Stock Exchange Announcement
19 October 2012
RomReal Press Release: Update on the financial situation of the Company.
RomReal wishes to update on the serious financial situation of the Company.
As previously stated, the Company has a bullet loan of EUR 11.6 million with Alpha Bank in Romania which matures on the 30th November, 2012. All interest on this loan up to maturity has been pre-paid in advance, but the principal payment will become due on the maturity date. The Company does not have sufficient cash to make this payment, or any significant down-payment, as it has been very difficult to divest assets during the severe downturn in Romanian real-estate market.
RomReal's management is currently in on-going discussions with Alpha Bank regarding a restructuring of the loan, but no agreement has been reached at this stage. The Management therefore wants to inform that the Company could enter in a default situation very soon if a solution with Alpha Bank is not found in time.
The Management of the Company has over the years put a substantial effort into reducing the operating costs of the company to adjust to the difficult market environment and secure cash to service payments on the loan and the Company's ongoing operating expenses. The Company will need to implement additional significant cost savings to ensure that there is sufficient working capital to fund its operations going forward.
If a solution is reached with Alpha Bank on viable terms, it is likely that a capital raising from the shareholders, possibly through a rights issue, will be needed to fund the Company's operations going forward. The details of such capital raising will be very dependent on the potential terms of the loan restructuring and the Company will therefore inform about further details on such a possible issue once the situation with Alpha Bank becomes clearer.
As the Company has announced in its previous quarterly statements, the Romanian real estate market is in a severe downturn with very few transactions taking place in the residential segment which is the focus area of the Company's assets. Bank financing of both construction and mortgages in Romania has almost come to a halt. On this background, the Board is of the opinion that the external valuation of the Company's assets carried out by the independent valuation firm in connection with the 2012 year-end audit, could lead to further reductions in the valuations of the Company's assets and hence a reduction in the IFRS based NAV.
For further enquiries please contact:
Harris Palaondas
RomReal - Investor Relations
+40 731123037
info@romreal.com
www.romreal.com