ORCO PROPERTY GRP

Turning Orco around or upside down

Monday, June 22, 2009,

Anna Sieczkos,

Czech Business

Weekly





See:

http://www.cbw.cz/en/article/turning-orco-around-or-upside-down.aspx

Orco: changes the deal with ColOG and delays subscription time



Orco has announced today that, after two months of review, it is necessary for the management of

Orco to implement and finalize the restructuring of the bond debt before proceeding with the capital

infusion from Colony Capital. Thus, until Novermber 30th, ColOG will be granted warrants which will

allow it to subscribe Orco shares at € 7 per share for a total amount of € 80m. Current

shareholders will also be given the right to subscribe one share per each existing one. ColOG stake

in Orco should thus not exceed 30%. The exercise of warrants, however, is dependent on the success

of the bond restructuring undertaken as part of the Safeguard Procedure and on the approval on the

EGSM.



Our view (KBC Securities / Patria):



The deal becomes more uncertain after this statement as it will depend on both a successful debt

restructuring and the vote of shareholders in the EGSM. Though we think the vote in the EGSM might

be positive for the deal, the debt restructuring is still questionable. One possible explanation for

the changes in the deal could be that Colony Capital wants to make sure that the money will be spent

for finishing cash generating projects and not that it will go for debt repayment. The fact that

ColOG should not hold more than 30% in Orco puts another question mark on the deal as the amount to

be subscribed by ColOG should then depend on the amount subscribed by current shareholders. On the

positive side, the new terms of the deal reduce significantly the dilutive effect that was present

before.

However, we think that the negative of the deal becoming more uncertain outweighs the positive and

we expect a slightly negative market reaction.



lucian.albulescu AT kbcsecurities.ro





Orco Sell

ORC FP

Close Price € 5.76

Fair Value 4.71

Market Cap €m 63.04

Free Float 75.8%

EPS P/E

FY08 -35.4 n.m.

FY09E -7.9 n.m.

FY10E -4.0 n.m.