Orco gets approval from large majority for restructuring transaction

By Jennifer Chiou

New York, May 8 - Orco Property Group SA said that holders of a large majority of its bonds registered under ISIN XS0302623953 and its warrants registered under ISIN XS0302626899 granted approval of the company's restructuring transaction at general meetings on May 7 in Luxembourg.

Holders approved the joint restructuring of Orco Germany and Orco Property debt.

About 72.5% of the total number of outstanding bonds and roughly 76% of the outstanding warrants was present or represented for a valid quorum, and the resolutions were passed by a vote of 100% of the votes cast.

According to a news release, 84.5% of the bonds will be converted into securities in the Oceane structure to be issued by Orco Property on May 9.

The first conversion of those issued securities into up to 18,361,548 new Orco Property shares is expected to take place on May 14.

A hearing is scheduled for the same date at the Paris Commercial Court to consider the company's request to modify the safeguard plan in connection with the approvals of the joint restructuring plan by the 2010, 2011, 2013 and 2014 bondholder and warrantholder general meetings.

Prior approvals

As noted on April 30, holders of about 77% of the company's floating-rate bonds due 2011 were present or represented, constituting a valid quorum, and the resolution for the restructuring was passed by a vote of all of the votes cast.

The financial restructuring of Orco debt, which includes the April 30 dividend payment under the current safeguard plan, must be approved by the court in Paris.

Effective April 30, Orco said it canceled 110 of the 140 floaters that were repaid by the company in 2008 under the early redemption procedures.

Other restructuring news

Orco said on April 27 that holders of three series of its bonds approved the previously announced proposed restructuring transactions at April 27 meetings.

Holders of about 85% of the company's €50,272,605 of 4½% bonds with attached warrants were present, and all voted in favor of the resolution.

In addition, holders of roughly 67% of the €149,999,928 of 1% convertible bonds and about 85% of the €175,000,462 of 2½% bonds with redeemable warrants were present, and 99% and 100%, respectively, voted in favor of the resolution.

The attendance represented quorums for those three series, and these holders voted to appoint ASOF Bondholder Representative Ltd. as the bondholders' representative for the three series of bonds and to waive and withdraw the current lawsuits against Orco and to forgo any further challenges regarding its safeguard plan.

As reported, a May 15 meeting will be held for the company's €24,169,193 of bonds exchangeable for Suncani Hvar shares.

Holders will be asked to approve the terms and conditions of the exchange of up to 89.9% of the bonds for common shares.

As already noted, the meeting for the CZK 300 million of Czech bonds was set for April 30.

Restructuring background

As previously reported, an ad hoc committee of Orco Property bondholders holding about one-third of the bonds 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 SA 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, as originally proposed

• 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%.

The company said before that if it could reach an agreement on scenario two with the Orco Germany bondholders by April 17, it would 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.

More background

The definition of Orco Germany SA bonds was replaced with €100,100,052 five-year bonds issued by Orco Germany, corresponding to €129.1 million including accrued interests and reimbursement premium.

Under the amended terms, if holders do not approve scenario two, then scenario three or, if applicable, scenario one will apply, according to bondholder notices.

The description of scenario two has been amended and replaced by the following:

• 84.5% of the Orco Germany bonds would be exchanged no later than May 18 for new 0.01% convertible bonds, €76 million of which would be converted into 18,361,548 Orco Property shares no later than May 22 and €33,129,067 of which would be repaid by Sept. 28. The second payment could be made in cash in the amount of €872.04 per note until July 16, a total of 7,848,081 shares until Sept. 28 or 55% of the share capital of Orco Germany.

The proposed amount of the new notes to be issued assuming 100% participation of bondholders is €55.2 million for Orco Property and €20 million for Orco Germany.

The new notes will mature on Feb. 28, 2018.

The coupon for the new notes will be 5% cash plus 5% paid in kind, as long as more than 75% of the nominal amount remains outstanding; 4% cash plus 4% PIK, as long as more than 50% but no more than 75% of the nominal amount remains outstanding; and 4% cash plus 3% PIK, as long as no more than 50% of the nominal amount remains outstanding.

Amortization will occur on Feb. 28, 2015 for 25% of the nominal amount, on Feb. 28, 2016 for 25% of the nominal amount, on Feb. 28, 2017 for 25% of the nominal amount and on Feb. 28, 2018 for the outstanding principal amount of the new notes.

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.

Meeting details

The meetings for the aforementioned notes were called on April 11 through bondholder notices to propose the following:

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

• Waiver and withdrawal of the current lawsuits against the company; and

• Agreement 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 had to be represented at the meeting, and at least two-thirds of the votes cast had to be in favor of the resolutions in order for them to pass.

As previously reported, the holders of Orco Germany'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.

Questions may be directed to Nicolas Tommasini at 33 1 40 67 67 23 or investors@orcogroup.com.

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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