ORCO PROPERTY 
By société anonyme
42 rue de la Vallée
L-2661 Luxembourg
R.C.S. Luxembourg B 44.996
(hereinafter referred to as the "Company")
The Orco Property Group Board of Directors (the
"Board") presents this report to the Orco
Germany
Bondholders and Orco Germany Warrantholders concerning the
transactions contemplated in the 19
December 2011 Binding Term Sheet (the "Term Sheet") among
Orco Property Group S.A. ("OPG"), Orco Germany S.A. ("OG")
and certain Orco Germany Bondholders (the "OG Bondholders")
that was subsequently approved by the OPG Board of Directors
during its meeting of 23 December 2011.
The OG Bondholders and OG Warrantholders will vote on the
transactions contemplated in the Term
Sheet during General Assemblies to be held on 27 January
2012.
Since early 2011, negotiations have taken place with
approximately 63% of the OG Bondholders to restructure
approximately EUR 129.1 Million of debt (consisting of the
nominal value, premium and coupon interest as at the maturity
date) that matures on 30 May 2012 and is represented by
148,077 OG Bonds (ISIN XS0302623953, the "OG Bonds").
Ultimately, on 19 December 2011, the parties entered into the
Term Sheet whereby it was agreed that binding documents would
be finalized and legal formalities would be undertaken in
order to convert all
148,077 OG Bonds valued at approximately EUR 129.1 Million
into 148,077 new OPG convertible bonds that can be converted
into either (i) newly issued ordinary shares of OPG (ISIN
LU0122624777, the "OPG Shares"); or (ii) OPG Shares and
ordinary shares of OG (ISIN LU0251710041, the "OG
Shares"),
depending on the conditions set forth below.
1
Subject to compliance with Luxembourg laws and to the
granting of all regulatory approvals (in particular the
decision from the Luxembourg market regulator, the CSSF,
confirming that in the context of the conversion detailed
below the OG Bondholders will not be obliged to launch a
takeover bid), on 31
January 2012 the 148,077 OG Bonds will take the form of
148,077 OPG OCA (Obligation Convertible en
Action, the "OPG OCA"), a Luxembourg convertible bond
instrument.
In this way, OPG can relieve the short term debt pressure on
OG through the equitization of approximately EUR 129.1
Million thereby improving the OG balance sheet and increasing
the OPG market capitalization. Through these contemplated
transactions, OPG would therefore effectively raise up to EUR
129.1 Million at an average share price of around EUR 4.74
per OPG Share. Through the contemplated transactions, funds
will be liberated that can be then channeled to various
assets which currently need them.
The OG transactions testify to the fundamental belief of a
majority of OG Bonds institutional investors in the quality
of the portfolio of both OPG and OG and the current strategy
implemented at the OPG level.
In addition, the contemplated transactions will have the
following benefits:
Allow OG to avoid a costly and time-consuming collective
procedure and remain within the OPG Group on a going concern
basis;
Allow for the partial or total refinancing of the EUR
300,000,000 in bank debt regarding OG's GSG Berlin portfolio
by facilitating the negotiations with the existing and
potential financing banks regarding this matter;
Pave the way for a further OPG deleverage by allowing an
equitization of some OPG Bonds into
OPG Shares;
Coupled with the MSREI transaction, they strengthen the
Group's equity and its value creation
capacity thereby opening new equitization possibilities for
the OPG Bondholders; Provide deleveraging at the Group level
thereby increasing the value of OPG;
Preserve the Group's liquidity and provides time and
liquidity headroom to optimize asset values for development
and mature assets;
Increase liquidity of the OPG Shares.
2
CONVERSION OF OPG OCA:
The 148,077 OPG OCA that will be exchanged for the 148,077 OG
Bonds will have a conversion that is split into two periods
as set forth below:
On or about 31 January, 2012 a first portion of the OPG OCA
representing an aggregate nominal amount of approximately EUR
79,100,000 will be converted into 130 OPG Shares per one OPG
OCA, which will result in the creation of 19,250,010 newly
issued OPG Shares (therefore resulting in an issue price of
around EUR 4.11 per OPG Share), which will increase the OPG's
share capital to EUR 148,845,891.60 represented by 36,303,876
OPG Shares. Of these
19,250,010 newly issued OPG Shares, 1,000,000 shares will be
reserved for the OPG Executive
Management.
Then, on or around 15 April, 2012 (the "Exchange Date") the
OPG OCA holders (formerly the OG Bondholders) will decide how
to convert the second portion of the OPG OCA representing an
aggregate nominal amount of approximately EUR 50,000,000 as
set forth below:
o If the OPG Bond Conversion Condition (as
defined below) is met three business days prior to the
Exchange Date, the remaining OPG OCA will be converted into
54 OPG Shares per one OPG OCA, which will result in the
creation of 7,996,158 new OPG Shares (therefore resulting in
an issue price of around EUR 6.25 per OPG Share), therefore
resulting in an average blended conversion price per OPG
Share of around EUR 4.74 on the overall transaction, and
bringing OPG's share capital to EUR
181,630,139.40 represented by 44,300,034 OPG Shares.
o if the OPG Bond Conversion Condition is not
met three business days prior to the
Exchange Date such remaining OPG OCA will, at the option of
OPG, be:
