GTC Slumps as Property Developer Plans Share Sale to Cut Debt

Globe Trade Centre SA, Poland’s second-largest property developer by market value, plunged to a two-month low after announcing plans to sell new shares and cut debt.

The stock declined as much as 6 percent and traded 4.4 percent lower to close at 7.55 zloty in Warsaw, valuing the company at 2.41 billion zloty ($794 million). GTC, as the Warsaw-based company is known, has sunk 24 percent this year, compared with a 1 percent gain on the WIG-Developers Index.

GTC, which raised 100 million euros from a rights issue last year to repay notes maturing in May, plans to sell as many as 31.9 million shares in a private offering, it said in a regulatory filing on Dec. 13. Its shareholders will vote on the capital increase on Jan. 9.

“It comes as a negative surprise that the company proceeds with a share issuance and the use of the proceeds is designated for debt repayment rather than for new projects,” Malgorzata Kloka, an analyst at UniCredit SpA in Warsaw, said in a note today.

GTC, whose net debt was 947 million euros ($1.3 billion) at the end of September, needs to repay 106 million euros of bonds in April, according to a presentation on its website. Its cash position shrank 53 percent to 103 million euros at the end of September from a year ago.

Based on “the last closing price, the offer could reach as much as 250 million zloty, although we would expect a material discount,” Kloka said. Last month GTC’s management “expressed its confidence in meeting the 2014 repayment schedule as asset disposals were on track and, allegedly, there was a potential for bond refinancing.”

Lone Star Real Estate Fund last month bought a 27.8 percent stake in GTC, which focuses on office buildings, shopping centers and residential properties, from Amsterdam-based Kardan NV for 160 million euros.