REG - Plaza Centers N.V. - RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
31/03/2022 13:15
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RNS Number : 7983G Plaza Centers N.V. 31 March 2022
31 March, 2022
PLAZA CENTERS N.V.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
Plaza Centers N.V. ("Plaza" / "Company" / "Group") today announces its results
for the year ended 31 December 2021.
Financial highlights:
· Reduction in total assets by €2.7 million to €9.8 million
mainly as a result of the decrease in Equity accounted investees as detailed
below, administrative expenses and costs of operations.
· Consolidated cash position as of December 31, 2021 increased by
circa €3 million to app. €4.7 million (December 31, 2020: €1.7 million)
as result of received consideration after the sale of plot in Chennai, India.
· €2.9 million loss recorded at an operating level (December 31,
2020: €25.4 million loss) mainly due to share in results of equity accounted
investees and administrative expenses.
· Recorded loss of €27.1 million (December 31, 2020: €33.5
million), mainly due to finance expenses on bonds.
· Basic and diluted loss per share of €3.95 (31 December 2020:
loss per share of €4.89).
Impact of the Covid-19
The risks associated with the Covid-19 global health and economic crisis may
affect the Company indirectly, through possible regulatory changes and the
impact on the macroeconomic environment, which may affect the conducted
activities which are concentrated at selling of the assets. The Company
monitors the consequences of the event and the actions taken in countries in
which it operates and assesses the risks and exposures arising from these
consequences. At this stage, the impact of the effect of the COVID 19 was a
delay in the legal procedures against the purchaser of the SPV which owns the
plot in Bangalore India (refer to Note 6(b)(1) in the annual consolidated
financial statements). Other than the above mentioned, at this stage, the
Company is not able to estimate the full future impact of COVID 19.
Material events during the period:
Sale agreement of plot in Bangalore, India:
Regarding the criminal cases filed for dishonor of the cheques which were
given as security for payment of certain instalments refer to Note 6(b)(1) in
the annual consolidated financial statements.
Until the approval of the financial statements the Purchaser paid to EPI
approximately INR 87.00 crores (EUR 11.2 million) (Company part INR 43.5
crores (approximately EUR 5.6 million)) out of a total consideration of INR
356 crores (approximately EUR 42 million) (Plaza part INR 178 crores
(approximately EUR 21 million) the SPV should have been received as of the
said date as per the Agreement.
At this stage, there is no clarity on payment of the remaining amount based on
the Agreement. Accordingly, the Company is taking necessary steps to protect
its interest, including submitting an appeal before the National Company Law
Appellate Tribunal, Chennai, India against the decision of the National
Company Law Tribunal, Bengaluru, India, which dismissed the insolvency
proceedings initiated against the Purchaser for the recovery of the amounts
due, and filing a motion with court in order to collect checks given by the
Partner to secure payments under the transaction, but were dishonored.
The local partner periodically submits, informally, offers for the acquisition
of all EPI rights in the land in amounts significantly lower than the contract
price. As of the date of the approval of these financial statements, EPI
continues to take action against the local partner in order to exhaust the
consideration for its rights in the land (both proceedings to collect the
consideration and proceedings to enforce separation between the parties) but
without any success so far. It is possible that the amounts that EPI will
actually charge will be significantly lower than the balance to be paid. It
should be taken into account that any change in terms of the transaction also
requires the consent of Elbit Imaging ltd which holds approximately 47.5% of
the share capital of EPI, and that there is a joint control agreement between
it and the Company.
The Company estimates that the procedures for separation from the local
partner and cancellation of the future right involve will cost up to one
million euros, with the period of time of one to three years. (The difference
in costs involved in the said separation procedure and the period of time
required for it depends on the legal proceedings that EPI will take as well as
on the question of whether the local partner will seek to compromise during
the legal proceedings).
Sale agreement of plot in Chennai, India:
On June 21, 2021, the Company announced regarding the agreement (the "SPA")
between Elbit Plaza India Real Estate Holdings Limited (a subsidiary held by
the Company (50%) and Elbit Imaging ltd.(50%)) ("EPI") and the purchaser (the
"Purchaser") for the sale of 100% stake in the SPV (subsidiary of EPI) which
owns 74.7 acre plot in Chennai, India, for a total consideration of INR 96.5
crores (approximately EUR 11.2 million), the Purchaser completed the
transaction and paid a consideration of INR 94.7 crores (approximately EUR
10.6 million). The change in the consideration is due to the Purchaser's
consent to take some additional liabilities in connection with the SPV (which
were not included in the original agreement with the Purchaser).
As stated above, Plaza were entitled to receive 50% of the transaction's
compensation. Accordingly, the Company received an additional consideration of
approximately EUR 4.25 million, in addition to advanced payments in a total
consideration of EUR 1.05 million, it already received. Furthermore, Plaza and
Elbit Imaging Ltd granted the Purchaser an indemnification, jointly and
severally, for some of EPI's presentations, which are presentations customary
in such transactions.
Update regarding a change in Elbit Imaging Ltd holdings
In the period since January 11, 2021 and up to January 13, 2022, the Company
announced that since August 5, 2020 and up to the last announcement, Elbit
Imaging Ltd. ("Elbit Imaging") sold about 1,670 thousand shares of the
Company, which are held in escrow account, for a total consideration of
approximately NIS 1,683 thousand, thus, Elbit Imaging holdings in the Company
have diminished from 44.9% to 20.55% of the Company's issued and paid-up
capital.
Deferral of payment of Debentures and partial interests' payment:
Refer to the below in Liquidity & Financing.
Dutch statutory auditor:
Refer to Note 16 (b)(7) in the annual consolidated financial statements.
Annual General Meeting:
Annual general meeting of the Shareholders of the Company was held on June 30,
2021, all the proposed resolutions were passed.
Information regarding proposals from G.C. Hevron Capital Ltd, L.I.A Pure
Capital Ltd and Zero One Capital Ltd:
In the period since July 9, 2021 till August 10, 2021, the Company received
proposals from G.C. Hevron Capital Ltd ("Hevron Capital"). According to
revised proposal received on August 10, 2021 the Company's assets will be
transferred to a trustee and/or will be managed exclusively for the benefit of
the bondholders, in order to create a mechanism according to which the
bondholders will exclusively benefit from any expected income from the
existing assets.
On July 21, 2021 the Company received additional proposal from L.I.A. Pure
Capital Ltd. to purchase shares of the Company, as a publicly-traded shell
company.
On July 30, 2021 the Company received additional proposal from Zero One
Capital Ltd to preserve the Company's existing assets in favor of the
Company's bondholders and other interested persons and simultaneously to
enable to flow new activity.
All proposals were discussed on bondholders meeting which was held on August
1, 2021. Following this bondholders meeting, an additional bondholders meeting
was held on August 11, 2021, in which the bondholders decided to approve that
the Company's Board of Directors can conduct a negotiation with G.C. Hevron
Capital Ltd regarding the sale of the Company's public structure and to grant
a no shop for a period of 60 days during which due diligence will be carried
out by G.C. Hevron Capital Ltd and its advisor.
On October 4(th), 2021 the Company received a request from G.C Hevron Capital
Ltd. to extend the "NO-SHOP" period, as Hevron Capital and its attorneys might
not succeed to submit the agreement within the designated time schedules, due
to the holiday's period and the complexity of the transaction.
The Company's Board of Directors has discussed Hevron Capital's request, as
stated above, and decided to approve an extension of the "NO-SHOP" period by
an additional 30 days, until November 12, 2021.
On March 30, 2022 the Company announced that Hevron Capital submitted to the
Company a request to extend the No-Shop period, due to the complexity and the
vast amount of data that needs to be procced in order to evaluate the proposed
settlement ("Hevron Capital' Request").
Following the above, the Company's Board of Directors approves Hevron
Capital's Request to extend the "No-Shop" period until May 20, 2022 subject to
the approval of the Company's bondholders'.
Update regarding an agreement for the sale of the Plaza Centers Czech Republic
S.R.O.'s receivables:
On August 10, 2021 the Company announced that Plaza Centers Czech Republic
s.r.o ("Plaza Centers CR"), a wholly owned subsidiary of the Company, has
signed an agreement for the sale of its receivables to a third party, for a
total consideration of EUR 200,000, regarding an advanced payment for the
purchase of a Czech project company which Plaza Centers CR paid in the past.
Key highlights since the period end:
Update regarding an Engagement letter with a law firm in London in connection
with the legal proceedings in the "Casa Radio" project:
On January 14, 2022 the Company announced, that further to the Company's
bondholders meeting dated November 25, 2021 and the Company's bondholders'
approval to initiate legal procedures in connection with the "Casa Radio"
project (the "Project"); that on January 13, 2022, the Company signed an
engagement letter with a law firm in London in order to take any relevant
actions in connections with the Project. For details in connection with the
legal proceedings in the "Casa Radio" project please refer to Note 5 in the
annual consolidated financial statements.
Update regarding the issuance of a notice of dispute and acceptance of offer
and consent to arbitrate to Romania with respect to the "Casa Radio" project :
On February 15, 2022 the Company announced, further to the Company's
bondholders meeting dated November 25, 2021 and the Company's bondholders'
approval to initiate legal procedures in connection with the "Casa Radio"
project (the "Project"); that on January 13, 2022, the Company signed an
engagement letter with a law firm in London in order to take any relevant
actions in connections with the Project.
For details in connection with the legal proceedings in the "Casa Radio"
project please refer to Note 5 in the annual consolidated financial
statements.
Commenting on the results, executive director Ron Hadassi said:
"Our active focus has continued to centre on asset disposals, accordingly we
have managed to execute the sale of our project in Chennai, India following
which the company received an amount of approximately EUR 4.25 million.
Regarding our Plot in Bangalore, India, as stated above, the Company is
continuing to take all necessary steps to protect its interest in its plot
while continuing Its efforts to realize a transaction; in connection with Casa
Radio Project, the Company issued a Notice of Dispute and Acceptance of Offer
and Consent to Arbitrate to Romania with respect to the Project and we hope
this will help us to unblock the current status of the Project.
For further details, please contact:
Plaza
Ron Hadassi, Executive
Director
972-526-076-236
Notes to Editors
Plaza Centers N.V. (www.plazacenters.com (http://www.plazacenters.com) ) is
listed on the Main Board of the London Stock Exchange, on the Warsaw Stock
Exchange (LSE: "PLAZ", WSE: "PLZ/PLAZACNTR") and, on the Tel Aviv Stock
Exchange.
Forward-looking statements
This press release may contain forward-looking statements with respect to
Plaza Centers N.V. future (financial) performance and position. Such
statements are based on current expectations, estimates and projections of
Plaza Centers N.V. and information currently available to the Company. Plaza
Centers N.V. cautions readers that such statements involve certain risks and
uncertainties that are difficult to predict and therefore it should be
understood that many factors can cause actual performance and position to
differ materially from these statements.
MANAGEMENT STATEMENT
During 2021 the management's focus has been on executing of cash proceeds on
signed SPA for the sale of Chennai project in India. In the Bangalore project
the Company together with Elbit continued to protect its interest in the
project, including by filling an appeal before the National Company Law
Appellate Tribunal, Chennai, India against the decision of the National
Company Law Tribunal, Bengaluru, India, which dismissed the insolvency
proceedings initiated against the Purchaser for the recovery of the amounts
due (refer also to Note 6(1)). The Company also continued cost reductions and
partial repayments to its bondholders.
In connection with Casa Radio Project, as stated above, the Company issued a
Notice of Dispute and Acceptance of Offer and Consent to Arbitrate to Romania
with respect to the Project and we hope this will help us to unblock the
current status of the Project. In addition, on December 20, 2021 the Company
and AFI Europe N.V. ("AFI Europe") agreed to extend the Long Stop Date, which
is the date on which the parties will execute a share purchase agreement,
subject to the satisfaction of conditions precedent (the "SPA"), until
December 31, 2022. The addendum was approved by the bondholders meeting held
on November 25, 2021.
Due to the board and management estimation that the Company is unable to serve
its entire debt according to the current redemption date (July 1, 2022) in its
current liquidity position, the Company intends to request from the
bondholders of both series (Series A and Series B) postponement of the
repayment of the remaining balance of the bonds.
Results
During the year, Plaza recorded a €27.1 million loss attributable to the
shareholders of the Company. This is a decrease compared to the losses
reported in 2020 (loss of €33.5 million). The losses were mainly from the
Net Finance Costs which were increased to €24.2 million in 2021, from €8.1
million in 2020 mainly due to foreign currency losses on bonds (including
inflation) and interests' expenses accrued on the debentures (partly due to
penalty interest calculated on the deferred principal); and from
administrative expenses and share in results of equity-accounted investees.
Total result of operations excluding finance income and finance cost was a
loss of €2.8 million in 2021 compared to the reported loss of €25.4
million in 2020.
The consolidated cash position (cash on standalone basis as well as fully
owned subsidiaries) as of 31 December 2021 was €4.7 million (31 December
2020: €1.7 million).
Liquidity & Financing
Plaza ended the period with a consolidated cash position of circa €4.7
million, compared to €1.7 million at the end of 2020.
As of December 31, 2021, the Group's outstanding obligation to bondholders
(including accrued interests) are app. €121.7 million.
As disclosed by the Company in Note 8 in the annual consolidated financial
statements, the Company was not able to meet its final redemption obligation
to its (Series A and Series B) bondholders, due on July 1, 2021, the
bondholders approved: (i) to postpone the final redemption date to January 1,
2022; (ii) that on July 1, 2021 the Company will pay to its bondholders a
partial interest payment in the total amount of EUR 125,000.
On November 25, 2021, the bondholders of Series A and Series B approved: (i)
to postpone the final redemption date to July 1, 2022; (ii) that on January 1,
2022 the Company will pay to its bondholders a partial interest payment in the
total amount of EUR 200,000 and to deferral all other unpaid interest. The
amount reflected 0.92% of accrued interest as of that date.
Due to the board and management estimation that the Company is unable to serve
its entire debt according to the current bonds repayment schedule in its
current liquidity position, the Company intends to request the bondholders of
both series for postponement of the repayment of the remaining balance of the
bonds. However, there is an uncertainty if the bondholders will approve the
request. In the case that the bondholders would declare their remaining claims
to become immediately due and payable, the Company would not be in a position
to settle those claims and would need to enter to an additional debt
restructuring or might cease to be a going concern.
Strategy and Outlook
The Company's priorities are focused on efforts to unblock the current status
of the Casa Radio project, getting further proceeds for Bangalore. The Company
also intends to seek for bondholders' approval for postponement of the
repayment of the bonds.
OPERATIONAL REVIEW
Over the course of the year to date, Plaza has continued to make progress
against its operational and strategic objectives. The Company's current assets
are summarized in the table below (as of balance sheet date):
Asset/ Project Location Nature of asset Plaza's effective ownership Status
%
Casa Radio Bucharest, Romania Mixed-use retail, hotel and leisure plus office scheme 75 for further information refer to note 5 (2) in the annual consolidated
financial statements )
Bangalore Bangalore, India Residential Scheme 47.5 for further information refer to note 6(b)(1) in the annual
consolidated financial statements
FINANCIAL REVIEW
Results
Finance income of €2.1 million in 2020 was mainly due to foreign exchange
movements on the debentures, which did not occur in the end of December 31,
2021.
Finance costs increased from €10.2 million in 2020 to €24.2 million in
2021. The main components of finance costs were foreign currency losses on
bonds (including inflation) and interests' expenses accrued on the debentures
which includes also penalty interest calculated on the deferred principal.
As a result, the loss for the period amounted to circa €27.1 million in
2021, representing a basic and diluted loss per share for the period of
€3.95 (2020: €4.89 loss).
Balance sheet and cash flow
The balance sheet as of 31 December 2021 showed total assets of €9.8 million
compared to total assets of €12.5 million at the end of 2020, mainly as a
result of the decrease in Equity accounted investees.
The consolidated cash position (cash on standalone basis as well as fully
owned subsidiaries) as of 31 December 2021 increased to €4.7 million (31
December 2020: €1.7 million).
Investments in equity accounted investee companies has decreased by €5.6
million to circa €5.1 million (31 December 2020: €10.7 million) mainly as
a result of cash distribution of €4.2 million (31 December 2020: €1.1
million).
