BRE Bank's ill-fated attempt to rescue telecoms-to-power group Elektrim leaves it facing a long road to recovery on which it may be vulnerable to a takeover, analysts said.
Although the collapse of a debt restructuring deal spares BRE, half-owned by Germany's Commerzbank, from pumping in an extra €100 million to keep Elektrim afloat, the bank is still nursing painful losses.
It leaves in tatters chief executive officer Wojciech Kostrzewa's strategy of building a major stake in Elektrim as a stepping stone to buying the latter's prized mobile telephony assets - and tarnishes his reputation as Warsaw's top dealmaker.
Kostrzewa, leading a "concert party" of local investors, earlier this year amassed a 23% stake in Elektrim for an estimated $30 million.
But talks on buying Elektrim's indirect stake in Polska Telefonia Cyfrowa (PTC) - Eastern Europe's largest mobile phone operator - collapsed amid legal risks stemming from an earlier bid for control of PTC by Deutsche Telekom.
And, since Elektrim on Monday pulled out of a deal to restructure its €480 million in defaulted bonds, the value of BRE's stake has slumped to $6 million as the market increasingly bets on the Elektrim saga ending in bankruptcy.
Kostrzewa, a late convert to the credo of risk avoidance, maintains that despite suffering a $23 million net loss in the first half as other new economy investments went bad, Poland's leading corporate bank can pull off a turnaround.
"Despite our losses in the first half, we will do all we can to achieve a positive (full-year) result," he said.
Kostrzewa's past talent for turning a profit on audacious equity plays won him promotion to the upper echelons of Commerzbank, where he now heads its Eastern European operations.
But his latest promise to take a conservative approach may be hard to fulfill since BRE's portfolio remains packed with risky new economy plays, such as bonds convertible into shares of media group ITI, whose Warsaw flotation collapsed this year.
Commerzbank - whose 50% stake in BRE has nearly halved in value to $215 million since March - said it retained full confidence in Kostrzewa.
"Up to now, we have been very satisfied with Kostrzewa's leadership of BRE, and with BRE itself," said Dennis Phillips, a spokesman for Commerzbank in Frankfurt. Despite that assurance, some investors say that Commerzbank either could lose patience and ditch its BRE holding or that BRE could be taken over, triggering bank consolidation in Poland.
"We will see a wave of consolidation by the strategic shareholders," said one Polish pension fund manager, who requested anonymity. "BRE and Commerzbank are in the frontline. In this market I expect consolidation sooner rather than later."
Speculation on potential bidders has focused on Bank Pekao, Poland's largest listed bank controlled by Unicredito Italiano, and BPH-PBK, controlled by Germany's HVB - one potential suitor for Commerzbank. Both Pekao and BPH-PBK lack strong investment banking arms to complement their extensive retail networks.
- Reuters
