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Case Study

Location: Russia

Deal Type: Class 1 Disposal of commercial real estate assets and loan restructuring

Deal Size: $620m

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BACKGROUND

In May 2016, Strand Hanson was engaged to act as Sponsor to AFI Development plc (“AFI”, or the “Company”).  AFI was in discussions with its principal lender, VTB Bank PJSC (“VTB”), regarding the settlement of outstanding loans of c.US$620m.

AFI had announced its preliminary results for the year ended 31 December 2015 in March 2016, which showed a decrease in the value of the Group’s property assets by approximately US$0.5 billion to US$1.4 billion.  VTB subsequently notified AFI that in its opinion AFI had experienced a material adverse change in its financial conditions and that AFI had 30 days to implement steps to address this, otherwise VTB would exercise its right to seek early repayment of the loans of c.US$620m.

STRAND HANSON ROLE

Strand Hanson acted as Sponsor to AFI in respect of its complex negotiations with VTB which extended over a six month period.

Following VTB’s notification in March 2016, VTB was unwilling to provide AFI sufficient time to seek an alternative transaction to either refinance the VTB loans or to dispose of assets in an orderly manner to repay the loans.  AFI’s options were therefore severely constrained by its indebtedness to VTB.

Following extensive negotiations, AFI announced it had agreed the Class 1 disposal of certain real estate assets in Moscow, including its principal asset the AFIMALL City Shopping Centre, to VTB with a value of, in aggregate, c.US$867m to settle the loans of c.US$620m (the “Disposal”).  However, the parties also announced that they were considering an alternative to the Disposal in the form of a personal guarantee from AFI’s Chairman, Mr Leviev.  Shareholders approved the Disposal on 1 August 2016 and subsequently, on 28 September 2016, the parties announced that they had agreed to amend the terms of the loans, which were finally entered into in December 2016.

Following a complex series of negotiations between the parties, the Company was able to secure an amendment to the loans, thereby providing financial stability and enabling AFI to retain assets with a value of, in aggregate, c.US$867m.