As of 31 December 2021, Plaza has a balance sheet liability of app. €100
million from issuing bonds on the Tel Aviv Stock Exchange. Additionally, Plaza
recorded provision for interests on bonds as of December 31, 2021, in amount
of €21.7 million (31 December 2020: €10.7 million).
Disclosure in accordance with Regulation 10(B)14 of the Israeli Securities
Regulations (periodic and immediate reports), 5730-1970
1. General Background
According to the abovementioned regulation, upon existence of warning signs as
defined in the regulation, the Company is obliged to attach its report's
projected cash flow for a period of two years, commencing with the date of
approval of the report ("Projected Cash Flow").
The material uncertainty related to going concern was included in the
independent auditors' report and in Note 1(b) in the consolidated financial
statements as of December 31, 2021. In light of the material uncertainty that
the SPA between the Company and AFI Europe N.V. will eventually be executed
and/or that the transaction will be consummated as presented above or at all,
(refer to Note 5 in the consolidated financial statements as of December 31,
2021) as well as the default of purchaser of Bangalore project to meet
payments schedule according to the signed amendment agreement (refer to Note
6(b)(1) in the consolidated financial statements as of December 31, 2021), the
board and management estimates that the Company is unable to serve its entire
debt according to the due date the bond holders approved to postpone the final
redemption date. Accordingly, it is expected that the Company will not be able
to meet its entire contractual obligations in the following 12 months.
With such warning signs, the Company is providing projected cash flow for the
period of 24 months following for the coming two years.
2. Projected cash flow
The Company has implemented the restructuring plan that was approved by the
Dutch Court on July 9, 2014 (the "Restructuring Plan"). Under the
Restructuring Plan, principal payments under the bonds issued by the Company
and originally due in the years 2013 to 2015 were deferred for a period of
four and a half years, and principal payments originally due in 2016 and 2017
were deferred for a period of one year. During first three months 2017, the
Company paid to its bondholders a total amount of NIS 191.7 million (EUR 49.2
million) as an early redemption. Upon such payments, the Company complied with
the Early Prepayment Term (early redemption at the total sum of at least NIS
382 million) and thus obtained a deferral of one year for the remaining
contractual obligations of the bonds.
In January 2018, a settlement agreement was signed by and among the Company
and the two Israeli Series of Bonds.
On November 22, 2018 the Company announced based on its current forecasts,
that the Company expected to pay the accrued interest on Series A and Series B
Bonds on December 31, 2018, in accordance with the repayment schedule
determined in the Company's Restructuring Plan and Settlement Agreement with
Series A and Series B Bondholders from 11 January 2018 (the "Settlement
Agreement"). The Company noted that it will not meet its principal repayment
due on December 31, 2018 as provided for in the Settlement Agreement. On
February 18, 2019 the Company paid principal of circa EUR 250,000 and Penalty
interest on arrears of EUR 150,000 following the bondholder's approval to
defer principal repayment to July 1, 2019.
In addition, during June 2019 the bondholders approved the deferral of the
full payment of principal due on July 1, 2019 and of 58% ("deferred interest
amount") of the sum of interest (consisting of the total interest accrued for
the outstanding balance of the principal, including interest for part of the
principal payment which was deferred as of February 18, 2019, plus interest
arrears for part of the principal which was fixed on February 18, 2019 and was
not paid by the Company and all in accordance with the provisions of the trust
deed; "the full amount of interest"), the effective date of which is June 19,
2019, and the payment date was fixed as of July 1, 2019. The company paid on
the said date a total amount of circa EUR 1.17 million, which is only 42% of
the full amount of interest.
On July 11, 2019, the Company announced that its Romanian subsidiary had
signed a binding agreement to sell a land in Romania, and that the Company
would use part of the proceeds now received by it EUR 0.75 million
(hereinafter: "the amount payable"), in order to make a partial interest
payment to the bondholders (Series A) and (Series B) issued by the Company.
The payment required changes in the repayment schedule and amendments of the
trust deeds which was approved unanimously by the Bondholders. The amount
payable was paid on August 14, 2019 and reflects 30% of accrued interest as of
that date.
On November 17, 2019, the bondholders of Series A and Series B approved a
deferral of all the scheduled Principal payment and app. 87% of deferral of
the scheduled Interest payment, both, as of December 31, 2019 to July 1, 2020.
On May 4, 2020, the bondholders of Series A and Series B approved: (i) to
postpone the final redemption date to January 1, 2021 of all the scheduled
Principal; (ii) that on July 1, 2020 the Company will pay to its bondholders a
partial interest payment in the total amount of EUR 250,000 and to deferral
all other unpaid scheduled Interest payment.
Following receiving the Settlement Amount related to the final price
adjustment of the sale of Belgrade Plaza and in light of the potential
negative impact of the Covid-19 on the possibility to receive future proceeds
from the Company's plots in India, the Company decided to increase the amount
to be paid to the bondholders on July 1, 2020, from EUR 250,000 to EUR
500,000. The amount reflected 6.74% of accrued interest as of that date.
On November 12, 2020, the bondholders of Series A and Series B approved: (i)
to postpone the final redemption date to July 1, 2021 of all the scheduled
Principal; that on January 1, 2021 the Company will pay to its bondholders a
partial interest payment in the total amount of EUR 200,000 and to deferral
all other unpaid scheduled Interest payment. The amount reflected 1.84% of
accrued interest as of that date.
On April 12, 2021, the bondholders of Series A and Series B approved: (i) to
postpone the final redemption date to January 1, 2022; (ii) that on July 1,
2021 the Company will pay to its bondholders a partial interest payment in the
total amount of EUR 125,000 and to deferral all other unpaid interest. The
amount reflected 0.84% of accrued interest as of that date.
On November 25, 2021, the bondholders of Series A and Series B approved: (i)
to postpone the final redemption date to July 1, 2022; (ii) that on January 1,
2022 the Company will pay to its bondholders a partial interest payment in the
total amount of EUR 200,000 and to deferral all other unpaid interest. The
amount reflected 0.92% of accrued interest as of that date.
The materialization, occurrence consummation and execution of the events and
transactions and of the assumptions on which the projected cash flow is based,
including with respect to the proceeds and timing thereof, although probable,
are not certain and are subject to factors beyond the Company's control as
well as to the consents and approvals of third parties and certain risks
factors. Therefore, delays in the realization of the Company's assets and
investments or realization at a lower price than expected by the Company, as
well as any other deviation from the Company's Assumptions (such as additional
expenses due to suspension of trading, delay in submitting the statutory
reports etc.), could have an adverse effect on the Company's cash flow and the
Company's ability to service its indebtedness in a timely manner.
In € millions 2022 2023
Cash - Opening Balance ((2)) 4.69 2.59
Proceeds from sales transactions, price adjustments ((5)) 0 0
Net cashflow from equity companies in India ((6)) 0 0
Total Sources 4.69 2.54
Debentures - principal - -
Debentures - interest - -
Other operational costs ((3)) 0.9
0.9
G&A expenses (including property maintenance) ((4)) 1.2 1.2
Total Uses 2.1 2.1
Cash - Closing Balance ((2)) 2.59 0.49
(1) The above cash flow is subject to the approval of the bondholders of
both series to postponement of the repayment of the remaining balance of the
bonds which are due on July 1, 2022.
(2) Total cash on standalone basis as well as fully owned subsidiaries.
(3) Includes provision for legal costs/Arbitrations.
(4) Total general and administrative expenses includes both cost of the
Company and of all the subsidiaries.
(5) The Company did not include any proceeds from pre-sale agreement
signed with AFI, due to the uncertainty as to the fulfilment of the conditions
set out in the preliminary agreement as mentioned in Note 5(2)(e) of the
consolidated financial statements as of 31.12.2021, thus there can be no
certainty an SPA will eventually be executed and/or that the Transaction will
be completed.
(6) The Company did not include any proceeds from its holding in an
indirect subsidiary (50%) which holds a property in Bangalore, India due to
the default of purchaser of Bangalore project to meet payments schedule
according to the signed amendment agreement (as detailed in Note 6(1) of the
Consolidated Financial Statements as of December 31, 2021) as there can be no
certainty that the agreement will be completed, hence no resources are
expected to be available in foreseeable future at this time.
Ron Hadassi
Executive Director
31 March 2022
PLAZA CENTERS N.V.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
IN 000 EUR
CONTENTS
Page
Independent Auditors' report 2 - 6
Consolidated statement of financial position 7
Consolidated statement of profit or loss 8
Consolidated statement of comprehensive income 9
Consolidated statement of changes in equity 10
Consolidated statement of cash flows 11
Notes to the consolidated financial statements 12 - 60
- - - - - - - - - - - - - - - - - - - - - -
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road Fax: +972-3-5622555
Tel-Aviv 6492102, Israel ey.com
Report on the Audit of the Consolidated Financial Statements
Independent Auditors' Report
To the shareholders of Plaza Centers N.V.
Opinion
We have audited the consolidated financial statements of Plaza Centers N.V.
and its subsidiaries ("the Company"), which comprise the consolidated
statement of financial position as at December 31, 2021 and the consolidated
statements of profit or loss, comprehensive income, changes in equity and cash
flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Company as at December 31, 2021, and its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the European Union.
Basis for Opinion
As mentioned in note 2(a) in the consolidated financial statements, these
consolidated financial statements, with our report included, are not intended
for Netherlands statutory filing purposes.
We conducted our audit in accordance with International Standards on Auditing.
Our responsibilities under those standards are further described in the
Auditors' Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company in
accordance with the International Ethics Standards Board for Accountants'
International Code of Ethics for Professional Accountants (including
International Independence Standards) ("IESBA Code"), and we have fulfilled
our other ethical responsibilities in accordance with the IESBA Code. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw your attention to Note 1(b) in the consolidated financial statements
which discloses the Company's financial position and board and management's
future plans to meet its financial liabilities.
The board and management estimate that the Company is unable to serve its
entire debt to bondholders according to the current repayment schedule in
total amount of EURO 121.7 million as of December 31, 2021 which is due on
July 1, 2022). The Company is dependent on the bondholders' approval for any
postponement of payments. In addition, the Company is not in compliance with
the main Covenants as defined in the restructuring plan (for more details
refer also to Note 8), hence in default which could trigger early repayment by
the bondholders.
The abovementioned conditions indicates the existence of a material
uncertainty that casts significant doubt about the Company's ability to
continue as a going concern. Our opinion is not modified in respect of this
matter.
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road Fax: +972-3-5622555
Tel-Aviv 6492102, Israel ey.com
Emphasis of Matter
We draw your attention to Note 5(3)(c) which discloses the risk that the
public authorities may seek to terminate the Public Private Partnership
Agreement ("PPP Agreement") and/or relevant permits and/or could seek to
impose delay penalties on the basis of perceived breaches of the Company's
commitments under the PPP Agreement.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the consolidated financial statements for
the year ended December 31, 2021. In addition to the matter described in the
Material Uncertainty Related to Going Concern section, we have determined the
matters described below to be the key audit matters to be communicated in our
report. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor's
Responsibilities for the Audit of the Consolidated Financial Statements
section of our report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit
opinion on the accompanying consolidated financial statements.
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road Fax: +972-3-5622555
Tel-Aviv 6492102, Israel ey.com
The Key Audit Matter we identified is:
Key Audit Matter Our Response
Valuation of trading property
We have identified the measurement of trading property (included in the joint Our procedures in relation to the management's fair value assessment of
venture, EPI, as disclosed in Note 6(b)) at net realizable value in the amount trading properties included:
of EUR 20.4 million, as a significant audit matter due to the size and the
complexity and judgement required in the valuation of trading property. The • Evaluation of the objectivity, independence, expertise of the
valuation of this property as of December 31, 2021, involved significant external valuator;
judgements and assumptions in reliance on an external valuator. In the context
of a property which is not yet developed, these estimates contain further • Reviewed the report prepared by the external valuator and held
risks in regards to success in obtaining permits, market condition and discussions with the valuator in order to gain an understanding of the
political environment, required to forecast all circumstances affecting the methodology and the key assumptions used in performing the valuation.
valuation.
• Using our own real estate specialists to assess the methodology
The Company's accounting policies regarding trading properties are disclosed used, the assumptions that were made and the appropriateness of the key
in Note 2(c) and 2(m) to the consolidated financial statements. The estimates used in the calculation of the fair value of the trading property
significant estimates involved in the valuation are disclosed in Note 6(b). based on their knowledge of the local economic, legal, political environment,
and other specific circumstances, used to analyse the appropriateness of the
valuation.
• Checked the appropriateness and consistency with other information
available to us of the inputs used by the valuator.We also assessed the
appropriateness of the disclosures relating to the assumptions, as we consider
them important to users of the financial statements.
Other information included in The Company's 2021 Annual Report
Other information consists of the information included in the Annual Report,
other than the financial statements and our auditor's report thereon.
Management is responsible for the other information.
Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon. In connection
with our audit of the financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road Fax: +972-3-5622555
Tel-Aviv 6492102, Israel ey.com
Responsibilities of Management and the Board of Directors for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with International Financial
Reporting Standards, as adopted by the European Union, and for such internal
control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic alternative
but to do so.
The board of directors is responsible for overseeing the Company's financial
reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial
Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors' report
that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with
International Standards on Auditing will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with International Standards on Auditing, we
exercise professional judgment and maintain professional scepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
• Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw
attention in our auditors' report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditors' report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
Kost Forer Gabbay & Kasierer Tel: +972-3-6232525
144 Menachem Begin Road Fax: +972-3-5622555
Tel-Aviv 6492102, Israel ey.com
• Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within the group
to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the
planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify
during our audit.
We also provide the board of directors with a statement that we have complied
with relevant ethical requirements regarding independence and to communicate
with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with the board of directors, we determine those
matters that were of most significance in the audit of the consolidated
financial statements for the year ended December 31, 2021 and are therefore
the key audit matters. We describe these matters in our auditors' report
unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such
communication.
The partner in charge of the audit resulting in this independent report is Mr.
Itay Bar-Haim.
March 31, 2022 KOST FORER GABBAY & KASIERER
Tel Aviv, Israel A member of Ernst & Young Global
CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN '000 EUR
December 31,
Note 2021 2020
ASSETS
Cash and cash equivalents 3 4,688 1,709
Prepayments and other receivables 39 90
Total current assets 4,727 1,799
Equity - accounted investees 6 5,113 10,737
Total non-current assets 5,113 10,737
Total assets 9,840 12,536
LIABILITIES AND SHAREHOLDERS' EQUITY
Bonds at amortized cost 8 99,999 87,137
Accrued interests on bonds 8 21,693 10,684
Trade payables 110 58
Other liabilities 7 425 409
Total current liabilities 122,227 98,288
Share capital 10 6,856 6,856
Translation reserve 10 (30,838) (31,292)
Other reserves (19,983) (19,983)
Share based payment reserve 10 35,376 35,376
Share premium 10 282,596 282,596
Accumulated deficit (386,394) (359,305)
Total equity (112,387) (85,752)
Total equity and liabilities 9,840 12,536
The notes are an integral part of the consolidated financial statements.
