Poland's Ciech unlikely to attract buyer unless markets improve

05 May 2010 11:29  [Source: ICIS news]

PRAGUE (ICIS news)—Poland’s largest chemicals manufacturer Ciech will probably not attract a privatisation buyer this year unless there is a significant improvement in the company's key markets, an industry analyst said on Wednesday.

It seems the treasury is holding out for a high price from a bidder despite the effects of the economic downturn having created a difficult environment for it as the seller. So the whole privatisation could turn on whether there is or is not a strong pick-up this year in Ciech's main markets," said Kamil Kliszcz, an analyst at Poland's BRE Bank.

As Europe's second largest producer of soda ash, Ciech would not be happy about the current deterioration in the soda ash market, but would be encouraged that its organic division, particularly its toluene di-isocyanate (TDI) business, was experiencing improved orders, Kliscz added.

Kliszcz also said potential bidders for the group might be deterred by the conditions attached to the debt restructuring deal Ciech has struck with a consortium of banks - an agreement the treasury had demanded as a condition for restarting the Ciech privatization.

"This deal requires Ciech to reduce its debt by Zl 400m ($129.4m, €99.5m) by the end of March next year and … we ourselves, like some investors, were not expecting such a significant financial restriction, but … this is not Ciech's main problem. In this privatisation, everything will depend on the markets," he said.

In its latest assessment of Ciech, Erste bank noted the debt restructuring deal contained a stipulation that the whole of a Zl 1.34bn loan would become immediately due should the treasury sell its Ciech stake. "This might make the privatisation process more difficult, as a new investor would have to find additional financing for the Ciech group," it said.

Ciech said it was unable to comment on issues that affected the ongoing privatization process.

Prior to the postponement of the privatization, state restructuring agency Nafta Polska shortlisted six bidders for Ciech, namely US-based private equity firm Bain Capital; London-based private equity firm Cinven in a consortium with Polish human resource and interim management services company Kolaja & Partners; German chemical company Petro Carbo Chem (PCC); National Qatar Industries Company; Lithuanian chemical, logistics and cargo group UAB Achema; and Polish investment fund Mistral.

($1 = Zl 3.09; €1 = Zl 4.02)

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By: Will Conroy
+44 20 8652 3214

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