Polimex: Share issue confirmed, restructuring plan announced

According to the company officials saying on a Friday’s press conference, Polimex which is now in a standstill agreement with creditors, plans to secure its restructuring deal before its standstill deal with creditors runs out near end-November and have a firm generating 5-6% EBITDA margins within two years. The CFO Robert Bednarski said that main shareholders have "conceptually" agreed to a restructuring plan put forward late Friday and the firm's intention is to secure all decisions tied to share issues before the end of the standstill agreement. Polimex estimates it needs PLN 500 m in fresh capital and will seek to convert and roll-over its mounted debts.

According to the management plan Polimex is proposing bondholders to take up to PLN 300 m in a debt conversion, shareholders take new shares in a rights issue and that an ex-rights issue go to "one or several investors interested in capitalizing the firm and taking a significant portion in capital". According to the CFO Mr. Bednarski it may happen that the three main share issues would not be priced identically. Officials offered a hint of light at the end of the tunnel, suggesting that the firm is ultimately to generate EBITDA margins at the level of minimum 5-6% and 3-4% net margins two years down the road after its debt restructuring is successful. As a part of that restructuring, Polimex is also proposing credits be extended to end-2015 and that bonds not converted to equity be refinanced with a new bond program maturing after 2015. Management has located PLN 330 m in asset disposals and PLN260 m in OPEX cuts that could potentially be put to debt payments.

Our view:
It appears to us that the company would not be able to deal with the mounting debt pile without the fresh capital or without the long term debt repayment waiver from major bond and credit holders. Our estimations regarding the new capital required by Polimex stay at PLN 500- PLN 750m which is in line with management’s expectations. We expect that the success of the share issues to be dependent most likely on the willingness of the bond holders to participate in the deal as well from the potential involvement of the branch investor who could engage into the firm financing in such a crucial moment. We see the company’s financial plan encompassing such huge asset disposals and cost cutting measures to be a blue-sky scenario at current market conditions. We expect more technical details regarding the share issue to come within upcoming days