March 31, 2022
Ron Hadassi David Dekel
Date of approval of the Executive Officer Chairman of the Board of Directors
financial statements
CONSOLIDATED STATEMENT OF PROFIT OR LOSS IN '000 EUR
Year ended
December 31,
Note 2021 2020
Revenues and gains
Revenue from disposal of trading properties 5 - 1,452
Total revenues - 1,452
Gains and other
Other income 4 386 33
Total gains 386 33
Total revenues and gains 386 1,485
Expenses and losses
Cost of trading properties disposed 5 - (580)
Cost of operations (77) (85)
Write-down of trading properties 5 - (24,000)
Share in results of equity-accounted investees 6 (1,903) (1,084)
Administrative expenses 13 (1,243) (1,100)
Other expenses (14) (46)
(3,237) (26,895)
Finance income 14 - 2,096
Finance costs 14 (24,238) (10,176)
(27,475) (34,975)
Loss before income tax (27,089) (33,490)
Loss for the year (27,089) (33,490)
Loss attributable to:
Equity holders of the Company (27,089) (33,490)
Earnings per share
Basic and diluted loss per share (EUR) 11 (3,95) (4.89)
The notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME IN '000 EUR
Year ended
December 31,
2021 2020
Loss for the year (27,089) (33,490)
Other comprehensive income
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences - foreign operations (Equity 454 (1,615)
accounted investees)
Other comprehensive loss (profit) for the year, net of income tax 454 (1,615)
Total comprehensive loss for the year (26,635) (35,105)
The notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY IN '000 EUR
Share Share Premium Share based payment reserves Translation Reserve Capital reserve from acquisition of non-controlling interests Accumulated deficit Total
capital
Balance on January 1, 2020 6,856 282,596 35,376 (29,677) (19,983) (325,815) (50,647)
Comprehensive income for the year
Net loss for the year - - - - - (33,490) (33,490)
Foreign currency translation differences - - - (1,615) - - (1,615)
Total comprehensive loss for the year - - - (1,615) - (33,490) (35,105)
Balance on December 31, 2020 6,856 282,596 35,376 (31,292) (19,983) (359,305) (85,752)
Comprehensive income for the year
Net loss for the year - - - - - (27,089) (27,089)
Foreign currency translation differences - - - 454 - - 454
Total comprehensive loss for the year - - - 454 - (27,089) (26,635)
Balance on December 31, 2021 6,856 282,596 35,376 (30,838) (19,983) (386,394) (112,387)
The notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS IN '000 EUR
Year ended
December 31,
2021 2020
Cash flows from operating activities
Loss for the year (27,089) (33,490)
Adjustments necessary to reflect cash flows used in operating activities
Net finance costs 24,238 8,080
Share of loss of equity-accounted investees, net of tax 1,903 1,084
Trading properties, net - 24,550
(948) 224
Changes in:
Trade receivables (10) 6
Other receivables 61 85
Trade payables 52 (36)
Other liabilities, related parties' liabilities and provisions 16 (68)
119 (13)
Interest paid (325) (699)
Net cash used in operating activities (1,154) (488)
Cash from investing activities
Distribution received from Equity Accounted Investees 4,175 983
Net cash provided by investing activities 4,175 983
Net cash used in financing activities - -
Increase (Decrease) in cash and cash equivalents during the year 3,021 495
Effect of movement in exchange rate fluctuations on cash held (42) 88
Cash and cash equivalents as of January 1(st) 1,709 1,126
Cash and cash equivalents as of December 31(st) 4,688 1,709
The notes are an integral part of the consolidated financial statements.
NOTE 1: - CORPORATE INFORMATION
a. Plaza Centers N.V. ("the Company" and together with its
subsidiaries, "the Group") was incorporated and is registered in the
Netherlands. The Company's registered office is at Pietersbergweg 283, 1105
BM, Amsterdam, the Netherlands. In past the Company conducted its activities
in the field of establishing, operating and selling of shopping and
entertainment centres, as well as other mixed-use projects (retail, office,
residential) in Central and Eastern Europe (starting 1996) and India (from
2006). Following debt restructuring plan approved in 2014 the Group's main
focus is to reduce corporate debt by early repayments following sale of assets
and to continue with efficiency measures and cost reduction where possible.
The consolidated financial statements for each of the periods presented
comprise the Company and its subsidiaries (together referred to as the
"Group") and the Group's interest in jointly controlled entities.
The Company is listed on the premium segment of the Official List of the UK
Listing Authority and to trading on the main market of the London Stock
Exchange ("LSE"), the Warsaw Stock Exchange ("WSE") and on the Tel Aviv Stock
Exchange ("TASE").
The Company's immediate parent company was Elbit Ultrasound (Luxemburg) B.V. /
s.a.r.l ("EUL"), which held 44.9% of the Company's shares, till December 19,
2018 when EUL informed that it has signed a trust agreement according to which
EUL will deposit its shares of the Company with a trustee and no longer
considers itself to be the controlling shareholder of the Company. At the date
of approval of these financial statements EUL held 20.55% of the Company's
shares (please refer to note 17 regarding the sale of app. 24.35% of the
Company's shares held by EUL).
b. Going concern and liquidity position of the Company:
As of December 31, 2021, the Company's outstanding obligations to bondholders
(including accrued interests) are app. EUR 121.7 million with due date that
was postponed to July 1, 2022 (the "Current Due date") (please refer to note
8).
Due to the above the Company's primary need is for liquidity. The Company's
current and future resources include the following:
1. Cash and cash equivalents (including the cash of fully owned
subsidiaries) of approximately EUR 4.688 million.
2. In addition, as detailed in note 5(2)(e), the Company and AFI Europe
N.V. entered into an addendum to the pre-sale agreement entered into between
the Parties in connection with the sale of its subsidiary (the "SPV") which
holds 75%
in the Casa Radio Project (the "Project") (the "Addendum" and the "Agreement",
respectively) pursuant to which the Parties agreed to extend the Long Stop
Date, which is the date on which the parties will execute a share purchase
agreement, subject to the satisfaction of conditions precedent (the "SPA"(,
until December 31, 2022. The addendum was approved by the bondholders meeting
held on November 25, 2021. There can be no certainty that the SPA will
eventually be executed and/or that the transaction will be consummated as
presented above or at all.
NOTE 1: - CORPORATE INFORMATION (Cont.)
3. Following the default of purchaser of Bangalore project to meet
payments schedule according to the signed amendment agreement (refer to Note
6(b)(1)) there can be no certainty that the agreement will be completed, hence
at this time no resources are expected to be available in the foreseeable
future.
As of December 31, 2021, the Company is not in compliance with the main
Covenants as defined in the restructuring plan (for more details refer also to
Note 8), hence constituting an event of default which could also trigger early
repayment demand by the bondholders.
Due to the abovementioned and due to the board and management estimation that
the Company is unable to serve its entire debt on the Current due date, the
Company intends to request the bondholders of both series an additional
postponement of the repayment of the remaining balance of the bonds. However,
there is an uncertainty if the bondholders will approve the request. In the
case that the bondholders would declare their remaining claims to become
immediately due and payable, the Company would not be in a position to settle
those claims and would need to enter to an additional debt restructuring or
might cease to be a going concern basis.
Due to the abovementioned conditions, a material uncertainty exists that casts
significant doubt about the Company's ability to continue as a going concern.
c. Impact of the Covid-19
The risks associated with the Covid-19 global health and economic crisis may
affect the Company indirectly, through possible regulatory changes and the
impact on the macroeconomic environment, which may affect the conducted
activities which are concentrated at selling of the assets. The Company
monitors the consequences of the event and the actions taken in countries in
which it operates and assesses the risks and exposures arising from these
consequences. At this stage, the impact of the effect of the COVID 19 was a
delay in the legal procedures against the purchaser of the SPV which owns the
plot in Bangalore India (refer to Note 6(b)(1)). Other than the above
mentioned, at this stage, the Company is not able to estimate the full future
impact of COVID 19.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of these financial statements:
The following accounting policies have been applied consistently in the
financial statements for all periods presented, unless otherwise stated.
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), as adopted by the
European Union ("EU").
The consolidated financial statements have been prepared on the historical
cost basis.
These consolidated financial statements are not intended for statutory filing
purposes. The Company is required to file consolidated financial statements
prepared in accordance with
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
the Netherlands Civil Code.
At the date of approval of these financial statements the Company had not yet
submitted consolidated financial statements for the year ended December 31,
2019, December 31, 2020 and December 31, 2021 in accordance with the
Netherlands Civil Code (for more details refer to Note 16(b)(7)).
The consolidated financial statements were authorized to be issued by the
Board of Directors on March 31, 2022.
b. Functional and presentation currency:
These consolidated financial statements are presented in EURO ("EUR"), which
is the Company's functional currency. All financial information presented in
EUR has been rounded to the nearest thousand, unless otherwise indicated.
c. Investment property vs. trading property classification:
The Group has designated all its properties for sale. The Company is actively
seeking buyers and does not hold the properties with the intention to gain
from capital appreciation. Therefore, management also believes that these
are appropriately classified as trading properties.
d. Functional and presentation currency
The EUR is the functional currency for Group companies (with the exception of
Indian companies - in which the functional currency is the Indian Rupee - INR)
since it is the currency of the economic environment in which the Group
operates. This is because the EUR (and in India the INR) is the main currency
in which management determines its pricing with potential buyers and
suppliers, determine its financing activities and budgets and assesses its
currency exposures.
e. Operating cycle determination:
The Group is unable to clearly identify its actual operating cycle with
respect to trading properties. As such, the Group's operating cycle relating
to trading properties and corresponding liabilities is 12 months. Trading
properties and liabilities associated therewith are presented as non-current
assets and non-current liabilities, respectively.
f. Use of estimates and judgments:
The preparation of the consolidated financial statements in conformity with
IFRS as adopted by the EU requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Information about assumptions and estimation uncertainties that have a
significant risk of resulting in a material adjustment within the next
financial year are included in the following notes:
- Notes 5, 6 - key assumptions used in determining the net
realisable value of trading properties;
- Notes 5,16 - recognition and measurement of provisions and
contingencies: key assumptions about the likelihood and magnitude of an
outflow of resources.
g. Basis of consolidation:
1. Subsidiaries:
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity
and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date
on which control ceases. Where necessary, adjustments are made to the
financial statements of the subsidiaries in order to bring the accounting
policies used in line with the ones used by the Group in the consolidated
financial statements.
2. Interests in equity-accounted investees:
The Group's interests in equity-accounted investees comprise interests in
associates and joint ventures.
Associates are those entities in which the Group has significant influence,
but not control or joint control, over the financial and operating policies. A
joint venture is an arrangement in which the Group has joint control, whereby
the Group has rights to the net assets of the arrangement, rather than rights
to its assets and obligations for its liabilities.
Interests in associates and the joint venture are accounted for using the
equity method. They are recognised initially at cost, which includes
transaction costs. Subsequent to initial recognition, the consolidated
financial statements include the Group's share of the profit or loss and other
comprehensive income of equity-accounted investees, until the date on which
significant influence or joint control ceases.
When the equity attributable to the owners of an associate changes as a result
of the associate selling or buying shares of its subsidiaries (that are
consolidated in its financial statements) to third parties while retaining
control in those subsidiaries, the balance of the investment in the associate
that is presented on the Company's books
on the equity basis changes. The Company has chosen the accounting policy of
recognizing the change in the balance of the investment in these cases
directly in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
3. Loss of control:
When the Group loses control over a subsidiary, it derecognises the assets and
liabilities of the subsidiary, and any related NCI and other components of
equity.
Any resulting gain or loss is recognised in profit or loss. Any interest
retained in the former subsidiary is measured at fair value when control is
lost.
4. Transactions eliminated on consolidation:
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated. Unrealised gains
arising from transactions with equity-accounted investees are eliminated
against the investment to the extent of the Group's interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
h. Foreign currency:
1. Foreign currency transactions:
Transactions in foreign currencies are translated to the respective functional
currencies of Group companies at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign
currencies are translated to the functional currency at the exchange rate at
the reporting date. Non-monetary assets and liabilities that are measured at
fair value in a foreign currency are translated to the functional currency at
the exchange rate when the fair value was determined.
Foreign currency differences are generally recognised in profit or loss.
Non-monetary items that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in profit or loss.
2. Foreign operations:
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on acquisition, are translated into euro at the
exchange rates at the reporting date. The income and expenses of foreign
operations are translated into euro at the exchange rates at the dates of the
transactions. Foreign currency differences are recognised in other
comprehensive income, and accumulated in the translation reserve, except to
the extent that the translation difference is allocated to non-controlling
interest.
When a foreign operation is disposed of in its entirety or partially such that
control, significant influence or joint control is lost, the cumulative amount
in the translation reserve related to that foreign operation is reclassified
to profit or loss as part of the gain or loss on disposal.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
If the Group disposes of part of its interest in a subsidiary but retains
control, then the relevant proportion of the cumulative amount is reattributed
to non-controlling interest.
When the Group disposes of only part of an associate or joint venture while
retaining significant influence or joint control, the relevant proportion of
the cumulative amount is reclassified to profit or loss.
If the settlement of a monetary item receivable from or payable to a foreign
operation
is neither planned nor likely to occur in the foreseeable future, then foreign
currency differences arising from such item form part of the net investment in
the foreign operation. Accordingly, such differences are recognised in other
comprehensive income and accumulated in the translation reserve.
3. Index-linked monetary items:
Monetary assets and liabilities linked to the changes in the Israeli Consumer
Price Index ("Israeli CPI") are adjusted at the relevant index at each
reporting date according to the terms of the agreement.
i. Cash equivalents:
Cash equivalents are considered as highly liquid investments, including
unrestricted short-term bank deposits with an original maturity of three
months or less from the date of investment or with a maturity of more than
three months, but which are redeemable on demand without penalty and which
form part of the Group's cash management.
j. Financial instruments:
1. Financial assets:
Financial assets are measured upon initial recognition at fair value plus
transaction costs that are directly attributable to the acquisition of the
financial assets, except for
financial assets measured at fair value through profit or loss in respect of
which transaction costs are recorded in profit or loss.
Debt instruments are measured at amortized cost when:
The Company's business model is to hold the financial assets in order to
collect their contractual cash flows, and the contractual terms of the
financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding. After
initial recognition, the instruments in this category are measured according
to their terms at amortized cost using the effective interest rate method,
less any provision for impairment.
2. Impairment of financial assets:
The Company evaluates at the end of each reporting period the loss allowance
for
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
financial debt instruments which are not measured at fair value through profit
or loss.
3. De-recognition of financial assets:
A financial asset is derecognized only when:
- The contractual rights to the cash flows from the financial
asset has expired; or
- The Company has transferred substantially all the risks and
rewards deriving from the contractual rights to receive cash flows from the
financial asset or has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset; or
- The Company has retained its contractual rights to receive
cash flows from the financial asset but has assumed a contractual obligation
to pay the cash flows in full without material delay to a third party.
4. Financial liabilities:
a) Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value less transaction
costs that are directly attributable to the issue of the financial liability.
After initial recognition, the Company measures all financial liabilities at
amortized cost using the effective interest rate method.
5. De-recognition of financial liabilities:
A financial liability is derecognized only when it is extinguished, that is
when the obligation specified in the contract is discharged or cancelled or
expires. A financial liability is extinguished when the debtor discharges the
liability by paying in cash, other financial assets, goods or services; or is
legally released from the liability.
6. Offsetting financial instruments:
Financial assets and financial liabilities are offset and the net amount is
presented in the statement of financial position if there is a legally
enforceable right to set off the recognized amounts and there is an intention
either to settle on a net basis or to realize the asset and settle the
liability simultaneously.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k. Fair value measurement
A number of the Group's accounting policies and disclosures require the
measurement of fair value, for both financial and non-financial assets and
liabilities.
When measuring the fair value of an asset or a liability, the Group uses
market observable
data as far as possible. The Company's finance department reviews significant
unobservable inputs and valuation adjustments. If third party information,
such as broker quotes, is used to measure fair values, then the finance
department assesses the evidence obtained from the third parties to support
the conclusion that such valuations meet the requirements of IFRS, including
the level in the fair value hierarchy in which such valuations should be
classified. Fair values are categorized into different levels in a fair
value hierarchy based on the inputs used in the valuation techniques as
follows:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs)
Further information about the assumptions made in measuring fair values is
included in the following notes:
Note 15 - Financial instruments
l. Share capital:
Ordinary shares are classified as equity. Incremental costs directly
attributable to issue of ordinary shares and share options are recognized as a
deduction from equity. Income tax relating to transaction costs of an equity
transaction is accounted for in accordance with IAS 12. Costs attributable to
listing existing shares are expensed as incurred.
m. Trading properties:
Trading properties are being designated for sale in the ordinary course of
business and as such are classified as trading properties (inventory) and
measured at the lower of cost and
net realizable value.
Net realizable value is the estimated selling price in the ordinary course of
business less the estimated costs to complete construction and selling
expenses. If net realizable value is less than the cost, the trading property
is written down to net realizable value.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In each subsequent period, a new assessment is made of net realizable value.
When the circumstances that previously caused trading properties to be written
down below cost no longer exist or when there is clear evidence of an increase
in net realizable value because of changed economic circumstances, the amount
of the write-down is reversed so that the new carrying amount is the lower of
the cost and the revised net realizable value.
