41/2012: Management Boards of PBG S.A., HYDROBUDOWA POLSKA S.A. and APRIVIA S.A. resolve to file petitions for insolvency with arrangement option
The Management Board of PBG S.A. reports that: (i) on June 4th 2012 it adopted a resolution whereby PBG S.A. is to file a petition for insolvency with arrangement option; (ii) on June 4th 2012 it received a notification to the effect that on June 4th 2012 the Management Board of HYDROBUDOWA POLSKA S.A. adopted a resolution to file a petition for insolvency with arrangement option; and (iii) on June 4th 2012 it received a notification to the effect that on June 4th 2012 the Management Board of APRIVIA S.A. adopted a resolution to file a petition for insolvency with arrangement option.
These decisions are primarily aimed at protecting the interests of creditors, employees and shareholders of the three companies, as well as facilitating the companies' further operations.
Since last year, PBG S.A. had been negotiating with the PBG Group's financing banks the terms of refinancing of the acquisition of RAFAKO shares. As a result of the talks, one of the banks withdrew its financing commitment and PBG S.A. had to finance the transaction using its own funds and drawing on available credit lines. Then, in April 2012 the focus of the negotiations shifted to bridge financing and restructuring of the debt of the PBG Group companies, including PBG S.A., HYDROBUDOWA POLSKA S.A. and APRIVIA S.A. (see Current Report No. 27/2012 of May 15th 2012). As a result, on May 14th 2012 the PBG Group and its financing banks entered into a standstill agreement (see Current Report No. 28/2012 of May 15th 2012).
The standstill agreement froze the debt exposure at a specified level and set out the preliminary terms of bridge financing for PBG S.A., HYDROBUDOWA POLSKA S.A., APRIVIA S.A. and other PBG Group companies. Moreover, under the agreement the banks were obliged to make every effort to obtain relevant decisions on bridge financing from their respective credit committees by May 18th 2012 and to make the funds under the bridge financing available by May 25th 2012.
The Management Boards of PBG S.A., HYDROBUDOWA POLSKA S.A. and APRIVIA S.A. resolved to file petitions for insolvency with arrangement option in view of the protracting negotiations with the banks concerning the final terms of bridge financing, and the related decline in the companies' liquidity position. Although on June 1st 2012 the banks which had committed to provide bridge financing issued positive credit decisions, fulfilment of the terms of such decisions depends on external financial institutions and the time for their fulfilment does not leave room for providing security for repayment of current liabilities and proper completion of the running contracts. Also, the three companies believe that given the lack of comprehensive financing and without restructuring of their financing sources, the terms of security over assets proposed in the standstill agreement of May 14th 2012 prevent all creditors from being treated equally. One of the consequences of the stall in negotiations with the banks and the PBG Group's failure to establish security specified in the standstill agreement was the hold on funds of the PBG Group companies, including PBG S.A., HYDROBUDOWA POLSKA S.A. and APRIVIA S.A., on the banks' technical accounts, which made it virtually impossible for the PBG Group companies to complete their contracts and conduct day-to-day operations.
The adoption of the resolutions also stems from lengthy contract settlement procedures, including with respect to major road construction contracts (in particular to A-1 and A-4 motorways) and the contract for construction of the National Stadium in Warsaw. The road construction contracts require the contractors to commit significant financial resources at the execution stage. Further, since the award of the contracts, prices of raw materials used in the construction process (concrete, bitumen, aggregate, diesel oil) have significantly increased. The execution of the contract for construction of the National Stadium also forced the PBG Group to commit, on a long-term basis, significant resources to its operating activities. The general contractor has so far incurred significant expenditure to complete the construction work. However, the final settlement is still being negotiated with the contracting authority.
The companies' Management Boards believe that the proposed measures, i.e. filing the petitions for insolvency with arrangement option, will best protect the interests of all companies' stakeholders, i.e. creditors (including contracting parties, consortium members, subcontractors, suppliers, lenders and bondholders), employees and shareholders. The objectives of insolvency proceedings with arrangement option are: (i) to protect creditors and employees, so that their claims may be satisfied on equal terms and to the largest extent possible, and (ii) to ensure further operation of the companies, which is in the interest of their shareholders. Please note that these decisions do not affect the operations of RAFAKO S.A., which will continue its normal business.
The Management Boards of PBG S.A., HYDROBUDOWA S.A. and APRIVIA S.A. view these measures as a form of restructuring of the companies' financial debt, which allow them to dispose of their non-core assets on an arm’s-length basis and implement the new strategy of the PBG Group focusing on power engineering.
In its petition for insolvency, the PBG Management Board intends to propose two scenarios for the arrangement, including partial repayment of creditors' claims, reduction of part of the financial debt, and conversion of claims into PBG shares. Scenario A provides for:
1) repayment of 100% of the nominal amount of claims of up to PLN 100,000.00 (excluding interest on the principal amount);
2) repayment of 80% of the nominal amount of claims from PLN 100,000.00 (excluding interest on the principal amount) to PLN 1,000,000.00;
3) repayment of 69% of the nominal amount of claims above PLN 1,000,000.00.
Scenario B provides for satisfaction of creditors' claims in line with scenario A, with an additional option (available for claims of above PLN 1m) of conversion of debt to equity, i.e. PBG shares, at a price of PLN 40 per share, up to 12% of the documented claim. The conversion of debt into shares will be effected within one year from the day on which the decision to approve the arrangement becomes final.
In its petition for insolvency, the HYDROBUDOWA POLSKA Management Board intends to propose two scenarios for the arrangement, including partial repayment of creditors' claims, reduction of part of the financial debt, and conversion of claims into HYDROBUDOWA POLSKA shares. Scenario A provides for:
1) repayment of 100% of the nominal amount of claims of up to PLN 10,000.00 (excluding interest on the principal amount);
2) repayment of 80% of the nominal amount of claims from PLN 10,000.00 (excluding interest on the principal amount) to PLN 1,000,000.00;
repayment of 44% of the nominal amount of claims above PLN 1,000,000.00. Scenario B provides for satisfaction of creditors' claims in line with scenario A, with an additional option (available for claims of above PLN 1m) of conversion of debt to equity, i.e. HYDROBUDOWA POLSKA shares, at a price of PLN 12 per share, up to 5% of the documented claim. The conversion of debt into shares will be effected within one year from the day on which the decision to approve the arrangement becomes final.
The Management Board of APRIVIA S.A. will present details of its arrangement proposal at a later date.
Legal basis:
Art. 56.1.1 of the Public Offering Act – inside information
Pliki:
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