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.