The amount of any write-down of trading properties to net realisable value and
all losses of trading properties are recognised as a write-down of trading
properties expense in the period the write-down or loss occurs. The amount of
any reversal of such write-down arising from an increase in net realizable
value is recognized as a reduction in the expense in the period in which the
reversal occurs.
Costs comprise all costs of purchase, direct materials, direct labor costs,
subcontracting costs and other direct overhead costs incurred in bringing the
properties to their present condition.
Borrowing costs directly attributable to the acquisition or construction of a
qualifying asset are capitalized as part of the costs of the asset. A
qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale. Other borrowing costs are
recognized as an expense in the period in which they incurred.
n. Impairment of non-financial assets:
The Company evaluates the need to record an impairment of non-financial assets
whenever events or changes in circumstances indicate that the carrying amount
is not recoverable. If the carrying amount of non-financial assets exceeds
their recoverable amount, the assets are reduced to their recoverable amount.
The recoverable amount is the higher of fair value less costs of sale and
value in use. In measuring value in use, the expected future cash flows are
discounted using a pre-tax discount rate that reflects the risks specific to
the asset. The recoverable amount of an asset that does not generate
independent cash flows is determined for the cash-generating unit to which the
asset belongs. Impairment losses are recognized in profit or loss.
An impairment loss of an asset is reversed only if there have been changes in
the estimates used to determine the asset's recoverable amount since the last
impairment loss was recognized. Reversal of an impairment loss, as above,
shall not be increased above the lower of the carrying amount that would have
been determined had no impairment loss been recognized for the asset in prior
years and its recoverable amount. The reversal of impairment loss of an asset
presented at cost is recognized in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following criteria are applied in assessing impairment of these specific
assets:
Investment in associate or joint venture:
After application of the equity method, the Company determines whether it is
necessary to recognize any additional impairment loss with respect to the
investment in associates or joint ventures. The Company determines at each
reporting date whether there is objective evidence that the carrying amount of
the investment in the associate or the joint venture is impaired. The test of
impairment is carried out with reference to the entire investment, including
the goodwill attributed to the associate or the joint venture.
o. Provisions:
Provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. The unwinding of the discount
is recognized as finance cost.
Warranties
A provision for warranties is recognized when the underlying products or
services are sold, based on historical warranty data and a weighting of
possible outcomes against their associated probabilities.
Legal claims:
A provision for claims is recognized when the Group has a present legal or
constructive obligation as a result of a past event, it is more likely than
not that an outflow of resources embodying economic benefits will be required
by the Group to settle the obligation and a reliable estimate can be made of
the amount of the obligation.
p. Revenue recognition:
Revenue from contracts with customers is recognized when the control over the
goods or services is transferred to the customer. Revenues from trading
properties are taken into account at the moment the trading property is sold.
The company considers the moment of sale being the latest of a) receiving the
payment for the trading property; or b) the transfer of the deed at the public
notary. The transaction price is the amount of the consideration that is
expected to be received based on the contract terms, excluding amounts
collected on behalf of third parties (such as taxes).
In determining the amount of revenue from contracts with customers, the
Company evaluates whether it is a principal or an agent in the arrangement.
The Company is a principal when the Company controls the promised goods or
services before transferring them to the customer.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In these circumstances, the Company recognizes revenue for the gross amount of
the consideration. When the Company is an agent, it recognizes revenue for the
net amount of the consideration, after deducting the amount due to the
principal.
Variable consideration:
The Company determines the transaction price separately for each contract with
a customer. When exercising this judgment, the Company evaluates the effect of
each variable amount in the contract, taking into consideration discounts,
penalties, variations, claims, and non-cash consideration. In determining the
effect of the variable consideration, the Company normally uses the "most
likely amount" method described in the Standard. Pursuant to this method, the
amount of the consideration is determined as the single most likely amount in
the range of possible consideration amounts in the contract.
Variable consideration is included in the transaction price only to the extent
that it is highly probable that a significant reversal in the amount of
revenue recognized will not occur when the uncertainty associated with the
variable consideration is subsequently resolved.
q. Finance income and cost:
Interest income and expense which are not capitalized are recognized in the
income statement as they accrue, using the effective interest method.
r. Income tax:
Income tax expense comprises current and deferred tax. It is recognized in
profit or loss.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable
income or loss for the year and any adjustment to tax payable or receivable in
respect of previous years. It
is measured using tax rates enacted or substantively enacted at the reporting
date.
Current tax also includes any tax arising from dividends. Current tax assets
and liabilities are offset only if certain criteria are met.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Deferred tax
Deferred tax is recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax assets are recognized for unused tax losses, unused tax credits
and deductible Temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be
realized. Such reduction is reversed when the probability of future taxable
profits improved.
Unrecognized deferred tax assets are reassessed at each reporting date and
recognized to the extent that it has become probable that future taxable
profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences.
When they reverse, using tax rates enacted or substantively enacted at the
reporting date.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
s. Employee benefits:
1. Bonuses:
The Group recognizes a liability and an expense for bonuses, which are based
on agreements with employees or according to management decisions based on
Group performance goals and on individual employee performance. The Group
recognizes a liability where contractually obliged or where past practice has
created a constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be estimated reliably.
2. Share-based payment transactions:
The fair value of options granted to employees to acquire shares of the
Company is recognized as an employee expense or capitalized if directly
associated with development of trading property, with a corresponding increase
in equity. The fair value is measured at grant date and spread over the
period during which the employees become unconditionally entitled to the
options. The amount recognized as an expense is adjusted to reflect the actual
number of share options that vest.
Where the terms of an equity-settled award are modified, the minimum expense
recognized is the expense as if the terms had not been modified. An additional
expense is recognized for any modification, which increases the total fair
value of the share-based payment arrangement or is otherwise beneficial to the
employees as
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
measured at the date of modification. The fair value of the amount payable to
employees in respect of share-based payments, which may be settled in cash, at
the option of the holder, is recognized as an expense, with a corresponding
increase in liability, over the period in which the employees become
unconditionally entitled to payment. The fair value is re-measured at each
reporting date and at settlement date.
Any changes in the fair value of the liability are recognized as an additional
cost in salaries and related expenses in the income statement.
t. Disclosure of new standards in the period prior to their
adoption:
1. Amendment to IAS 37, "Provisions, Contingent Liabilities and
Contingent Assets":
In May 2020, the IASB issued an amendment to IAS 37, regarding which costs a
company should include when assessing whether a contract is onerous ("the
Amendment"). According to the Amendment, costs of fulfilling a contract
include both the incremental costs (for example, raw materials and direct
labor) and an allocation of other costs that relate directly to fulfilling a
contract (for example, depreciation of an item of property, plant and
equipment used in fulfilling the contract).
The Amendment is effective for annual periods beginning on or after January 1,
2022 and applies to contracts for which all obligations in respect thereof
have not yet been fulfilled as of January 1, 2022. Early application is
permitted.
The Company estimates that the application of the Amendment is not expected to
have a material impact on the financial statements.
2. Annual improvements to IFRSs 2018-2020:
In May 2020, the IASB issued certain amendments in the context of the Annual
Improvements to IFRSs 2018-2020 Cycle. The main amendment is to IFRS 9,
"Financial Instruments" ("the Amendment"). The Amendment clarifies which fees
a company should include in the "10% test" described in paragraph B3.3.6 of
IFRS 9
when assessing whether the terms of a debt instrument that has been modified
or exchanged are substantially different from the terms of the original debt
instrument.
The Amendment is effective for annual periods beginning on or after January 1,
2022. Early application is permitted. The Amendment is to be applied to debt
instruments that are modified or exchanged commencing from the year in which
the Amendment is first applied.
3. Amendment to IAS 1, "Presentation of Financial Statements":
In January 2020, the IASB issued an amendment to IAS 1, "Presentation of
Financial Statements" ("the Amendment") regarding the criteria for determining
the classification of liabilities as current or non-current.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Amendment includes the following clarifications:
• What is meant by a right to defer settlement;
• That a right to defer must exist at the end of the
reporting period;
• That classification is unaffected by the likelihood that
an entity will exercise its deferral right;
• That only if an embedded derivative in a convertible
liability is itself an equity instrument would the terms of a liability not
impact its classification.
The Amendment is effective for annual periods beginning on or after January 1,
2023 and must be applied retrospectively.
The Company is evaluating the possible impact of the Amendment on its current
loan agreements.
4. Amendment to IAS 8, "Accounting Policies, Changes to Accounting
Estimates and Errors":
In February 2021, the IASB issued an amendment to IAS 8, "Accounting Policies,
Changes to Accounting Estimates and Errors" ("the Amendment"), in which it
introduces a new definition of "accounting estimates".
Accounting estimates are defined as "monetary amounts in financial statements
that are subject to measurement uncertainty". The Amendment clarifies the
distinction between changes in accounting estimates and changes in accounting
policies and the correction of errors.
The Amendment is to be applied prospectively for annual reporting periods
beginning on or after January 1, 2023 and is applicable to changes in
accounting policies and changes in accounting estimates that occur on or after
the start of that period. Early application is permitted.
The Company is evaluating the effects of the Amendment on its financial
statements.
5. Amendment to IAS 12, "Income Taxes":
In May 2021, the IASB issued an amendment to IAS 12, "Income Taxes" ("IAS
12"), which narrows the scope of the initial recognition exception under IAS
12.15 and IAS 12.24 ("the Amendment").
According to the recognition guidelines of deferred tax assets and
liabilities, IAS 12 excludes recognition of deferred tax assets and
liabilities in respect of certain temporary differences arising from the
initial recognition of certain transactions. This exception is referred to as
the "initial recognition exception". The Amendment narrows the scope of the
initial recognition exception and clarifies that it does not apply to the
recognition of deferred tax assets and liabilities arising from transactions
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
that are not a business combination and that give rise to equal taxable and
deductible temporary differences, even if they meet the other criteria of the
initial recognition exception.
The Amendment applies for annual reporting periods beginning on or after
January 1, 2023, with earlier application permitted. In relation to leases and
decommissioning obligations, the Amendment is to be applied commencing from
the earliest reporting period presented in the financial statements in which
the Amendment is initially applied. The cumulative effect of the initial
application of the Amendment should be recognized as an adjustment to the
opening balance of retained earnings (or another component of equity, as
appropriate) at that date.
The Company estimates that the initial application of the Amendment is not
expected to have a material impact on its financial statements.
NOTE 3:- CASH AND CASH EQUIVALENTS
December 31,
Bank deposits and cash denominated in 2021 2020
EUR - bank balances 3,679 1,338
United States Dollar (USD) - bank balances 909 265
New Israeli Shekel (NIS) - bank balances 92 88
Other currencies 8 18
4,688 1,709
*) The balances are not bearing interest.
NOTE 4:- OTHER INCOME
December 31,
2021 2020
Sale of receivables (1) 200 -
Other income 186 33
386 33
(1) On August 10, 2021 the Company announced that Plaza Centers Czech
Republic s.r.o ("Plaza Centers CR"), a wholly owned subsidiary of the Company,
has signed an agreement for the sale of its receivables to a third party, for
a total consideration of EUR 200,000, regarding an advance payment for the
purchase of a Czech project company which Plaza Centers CR paid in the past.
NOTE 5:- TRADING PROPERTIES
December 31,
2021 2020
Balance as of 1 January - 40,375
Increase in value (Write-down) of trading properties, net (1) - (39,825)
Trading properties disposed (2) - (550)
Balance as of 31 December - -
Trading properties designated for sale - -
(1) Breakdown of write-downs (Increase in value) of trading properties
is presented in the table below:
Year ended
December 31,
Project name (location) 2021 2020
Casa Radio (Bucharest, Romania) (*) - 39,825
- 39,825
Change in provision in respect to PAB (*) - (15,825)
Net write-downs - 24,000
(*) See also note 5(2)(d) below.
For detailed information with respect to the write down, refer also to Note
5(3).
(2) Casa Radio:
(a) General:
In 2006 the Company entered into a PPP agreement with the Government of
Romania to develop the Casa Radio site in the city center of Bucharest
("Project") and acquired 75% interest in the joint venture company developing
the Project ("Project SPV"). After signing the PPP agreement, the Company
holds indirectly 75% of the shares in the Project SPV, the remaining shares
are held by the Romanian authorities (through CNI, a Romanian company
ultimately owned by the Romania authorities)(15%) and a third-party private
investor (10%).
Pursuant to the PPP agreement, the Project SPV was granted development and
exploitation rights in relation to the site for a period of 49 years, starting
December 2006 (34 years remaining at the end of the reporting period). As part
of its obligations under the PPP agreement, the Project SPV has committed to
construct a public authority building ("PAB") measuring approximately 11.000
square meters for the Romanian Government at its own cost.
NOTE 5:- TRADING PROPERTIES (Cont.)
Large scale demolition, design and foundation works were financed by loans
given to the Project SPV by the Company. These works were performed on site
until 2010. Construction and development were put on hold due to difficulties
procuring further financing because of the global financial crisis and later,
as well as, the lack of progress in the renegotiation of the PPP agreement
with the Romanian authorities, as detailed in subsection (c) below. These
circumstances (and mainly the bureaucratic deadlock with the Romanian
authorities to deal with the issues specified below) caused the Project SPV
not to meet the development timeline of the Project as specified in the PPP
agreement. However, management believes that it had legitimate reasons for the
delays in this timeline, as discussed in subsection (c) below.
(b) Obtaining of the Detailed Urban Plan ("PUD") permit:
The Project SPV obtained the PUD for the Project in September 2012. On
December 13, 2012, the Court took note of the waiver of the claim submitted by
certain plaintiffs and rejected the litigation aiming to cancel the approval
of the Zonal Urban Plan ("PUZ") for the Project. The Court decision is
irrevocable.
(c) Discussions with the Romanian authorities:
Following the Court decision with respect to the PUZ, the Project SPV was
required to submit a request for building permits within 60 days from the
approval date of the PUZ/PUD and commence development of the Project within 60
days after obtaining the building permits. The building permits have not
been obtained.
Due to substantial differences between the approved PUD and stipulations in
the PPP agreement and changes in EU law concerning environmental
considerations in buildings used by public bodies, the Project SPV attempted
to renegotiate the future development of the Project with the Romanian
authorities on items such as timetable, structure, milestones and adaptation
of the PAB development to the current EU requirements. Despite many
notifications sent to the Romanian authorities, expressing a wish to
renegotiate the existing PPP agreement, no major breakthrough has been
achieved. The Company may be subject to significant delay penalties under the
terms of the PPP agreement if it is determined that the Company was at fault
in causing the delays.
Because of the failure of the Romanian authorities to cooperate, negotiate and
adjust the PPP agreement, the Project SPV was not able to meet its obligations
under the PPP agreement. This resulted in a situation where the Project SPV
could not "de facto" continue the execution of the Project and created a risk
that the Romanian authorities could attempt to terminate the PPP agreement
and/or to impose penalties on the Company and the Project SPV. As of the date
of approval of these consolidated financial statements, the Project SPV has
not received any termination notification from the Romanian authorities.
NOTE 5:- TRADING PROPERTIES (Cont.)
Still, in the case of termination of the PPP agreement, any disputes regarding
the relationship and compensation between the parties is to be determined by
way of arbitration. The management, believes that, in the case of termination,
the Company has a good case to claim compensation for damages.
The Romanian authorities undertook to discuss in good faith the restructuring
of the Project and the PPP agreement in situations where significant
unexpected circumstances arise. Further, the unresponsiveness of the Romanian
authorities is a violation of the general undertaking to support the Project
SPV in the execution of the Project as agreed in the PPP agreement.
Management has taken a number of steps in order to unblock the development of
the project and mitigate the risk of termination of the PPP agreement,
including commencing a process to identify third party investors willing and
capable to join in the development of the Project and/or potential buyers of
the Company's interest in the Project. Management believes that reputable
investors with considerable financial strength can enhance negotiation
position vis-à-vis the Romanian authorities and assist in advancing an
amicable agreement with the relevant authorities with respect to the
development of the Project. As a result of the Company's ongoing efforts, a
pre-sale agreement for the sale of its shareholding in the Project SPV and its
interests in the Project was signed on 3 July 2019 (see (2)(e) in this Note).
