Orco Battles With Shareholders Over Capital Rise in Germany

Orco Property Group SA, a developer with assets in central and eastern Europe, is battling shareholders over its German unit’s capital increase and a new share sale to billionaire Radovan Vitek, the largest owner.

A Luxembourg court suspended resolutions approved by Orco Germany on Nov. 29 to raise its capital and barred the issuing of new shares, Orco shareholder Alchemy Special Opportunities said today in a statement. The order will remain in force until another hearing is held by Jan. 31, it said.

Orco Germany will seek to overturn the decision and take “all” legal steps available to challenge it, the company said in a separate statement today. The legal move by shareholders including Alchemy, impairs the company’s ability to act in the company’s and shareholders’ best interests, it said.

Orco last week announced that it booked asset writedowns worth more than half of its market value, triggering the deepest loss since the central European real-estate developer got protection from creditors in 2009.

Orco’s net loss in the nine-month period ended Sept. 30 was 116.7 million euros ($160 million) as the developer took 146 million euros of impairments and an asset re-evaluation in the third quarter, it said on Nov. 30. That compares with a restated loss of 34.3 million euros for the same period a year earlier.

Capital Increase

Orco Germany said on Dec. 2 that the board approved a reserved capital increase of as much as 100 million euros. Tandis AS, a company controlled by Vitek, the Czech billionaire, subscribed to 114,600,000 new ordinary shares for 0.47 euro apiece, Orco Germany said in a regulatory filing.

Alchemy said the price and the 100 million euro-increase are “extremely and unnecessarily” dilutive to the Orco Property Group shareholders’ interests in its German unit and would give a controlling stake to Vitek.

Alchemy recognizes the company’s need for liquidity and proposes a limited capital increase at the parent, it said. The fund is ready to commit capital under “acceptable” terms, it added.

Kingstown Capital Management LP, which is also part of the complaint, controls 11.8 percent in Orco Property Group, while Alchemy owns 10 percent, according to Bloomberg data.

Vitek has about 31 percent, according to the data.

Orco was scheduled to have a general meeting with shareholders today in Luxembourg. It adjourned the session for Jan. 6 on request of both Vitek and Alchemy, the company said today. The meeting’s agenda includes voting on the removal of eight members of the board of directors, including Vitek and Chief Operating Officer Nicolas Tommasini.

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