Argo Real Estate Opportunities Fd Statement re ERA Shopping Park Oradea (6369S)

TIDMAREO

RNS Number : 6369S

Argo Real Estate Opportunities Fd

11 November 2013

Argo Real Estate Opportunities Fund Limited

("AREOF" or "the Company")

Statement Re: ERA Shopping Park Oradea

The Board wishes to announce that it has filed a petition for the voluntary insolvency of Omilos Oradea Srl, a Romanian subsidiary of the Company that owns the ERA Shopping Park Oradea, with the relevant courts.

This decision follows a legal dispute relating to the sum of EUR3.2m ("Claim") claimed by the Romanian company, S.C. Constructii Bihor SA (the "Contractor"), arising from a construction contract related to ERA Shopping Park Oradea. Under Romanian law voluntary insolvency leads to a form of "judicial administration" which allows a company to restructure its balance sheet whilst providing it with a degree of protection from its creditors.

Omilos Oradea Srl will file for voluntary insolvency after consultation with the consortium of its senior lenders ("the Lenders"). Omilos Oradea Srl, has a loan of EUR62.3m with the Lenders.

Arbitration proceedings relating to the Claim were brought against Omilos Oradea Srl by the Contractor. The initial arbitration ruling was granted in favour of the Contractor and consequently the Contractor initiated an enforcement procedure against Omilos Oradea Srl's movable and immovable assets for recovering the Claim. The arbitration award was upheld on appeal by a Romanian court. Following consultation with legal counsel, Omilos Oradea Srl was advised that it had grounds for seeking a further second level appeal and consequently it filed a second appeal with the Romanian Supreme Court. In order to suspend the enforcement proceedings initiated by the Contractor and untilthe second appeal would be considered by the Court, Omilos Oradea Srl requested that the syndicate of Lenders release EUR320,000 from revenue generated by such company to cover the surety required by the Romanian Supreme Court ("Down Payment Funds"). The Lenders accordingly received legal advice which suggested that the chances of such an appeal succeeding were not as strong as the legal advice received by Omilos Oradea Srl had suggested. Accordingly, the Lenders informed Omilos Oradea Srl that they would not make available the Down Payment Funds and, in order to protect their rights vis-à-vis the Claim by the Contractor, proceeded to accelerate their loans to Omilos Oradea Srl.

As a result of the aggressive stance taken by the Contractor, both Omilos Oradea Srl and the Lenders are of the view that a judicial administration is now in the best interests of Omilos Oradea Srl itself, its creditors and its other stakeholders. A voluntary insolvency will afford protection and minimize the disruptive impact caused by the hostile acts of the Contractor. Omilos Oradea Srl will actively work with the Lenders with a view to a restructuring of its debt in order to place Omilos Oradea Srl's finances on a sounder footing and continue its operations without interruption.

However, the outcome of the voluntary insolvency, if not accepted by a majority of creditor voting classes, could lead to bankruptcy and liquidation of the assets of Omilos Oradea Srl to satisfy its creditors. If such liquidation happens, it will result in the loss of Omilos Oradea Srl assets.

In view of the above, AREOF intends to write down to zero the value of this asset on its balance sheet. This is a likely result of a potential forced liquidation of Oradea Srl's Omilos assets in case a creditor restructuring plan is not approved. Nevertheless the Loan Facility of Omilos included cash sweeps that did not provide AREOF with any cash flow, hence no impact is expected on AREOF's solvency. The voluntary insolvency might have an impact in terms of cross defaults on other group facilities but we do not expect this to have any material consequences.

Background

ERA Shopping Park Oradea is a 65,700 sqm retail park on the outskirts of the Romanian city of Oradea. Phase 1 of the retail park was opened in March 2009 with leading anchor tenants Carrefour, Altex and Bricostore. Phase 2, which comprises a 16,000 sqm shopping mall, was completed in early spring 2012 and a Mobexpert furniture anchor of 8,000 sqm opened in May 2012.

Enquiries:

 
 Argo Real Estate Opportunities Fund Limited 
  David Clark, Chairman                         [phone] 
 
 finnCap Limited (Nominated Adviser) 
  Matthew Robinson 
  Henrik Persson                                [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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