(d) Provision in respect of PAB:
As mentioned in point (a) above, when the Company entered
into an agreement to acquire 75% interest in the Project SPV it assumed a
commitment to construct the PAB at its own costs for the benefit of the
Romanian Government. As detailed in note 5(3) below, the carrying amount of
the trading property was fully written as of December 31, 2020. Accordingly,
the Company also fully reduced the provision in respect of the construction of
the PAB as of December 31, 2020.
(e) On 3 July 2019 the Company's wholly owned
subsidiary Dambovita Center Holding B.V ("Dambovita NL") as seller, the
Company as guarantor and AFI Europe N.V. as buyer entered into a pre-sale
agreement for the sale of the shareholding in Dambovita Center S.R.L
("Dambovita RO") (the "Pre-Sale Agreement"). Pursuant to the terms of the
Pre-Sale Agreement, AFI Europe N.V. shall carry out a due diligence review
which shall be completed no later than 5 September 2019 following which,
subject to the satisfaction of the other Conditions precedent in the Pre-Sale
Agreement, the parties to the Pre-Sale Agreement will execute a share purchase
agreement in the short form being Annex 3 to the Pre-Sale Agreement (the
"SPA") and an intragroup loan assignment/novation agreement.
NOTE 5:- TRADING PROPERTIES (Cont.)
Conditions precedent in the Pre-Sale
Agreement comprise inter alia (i) the satisfactory completion of a due
diligence investigation by AFI Europe N.V. by the latest on 5 September 2019;
(ii) the Romanian competition council having issued competition approval for
the transaction; (iii) publication of the contemplated sale of the shares in
Dambovita RO by Dambovita NL in the Official Gazette of the Romanian
Government and the lapse of a 30-day objection period with no opposition being
lodged; (iv) no pending or imminent material adverse change (which includes
insolvency of Dambovita RO, termination of the PPP Agreement or a significant
amendment of the terms and conditions of the PPP Agreement rendering the
fulfilment thereof more onerous; (v) issuance of a Government Decision
confirming that Dambovita NL may transfer the shares to AFI Europe N.V.(or any
of its affiliates) and that the Company and Elbit Imaging Ltd. may transfer
their rights and obligations under the PPP Agreement to AFI Europe N.V.(vi);
amendment of the PPP Agreement in order to transfer the rights of Elbit
Imaging Limited and the Company to AFI Europe N.V.; (vii) obtaining a written
confirmation that the 49 years term of the PPP Agreement shall be calculated,
the earliest, starting from 2012, however, in case the 49 years concession
term is calculated from any other previous date, the parties to the Pre-Sale
Agreement will try to find an amicable compromise, discounting the Purchase
Price (as defined below) to reflect the shorter concession term; in case of
such parties' failure to reach an agreement with respect to the discounted
Purchase Price, AFI Europe N.V. has the right to consider this condition
precedent as not being fulfilled; and (viii) the receipt of approval of the
General Meeting and the Company's bondholders for the Transaction.
Upon satisfactory completion of the due diligence to be
carried out by AFI Europe, there will be a down payment of EUR 200,000, which
shall be repaid upon the occurrence of (i) cancellation of the PPP Agreement;
(ii) initiation of Dambovita RO's dissolution due to negative equity
requirements; (iii) the existence of elements of criminal investigation
against Dambovita RO, beyond the information as disclosed to AFI Europe or, if
such investigation would be held against Dambovita RO's directors of
employees, in case this would trigger a significant impact on the Dambovita
Project or (iv) Dambovita NL refuses to proceed to closing or is not present
at the closing date, although all the conditions precedent were fulfilled or
waived. The fulfilment of the Conditions precedent relating to the approval of
the Company's shareholders and bondholders as referred to above must occur no
later than 5 September 2019. On 30 July 2019, the bondholders of Bonds series
A and Bonds Series B decided to authorize the Company to enter into the
agreement and execute the transaction contained therein. In addition, an
extraordinary general meeting of Shareholders of the Company held on 29 August
2019 approved the transaction as detailed in the Notice of EGM.
On 5 September 2019 in accordance with the pre-sale agreement, AFI has paid
the down payment of EUR
200,000.
NOTE 5:- TRADING PROPERTIES (Cont.)
PRE-SALE AGREEMENT - SPECIFIC PROVISIONS
The long stop date as referred to in the Pre-Sale Agreement (i.e. the date on
which all conditions precedent must be fulfilled and closing of the
Transaction must occur) is 15 months after the lapse of the due diligence
period (5 September 2019).
Pursuant to the Pre-Sale Agreement, Dambovita NL will transfer its interest in
Dambovita RO and will assign the Intragroup Loans to AFI Europe N.V. for the
maximum consideration of EUR 60 million, subject to the fulfilment of certain
conditions (the "Purchase Price").
The Purchase Price is defined in the Pre-Sale Agreement as EUR 60 million
minus 75% of Dambovita RO's liabilities computed based on the closing accounts
(being the financial statements of Dambovita RO for the period from 1 January
of the year in which the closing of the Transaction will occur) and excluding
the Intragroup Loan, plus 75% of Dambovita RO's available cash and other
current assets as shown in the closing accounts (as referred to above) and
minus (insofar applicable) an amount agreed upon by the parties to the
Pre-Sale Agreement to be reduced from the Purchase Price if the 49-year
PPP-rights period will be calculated from any date prior to the year 2012. The
loan assignment amount (as part of the Purchase Price) will be
calculated on the Closing Date as the balance between the Purchase Price and
the price for the shares sold (being the nominal value of these shares RON
44,050,380, which is the equivalent of USD 14,778,862).
Subject to fulfilment of the conditions precedent in the Pre-Sale Agreement as
detailed above which includes, among others, the execution of the SPA, AFI
Europe N.V. is bound to make a payment of EUR 20 million to Dambovita NL. A
further EUR 22 million is to be paid later upon the issuance by the competent
authorities of a building permit for the first stage of the Dambovita Project
(the development of the shopping mall or the office building, excluding the
public authority building as referred to above). The balance between the
Purchase Price and the payments already made, will be paid out to Dambovita NL
upon all permits required for the operation of any of the components (office
building or shopping mall) of the first stage of the Dambovita Project
including a fire permit and the operation permit having been obtained. In
addition the Company and Dambovita NL, granted the AFI Europe N.V.
indemnification, jointly and severally, for some warranties under the Pre-Sale
Agreement, which customary in such transactions.
On November 2, 2020, the Company, Dambovita NL and AFI Europe N.V. ("AFI", and
together with the Company, the "Parties") entered into an addendum to the
pre-sale pursuant to which the Parties agreed to extend the Long Stop Date,
which is the date on which the parties will execute a share purchase
agreement, subject to the satisfaction of conditions precedent, until December
31, 2021.
NOTE 5:- TRADING PROPERTIES (Cont.)
The Parties have further agreed that in case of any litigation and/or
arbitration process to which the Company is a party, will result in the loss
of any of their rights under the PPP Agreement with the Government of Romania
to develop the Casa Radio site in the city center of Bucharest, AFI shall no
longer be bound by its obligations under the Agreement and the Company shall
reimburse AFI with the entire advance payment of EUR 200,000 already paid by
AFI. The prepayment of EUR 200,000 is included in Other Liabilities in the
consolidate statement of financial position.
The Addendum was subject to the approval of the Company's bondholders which
was obtained on 12 November 2020.
Further to the above, on December 20, 2021 the Company, Dambovita NL and AFI
have signed an additional addendum to the Agreement (the "Addendum 2") which
pursuant to the Addendum 2 the Parties agreed to extend the Long Stop Date
until December 31, 2022.
In addition, for the avoidance of doubt, the extension of the Long Stop Date
as stated above, has been approved at the Company's bondholders' meetings
which were held on November 25,
2021.
As of the date hereof, there can be no certainty that either the conditions
precedent in the Pre-Sale Agreement as detailed above will be met, that the
Sale Agreement will be executed and/or that the Transaction will be
consummated as presented above or at all.
(3) Write-down of trading properties:
Trading properties are measured at the lower of cost and net realizable value.
Determining net realizable value is inherently subjective as it requires
estimates of future events and takes into account special assumptions in the
valuations, many of which are difficult to predict.
Actual results could be significantly different than the Company's estimates
and could have a material effect on the Company's financial results.
These valuations become increasingly difficult as they relate to estimates and
assumptions for projects in the preliminary stage of development.
Management is responsible for determining the net realizable value of the
Group's trading properties.
As detailed above, despite many notifications sent to the Romanian authorities
expressing a wish to renegotiate the existing PPP agreement, no major
breakthrough could be achieved, in addition, the Romanian authorities have not
cooperated substantively with the Company's request to approve the transfer of
the Company's shares in the Project SPV and its interest in the Project to
AFI.
NOTE 5:- TRADING PROPERTIES (Cont.)
Because of the abovementioned issues surrounding the satisfaction of the
conditions precedent in the pre-sale agreement, it is currently not certain
whether the sale agreement as contemplated in the pre-sale agreement would be
entered into and whether therefore the transaction with AFI would proceed. As
such the Company, Dambovita NL and AFI Europe N.V. agreed to extend the Long
Stop Date until December 31, 2022. Additionally, as the external appraisers,
in their opinion from the previous years did not reflect the risk related to
the uncertainty in respect of fulfilment of the conditions precedent set out
in the pre-sale agreement, as described above, the management has concluded
that it can't measure the net realizable value of the Project based on either
the pre-sale agreement or based on the residual value approach as the
management would need to assume that it would receive the Romanian authorities
approval to restructure and adjust the PPP agreement. As a result, the value
of the trading property of the Project was fully reduced.
Still, the Company believes that despite this reduction there is no change in
the value of the Company's rights under the PPP Agreement. In addition,
management, believes that in case they will decide to pursue it material
economic damage, the Company has a good case to claim compensation for such
damages. On the other hand, if the Company comes to an understanding with the
Romanian authorities, it will measure the Casa Radio NRV to reflect its
updated financial projections.
NOTE 6:- EQUITY ACCOUNTED INVESTEES
a. The Group has the following interest in the below joint
ventures.
Interest of holding (percentage)
as of December 31,
Company name Country Activity 2021 2020
Elbit Plaza India Real Estate Holdings Ltd. ("EPI") (*) Cyprus Mixed-use large-scale projects 47.5% 47.5%
(*) Though EPI is 47.5% held by the Company, the Company is accounted
for 50% of the results, as the third party holding 5% in EPI is deemed not to
participate in accumulated losses, hence Elbit and the Company, the holders of
the remaining 95% each account for 50% of the results of EPI.
The movement in equity accounted investees (in aggregation) was as follows:
2021 2020
Balance as of 1 January 10,737 14,419
Distribution received from equity-accounted investees (4,175) (983)
Share in results of equity-accounted investees, net of tax (1) (1,903) (1,084)
Effect of movements in exchange rates 454 (1,615)
Balance as of 31 December 5,113 10,737
(1) Breakdown of the Group's share of increase (write-downs) of
trading properties projects held by equity accounted investees is as follows:
Year ended
December 31
Project name (holding company name) 2021 2020
Bangalore (held by EPI) (*) (1,577) (434)
Chennai (held by EPI) (*) - (526)
Other expenses (326) (123)
(1,903) (1,084)
(*) Refer to the below paragraphs b(1) and b(2) regarding the
properties' write downs.
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
b. Material joint ventures:
The summarized financial information of the material joint venture EPI (due to
holding of major schemes in Bangalore and Chennai) is as follows:
2021 2020
Current assets (*) 183 1,106
Trading properties-non current 20,441 33,090
Other current liabilities (10,398) (12,722)
Net assets (100%) 10,226 21,474
Group share of net asset (50%) (**) 5,113 10,737
Carrying amount of interest in joint venture 5,113 10,737
(*) Including cash and cash equivalents in the amount of EUR 40
thousand (2020 - EUR 910 thousand);
(**) Refer to remark on EPI holding rate in section (a) above.
2021 2020
Write-downs of trading properties (3,153) (1,921)
Other expenses (653) (247)
Total loss (100%) (3,806) (2,168)
Group share of loss (50%) (1,903) (1,084)
Total results from investees (1,903) (1,084)
(1) Bangalore:
In March, 2008 Elbit Plaza India Real Estate Holdings Limited (a subsidiary
held by the Company (50%) and Elbit Imaging ltd.(50%)) ("EPI") entered into a
share subscription and framework agreement (the "Agreement"), with a
third-party local developer (the "Partner"), and a wholly owned Indian
subsidiary of EPI which was designated for this purpose ("SPV"), to acquire
together with the Partner, through the SPV, up to 440 acres of land in
Bangalore, India (the "Project") in certain phases as set forth in the
Agreement.
As a result of the failure of the Partner to complete the transaction under
the Agreement and in accordance with the provisions thereto, EPI has 100%
control over the SPV and the partner is no longer entitled to receive the 50%
shareholding.
The Partner has surrendered sale deeds to the SPV for approximately 54 acres
(the "Plot"). The Plot is registered in the name of a third party land owner
who transferred 100% ownership right in the Plot to the Partner ( 90%
ownership rights acquired through Joint Development Agreement & Power of
Attorney and balance 10% ownership rights acquired through sale). The Partner
in turn transferred 100% Development rights and 90% rights in the Plot and
constructed area therein to the SPV through Joint Development Agreement &
Power of Attorney while the balance 10% rights in the Plot and constructed
area held by the Partner.
On December 2, 2015 EPI has signed an agreement to sell 100% of its interest
in the
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
SPV to the Partner (the "Sale Agreement"). The total consideration upon
completion of the transaction was INR 321 crores (approximately EUR 44
million) which should have been paid no later than September 30, 2016 ("Long
Stop Date"). On November 15, 2016, the Partner informed EPI that it will not
be able to execute the aforesaid payment.
As a result of the foregoing, the SPV has received from the escrow agent the
sale deeds in respect of additional 8.7 acres (the "Additional Property")
which has been mortgaged by the Partner in favor of the SPV in order to secure
the completion of the transaction on the Long Stop Date. The Additional
Property has not yet been registered in favor of the SPV for cost-benefit
reasons. In addition, as per the Sale Agreement, the Company took actions in
order to get full separation from the Partner with respect to the Plot and
specifically the execution of the sale deed with respect of the 10% undivided
interest, all as agreed in the Sale Agreement.
In light of the above, and after lengthy negotiations between the parties, new
understandings were formulated and the parties signed a revised agreement that
substantially altered the outline of the original transaction (and this
agreement was amended several more times, the last of which in April 2019),
and concluded that: (i) the closing date for the transaction will be extended
to November 2019, and may be further extended to August 2020 (the "Closing
Date"). It should be clarified that the postponement of the closing date to
November 2019 and August 2020 was subject to receipt of payments as agreed in
the Sale Agreement and subject to mutually agreed payment terms; and (ii) the
consideration was increased to INR 356 crores (approximately EUR 49 million)
(Plaza part approximately EUR 24.5 million) (the "Consideration").
After August 2019, the Partner was unable to pay any further amounts nor was
able to give firm commitment on payment of the remaining amount. In the
absence of clarity on payment of the remaining amount and failure of the
Partner to give full separation with respect to the Plot, on January 10, 2020,
the Company announced that a notice has been issued to the Partner to file its
response in the insolvency proceedings initiated for the recovery of the
amounts due.
On May 18, 2021, the Company announced that the insolvency proceedings
initiated against the Purchaser for the recovery of the due amounts has been
dismissed by the National Company Law Tribunal in Bangalore since the case is
not maintainable before it and therefore the SPV should claim for the recovery
of its debt or for the resolution of its dispute in any other forum.
In addition, criminal cases for dishonor of the cheques aggregating INR 15
crores which were given as security for payment of certain installments, the
Court had issued arrest warrants and the local police were on the lookout for
the accused persons. On May 18, 2021, the Company announced that all the
accused persons appeared before the court and were granted bail. In addition,
all further proceedings continue in the matter.
On July 29, 2021 the Company announced that the SPV has submitted an appeal
before the National Company Law Appellate Tribunal, Chennai, India against the
decision of the National Company Law Tribunal, Bengaluru, India, which
dismissed
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
the insolvency proceedings initiated against the Partner for the recovery of
the amounts due.
As of this date, the Partner paid to EPI approximately INR 87.00 crores (EUR
11.2 million) (Company part INR 43.5 crores (approximately EUR 5.6 million))
out of a total consideration of INR 356 crores (approximately EUR 32 million)
(Plaza part INR 178 crores (approximately EUR 16 million) as per the
Agreement.
