Information on conversion of PNI’s arrangement bankruptcy into liquidation bankruptcy of the company and Budimex SA’s commentary

On May 29 this year. Budimex SA has received information about the decision of the Commercial Court at the District Court for the city of Budimex SA. St. Warsaw, X Commercial Division for bankruptcy and reorganization cases, on the exchange of arrangement bankruptcy of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. in arrangement bankruptcy for bankruptcy including liquidation of the company’s assets, on the dismissal of its interim court administrator and the appointment of a receiver.

Since 30 November 2012, when the Court revoked PNI’s own management and appointed a court administrator, Budimex has not exercised operational supervision over this company, has no access to its data, systems or the content of its contracts, and thus does not have information to assess the true condition of PNI.

The current decision of the Court and the preceding resignation from the function of the court administrator appointed by the Court in 2012 are interpreted as declaring the management exercised by the administrator ineffective for concluding an arrangement of creditors.

Unfortunately, despite the fact that from the purchase of PNI in 2011 to the end of June 2012, Budimex co-financed the company with PLN 110 million in cash, which was spent on saving it and maintaining jobs, despite the fact that together with the trade unions it worked out agreements on the protection of the company. The Voluntary Redundancy Programme, which he implemented as long as he exercised operational supervision over the company, and despite the fact that he commissioned PNI to work on Budimex’s railway contracts (LCS Iława and Pomeranian Metropolitan Railway), at the moment the probability of PNI’s closure and the loss of jobs by several hundred employees of this company has increased significantly, which we very much regret.

Already in November 2012, when, at the request of several creditors, PNI’s own management was taken away and the responsibility for the company’s assets was entrusted to a court administrator, Budimex argued that managing a construction company in the current situation, on such a difficult market as the railway market, is a very complex task, which will be better performed by the company’s professional self-management than the court administrator.

Budimex intends to file a complaint against the Court’s decision to change the way bankruptcy proceedings are conducted.

Budimex has not consolidated PNI’s results since 30 November 2012. The above decision will not affect the consolidated financial statements of the Budimex Group. The accounting impact on the separate financial statements of Budimex SA will amount to minus PLN 5,054 thousand and is not related to the outflow of cash from Budimex SA. The difference results from the recognised profit on the sale of shares by Budimex SA to Budimex Kolejnictwo SA in 2012. This profit was eliminated as part of consolidation exclusions in the consolidated financial statements of the Budimex Group.