Trading Update

RNS Number : 0773U

Carpathian PLC

15 December 2011

 



Date:	15 December 2011
On behalf of:	Carpathian PLC ("Carpathian", the "Company" or the "Group")
Immediate release

Carpathian PLC

Trading Update

Highlights

§ Objectives following Strategic Review substantially completed

§ €96.43m equity recovered from the disposal of core properties

§ Management charges to execute Strategic Review €0.6m below allowable budget

§ Corporate restructuring has enabled reduction of €21m tax liability provision

§ C Share bonus issue of 12 euro cents per ordinary share, making a total distribution to shareholders from the Strategic Review of  41.5 euro cents

§ Two remaining assets to be disposed - Riga and Baia Mare

§ De-listing from AIM and liquidation targeted for 2012

Carpathian Plc (AIM: CPT), the commercial property investment company formed to focus on retail properties within Central and Eastern Europe, is pleased to provide a trading update regarding the progress made on the key objectives set out in its Strategic Review together with the announcement of a further dividend distribution.

As announced on 1 May 2009, the Strategic Review approved by the Board concluded that the Company would pursue a future focusing on maximising shareholder value by realising equity value from sales of its core investment portfolio.

The first element of the implementation of the Strategic Review was to obtain appropriate extensions and modifications to the Group's bank facilities by adjusting financial covenants where necessary. This was completed as announced on 2 July 2009. The second element was to realign the interest of the Company's Property Investment Adviser with shareholders in conjunction with an operating cost reduction programme. This was completed on 5 February 2010.

As of 15 December 2011, the value realisation programme from the sales of the core investment portfolio is substantially complete. Core investment properties were sold recovering equity for the Company (in chronological order) as follows:

Investment Property		Completion Date	Valuation*	Sales Price**	Equity Recovered***
Konzum Portfolio	Croatia	November 2010	€46m**	€45m	€3.5m
Blue Knight Portfolio (excluding Gdansk)	Poland	March 2011	€42.2m	€40.2m	€15.5m
Promenada	Poland	May 2011	€169.5	€169.5m	€59.8m
Slupsk	Poland	April 2011	€0.75m	€0.75m	€0.73m
Osowa, Gdansk	Poland	May 2011	€34.5m	€34.5m	€9.8m
MacroMall	Romania	November 2011	€2.5m	€1m	€1m
Satu Mare	Romania	November 2011	€2.1m	€1.1m	€1.1m
Babilonas	Lithuania	December 2011	€25m	€24.1m	€5m
Total			€319.5m	€313.1m	€96.43m

*              Independent property valuations carried out at the calendar year end preceding the completion date

**              Refers to the gross sales price excluding any retentions or transactions from the transaction

***           Refers to the initial equity recovered from transaction excluding additional recovery of retentions

The two remaining investment properties are the Galleria Riga, Latvia and development land in Baia Mare, Romania.

Galleria Riga is a completed shopping centre development that commenced trading in October 2010. The Company also has peripheral property holdings enabling extensions at a later date. The centre currently has a footfall and occupancy rate below target levels.  Following a recent change of local management, there is now interest from major retailers in opening space within the centre. The additional equity investment required to address these issues and to attract anchor retailers has a far longer-term payback than the Company's expected remaining life. The Company continues its discussions with its joint venture partner and senior debt financing bank and with third parties who may adopt a longer-term investment strategy.

Galleria Riga is a non-consolidated investment property as Carpathian PLC is a joint venture partner and does not have majority management control.

The Baia Mare land, Romania continues to be marketed. The site of 125,238 sq m requires infrastructure investment to connect it to the main adjoining highway - a factor having to be considered by potential buyers.

In addition, the MID portfolio, comprising four shopping centres in the Czech Republic and Hungary, continues to be categorised as non-core investment with the prospect of retrieving little or no equity value in the short to medium term. The portfolio is expected to be derecognised from the Company's balance sheet, as the financing bank has control over its cash flow.  The current debt facility expires at the end of 2011. Discussions are in hand with the financing bank for a short term loan extension pending discussions with a third party over a potential disposal by the Company.

The corporate restructuring of the Group is also substantially complete resulting in a reduction of €21 million in its tax liabilities from the amount provided at year end 31 December 2010. The deferred tax liabilities as at 30 June 2011 were €1.6 million.

The expenses relating to the Property Investment Adviser on a cumulative basis are approximately €0.6 million below the maximum amount set out in the Property Management Agreement signed in February 2010.   

Dividend update

Following the conclusion of the Strategic Review and successful amendment of a number of banking facility agreements to protect the core portfolio, the Board announced a dividend payment of 4.5 euro cents per share on 17 December 2009.  On 21 September 2011, the Board announced a further distribution of 25 euro cents per ordinary share via a B Share bonus issue.  As a result of the substantial completion of the Company's sales programme, the Board is now announcing an additional distribution of 12 euro cents per ordinary share via a C Share bonus issue with a record date of 23December 2011. The ordinary shares will be marked ex-entitlement to the C Share bonus issue on 21 December 2011 

This will result in an issue of new C shares pro rata to existing shareholders, offering qualifying shareholders the opportunity to elect for a conventional dividend (income) distribution or for a share sale and purchase (capital) distribution. The details were described in the circular dated 14 July 2010 that convened the Annual General Meeting on 6 August 2010. A copy of this circular is available for download from the Company's website: http://www.carpathianplc.com/Attachments/000033/Circular%202010.pdf 

Further particulars and a form of election will be circulated by the end of December.

Note on going concern

Now that the programme of value realisation is substantially complete, the Board has concluded that the Company's business purpose has ceased and that accordingly it is in the best interests of the Company to seek its liquidation before the end of 2012.  An extraordinary general meeting of the Company will be convened in due course to consider the proposal. The Company is working together with its advisers to quantify the remaining future liabilities of the Group and its likely liquidation costs.

The current Property Management Agreement with CAM expires on 31 December 2011. The Company proposes to make arrangements with CAM for the provision of the necessary accounting and other administrative services over the next few months to produce the 2011 financial statements, achieve an orderly wind-down and manage the necessary liquidations.

-Ends-

Enquiries:

Carpathian PLC
Rory Macnamara, Non-executive Chairman	Via Redleaf Polhill
CPT LLP	020 7529 6413
Paul Rogers/Balazs Csepregi	[e-mail]
Collins Stewart Europe Limited	020 7523 8350
Bruce Garrow
Redleaf Polhill	020 7566 6720
Henry Columbine / Luis Mackness	[e-mail]

Notes to Editors:

-	Carpathian was created in 2005 for the purpose of investing in Central and Eastern European commercial real estate.
-	Carpathian was admitted to trading on AIM in July 2005.
-	CPT LLP is the Property Investment Adviser to Carpathian. CPT LLP owns 100% of Carpathian Asset Management Limited (CAM). CAM, which was previously owned 50% by the Company, became fully externalised when the Company and CPT LLP implemented the new portfolio management agreement on 1 March 2010. CAM, together with its parent undertaking, CPT LLP, is responsible for managing the remaining core portfolio of assets and transactions within Central and Eastern Europe.

 

END

 

 

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