PNI filed for arrangement bankruptcy

In August this year, the Management Board of Budimex SA decided to terminate further financial support for the subsidiary PNI Sp. z o.o., acquired in the course of privatization proceedings from Polskie Koleje Państwowe SA in 2011. The decision to suspend further financing of PNI was dictated by the need to protect the interests of the entire Budimex Group and its shareholders and employees.

Budimex SA, since the purchase, has supplied PNI Sp. z o.o. with an additional amount of over PLN 100 million allocated m.in. to increase the company’s share capital, repay part of the receivables and pay employee severance pay. As a consequence, the failure of PNI’s efforts to renegotiate unfavourable contracts and to obtain external financing for its current operations and negative financial flows of the company, PNI Sp. z o.o. filed for arrangement bankruptcy today.

The current difficult financial situation of PNI Sp. z o.o. is a consequence of the company’s involvement in extremely unprofitable contracts, concluded before the privatization transaction, which – despite many attempts – could not be renegotiated.

“We have been rescuing this company from the moment of recognizing its real financial condition, or in fact from the moment of its takeover. We fought for PNI by all possible means, including the great financial effort of the Budimex Group. We believed in the success of this company and cooperation with its existing business environment. Now we have to wait for the court’s decision and then plan the next steps,” said Dariusz Blocher, President of the Management Board of the Budimex Group, and added: “At the same time, I would like to emphasise very clearly that the condition of the Budimex Group is independent of the proceedings in the PNI case. It is due to the protection of the interests of shareholders, employees, customers and partners of Budimex SA that the Management Board of the Group has made a responsible decision to cease further financing of PNI’s current operations. We do not want and cannot risk the loss of several hundred million zlotys which, according to our estimates, should still be invested in PNI to maintain its existence, especially since we do not see any prospect of return on this investment. I can firmly assure you that despite the current expenditure on PNI, Budimex remains a financially stable Group that continues its business strategy for the coming years.

The proposed arrangement, based on agreements with PKP PLK as the contracting authority and with members of consortia in which PNI executes unprofitable contracts for PKP PLK, allows PNI to continue its operations and settle most of the company’s financial liabilities.

In accordance with the Act, the Court has 3 months to consider the application, i.e.: until 24 November this year.

ADDITIONAL INFORMATION TO THE PRESS RELEASE
Calendar of events around the privatization of PNI Sp. z o.o.:

• August 4, 2011 – conclusion of a sales agreement between Polskie Koleje Państwowe S.A. and Budimex S.A. for the sale of PNI Sp. z o.o.
• November 16, 2011 – purchase of 100% of shares in PNI Sp. z o.o. by Budimex S.A.
• June 14, 2012 – increase of the share capital of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. by PLN 40 million
• 27 June 2012 – publication of the stock exchange report, Budimex S.A. writes down the value of shares of PNI Sp. z o.o. in the amount of PLN 182,267 thousand; the decision was made on the basis of the valuation of the shares of PNI Sp. z o.o. taking into account the current financial data of PNI Sp. z o.o. for the financial year ended 31 March 2012.
• July 13, 2012 – increase of the share capital of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. by PLN 23 million
• August 24, 2012 – the Management Board of PNI Sp. z o.o. files a petition for arrangement bankruptcy in the District Court for Warsaw Praga-Północ in Warsaw
• August 24, 2012 – publication of the stock exchange report, Budimex S.A. recognises impairment losses in the separate financial statements with a total value of PLN 145,158 thousand and a write-down on the value of shares in PNI Sp. z o.o. in the amount of PLN 45,000 thousand in the consolidated financial statements of the Budimex Group; the decision was made as a consequence of PNI’s filing for arrangement bankruptcy.