Information concerning change of the arrangement bankruptcy of PNI to liquidation bankruptcy of the company and comment from Budimex SA

News date: May 29, 2015

On 29 May 2015, Budimex SA was notified of the decision of the Commercial Court at the District Court for the Capital City of Warsaw, 10th Commercial Division for bankruptcy and restructuring cases, on the change of the arrangement bankruptcy of Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o. in arrangement bankruptcy to bankruptcy involving liquidation of the company’s assets, on the recall of its provisional court administrator and appointment of a receiver.
Since 30 November 2012, when the Court repealed PNI’s administration by the bankrupt in possession and appointed a court administrator, Budimex has not exercised operational supervision over that company, has had no access to its data, systems or contents of agreements concluded by the company and thus has not had at its disposal information which would allow for assessment of the true condition of PNI.
We interpret the current decision of the Court and the preceding resignation of the court administrator appointed by the Court in 2012 as deeming the administration exercised by the administrator ineffective for the purpose of leading to an arrangement with the creditors.
From purchase of PNI in 2011 until the end of June 2012, Budimex subsidised this company with the amount of PLN 110 million in cash, which was expended on saving the company and maintaining jobs; together with trade unions, it developed agreements on the Voluntary Departures Programme, which it carried out for as long as it exercised operational supervision over the company; moreover, it ordered completion of works on Budimex railway contracts (LCS Iława and Pomeranian Metropolitan Railway) to PNI. Unfortunately, in spite of the foregoing, right now, the probability of PNI terminating its activity and of several hundred employees losing their jobs has considerably increased, which we deeply regret.
Already in November 2012, when at the request of several creditors, administration by the bankrupt in possession was repealed and responsibility for the company’s assets was entrusted to the court administrator, Budimex argued that managing a construction company in the situation which transpired, in a market as difficult as the railway market, is a very complex task, which would be performed better by the company’s administration rather than by the court administrator.
Budimex intends to file a complaint against the Court’s decision on changing the manner in which the bankruptcy proceedings are conducted.
Budimex has not consolidated the results of PNI since 30 November 2012. The aforementioned decision will have no impact on the consolidated financial statements of the Budimex Group. The accounting impact on the individual financial statements of Budimex SA will be minus PLN 5,054 thousand and will not involve any outflow of cash from Budimex SA. The difference is due to the gain recognised on sale of shares by Budimex SA to Budimex Kolejnictwo SA in 2012. This gain was eliminated as a part of consolidation eliminations in the consolidated financial statements of the Budimex Group.