Plaza Regulatory News (PLAZ)

27 November 2013

Plaza Centers N.V. (the "Company" or "Plaza")

FINANCIAL INFORMATION FOR NINE MONTHS ENDED 30 SEPTEMBER 2013

Further to the announcements made on 14 and 18 November regarding Plaza's debt restructuring process, and information provided in the third quarter interim management statement reported on 18 November, the Company today announces financial information for the nine months period ended 30 September 2013.

Management have taken the decision to provide this interim financial information to ensure shareholders and bondholders have full insight into the Company's financial performance in light of the Board concluding to withhold payment on the upcoming maturities of the bonds and approach the creditors of the Company with a restructuring plan in a formalized restructuring.

Highlights:

· Loss for the three month period ended 30 September 2013 of €90 million which includes an impairment loss of €71.2 million related to properties in India, Romania, Serbia and Poland.

· Total equity of €258 million compared to €442 million on 31 December 2012.

· Current consolidated cash position (including restricted bank deposits and held for trading financial assets) of €33 million (31 December 2012: €66 million).

· The auditors of Plaza, without qualifying their conclusion on the interim financial information, draw attention to the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

For further information on the current situation, the content of the restructuring plan and the further process, please visit: http://www.plazacenters.com/index.php?p=debt_restructuring 

For further details, please contact:

Plaza

Ran Shtarkman, President and CEO +36 1 462 7221

Roy Linden, CFO +36 1 462 7222

FTI Consulting

Stephanie Highett / Nina Legge +44 20 7831 3113

Notes to Editors

Plaza Centers N.V. (www.plazacenters.com) is a leading emerging markets developer of shopping and entertainment centres. It focuses on constructing new centres and, where there is significant redevelopment potential, redeveloping existing centres in both capital cities and important regional centres. The Company is dual listed on the Main Board of the London Stock Exchange and, as of 19 October 2007, on the Warsaw Stock Exchange (LSE:"PLAZ", WSE: "PLZ/PLAZACNTR"). Plaza Centers N.V. is an indirect subsidiary of Elbit Imaging Ltd. ("EI"), an Israeli public company whose shares are traded on both the Tel Aviv Stock Exchange in Israel and on the NASDAQ Global Market in the United States. It has been active in real estate development in emerging markets for over 17 years.

Independent Auditors' Report on Review of Interim Financial Information

Board of Directors

Plaza Centers N.V.

Introduction

We have reviewed the accompanying condensed consolidated statement of financial position of Plaza Centers N.V. ("the Company") as at September 30, 2013, the condensed consolidated statements of profit or loss and comprehensive income for the nine and three month periods then ended, the statement of changes in equity and cash flows for the nine month period then ended and notes to the interim financial information ("the condensed consolidated interim financial information"). Management is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34, 'Interim Financial Reporting'as adopted by the EU. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.

Scope of Review 

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying September 30, 2013 condensed consolidated interim financial information is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the EU.

Emphasis of matter

Without qualifying our conclusion, we draw attention to Notes 2c), 8 and 15 b) in the condensed consolidated interim financial information which describes, among other matters, that the Company has withheld payment of an instalment on the Polish bonds; the Board of directors of the Company has decided to withhold payment on the fourth quarter payments of the Israeli bonds; and that the Company filed for reorganization proceedings with the District Court of Amsterdam in the Netherlands. These conditions, along with other matters as set forth in Note 8, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

Without qualifying our conclusion, we draw attention to Note 4 and Note 6 to the condensed consolidated interim financial information which describes that the Company early adopted IFRS 11 Joint arrangements with a date of initial application of 1 January 2013 and the effect thereof on the condensed consolidated interim financial information.

Plaza Centers N.V.

Condensed consolidated interim statement of financial position

 (*) Restated due to Retrospective application - refer to Note 4 and 6 regarding initial application of the new suite of standards

The notes on pages 10 - 27 are an integral part of this condensed consolidated interim financial information.

Plaza Centers N.V.

