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WGF AG
WGF AG Hotelprojekt Essen Osramhaus
WGF AG Hotelprojekt Essen Osramhaus
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WGF-Projektentwicklung Essen
Management members at the Düsseldorf-based WGF AG talk with REFIRE about the company's hotel conversion project in Essen, and the key role that project development is playing in the company's future.
It’s not looking good at all for the many thousands of private investors who bought bonds in the Düsseldorf-based WGF AG, which filed for insolvency last week two days prior to repaying one of its bonds. The company has filed an application to the Düsseldorf count court to enter into what is called “self-administered insolvency proceedings”, a process which avoids the appointment of an external administrator, although it’s not clear whether this will be granted.
Trading in WGF’s bonds was suspended last week after the company missed a further deadline for publishing its annual 2011 financial report. WGF had earlier asked for an extension of the deadline until December 10th,, six months after the original due date, citing the need for “essential final details from the accounting firm and the accompanying prerequisite supervisory board meeting”. Statements from the company suggested the loss for 2011 was in the region of €71m, a figure which has since been revised marginally downward by the company new emergency ‘clean-up’ board member Bernd Depping.
In a statement this week, Depping said, “There is substantial value in our firm’s holdings. At the moment our valuations are obviously under pressure since we’ve filed for insolvency, but it cannot be in the interests of our creditors for us to be selling off our assets below value. The plan we’ve put in place will allow us to sell the assets off at market values and deliver more value to our creditors.”
Since its establishment in 2003 by founder and CEO Pino Sergio, WGF has been at the forefront of real estate trading firms who have financed themselves by the issuance of bonds to private and institutional investors. The bonds, of which six different tranches have been issued, were secured against mortgages so that WGF could refinance itself independent of bank financing. The bonds offered attractive interest rates of up to 6.35% and were rated by rating agency Creditreform. Two of the bonds have already been redeemed to investors, although bonds with a nominal value of more than €200m are still in circulation – the actual number is disputed, with original estimates saying it was double that - and it is these that may prove difficult to redeem.
WGF originally used the proceeds from the bond sales to invest in housing, upgrade its assets, and sell on at a profit. Over time the company expanded into fund management and most recently has focused on project development, where it still has a number of projects being developed in Berlin, Hamburg and Essen. The company has reported losses for the past few years in its original business of property trading, and has had to take valuation write-downs on much of its existing stock.
WGF had come under increasing pressure over the past eighteen months following negative press comment about its business practices, and uncertainty spread by a group of lawyers who accused the company of operating a Ponzi-style financing operation. WGF had consistently denied any wrongdoing, but under pressure to produce the latest annual results, had grudgingly conceded that the previous accounts had not been easy to understand, and that future accounts would be much more transparent. It remains to be seen whether there will be future accounts, or how the various class action suits now being lined up against the company will pan out.