PACE Slumped 94% in 2Q after a ฿3 Billion Revaluation Value of Investment

PACE Development Corporation Public Company Limited or PACE announced its 2Q18 consolidated financial statement today (August 15, 2018) through SET.

In 2Q18, PACE recorded net income for the three-month period ended June 30, 2018 of 217 million baht (4%of the total revenues), significantly decreased by 94% as compared to the same period last year of 3,915 million baht. This was mainly from the effect from loss of control in subsidiaries of 7,113 million baht in 2Q17, and recorded loss on disposal of assets of 3,115 million baht in PACE’s Statement of Comprehensive Income for the six-month period as of June 30, 2018.

In accordance of 1Q17, PACE had 2 new investment partners: 1) Apollo Asia Sprint Holding Company Limited, and 2) Goldman Sachs Investments Holding (Asia) Limited which own a combined 49% stake in The Bangkok Edition Hotel, Rooftop Bar, Observation Deck, and retail Cube Building. This caused PACE to lose control in its subsidiaries.

Afterward, PACE engaged the independent financial advisory firm to remeasure fair value of investments in the amount of 6,487 million baht and recorded such investments in the consolidated statement of financial position as at December 31, 2017, and recorded loss on impairment of investments in the amount of 7,113 million baht in the Statement of Comprehensive Income for the period ended December 31, 2017, respectively.

 

Later, in April 2018, PACE together with PP1 and PP3 which are its subsidiaries (former as joint ventures) entered into Disposition of assets with King Power MahaNakhon Co., Ltd. in order to dispose its subsidiaries’ assets, comprising of: hotel, Observation Deck, and Retail Cube Building to KPM with the total value of not exceeding 14,000 million baht.

Meanwhile, PACE and its subsidiaries entered into Investment Buy-Out Agreement to purchase shares in PP1 and PP3 from its investment partners [Apollo Asia Sprint Company Limited (“Apollo”) and Goldman Sachs Investments Holdings (Asia) Limited (“Goldman”)] with the total value of not exceeding USD 320 million.

The reason of the value of 14,000 million baht from the disposition of the assets and proceeds to complete which was lower than the valuation from the independent financial advisory of 17,182 million baht (the total Business value of PP1 of 5,058 million baht as the valuation of the 1st independent financial advisory, and the total Business value of PP3 of 12,124 million baht as the valuation of the 2nd independent financial advisory) which caused the record of loss on impairment of investments. This was due to the valuation from the independent financial advisory was based on the assumption that all assets are completed and able to operate as planned.

 

To do so, PACE was required to invest additional capital to complete the construction in the amount of not exceeding 875 million baht. The main reason was caused by the crisis of lack of confidence in the bond market since 3Q17 which affected PACE’s ability to prepare the additional fund to complete the construction of its projects as planned. This included the obligation to repay current portion of debentures as well as bill of exchange of more than 3,000 million baht. Accordingly, PACE decided to dispose its assets in order to use that cash flow to solve its debt.

Consequently, PACE recognized the adjustment between the fair value of the investment from the independent financial advisory and the actual value of the investment, and recorded loss from investments in joint ventures in the amount of (285) million baht, and 3,115 million baht in PACE’s Statement of Comprehensive Income for the three-month period ended March 31, 2018 and the six-month period end June 30, 2018, respectively.

In 2Q17, PACE received a notification from The Securities and Exchange Commission (SEC) indicated PACE to clarify the actual value of the investment on November 16, 2017. To complete the process, PACE engaged the second independent financial advisory firm to remeasure fair value of PP1 and PP3 investments once more by using Income Approach and Black-Scholes option.

The results of the evaluation was PACE acknowledged the loss of actual value of the investment, which consequenced to the second quarter of 2017’s financial statements, and recorded a profit/loss for 7,113 million baht. The aforementioned statement shown that PACE had recorded a net profit of 3,915 million baht.