Kardan N.V. – Director’s Report Q3 2017– Page 4
3. In regards to sale of the Company’s holdings in TGI – due to the fact that as of the date of this report the Company does not have accurate information regarding the exact net consideration to be received from the transaction which would be used for repayment to the Debenture Holders, in order to prepare this cash flow forecast, it was assumed that the consideration would equal the amount to be paid to the Debenture Holders in February 2018 (€ 113.0 million), net of the Company’s cash balances (€ 7.0 million) and amounts made available to the Company by its subsidiaries (€ 16.0 million), subject to the assumptions and explanations detailed below. As aforesaid, as of the date of this report, the negotiations regarding the sale of TGI were not yet completed, and accordingly, it is not certain that a sale agreement will be signed, that the expected consideration will equal the consideration included in the cash flow forecast or the date in which the consideration be received by the Company.
4. It is noted, that according to the negotiations for the sale of TGI, the Company expects to receive the majority of the consideration upon completion of the sale transaction and that it could be used to make payment to the Debenture Holders (assuming that there will be no other restrictions from making such payments).The remaining part of the consideration is expected to be deposited in escrow for a certain period to secure certain representations given by the Company.
5. As of the date of approval of this report, the Company does not have information regarding the exact amount that would be deposited in escrow (‘Escrow Deposit’) and regarding the date on which the Escrow Deposit will be transferred to the Company. It is noted that there is a possibility that part of the Escrow Deposit will only be received in 2019. Since that as of the date of this report, the Company does not have information regarding the amounts and dates on which the Escrow Deposit will be transferred to the Company, it was assumed that most of it will be transferred to the Company during 2018, and that € 5 million will be transferred to the Company only in 2019. It was also assumed that all the amounts above could be used by the Company for repayment to the Debenture Holders, however, as stated above, this is an assumption and there is no certainty that it would materialize.
6. As detailed in the press release issued by the Company on November 23, 2017, the Company approached the trustees of the Debenture Holders (‘the Trustees’) requesting them to conduct negotiations in relation to rescheduling the payments to the Debenture Holders (series A and B) (‘the Debenture Holders’) due to reasonable possibility of delays in the sale process of TGI which may prevent the Company from meeting the coming payment due in February 2018.
7. The cash flow for the years 2018 and 2019 therefore, includes the receipt of consideration from the sale of the Company’s holdings in TGI according to a scenario which is considered by the Company to be reasonable, however, readers of this cash flow forecast must take into account, as stated above, that there is a reasonable possibility that the consideration will not be received before February 2018, and therefore that the payments to the Debenture Holders included in this cash flow, will not be made on time.
8. The cash flow forecast does not include additional interest in arrears with respect to delay in making payments to the Debenture Holders, in light of the Company’s request from the Trustees, as mentioned above. As of the date of approval of this report, the Company does not have information regarding the date of payment to the Debenture Holders. Readers of the cash flow forecast should take these facts into consideration, with all that it might entail or imply.
9. Loan repayment and dividends include the repayment of an inter-company loan in the amount of
€ 5.0 million, as well as estimated dividend amounts (in total € 18 million) that the Company could receive from KFS and GTC RE, taking into account the distributable reserves and limitations applicable to these companies, as detailed in section 13 below.
10. Generally, in the forecast of sales of assets lies uncertainty, mainly due to dependence on third parties, inter alia, due to the need to find potential buyers and to reach agreements with them regarding the terms of the transaction, due to the Company's need to obtain the approval of the debenture holders to some of the transactions, and due to the need of the potential buyers to finalize agreements with financing parties in order to obtain funding for such acquisitions.