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Investors in Orchid Developments have endured another blow as the Bulgaria-focused and London-listed property company said it was in urgent need of fresh capital.
Orchid warned it “cannot be certain that it can continue to operate with the full support of its creditors” and was “likely not to be able to operate as planned, unless additional capital is raised”.
Shares on Thursday lost half their remaining value to trade at 1.6p, underscoring the company’s fall from grace since it floated on Aim at 95p in July 2005.
Orchid was one of several eastern Europe developers to join London’s junior market during the boom years as investors sought to capitalise on the region’s untapped property markets.
Bulgaria’s property market went on to surge as overseas citizens keen on holiday homes joined a rush from institutional investors. Orchid shares reached highs of 174p on the eve of the country’s accession to the EU in 2007.
But the company was caught out by the downturn following the global financial crisis.
By last December net debt was €129m. The shares trade at a steep discount to net asset value of about €70m, with market capitalisation at £1.5m. The group has struggled to sell assets.
“We’re one of the only international developers that are still active in the country,” said Guy Meyohas, the Israeli co-founder and chief executive. “There are others that didn’t survive. I’m sure we’ll find a way. Whatever is needed.”
Mr Meyohas indicated he may be willing to invest more of his personal wealth to support Orchid, which is advised by Shore Capital.
The other big shareholders aside from Ofer Miretzky, the other founder, include Midas Capital Partners, Progressive Asset Management and Henderson Global Investors. The main lenders are two Hungarian banks, MKB and OTP.
The portfolio has three residential and six commercial developments in Sofia and Varna. Its main investment is Grand Mall Varna, a retail development whose occupiers have included Carrefour, Zara and Adidas.
Orchid said: “The quantum of free cash flow, which may be generated in the short to medium term including from the sales of apartments and other assets, remains difficult to predict and unclear.
“The board is considering the best manner in which to address its immediate working capital needs.”