since last
announcement Elbit Imaging sold about 120 thousand shares of the
Company, which are held in escrow account, for an average price of
NIS 0.76 per share and for a total consideration of approximately
NIS 91 thousand, thus, Elbit Imaging holdings in the Company have
diminished from 28.8% to 27.1% of the Company's issued and paid-up
capital.
b. Update regarding the sale of its holding in the project in Chennai, India.
For details on the revised understanding signed on March 31,
2021 between Elbit Plaza India Real Estate Holdings Limited (a
subsidiary held by the Company (50%) and the purchaser please refer
to Note 6(b)(2).
NOTE 19:- LIST OF GROUP ENTITIES
As of December 31, 2020, the Company owns the following
companies (all are 100% held subsidiaries at the end of the
reporting period presented unless otherwise indicated):
Hungary
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
Tatabanya Plaza Ingatlanfejlesztesi Inactive
Kft.
----------------------------------- ------------------ --------------------------------
Plasi Invest 2007 Kft. Inactive
----------------------------------- ------------------ --------------------------------
Poland
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
Plaza Centers (Poland) Management company Company under liquidation
Sp. z o.o. w likwidacji
----------------------------------- ------------------ --------------------------------
Indirectly or jointly owned
----------------------------------- ------------------ --------------------------------
EDP Sp. z o.o. Inactive 50% held by Plaza Centers
N.V. with Israeli-based partner
----------------------------------- ------------------ --------------------------------
Hokus Pokus Rozrywka Sp. Inactive 50% held by Plaza Centers
z o.o. w likwidacji N.V.
50% held by P.L.A.Z.A B.V.
----------------------------------- ------------------ --------------------------------
Fantasy Park Suwalki Sp. Inactive 100% held by Mulan B.V.,
z o.o. w likwidacji company under liquidation
----------------------------------- ------------------ --------------------------------
Fantasy Park Torun Sp. Inactive 100% held by Mulan B.V.,
z o.o. w likwidacji company under liquidation
----------------------------------- ------------------ --------------------------------
Fantasy Park Zgorzelec Inactive 100% held by Mulan B.V.,
Sp. z o.o. w likwidacji company under liquidation
----------------------------------- ------------------ --------------------------------
Romania
----------------------------------- ------------------ --------------------------------
Indirectly or jointly owned
----------------------------------- ------------------ --------------------------------
Dambovita Center S.R.L. Mixed-use project 75% held by Dambovita Centers
Holding B.V.
Casa Radio project
----------------------------------- ------------------ --------------------------------
Plaza Bas B.V. Holding company 50.1% held by Plaza Centers
N.V.
----------------------------------- ------------------ --------------------------------
Serbia
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
Plaza Centers Management Management company
D.O.O.
----------------------------------- ------------------ --------------------------------
Czech Republic
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
Plaza Centers Czech Republic Inactive
S.R.O.
----------------------------------- ------------------ --------------------------------
Bulgaria
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
Shumen Plaza EOOD Inactive Shumen Plaza project - Sold
03/2017;
Company under liquidation
----------------------------------- ------------------ --------------------------------
Plaza Centers Management Management company Company under liquidation
Bulgaria EOOD
----------------------------------- ------------------ --------------------------------
Plaza Centers Development Inactive Company under liquidation
EOOD
----------------------------------- ------------------ --------------------------------
Cyprus - Ukraine
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
PC Ukraine Holdings Ltd. Inactive Company under liquidation
----------------------------------- ------------------ --------------------------------
Plaza Centers Ukraine Ltd. Inactive 100% held by Plaza Centers
N.V.
----------------------------------- ------------------ --------------------------------
The Netherlands
----------------------------------- ------------------ --------------------------------
Directly wholly owned
----------------------------------- ------------------ --------------------------------
Plaza Dambovita Complex Holding company
B.V.
----------------------------------- ------------------ --------------------------------
Plaza Centers Enterprises Finance company 100% held by Plaza Dambovita
B.V. Complex B.V.
----------------------------------- ------------------ --------------------------------
Mulan B.V. (Fantasy Park Holding company Holds Fantasy Park subsidiaries
Enterprises B.V.) in CEE
----------------------------------- ------------------ --------------------------------
P.L.A.Z.A B.V. Inactive 100% held by Mulan B.V.
