Orco Property to issue €73.05 million of new notes in exchange offer

By Angela McDaniels

Tacoma, Wash., Oct. 1 - Orco Property Group SA will issue €73,051,230 of new notes through an exchange offer that ended at 11 a.m. ET on Sept. 27, according to a company news release.

The offer was part of the company's restructuring. About 89.9% of Orco Property's bonds were mandatorily converted on Sept. 3, and about 84.5% of Orco Germany SA's bonds were converted on May 9. Orco Property offered to issue up to €75.2 million of bonds in exchange for the bonds that remained outstanding after the mandatory conversions.

The exchange offer began Sept. 6. The following bonds were eligible:

• Obsar 1 bonds issued by Orco Property on Nov. 18, 2005;

• Czech bonds issued by Orco Property on Feb. 3, 2006;

• Bonds exchangeable for Suncani Hvar shares issued by Orco Property on June 30, 2005;

• Convertible bonds issued by Orco Property on June 1, 2006;

• Obsar 2 bonds issued by Orco Property on March 28, 2007; and

• Bonds issued by Orco Germany on May 24, 2007.

At the beginning of the exchange offer, about €77.7 million of Orco Property Safeguard bond liabilities and Orco Germany bond redemption amounts remained outstanding. On Oct. 4, 94% of this outstanding amount, or €73,051,230, will be exchanged for an equal principal amount of new Orco Property notes.

New notes will be issued in exchange for Orco Property bonds at a ratio of €1 principal amount of new notes for €1 claim amount under the Safeguard plan, subject to rounding.

New notes will be issued in exchange for Orco Germany bonds at a ratio of €1 principal amount of new notes for €1 in repayment amount, or 100% principal amount plus 4% interest accrued as of May 31 plus a 25% redemption premium, subject to rounding.

In terms of nominal amount, €1 of bonds will be exchanged for a nominal amount of new notes ranging from about €1.20 to €1.40, depending on the bond exchanged.

The new notes mature on Feb. 28, 2018 and pay an annual coupon consisting of a combination of cash interest, falling to 4% from 5% upon repayment of at least 50% of the principal, and payment-in-kind interest, falling in steps to 3% from 5% upon repayment of 50% and 75% of the principal.

The principal will be repaid in four annual payments in 2015, 2016, 2017 and 2018. 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.

Any April 30 Safeguard payment that still remains outstanding on Orco Property bonds will be paid by Oct. 31, according to the news release.

In total, the company restructured €411 million principal amount of Orco Property bonds (€549 million in remaining Safeguard payments) and €100 million principal amount of Orco Germany bond debt (€129 million including interest and redemption premium).

Following the conversion of the Orco Property and Orco Germany bond debt into 90,787,096 new Orco Property shares and the issuance of the new notes, Orco Property's remaining Safeguard bond debt will be reduced to €4 million and Orco Germany's remaining bond debt will be reduced to €41,912.

Bonds not exchanged through the offer will remain outstanding.

The Orco Germany bonds were amended through a series of bondholder meetings. The amendments will become effective once the new notes are issued. As amended, the Orco Germany bonds will mature on Dec. 31, 2050 with a coupon of 0.5%. The interest payment originally scheduled for May 30 is due Dec. 31, 2050, effective as of the date of issuance of the new notes, the release noted.

BNP Paribas Securities Services (00 352 26 96 20 00 or e-mail lux_ost_domiciliees@bnpparibas.com) or BNP Paribas Securities Services, Luxembourg Branch (00 352 26 96 20 00 or e-mail lux_ost_domiciliees@bnpparibas.com) were the exchange agents, paying agents and depositaries for the exchange offer.

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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