Tower Group A/S has been pursuing a financial restructuring for several months, which was designed to reschedule interest and amortisation on certain loans to its German subsidiaries. This process has been hampered and delayed by the insolvency of subsidiaries Tower 1 Immobilien dritte GmbH and Tower 1 Immobilien fünfte GmbH in July and Tower 1 Immobilien zweite GmbH and Tower 1 Immobilien vierte GmbH in August (representing approximately 52% of the Tower Group A/S portfolio). This development prompted significant changes to be made to the IDW S6 report required by senior lenders in order to agree to the restructuring. It also had a deep impact on the operations of the Company as described in Company release no. 34, 13 October 2011. As of today, the finalization of the restructuring is still subject to uncertainty as not all lenders have indicated if they are able to sign up before the end of 2011.
Tower Group A/S has over the past 18 months made great strides in implementing a rigorous programme of operational improvements in order to enhance the performance of its residential portfolio. However, the Company’s business is still not financially sustainable without further capital. Tower Group A/S was also forced to outsource its property management due to the loss of economies of scale once over half of the portfolio was lost. Finally, Tower Group A/S suffered increased costs due to the ongoing expenses of advisers associated with the restructuring. In order to improve the Company’s capital, Tower Group A/S was anticipating raising EUR 12 million by way of a rights issue at the same time as completing the restructuring.
For several months, Tower Group A/S has been supported by a series of loans made by its majority shareholder designed to enable Tower Group A/S and its subsidiaries to continue to operate pending completion of the restructuring. Due to the ongoing uncertainties associated with the restructuring and overall economic environment, Tower Group A/S has been unable to secure further bridge funding from its majority shareholder. The Board of the Company is now considering whether it is possible for Tower Group A/S to continue as a going concern. These events bring into serious question whether the Company will be able to complete its proposed financial restructuring and rights issue.
As a consequence of the above, the Chairman of the Board, Jens Erik Christensen, and Board member, Jette Jakobsen, notified the Company that they want to resign from the Company's Board of Directors with immediate effect.
Further announcements will be made in due course.
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.