Condensed consolidated interim statement of profit or loss

(*) Restated due to Retrospective application - refer to Note 4 and 6 regarding initial application of the new suite of standards

The notes on pages 10 - 27 are an integral part of this condensed consolidated interim financial information.

Plaza Centers N.V.

Condensed consolidated interim statement of comprehensive income

(*) Restated due to Retrospective application - refer to Note 4 and 6 regarding initial application of the new suite of standards

The notes on pages 10 - 27 are an integral part of this condensed consolidated interim financial information.

Plaza Centers N.V.

Condensed consolidated interim statement of changes in equity

(*) Restated due to Retrospective application - refer to Note 4 and 6 regarding initial application of the new suite of standards

The notes on pages 10 - 27 are an integral part of this condensed consolidated interim financial information.

Plaza Centers N.V.

Condensed consolidated interim statement of cash flows

(*) Restated due to Retrospective application - refer to Note 4 and 6 regarding initial application of the new suite of standards

The notes on pages 10 - 27 are an integral part of this condensed consolidated interim financial information.

Plaza Centers N.V.

Condensed consolidated interim statement of cash flows continued

(*) Restated due to Retrospective application - refer to Note 4 and 6 regarding initial application of the new suite of standards

The notes on pages 10 - 27 are an integral part of this condensed consolidated interim financial information.

1. Reporting entity

Plaza Centers N.V. ("the Company") was incorporated and is registered in the Netherlands. The Company's registered office is at Keizersgracht 241, 1016 EA, Amsterdam, the Netherlands. The Company conducts its activities in the field of establishing, operating and selling of shopping and entertainment centers, as well as other mixed-use projects (retail, office, residential) in Central and Eastern Europe (starting 1996), India (from 2006), and, between 2010 and 2012, also in the USA.

The Company is dual listed on the Main Board of the London Stock Exchange ("LSE")and, starting October 2007, in the Warsaw Stock Exchange ("WSE").

The Company's immediate parent company is Elbit Ultrasound (Luxembourg) B.V. / S.à r.l. ("EUL"), which holds 62.5% of the Company's shares, as at the end of the reporting period. The ultimate parent company is Elbit Imaging Limited ("EI").

The condensed consolidated interim financial information of the Company as at September 30, 2013 and for the nine months then ended comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in joint ventures.

The consolidated financial statements of the Group as at and for the year ended December 31, 2012 are available on the Company's website (www.plazacenters.com) and also upon request from the Company's registered office.

2. Basis of presentation

a. Statement of compliance

This Condensed Consolidated Interim Financial Information has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the EU. It does not include all of the information required for a complete set of IFRS financial statements, and should be read in conjunction with the annual Consolidated Financial Statements of the Group as at and for the year ended December 31, 2012.

However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended December 31, 2012.

The condensed consolidated interim financial information was authorized for issue by the Company's Board of Directors on November 26, 2013.

b. Judgments and estimates

The preparation of interim financial information requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were principally the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2012. However, management reassessment of the probability of future development of certain real estate properties is done on an on-going basis, and resulted in write downs in 2013, as described in note 13a below. In addition, due to the proposed restructuring plan published on November 18, 2013 management is in a process assessing the potential implications of such plan on the classification and measurement of its Trading Properties and which could have a material effect on the company's financial results.

c. Going concern

The condensed consolidated interim financial information have been prepared on the assumption that the Group will continue as a going concern in the foreseeable future, for at least but not limited to twelve months from the end of the reporting period.

In respect of the above, the Company announced on November 18, 2013 that it had filed for reorganization proceedings (surseance van betaling) with the District Court of Amsterdam in the Netherlands (the "Court") and submitted a restructuring plan to the Court, and that it would withhold payment on the bonds and any material payment to its creditors. For a detailed discussion about the Group's liquidity position and restructuring plan refer to note 8.

