RNS Number : 3958X
EuroTrust A/S
24 June 2008
24 June 2008
Eurotrust A/S
("Eurotrust" or the "Company")
Disposal of Property Development Business
and Working Capital Update
Summary
* Eurotrust is pleased to announce that a conditional agreement has been reached to sell the Company's property development business
for consideration of up to DKK 325m (EUR44m) with net debt of DKK 644m (EUR86m) being transferred to the Buyer
* The conditions to the SPA are required to be satisfied by 30 June 2008. The Directors are confident that Completion will take
place by this date, although they point out that fulfilment of the relevant conditions is not in the sole control of the Company
* If Completion does not occur by 30 June 2008, the Group would face a significant cash shortfall, and in such circumstances the
Directors would have to consider all options available to generate liquidity
* Following the disposal of the property development business the Company will require equity financing in the short to medium term.
The Directors have, however, already been in negotiations with strategic investors, who have expressed their interest in investing equity
capital to the newly focused and profitable wind energy business.
* Upon completion of the Disposal, Brian Birkenhead will become Non-executive Chairman and Bo Kristensen (current Chairman) and
Peter Juul will resign from the Board of Directors
Commenting on the Disposal, the Chairman-designate Brian Birkenhead said:
"The proposed sale of Eurotrust's property development activities is a necessary step in the Company's ambition to become a leading
independent wind energy producer in Europe. Completion of the transaction will be the first step in reaching our goal. Once that is
completed, while significant challenges will remain, Eurotrust can focus on raising capital to fund the development of its high quality wind
energy business."
CEO Robert Skjoedt said:
"Eurotrust benefits from a talented and committed team of wind energy professionals. With the disposal of the property development
activities nearly behind us, the Company can focus on raising capital and pursuing its medium term target of 1,000 MW in operation in the
next three to five years."
The above is a summary only and should be read in conjunction with the rest of this announcement, which should be read in full. Figures
quoted in EUR have been calculated on the basis of an exchange rate of 7.45 DKK/EUR.
1 Introduction
In September 2007, Eurotrust, the European wind power producer and real estate developer, announced its intention to dispose of its
property development division in order to capitalise on its wind energy business and to take advantage of the significant opportunities in
the market.
The Company is pleased to announce that it has entered into a conditional agreement for the disposal of the Target Companies (as defined
in the Annex to this announcement), representing substantially all of the Group's property development business, with CSV Invest ApS (a
wholly owned subsidiary of the Copenhagen Stock Exchange listed company Capinordic). Following Completion,
CSV will on-sell the majority of the relevant assets to Olicom (also listed on the Copenhagen Stock Exchange).
The Directors believe that disposing of the property development division will allow the Company to focus on developing its profitable
wind energy business and that, as a stand-alone renewable energy company, the Company will be more attractive to investors thereby
increasing the opportunities to raise capital needed for development. Importantly, the Disposal will reduce the Group's liabilities and
expense base.
Agreement with CSV has been reached following completion of an auction process (conducted by the Company in conjunction with Carnegie
Bank A/S) and extensive negotiations with a number of potential purchasers and, as such, in the opinion of the Independent Directors, the
Disposal represents the best available option for the Group given the poor future prospects for the Group should it be required to continue
to support the property development division as presently capitalised and in such challenging markets.
Consideration under the SPA:
The maximum consideration payable under the SPA is up to DKK 325m (EUR44m) (payable in stages) together with repayment of certain
operating expenses incurred by the property development division since 1 April 2008. The obligations of the parties under the SPA are
subject to a number of conditions, which must be fulfilled by 30 June 2008 and full details of these (together with details of the timing
and nature of consideration) are set out in paragraph 2 of this announcement. The Board intends to use the initial cash consideration of DKK
75m (EUR10m) (payable on Completion) primarily to repay certain indebtedness of the Group, with the balance being applied towards working
capital requirements.
As part of negotiating the terms of the Disposal, the Company and certain of its lenders have agreed to a variation of the terms of
certain of the Group's debts. These arrangements are conditional upon the Disposal completing, and accordingly should Completion not occur
the Company would face significant repayment obligations at the end of this month.
As part of the Disposal, the Buyer will assume net debt obligations totalling DKK 644m (EUR86m). The Company currently guarantees
certain of these obligations, although the Directors are seeking to negotiate appropriate releases from the relevant creditors. Further
details are set out in paragraph 4 of this announcement.
