November 30, 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 to enrol 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 realized from the supply of services to the subsidiaries. On 12/31/2005 the company ceased, to offer these services, and consequently there is no turnover recorded. The decline in the group's turnover is mainly due to the lack of working capital for its financing, as well as due to the gradual termination of non profitable activities and products.
Due to accumulated losses, the article 47 of Codified Law 2190/20 may be applied and the BoD announced the issue to the Shareholders' Repeat Ordinary General Meeting on 07/20/2006. More specifically, during the General Meeting, it was mentioned the fact that the company in the past years had substantially supported its textile sector subsidiaries, yet these participations due to the major recession at the Stock Exchange in the one hand, and due to the crisis in the textile sector on the other, which is its core investment, did not turn out as expected leading this way to major decline in the Net Equity. Hence, the Board of Directors considers three alternatives 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-a-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' Shareholders Meetings. Already the Shareholders Meetings of the merged companies on 09/12/2006 approved the above merger. On 09/30/2006 (date of financial statements) the notary deed of the merger was signed, while all the required documents for the approval of the merger by the supervising authorities have been submitted (Ministry of Development, Societes Anonyme and Credit Directory). Approval of the merger is expected along with approval of the prospectus by the Capital Market Committee.
The viability of the Group will depend on the successful and prompt realization of the business plan, the successful completion of the merger and the capital increase of the subsidiary NAOUSSA SPINNING MILLS SA, the successful and without any delay debt restructuring, the financing of supplies and sales, as well as the successful settlement of remaining post dated and current liabilities.
We remain at your disposal for any further clarification.
