The credit committee of ECM Real Estate Investments has chosen to entrust the reorganization of the company to the development group Crestyl.
The reorganization of ECM REI was accepted back in March as the outcome by the courts of an insolvency process that had taken a year. Crestyl’s goal will be to minimize the impact of insolvency on ECM’s position and its properties.
Crestyl’s director Omar Koleilat said “This is a very interesting experience and I believe we’ll be able to complete the assignment successfully. We intend to work very closely with the credit committee and with the whole management of ECM.”
The option before the committee, and which was reportedly preferred by some, would have been to simply liquidate all the property of the company. The implication would seem to be that with a professional property company running the show, considered decisions on how best to proceed with ECM’s assets will be taken, meaning some properties may yet be developed in order to produce a greater level of return. Part of the deal is that ECM REI’s management structure will be changed, including the appointment of Koleilat as board member. ECM’s various companies will then be moved to Crestyl’s offices “in order to maximize the synergies of both teams.”
PPF has filed an injunction against potential changes to the board of directors at the failed developer ECM. A Prague court was due to decide whether to accept a proposal under which top board members in ECM would be replaced by three people from the Prague developer Crestyl. There’s a great deal at stake, with interests as diverse as the creditors of EMC themselves, so that someone has filed an official complaint should come as little surprise.
The Czech developer ECM is reported to have been taken out bankruptcy and placed in a temporary legal limbo zone as a Prague court decides whether to accept a re-organization arrangement suggested by the company. The idea apparently is for ECM to relinquish board positions to representatives of the Prague-based developer Crestyl. Its director Omar Koleilat would become chairman of the board. One of the other options that had been in play earlier this week reportedly envisioned Anton Hopfgartner (Property Solutions) filling that role.
The liquidator in charge of ECM until now, Ivo Hala believes a re-organization isn’t feasible, as it would require an influx of new money to the company. “Bankruptcy proceedings seem to be more advantageous because they offer greater satisfaction for the creditors in a shorter time horizon,” he wrote, according to court materials cited by CTK.
However, some of ECM’s creditors seem to be leaning the other way, including Astin Capital Management, which is representing bond holders with CZK 3.1bn. The decision on re-organization now lies with the courts. (As ever, public comments or private emails on the issue are more than welcome)
E15 is reporting that Ceska sporitelna is heading up a temporary creditors committee for ECM Real Estate. The bank is owed CZK 194m by the failed developer. Volksbank, Glancus Investments and Astin Management (representing bond holders) are also on the committee. Both banks reportedly prefer a restructuring of ECM, whose long-term debts come to €165.9m. Glancus would prefer bankruptcy.
The company that holds the Time Out brand in Romania has gone into bankruptcy, according to an article (in English) in Ziarul Financiar. Great United Trading Company (whose sole shareholder is the Czech based retailer Time Out) pulled in €2.85m in turnover last year in Romania, but made a loss of €140,000.
Quoting an ex-manager from GUTC, ZF says Time Out decided mid-way through last year to pull out of Romania, as it already had a €1m debt to recover. The first choice, said George Mihai Petrescu, would have been a franchise partner to take over the business, but it proved impossible to find one quickly enough. The company reportedly went into administration in December.
The commonly held opinion is that the US government should have bailed out Lehman Brothers last September. When you look at the trail of destruction that leads back to that catastrophe, it’s hard to argue. But the debate in the US over a new regulatory system is bringing out arguments that the bailout of Bear Stearns in spring 2008 actually prepared the way for a serious collapse. David Skeel, a bankruptcy prof from the University of Pennsylvania, makes his case:
…the risk of widespread ripple-effect collapses–also known as contagion effects or systemic risk–was almost certainly overstated. The creditors of Bear Stearns would have suffered losses, and the shareholders would have been wiped out. But this hard medicine would have sent a very clear message to the managers, creditors, and shareholders: Better watch what the company is doing, or you could get burned. In more technical terms, a Bear Stearns bankruptcy would have eliminated moral hazard–the tendency not to take precautions if you’ll be spared the consequences of bad outcomes.
If you’re not into economic theory, then give this link a miss. But it’s worth considering whether the Lehman Brothers wake-up call didn’t actually save us all from something even worse down the road.