EUROCASTLE INVEST. 
By FOR IMMEDIATE RELEASE
Contact:
International Administration Group (Guernsey) Limited
Company Administrator
Attn: Mark Woodall
Tel: +44 1481 723450
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
Preliminary Results, Amendment to Convertible Securities & Management Agreement and New Investment Focus
Guernsey. 28 February 2013 - Eurocastle Investment Limited (Euronext Amsterdam: ECT) ("Eurocastle" or the "Company") hereby announces its preliminary results for the 12 months ended 31 December 2012.
Highlights
The Company expects to report that its NAV has decreased by ?55.6 million (?0.18 per share) to ?307.3 million or ?0.46 per share1 mainly as a result of share dilution reflecting interest accruing on the convertible debt (?0.10 per share) and a decrease in the fair value of the Company's investment property (?0.10 per share), which has been partially offset by gains realised from senior debt repurchases net of impairment losses within Eurocastle's Debt Investment portfolio.
The Company has secured a 12 month extension of the senior loan on the Drive portfolio to January 2014 with interim amortisation targets to be met through an agreed sales programme. Eurocastle remains in constructive discussions with the lenders of the junior facility which matured in January 2013.
As at 31 December 2012, Eurocastle had a corporate cash balance of ?38.8 million.
The Company proposes to clean up its capital structure by re-striking the conversion price in its outstanding Convertible Securities from ?0.30 to ?0.05 per share and converting all such outstanding convertible debt into ordinary shares.
Conditional on such conversion, the Company has reached agreement to rebase the management fee calculation under its management agreement with FIG LLC, an affiliate of Fortress Investment Group LLC ("Fortress"), which will preserve capital for investment.
The Company sees opportunities in moving its investment focus to distressed Italian debt and real estate.
1 The NAV disclosed is on a fully diluted basis and excludes the negative NAV of the Mars Floating portfolio as this financing is non-recourse to the Company and not callable as a result of any changes in the value of the assets.
| Summarised Balance Sheet | 2012 (unaudited) ?'000 | 2011 (audited) ?'000 |
| Cash and cash equivalents | 141.3 | 117.7 |
| Real Estate investment property | 2,020.3 | 2,201.8 |
| Debt investments | 456.1 | 494.2 |
| Other assets | 31.7 | 57.1 |
| Total assets | 2,649.4 | 2,870.8 |
| Interest bearing debt financing | (2,251.0) | (2,405.9) |
| Other liabilities | (106.3) | (102.0) |
| Total liabilities | (2,357.3) | (2,507.9) |
| Net assets | 292.1 | 362.9 |
| Net assets ?/share | 0.44 | 0.64 |
| Net assets of the Mars Floating Portfolio | (15.2) | 5.7 |
| Adjusted net assets2 | 307.3 | 362.9 |
| Adjusted net assets ?/share | 0.46 | 0.64 |
| Summarised Income Statement | 2012 (unaudited) ?'000 | 2011 (audited) ?'000 |
| Rental and service charge income | 167.7 | 121.1 |
| Interest income | 23.9 | 25.2 |
| Net impact of sale of Mars Fixed | 6.8 | (9.4) |
| Decrease in fair value of investment properties | (94.7) | (28.8) |
| Other than temporary impairment on securities | (16.7) | (41.0) |
| Interest expense | (87.2) | (80.8) |
| Service charges and property operating expenses | (57.0) | (41.2) |
| Other operating income / (expenses) | (14.8) | (16.1) |
| Net (loss) / profit before taxation | (71.9) | (71.0) |
| Taxation | (9.7) | (1.1) |
| Net (loss) / profit after taxation | (81.7) | (72.1) |
2 Excludes the negative net assets of the Mars Floating portfolio.
The Company expects to publish its audited financial statements for the year ended 31 December 2012 in the second half of March 2013.