----------------------------------- ------------------ --------------------------------
Plaza Centers Management Holding company
B.V.
----------------------------------- ------------------ --------------------------------
Dambovita Centers Holding Holding company 100% held by Plaza Centers
B.V. N.V.
----------------------------------- ------------------ --------------------------------
Plaza Bas B.V. Holding company 50.1% held by Plaza Centers
N.V.
----------------------------------- ------------------ --------------------------------
NOTE 19:- LIST OF GROUP ENTITIES (Cont.)
Cyprus - India
-------------------------------- ------------------ ----------------------------
Directly wholly owned
-------------------------------- ------------------ ----------------------------
PC India Holdings Public Company Inactive Company under liquidation
Ltd.
-------------------------------- ------------------ ----------------------------
Indirectly or jointly owned
-------------------------------- ------------------ ----------------------------
Elbit Plaza India Real Estate Holding company Equity accounted investee
Holdings Ltd. 47.5% held by Plaza Centers
N.V.
-------------------------------- ------------------ ----------------------------
Polyvendo Ltd. Holding company 100% held by Elbit Plaza
India Real Estate Holdings
Ltd.
-------------------------------- ------------------ ----------------------------
Elbit Plaza India Management Management company 99.99% held by Polyvendo
Services Pvt. Ltd. Ltd.
-------------------------------- ------------------ ----------------------------
Vilmadoro Ltd. Holding company 100% held by Elbit Plaza
India Real Estate Holdings
Ltd.
-------------------------------- ------------------ ----------------------------
Kadavanthra Builders Pvt. Mixed-use project 100% held by Elbit Plaza
Ltd. India Real Estate Holdings
Ltd.
Chennai (SipCot) project
-------------------------------- ------------------ ----------------------------
Aayas Trade Services Pvt. Mixed-use project 99.9% held by Elbit Plaza
Ltd. India Real Estate Holdings
Ltd.
Bangalore project
-------------------------------- ------------------ ----------------------------
Entities disposed or dissolved in 2020
------------------------------------------------------------------------------
Hungary
------------------------------- ------------------ -------------------------
HOM Ingatlanfejlesztesi és Management company Company disposed 03/2020
Vezetesi Kft.
------------------------------- ------------------ -------------------------
Poland
------------------------------- ------------------ -------------------------
Wloclawek Plaza Sp. z o.o. Mixed-use project Company dissolved 12/2020
w likwidacji - plot land
sold 10/2019
------------------------------- ------------------ -------------------------
Szczecin Plaza Sp. z o.o. Inactive Company dissolved 12/2020
------------------------------- ------------------ -------------------------
Lublin Or Sp. z o.o. Inactive Company dissolved 03/2020
------------------------------- ------------------ -------------------------
Fantasy Park Kraków Sp. Inactive Company dissolved 09/2020
z o.o.
------------------------------- ------------------ -------------------------
The Netherlands
------------------------------- ------------------ -------------------------
Plaza Centers Establishment Holding company Company dissolved 12/2019
B.V.
------------------------------- ------------------ -------------------------
Plaza Centers (Estates) B.V. Holding company Company dissolved 06/2020
------------------------------- ------------------ -------------------------
Romania
------------------------------- ------------------ -------------------------
Adams Invest S.R.L. Residential Company dissolved 05/2020
project
------------------------------- ------------------ -------------------------
Cyprus - Ukraine
------------------------------- ------------------ -------------------------
Tanoli Enterprises Ltd. Inactive Company dissolved 07/2018
------------------------------- ------------------ -------------------------
Cyprus - India
------------------------------- ------------------ -------------------------
HOM India Management Services Management company Company dissolved 08/2018
Pvt. Ltd.
------------------------------- ------------------ -------------------------
- - - - - - - - - - - - - - - - - - -
F:W2000w200060252262M20E$12-PLAZA CENTERS.docx
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END
FR UASNRAWUOOAR
(END) Dow Jones Newswires
March 31, 2021 12:55 ET (16:55 GMT)
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