Croatian media claims Orco Property Group’s Vitek and former CEO Ott working together

Local Croatian media reported March 20 that in a controversial partnership between the founder of Orco Property Group, Jean Francois Ott, and the company’s majority shareholder, Czech multimillionaire Radovan Vitek, the two have come to an agreement with banks to buy out unpaid loans plaguing the troubled Suncany Hvar hotel group.

The alleged agreement between Vitek and Ott, which was noted by the Croatian website, poslovni.hr but confirmed nowhere else, potentially has connotations ranging far beyond Croatia if true.

In Croatia, the alleged deals could torpedo bankruptcy procedures initiated by the Croatian government property management office DUUDI, which had initiated bankruptcy proceedings after a difficult nine-year partnership with Orco Property Group. Paradoxically, according to poslovni.hr, Orco has repeatedly claimed a lack of flexibility with regard to the DUUDI’s take on financial restructuring needs in the face of the hotel group’s losses.

Banks are said to be owed about HRK 400 mln of the hotel groups total debt of HRK 600 mln.

A wider game…

Yet the subtext here may have far reaching connotations. The past year has seen minority investors repeatedly issue press releases, claiming that Radovan Vitek and Ott (while still CEO) had conspired to work together to the disadvantage of other shareholders. Minority shareholder and distressed asset investor Kingstown wrote in an open letter earlier this year that Vitek was actually able to exercise control of the company with a minority position, which also enabled him to strip Orco Property Group assets.

As evidence of this, Kingston pointed to “Ott’s purchase of 9.1 million OPG shares (9% of the company), for €27 million during January 2013,” which was made through a Seychelles entity and the stock is held at CSOB, a Czech bank—which just happened to be the same bank used by Vitek to hold Orco shares: the sale by Orco Property Group of its Endurance Fund investment; the sale of a 9% stake in Orco Germany by Orco Property Group in June 2013 to a Czech individual whom Kingstown stated did not have the financial wherewithal for such a move and Vitek’s board member candidates.

Unexpectedly, the Croatian allegations in the press that Vitek and Ott have been working together to negotiate with banks would at least add some circumstantial credence to the accusations previously made by Kingstown and other minority shareholders.

This is despite the fact that Vitek dismissed Ott as CEO March 19, according to the Czech news site, IHNED.cz., following the dismissal of other former Ott sidekicks, including Nicolas Tommasini, Ales Vobruba and Brad Taylor.

That Ott has also stated that these former Orco executives may need compensation likely also has current minority shareholders worried.

“The former executive team may acquire some assets from the group,” Orco said in a press release.”

Vitek has also stated that such compensation has reduced Orco’s value by millions of euros.

Vitek, one of the top real estate investors in the Czech Republic, has said that the group needs more funding and that Orco Germany is its only significant liquid asset.

Orco posted losses of 142.4 mln net in the first nine months of 2013.

 

Photo courtesy of Zairon