The Czech business news publisher E15, carries a fascinating interview with Alexis Juan, a member of the board at Orco. Juan was brought on board to comply with demands from the French court overseeing the safeguard procedure at Orco. It insisted that a majority of the board members be independent of the developer, and Juan was proposed back in June 2009.
And to be fair, Juan goes to considerable lengths in the interview to establish himself as being independent. For example, when explaining why, when he was the head of Komercni banka, he didn’t lend Orco a single crown.
“Jean Francois Ott often came to me and said, ‘look, CSOB lends me money, Erste Bank lends me money, and you don’t want to. I told him, look, I’m not going to lend you money for two reasons. Your debt is too high, and I can’t accept that.’ Another important reason was within the Societe General group, developers weren’t given loans. We didn’t have experience with it.”
KB did eventually lend Orco money, after he left, and he was eventually involved in getting that loan refinanced, arguing that the developer was paying interest on time.
“KB’s position was that the loan was supposed to be paid back in September 2009, and they didn’t want to extend it. I told them they weren’t financing a normal development project, you’re financing something like La Defense in Paris. That takes many years of work. In the end, they understood.”
Juan points out that Orco managed to lend from 33 different banks. The journalist asked the most basic of questions, “how did it manage to do that” and got a laser straight answer.
“Because the company was a fairy tale story of success, because the market was going up, demand for residential and offices was rising in the region, because – and now we’re at the cause of the financial crisis – it was simple to get money. Lots of money. Cheap money with little collateral. Now we have to be patient.”
He also outlines what he calls a new solution to the bondholders, who rejected Orco’s latest offer on January 20.
“Two weeks ago, we gave the court a new solution: a ten-year payment calendar. The company will of course continue to pay interest, but will return the principle according to a payment calendar. One percent the first year, 5% for years two to six, 10% in year seven, 20 in year eight, and 25% in the ninth and tenth years. In all, €553m, including the capitalized interest. During this time, the company will be able to carry out its restructuring plan.”
If nothing else, it’s a remarkably candid sounding interview and there’s a lot more. It’s not that what’s being said is so shocking, it’s just the openness of the tone from such a senior figure. Is this the beginning of a new strategy?
If you read Czech, the interview is here. If not…well, you can’t expect a full translation for free, can you?