Annual report 2010 - plazacenters

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Certain loan agreements include an undertaking to fulfil certain financial and operational covenants throughout the duration
of the credit, namely: complying with “a minimum debt services cover ratio”, “loan outstanding amount” to secured assets value
ratio; complying with certain restrictions on interest rates; maintaining certain cash balances for current operations; maintaining
equity to project cost ratio and net profit to current bank’s debt; occupancy percentage and others.
All of the companies are in compliance with the entire loan covenants with the exception of covenants in respect of four of the
secured loans granted. The Company is in negotiation with the financing banks in respect of settling the bank requirements and
agreeing on new covenants and/or waivers. In addition, one financial facility has matured on December 31, 2010, and the
Company is currently negotiating with the financing bank the details of the prolongation of the facility.
The Project Companies undertook not to make any disposition in and to the secured assets, not to sell, transfer or lease any
substantial part of their assets without the prior consent of the financing bank. In certain events the Project Companies
undertook not to allow, without the prior consent of the financing bank: (i) any changes in and to the holding structure of
the Project Companies nor to allow for any change in their incorporation documents; (ii) execution of any significant activities,
including issuance of shares, related party transactions and significant transactions not in the ordinary course of business;
(iii) certain changes to the scope of the project; (iv) the assumption of certain liabilities by the Project Company in favor of third
parties; (v) receipt of loans by the Project Company and/or the provision thereby of a guarantee to third parties; and the like.
2. Commitment in respect of derivative transaction
Within the framework of cross currency interest rate swap transactions and regular swaps (refer to note 16), executed between
the Company and Israeli and Polish banks (the “Banks”) , the Company agreed to provide the Banks with a cash collateral deposit
which will be calculated in accordance with a specific mechanism provided in each swap transaction agreement. Accordingly, as
of the end of the reporting period, the Company has pledged, a security deposit in the amount of EUR 17.3 million in respect of
these swaps transactions. In respect of the Suwałki IRS the project company also established a bail mortgage up to EUR 4 million
encumbering the real estate project. In respect of commitments connected to call options, refer to note 40.
3. Commitment in respect of structured deposits
In order to secure credit lines provided to the Company for the purpose of investing in financial structures (refer to note 16), the
Company has provided the issuing banks a pledge on the structures issued. In addition the Company also has to comply with
certain covenants stipulated in the loan agreement (mainly loan to value covenants). Failing to comply with the said covenants
shall oblige the Company to provide an additional cash collateral. As of the end of the reporting period the Company has
secured cash collateral of EUR 9.1 million.
4. Commitment in respect of bonds raised in Poland
Under the offering memorandum for the issuance of Polish bonds, certain circumstances shall be deemed events of default
giving the bondholders the right to demand early redemption, which includes among others the following covenants:
a) Breach of the cash position as a result of the payment of dividend or the buy-back programme – if at any time during
a period of 90 days from the payment of dividend, or the acquisition of its own shares, the cash position falls below
EUR 50 million;
b) Breach of financial ratios – the Net Capitalization Ratio exceeds 70%; net capitalization ratio is the net debt divided by the
equity plus the net debt, as calculated by the Group’s auditor; “net debt” mean the Group’s total debt under: loans and
borrowings, lease agreements, bonds, other debt securities and other interest bearing or discounted financial instruments
in issue, less related hedge derivatives, cash and cash equivalents, short- and long-term interest bearing deposits with
banks or other financial institutions, available-for-sale marketable securities and restricted cash, calculated based on the
consolidated financial statements.
c) Failure to repay material debt – the Company fails to repay any matured and undisputable debt in the amount of at least
EUR 100 million within 30 days of its maturity.
Plaza Centers N.V. Annual report 2010119