Investor Update

RNS Number : 8946G

Equest Investments Balkans Ltd

09 February 2010

 



9  February 2010

EQUEST INVESTMENTS BALKANS LIMITED
("EIB or the "Company")

Investor Update

Portfolio Update

Considerable progress was made in 2009 to refocus the Company's strategy on its core assets, primarily TechnomarketDomo NV ("TMD"), to sell non-core assets and to refinance or restructure certain of the EIB Group's debt facilities and other financial obligations.

TMD

EIB owns 61.8% of the share capital of TMD, EIB's most important subsidiary which in turn owns 100% of both the local Bulgarian and Romanian operating companies.  The TMD Group, comprising the Technomarket and Domo branded electronics operations in Bulgaria and Romania respectively, achieved its overall sales targets in 2009, despite continuingly difficult market conditions. TMD has remained the market leader in Bulgaria and has now moved to a leading market position in Romania as well.  At the end of the year, the TMD network consisted of 219 stores (2008: 212 stores).

Unaudited 12 month revenues for the year ended 31 December 2009 were approximately EUR 561 million (2008: EUR 621.5 million), of which EUR 394 million were from the Bulgarian operations (approximately 6% behind the corresponding period in 2008) and EUR 167 million from the Romanian operations (approximately 17%  behind the corresponding period in 2008).  

In July 2009, with the assistance of EIB and its largest shareholder, the State General Reserve Fund of the Sultanate of Oman ("SGRF"), TMD Group's long term loan facilities with Raiffeisen Zentralbank Osterreich AG ("RZB") were reduced and the balance of the loans was restructured.  This restructuring, while burdening EIB with onerous commitments to SGRF by way of a comprehensive security package ("the SGRF Security"), nevertheless provided EIB with further time to protect and grow the value of its investment in TMD.

As announced on 11 January 2010, a balance of EUR 17 million (plus accrued interest) due to be repaid to RZB by 31 December 2009 was met by RZB calling the Citibank Guarantee which, in turn, was covered  by SGRF under the terms of its related counter indemnity.  The terms of the SGRF security were described in the announcement made on 16 July 2009.  These terms included particular exchange rights that SGRF has in connection with EIB's indebtedness to SGRF, the exercise of which would be triggered by certain conditions, involving approval of business and integration plans and the completion of a number of senior TMD management appointments, not being satisfied by EIB by 31 December 2009.  SGRF has now notified EIB that SGRF's exchange rights and rights under the SGRF Security have become exercisable and as such SGRF has reserved its position.  EIB is in discussions with SGRF on the circumstances giving rise to this notification and is continuing to work with SGRF on a longer term resolution of these issues. 

The process of integrating TMD's Bulgarian and Romanian operations is underway and the expected efficiencies from this are being incorporated into TMD's budget for 2010 which will be presented to the Board of TMD for final approval at its next meeting in late February. 

Through repayment and the arrangements described above, the exposure to RZB in respect to TMD, as at 31^st December 2009, had been reduced from an outstanding principal amount of approximately EUR 81 million to approximately EUR 39 million, with final maturity extended from three to five years, that is until 31 December 2014.

Property Companies

Immofinance, one of EIB's property subsidiaries, is in discussions with the respective banks financing its two remaining development projects, namely Sozopolis and Banya, as to the future of these projects. The loan facilities, which are currently in default as a result of breaches of covenants, are secured on the relevant developments and are on a non-recourse basis to EIB.  EIB has retained an independent property consultant to advise on the best course of action for EIB with respect to these development projects as well as on  the disposal of  the remaining properties within its portfolio; these include the former cinema sites (namely Iztok, Urvich and Evropa Palace) owned by Pelican, EIB's other property subsidiary. 

Novera AD

As previously announced, the remaining Concession Agreements for the provision of waste management and street cleaning services in Sofia held by three wholly owned subsidiaries (the "Concessionaires") of Novera AD were terminated by the Municipality of Sofia in March 2009.  , EIB rejects the basis of the termination of these Concession Agreements and is pursuing its complaint with the Bulgarian Government.

EIB has entered into discussion with legal representatives of the Bulgarian Government, over the Municipal Council of Sofia's conduct in relation to the Concession Agreements.  The senior and mezzanine lenders to Novera are also participating in these discussions.  Novera is now in liquidation and the liquidator is handling all of the necessary paperwork relating to the company's former employees.  The liquidator is also realising any remaining assets to help cover the costs of the liquidation.

Borovets

The current economic and financial climate make any immediate decision in respect to the future plans for this potential ski resort development unlikely.

Financing

The Company will be reliant on raising additional funding, part of which may come from the proceeds of further asset disposals, in order for the Group to meet its obligations, including the repayment obligation to SGRF referred to above.  The Board of EIB is considering the funding alternatives which may be available to the EIB group to assist it in protecting the value of its investments.  

Change of Company Name

Further to the announcement on 6 November 2009 and in connection with the termination arrangements with Equest Capital Limited, the Board of EIB announces that it has resolved to change the name of the Company to Trans Balkan Investments Limited.  The necessary statutory steps to effect the name change are expected to be completed shortly.  A further short announcement will be made when the name change becomes effective.

Change of Auditor

The Board of EIB announces that Deloitte & Touche LLP have replaced Grant Thornton LLP as auditors of the Company.  Grant Thornton LLP confirmed in their letter of resignation that there were no circumstances in connection with their ceasing to hold office that needed to be brought to the attention of the members, or creditors, of the Company. 

Commenting, Ian Schmiegelow, Chairman of the Board of Directors of EIB, said today:

"While it remains clear that the Company is still burdened with considerable liquidity problems, I am encouraged by the continuing assistance granted to EIB and its subsidiaries by its largest shareholder and by the material progress achieved in rationalising the various holdings and connected debt obligations of the Group.  It is particularly pleasing to witness the growing integration of Technomarket and Domo and the consistent manner in which their management is coping with the testing consumer markets."

Enquiries:

Equest Investments Balkans Limited	Ian Schmiegelow (Chairman) Natalie Weedon	Tel: + 44 20 7630 3350
Financial Dynamics	Ed Gascoigne-Pees Nick Henderson	Tel: + 44 20 7269 7132
Collins Stewart Europe Limited (Nomad)	Hugh Field	Tel: [phone]
KBC Peel Hunt Limited (Broker)	Capel Irwin	Tel: + 44 20 7418 8900

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