28 Sep 2016 09:06
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 THE DISPOSAL AND AMENDMENT
OF THE LOAN FACILITY AGREEMENTS AND GUARANTEE
London, 28 September 2016 - Further to the Company's H1 2016 results announcement of 25 August 2016, negotiations between AFI Development, VTB Bank PJSC ("VTB") and Mr Leviev, the Executive Chairman and largest shareholder of the Company, have been ongoing in respect of reaching an agreement 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 (together the "Loan Facility Agreements" or "Loans") as detailed in the Company's circular dated 15 July 2016 (the "Disposal") and which was approved by shareholders on 1 August 2016.
The Company is pleased to announce that the Company and VTB have agreed to amend the terms of the Loan Facility Agreements. As detailed below, the amendments include the deferral of the quarterly principal payments due on the Loan Facility Agreements to maturity of each of the Loans and the removal of the existing covenants to the Ozerkovskaya III Loan Facility, which Krown Investments LLC ("Krown") is currently in breach of, in consideration for which VTB has sought additional security in respect of the Loans which now includes cross default provisions between each of the Loans and a suretyship from Bellgate Constructions Limited ("Bellgate"), which holds the AFIMALL City project, in respect of the Ozerkovskaya III Loan Facility.
In addition, Mr Leviev has entered into a personal guarantee with VTB in respect of the Group's obligations under the Ozerkovskaya III Loan Facility (the "Guarantee").
As a result of the amendments to the Loan Facility Agreements and the Guarantee being entered into, the Disposal will not proceed.
Amendments to the Loan Facility Agreements
(a) Krown, which holds Ozerkovskaya III, a completed Class A office complex in Moscow
Krown and VTB have entered into an addendum to the Ozerkovskaya III Loan Facility pursuant to which:
(i) the existing covenants (being the debt service coverage ratio and the loan to value covenants), which Krown is currently in breach of, have been removed;
(ii) all quarterly principal payments due under the facility, including the quarterly principal payment due on 30 June 2016 and which has not been paid, will be deferred to maturity, being 26 January 2018; and
(iii) the Company will provide additional security to VTB in consideration of the above.
All other terms of the facility, including interest payments, remain essentially the same.
Pursuant to the additional security, a new share pledge by the Company over 100% of the share capital of Bellgate has been entered into with VTB (the "Bellgate Share Pledge"). The Bellgate Share Pledge continues to cover the obligations of Bellgate pursuant to the AFIMALL City Loan Facility (with any liability arising now being satisfied by, inter alia, the transfer of the pledged shares to VTB), and now also covers the obligations of Krown in respect of the Ozerkovskaya III Loan Facility. In addition, within 60 calendar days of this announcement, the Company and VTB shall execute the following agreements which will provide additional security, being a:
· Share pledge agreement over 100% of the share capital of each of Titon LLC (which holds the Company's interest in the Kossinskaya project) and Semprex LLC (which holds the Company's interest in the Aquamarine Hotel);
· Mortgage agreement over the Kossinskaya project;
· Suretyship agreements with each of Titon LLC, Rognestar Finance Limited (the parent company of Titon LLC), Bellgate, Semprex LLC and AQUAMARE TRE LTD (the parent company of Semprex LLC) for the full amount of the Ozerkovskaya III Loan Facility;
· Second ranking mortgage agreement over AFIMALL City and the Aquamarine Hotel; and
· Pledge agreement over the equipment used to operate the Kossinskaya project.
(b) Bellgate, which holds AFIMALL City Shopping Centre, a shopping and entertainment centre in Moscow City, the business district of Moscow
Bellgate and VTB have entered into an addendum to the AFIMALL City Loan Facility pursuant to which:
(i) all quarterly principal payments due under the facility, including the quarterly principal payment due on 30 June 2016 and which has not been paid, will be deferred to maturity, being 1 April 2018; and
(ii) the Company will provide additional security to VTB in consideration of the above.
All other terms of the facility, including covenants and interest payments, remain essentially the same.
Within 60 calendar days from this announcement, the Company and VTB shall also execute the following agreements:
· Second ranking pledge agreement over 100% of the share capital of each of Krown and Titon LLC (which holds the Kossinskaya project);
· Pledge agreement over 100% of the share capital of each of Semprex LLC and AFI FM LLC (the property management company for the AFIMALL City Shopping Centre);
· Suretyship agreements with each of Krown, AFI FM LLC, Inscribe Limited (parent company of AFI FM LLC), Titon LLC, Rognestar Finance Limited and AQUAMARE TRE LTD for the full amount of the AFIMALL City Loan Facility;
· Second ranking mortgage agreement over each of the Ozerkovskaya III project and the Kossinskaya project; and
· Second ranking pledge agreement over the equipment used to for operate the Kossinskaya project.
The Guarantee and New Loan
In addition to the addenda to the Loan Facility Agreements described above, Mr Leviev has today provided VTB with the Guarantee, being a personal guarantee and indemnity deed under English law from Mr Leviev to VTB, pursuant to which Mr Leviev has undertaken to guarantee, for a period of 10 months, the obligations of Krown under the Ozerkovskaya III Loan Facility. The Guarantee, which is enforceable for 12 months, provides additional security to VTB in respect of the Ozerkovskaya III Loan Facility.
Should VTB enforce the Guarantee, the payment by Mr Leviev of any amounts under the Guarantee will lead to a discharge of Krown's respective payment obligations under the Ozerkovskaya III Loan Facility and any such payment made by Mr Leviev to VTB under the Guarantee will be deemed the granting of a new loan between the Company and Mr Leviev (the "New Loan"). If, as a result of the enforcement of the Guarantee, the Ozerkovskaya III Loan Facility is repaid in full by Mr Leviev, all claims of VTB under the security documents in respect of Krown's secured obligations under the Ozerkovskaya III Loan Facility will fall away.
The New Loan will accordingly only become effective in the event that VTB enforces the Guarantee and Mr Leviev makes a payment to VTB. The New Loan, if drawn, would be unsecured, accrue interest at an annual rate of 7.0% plus three month LIBOR payable quarterly, be a maximum amount of US$220 million, being equal to the maximum value of the Ozerkovskaya III Loan Facility, and repayable in full on or before 26 January 2018. The interest rate and maturity date of the New Loan are the same as the Ozerkovskaya III Loan Facility.
The terms of the Guarantee are as previously announced on 2 August 2016, except that, following completion of the purchase by Mr Leviev of an interest in, in aggregate, 64.88% of the Company's issued share capital as announced on 8 September 2016, the limitation of liability provision in the event that Mr Leviev ceased to have effective control of the Company has now been removed.
The Disposal
The Board of Directors of AFI Development believes that the addenda to the Loan Facility Agreements are in the best interests of the Company and shareholders as a whole and accordingly, have decided not to proceed with the Disposal as approved by shareholders on 1 August 2016.
The addenda to the Loan Facility Agreements provide the Company with the ability to explore all options in relation to maximising shareholder value and to repaying the Loan Facilities when they fall due in 2018, which may or may not include the disposal of certain assets or projects, and the Company will keep the market updated in this regard.
- 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.
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 and 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.