Net realizable value measurement of Bangalore project:
As of December 31, 2021 and 2020 the Group measured the net realizable value
of the project. The net realizable value of the project based on the
comparable Method is INR 172 crores (EUR 20.4 million); 2020 - INR 198 crores
(EUR 22.1 million). Due to decrease in value of the plot EPI recognized a
write down in the amount of app. EUR 3.2 million (the Company part (50%) app.
EUR 1.6 million).
The evaluation method Value in INR million Value in EUR million
Comparable Method 1,718 20.4
DCF Method 1,634 19.4
Given that the plot is still in land stage and in light of the Company's
intention to sell the Plot to the Partner or to any other third party (see
above), and in light of the uncertainty as to the completion of the
transaction with the Partner, the Company believes that the comparable method
reliably reflects the net realizable value of the Plot and therefore the
Company recorded the value of the plot as of December 31, 2021 at the value
of INR 172 crores (EUR 20.4 million) (the Company part (50%) app. EUR 10.2
million).
The valuation of the property reflects the interest that the partner still
holds in the plot (10% as described above), the size of the non-contiguous
land parcel and the petition/application filed with NCLT against the partner.
The following main parameters have been considered to arrive at the land value
of the subject property by land sale comparison method:
Parameter Premium (Discount)
Applicable land value (INR Mn/acre) 96
Applicable FSI value (INR/Sq. ft) 1,085
Total land value (INR Mn) 5,207
Discount on account of Revised Master Plan 2015 Buffer zone norms (%) -25%
Presence of minority shareholder -20%
Total land value (INR Mn) 3,124
Discount on account of the petition/application filed with NCLT -45%
Total land value (INR Mn) 1,718
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
(2) Chennai:
In December 2007, EPI executed agreements for the establishment of a special
purpose vehicle ("Chennai Project SPV") together with a local developer in
Chennai ("Local Partner"). The Chennai Project SPV acquired 74.73 acres of
land situated in the Sipcot Hi-Tech Park in Siruseri District in Chennai
("Property").
On September 16, 2015, EPI has obtained a backstop commitment from the Local
Partner for the purchase of its 80% shareholding in the Chennai SPV by January
15, 2016, for a net consideration of approximately INR 161.7 Crores (EUR 21.1
million). Since the Local Partner had breached its commitment, EPI exercised
its rights and acquired the Local Partner's 20% holdings in the Chennai
Project SPV. Accordingly, as of December 31, 2020, EPI has 100% of the
equity and voting rights in the Chennai Project SPV. However, there are two
lawsuits (being filed in India) by plaintiffs claiming to be legal heirs of
the landowners of the Property, who wish to recognize them as owners of 2.5%
the
Property.
During 2016, Chennai Project SPV has signed a Joint Development Agreement with
a local developer ("Developer" and "JDA", respectively) with respect to the
Property. Under the terms of the JDA, the Chennai Project SPV granted the
property development rights to the Developer" who shall bear full
responsibility for all of the
project costs and liabilities, as well as for the marketing of the scheme. The
JDA also stipulates specific project milestones, timelines and minimum sale
prices.
In February 2019 the Chennai Project SPV issued notice to Developer
terminating the JDA due to its failure to obtain the access road. The said
termination of JDA has been disputed by the Developer. Therefore, the Chennai
Project SPV has initiated arbitration proceeding against the Developer in
accordance with the Arbitration Rules of the Singapore International
Arbitration Centre, in accordance with the JDA Agreement to protect its
rights. In June, 2019 the aforesaid dispute was amicably resolved, the
arbitration proceedings withdrawn and the JDA restored.
On June 13, 2019 the Company announced that EPI and the Developer have signed
a share purchase agreement ("SPA") according to which: (i) the Developer has
paid a deposit of INR 5 crores (approximately EUR 0.625 million) in order to
provide the Developer with an additional six months to complete the closing,
which may be extended by another three months upon payment by the Developer of
an additional deposit of INR of 5 crores (approximately EUR 0.625 million).
On December 5, 2019 the Company announced that EPI and the Developer have
reached a revised understanding regarding the amendment of the agreement
according to which: (i) The Developer further paid the Chennai Project SPV INR
5 crores (approximately EUR 0.625 million) and received a three months
extension to complete the closing (i.e., until March 3, 2020). This closing
may be extended for an
additional three months period (i.e., until June 3, 2020), for an additional
payment of INR 5 crores, to be paid by the Developer. (ii) Out of the payments
received from the Developer (as detailed above) EPI is entitled to receive a
total of INR 17 crores (Plaza part INR 8.5 crores (approximately EUR 1.05
million).
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
Accordingly, on February 18, 2020 the Company announced that EPI has received
INR 17 crores (approximately EUR 2.1 million (the Company's part EUR 1.05
million)) from the Chennai Project SPV.
On March 8, 2020 the Company announced that EPI and the Developer have reached
a revised understanding regarding the amendment of the agreement according to
which: (i) The Purchaser paid further INR 5 crores (approximately EUR 0.625
million) and get additional three months to complete the closing until June 3,
2020, which may be extended by another three months upon payment by the
Purchaser of an additional deposit of INR of 7.5 crores (approximately EUR 0.9
million).
On June 2, 2020 the Company announced the parties have reached to a revised
understanding as follows: (i) The Developer requests and gets an extension of
3 months to complete the closing (i.e. up to September 2, 2020) without an
additional
payment of INR 7.5 crores (approximately EUR 0.9 million). The Developer will
have an option to extend this period of time by another 3 months (i.e., up to
December 2, 2020) upon paying additional deposit of INR 7.50 crores
(approximately EUR 0.9 million) (Plaza part INR 3.75 crores (approximately EUR
0.45 million)).
On August 31, 2020 the Company announced further to revised understanding
regarding the amendment agreed by the parties on June 2, 2020 the parties have
reached a revised understanding as follows: (i) The Purchaser will deposit
INR 1 crore (approximately EUR 0.115 million) and agrees to deposit additional
INR 0.50 crore (approximately EUR 0.0575 million) by December 1, 2020;
(ii) The Purchaser gets additional seven months to complete the closing (up
to 1, April 2021), which may be extended by another three months (up to June
30, 2021) upon payment by the Purchaser of an additional deposit of INR 7.5
crores (approximately EUR 0.861 million);
Accordingly, the Purchaser has deposited INR 1.50 crore (approximately EUR
0.172
million) in accordance with his obligation in connection with the revised
understandings to the Agreement as agreed on August 31, 2020.
On March 31, 2020 the Company announced further the revision of the
understanding regarding the amendment agreed by EPI and the Purchaser ("The
Parties"). On August 31, 2020 the Parties have reached a revised understanding
(the "Revised Understandings") as follows: (i) The Purchaser will deposit INR
7.5 crore (approximately EUR 0.861 million Plaza part is approximately EUR
0.43 million)) (ii) The Purchaser can complete the closing by April 30, 2021
at a revised consideration of 96.50 crores (approximately EUR 11.6 million
(Plaza part is approximately EUR 5.8 million)). (iii) If the Purchaser fails
to complete the closing by April 30, 2021 then the Purchaser gets additional
two months to complete the closing by June 30, 2021 but at the initial
consideration of INR 108 crores (approximately EUR 13 million (Plaza part is
approximately EUR 6.5 million)).
On June 21, 2021 the Company announced the Purchaser completed the transaction
and paid consideration of INR 94.7 crores (approximately EUR 10.6 million).
The
NOTE 6:- EQUITY ACCOUNTED INVESTEES (Cont.)
change in the consideration is due to the Purchaser's consent to take some
additional liabilities in connection with the SPV (which were not included in
the original agreement with the Purchaser).
Furthermore, the Company and Elbit Imaging Ltd granted the Purchaser an
indemnification, jointly and severally, for some of EPI's presentations, which
are presentations customary in such transactions.
NOTE 7:- OTHER LIABILITIES
December 31,
2021 2020
Prepayments (*) 200 200
Salaries and related expenses (**) 16 20
Accrued expenses 209 189
Total 425 409
(*) Including EUR 200 thousand payable due to down payment in regard
to pre-sale agreement for the sale of Casa Radio Project (refer to note
5(2)(e)).
(**) Refer to Note 17.
NOTE 8:- BONDS
a. Composition:
Effective interest rate Contractual interest rate Principal final maturity Carrying amounts
as at
December 31 2021
Series A Bonds 11.58% CPI+8%((*)) 2022 41,275
Series B Bonds 13.83% CPI+8.9%((*)) 2022 58,724
99,999
(*) Including 2%
interest on arrears
b. Mandatory repayments subsequent to the reporting date (without
early repayments):
2022 99,999
99,999
(1) Pursuant to the Company's Restructuring Plan, the Company will
assign 78% of the net proceeds received from the sale or refinancing of any of
its assets as early repayment.
NOTE 8:- BONDS (Cont.)
(2) Approved amendment to an early prepayment term under the
Restructuring Plan
The Company has implemented the restructuring plan that was approved by the
Dutch Court on July 9, 2014 (the "Restructuring Plan"). Under the
Restructuring Plan, principal payments under the bonds issued by the Company
and originally due in the years 2013 to 2015 were deferred for a period of
four and a half years, and principal payments originally due in 2016 and 2017
were deferred for a period of one year.
During the first three months of 2017, the Company paid to its bondholders a
total amount of NIS 191.7 million (EUR 49.2 million) as an early redemption.
Upon such payments, the Company complied with the Early Prepayment Term (early
redemption at the total sum of at least NIS 382,000,000 (approximately EUR 98
million)) and thus obtained a deferral of one year for the remaining
contractual obligations of the bonds.
In addition to the above, the following terms were approved by the
bondholders:
(a) Casa Radio proceeds - If the Company shall sell the Casa Radio
project located in Romania (hereinafter: the "Project") to a third party,
including by way of selling its holdings in any of the entities through which
the Company holds the project (and said sale shall be carried out before the
full repayment of the
bonds and until no later than December 31, 2019, and for an amount which
exceeds EUR 45 million net (i.e. after brokerage fees (if any), taxes, fees,
levies or any other obligatory payment due to any authority in respect to the
said sale) which shall actually be received by the Company, then the holders
of bonds shall be eligible for a one-time payment (which shall come in
addition to the principal and interest payments in accordance with the
repayment schedule), in certain amounts specified in tranches.
(b) Registering of Polish bonds for trade - the Company has committed
to undertake best efforts to admit the Polish bonds for trading on the Warsaw
Stock Exchanges and proceeding in this respect are ongoing.
(c) Deferred debt ratio of Series B bonds - were reduced to 68.24%
from 70.44%
following the cancellation of the treasury bonds. The ratio
has been changed for Series B bonds in order to maintain a distribution ratio
between the three series.
(c) Settlement agreement with Bondholders of
Israeli Series of Bonds:
In January 2018, a settlement agreement was signed by and among the Company
and the two Israeli Series of Bonds ("Settlement Agreement"). In the
Settlement Agreement it was agreed, inter alia, to approve:
- New repayment ratios between the two Israeli Series of Bonds
(new ratio: Bond A- 39% Bond B- 61%);
NOTE 8:- BONDS (Cont.)
- An increase in the level of the mandatory early repayments
from 75% to 78% of the relevant net income;
- New repayment schedule;
- An increase in the compensation to be paid to the Bondholders
in the event of successful disposal of Casa Radio Project;
- A waiver of claims to the Company and its directors and
officers; and
- To waive the request for publication of quarterly financial
reports by the Company.
As a result of settlement agreement signing, Series A Bondholders withdraw
their request for immediate repayment.
It is clarified that the Settlement Agreement is a separate agreement among
the parties thereto with respect to the Company's restructuring plan, and as
such has no effect on the Polish Bondholders.
On January 31, 2018 the Company paid the bondholders a total amount of
principal and interest of EUR 38,487 thousand.
(1) The net cash flow received by the Company following an exit or
raising new financial indebtedness (except if taken for the purpose of
purchase, investment or development of real estate asset) or refinancing of
real estate assets after the full repayment of the asset's related debt that
was realized or in respect of
a loan paid in case of debt recycling (and in case where the exit occurred in
the subsidiary - amounts required to repay liabilities to the creditors of
that subsidiary) and direct expenses in respect of the asset (any sale and tax
costs, as incurred), will be used for repayment of the accumulated interest
till that date in all of the series (in case of an exit which is not one of
the four shopping centres only 50% of the interest) and 78% of the remaining
cash (following the interest payment) will be used for an early repayment of
the close principal payments for each of the series (A, B, Polish) each in
accordance with its relative share in the deferred debt. Such prepayment will
be real repayment and not in bond purchase.
(2) On November 22, 2018 the Company announced based on its current
forecasts, the Company expected to pay the accrued interest on Series A and
Series B Bonds on December 31, 2018, in accordance with the repayment schedule
determined in the Company's Restructuring Plan and Settlement Agreement with
Series A and Series B Bondholders from 11 January 2018 (the "Settlement
Agreement"). The Company noted that it will not meet its principal repayment
due on December 31, 2018 as provided for in the Settlement Agreement. The
Company may be able to partially pay the said principal depending, among other
things, on the actual sale of assets and taking into consideration the cash
needs in accordance with the scope of the forecasted activity.
NOTE 8:- BONDS (Cont.)
2019
Following the announcement of the Company from January 2019, the Company
repaid in February 2019 circa EUR 400,000 (principal of circa EUR 250,000 and
penalty interests of circa EUR 150,000) to its Series A and Series B. As
provided for in the Settlement Agreement, the bondholders approved the
deferral of payment to July 1, 2019.
In addition, during June 2019 the bondholders approved the deferral of the
full payment of principal due on July 1, 2019 and of 58% ("deferred interest
amount") of the sum of interest (consisting of the total interest accrued for
the outstanding balance of the principal, including interest for part of the
principal payment which was deferred as of February 18, 2019, plus interest
arrears for part of the principal which was fixed on 18.2.2019 and was not
paid by the Company and all in accordance with the provisions of the trust
deed; "the full amount of interest"), the effective date of which is
19.06.2019, and the payment date was fixed as of 01.07.2019. The Company paid
on the said date a total amount of circa EUR 1.17 million of which is only 42%
of the full amount of interest.
On July 11, 2019, the Company announced that its Romanian subsidiary had
signed a binding agreement to sell land in Miercurea Ciuc, Romania, and that
the Company would use part of the proceeds now received by it EUR 0.75 million
(hereinafter: "the amount payable"), in order to make a partial interest
payment to the bondholders (Series A) and (Series B) issued by the Company.
The payment required changes in the repayment schedule and amendments of the
trust deeds which was approved unanimously by the Bondholders. The amount
payable was paid on August 14, 2019 and reflects 30% of accrued interest as of
that date.
On November 17, 2019 the bondholders of Series A and Series B approved a
deferral of all the scheduled Principal payment and app. 87% of deferral of
the scheduled Interest payment, both, as of December 31, 2019 to July 1, 2020.
Accordingly, in December 2019, Company made a partial interest payment in
amount of circa EUR 0.6 million of which is only 13% of the full amount of
interest.
2020
On May 4, 2020, the bondholders of Series A and Series B approved: (i) to
postpone the final redemption date to January 1, 2021 of all the scheduled
Principal; (ii) that on July 1, 2020 the Company will pay to its bondholders a
partial interest payment in the total amount of EUR 0.25 million and to
deferral all other unpaid scheduled Interest payment.
Following receiving the Settlement Amount related to the final price
adjustment of the sale of Belgrade Plaza and in light of the potential
negative impact of the Covid-19 on the possibility to receive future proceeds
from the Company's plots in India, the Company decided to increase the amount
to be paid to the bondholders on July 1, 2020, from EUR 0.25 million to EUR
0.5 million. The amount reflected 6.74% of accrued interest as of that date.
On November 12, 2020, the bondholders of Series A and Series B approved: (i)
to postpone the final redemption date to July 1, 2021 of all the scheduled
Principal; that on January 1,
NOTE 8:- BONDS (Cont.)
2021 the Company will pay to its bondholders a partial interest payment in the
total amount of EUR 0.2 million and to deferral all other unpaid scheduled
Interest payment. The amount reflected 1.84% of accrued interest as of that
date.
