POLAND Back in December last year, the management of Hydrobudowa Polska, part of Grupa PBG, wrote to the company's shareholders and investors. The letter began: Having assessed the current financial condition of Grupa HBP, we can say that we are in good shape, while the prospects of the market which we operate in provide the basis for looking to the future with optimism. However, in June this year the contractor of such projects as the National Stadium in Warsaw, the PGE Arena in Gdańsk, the Municipal Stadium in Poznań and the A1 motorway, announced that three companies from Grupa PBG, PBG, Hydrobudowa Polska and Aprivia had decided to file for bankruptcy, subject to arrangements, with creditors at the Poznań district court.
On June 21st, the court declared the bankruptcy of one of them, Hydrobudowa Polska, final. However, this is not the end of the company's operations. The bankruptcy declaration in this form, says Weronika Piluchowska of the Góralski & Goss law firm, does not exclude the possibility of continuing the company's business activities as it creates better prospects to implement the arrangement. In this case the proposed arrangement involves the partial repayment of creditors and the conversion of the outstanding debt into shares in the company, she explains.
The troubles continue
The reasons for filing for bankruptcy were related to negotiations over financing for the group, according to a PBG announcement. The court acceded to the request to declare the bankruptcy of PBG subject to arrangements. Immediately, shares in Hydrobudowa shot up by 20 pct and those of PBG by app. 15 pct. However, more bad news emerged just a day later, when Nordea Bank Polska, BZ WBK, HSBC and Raiffeisen Bank Polska terminated loan agreements with the companies. The total value of Hydrobudowa's outstanding debt with Bank Zachodni WBK amounted to PLN 123.14 mln on June 6th. In addition, Nordea terminated a loan with the company of PLN 60.46 mln, while the Opera TFI investment fund and SGB-Bank called for the immediate redemption of PBG's bonds, including interest with a total value of PLN 34.9 mln. Filing for bankruptcy subject to arrangements is intended, as the name suggests, to lead to an arrangement with creditors, its later implementation and, foremost, to the possibility of continuing operations. In the case of a liquidation, the shareholders would have been left with nothing, to put it bluntly. Nonetheless, it was the bankruptcy filings subject to arrangements that triggered the reactions of the banks?, which are admittedly typical in such situations and result from banking procedure, but have virtually paralysed the normal functioning of the company. This is why the management's current priority is to restore normal relations with the banks, based on a common-sense business approach, explains Hydrobudowa Polska spokesman Krzysztof Woch. The next stage of this story involved more companies in the group PBG Avatia, Dromost, Przedsiębiorstwo Robót Inżynieryjno-Drogowych, Metorex, KWG, PBG Technologia, PBG Energia and Strateg Capital also filing for bankruptcy, this time after mutual sureties that had been granted for the loans were recalled by the banks.
There is still a chance...
?The loss of credit worthiness is a serious hindrance to the further business activity of PBG. A situation of this type entails being cut off from external financing and, consequently, could make it impossible to execute current contracts as well as rule out the chance of us acquiring new ones, believes Mikołaj G. Goss of the Góralski & Goss law firm. However, the company is trying to free itself from external financing so that it might be able to continue working on some of its contracts. One solution is to assume the role of a consortium leader, leaving the burden of financing to a partner from outside the PBG group. ?Another possibility involves direct payments being made by an ordering party to subcontractors, through which some of the overdue liabilities could be settled, allowing the work with these subcontractors could continue. This is important because according to the Corporate Bankruptcy and Reorganisation Act, an outstanding debt that arises before the declaration of bankruptcy subject to arrangements is part of the arrangement by law, and so cannot be paid off in any other way but as part of the arrangement. However, outstanding debts resulting from work carried out after the declaration of an arrangement can and should be cleared on a current basis, adds Krzysztof Woch. Two months earlier Dolnośląskie Surowce Skalne, a company involved in the construction of section C of the A2 motorway in time for Euro 2012, was declared bankrupt ? hopefully the last victim of the event.
Zuzanna Wiak
