26th May 2016 15:25
LONDON (Alliance News) - AFI Development PLC said Thursday that VTB Bank PJSC may accelerate repayment of the USD614.0 million of loans it is owed if AFI Development does not complete the disposal of three of its properties to the bank by June 10, which will see its equity fall by around USD266.0 million.
The real estate company, which develops property in Russia, said on March 30 its operating subsidiary AFI RUSS LLC received a letter from VTB, which is involved in loan agreements with two of AFI Development's subsidiaries, Bellgate Construction Ltd and Krown Investments LLC.
According to the letter, the bank had reached the conclusion that the two subsidiaries had experienced "material adverse changes in their financial conditions and there had appeared other circumstances that indicate that their obligations under the loan facility agreements could be not met on time".
On Thursday, AFI Development said it had been notified in writing that the bank would exercise its rights under its loan facility agreement to accelerate repayment of the USD614.0 million loans unless a transaction is completed with the bank by June 1. The bank added that full transaction documentation would need to be agreed by both parties and finalised by June 1.
The transaction referred to by VTB is "currently contemplated" to involve the releasing of AFI Development and its subsidiaries from the loans in exchange for the disposal of three of AFI's properties to the bank.
These properties are AFIMALL City, a shopping and entertainment centre in Moscow, Russia, which was valued at USD666.0 million at March 31, Ozerkovskaya III, which is an office complex in Moscow and was valued at USD197.4 million at March 31, and Aquamarine Hotel, valued at USD14.0 million.
AFI Development had said in its first quarter trading update last week that disposing these properties would decrease its equity by around USD266.0 million.
The disposal would be classified as a Class 1 transaction and ordinarily would be conditional upon shareholder approval. However, AFI Development will not be able to publish a circular or seek shareholder approval before June 10 and, as such, is looking to take advantage of another of the listing rules which allows companies in "severe financial difficulty" to make disposals without shareholder approval in certain circumstances.
AFI Development said if a disposal is not completed by June 10 and the bank accelerates the loan repayments, it is "highly probable that there would be a material adverse effect on the group's operations and on the value of the company's shares".
"The company has a high degree of confidence that it can finalise all the steps required to reach contractual agreement with the bank within the deadlines specified by the bank," AFI Development added.
Shares in AFI Development were down 1.5% at USD0.0901 on Thursday.
By Hannah Boland; [email protected]; @Hannaheboland
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