PTK trolls for creditors, finds understanding funder
But when that time came for Polska Telewizja Kablowa (PTK), Poland's largest cable operator, company officials found it hard to convince banks that they were actually worth anything.
"We went to several Polish banks that asked what the true value of a cable company was," said Marjorie Feldman, chief financial officer of PTK. "I said - look in the Wall Street Journal. Take your pick."
PTK was looking for a $1.5 million loan to help finance the acquisition of Elektrim TV, the cable subsidiary of publicly-listed Elektrim SA. The $3.2 million deal would double PTK's subscriber base in Warsaw from 20,000 to 40,000 subscribers.
The problem is that the company's bottom line was still written in red ink, a fact which most Polish banks felt queasy about. "They kept asking us crazy, off-the-wall questions. But when they got to the bottom line, they always said, 'No,'" Feldman said. "I kept explaining that when you add back depreciation and the like, that we were actually showing a profit.
"There was just very little business sense applied. It was all based on the numbers," Feldman said. While showing a net loss, the company has a positive net operating profit.
Feldman declined to release information on PTK's revenues and profits. According to data from Kagan World Media, average basic cable rates in 1994 were running at $5.50. With 250,000 subscribers nationwide, that would mean revenues around $16.5 million, or around one-third of the industry's $51 million basic cable revenues last year.
After frustrating encounters, PTK finally secured a loan in early October from AmerBank for $2.5 million, $1.5 million for the acquisition of Elektrim TV, and $1 million for working capital.
PTK's arrival on AmerBank's doorstep is part of a trend in Poland, in which more and more subsidiaries are looking for financing based on their own merit, said Wlodzimierz Paszkowski, AmerBank deputy president.
"To some extent this (PTK deal) is a national transformation," Paszkowski said. "At some point a company has to stand on its own two feet. If they finance everything internationally, it's a strain on the parent's balance sheet."
Concerning PTK's frustration with finding a credit line, not only bank officials are fixated on net earnings, Paszkowski said. That fixation goes all the way up to the bank regulators.
In 1991, for example, AmerBank made a loan to Centertel, which had a monopoly on cellular telephones but needed funds to build up its network. Despite Centertel's privileged market position, central bank inspectors questioned AmerBank officials about why they made a loan to the company if the mobile phone company was showing a loss, Paszkowski said.
PTK, not a monopoly, was attractive because of its revenue structure and corporate strategy, Paszkowski said.
"They've got a sound and solid stream of income which we can evaluate quite easily," Paszkowski said. "They also have a good management which knows where to save the buck and make the buck." Feldman pointed out that PTK stresses efficiency, operating on a 50% margin.
Polska Telewizja Kablowa and AmerBank also have some historical ties as institutions founded by well-known Polish emigres who returned to Poland to start up businesses just as market reforms began.
Amerbank's spiritual father is Jerzy Kosinski, the controversial author of the Painted Bird and Cockpit. The founding shareholders of the bank, including Frederick T. Field (of Marshall Fields), Warner Communications Inc. and HAC Investment Ltd. (a subsidiary of Bankers Trust), were Kosinski's personal friends who the author convinced of the need for professional financial institutions in Poland that would provide capital for the economic transformation about to take place. AmerBank was the first foreign bank to receive a banking license here.
PTK was founded by David Chase, a Pole who emigrated to the United States after World War II and was on Forbes' list of the 400 wealthiest Americans before the stock market crash of 1987. Besides founding PTK, Chase was instrumental in selling the name of Poland to General Electric Capital Services, which recently bought out the bank he founded with the Solidarity trade union (WBJ, August 25-31).
Paszkowski said that as pioneers in the Polish market, AmerBank and PTK found it easier to understand each other. "This is our method of approaching clients. To try to understand their business, to exchange information and communicate."
"We went to several Polish banks that asked what the true value of a cable company was," said Marjorie Feldman, chief financial officer of PTK. "I said - look in the Wall Street Journal. Take your pick."
PTK was looking for a $1.5 million loan to help finance the acquisition of Elektrim TV, the cable subsidiary of publicly-listed Elektrim SA. The $3.2 million deal would double PTK's subscriber base in Warsaw from 20,000 to 40,000 subscribers.
The problem is that the company's bottom line was still written in red ink, a fact which most Polish banks felt queasy about. "They kept asking us crazy, off-the-wall questions. But when they got to the bottom line, they always said, 'No,'" Feldman said. "I kept explaining that when you add back depreciation and the like, that we were actually showing a profit.
"There was just very little business sense applied. It was all based on the numbers," Feldman said. While showing a net loss, the company has a positive net operating profit.
Feldman declined to release information on PTK's revenues and profits. According to data from Kagan World Media, average basic cable rates in 1994 were running at $5.50. With 250,000 subscribers nationwide, that would mean revenues around $16.5 million, or around one-third of the industry's $51 million basic cable revenues last year.
After frustrating encounters, PTK finally secured a loan in early October from AmerBank for $2.5 million, $1.5 million for the acquisition of Elektrim TV, and $1 million for working capital.
PTK's arrival on AmerBank's doorstep is part of a trend in Poland, in which more and more subsidiaries are looking for financing based on their own merit, said Wlodzimierz Paszkowski, AmerBank deputy president.
"To some extent this (PTK deal) is a national transformation," Paszkowski said. "At some point a company has to stand on its own two feet. If they finance everything internationally, it's a strain on the parent's balance sheet."
Concerning PTK's frustration with finding a credit line, not only bank officials are fixated on net earnings, Paszkowski said. That fixation goes all the way up to the bank regulators.
In 1991, for example, AmerBank made a loan to Centertel, which had a monopoly on cellular telephones but needed funds to build up its network. Despite Centertel's privileged market position, central bank inspectors questioned AmerBank officials about why they made a loan to the company if the mobile phone company was showing a loss, Paszkowski said.
PTK, not a monopoly, was attractive because of its revenue structure and corporate strategy, Paszkowski said.
"They've got a sound and solid stream of income which we can evaluate quite easily," Paszkowski said. "They also have a good management which knows where to save the buck and make the buck." Feldman pointed out that PTK stresses efficiency, operating on a 50% margin.
Polska Telewizja Kablowa and AmerBank also have some historical ties as institutions founded by well-known Polish emigres who returned to Poland to start up businesses just as market reforms began.
Amerbank's spiritual father is Jerzy Kosinski, the controversial author of the Painted Bird and Cockpit. The founding shareholders of the bank, including Frederick T. Field (of Marshall Fields), Warner Communications Inc. and HAC Investment Ltd. (a subsidiary of Bankers Trust), were Kosinski's personal friends who the author convinced of the need for professional financial institutions in Poland that would provide capital for the economic transformation about to take place. AmerBank was the first foreign bank to receive a banking license here.
PTK was founded by David Chase, a Pole who emigrated to the United States after World War II and was on Forbes' list of the 400 wealthiest Americans before the stock market crash of 1987. Besides founding PTK, Chase was instrumental in selling the name of Poland to General Electric Capital Services, which recently bought out the bank he founded with the Solidarity trade union (WBJ, August 25-31).
Paszkowski said that as pioneers in the Polish market, AmerBank and PTK found it easier to understand each other. "This is our method of approaching clients. To try to understand their business, to exchange information and communicate."
