PBG SA (PBG), Poland’s third-largest builder, decided to file for bankruptcy to help reach an agreement with creditors to cut debt by as much as 31 percent.
PBG, which helped build three out of four stadiums for European soccer championship that kick off in Poland and Ukraine this week, is proposing to honor 69 percent of its debt to creditors owed more than 1 million zloty ($282,700), 80 percent to those owned from 100,000 zloty to 1 million zloty and 100 percent for those owned lesser sums, the company said in a regulatory filing today.
The company, which specialized in oil and gas engineering, ventured out of its core business to bid on arena and motorway deals after Poland was selected to co-host the Euro 2012 soccer championship, only to see its debt swell on falling margins. PBG said negotiations with banks remain at an “impasse” that prevent the company from fulfilling its contracts.
“This bankruptcy is going to have a big negative impact, not just on banks that are financing PBG and on its subcontractors, but on the whole economy,” Robert Maj, an analyst at KBC Securities in Warsaw, said today by phone.
PBG’s unconsolidated debt, which doesn’t include the borrowings of its unit, amounts to 1.5 billion zloty, Chief Financial Officer Przemyslaw Szkudlarczyk said via a video conference today. The entire group’s debt at its 12 crediting banks is at 1.7 billion zloty, Kinga Banaszak-Filipiak, a spokeswoman, said at the conference.
The builder’s shares fell 13.2 percent to 14.63 zloty at 1:18 p.m., three minutes after the statement was issued, their biggest drop in six weeks. No other transactions were completed after that time. The Warsaw Stock Exchange hasn’t suspended the PBG shares and is trying to balance supply and demand, said a spokeswoman, who declined to be identified in line with company policy.
The WIG20 (WIG20) blue-chip index rose 0.3 percent, reducing a 0.7 percent gain after PBG made its announcement.
PBG’s four biggest bank creditors are Bank Pekao SA (PEO), Bank Zachodni WBK SA, ING Bank Slaski SA (BSK) and Nordea Bank Polska SA, the CFO said. Slaski fell 3.7 percent to 74.25 zloty, the biggest decline in more than five months, while Pekao dropped 1.5 percent to 136 zloty.
Piotr Utrata, a spokesman for Slaski, and Pekao’s deputy spokesman Miroslaw Kuk, declined to comment when reached by phone by Bloomberg News. Artur Sikora, a spokesman for Zachodni, didn’t answer calls to his mobile phone seeking comment. Slawomir Zygowski, an acting chief executive officer of Nordea AB’s Polish unit, didn’t answer a call to his mobile phone.
“PBG itself isn’t a problem for the banking sector, but it’s hard to tell what the impact will be for the whole construction industry,” Andrzej Bursa, an analyst at Ipopema Securities SA, said by phone today. “It seems that the market has overreacted” when it comes to the price of the banks on the Warsaw bourse, he added.
Holders of more than 1 million zloty of PBG debt may also be given the option of converting 12 percent of the debt into company shares at a rate of 40 zloty a share, to be executed one year after a debt agreement is reached, PBG said.
Aprivia SA and Hydrobudowa Polska SA, both controlled by PBG, also decided to file for bankruptcy aiming at an arrangement today. Hydrobudowa will offer the same conditions to creditors except for amounts over 1 million zloty, where it is offering to honor 44 percent of its debt, PBG said in the statement. Aprivia will release details of its proposed debt reduction later.
“We’ve always said that the first half of the year would be difficult and we would need additional financing to make up for a negative operating cash flow,” Szkudlarczyk said. “Our contracts allow us to generate cash starting in the second half.”
PBG, which last year failed to sell Hydrobudowa to Spain’s Obrascon Huarte Lain SA, needs about 700 million zloty of extra funding, the CFO said.
PBG is helping build Poland’s first liquefied natural gas terminal, its unit Rafako SA is also part of the group that won a 9.3 billion-zloty contract to build a power plant for PGE SA utility.
The company’s order backlog stands at 9 billion zloty, Szkudlarczyk said.
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