Orco CEO hits back at minority shareholders

Jean Francois Ott, CEO and chairman of troubled CEE developer Orco Property Group, has slammed a move by minority shareholders to remove him and the company's current board. 'This is very damaging for the company,' he said in a reaction.

Ott said he was in talks with new potential shareholders including London-based financial institutions and high net worth individuals who would help him put the company on a firmer footing. He said he would also consider an equity issue to raise fresh capital. 'The debt restructuring is one side of the problem, but you also need people with experience of the CEE market. These shareholder activitists don't have that experience and are planning to hire people that I fired. They are not the right people.'

Last week, it emerged that two shareholders in the group are seeking an ordinary general meeting of shareholders to vote on a proposal to replace Ott and the current management team with a new board. The company's board of directors now has 30 days to hold this general meeting. The activist shareholders hold 10% of the voting rights in Orco.

'We have lost confidence in the chairman and CEO,' said Jean-Pierre Mattei, the former head of the Paris Commercial Court representing the two shareholders, in a press statement. 'After a full year under French "safeguard" court protection, he has failed to cut down the debt burden that has been paralyzing the company and ruins any hope of a rebound for Orco.'

It is proposed that Jean-Pierre Mattei, Anne-Marie de Chalambert, Jean Coeroli, Emile Ferenczy, Jean Van Den Esch and Patrick Aubart be appointed to the board of directors, with Jean-Pierre Mattei to become chairman of the board.

'The new board's top priority will be to slash the consolidated debt by at least 25%, the company's survival depends on it. The company needs breathing space in order to invest and grow, on the basis of a healthy, profitable and sustainable business model’, said Mattei. 'We are calling on fellow shareholders to support our decisions and give Orco and its employees renewed impetus so that the company finally creates value for all stakeholders'.

Orco is an investor, developer and asset manager in the Central European real estate and hospitality market. It managing assets of EUR 2.2 bn and is listed on Euronext Paris as well as Prague, Warsaw and Budapest.

The firm has been one of the high-profile victims of the financial and economic downturn. In March 2009 Orco sought and was granted a form of creditor protection by the Paris Commercial Court to allow the firm the space to negotiate a deal with bondholders. The bondholders have rejected two offers to date. They have been asked to vote on an amendment to the terms and conditions of their 2014 bonds. A new meeting will be convened in April.

The shareholders demanding Ott's removal said Orco has in excess of EUR 1.6 bn in consolidated debt, compared with cash EBITDA of EUR 65 mln in 2008. Over the past three years, its stock price has dropped from EUR 130 to EUR 7. The company has a market capitalisation of roughly EUR 100 mln. Ott currently has a 1.6% stake in the company.