Bondholders ask Elektrim for compensation

Elektrim's bondholders are calling for additional compensation from the troubled conglomerate for delayed repayment, a source knowledgeable about the situation said last week. "The (situation) is heating up and bankruptcy is a real option," said the source, who asked not to be identified. "People are aware that if (they) don't reach an agreement, (bondholders) will liquidate the company." Elektrim was ordered by a Warsaw court in January to start repayment negotiation talks with the holders of €480 million in unsecured bonds, who had filed a petition for the company's bankruptcy after it defaulted last December. Elektrim representatives have met twice with bondholders' representatives as of last week but no negotiations have taken place, the source said, despite Elektrim's comments that it would make bondholders a more acceptable repayment offer. Bondholders rejected Elektrim's original proposal for a 40% reduction of the debt and an extended repayment period. Last month Elektrim proposed two new repayment schemes, the first with a 25% debt write-off and repayment of the remaining portion by the end of 2004 and the second plan with a 15% debt reduction with repayment of the remainder by the end of 2007. But the source called the new proposals "a waste of time" and said that Elektrim never submitted them for the bondholders' trustee to vote on.

Elektrim also dumped London-based restructuring consultant Klesch & Co. at the request of bondholders who opposed the reported $3 million deal that Elektrim signed with the financial firm, the source said. Now Elektrim is being represented by the Austrian firm Meinl Bank, which gave bondholders a presentation of Elektrim's history last week in London, although no additional repayment options were offered, according to the source. Elektrim representatives at the meeting also told bondholder representatives they would keep them informed about their talks with BRE Bank, which announced last month that it intended to buy a 49% stake in Elektrim's telecom unit, Elektrim Telekomunikacja (ET). Ewa Bojar, Elektrim's spokeswoman, would not confirm whether Elektrim had replaced Klesch & Co. and added that the firm was not legally obligated to disclose such information. She would not comment on any negotiations with BRE Bank. The source also said that Elektrim asked bondholders to refrain from talking to the press. "Elektrim is begging (bondholders) not to deride them to the press," according to the source, adding that most bondholders were willing to oblige to "give Elektrim some breathing room" and "a chance to come up with a new proposal that is acceptable." "We may not permit bondholders not to speak," Bojar said. When asked if anyone from Elektrim or associated with the firm asked or told bondholders not to speak to journalists, she said she didn't know.

Elektrim is scheduled to meet with its creditors, including the bondholders, on April 23 in the Warsaw court that is overseeing its debt-restructuring proceedings to see if they will accept a repayment proposal. The firm was about to submit the proposal to its court-appointed supervisor, Zdzisław Hankowicz, last Thursday afternoon, Hankowicz said. He added that he expected to deliver the proposal to the Warsaw court the following day so that it could be sent to creditors immediately. Elektrim owes a cumulative zł. 2.33 billion ($568 million) to 124 creditors. If the creditors reject the proposal, they could force the company into bankruptcy. Elektrim would not comment on the matter.