3. Significant accounting policies

Except as described in Note 4, the accounting policies applied by the Group in this condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended December 31, 2012. The change in accounting policies disclosed in note 4 will also be reflected in the Group's consolidated financial statements as at and for the year ending December 31, 2013. (For the effect of the changes on the Company's statement of financial position for December 31, 2012, the statement of profit or loss, the statement of other comprehensive income, the statement of cash flows for the nine months period ended September 30, 2012 and the equity as at January 1, 2012, refer to Note 6).

4. Initial application of new standards

The Group has early adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, as well as the consequential amendments to IAS 28 Investments in Associates and Joint Ventures (2011) and IFRS 13 Fair value measurement, with a date of initial application of January 1, 2013. The adoption of these standards has the following effect on the interim condensed consolidated financial statements.

· IFRS 11 Joint Arrangements

· IFRS 12 Disclosure of Interests in Other Entities

As a result of the adoption of IFRS 11, the Group has changed its accounting policy with respect to its interests in joint arrangements.

Under IFRS 11, the Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group's rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considered the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification.

The Group evaluated its involvement in the joint arrangements it holds and classified them as joint ventures. Following the application of IFRS 11 joint ventures will henceforward be accounted for using the equity method, whereas until application of the standard the Company's accounting policy was the proportionate consolidation method.

Since the Company did not provide guarantees to the joint ventures, losses from the joint ventures will be accounted for until the investment is reduced to zero. If the joint venture subsequently reports profits, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of the losses not recognized.

Any unrecorded losses at the date of transition are recorded in the retained earnings. The Group disclosed its interests in joint ventures as required under IFRS 12 (refer to Note 5). Note 6 includes a summary of the adjustments made to the Group's statements of financial position at December 31, 2012, its statements of profit or loss, the statements of comprehensive income and cash flows for the nine months period ended at September 30, 2012 as a result of the implementation of the equity method instead of proportionate consolidation.

IFRS 10 Consolidated Financial Statements and the consequential amendments to IAS 28 Investments in Associates and Joint Ventures (2011) did not have any material effect on the Company condensed consolidated interim financial information.

IFRS 13 Fair value measurement provides a single framework for measuring fair value. The measurement of the fair value of an asset or liability is based on assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The company adopted IFRS 13 on January 1, 2013 on a prospective basis.

The adoption of IFRS 13 did not require any adjustments to the valuation techniques used by the Company to measure fair value and did not result in any measurement adjustments as at January 1, 2013.

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) - as a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of profit or loss and other comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be.

Comparative information has been re-presented accordingly. The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Apart from the above, the Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

5. Interests in joint ventures

The Company has the following interest (directly and indirectly) in the below joint ventures, as at September 30, 2013 and December 31, 2012:

(1) Refer also to note 14 (d) for the dissolving of investee.

(2) Refer also to note 14 (b) for the selling of the investee.

(3) Refer also to note 15 (a) for the selling of the investee.

6. Effect of initial application of new standards

(1) Effect on the statement of financial position

6. Effect of initial application of new standards (cont.)

(2) Effect on equity

(1) The change in equity attributable to owners of the Company is stemming entirely from decrease in the retained earnings, due to non-specific finance expenses which were de-capitalized as equity accounted investees assets are not qualified assets as defined in IAS 23.

6. Effect of initial application of new standards (cont.)

(3) Effect on the statement of profit or loss and statement of comprehensive income

(1) The change in equity attributable to owners of the Company is stemming entirely from decrease in the retained earnings, due to non-specific finance expenses which were de-capitalized as equity accounted investees assets are not qualified assets as defined in IAS 23

6. Effect of initial application of new standards (cont.)

(3) Effect on the statement of profit or loss and statement of comprehensive income (cont.)

(4) Effect on the statement of cash flows

7. Segment reporting

The Group comprises the following main geographical segments: CEE and India. The Group does not have reportable operating segment. In presenting information on the basis of geographical segments, segment revenue is based on the revenue resulting from either selling or operating of Trading Properties and Investment Property geographically located in the relevant segment.

Data regarding the geographical analysis in the nine months and the three months period ended September 30, 2013 and 2012 is as follows:

(1) CEE - including impairment of EUR 64.3 million. India - including impairment of EUR 15.6 million.

