WARSAW - Debt-laden Polish builder PBG filed for bankruptcy protection on June 4 only days before the start of the Euro 2012 soccer tournament, citing difficulties related to road and stadium contracts for the competition.
PBG shares dropped 13 percent immediately after the announcement and were indicated down nearly 50 percent after being automatically suspended by the exchange. The stock has already shed more than three-quarters of its value this year.
PBG is the biggest Polish builder to declare bankruptcy in the wake of Poland’s 20 billion euros ($24.7 billion) spending spree to develop and upgrade its infrastructure ahead of Euro 2012, that featured fierce competition for contracts between local and foreign builders.
The company is one of Poland’s most active construction groups and is also part of a consortium to build Poland’s first liquefied natural gas (LNG) terminal. It took part in building three of the country’s four stadiums for the soccer championship.
PBG, which at its peak had a market capitalisation of some $1 billion, ran into solvency problems partly because it took on deals with razor-thin margins to build motorways only to see soaring prices of building materials.
The company, which was relegated from Warsaw’s blue chip stock index in March, has been in debt restructuring costs with its lenders but said it was forced to seek creditor protection because it was running out cash.
"The reason for the bankruptcy filing is the difficult liquidity situation resulting from capital-thirsty road contracts, lack of total payment for the contract on the National Stadium and the prolonged talks with banks over securing financing," PBG said in a statement.
PBG, whose long- and short-term debts totalled 4.2 billion zlotys ($1.2 billion) at the end of the first quarter, said it aimed to reach a deal with its creditors and presented two proposals that included debt-for-equity swaps.
After shedding assets, PBG would refocus on the energy sector, which is expected to see heavy spending to build and upgrade power plants.
"I think they will reach a deal," said one Warsaw-based analyst who asked not to be named. "In case of liquidation, there would be a long list of losers – banks, subcontractors, as well as investors in unfinished projects."
Several other Polish companies have been forced to seek court protection from creditors in recent months after running into liquidity troubles similar to PBG.
