D.H. Cyprotels Public Ltd (DHH) announced that its financial results will be restated following the consolidation of the associated company Cinolinks Enterprises.
The changes pertain to the own shares reserves will be debited with CYP 8.4 mkn, with a credit in the long-term borrowing of CYP 3.8 mln and the long-term liabilities of CYP 4.6 mln.
It is noted that the above deal is not final and might change.
The agreements of DHH with the sellers of the hotel units were reached on December 15, 1999, after a number of negotiations before the date of signing.
For the purchase of the hotel units, DHH preferred to issue shares at a high price – instead of paying cash – due to the significant increase of its assets (by CYP 10.4 mln). It, therefore, decided to submit CYP 2.5 mln cash and issue 1.2 mln shares (of nominal value 50 cents), which corresponded to 3.7% of the total issued share capital of DHH.
Due to the fact that the sellers demanded securities in case the value of DHH shares fell below the price in which they were calculated, CYP 6.64 per share, DHH would offer compensations at the price above.
Since undertaking such an obligation would be irregular for DHH, the Company decided that Drake Investment Ltd (DRAKE), which aimed at its listing in the CSE and was acquiring shares of various companies, be committed to the sellers, acquiring the shares at the price of CYP 6.64. It is also noted that the price of CYP 6.64 was lower than the trading price of the share in the CSE.
The agreement with Drake was real, however, Drake was unable to meet its obligations and in January 2000 the agreements were assigned to Cinolinks Enterprises (Cinolinks).
It is worth noting that the agreements of Drake were assigned to Cinolinks in early January, when the price of DHH share in the CSE stood at CYP 6,00. It was anticipated that Cinolinks could distribute the shares and collect the cash that were paid for the acquisition (or even the largest part of the sum).
Unfortunately, the situation got more complicated when the CSE general index dropped sharply and Cinolinks was unable to regain the amount of investment.
We wish to inform you that the benefit from the specific transactions and the cash paid by DHH devolved to DHH and the current value of exchanges (hotels) is significantly higher than the cost submitted or may have been submitted by DHH and/or other company of the Group.