(2) CEE- including fair value negative adjustment of Investment property of EUR 4.3 million.

(3) India - including equity accounted investees loss mainly due to impairment of EUR 56 million

7. Segment reporting (cont.)

(1) - CEE - including trading property impairment of EUR 6 million.

(2) - India - including equity accounted investees loss mainly due to impairment of EUR 1.2 million

8. Financial risk management

The Company has been facing challenging market conditions for some years. These have primarily been caused by the underlying economic environment in many of the countries in which the Company operates, combined with the lack of transactional liquidity in the investment markets for assets such as those owned by the Company and the ongoing lack of traditional bank financing available to real estate developers and investors.

Against this background, the Company's management has made progress in re-positioning its business model to ensure that it is focused on the deleveraging of its balance sheet and the recycling of capital, primarily through the disposal of its non-core assets.

In 2013 alone, the Company has raised circa EUR 61 million through the disposal of five assets and the collection of the remaining proceeds from the transaction in the US.

In addition, it has successfully applied intensive asset management initiatives to maximize the income generated by its portfolio of investment assets, and has also had success in refinancing an EUR 59.3 million loan secured against one of its largest assets, Riga Plaza in Latvia during November 2013.

The Company continues to manage all its assets, with a view to preparing them for sale in an improved market supported by improving operating figures of the assets.

However, despite ongoing efforts to progress with a number of asset disposals and complete some alternative financing transactions, the Company has not been able to complete these transactions within a timeframe that will enable it to meet its short term obligations towards bondholders, specifically a circa EUR 15 million payment to Polish bondholders on 18 November 2013 and a circa EUR 17 million payment due to Israeli bondholders on 31 December 2013, and therefore has decided to withhold payment on maturities of the bonds and any material payment to its creditors.

Therefore, on November 18, 201, the Company filed for reorganization proceedings (surseance van betaling) with the District Court of Amsterdam in the Netherlands (the "Court") and submitted a restructuring plan to the Court. Pursuant to Dutch reorganization proceedings, the Court has appointed an administrator to manage the affairs of the Company together with existing management; ordinary unsecured creditors become subject to a stay; and the Company has the ability to restructure its debts during the moratorium with majority consent of its creditors. Throughout the restructuring process the Company intends to continue its business activities as normal.

The reorganization proceedings and the subsequent implementation of the restructuring plan will provide the Company with the ability to resolve its immediate liquidity situation in order to protect the continuity of the Company and preserve value for its shareholders and creditors.

This will be achieved primarily through a deferral of payment obligations to creditors of the Company for a period of three to four years, or shorter if cash flow permits.

Other main features of the debt restructuring plan include:

1) increased interest compensation to by 1.5%) to bondholders;

2) negative pledge on all the Group's assets;

3) potential issuing of rights by shareholders, and;

4) dividend distribution restriction

Aside from the proposed payment deferral, the terms of the proposed restructuring plan do not require bondholders to take a loss on the value of their outstanding exposures.

The meeting of creditors to approve the plan is scheduled to April 17, 2014. Upon implementation of the plan the Company believes it will be able to repay its creditors in full and return to generating significant value for its stakeholders, securing the viability of the Company for the future.

Accordingly, the Company believes that, on a going concern basis, the Company retains significant value for its shareholders and will be able to repay its creditors in full. By contrast, the Board of Directors of the Company is certain that a forced liquidation would cause shareholders and creditors to incur significant losses.

These conditions indicate the existence of material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

9. Financial instruments

Carrying amounts versus fair values

The Company presents and measure part of its debentures according to its fair value. The Carrying amount as at September 30, 2013 of the debentures presented at fair value was as follows:

The fair values of financial assets and financial liabilities as at September 30, 2013 approximates the carrying amounts in the condensed consolidated statement of financial position, with the exception of Debentures at amortized cost which is as follows:

Fair value hierarchy

The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows:

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

· Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

· Level 3: unobservable inputs for the asset or liability