20th Nov 2009 10:51
Engel East Europe N.V.
Trading Update and Parent Company Funding
Friday, 20 November 2009 - Engel East Europe N.V. ('Engel' or 'the Company'), the AIM-listed Central and Eastern European property developer (EEE:L), today announces a further update of the Company's financial position and its parent company funding arrangements.
During the third quarter of 2009, the cash position of the Company and its subsidiaries ("Engel Group") deteriorated mainly as a result of the following:
Delays in closing sales of completed flats, mainly in the Vokovice project, Czech Republic.
Delays in selling several projects, mainly the Marina Dorcol project in Serbia, the commercial plot in Wilanow, Poland ("Wilanow Property") and the Panorama project in Bulgaria.
Although the Directors are hopeful that these financial difficulties will be resolved by the end of the first quarter of 2010, they consider that the above mentioned conditions indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.
In order to manage its financial situation, the Company requested its parent company to secure additional funding support to cover the Company's short term working capital requirements. Further to the announcement made on 30 October 2009, the Company has now agreed the terms of a bridging loan of €200,000 from Engel Resources and Development Ltd ("ERD"), a member of the parent company group. Management is also exploring other avenues to reduce debt and manage the Company's short term working capital and overall financial position.
As the Company has not been able to provide the pledge over the Wilanow Property as security under the terms of the previous funding agreement with ERD within the required time scale, the Company has agreed, as part of the bridging loan agreement, to transfer its entire shareholding in Wilanow 1 Development sp zoo ("EPL"), the company that owns the Wilanow Property, to ERD. Under the terms of the transfer agreement, ERD will offset the entire net proceeds of any sale of the Wilanow Property or EPL against Engel's existing debt. The proceeds will be used firstly to reduce the bank borrowing of the Engel Group that has been guaranteed by ERD, and any surplus will be used to offset other obligations of the Engel Group to ERD. If no sale has been completed within one year of the transfer, the value of the Wilanow shareholding will be determined by an independent appraiser and offset against Engel's debt on the same basis.
The Wilanow property has a book value of €5.7 million, and the net book value of EPL is €5.4 million.
The Board, with the exception of Messrs. Boymelgreen and Shkedi who are also directors of ERD, considers, having consulted with its Nominated Advisor, that the terms of the bridging loan agreement and the share transfer agreement are fair and reasonable in so far as the Company's shareholders are concerned.
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Enquiries:
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Engel East Europe N.V. |
Tel: +972 (9) 970 7004 |
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Samuel Hibel |
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Libertas Capital Corporate Finance Limited |
Tel: +44 (0) 20 7569 9650 |
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Sandy Jamieson |
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Bankside Consultants |
Tel: +44 (0) 20 7367 8888 |
|
Simon Bloomfield or Andy Harris |
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