Conditions to the SPA:
The SPA is subject to certain conditions, and whilst the Directors are confident that these will be fulfilled by 30 June 2008,
fulfilment of the relevant conditions is not in the sole control of the Company. Accordingly, there can be no guarantee that such conditions
will be satisfied. In the event that the SPA does not become unconditional and Completion does not occur (or if it is delayed beyond 30 June
2008) the Directors will seek to agree an extension of the Group's repayment obligations with the Banks, but in the absence of a successful
disposal of the property development division there can be no guarantee that agreement on any such extension would be reached, or that any
such extension would be on terms which the Directors would consider to be in the best interests of the Company's shareholders.
Accordingly, if Completion does not take place and, as a result, an extension cannot be agreed, the Directors would consider all options
for meeting the Group's funding shortfall including raising additional funds by disposing of some or all of the Group's wind farm assets
and/or real estate assets and seeking a potential offer for the Group or its business on a going concern business. However, an extension of
the Group's repayment obligations would still be required, and there can be no guarantee that any such extension would be made available or
that the relevant creditors would not immediately seek repayment of the relevant debts as they fall due. In these circumstances, considered
by the Directors to be unlikely, there will be no other alternative but for the Company to seek to enter into a court sanctioned agreement
or arrangement with its creditors.
Nonetheless, the Directors are optimistic that Completion will be achieved and that the Group will therefore be able to focus on
developing its wind business.
Equity fundraising:
The Group will require additional equity capital to be injected from external sources in the short to medium term, as well as the
continued support of its lenders, in order to be able to continue the growth of the wind farm business and to pursue its stated strategy of
becoming a leading independent wind power producer in Europe. The successful conclusion of a fundraising will be key to maintaining and
improving the Group's financial condition. The Company has commenced discussions regarding a potential equity injection, further details of
which are set out in paragraph 6 of this announcement.
General
Although the Disposal is not a related party transaction for the purposes of the AIM Rules, in view of his position as a director and
shareholder of Capinordic, Erik Damgaard has not taken part in the Independent Directors' decision to approve the Disposal.
Defined terms have the meanings set out in the Annex to this announcement.
2 Principal terms of the SPA
The Target Companies will on Completion be sold to CSV (a wholly owned subsidiary of the Copenhagen Stock Exchange listed company
Capinordic) on a going concern basis. Olicom (also listed on the Copenhagen Stock Exchange) will, following Completion, on-purchase the
majority of the relevant assets.
The maximum consideration payable under the SPA is up to DKK 325m (EUR44m). Initial consideration of DKK 75m (EUR10m) is payable on
Completion, subject to adjustment in accordance with the transfer balance mechanism set out in the SPA. The Company will also be entitled to
additional contingent consideration in certain circumstances, which will be calculated as a percentage of the aggregate net result of
certain projects. The additional consideration payable pursuant to the earn out arrangements is subject to a cap of DKK 250m (EUR34m) and is
payable on completion of the projects concerned. The latest date for calculation and payment of the earn out consideration is 2024, and the
value of any relevant project not completed at the time shall be assessed and included in the calculation of the final earn out. In
addition, the Company will receive (on Completion) an amount representing certain operating expenses of the property development division
since 1 April 2008. The quantum of this payment will not be determined until Completion, and will be announced by the Company at that time.
The SPA is conditional upon (inter alia):
* CSV and Olicom being put in funds in order to satisfy payment of part of the consideration;
* obtaining certain undertakings from a number of the Group's lenders in relation to the continued availability of financing in
relation to the property development division; and
* obtaining the release of certain companies within the real estate division from cross-guarantees relating to outstanding debts
relating to the wind energy division.
It is a term of the SPA that these conditions must be fulfilled by no later than 30 June 2008 and if they are not fulfilled (or waived)
by such time then the obligations of the parties under the SPA will lapse.
The SPA contains certain restrictions on the conduct of the business of the Target Companies between the date of the SPA and Completion,
including that the business of such companies shall be conducted in the usual course in all material respects.
The Company has given certain customary warranties to CSV under the SPA relating to the capacity of the Company to enter into and
perform its obligations under the SPA and the business and assets of the Target Companies and their subsidiaries. The SPA also contains
mutual indemnities given by CSV and the Company in relation to losses suffered by either party as a result of breach of the SPA. As is
customary, the Company's liability in relation to the warranties given by it under the SPA is subject to certain limitations in time and
amount.
