In a market filing, (49
PLN, -0,31%) informed the court has granted bankruptcy protection for debt restructuring to PNI, the firm's rail infrastructure unit. PNI proposed full repayment of the liabilities of up to PLN
0.02m, a 10% reduction of the liabilities amounting to PLN
0.02m-PLN 0.1m and a 20% reduction of liabilities of PLN
0.1m-PLN 1m, while liabilities in excess of
1m are proposed to be reduced by 30%. PNI also proposed that its liabilities against be cut by 40%. At the same time, PNI proposed renegotiating four major contracts with PKP PLK. According to PNI’s management plan, the last tranche of the firm’s liabilities will be paid back by end-March 2015.
We had expected the court to grant bankruptcy protection for debt restructuring to PNI and the news is also unlikely to come as a major surprise for the market. Budimex’s CEO Dariusz Blocher had stressed several times that such scenario was highly probable. While the successful renegotiation of PNI’s contracts with PKP PLK cannot be entirely ruled out, we believe the firm will find it extremely difficult to reach acceptable compromises, especially given the recent “dispute” with the firm’s main contractor. Our base-case scenario assumes the liquidation of PNI.
Budimex’s CEO, quoted in today’s Puls Biznesu daily, admitted that negotiations with PKP PLK are likely to be very tough. While this could potentially leave without the desired diversification into the rail segment, keeping PNI alive could bring additional cash outflows and put significant pressure on dividend payouts and hit Budimex’s financial results in the years ahead. The news came out during yesterday’s trading hours and had no major price-moving impact on . We also expect a neutral reaction today.