PBG goes bankrupt in the face of big stadium, highway projects; indicative of the sector – analysts say
PBG, a major Polish construction company, responsible for, among other projects, three new football stadiums for the European Championship EURO 2012, announced its bankruptcy plan on Tuesday, June 5 2012.
The PBG bankruptcy plan is a further sign of the troubles of the Polish construction and road infrastructure sector in 2012, with many of the major national companies filing for bankruptcy. PBG filed bankruptcy on the same day as another major construction company, Hydrobudowa Polska.
PBG’s liabilities total PLN 3 bln, it suffered major losses on the construction of the Warsaw football stadium and national highways.
“Instead of golden deals, these projects sank these companies,” Marek Michalowski, chairman of the supervisory board of another Polish construction company, Budimex, told the Polish media. “ Banks must introduce stricter rules on financing of this sector, otherwise companies will continue to go into liquidation proceedings.”
“PBG’s failure would raise the reserves in Polish banks, which will bring them negative results, CDM Pekao analaysts said. “PBG already has a restructuring plan prepared, and just needs a bail-out. A compromise, that would prevent the company from bankruptcy would be a much better solution for the Polish economy and Polish banks.”
For Polish banks, the bankruptcy means the necessity to increase their reserves and lock capital of approx. PLN 459 mln.
The company is currently negotiating bankruptcy terms with its creditors. The liquidation plan will impact contracts that have already been awarded to the company, including the construction of highway A4 crossing Southern Poland from East to West and a new LNG terminal. It will also downplay the company’s chances in future public tenders.
The share price of both companies fell dramatically on the Warsaw Stock Exchange. PBG’s share price stood at PLN 7 on Tuesday, down from PLN 130 at the same time last year. Hydrobudowa shares stood at PLN 0,20 while last year’s prices were PLN 2,2.
If the PBG and Hydrobudowa fail, they will join a long list of Polish construction and infrastructure development companies that collapsed this year, including Dolnoslaskie Surowce Skalne, Poldim, Budbaum, Wakoz.