Orco Property Group bondholders to vote on restructuring on April 27

By Angela McDaniels

Tacoma, Wash., April 11 - Orco Property Group SA called meetings on April 27 for the holders of five series of its bonds, according to bondholder notices.

The meetings will cover the company's €50,272,605.30 of 4½% bonds with attached warrants, €24,169,193.39 of bonds exchangeable for Suncani Hvar shares, €149,999,928 of 1% convertible bonds, €175,000,461.60 of 2½% bonds with redeemable warrants and CZK 300 million of Czech bonds.

Among other matters, holders will be asked to

• Approve the terms and conditions of the exchange of up to 89.9% of the bonds for common shares;

• Waive and withdraw the current lawsuits against the company; and

• Agree not to further challenge the judgment adopting the company's Safeguard Plan, which was approved by the Paris Commercial Court on May 19, 2010.

For each series of bonds, at least half of the bonds must be represented at the meeting, and at least two-thirds of the votes cast must be in favor of the resolutions in order for them to pass.

As previously reported, the holders of Orco Germany SA's €100.1 million of bonds due May 30, 2012 voted in favor of exchanging the bonds for convertible bonds issued by Orco Property.

The bondholders voted at a meeting on April 5. The holders of about 63% of the outstanding Orco Germany bonds were present or represented, and the resolution was unanimous.

Restructuring

An ad hoc committee of Orco Property bondholders holding about one-third of the bonds has proposed a restructuring.

Under scenario one

• 86.3% of the Orco Property bonds would be mandatorily exchanged for shares;

• Holders would have the option to exchange the remaining bonds for new Orco Property bonds via a public exchange offer;

• Each existing shareholder would receive one three-month warrant per Orco Property share exercisable for one new share at a price of €4.10; and

• The company would promise not to offer to the Orco Germany bondholders any transaction that would be more favorable than that approved by the Orco Germany bondholders at their meeting on April 5.

Under scenario two

• 89.9% of the Orco Property bonds would be mandatorily exchanged for shares after shareholder approval was received;

• Holders of the Orco Property bonds would have the option to exchange their remaining bonds for new Orco Property bonds via a public exchange offer;

• 84.5% of the Orco Germany bonds would be exchanged no later than May 28 for new 0.01% convertible bonds, €76 million of which would be converted into 18,361,548 Orco Property shares no later than June 18 and €33,129,067 of which would be repaid by July 16. The second payment could be made in cash in the amount of €223.73 per note, in shares at the rate of 53 shares per note or in Orco Germany shares. In the last case, the holders would receive 55% of the share capital of Orco Germany;

• Holders of the Orco Germany bonds would have the option to exchange their remaining bonds for new Orco Property bonds via a public exchange offer. Any Orco Germany bonds not exchanged would be amended to have their maturity postponed to 2050 and their interest rate lowered to 0.5%.

If the company can reach an agreement on scenario two with the Orco Germany bondholders by April 17, it will pursue scenario two.

Under scenario three

• The Orco Germany bondholders would convert 100% of their claims into Orco Property equity for no more than 27.2 million shares and would not receive any Orco Germany equity nor any debt consideration;

• 73.6% of the Orco Property bonds would be mandatorily exchanged for new shares after shareholder approval was received; and

• The remaining Orco Property bonds would be exchangeable on a voluntary basis for new bonds in a public exchange offer.

The total number of shares to be issued would be 97.9 million under scenario one, 65 million under scenario two and 45 million under scenario three.

New notes

The new notes will mature on Feb. 28, 2018. The principal will be repaid in four annual payments in 2015, 2016, 2017 and 2018.

The new notes will pay a combination of 4% to 5% cash interest and 3% to 5% payment-in-kind interest. The percentages will vary annually depending on the principal amount of notes already reimbursed.

The notes will be callable at par at any time.

The new notes will benefit from a 25% cash sweep from net sale proceeds on selected assets in the event that less than €144.7 million of new notes are issued and 37.5% otherwise.

Orco Property Group is a Central European developer and asset management company based in Luxembourg. Orco Germany is a real estate company based in Berlin.

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