2021
On April 12, 2021, the bondholders of Series A and Series B approved: (i) to
postpone the final redemption date to January 1, 2022; (ii) that on July 1,
2021 the Company will pay to its bondholders a partial interest payment in the
total amount of EUR 125,000 and to deferral all other unpaid interest. The
amount reflected 0.84% of accrued interest as of that date.
On November 25, 2021, the bondholders of Series A and Series B approved: (i)
to postpone the final redemption date to July 1, 2022; (ii) that on January 1,
2022 the Company will pay to its bondholders a partial interest payment in the
total amount of EUR 200,000 and to deferral all other unpaid interest. The
amount reflected 0.92% of accrued interest as of that date.
As detailed in Note 1(b) the Company expects that it will not be able to meet
its entire contractual obligations in the following 12 months.
Accordingly, it intends to request the bondholders of both series to
postponement of the repayment of the remaining balance of the Bonds.
d. Covenants:
The bonds' covenants are detailed in Note 16(b)(1).
In respect of the Coverage Ratio Covenant ("CRC"), as defined in the
restructuring plan,
as at December 31, 2020 the CRC is not in compliance with 118% minimum ratio
required.
e. Credit rating:
In January 2018, Standard & Poor's Maalot, the Israeli credit rating
agency which is a division of International Standard & Poor's has
discontinued tracking Plaza's rating at the Company's request.
NOTE 9:- INCOME TAXES
a. Unrecognized deferred tax assets:
Deferred tax assets have not been recognized in respect of tax losses in a
total amount of EUR 95,094 thousand (2020: EUR 107,717 thousand). Deferred tax
assets have not been recognized in respect of these items because it is not
probable that future taxable profit will be available against which the Group
can utilize the benefits. As of December 31, 2021, the expiry date status of
tax losses to be carried forward is as follows:
Total tax losses carried forward 2022 2023 2024 2025 2026 After 2026
95,094 25,232 18,470 14,646 23,736 10,538 2,472
Tax losses are mainly generated from operations in the Netherlands. Tax
settlements may be subject to inspections by tax authorities. Accordingly, the
amounts shown in the financial statements may change at a later date as a
result of the final decision of the tax authorities.
c. Reconciliation of effective tax rate:
2021 2020
Dutch statutory income tax rate 25% 25%
Loss from continuing operations before income taxes (27,089) (33,490)
Tax benefit at the Dutch statutory income tax rate (6,722) (8,372)
Effect of tax rates in foreign jurisdictions 376 158
Current year tax loss and other timing differences for which no deferred taxes 6,162 8,087
are created
Non-deductible expenses (exempt income) 234 127
Tax Expense - -
d. The main tax laws imposed on the Group companies in their
countries of residence:
The Netherlands:
a. Companies resident in the Netherlands are subject to corporate
income tax at the general rate of 25%. The first EUR 245,000 of profits is
taxed at a rate of 15%. Tax losses may be carried back for one year and
carried forward for six years (for 2019 - nine years).
b. Starting January 1, 2022 losses will be
offset (forward or backward) in accordance with the following restrictions:
1. Up to 1 million EUR - unlimited
2. Over 1 million EUR - against 50% of the remaining profit in that year
b. The Dutch participation exemption gives a full exemption from
corporation tax applies to benefits such as dividends and capital gains
derived from a qualifying participation. The participation exemption generally
applies if the parent Company holds at least 5 percent of the shares in the
participation. The
NOTE 9:- INCOME TAXES (Cont.)
requirements to meet the participation exemption are as follows:
1. The parent Company has an interest of at least 5 percent in the
participation; and
2. At least one of the following three tests is met:
a) The parent Company's objective with respect to its participation is to
obtain a return that is higher than a return that may be expected from normal
active asset management ("Motive Test"); or
b) The participation is subject to a "reasonable taxation" according to
Dutch tax standards ("Subject-to-Tax Test"); or
c) The direct and indirect assets of the participation generally consist
of less than 50 percent of 'low taxed free passive investments' ("Asset
Test").
NOTE 10:- EQUITY
December 31,
2021 2020
Remarks Number of shares
Authorized ordinary shares of par value EUR 1 each 10,000,000 10,000,000
Issued and fully paid 6,855,603 6,855,603
Translation reserve
The translation reserve comprises, as of December 31, 2021, all foreign
currency differences arising from the translation of the financial statements
of foreign operations in India.
Restriction of dividend
The Company shall not make any dividend distributions, unless (i) at least 75%
of the Unpaid Principal Balance of the Bonds has been repaid and the Coverage
Ratio on the last Examination Date prior to such Distribution is not less than
150% following such Distribution, or (ii) a Majority of the Plan Creditors
consents to the proposed Distribution.
Notwithstanding the aforesaid, in the event an additional capital injection of
at least EUR 20 million occurs, then after one year following the date of the
additional capital injection, no restrictions other than those under the
applicable law shall apply to dividend distributions in an aggregate amount of
up to 50% of such additional capital injection.
NOTE 11:- EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") at December 31, 2021 was
based on the loss attributable to ordinary shareholders of EUR 27,089 thousand
(2020: loss of EUR 33,490
NOTE 11:- EARNINGS PER SHARE (Cont.)
thousand) and a weighted average number of ordinary shares outstanding of
6,856 thousand (2020: 6,856 thousand).
Weighted average number of ordinary shares basic and diluted:
In thousands of shares with a EUR 1 par value December 31,
2021 2020
Issued ordinary shares at 1 January 6,856 6,856
Weighted average number of ordinary shares at 31 December 6,856 6,856
NOTE 12:- EMPLOYEE SHARE OPTION PLAN
Number Number of options
of options
2021 2020
Outstanding at the beginning of the year 235,520 235,520
Share options expired during the year (195,550) -
Outstanding at the end of the year 39,970 235,520
Exercisable at the end of the year 39,9700 235,5200
During 2021 and 2020 there were no employee costs for the share options
granted.
NOTE 13:- ADMINISTRATIVE EXPENSES
Year ended
December 31
2021 2020
Salaries and related expenses 435 474
Professional services (1) 770 573
Offices and office rent 20 32
Travelling and accommodation 2 3
Others 16 18
Total 1,243 1,100
(1) Expenses include one-time payment of approximately EUR 222
thousand for directors and officers liability - runoff policy.
NOTE 14:- FINANCE INCOME AND FINANCE COSTS
Year ended
December 31
2021 2020
Recognized in profit or loss
Foreign currency gain on bonds (including inflation) - 2,096
Finance income - 2,096
Interest expense on bonds (9,612) (10,155)
Foreign currency losses on bonds (including inflation) (14,600) -
Other finance expenses (26) (21)
Finance costs (24,238) (10,176)
Net finance costs (24,238) (8,080)
NOTE 15:- FINANCIAL INSTRUMENTS
Financial Risk Management:
Overview
The Group has exposure to the following risks from its use of financial
instruments:
· Credit risk
· Liquidity risk
· Market risk
This Note presents information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and
managing risk, and the Group's management of capital.
The Board of Directors has established a continuous process for identifying
and managing the risks faced by the Group (on a consolidated basis), and
confirms that it is responsible to take appropriate actions to address any
weaknesses identified.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities.
The Company's Audit Committee oversees how management monitors compliance with
the Group's risk management policies and procedures and reviews the adequacy
of the risk management framework in relation to the risks faced by the Group.
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
a. Credit risk:
Credit risk is the risk of financial loss to the Group if a counterparty to a
financial instrument fails to meet its contractual obligations, and arises
principally from the Group's financial instruments held in banks and from
other receivables.
Management had a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis.
Cash and deposits and other financial assets
The Group limits its exposure to credit risk in respect to cash and deposits,
by investing mostly in deposits and other financial instruments with
counterparties that have a credit rating of at least investment grade from
international rating agencies. Given these credit ratings, management does not
expect any counterparty to fail to meet its obligations.
b. Liquidity risk:
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. For detailed information refer to Note
1(b).
Liquidity risk
The following are the contractual maturities of financial liabilities,
including estimated interest payments and excluding the impact of netting
agreements:
December 31, 2021
Non-derivative financial liabilities Carrying amount Contractual cash flow 6 months or less 6-12 months (*)
Bonds issued (*) (121,692) (126,870) - (126,870)
Trade and other payables (202) (202) (202) -
121,894 (127,072) (202) (127,072)
December 31, 2020
Non-derivative financial liabilities Carrying amount Contractual cash flow 6 months or less 6-12 months (*)
Bonds issued (*) (97,821) (101,982) - (101,982)
Trade and (147) (147) (147) -
other payables
97,968 (102,129) (147) (101,982)
(*) Refer to Note 8.
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
c. Market risk:
Currency risk:
Currency risk is the risk that the Group will incur significant fluctuations
in its profit or loss as a result of utilizing currencies other than the
functional currency of the respective Group Company.
The Group is exposed to currency risk mainly on borrowings (Bonds issued in
Israel) that are denominated in NIS.
The following exchange rate of EUR/NIS applied during the year:
Reporting date
Average rate Spot rate
EUR 2021 2020 2021 2020
NIS 1 0,262 0,255 0,284 0,254
NIS denominated bonds - a change of 5 percent in EUR/NIS rates at the
reporting date would increase/decrease loss by EUR 5 million, as a result of
having issued NIS linked Bonds.
This effect assumes that all other variables, in particular CPI index, remain
constant.
Interest Rate Risk (including inflation):
The Group's interest rate risk arises mainly from Bonds issued at fixed
interest rate expose the Group to changes in fair value, if the interest is
changing. As the Israeli inflation risk is diminishing to a level that
management believes is acceptable (Israeli CPI 2021 - 1.49%; 2020 - (0.6%))
and due to liquidity constraints, the Company has stopped using hedging of CPI
in recent years.
Sensitivity analysis - effect of changes in Israeli CPI on carrying amount of
NIS bonds
A change of 3 percent in Israeli Consumer Price Index ("CPI") at the reporting
date (and in 2020) would have increased (decreased) profit or loss by the
amounts shown below. This analysis assumes that all other variables, in
particular foreign currency rates, remain constant.
NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)
Profit (loss) effect
For the year ended Carrying amount of bonds CPI increase effect CPI
December 31, decrease effect
2021 99,999 (3,000) 3,000
2020 87,137 (2,614) 2,614
Shareholders' equity management:
Refer to Note 10 in respect of shareholders equity components in the
restructuring plan including dividend policy. The Company's Board of
Directors is updated on any possible equity issuance, in order to assure
(among other things) that any changes in the shareholders equity (due to
issuance of shares, options or any other equity instrument) is to the benefit
of both the Company's bondholders and shareholders.
Fair values:
The table below is a comparison between the carrying amount and fair value of
the Company's financial instruments that are presented in the financial
statements not at fair value:
Carrying amount Fair value (*)
2021 2020 2021 2020
Bonds A at amortized cost - Israeli bonds 41,275 35,996 6,025 5,887
Bonds B at amortized cost - Israeli bonds 58,724 51,171 8,849 7,086
(*) The fair value is based on Level 1 in fair value hierarchy and
measured based on market quote.
Management believes that the carrying amount of cash, receivables and trade
payables approximate their fair value due to the short-term maturities of
these instruments.
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS
a. Contingent liabilities and commitments to related parties:
1. The Company entered into an indemnity agreement with all of the
Company's directors and senior management- the maximum indemnification amount
to be granted by the Company to the directors shall not exceed 25% of the
shareholders' equity of the Company based on the shareholders' equity set
forth in the Company's last consolidated financial statements prior to such
payment. No consideration was paid by the Company in this respect since the
agreement was signed.
2. The Company maintains Directors' and Officers' liability cover,
presently at the maximum amount of USD 5 million for a term of 12 months
commencing on May 1, 2021. Pursuant to the terms of this policy, all the
Directors and Senior Managers are insured. The new policy does not exclude
past public offerings and covers the risk that may be incurred by the
Directors through future public offerings of equity up to the amount of USD 5
million.
b. Contingent liabilities and commitments to others:
1. As part of the completion of the restructuring plan (refer also
to Note 8), the Group has taken the following commitments and collaterals
towards the creditors:
a) Restrictions on issuance of additional bonds - The Company
undertakes not to issue any additional bonds other than as expressly provided
for in the Restructuring Plan.
b) Restrictions on amendments to the terms of the bonds - The Company
shall not be entitled to amend the terms of the bonds, with the exception of
purely technical changes, unless such amendment is approved under the terms of
the relevant series and the applicable law and the Company also obtains the
approval of the holders of all other series of bonds issued by the Company by
ordinary majority. Refer to Note 8 for recent amendments.
c) Coverage Ratio Covenant ("CRC") - the CRC is a fraction calculated
based on known Group valuation reports and consolidated financial information
available at each reporting period. The CRC to be complied with by the Group
is 118% ("Minimum CRC") in each reporting period. For December 31, 2021 the
calculated CRC is not in compliance with Minimum CRC (also refer to Note 8(d)
regarding breach of covenant). In the event that the CRC is lower than the
Minimum CRC, then as from the first cut-off date on which a breach of the CRC
has been established and for as long as the breach is continuing, the Company
shall not perform any of the following: (a) a sale, directly or indirectly, of
a Real Estate Asset ("REA") owned by the Company or a subsidiary, with the
exception that it shall be permitted to transfer REA's in performance of an
obligation to do so that was entered into prior to the said cut-off date, (b)
investments in new REA's; or (c) an investment that regards an existing
project of the Company or of a subsidiary, unless it does not exceed a level
of 20% of the construction cost of such project (as approved by the lending
bank of these projects) and the certain
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
loan to cost ratio of the projects are met.
If a breach of the Minimum CRC has occurred and continued
throughout a period comprising two consecutive quarterly reports following the
first quarterly/year-end report on which such breach has been established,
then such breach shall constitute an event of default under the trust deeds,
and the Bondholders shall be entitled to declare that all or a part of their
respective (remaining) claims become immediately due and payable.
d) Minimum Cash Reserve Covenant ("MCRC") - cash reserve of the Company
has to be greater than the amount estimated by the Company's management
required to pay all administrative and general expenses and interest payments
to the bondholders falling due in the following six months, minus sums of
proceeds from transactions that have already been signed (by the Company or a
subsidiary) and closed and to the expectation of the Company's management have
a high probability of being received during the following six months. MCRC is
not maintained as of December 31, 2020 and 2021.
e) Negative Pledge on REA of the Company - The Company undertakes that
until the bonds have been repaid in full, it shall not create any encumbrance
on any of the REA, held, directly or indirectly, by the Company except in the
event that the encumbrance is created over the Company's interests in a
subsidiary as additional security for financial indebtedness ("FI") incurred
by such subsidiary which is secured by encumbrances on assets owned by that
subsidiary.
f) Negative Pledge on the REA of Subsidiaries - The subsidiaries shall
undertake that until the bonds have been repaid in full, none of them will
create any encumbrance on any of REA except in the event that:
(i) the subsidiary creates an encumbrance over a REA owned by such
subsidiary exclusively as security for new FI incurred for the purpose of
purchasing, investing in or developing such REA; Notwithstanding the
aforesaid, subsidiaries shall be entitled to create an encumbrance on land as
security for FI incurred for the purpose of investing in and developing, but
not for purchasing, an REA held by a different Group company (hereinafter: a
"Cross Pledge"), provided the total value of the lands owned by the Group
charged with Cross Pledges after the commencement date of the plan does not
exceed EUR 35 million, calculated on the basis of book value (the "Sum of
Cross Pledges"). When calculating the Sum of Cross Pledges, lands that were
charged with Cross Pledges created prior to the commencement date of the plan
or created solely for the purpose of refinancing an existing FI shall be
excluded. The Group did not have cross-pledge as of December 31, 2021.
(ii) The encumbrance is created over an asset as security for
new FI that replaces existing FI and such asset was already encumbered prior
to the
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
refinancing. Any excess net cash flow generated from such refinancing, shall
be subject to the mandatory early prepayment of 75%.
The encumbrance is created over interests in a Subsidiary as additional
security for FI incurred by such subsidiary which is secured by encumbrances
on assets owned by that subsidiary as permitted by sub-section (i)
above.
