Last checked at 7 May 2010 07:00
| Date: | 7 May 2010 |
| On behalf of: | Carpathian PLC ('Carpathian' or the 'Company') |
| Embargoed until: | 0700hrs |
Carpathian PLC
Refinancing of Riga Development
Carpathian announces a new financing structure and debt arrangements permitting completion of the prime city centre retail scheme, "Galleria Riga", in Riga, Latvia.
Drawdowns from the existing facilities had been restricted due to breach of various terms of the facility agreements including a shortfall in the required pre-leasing levels. Without the ability to draw further on the bank facilities, construction and other required funding would have ceased.
Following extensive negotiations, a revised agreement has been finalised between the Company and the co-owner and development partner, Titan Invest A/S ('Titan'). Revised terms have also now been signed between the co-owned SPV, SIA Patollo and Nordea, the senior lender.
The combination of these arrangements results in a project which is now "fully funded" to completion from new capital invested by Titan together with the relaxation of terms applying to the debt facility permitting drawdown of remaining funds. These combined funding sources cover all remaining budgeted costs including interest payments, running costs and tenant incentives.
Under the re-structured agreement, Carpathian has increased its shareholding in Patollo from 18% to 80% and both the Company and Titan have agreed the cancellation of existing second rank priority loans to the project SPV including all interest. Prior to the completion of the refinancing, in the preliminary results for the year ended 31 December 2009, an impairment loss of €32.3 million has been recognised in the profit and loss account for the year in relation to loans receivable from the Company's joint venture holding the Riga development to reflect the present market value of this investment.
Titan has committed to provide funding in the form of new capital and income guarantees to a total value of €9.77m as part of the agreement with the lending bank, Nordea. The revisions to the debt facility should enable completion by the construction company Re & Re to be funded. The funding facility from Titan receives an interest rate of 12% pa, rolling up and secured only against the value of the project.
As part of these arrangements, the development partner, Titan, has a new incentive arrangement expiring by the end of 2016 enabling its shareholding to grow from 20% to 40% subject to achieving certain incremental NOI hurdles, with the balance remaining with the Company.
In addition to this, Titan has been granted option rights to purchase Carpathian's shareholding at a range of prices which increase on certain dates over the period until 28th February 2012.
These arrangements should enable project completion without any capital injection from the Company and will again incentivise the development partner to achieve a recognisable investment value.
The project will have a gross development cost of approximately €109 million at completion and is now planned to open and commence trading in September 2010.
Following the completion of the restructuring, the Riga development project will be fully consolidated into the balance sheet of Carpathian as an investment property. The revised Nordea debt facility totals €59.9m, of which approximately €40m has currently been drawn. This facility expires in September 2017, with 50% of the total at a fixed rate of 6.73% including margin and 50% at a floating rate. Previous minimum pre-leasing restrictions are now removed. A debt service cover ratio below 1.2 gives rise to a full income sweep (less management costs), whilst a default arises only if the debt is not serviced.
The project comprises 22,459 sq m of retail and catering space and a 126-space car park, within the heart of the old town district. The retail space is on 7 levels plus roof garden / restaurants and is to be finished to a high standard offering a quality department store style environment. Currently approximately 60% of the space is under offer and negotiations are continuing for the remaining space.
Galleria Riga represents the final development project remaining in the Company's portfolio.
Enquiries
| Carpathian PLC |
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| Rory Macnamara, Non-Executive Chairman | Via Redleaf Communications |
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| Carpathian Asset Management Ltd | 020 7529 6413 |
| Paul Rogers/Balazs Csepregi | ir@carpathianam.com |
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| Collins Stewart Europe Limited | 020 7523 8350 |
| Bruce Garrow |
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| Redleaf Communications | 020 7566 6700 |
| Emma Kane/Adam Leviton/Henry Columbine | carpathian@redleafpr.com |
Notes to Editors:
- Carpathian was created in 2005 for the purpose of investing in Central and Eastern European commercial real estate.
- Carpathian's primary focus is on shopping centres, supermarkets and retail warehousing in Croatia, the Czech Republic, Hungary, Poland, Romania, Lithuania and Latvia.
- Carpathian was admitted to trading on AIM in July 2005.
- CAM is the Property Investment Adviser to Carpathian. CAM, together with its parent company, CPT LLP, is responsible for managing the core portfolio of assets and transactions within Central and Eastern Europe