PKN Orlen in danger of breaching covenants again - bank

10 June 2009 12:13  [Source: ICIS news]

PRAGUE (ICIS news)--Poland's PKN Orlen is at risk of breaching its banking covenants on major loans for a second time this year despite having started “active crisis management”, ING bank said on Wednesday.

“The market seems over confident regarding the outlook for PKN Orlen, given our view that the company is not out of the woods yet… Management has realised the risk, but is it too late?“ the bank asked, reiterating a 'Sell' recommendation on Orlen stock.

Oil and petrochemicals group Orlen, which recently had its bond status reduced to 'junk' by Moody's ratings agency, could improve its financial health by selling its strategic oil inventories to the Polish state and earning capital on a sale of its 24.4% stake in Polish mobile operator Polkomtel telecom, ING added.

However, both transactions were unlikely to occur this year, meaning “2009-10 is likely to be challenging for Orlen operationally, and we expect the outlook to worsen", the bank said.

Orlen said it was confident that its crisis plan, including substantial capital expenditure reductions, would keep the company on a healthy financial course, but said it was exposed to external factors - such as the depreciation of the zloty and the price of oil - over which it had no influence.

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By: Will Conroy
+44 20 8652 3214



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