August 31, 2006 According to the ATHEX regulation, in force since November 25, 2005, and in particular according to article 212, the BoD of the ATHEX in its meeting on 4.3.2006, taking under consideration the company's Annual Financial Statements 2005 according to IFRS, decided the enlist the company's shares to the Supervision Regime (article 212) as of Tuesday April 4, 2006.
The reasons for the enlisting according to articles 212 and 213 are:
1. The company's Net Equity position is reported at below 50% of its paid-in share capital, and
2. The company's EBITDA both parent and consolidated are negative.
As already known KLONATEX S.A owns holdings primarily in the textile sector. Via its subsidiary NAOUSSA SPINNING MILLS S.A., KLONATEX controls and participates in 8 companies of the textile sector.
The company's turnover was mainly derived from the supply of services to its subsidiaries. On 12/31/2005 the company ceased the supply of these services, hence there is no turnover recorded. The decline in turnover is mainly due to the lack of working capital as well as due to the gradual termination of non profitable activities and products. Due to accumulated losses, the company's net equity is at below 50% of its paid-in share capital (hence, article 47 of Codified Law 2190/20 is applied). Therefore, the Board of Directors announced to the Shareholders' General Meeting that there are three alternatives under consideration so as to deal with the situation: share capital increase, share capital decrease and increase in the value of total assets in particular of participations, to restore net equity vis-à-vis the share capital. At the same time, the company pursues the disposal of the ALDEMAR S.A participation, the proceeds of which are intended to decrease debt.
On March 15, 2006 an agreement was signed under special terms and conditions with the main credit banks regarding the financing of the restructuring and reorganization business plan for the companies of the group's textile sector, providing, among others, the merger through absorption of FANCO S.A., RODOPI SPINNING MILLS S.A. and GALLOP S.A. by the parent NAOUSSA SPINNING MILLS S.A. The merger will take place based on the Balance Sheet as of 3/31/2006, also constituting the transformation Balance Sheet, to be also approved by the companies' General Meetings. At the same time, the issue of a convertible bond loan or/and share capital increase of the subsidiary NAOUSSA SPINNING MILLS S.A. up to the amount of at least 10 million euro is provided, underwritten by European Textile Investments Ltd through a European bank, an amount by which debt to the main credit banks will decrease. Following conclusion of the above, there will also be refinancing of the subsidiaries' total bank debt up to the amount of 140 million euro under special terms to be agreed. The company's and the Group's sustenance depend upon success of the subsidiaries' business plan, regular financing, debt refinancing, settlement of the remaining liabilities, successful completion of the merger and share capital increase of NAOUSSA SPINNING MILLS S.A..