The parties have also entered into certain ancillary agreements pursuant to the SPA, including a transitional services agreement whereby
the Company has agreed to continue to deliver certain IT and finance services to the Target Companies for a period of up to six months from
Completion.
3 Turnover and profits attributable to the Target Companies
The following financial information in respect of the business to be sold has been extracted, without material adjustment, from the
underlying supporting schedules to the audited accounts of the Group for the year ended 30 June 2007 and the unaudited interim results of
the group for the six months ended 31 December 2007.
Year ended 30 June 2007 Six months ended 31 December 2007
1,000 DKK 1,000 Euro 1,000 DKK 1,000 Euro
Turnover 175,509 23,558 49,380 6,628
Loss before Tax -86,744 -11,643 -51,797 -6,953
4 Financial effects of the Disposal
The initial proceeds of the Disposal (which are subject to adjustment in accordance with the transfer balance mechanism set out in the
SPA) will primarily be applied towards the repayment of certain debt, with the balance being applied towards working capital requirements.
After such repayment, the Company will be left with debt liabilities of a corporate nature and property related liabilities. A significant
proportion of these debts were due for repayment at the end of this month, however a satisfactory new repayment programme has been agreed
with the relevant creditors of the Group who have confirmed that repayment at the end of this month will not be mandatory provided the
Disposal completes.
Furthermore, as part of the Disposal, the Buyer will assume the net debts of the business being acquired (approximately DKK 644m
(EUR86m) in aggregate). The Company currently guarantees approximately DKK 276m (EUR37m) of these obligations, although the Directors are
confident that in practical terms any actual exposure would be significantly lower. The Directors are, in any event, in negotiations with
the relevant creditors of the Group to seek appropriate releases, and are confident that such releases can be obtained in relation to a
significant proportion of this sum prior to (or shortly following completion of) the Disposal. There can however be no certainty that such
releases will be obtained, and in these circumstances the Company would have continued potential exposure under the relevant guarantees.
5 Information on the Group
Wind division:
Following Completion, the principal business of the Company will be the development of wind farms with the aim of becoming a leading
independent wind power producer in Europe. The medium term goal remains to achieve 1,000 MW of installed capacity in the next three to five
years and, following Completion, the Company will have the freedom to pursue this stated aim without the distraction of non-core
activities.
The Company, through its subsidiaries and joint ventures, currently owns and has in operation wind farms with a total capacity of
approximately 130 MW (taking into account the Cortijo de Guerra wind farm referred to below) in Germany, Italy and Spain.
During March 2008, the Company finalised construction of the Cortijo de Guerra I wind farm (41 MW) in Spain, which was completed on
budget and began commercial operation in March of this year with testing and commissioning procedures completed in May.
Construction has also commenced on the 51 MW wind farm in Karcino which, once commissioned, will be one of the largest wind farms in
Poland. Subject to financing, Karcino is expected to be completed in 2009.
A further 5.9 MW is under construction in Brandenburg and Sachsen-Anhalt in Germany and an additional 335 MW is under development in
Europe with secured project rights.
In September 2007, the Company announced that European Wind Farms A/S (its 50.25% owned subsidiary) had entered into an agreement with
R.E. Wind Srl (an Italian wind farm developer) to jointly develop a portfolio of nine Italian wind farm projects in the regions of Tuscany,
Calabria, Puglia and Sicily totalling 683 MW (of which the Company will own an economic interest in 171 MW).
Property development division:
Trading in the property development division was below management expectations for the six months ended 31 December 2007, primarily due
to a weak real estate market and a defensive financial market which resulted in poor sales of real estate units across some of the Company's
projects and higher than expected costs, particularly at the RGolf and Wellness Centre.
Despite the implementation of management initiatives to boost sales and the good performance of the Company's real estate operations in
Norway, the overall trading performance in the property development division has continued to be very disappointing during 2008.
Following Completion, the Company will have disposed of substantially all of the property development division. The Company will however
retain certain property interests, including one project currently under cancellation (which was not therefore appropriate to be included as
part of the Disposal) and the RGolf and Wellness Centre which is now fully operational and which the Directors believe to be significantly
undervalued in the current market. The Directors believe that, by retaining the Rasset for the short to medium term, they will be able to
achieve a disposal on more favourable terms than is possible in the current market.
