25 Jul 2016 15:13
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
AFI DEVELOPMENT PLC
("AFI DEVELOPMENT" OR "THE COMPANY")
UPDATE ON NEGOTIATIONS ON THE GUARANTEE OF MR LEVIEV AND THE DEFERRAL OF PRINCIPAL PAYMENTS UNDER THE LOAN FACILITIES AND THE STANDSTILL
London, 25 July 2016 - The Company provides the following update to the market.
As announced on 15 July 2016, Mr Leviev, the Executive Chairman of the Company, and VTB Bank PJSC ("VTB") continue to negotiate the terms of a personal guarantee that may be provided by Mr Leviev to VTB in respect of the Group's obligations under the Ozerkovskaya III Loan Facility (the "Guarantee") as an alternative to the disposal of certain properties by the Group to VTB in exchange for VTB releasing the Group from its obligations in respect of the Ozerkovskaya III Loan Facility and the AFIMALL City Loan Facility (the "Disposal"). If these discussions result in the Guarantee and related documentation being agreed prior to completion of the Disposal then, subject to obtaining all approvals required (including if necessary any shareholder approvals) in relation to the Guarantee, the Board of the Company may determine not to proceed with the Disposal.
Details of the Disposal and the background to the Disposal are contained in the 15 July 2016 announcement and in the shareholder circular published on the same date. These can be found on the Company's website (http://www.afi-development.com). Terms used in this announcement and not defined herein have the meaning given to them in the circular dated 15 July 2016.
In connection with, and as a condition to, the entry into of the Guarantee, it is currently anticipated that VTB will agree to defer payment of principal amounts due under each of the Ozerkovskaya III Loan Facility and the AFIMALL City Loan Facility (together the "Loan Facility Agreements") for a period of 10 months from the date of the Guarantee (the "Deferrals") and not to enforce for prior breaches of such facilities (the "Standstill"). The Deferrals and the Standstill are intended to provide the Company with a 10 month period in which to repay in full the Ozerkovskaya III Loan Facility, the outstanding balance of which currently amounts to US$191.1 million, from the proceeds from the planned disposal of Ozerkovskaya III and potentially other properties of the Company. Should the Ozerkovskaya III Loan Facility not be repaid in full within this 10 month period, the Guarantee would become enforceable. Should VTB enforce the Guarantee, and following payment by Mr Leviev of all amounts outstanding under and the subsequent discharge of the Ozerkovskaya III Loan Facility, a new loan between the Company and Mr Leviev would become effective which would have the same interest rate and maturity as the existing Ozerkovskaya III Loan Facility but would be unsecured (the "New Loan").
As the Guarantee, Standstill and Deferrals and the terms of the New Loan are still under negotiation, there is no certainty as to whether they will be agreed, approved (if necessary) or entered into prior to completion of the Disposal and there is no certainty as to what their final terms may be. The purpose of this announcement is to update the market as to the negotiations relating to these arrangements. Mr Leviev, the Company and/or VTB are under no obligation to enter into and may determine not to enter into such arrangements.
Shareholders are therefore reminded of the General Meeting which has been convened for 10.00 a.m. EEST at the offices of Fuamari Secretarial Ltd at 6 Spyrou Kyprianou Av., 3070 Limassol Cyprus on 1 August 2016 at which the Resolutions to approve the Disposal will be proposed. There is no certainty that the Guarantee, Standstill, Deferrals and New Loan will be agreed, and it is therefore important that Shareholders approve the Resolutions so that the Disposal may proceed in the event that the Guarantee, Standstill and Deferrals are not so agreed. In the event that the Guarantee, Standstill, Deferrals and New Loan are not agreed and the Disposal is not approved, the Board expects, based on its discussions with and correspondence received from VTB, that VTB would exercise its rights to demand accelerated repayment of the loans and that the Group would be unable to meet such a demand resulting in the consequences outlined in the circular dated 15 July 2016.
