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Orco Declines to Three-Month Low on Dilution From Debt Swap

Orco Property Group SA, a developer in central Europe overhauling its debt under a court-approved plan, fell to a three-month low in Czech trading on concern a plan to exchange bonds for equity will dilute share value.

The stock slipped 2 percent to 84.5 koruna at the close in Prague, the lowest since Jan. 17, underperforming the PX equity gauge, which retreated 0.5 percent. In Paris, its home market, Orco slipped 1.8 percent to 3.37 euros.

Orco reached a preliminary agreement with some bondholders to convert about 90 percent of its bonds and about 85 percent of debt issued by its German unit into approximately 91.2 million shares, the Luxembourg-registered company said yesterday. The swap would increase the number of outstanding shares to about 108.3 million from 17.1 million, Orco said in the statement.

“The dilution effect will significantly exceed the effect of the debt reduction,” analysts led by Milan Vanicek at J&T Banka AS in Prague wrote in an e-mailed report to clients today. “We consider the news negative.”

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