* Deal subject to bond restructuring
* Analysts note risk Colony could walk away
* Shares jump before paring gains on market sentiment
(Adds conference call comments, analyst)
By Jason Hovet
PRAGUE, June 23 (Reuters) - Orco Property Group <ORCO.PA>
<> agreed to grant U.S. group Colony Capital warrants
that could boost its capital by 80 million euros ($111 million)
or more once it escapes from creditor protection.
The global economic downturn has severely impacted demand
for new homes and office buildings in central Europe, and banks
have toughened lending in debt-strapped Orco's key markets.
Orco was given court protection from creditors in March for
a renewable six-month period, and the central European developer
said on Tuesday the exercise of the warrants granted to Colony
was dependent on restructuring its bond debt in that time.
[]
Chief executive Jean-Francois Ott said Orco had 400 million
euros in outstanding bond debt and 1.1 billion in bank loans.
"We have to restructure, we want to restructure the bonds,
and that's a job that will be done over the next few weeks," Ott
told reporters on a conference call.
He said the company was starting to speak with bondholders,
and was looking to offer one proposal, which included a possible
debt for equity transaction.
He added about the possible Colony stake: "What that brings
to us is that we can, in the very near future, have a company
that has restructured its debt, reinforced its equity and also
has a substantial amount of cash to invest in its projects."
The shares, which would be subscribed to ColOG, a company
controlled by Colony-advised funds, will be priced at 7 euros.
The same subscription price will be offered to existing
shareholders, which hold Orco's 10.9 million shares, at a
one-to-one ratio. Ott said the company could raise up to a total
140 million euros, provided that most shareholders subscribe.
The company's founder 18 years ago, Ott has fought off
pressure from some shareholders seeking his removal.
A group which claims to control 14 percent of the developer,
SOS Orco, said on Tuesday the conditions Colony put on the deal
showed its distrust in the company's state since there was no
commitment to provide capital.
Orco had started talks with Colony at the end of April on a
possible 25 million euros reserved capital hike, with the option
of raising another 140 million. []
Under a deal worked out late on Monday, ColOG's equity stake
should not exceed 30 percent, Orco said, and the terms of the
deal are valid until Nov. 30.
Orco shares jumped as much 12 percent on Tuesday, before
paring gains. By 1202 GMT, shares traded at 6.07 euros and 165
crowns, respectively up 5.4 percent and 4.5 percent.
Analysts, though, took a harsher view.
"It is still possible that Colony Capital will not use its
right to subscribe new shares, and Orco will have to look for a
new investor," said Atlantik FT analyst Patrick Vyroubal.
Orco operates in the Czech Republic, Germany, Poland,
Slovakia, Hungary and Croatia, and holds more than 2 billion
euros in assets. It posted a 391 million euro loss in 2008.
Orco shares have held steady since March 26 when it sought
creditor protection but trade down 88 percent from a year ago.
($1=0.7216 euros)
(Reporting by Jason Hovet; Editing by Dan Lalor and Mike
Nesbit)