Amendments to Convertible Securities and Management Agreement
Eurocastle also announces that it has today posted to the holders of its ?75,000,000 20 per cent. perpetual subordinated convertible securities (the "Series A Convertible Securities") and the holders of its ?24,750,000 20 per cent. perpetual subordinated convertible securities (together with the Series A Convertible Securities, the "Convertible Securities") a notice seeking their consent to certain amendments to the conditions of the Convertible Securities. The amendments, if approved by the requisite majority of securityholders, would authorise Eurocastle to mandatorily convert all but not some of the outstanding Convertible Securities (total expected balance as at 28 February 2013 of ?166.5 million) on or prior to 31 May 2013 at a Conversion Price of ?0.05 per ordinary share, resulting in the issue of new ordinary shares representing in excess of 96% of the resultant aggregate number of ordinary shares in issue. The Conversion Price of ?0.05 is equal to the 90 day trailing average price of the Company's ordinary shares as quoted on Euronext.
If the securityholders approve the amendment to the conditions of the Convertible Securities, Eurocastle currently expects to exercise the mandatory conversion right promptly following the effective date of the amendment.
Eurocastle and Fortress, its investment manager, have agreed to make certain amendments to the management and advisory agreement pursuant to which Fortress manages Eurocastle's assets, with the effectiveness of such amendments being conditional upon the conversion of all of the outstanding Convertible Securities. The agreed amendments would (i) reduce the amount payable by Eurocastle to Fortress as annual management fee by resetting the capital base upon which such fee is calculated from an amount equal to aggregate equity proceeds raised to ?300 million plus an amount equal to the proceeds of any future issue of equity share capital; and (ii) similarly reset the capital base upon which Fortress's entitlement to incentive compensation is calculated.
Taken together, Eurocastle believes that these measures will simplify the capital structure of the company, reduce the Company's ongoing operating costs thus freeing up additional capital for investment, and re-align the investment manager's incentives. If market conditions permit, the Company may seek to raise additional capital through the issue of further shares in order to make new investments. Subject to profits being available for the purpose, the Company also intends to resume regular dividend payments.
New Investment Opportunities
Concurrently, Eurocastle is intending to pursue new investment opportunities in the Italian real estate market. Fortress believes there is the potential for attractive gross unlevered returns through investment in Italian non-performing loans and other real estate assets. Fortress has had a significant presence in Italy since 2000 both as an investor in non-performing loans and through its ownership of Italfondiario, the largest independent non-performing loan servicer in Italy.
Enquiries
| Mark Woodall | Tel: +44 1481 723450 |
Holders of Convertible Securities wanting further information should contact Anson Registrars Limited, the Registrar and Principal Paying, Transfer and Conversion Agent for the Convertible Securities, on +44 1481 711301 or registrars@anson-group.com.
This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in the United States.
The securities mentioned herein have not been, and will not be, registered in the United States under the US Securities Act of 1933 (the "Securities Act"). Securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of the securities mentioned herein in the United States.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
Neither the content of Eurocastle's website (or any other website) nor the content of any website accessible from hyperlinks on Eurocastle's website (or any other website) is incorporated in this announcement.
Forward-Looking Statements
Some of the statements contained in this announcement may include forward-looking statements which reflect Eurocastle's or, as appropriate, the Directors' current views with respect to future events and financial performance. Statements which include the words "expects", "believe", "intend", "plan", "project", "anticipate", "would" and similar statements of a future or forward-looking nature identify forward-looking statements for the purposes of the US federal securities laws or otherwise.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause Eurocastle's actual results to differ materially from those indicated in these statements. These forward-looking statements speak only as at the date of this announcement. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to Eurocastle as of the date hereof. The financial information included in this press release reflects Eurocastle's current preliminary estimates, is subject to the completion of the Company's year end financial review process and is subject to change. Actual results for the 12 months ended 31 December 2012 could differ in material ways from the preliminary results and outlook provided herein. Subject to any continuing obligations under the Listing Rules and the Disclosure and Transparency Rules, Eurocastle undertakes no obligation publicly to update or review any forward-looking statement contained in this announcement, whether as a result of new information, future developments or otherwise.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Eurocastle Investment Limited via Thomson Reuters ONE
