RNS Number : 8431J
  Bulgarian Property DevelopmentsPLC
  10 December 2008
   
     FOR RELEASE                                             07.00                                       10th December 2008

    BULGARIAN PROPERTY DEVELOPMENTS PLC
    ("BPD")

    BPD entitled to EUR3.9 million penalty after Fairplay fails to complete purchase of BPD's 50% stake in Varna Logistics AD. BPD is
resisting Fairplay's efforts to reclaim the penalty

    BPD announced on 1st July 2008 that it had exchanged contracts for the sale of its 50% stake in Varna Logistics AD ("Varna Logistics")
to Fairplay for EUR15,000,000. At the same time it announced that it had purchased Fairplay's 50% stakes in Trakia Retail Centre and
Sandanski Retail Centre for a total price of EUR3.9 million (EUR3 million for Trakia Retail Centre and EUR0.9 million for Sandanski Retail
Centre). The consideration for these shareholdings was not paid in cash but was deemed to be an advance payment by Fairplay to be offset
against the amount that Fairplay was due to pay on completion of its purchase of BPD's 50% shareholding in Varna Logistics.
    On 28th October 2008, BPD announced the completion of the sale on 27th October 2008 of the land owned by Trakia Retail Centre. The
consideration was EUR6 million, EUR3 million of which has, since completion, been held in a notary escrow account as a performance guarantee
for the completion by BPD of the sale of its 50% shareholding in Varna Logistics to Fairplay.  
    Fairplay has failed to complete the purchase of BPD's stake in Varna Logistics. Under the terms of the contract the transfers of the
shares in Trakia Retail Centre and Sandanski Retail Centre were irrevocable and, even though Fairplay has failed to complete the purchase of
BPD's stake in Varna Logistics, it should not be entitled to reclaim these shares or demand payment for them and the EUR3 million
performance guarantee should be released to BPD.  

    Through a notary certified notification Fairplay has informed BPD that it has appealed to the Arbitration Court of the Bulgarian
Industrial Association claiming "economic impossibility". The term "economic impossibility" is provided for under the provisions of Article
307 of the Commercial Act of Bulgaria. According to the notification, Fairplay has made two requests to the Court of Arbitration: (i) to
rescind the contract and receive back the advance payment of EUR3.9 million or (ii) to amend the contract price to EUR9.3 million (this
price would include the EUR3.9 million payment already paid). BPD has not yet received the full text of Fairplay's submission to the
Arbitration Court. In order to secure its claim to recover the advance payment of EUR3.9 million, Fairplay has served a disposal injunction
preventing the release to BPD of the EUR3 million currently held in the notary escrow account as a performance guarantee.

    The advice that BPD has received is that Article 307 was intended to be used in the case of war or of very deep economic crisis which
the parties could not foresee and could not have foreseen. To the best of our knowledge no successful action has yet been brought under the
terms of Article 307. In fact, were Fairplay's action to succeed, a precedent could be set where all current contracts in Bulgaria could be
challenged and terminated by the courts, leading to economic chaos. BPD intends to resist this claim vigorously and will take all necessary
actions to answer Fairplay's contentious claims, including, if appropriate, seeking damages from Fairplay.

    Assuming that Fairplay's claim is rejected with no further adverse consequences to Fairplay or BPD, the net effect would be that:

    *     BPD will retain a 50% shareholding in Varna Logistics
    *     BPD will have received Fairplay's 50% shareholding in Sandanski Retail Centre at no cost to BPD (other than transaction costs) and
will own 100% of Sandanski Retail Centre
    *     BPD will have received Fairplay's 50% shareholding in Trakia Retail Centre at no cost to BPD (other than transaction costs) and
sold it for EUR3 million.
    Ivo Hesmondhalgh, Joint Chief Executive, commented:

    "Despite a clear contractual obligation on Fairplay's part, they are trying to avoid their responsibilities under the contract. We will
take whatever measures are necessary to enforce their obligations and resist their claims. 

    Whilst we would have preferred to have completed the sale of our 50% stake in Varna Logistics on the agreed terms, we are, nevertheless,
pleased to retain a 50% stake in Varna Logistics as we continue to believe that the project is a good one. The logistics park is servicing a
clearly expressed need for modern warehousing in Bulgaria's second city."

    Enquiries:

    Bulgarian Property Developments
    Ivo Hesmondhalgh (Joint Chief Executive)            +44 (0) 20 7243 1336
    Philip Pashov (Joint Chief Executive)                   +359 (0) 963 13 59

    Cubitt Consulting
    Brian Coleman-Smith/James Verstringhe               +44 (0) 20 7367 5100

    Matrix Corporate Capital LLP (Nominated Adviser)
    Stephen Mischler                                             +44 (0) 20 3206 7203

    Background Note:
    Since BPD was incorporated in May 2004 and floated on AIM in January 2005, it has raised a total of �62.22 million in equity. This has
been used to acquire and develop land for commercial property use across Bulgaria, in particular for building distribution centres, retail
centres and offices.

    BPD's portfolio currently includes properties in Sofia, Varna, Plovdiv, Vidin, Ruse, Bansko, Pleven and Sandanski.
    http://www.bpdplc.com 

This information is provided by RNS
The company news service from the London Stock Exchange
 
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