Bondholders bid for ET to avert Elektrim bankruptcy

Conglomerate Elektrim took a step back from bankruptcy last week when a creditor-linked group offered to buy its telecoms assets, although analysts said shareholders were still at risk. A creditors' group led by Elliott Advisors, a London-based investment fund, said it offered €350 million for Elektrim's minority stake in Elektrim Telekomunikacja (ET), which controls Eastern Europe's largest mobile operator Polska Telefonia Cyfrowa (PTC). Elektrim shares jumped 30% early last Monday, while the Warsaw Stock Exchange's blue-chip WIG 20 index was up just 0.6%, in response to fading fears of immediate bankruptcy, which have hung over the firm since it pulled out of a debt restructuring deal earlier this month. "Elektrim shares are rising because the threat of bankruptcy has receded," said Magdalena Łapsa, an analyst at SG Securities. "But what if the management strikes a deal with the bondholders, and after the repayment Elektrim is left with nothing?" The bid, the second made by Elliott Advisors since Elektrim defaulted on €480 million worth of bonds late last year, may also signal interest by private equity players for investment in the region's battered telecoms sector. Poland's BRE Bank, Elektrim's largest single shareholder and cofinancier of a proposed debt restructuring deal, has unsuccessfully tried to buy the ET stake for months. The lender's loss of exclusive rights to buy ET, followed by the collapse of the debt deal, led analysts to speculate that BRE had given up on its costly rescue bid and chopped nearly 60% off the value of Elektrim shares last week.

Elektrim, which abandoned the restructuring deal after saying it was concerned that it might not be able to make payments, said it would review the bondholders' bid. "We will look at this offer," said Maciej Radziwiłł, Elektrim's chief executive officer. "This is an important sum (that) could allow us to pay off most of our debt." The bondholders are pressing for Elektrim to sign the initial restructuring agreement, under which it would issue new bonds secured by its assets. They said they were willing to renegotiate later if the original restructuring agreement proved to be too onerous. The offer from Elliott Advisors may allow the company to go ahead with the restructuring deal, knowing that it has a buyer for the prized telecoms stake. "We disagree with their contention that they wouldn't be able to live up to the terms of the agreement," said an Elliott official who asked not to be named. "We actually think that they can; they just don't want to." The official added that it would be irresponsible for Elektrim to reject the group's ET bid. Elektrim owns 49% of ET, a joint venture with France's Vivendi Universal, which controls PTC. But PTC's ownership is being challenged in court by its other shareholder, Deutsche Telekom. Previously, an Elliott-led group bid €450 million for ET, but it had cut the offer in response to lower valuations in the sector, hard hit by telecom woes on a global scale. Radziwiłł also said that it was difficult to unload the assets because of legal dangers stemming from the dispute with Deutsche Telekom. - Reuters