The encumbrance is created as security for new FI that is incurred for
purposes other than the purchase of and/or investment in and development of a
REA, provided that at least 75% of the net cash flow generated from such new
FI is used for mandatory early prepayment.
g) Limitations on incurring new FI by the Company and the subsidiaries
- The Company undertakes not to incur any new FI (including by way of
refinancing an existing FI with new FI) until the outstanding bonds debt (as
of November 30, 2014) have been repaid in full, except in any of the following
events:
(i) the new FI is incurred for the purpose of investing in the
development of a REA, provided that: (a) the Loan To Cost ("LTC") Ratio of the
investment is not less than 50% (or 40% in special cases); (b) the new FI is
incurred by the subsidiary that owns the REA or, if the FI is incurred by a
different subsidiary, any encumbrance created as security for such new FI is
permitted under the negative pledge stipulation above; and (c) following such
investment the consolidated cash is not less than the MCRC;
(ii) The new FI is incurred by a subsidiary for the purpose of
purchasing a new REA by such Subsidiary, provided that following such purchase
the cash reserve is not less than the MCRC.
(iii) At least 75% of the net cash flow resulting from the incurrence of
new FI is used for a 75% early prepayment of the bonds. Subject to the terms
of the plan, the Group may also refinance existing FI if this does not
generate net cash flow.
h) No distribution policy - The Company's ability to pay dividend is
limited unless certain conditions are met.
i) 75% mandatory early repayment - Refer to Note 8 and to other
sections in this note regarding changes in increase of repayment to 78%.
2. General commitments and warranties in respect of trading
property disposals:
In the framework of the transactions for the sale of the Group's real estate
assets, the Group has provided indemnities which are customary for such
transactions to the respective purchasers.
Such indemnifications are limited in time and amount. No indemnifications were
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
exercised against the Group till the date of the statement and approval of the
financial position
3. The Company is liable to the buyer of its previously owned
shopping centre in the Czech Republic ("NOVO") - sold in June 2006 - in
respect to one of its tenants ("Tesco"). Tesco leased an area within the
shopping centre for a period of 30 years, with an option to extend the lease
period for an additional 30 years, in consideration for EUR 6.9 million which
was paid in advance. According to the lease agreement, the tenant has the
right to terminate the lease agreement subject to fulfilment of certain
conditions as stipulated in the agreement.
In case Tesco leaves the mall before expiration of lease
period the Company will be liable to repay the remaining consideration in
amount of EUR 1.29 million as of balance sheet date, unless the buyer finds
another tenant that will pay higher annual lease payment than Tesco. The
management does not expect to bear a material loss.
4. Contingent liabilities due to legal proceedings:
The Company is involved in litigation arising in the ordinary course of its
business. Although the final outcome of each of these cases cannot be
estimated at this time, the Company's management believes, that the chances
these litigations will result in any material outflow of resources to settle
them is remote, and therefore no provision or disclosure is required.
5. Lawsuit against entities involved in the sale of U.S. shopping
centers in 2011:
In March 2018, a shareholder of the Company (hereinafter: "the Plaintiff")
filed a motion with the Economic Department of the District Court in Tel-Aviv
to reveal and review internal documents of the Company and of Elbit Imaging
Ltd. (hereinafter: "Elbit") (hereinafter: "the Motion"), in which the Court
was asked to instruct the Company and Elbit (hereinafter together: "the
Respondents") to provide the plaintiff with certain documents of the
respondents in connection with the Casa Radio project in Romania and with the
sale of the U.S. Shopping Centers in 2011.
In February 2020, an agreement was reached between the Plaintiff and the
Respondents according to which the motion will be dismissed by consent and the
plaintiff and the respondents (hereinafter: "the Parties") will jointly
examine the feasibility of the lawsuit in connection with the above events.
In light of the aforesaid, an agreement was signed between the Plaintiff, the
Respondents and First Libra Israel Ltd. (hereinafter: "Libra") according to
which Libra will finance all the expenses of filing and managing of a new
lawsuit by the Respondents against certain parties (certain officers in the
Respondents, a portion of the heirs of Motti Zisser (the former controlling
shareholder of the Respondents and other parties)) who were involved in the
Respondents' transaction for the sale of real estate in the United States in
2011 and for which funds (brokerage fees) were allegedly illegally transferred
to private companies controlled by the late Mr. Motti Zisser (hereinafter:
"Financing Agreement" and "New Lawsuit", respectively).
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
The parties to the Financing Agreement agreed, inter alia, that
any consideration received as a result of the New Lawsuit (to the extent
received) (hereinafter: "the Lawsuit Funds") will first be used to reimburse
Libra's expenses for the New Lawsuit (plus interest and VAT) and the balance
after deduction of such expenses (hereinafter: "the Balance of the Lawsuit
Funds") will be divided among all those involved in the New Lawsuit, so that
each of the Company and Elbit will be entitled to circa 20.75% of the Balance
of the Lawsuit Funds.
In order to ensure the distribution of the Lawsuit Funds as stated above, both
the Company and Elbit signed lien documents in favor of Libra, the Plaintiff
and the attorneys representing them (hereinafter collectively: "the
Eligibles") with respect to the reimbursement of expenses and their portion in
the Lawsuit Funds (hereinafter: "the Lien").
On October 18, 2020 the parties filed the New Lawsuit (in the amount of
circa NIS 60 million (approximately EUR 15 million)).
On February 2, 2021, Ran Shtarkman filied a motion to dismiss the lawsuit
against him in limine. On April 5, 2021, the court rejected the defendant Ran
Shtarkman's motion to dismiss the lawsuit against him in limine. An appeal
that was filed to the Supreme Court in respect of this decision was denied.
On April 4, 2021, one of the defendants, Philip Meyer, filed a motion for
dismissal in limine of the lawsuit against him. On August 10, 2021, the motion
was accepted. On November 14, 2021, the Company and Elbit filed an appeal to
the Supreme Court upon this court decision. A court hearing is schedule on
January 4, 2023.
On September 14, 2021, the defendant David Zisser also filed a motion to
dismiss in limine the lawsuit against him. Following the Company's and Elbit's
motions, on November 4, 2021, the court ordered that the discussion on the
abovementioned motion will be stayed until a decision of the Supreme Court on
the appeal against Philip Meyer.
6. For details on the notice which were issued to a local investor
in the Bangalore project - India and on the Environmental status of the
property in the project please refer to Note 6(b)(1).
7. Dutch statutory auditor:
As described in Note 2(a) these consolidated financial
statements are not intended for statutory filing purposes. The Company is
required to file consolidated financial statements prepared in accordance with
The Netherlands Civil Code. During 2019 the Company has been informed by the
audit firm, Baker Tilly (Netherlands) N.V., that they would cancel their
license to audit public interest entities (such as the Company) and that, as a
consequence, they are not in the position to provide the Company with their
audit services for the 2019 statutory annual accounts. As a listed company,
the Company needs to engage a Dutch audit firm that is licensed to perform
audits for public interest entities. The choice for such firms in the
NOTE 16:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Netherlands is very limited as only six firms have the
appropriate license.
Despite extensive effort of the Company to find a new Dutch
auditor, none of those six firms has been found prepared to accept the Company
as their client. The Company approached in writing the Dutch Ministry of
Finance, The Royal Dutch Institute of Chartered Accountants, the Authority for
the Financial Markets to indicate the severe adverse consequences the Company
would suffer if this problem will not be solved but none of those authorities
has been able to find the solution. The Royal Dutch Institute of Chartered
Accountants has put considerable effort in helping the Company by approaching
audit firms and assessing their procedures for client acceptance but has no
legal possibilities at its disposal to force audit firms to accept a specific
client. This leaves the Company in the awkward position of not being able to
meet its obligations regarding the statutory audit.
The Company has proposed to the authorities various
alternative solutions to get the annual accounts of 2019 audited. It appeared
that none of those are legally feasible and none of the addressees came up
with any alternatives. It is now time to emphasize that the Company exhausted
its sources to comply with the requirements of mandatory Dutch law.
Due to the above and in order to avoid an outright
violation of applicable stock exchange regulations, the Company decided to
engage EY Israel to audit its IFRS consolidated annual accounts and to issue
an auditor statement on that. The Company submitted the annual consolidated
financial statements as of December 31, 2019 and as of December 31, 2020 which
were filed to the London Stock Exchange, the Warsaw Stock Exchange and the Tel
Aviv Stock Exchange, to the Authority for the Financial Markets and to other
relevant Dutch authorities.
As of the date of approval of these consolidated financial
statements the Company still didn't find any solution to get the annual
accounts of 2019, 2020 and 2021 audited therefore, it will submit the annual
consolidated financial statements as of December 31, 2021 that were filed to
the London Stock Exchange, the Warsaw Stock Exchange and the Tel Aviv Stock
Exchange, to the Authority for the Financial Markets and to any other relevant
Dutch authorities.
NOTE 17:- RELATED PARTY TRANSACTIONS
Related party transactions
Transactions between the Company and its subsidiaries have been eliminated on
consolidation and are not disclosed in this note. Details of transactions
between the Group and other related parties are disclosed below.
NOTE 17:- RELATED PARTY TRANSACTIONS (Cont.)
During the year, Group entities had the following trading transactions with
related parties that are not members of the Group:
Year ended
December 31,
2021 2020
Costs and expenses
Recharges - Elbit Imaging Ltd. 13 29
Compensation to key management personnel 170 174
Performance linked benefits - management - 28
Compensation to board members (1) 224 230
The amounts disclosed in the table are the amounts recognised as an expense
during the reporting period related to key management personnel.
(1) 2021 - two board members; 2020 - two board members.
On March 23, 2020 Mr. David Dekel was appointed as the non-executive Chairman
of the Board of Directors.
Year ended
December 31,
2021 2020
Other liabilities
Elbit Imaging Ltd 26 13
Due amounts to directors and key management personnel 44 19
As of December 31, 2021, the Company identified Davidson Kempner Capital
Management LLC ("DK") among the Company's related parties.
DK holds 26.3% of the Company's outstanding shares of the Company as of the
reporting date, following the finalization of the Restructuring plan. DK has
no outstanding balance as of the reporting date with any of the Group
companies.
Update regarding a change in Elbit Imaging Ltd holdings
Since August 5, 2020 and up to last announcement Elbit Imaging sold about
1,670 thousand shares of the Company for a total consideration of
approximately NIS 1,683, thus, Elbit Imaging holdings in the Company have
diminished from 44.9% to 20.55% of the Company's issued and paid-up capital.
After the reporting date, out of the above, Elbit Imaging sold about 77
thousand shares of the Company for a total consideration of approximately NIS
150 thousand, thus, Elbit Imaging holdings in the Company have diminished by
2.67%.
NOTE 18:- DISCLOSURE OF MATERIAL EVENTS DURING AND AFTER THE REPORTING PERIOD
a. For details regarding a change in Elbit Imaging Ltd holdings refer to
note 17.
b. Update regarding an Engagement letter with a law firm in London in
connection with the legal proceedings in the "Casa Radio"
project
On January 14, 2022 the Company announced, that further to the Company's
bondholders meeting dated November 25, 2021 and the Company's bondholders'
approval to initiate legal procedures in connection with the "Casa Radio"
project (the "Project"); that on January 13, 2022, the Company signed an
engagement letter with a law firm in London in order to take any relevant
actions in connections with the Project.
For details in connection with the legal proceedings in the "Casa Radio"
project please refer to Note 5.
c. Update regarding the issuance of a notice of dispute and acceptance
of offer and consent to arbitrate to Romania with respect to the "Casa Radio"
project
On February 15, 2022 the Company announced, further to the Company's
bondholders meeting dated November 25, 2021 and the Company's bondholders'
approval to initiate legal procedures in connection with the "Casa Radio"
project (the "Project"); that on January 13, 2022, the Company signed an
engagement letter with a law firm in London in order to take any relevant
actions in connections with the Project.
For details in connection with the legal proceedings in the "Casa Radio"
project please refer to Note 5.
d. Update regarding proposal the Company received
In the period since July 9, 2021 till August 10, 2021, the Company received
proposals from G.C. Hevron Capital Ltd ("Hevron Capital") based on which the
Company's assets will be transferred to a trustee and/or will be managed
exclusively for the benefit of the bondholders, in order to create a mechanism
according to which the bondholders will exclusively benefit from any expected
income from the existing assets.
On July 21, 2021 the Company received additional proposal from L.I.A. Pure
Capital Ltd. to purchase shares of the Company, as a publicly-traded shell
company.
On July 30, 2021 the Company received additional proposal from Zero One
Capital Ltd to preserve the Company's existing assets in favor of the
Company's bondholders and other interested persons and simultaneously to
enable to flow new activity.
All proposals were discussed on bondholders meeting which was held on August
1, 2021. Following this bondholders meeting, an additional bondholders meeting
was held on August 11, 2021, in which the bondholders decided to approve that
the Company's Board of Directors can conduct a negotiation with G.C. Hevron
Capital Ltd regarding the sale of the Company's public structure and to grant
a no shop for a period of 60 days during which due diligence will be carried
out by G.C. Hevron Capital Ltd and its advisor.
NOTE 18:- DISCLOSURE OF MATERIAL EVENTS DURING AND AFTER THE REPORTING PERIOD
(Cont.)
On October 4th, 2021 the Company received a request from G.C Hevron Capital
Ltd. to extend the "NO-SHOP" period, as Hevron Capital and its attorneys might
not succeed to submit the agreement within the designated time schedules, due
to the holiday's period and the complexity of the transaction.
The Company's Board of Directors has discussed Hevron Capital's request, as
stated above, and decided to approve an extension of the "NO-SHOP" period by
an additional 30 days, until November 12, 2021.
On March 30, 2022 the company announced that Hevron Capital submitted to the
Company a request to extend the No-Shop period, due to the complexity and the
vast amount of data that needs to be procced in order to evaluate the proposed
settlement ("Hevron Capital' Request").Following the above, the Company's
Board of Directors approves Hevron Capital's Request to extend the "No-Shop"
period until May 20, 2022 subject to the approval of the Company's
bondholders'.
NOTE 19:- LIST OF GROUP ENTITIES
As of December 31, 2021, the Company owns the following companies (all are
100% held subsidiaries at the end of the reporting period presented unless
otherwise indicated):
Romania
Indirectly or jointly owned
Dambovita Center S.R.L. Mixed-use project 75% held by Dambovita Centers Holding B.V.
Casa Radio project
The Netherlands
Directly wholly owned
Plaza Dambovita Complex B.V. Holding company
Plaza Centers Enterprises B.V. Finance company 100% held by Plaza Dambovita Complex B.V.
Mulan B.V. (Fantasy Park Enterprises B.V.) Holding company Holds Fantasy Park subsidiaries in CEE
Plaza Centers Management B.V. Holding company
Dambovita Centers Holding B.V. Holding company 100% held by Plaza Centers N.V.
Plaza Bas B.V. Holding company 50.1% held by Plaza Centers N.V.
Cyprus - India
Indirectly or jointly owned
Elbit Plaza India Real Estate Holdings Ltd. Holding company Equity accounted investee
47.5% held by Plaza Centers N.V.
Polyvendo Ltd. Holding company 100% held by Elbit Plaza India Real Estate Holdings Ltd.
Elbit Plaza India Management Services Pvt. Ltd. Management company 99.99% held by Polyvendo Ltd.
Vilmadoro Ltd. Holding company 100% held by Elbit Plaza India Real Estate Holdings Ltd.
Aayas Trade Services Pvt. Ltd. Mixed-use project 99.9% held by Elbit Plaza India Real Estate Holdings Ltd.
Bangalore project
Entities disposed or dissolved in 2021
Poland
EDP Sp. z o.o. Inactive Company dissolved 01/2021
Cyprus - India
Kadavanthra Builders Pvt. Ltd. Mixed-use project Company sold 06/2021
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. END FR UARURUSUOOARRecent news on Plaza Centers NV
See all newsREG - Plaza Centers N.V. - COMPANY PRESENTATION
AnnouncementREG - Plaza Centers N.V. - Statement re Tax Authority Investigation
AnnouncementREG - Plaza Centers N.V. - APPOINTMENT OF COMPANY'S AUDITOR
AnnouncementREG - Plaza Centers N.V. - Result of AGM
AnnouncementREG - Plaza Centers N.V. - UPDATE ON THE PRE-SALE OF DAMBOVITA CENTER PROJECT
Announcement