Orco Property Group, Orco Germany ink joint restructuring agreement

By Caroline Salls

Pittsburgh, April 18 - Orco Property Group, SA and Orco Germany SA have entered into a joint restructuring agreement with bondholders representing about one-third of the Orco Property Group bonds and 61% of the Orco Germany bonds, according to a news release.

Under the joint agreement, roughly 90% of the Orco Property Group bonds will be converted into 65 million Orco Property Group shares. The remaining Orco Property Group bonds will be exchanged for €55.2 million in newly issued bonds.

In addition, 85% of the Orco Germany bonds will be converted into 26.2 million Orco Property Group shares. The remaining Orco Germany bonds can be exchanged for €20 million in new notes, the release said.

The new notes to be issued by Orco Property Group will mature in 2018 and will bear an annual interest consisting of a combination of cash interest, which will decrease to 4% from 5% upon repayment of at least 50% of the principal, and payment-in-kind interest, which will decrease in steps to 3% from 5% upon repayment of 50% and 75% of the principal.

Orco said the principal would be repaid in four annual payments in 2015, 2016, 2017 and 2018.

Also, the new notes will benefit from a 25% cash sweep from net sale proceeds on selected assets, which will correspondingly reduce the subsequent annual repayment.

Bondholder meetings

The implementation of the joint agreement is subject to finalization of some Orco Germany transaction documents by April 24 and the approval at a minimum of the Orco Property Group bondholder general assemblies for the company's 2010, 2013 and 2014 bonds.

Upon approval of the joint agreement by these general assemblies and the Commercial Court of Paris, Orco said other options announced earlier this month will not be applicable, including the Orco Germany bondholders' option to receive part of the share capital of Orco Germany.

The bondholder general assemblies for the Orco Property Group 2010, 2012, 2013 and 2014 bondholders will be held on April 27. The general assembly for the 2011 bonds will be held on April 30.

After those meetings, the joint agreement will be submitted to the Orco Property Group shareholder general assembly for approval.

Since the joint agreement modifies conversion terms approved by the Orco Germany bondholders on April 5, the company said new convening notices will be published shortly for an Orco Germany bondholder general assembly to be held on May 7 to approve the terms of the joint agreement.

Orco said the joint agreement is also subject to approval by applicable regulatory authorities, and the conversion of the Orco Property Group bonds is subject to a modification of the company's safeguard plan by the Commercial Court of Paris.

The company said a hearing on the plan modification is likely to occur in mid May.

Once the joint agreement is implemented, Orco said its share capital will increase to 108.3 million shares from 17.1 million shares, assuming that the terms of the joint agreement are approved by each of the bond tranches and assuming 100% participation in the new notes offer.

Standstill agreement

According to the release, RBS and GSD have signed a standstill agreement that will be in effect from April 19 to June 15.

The standstill defers the repayment obligation related to the April 15 maturity of the €300 million financing for Orco Germany's GSG portfolio.

The company said this extension would allow the group to further advance its refinancing negotiations.

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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