The Guarantee
The Guarantee is expected to be on similar terms to the existing AFI Krown Suretyship which currently secures the Ozerkovskaya III Loan Facility. Under the Guarantee, Mr Leviev proposes to guarantee for a period of 12 months all the obligations of Krown under the Ozerkovskaya III Loan Facility and all the obligations of the Company as a guarantor of Krown's obligations under the Ozerkovskaya III Loan Facility.
The Standstill and Deferrals
The Standstill and Deferrals will be effected by amendments (the "Amendments") to the Ozerkovskaya III Loan Facility and the AFIMALL City Loan Facility, respectively. Pursuant to the Amendments it is proposed that all quarterly principal amounts payable under the Loan Facility Agreements, including the quarterly payments due on 30 June 2016, will be deferred for a period of 10 months following the date of the Guarantee and will become payable upon the expiry of such 10 month period. In addition, pursuant to the Amendment to the Ozerkovskaya III Loan Facility, VTB proposes not to accelerate the Loan Facility Agreements for a period of 10 months following the date of the Guarantee as a result of VTB's claim that there has been a material adverse change in the financial condition of Krown and/or Bellgate which occurred prior to the date of the Guarantee or as a result of the breaches of the financial covenants in the Ozerkovskaya III Loan Facility.
If Mr Leviev ceases to have effective control the Company, his liability under the Guarantee shall be decreased to US$100,000, and VTB may immediately terminate the Standstill and the Deferrals. In such circumstances, VTB would be able to enforce its security under the Loan Facility Agreements (without any further consent or approvals required from either the Company or its shareholders).
VTB may also terminate the Deferrals, resulting in the accrued quarterly principal payments becoming immediately due, if in the opinion of VTB the financial condition of either Krown or Bellgate deteriorates or if the market value of either Ozerkovskaya III and/or AFIMALL Shopping Centre, being the respective assets of Krown and Bellgate, decreases by more than 20%, in each case from the date of the Guarantee.
Additional security
It is anticipated that VTB would be provided with the following proposed additional security for the period of 12 months following the date of the Guarantee:
· In respect of the Ozerkovskaya III Loan Facility: (i) a second ranking pledge of the shares in LLC Titon, (which holds the Company's interest in its Kossinskaya project at 21 Kossinskaya Street, Moscow, and which had a book value of approximately US$27.1 million as at 31 March 2016); (ii) a guarantee from LLC Titon and the pledgor of the shares in LLC Titon; and (iii) a second ranking mortgage of an office complex and lease rights in relation to the underlying land plot held by LLC Titon.
· In respect of the AFIMALL City Loan Facility: (i) a first ranking pledge of 100% of the shares in LLC Titon; (ii) a guarantee from LLC Titon and the pledgor of the shares in LLC Titon; and (iii) a first ranking mortgage of an office complex and lease rights in relation to the underlying land plot held by LLC Titon.
In addition, Krown and Bellgate would undertake, amongst other things, not to distribute dividends without VTB's consent during the 12 month period.
- ENDS -
For further information, please contact:
AFI Development, +7 495 796 9988
Ilya Kutnov, Corporate Affairs/Investments Director (Responsible for arranging the release of this announcement)
Citigate Dewe Rogerson, London +44 20 7638 9571
David Westover
Sandra Novakov
Marina Zakharova de Calero
This announcement contains inside information.
About AFI Development
AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.
AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction and quality of customer service.
AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centers, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favorable return.
AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighborhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.
Legal Disclaimer
Some of the information in these materials may contain projections or other forward-looking statements regarding future events, the future financial performance of the Company, its intentions, beliefs or current expectations and those of its officers, directors and employees concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and business. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" or the negative of such terms or other similar expressions. These statements are only predictions and that actual events or results may differ materially. Unless otherwise required by applicable law, regulation or accounting standard, the Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia and market change in the industries the Company operates in, as well as many other risks specifically related to the Company and its operations.