The intention of the Company remains to divest itself of all of its non-wind farm assets in due course.
Management, location of operations and employees
Following Completion, the Group will continue to operate primarily from its base in Kolding, and will employ approximately 79
individuals in aggregate of which 14 will be based in Kolding, 50 in Rand 15 employed by European Wind Farms A/S. This reduction from a
current headcount of 118 reflects the transfer out of the Group of those employees exclusively concerned with the property development
business.
It is intended that on Completion Bo Kristensen and Peter Juul (who have historically had responsibility for the property development
division) will resign as Directors of the Company and that Brian Birkenhead will take over the role of Non-executive Chairman.
The other Directors, namely Robert Skjoedt (CEO), Kim Simonsen (CFO), Erik Damgaard, Christian Rovsing, Jan Berger and Ernst Hoffmann
will continue in their current positions.
6 Prospects for the Group
The Company has, for a long time, been operating in difficult markets with contrasting prospects. The property development market has
been extremely weak in Denmark and Norway. As a result, the progress of the wind division has been limited by the financial pressure created
by the performance of the historically larger property development division. Given the strength of the Company's wind assets, and the
available market into which it can grow within Europe, the Directors are strongly of the opinion that the prospects of the Company
(including the prospects of securing future funding, which is key to the Company's strategy) will be greatly improved following a disposal
of the property development division.
Nonetheless, as stated above, the Group will require additional equity funding to be injected from external sources in the short to
medium term in order to be able to continue the growth of the wind farm business and to pursue its stated strategy of becoming a leading
independent wind power producer in Europe. The Directors have therefore entered into discussions with certain potential strategic investors
with a view to a significant equity injection being made into the Company in the short term. Whilst these discussions are progressing well
there can at this stage be no guarantee that these negotiations will reach a successful conclusion (in particular in circumstances where the
Disposal does not complete), and all possible financing options are therefore being pursued.
For further information, please contact:
Eurotrust A/S
Tel: +45 7696 6090
Robert Skjoedt
Chief Executive Officer
Kaupthing Singer & Friedlander Capital Markets Limited (Nominated Adviser/Broker)
Tel: +44 (0)20 3205 5000
Jos Trusted
Richard Savage
West Hill Corporate Finance Limited (Financial Adviser)
Tel: +44 (0) 207 464 8822
Alan Richards
John Terrando
Cubitt Consulting
Tel: +44 (0)20 7367 5100
Simon Brocklebank-Fowler
Michael Henman
Allison Reid
Annex - Defined Terms
Buyer or CSV CSV Invest ApS, a private limited company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under number 19 02 94 41
Board or Directors Bo Kristensen, Robert Skjoedt, Peter Juul, Kim
Simonsen, Erik Damgaard, Christian Rovsing, Jan
Berger, Brian Birkenhead and Ernst Hoffmann
Eurotrust or the Company Eurotrust A/S, a limited liability company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under number 10 29 81 48) and, where the
context requires, any company within the Group
Capinordic Capinordic A/S, a limited liability company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under number 13 25 53 42
Completion completion of the Disposal pursuant to the SPA
Disposal the proposed disposal of the Target Companies
(representing substantially all of the property
development business of the Group) and related
assets pursuant to the SPA
Group the Company and its subsidiaries
Independent Directors the Directors, other than Erik Damgaard
Olicom Olicom A/S, a limited liability company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under number 76 80 00 14
SPA the conditional sale and purchase agreement entered
into between the Company (1) and CSV (2) on 23 June
2008 pursuant to which CSV has agreed to buy and
the Company has agreed to sell the Target Companies
Target Companies the entire issued share capital of: (i) Aktiv
Gruppen Holding A/S (a limited liability company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under number 20 35 86 45), (ii) Real
Ejendomme A/S (a limited liability company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under CVR number 27 06 71 82) and (iii) C2
Invest ApS (a private limited liability company
incorporated under the laws of Denmark and
registered with the Danish Commerce and Companies
Agency under number 15 28 26 06) and 50.0002 per
cent. of the issued share capital of AGH Norge A/S
(a limited liability company incorporated under the
laws of Denmark and registered with the Danish
Commerce and Companies Agency under CVR number 28
71 19 48, the remaining 49.9998 per cent. of the
share capital of which is owned by Aktiv Gruppen
Holding A/S)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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