OREANDA-NEWS. January 26, 2010. PIK (LSE: PIK), a leading Russian residential developer, is pleased to provide a detailed summary of its debt restructuring.

Background
From 2004 through to 2007, PIK Group experienced strong revenue growth and followed a strategic expansion of its operations from Moscow into Russia’s regions and some of the CIS countries. This growth was financed by Group’s cash flows, bank debt and a proportion of proceeds from the Group’s IPO in 2007.

The onset of the global financial crisis in the second half of 2008 had a severe impact on the business. Consumer demand for residential apartments and consequently Group cash flows dried up. At the same time, the closure of global capital markets made it impossible to refinance Group’s short-term debt, and management therefore entered into negotiations with its creditors to agree restructuring terms.

Debt restructuring terms

As at June 30 2009, the Group’s short-term debt equalled to RUB44,86bn (US\\$1,43bn). The Group has aimed to extend debt maturities and achieve grace periods for principal repayment as well as reducing the overall level of debt though asset disposal.

The Group has made very good progress against these objectives. In August 2009, the Group’s largest creditor, Sberbank, agreed to restructure its existing debt and provide an additional RUB12,75bn (equivalent to approx. US\\$425MM) of funding subject to a number of condition precedents, including the receipt of government guarantees and bilateral restructuring with 80% of PIK’s remaining loan facilities (excluding Vnesheconombank’s facility of US\\$262MM). On December 9 and 16, 2009, the Group signed state guarantee agreements for up to a total of RUB 14.375bn, valid until November 21, 2014. By December 23, 2009, the Group had finalized the restructuring of 83% of the remaining debt and therefore met Sberbank’s requirements.

Asset disposals
During 2009, the Group has netted out the following non-core assets against approximately RUB6,9bn of debt.

New Sberbank project financing

A new RUB12.75bn (equivalent to approx \\$430mm) facility has been committed by Sberbank to finance Group construction projects. PIK plans to draw down the loan from Sberbank during 2010 to complete existing projects and launch new developments.

Post receipt of Sberbank funds, the Group’s debt will total approximately RUB50,0bn (approx \\$1,67bn at a current exchange rate) of which 72,0% will be denominated in RUB. The effective average cost of USD denominated debt is 10,9%, and 15,7% for RUB debt. For 2010, interest expenses will equal approximately RUB4,6bn (including expected interest payable to Nomos) due to the reduced interest rates over grace periods agreed with the number of creditors.