Cyprus Mail

Ha Potami deal goes belly up

By Angelos Anastasiou

PROPERTY giant Aristo Developers has announced that negotiations with China Glory International Investment Group (CGIG) over the sale of luxury golf resort and residence complex Venus Rock in Ha Potami, Paphos, have broken down forcing creditors Bank of Cyprus to re-examine loan restructuring options.

In a statement yesterday, Dolphin Capital Investors (DCI) – major shareholders in Aristo – announced the collapse of the talks over the €240 million deal, after the Chinese investors “failed to comply with the payment terms despite extended negotiations with Aristo Developers to amend certain payment terms.”

“As a result, Aristo notified CGIG of the termination of the agreement, which was activated on Wednesday,” the statement said.

Reports of complications in the agreement had surfaced as early as December 2013, when CGIG had failed to make good on its part of the deal, citing bureaucratic inefficiencies in “getting the approval required under the Chinese foreign exchange control regulations.”

But despite informing Aristo that it was in the “final stages” of getting the required permits, CGIG never followed up on its initial €2 million contract-signing fee, though it later made a further down-payment of €3 million to Aristo.

DCI’s statement argued that Aristo is contractually entitled to keeping the €5 million as a penalty for reneging on the deal, while retaining its legal rights vis-a-vis the Chinese investment group.

DCI also noted that Aristo has already been approached by “two other interested parties for the full or partial sale of Venus Rock and is already in negotiations with them.” At the same time, the group said, Aristo resumed the sale of residences and plots in the project, which are a major factor in its sales and had been frozen over the past year due to the deal with CGIG.

But according to daily Politis, news of the breakdown in negotiations with CGIG caused some anxiety to the upper floors of the Bank of Cyprus headquarters.

According to a BoC internal memo leaked last month, as at the end of 2013 the lender had been exposed to the land-development group to the tune of €300 million, of which over €5 million had been unpaid repayments due.

“On May 20, 2013, the sale of the Venus Rock project was announced by DCI Ltd to an international joint venture for €290 million,” the memo said. “Following the sale, the Group’s total obligations to the bank will be reduced by approximately €156 million with the release of an equal amount of collateral. Liquidity will be enhanced significantly, and late payments will be settled in full.”

Politis reported that the Bank of Cyprus is examining drastic solutions if it determines that viable loan repayment options are no longer available, going as far as transforming non-performing loans into equity stakes so that the remaining loan can be serviced. But Aristo’s CEO Theodoros Aristodemou denied any discussion of such options has taken place, while state radio cited sources from inside the bank who also denied examining this scenario.

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