LONDON, December 6, 2013 /PRNewswire/ --
Alchemy and Kingstown take legal action to restrain new capital raise
- Alchemy believes the decision by Orco Property Group S.A. ("OPG") and Orco Germany S.A. ("OG") on 29 November 2013 to implement a reserved capital increase of up to €100 million in OG, including the issue of €54 million of stock to Tandis, a.s., a vehicle owned and controlled by Radovan Vitek, was unnecessary, invalid, extremely dilutive (due to the discounted price and excessive quantum) and gravely disadvantageous to the interests of OPG shareholders.
- If fully issued the €100 million capital increase in OG would dilute OPG's holding of its most valuable asset from 88% currently to 46%.
- In addition, as far as we are aware, OG itself has no liquidity requirement and so we do not understand why it was considered appropriate to raise capital in OG urgently in order to help address liquidity concerns or make selective investments elsewhere in OPG.
- Alchemy and Kingstown therefore obtained an order from the Luxembourg court today, against OPG, OG and Tandis a.s:
- Suspending with immediate effect the resolutions of OG made on 29 November 2013 to increase capital;
- Preventing OG from issuing the new shares; and
- If the new shares have already been issued, appointing Mr Yann Baden as receiver to take control of and safeguard the new shares.
- The order was obtained ex parte and will remain in force until 31 January 2014 before which there will be a further hearing, if necessary, attended by all the parties to the litigation.
Legal Action To Protect OPG's Minority Shareholder Interests
Alchemy took this step in order to safeguard the interests of all shareholders until a fair solution to the current capital needs of OPG and OG can be agreed in the interests of all shareholders.
We believe this attempted capital raise is very damaging to the interests of OPG's minority shareholder interests because:
- The quantum (up to €100 million) and the price (€0.47 per share) are significantly and unnecessarily dilutive to the OPG shareholder's interests in OG, OPG's single most valuable asset. If fully issued, OPG's ownership of in OG would reduce to 46%;
- By raising so much capital OPG has granted a blocking stake to Radovan Vitek thereby preventing OPG shareholders from ever benefitting from a premium price which would be achievable from a sale of a majority of the shares in OG - this, in our view, is not in the interest of the majority of shareholders; and
- We fail to see what corporate benefit there is for OG in raising such a large amount of capital and when the use of proceeds is at best unclear; only €12 million is to be made available to OPG and the transaction is clearly value destructive for OG shareholders.
These concerns formed the basis of the application made to the Luxembourg court today.
Alchemy Stands Ready To Commit Capital To OPG Under An Acceptable Governance Regime
Alchemy recognises the company's need for liquidity and proposes a limited capital raise at OPG level. Before supporting this proposal, we would require:
- A detailed analysis of the capital needs of OPG (which is today completely absent);
- A resolution to the very serious corporate governance concerns created in the first instance by Radovan Vitek's proposals to remove six Directors from the OPG Board, leaving it controlled by him and his associates. Alchemy supports a balanced Board with appropriate shareholder and management representation and genuinely independent Directors; and
- That all shareholders of OPG are offered the opportunity to participate in the capital raise pro rata to their shareholding in OPG, although Alchemy would be prepared, together with a smaller group of shareholders to underwrite the share issue to provide certainty of funds for OPG and management.
Alchemy hopes that the Company will engage with shareholders to find an equitable way forward and that there will be no need to take further steps in the litigation.
Alchemy Special Opportunities ("Alchemy") owns 12.5 million shares or 10.95%, respectively, of the ordinary share capital of OPG. Alchemy manages funds acting in a fiduciary capacity on behalf of institutional clients in Europe and the United States. In addition, since the shareholders' meeting of the 4th of February 2013, Mr. Ian Cash from Alchemy has been on OPG's Board of Directors.
Should any shareholder wish to discuss this then please contact:
In the UK: Buchanan Communications, +44-20-7466-5000
In France LPM Strategic Communications, +33-1-44-50-40-39
Sophie Ryan/Luc Perinet
Ian Cash, email@example.com
SOURCE Alchemy Special Opportunities and Kingstown Capital Management