The company announced in its annual report for 2009/10, Company release no. 15, 18 May 2011, result expectations for the period 1 January 2011 to 31 December 2011 before tax and value adjustments of approximately DKK 0.0 to 10.0 million.
The Company has, most recently in the interim report for the 3rd quarter 2011, Company release no. 34, 13 October 2011, stated that it no longer considered the expectations realistic, but that the Company due to the consequences of insolvency in four of the Company's German subsidiaries – as described in Company releases no. 27, 21 July 2011, and no. 28, 18 August 2011 – and a number of other uncertainties was not in a position to provide updated expectations for the year 2011. The Company indicated in the interim report that it expected that the insolvency of the four German subsidiaries would result in write-downs of receivables worth DKK 182 million.
The Company has now had the opportunity to examine the implications of the insolvency situation and on this background downgrades its result expectations, so that the Company now expects a loss – including anticipated losses on receivables from the four insolvent subsidiaries, but before tax and value adjustments to properties – in the range of DKK -250 to -300 million for the period 1 January 2011 to 31 December 2011.
The Company is in ongoing negotiations with the Group's lenders regarding a restructuring of the Group's capital structure. The impact on the result expectations for the year 2011 of the expected new agreements with the Group's lenders cannot be specified, until the agreements are fully negotiated, but the management expects, based on the present draft agreements as per today, that the impact on the result expectations will be an income of around DKK 90 to 110 million. This effect is not included in the result expectations above.
The downgrade is explained by several factors, including primarily the filing for insolvency in four of the Company's German subsidiaries and consequently the 100% write-down of receivables, which represent approx. DKK 182 million in total in these subsidiaries.
The downgrade is further explained by declining revenues, increased operating and restructuring costs, settlement of a lawsuit, depreciation of receivables, higher interest expenses and net tax adjustments.
The company is, as mentioned, still working on a restructure of its capital structure, which will, among other things, involve new agreements with the Group's lenders and a capital increase through the offering of a preemptive rights issue. The company expects to announce a prospectus soon.
Best regards
Tower Group A/S
Martin Coté
CEO
Questions regarding this release can be directed to Martin Coté, CEO, on tel.: +420 725 716 755.
