The management of Polish Steel (PHS) will step up efforts to restructure the state steel holding's outstanding debts this week. The process, which must be finished before a tender for the sale of PHS can be announced, will be completed by the end of August, said Krystian Kozakowski, the vice president of PHS.
The estimated zł. 5 billion ($1.1 billion) debt of Huta Katowice (HK) and Huta Tadeusza Sendzimira (HTS), the largest mills comprising PHS, have caused friction with suppliers and contractors by limiting production and sales and have led banks to freeze accounts, stifling the mills' liquidity.
PHS steel mill mangers will meet with creditors this week to place a repayment offer on the table aimed at wiping out the conglomerate's debt to state-owned entities, Kozakowski said.
"I would sum it up in one sentence: PHS is finally up and running," he said. "We are working in two directions - a financial, debt-reduction direction aimed at the conversion, reduction and prolongation of debts (and one) accompanied by the development, stabilization and stimulation of sales."
HK and HTS will negotiate to reduce by 50% their debts to state sector firms, including coal and energy suppliers and Polish State Railways (PKP). Following an agreement with creditors, which must take place before July 20, the Treasury Ministry will issue 160 million shares with a nominal value of zł. 10 each, which will be sold to creditors for zł. 20, said Jarosław Zwoliński, HK's spokesman.
The issue should wipe out zł. 3.2 billion ($762 million) of the conglomerate's debt and raise equity capital to zł. 4.1 billion ($976 million), he said.
"We will also ask our private suppliers and contractors to reduce the debts, although this will be subject to individual contracts," Zwoliński said. "I can't say what level of reduction we will propose."
As a result of negotiations between HK's banks and the Industrial Development Agency (ARP), the banks agreed to reduce the mill's zł. 250 million ($60 million) debts by 35% and accept five-year treasury-backed bonds issued by the ARP as repayment. The agreement will free HK's bank accounts, which have been frozen since February after the mill failed to keep up with repayments.
"We expect that our accounts will be unblocked later today," Zwoliński told the WBJ last Friday.
Further PHS debt was wiped out last week when HTS creditors voted in favor of a settlement to write off 40% of zł. 750 million ($178 million) owed by the mill and repay the remainder in 20 installments over five years.
Investor interested
Progress on restructuring PHS debt is a positive sign for steel conglomerate LNM Holdings, registered in the Dutch Antilles, which last week reaffirmed its interest in the privatization of PHS.
"We are hoping that things will start to move ahead now," said Annanya Sarin, the director of corporate communications at LNM Holdings. "There is a need for these companies to be privatized to bring them in line with the standards of the global steel industry."
Although she would not comment on how current debt restructuring would influence LNM Holdings' privatization offer, Sarin admitted that the firm's "due diligence will have to be revalidated."
