Elektrim on the road to bankruptcy

Elektrim put itself on the track to bankruptcy last week when it reneged on its plans to conclude its debt restructuring, analysts said. The troubled telecom and power holding shocked bondholders when it pulled out of a complicated restructuring deal aimed at repaying €480 million to creditors, blaming its decision on market conditions that have delayed the sale of choice assets, such as Polska Telefonia Cyfrowa (PTC), the nation's largest mobile operator. Analysts said that as a result of the decision, Elektrim had driven the final nail in its own coffin. They added that bondholders would now be forced to file for the company's bankruptcy. "The only question is when," said Andrzej Kasperek, an equity analyst at Bank Handlowy. He explained that following Elektrim's planned asset disposal, there would be little reason for the company to exist. "They have nothing," he said. "For me, the company is going to go bankrupt sooner or later." Elektrim's bondholders issued a strong rebuttal of the telecom and energy group's move at the end of last week, but offered a way to make amends. "The informal bondholders committee is shocked by the company's announcement," the written statement said. "The committee is skeptical of the reasons cited by Elektrim for refusing to fulfill its undertaking to proceed with the restructuring." Previously, the bondholders had said that if Elektrim proceeded with its restructuring as planned, they would be willing "to address any genuine concerns" in the agreement. "Elektrim agreed to a deal," said a spokesman for the bondholders who asked not to be named. "We have said that we are willing to negotiate some terms of the contract (that Elektrim is unhappy with)."

In particular, the bondholders want the beleaguered BRE Bank to fork over €100 million to purchase bonds after Elektrim signed the deal - one element of the agreement that Elektrim backed out of. "BRE bank is not off the hook," the bondholder's spokesman said. On Friday, Ewa Bojar, Elektrim's spokeswoman, declined to say whether Elektrim received such an offer from bondholders since she was waiting for official information from the company's management. The uncertainly has, inevitably, led to conjecture. "The speculation has been that the bondholders will not accept (new negotiations)," said Magdalena Łapsa, an analyst at SG Securities. "The bondholders will not accept debt reductions. What they can do is postpone payments." And Elektrim's move has left analysts just as puzzled as bondholders. Łapsa questioned why the company's management would select such an option when its financial position has remained flat since it signed the agreement. "Nothing has changed in the past two months," she said. "Starting new negotiations would just postpone the inevitable." Restarting talks and redrafting a contract is out of the question, analysts said. "It is just postponing Elektrim's inevitable bankruptcy," Łapsa said. Elektrim lost more than half its stock value on the Warsaw Stock Exchange (WSE) last week. On Friday, it closed at zł. 1.14 a share.