"Vila Oliva" as the largest minority shareholder with 29 percent of shares will support the new restructuring plan of the "Simo Milošević" Institute from Igalo and participate in its recapitalization and rescue with an amount of up to seven million euros, the co-owner of "Vila Oliva" told "Vijesti". Zarko Rakcevic.
The previous Restructuring Plan of the Institute, which envisaged the sale of the first phase, the children's department, the skyscraper and the E department, as well as significant land for the construction of apartments and a shopping center, was not adopted in January due to the opposition of Rakčević, without whom the state, with 56 percent of the shares, did not have the two-thirds majority required for this decision.
At Rakčević's request, a new Restructuring Plan was prepared and will be presented at the Shareholders' Meeting scheduled for February 24. This plan envisages a significantly smaller sale of assets - the children's department to the state for the school, proportional participation in the recapitalization of all shareholders - which means that the state would not reach two-thirds, the registration of land from the state to the Institute, bringing the Institute to four stars in four years, professionalization of management, rationalization of the number of employees and all costs,... All of this is estimated at a total of 88 million euros, and it is urgently necessary to provide 21,5 million euros through recapitalization to settle liabilities in order to avoid bankruptcy.
"Vile Oliva" is purchasing shares at a price of 155 euros through recapitalization, and could increase its stake by only 0,5 percent from the current 29 percent.
Saving the Institute is a priority
Rakčević tells "Vijesti" that as a minority shareholder with a significant stake, they will do everything in their power to prevent the Institute from going bankrupt, but also to start applying the logic of a good host.
"We believe that the institute, which rehabilitates, recovers and brings back to life about five thousand citizens of Montenegro annually, including five hundred children, is of enormous importance not only for the health of the nation, but also returns a huge number of people to normal life, both for families and for the state of Montenegro. We believe that the owners of the Institute, together with the majority, and I emphasize the majority because there are 20% of workers who are on sick leave, some of whom are not very justified, responsible, professional and dedicated workers, can continue their noble mission and socially responsible service to the citizens of Montenegro who need help. Along with this mission, we believe that the institute can, through good management, reconstruction to a four-star level, and the purchase of new medical equipment, not only get out of the zone of millions of losses, but also become an internationally known and recognized profitable center for rehabilitation and rest. We believe that by changing its current practice, the Institute can fulfill both missions, both this health and humane one and this economic one. So, to be a successful company. "This requires and we expect the election of capable and professional, not suitable, representatives to the governing bodies," said Rakčević.
He recalls that this summer, together with the Government as the majority owner, they prevented bankruptcy and gave the Institute a new chance with an interest-free loan of five million euros, and that the decision to apply realistic prices for funded patients was very important for its operations.
"We insisted on corrections to the restructuring plan and a sixth strategic option was proposed in order to save the institute and share the burden. With the changes we requested in the restructuring plan, we accepted that through recapitalization, i.e. the injection of money in the amount of up to seven million euros, which is 29 percent more than the "Vile Oliva" has, we would cover the Institute's due liabilities in the amount of 21,5 million euros. All shareholders can participate in covering losses in the recapitalization. In the discussions that were held, the public was aware of some of the differences that we had publicly stated over the past months. All or almost all of our suggestions in this sixth strategic option were accepted. So the restructuring plan was changed in the sense that there was no sale of the main building of the first phase. We agreed that the sale of the children's department building was possible, and exclusively for the school, which is naturally in the interest of the local community of Igalo and Herceg Novi, that there would be no housing construction on the land that must be returned to the Institute, because there is all the evidence for that. "It was agreed that, in accordance with the law, a public offer will be made to purchase the shares of all remaining minority shareholders, because there are around 14,5% of minority shareholders and normally that offer is open to everyone," said Rakčević.
Will insist on professional management
He states that he will insist on professional management, transparency of all future restructuring procedures, and control of all investments.
"For each phase of the investment, in accordance with legal procedures, public tenders will be conducted, so we believe that the funds planned for investment and bringing the institute to the four-star level, in fair competition with serious bidders, will be smaller than planned. At the same time, it is logical to form committees for monitoring and controlling the implementation of investment investments, consisting of representatives of both the majority and minority shareholders and independent experts. So, in short, we believe in the future of the Institute, we think that Montenegro and the citizens of Montenegro need the Institute, and we believe that it will be understood that there must be a change in practice and that the logic of a good host and responsible business must truly be applied," said Rakčević.
According to the basic part of the Plan, which is aligned with European standards on permitted state aid, the state can provide up to 60 percent of the necessary money for restructuring, and the Institute itself must provide 40 percent through the sale of assets and loans, along with recapitalization from small shareholders.
The plan envisages raising 88 million euros, including 3,5 million from the budget for the purchase of small shareholders, 56,5 million through several phases of recapitalization, 13,5 million euros from the sale of assets, and 14,5 million from a loan that the Institute could only receive once the land owned by the state is returned to its ownership.
61,6 million euros would be spent on the reconstruction of buildings, 21,4 million on debt repayment, 1,4 million on the information system and marketing, and 3,5 million on the purchase of shares from small shareholders.
Sequence of moves - adoption of the plan, purchase of small shares, then recapitalization
The plan foresees the sequence of measures envisaged in rescuing the Institute. The first is the adoption of the Restructuring Plan on February 24, after which the purchase of shares of minority shareholders would be enabled through a public offering “based on the proportions of the public offerors”. The plan does not state the price at which the shares of small shareholders could be purchased, but rather cites the offer of “Vila Oliva” from May last year, according to which they were ready to purchase shares from the Government at a price of 70 euros each or to sell their shares to the state at 58 euros. The current stock exchange price is 58 euros, while the nominal price at which the recapitalization will be carried out is 154,9 euros. A group of small shareholders placed a sell order on the stock exchange at a price of 100 euros per share.
After purchasing shares from minority shareholders who would be interested in selling their shares, the Institute would adopt a decision on recapitalization, as stated, "one or more decisions in accordance with the necessity of providing funds in the manner envisaged for the implementation of specific measures from the Restructuring Plan".
This means that an emergency capital increase of at least 21,5 million euros, the current estimated liabilities of the Institute, would first be carried out in order to avoid bankruptcy. The government would participate with around 14 million and “Vile Olive” with up to seven million, with the possible participation of some other shareholders.
"If minority shareholders are not interested in participating in the recapitalization process, the missing funds for their own participation would be provided by the Institute (instead of minority shareholders)," the Plan states.
Government abandons major sale, first phase may be a luxury hotel
One of the options in the Plan, if sufficient funds are not provided through recapitalization, is to sell significant assets of the Institute for 37 million euros.
It envisages the sale of the old spa site for 7,5 million, the site below the second phase for 2,7 million, the land on Šištet hill for 17,8 million, the site behind Tito's villa for 3,8 million, and the children's ward for 4,9 million.
The new plan completely removes the sale of the Institute's first phase building from the possible sale of assets.
The option remains to transform this facility into a high-class luxury hotel through a joint venture with a private partner, which, as stated, is "a model applied by competing European rehabilitation centers."
"This investment would be realized by forming a special purpose company into which the Institute would contribute the value of existing facilities and land."
Phase I (Main Building, E Department and Soliter), while the private partner would invest in the facility, bringing it to a new purpose. Accordingly, the private partner would take over majority ownership, while the Institute would be a minority owner of the company that manages the hotel complex," the alternative part of the plan states.
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