Plaza withholds bond payments amid liquidity crunch

Emerging markets property developer Plaza Centers has suspended repayments to bondholders to stave off financial collapse. The company has also disposed of another asset in India.

Citing continuing 'challenging market conditions', the London and Warsaw-listed property company announced on Thursday that it will withhold payment on the upcoming bond maturities amid an ongoing restructuring programme, which has led to the sale of assets in the US and more recently, a second asset in India.

Plaza said it is managing all its assets intensively, with a view to preparing them for sale in an improving market supported by improving operating figures of the assets.

Explaining the decision to withhold the bond repayments, the company said: 'Despite ongoing efforts to progress a number of asset disposals and complete some alternative financing transactions, the company has not been able to complete these deals within a timeframe that will enable it to meet its short-term obligations towards bondholders.'

The repayment suspension relates specifically to a €15 mln payment due to Polish bondholders on 18 November 2013 and a €17 mln payment due to Israeli bondholders on 31 December 2013.

Plaza currently holds about €23 mln of free cash balances while an additional €10 mln is held as restricted cash on a consolidated basis. Trading of the Israeli bonds will likely be suspended by the Tel Aviv Stock Exchange for a limited period.

The company’s board said it expects auditors who are conducting a review of the 30 September 2013 financial statements will refer to 'the liquidity situation and potential impact on Plaza’s ability to continue operating as a going concern' in their report due in the last week of November.

Plaza added: 'Given the strong balance sheet of the company on a going concern basis, the restructuring plan will be aimed at resolving the present liquidity situation in order to safeguard the continuity of the company and preserve value for the creditors. In the meantime the company will refrain from incurring additional material financial liabilities.'

As part of its drive to shore up liquidity Plaza also announced an agreement to sell Koregaon Park Plaza, a retail, entertainment and office scheme located in Pune, India. The transaction values the asset at the current book value of €40.5 mln.

Ran Shtarkman, president and CEO of Plaza Centers, said: 'This second exit in India follows the disposal of our office complex in Pune, Maharashtra, earlier in the year and is in line with our ongoing strategy to deleverage our balance sheet and recycle capital, primarily through the disposal of non-core assets.

'We will also continue to focus on progressing our asset management initiatives to maximise the income generated by our portfolio of core investment assets, which are predominantly based in CEE.'

Plaza has faced challenging market conditions for some years. The situation, the company said, has primarily been caused by the underlying economic situation in many of the countries in which it operates, combined with the lack of transactional liquidity in the investment markets and the ongoing lack of traditional bank financing.

Plaza’s management team has responded by deleveraging the balance sheet and recycling capital, primarily through the disposal of non-core assets. During 2013 the company has raised €61 mln through the disposal of five assets and the collection of the remaining proceeds from the disposal of 47 malls in the US for €1.4 bn, followed by the two disposals in India.

Plaza had just under €800 mln of assets under management in August 2013.

Here's a link to all the news from Mapic 2013