Company release no. 92 - Pending negotiations concerning strenghtening of the capital structure

Company Release no. 92 of 23 July 2009

Pending negotiations concerning strengthening of the capital structure

As announced previously, the company is in a very strained liquidity situation
and needs to refinance the short-term liability. 

Since publishing reorganisation of the company and new management on 23
December 2008, Tower Group has implemented a series of initiatives, which will
improve operations and thereby strengthen the long-term earning capacity of the
company. 

Therefore the company has negotiated with a number of Danish banks with second
preferred mortgage in the company's properties, and at the end of April 2009 it
obtained a temporary credit facility against supplementary mortgage to meet the
short-term liquidity challenges concerning the property management. 

This gave the company management time to continue its work with strengthening
of the company's total capital structure, and provide Tower Group with the
opportunity to adjust and rationalize operations with a view to securing and
improving the concern's future operations and profitability. 
 
The temporary credit facility will expire on 31 October 2009, and this
announcement amplifies status on the management's work concerning strengthening
of the company's total capital structure and adjustment and rationalization of
operations. 

Since the result of the ongoing negotiations may create some uncertainty
concerning trade with the company's shares, the company has asked Nasdaq OMX
Copenhagen prior to this release to keep the company's shares - ISIN
DK0011188035 on the observation list. Observation list status is expected to be
kept until the total solution on the capital structure can be published. In
that connection a process plan that will extend to 30 September 2009 is being
prepared. 

At the same time the company has asked Nasdaq OMX Copenhagen to keep the
company's bonds 8,5% Tower Group 2012  -  ISIN DK0030067004 on the observation
list. 


Pending strengthening of the capital structure

The temporary credit facility of DKK 66.1 mill. granted by a syndicate of
Danish banks, provided the company with the possibility during the very
strained short-term liquidity situation to ensure the operation of the
properties and to continue work on strengthening the total capital structure of
the company, and to provide Tower Group with the opportunity to adjust and
rationalize operations with a view to ensuring and strengthening the group's
continued operations and profitability. 

Supported by a corporate finance company, the company has negotiated with a
number of partners during the past months. The result of this is that, in
understanding with the syndicate banks for the temporary credit facility,
discussions on the point of substance will be initiated with a regard to
ensuring a total solution of the capital structure of the company. 

The temporary credit facility has been obtained with the sole purpose of
servicing the operation of the properties and will not create liquidity to
service the subordinate bond debt of DKK 300 mill., where the next interest
payment of DKK 25.5 mill. is due on 22 November 2009. 

Therefore a precondition for a total solution and strengthening of the capital
structure will be that the company in the future will be able to service all
debts. 

A total solution is estimated to include the following:

•	Capital injection of liquid funds in the size of DKK100 mill.
•	Conversion of part of the pledged second preferred mortgage to equity.
•	Bond debts of a total of DKK 300 mill. must endure that interest payments are
zeroed in the future, and therefore bondholders will be offered conversion of
the bond debt into shares. 
•	A considerable dilution of the current shareholders, cf. the above actions.
•	Capital increase will be with pre-emption rights for shareholders.


The new investors are expected to obtain a majority holding after a transaction
as a whole, i.a. through subscription and acquisition of shares in connection
with the transaction as a whole. 

The conversion of pledged second preferred mortgage is expected to take place
through a part conversion of bank debts against issue of shares in Tower Group
at the same time as agreement of up to 5 years' commitment on the remaining
second preferred mortgage. 

A precondition for the offer to Tower Group bondholders with DKK 300 mill.
concerning conversion into shares is a decision on a meeting of shareholders,
where the management will go through status of the capital structure and
outline the necessary suggestions for the implementation and outcome of the
plan, if such a solution as a whole is not obtained. The company will
coordinate call for such a bondholders' meeting in cooperation with Special
Servicer. 

During the past months the possibility of capital injection in the market as a
whole with subscription right for current shareholders has been evaluated. It
has been the clear assessment of the company and consultants that it was not
realistic to acquire the necessary liquid capital through a traditional capital
injection via the market 



Implemented improvements of operation

•	Effective as of 1 February 2009 the company's administration agreement with
Tower Management A/S was terminated, and as a consequence of this employees in
Denmark and Germany have been transferred to Tower Group. At the same time
reductions and changes for a new organisation in Tower Group as well as a
series of cost savings were implemented. Furthermore focus shifted from
acquisition to improvements in operation. 

•	Effective as of 1 February 2009 the company has terminated its administration
agreement with Curanis Wohnimmobilien GmbH based on material breach of the
agreement on administration of Tower Group's properties in NRW. The properties
in NRW constitute more than half of the company's total assets. A preliminary
claim has been assessed to EUR 3.5 mill. which will be claimed through the
courts. 

•	As a consequence of the break with Curanis, Tower Group has established a new
set-up in NRW, where the portfolio will be managed in a network of 3
administrators in addition to self-administration in Wuppertal. The portfolio
will be recorded centrally by a German agency, but on Tower Group's own
accounting systems, by which ownership of data and real time updating is
ensured. 

•	After going through the processes in NRW, Tower Group has chosen to insource
the management of 2,853 of the group's leases in Wuppertal and its vicinity via
the company's Wuppertal-office. Furthermore a leasing concept has been
established in Wuppertal (www.wuppertal-wohnen.de) which, together with an
arrears department will increase the lease ratio and ensure closer follow-up on
the outstanding rents for the NRW portfolio. In addition to this, the new
accounting system established as per April will increase the possibility of
following the result of the new external administrators and at the same time
improve the possibility to perform active asset management with regard to
external administrators. 

•	As of 1 July 2009 Tower Group has transferred administration of the company's
remaining properties in NRW, which was formerly administered by Alpha NRW GmbH.
The properties have been taken over by the new set-up in Wuppertal, so that all
properties in NRW will be administered in the same system in the future. 

•	As of 1 July 2009 Tower Group has transferred administration of all other
properties administered by Alpha Immobilienvervaltung GmbH, which primarily
relates to Berlin properties. In that connection 13 employees of Alpha
Immobilienvervaltung GmbH are now employed with Tower Group's German operating
subsidiary Tower Management GmbH. 

•	Thus Tower Group now has 7,586 leases in self-management out of the concern's
10,035 leases, which is expected to increase the operational efficiency,
improve control of processes and data, as well as increase the profitability of
the portfolios. 


Kind regards
Tower Group A/S


Jens Erik Christensen 		Michael Brag
Chairman of the Board		Managing Director

Questions concerning this release may be directed to Jens Erik Christensen,
Chairman of the Board, telephone 40 61 90 90