Orco-Colony deal becomes less likely

The struggling Central European property firm, Orco Property Group, has reportedly hired UBS bank to help find potential new investors. Colony is still in talks to acquire a stake in the group after Orco filed for bankruptcy protection.

Orco Property Group has hired UBS bank to search out new investors after the firm’s chief executive suggested a deal with Colony Capital was becoming less likely.

CEO Jean-Francois Ott reportedly told the Czech Republic newspaper Hospodarske Noviny that a deal on debt restructuring with bondholders was unlikely before Colony’s share exclusivity period ends next month.

“We authorised Swiss bank UBS to start searching out potential new shareholders,” he was cited as saying.

In May, Orco said Colony was planning to inject up to €25 million of equity in the company by the end of the second quarter through a subsidiary, CoLOG. The capital injection would be in partnership with Ott.

A further €140 million was expected to be committed to the firm once the bankruptcy protection process, known as Procédure de Sauvegarde, were completed. Orco filed for bankruptcy protection, which lasts six months, in March.

According to a Reuters report today of the interview, Ott said some bondholders in Orco had balked last month at receiving shares in the real estate group as part of a debt restructuring plan, killing a deal to restructure bonds worth €411 million.

He said Orco still had creditor protection so was under no time pressure for a new debt deal, and that the group would negotiate more with Colony. “A chance at a deal [with Colony Capital] is still there.”

Approval of the debt restructuring plan was a condition for Colony Capital to go ahead with an €80 million equity injection into the firm. An extraordinary general meeting of shareholders will be held on 20 October to vote on the Colony plan.

Orco has teamed up with various private equity real estate firms to develop projects across Europe, including Morgan Stanley Real Estate Funds, AIG Global Real Estate and GE Real Estate.