Expert from VŠE: Indebted ECM meets the conditions for reorganization

CITY Project at Pankrácká Plain

Prague - The indebted development company ECM Real Estate Investments (ECM) meets the conditions for bankruptcy resolution through reorganization. This is evident from the assessment by Bohumil Král, an accounting expert from the University of Economics in Prague and a representative of the Czech Accountants Association. ČTK learned this today from the insolvency register on the website www.justice.cz. The Ministry of Finance is also expected to comment on the matter by March 15.
A condition for allowing reorganization is that the debtor's total turnover for the last accounting period is at least 100 million crowns. According to Král from VŠE, it can be unequivocally stated that ECM's total turnover in the period before the filing of the insolvency proposal, i.e., in 2010, significantly exceeded the 100 million crown threshold.
Insolvency judge Jiří Rada considers the term "total turnover" to be so unclear that he requested assistance from the office of Miroslav Kalousek. Milan Janků, the chairman of ECM's board, and another board member, Antonín Jakubše, approached the expert from the University of Economics regarding the resolution of the same question.
ECM managers also turned to Král from VŠE because they question the assessment made by the consulting company PwC, which was prepared for the developer's insolvency administrator Ivo Hala. According to PwC's opinion, the real estate company did not meet the conditions for reorganization. Janků and Jakubše from ECM labeled PwC's stance as "almost scandalously manipulated, misleading, and clientelist".
The insolvency proceedings against ECM have been ongoing since spring 2011. Since July, ECM has been in bankruptcy, but the High Court in Prague annulled the bankruptcy decision in October due to procedural errors. A repeated meeting of creditors in November did not decide on the solution to the developer's insolvency; since then, the court's ruling has been awaited. There is no deadline for its decision, according to the minutes from the last meeting of the creditors' committee, this is unlikely to happen before the Ministry of Finance comments on the allegedly unclear accounting terms.
Creditors have filed claims amounting to 9.5 billion crowns in the insolvency proceedings against ECM. However, the insolvency administrator Hala recognized only claims of 2.2 billion crowns.
Reorganization as a way to resolve debts was proposed by the chairman of the board and CEO of ECM, Janků, and by Astin Capital Management, which represents part of the bondholders. In the insolvency proceedings against ECM, it filed the largest claim of about three billion crowns. However, the insolvency administrator Hala did not recognize Astin Capital's claim.
Conversely, ECM's bankruptcy is being promoted, among others, by Glancus Investments from the PPF group in addition to the insolvency administrator.
ECM is mainly known for its high-rise building projects in Prague at Pankráci. The company was founded in 1991 by entrepreneur Janků.