International Property News

Orco seeks court protection from creditors

27th March 2009

Real estate company Orco Property Group has asked for court protection against creditors in Paris, the firm has said in a press release sent to CTK Thursday.

Orco spokeswoman Petra Zdenkova added that the court had given protection to the company. The measure is aimed at accelerating strategic and financial restructuring at the company.

Orco's shares are traded on the stock exchanges of Prague, Paris, Warsaw and Budapest.

Immediately after the release of the news, the Prague Stock Exchange (BCPP) suspended trading in Orco shares and bonds.

Orco said it was grappling with problems with planned sale of properties due to the situation on real estate markets. It also has problems with paying back loans that some of the group's members have.

Zdenkova said there was no danger of bankruptcy.

"By French procedure, court protection is given only to companies able to prove they are solvent, that is they do not face bankruptcy," Zdenkova told CTK.

Law office Ambruz & Dark has called attention to the fact that protection against creditors in France has a direct impact on the parent company traded on the bourse. The measure does not apply to Czech subsidiaries.

"In general, this is one of the last steps by means of which the management can avert bankruptcy and have for some more time full control over a company and make or complete the necessary restructuring measures. The stance of the financing banks will be of key importance," said Michal Hrncir of Ambruz & Dark real estate team.

With the court protection against creditors, the management will gain time for restoring the company's financial health and proceeding with talks it has launched with financial partners, said CEO Jean-François Ott.

SOS Orco, the association set up to protect investments of smaller shareholders, says the company's application for protection against creditors confirms their fears of the way the company was managed in the past months.

"We have tried to stay calm and to reach agreement and not to raise tension. But the situation makes us declare that at a general meeting at end-April we will demand a complete change of management," said SOS Orco chairman Lubos Smrcka.

Smrcka does not like the suspension of trading in Orco's shares and bonds on BCPP. The market should enable selling and buying of the stock, irrespective of whether someone likes it or not, he said.

The firm Atlantik financni trhy has announced it has suspended its investment recommendation for Orco shares. It has thus far put the price of Orco stock at EUR10.6 (Kc291) and its advice for long-term investors was to "buy".

Its short-term outlook was negative, however. Orco shares added 6.66 percent to Kc157.05 in Prague on Thursday.

SOS Orco argues that the growth in the price of Ocro stock, seen in the past days when it rose to over Kc157 apiece on relatively large trading volumes, signals the efforts of some investors to raise their stake before the general meeting to be held at end-April.

The market is now waiting for Orco's economic results for last year. The developer was supposed to announce them early last week but postponed the announcement until end-March. It has not disclosed the exact date.

Investicni spolecnost Prosperita of Orlova is probably Orco's biggest shareholder. It announced in March that it controlled around 5 percent in Orco and wanted to raise the stake further but not to take full control of the company.

Prosperita earlier also said that its further stance on the situation in Orco could not be expected before the release of economic results for 2008.

Orco has already laid off some 220 employees and closed some offices within its restructuring process. Changes also came when two key managers left the company.

Orco's biggest planned project is a housing and office complex in Prague 6-Bubny into which it wants to gradually invest over Kc70bn.

The company also owns large real estate complexes, for example, in Berlin and Moscow.

Source: Prague Monitor