Gets Temporary Moratorium on Debt Repayments
LONDON (AP) _ Polly Peck International PLC on Friday secured a temporary debt repayment moratorium from lenders, gaining time to cope with a liquidity crunch, the company said.
The food and electronics company controlled by Asil Nadir, its chairman and chief executive, had sought the freeze on repayments after lenders clamped down on its credit lines.
The lines of credit were tightened after the Sept. 20 trading suspension in Polly Peck’s stock. The suspension, which is still in force, caused the liquidity problems, the company said earlier this week.
The trading halt stemmed from an inquiry by Britain’s Serious Fraud Office into a possible stock manipulation scheme in Polly Peck shares.
The payment moratorium came after bankers for the cash-starved conglomerate met with the company management on Friday.
″It was agreed by the bankers and other lenders . . . that a temporary standstill would be granted to the company so that the best way forward may be discussed,″ the company said in a brief news release late Friday.
The release added that the discussions will be conducted by a steering committee of 10 representatives of the lenders and may lead to a longer standstill period. The panel may wait to conclude its business until after reviewing a report on Polly Peck being done by an accounting firm.
Executives of Polly Peck weren’t available to comment on the exact terms of the standstill arrangement. A company spokesman, speaking anonymously, said he wasn’t authorized to elaborate on the matter.
Banking industry sources gave conflicting reports on how long the moratorium would last. It was expected to run from one week to a few weeks but not as long as the 90 days Polly Peck had sought.
Standard Chartered PLC, a major U.K. commercial bank, is leading the Polly Peck steering committee and will be responsible for coordinating further talks between the company and its lenders, according to banking sources who didn’t wish to be identified.
Polly Peck’s announcement also suggested that the review being done by accountants from Coopers & Lybrand Deloitte would ease persistent doubts about the company’s financial health.
The report by the British arm of the international accounting and consulting firm isn’t expected to be completed for three months. But preliminary findings might be available sooner to Polly Peck’s major lenders.
The company’s main creditors had contemplated forcing Polly Peck into hands of a court-appointed adminstrator while questions over its financial and fiscal soundness were addressed.
But banking sources who attended the Friday meeting with Polly Peck’s management said the company made a strong case to maintain its independence while its financial affairs are sorted out.
″There are many, many questions which still have to be answered,″ said a banker leaving the talks. ″At this point, banks want to avoid administration,″ said the banker, who spoke on condition of anonymity.
It also emerged Friday that the Bank of England last week advised Turkey of Polly Peck’s urgent need for $190 million.
The Bank of England, the country’s central bank, declined to comment on its involvement with Polly Peck and the Turkish government, which has indicated it is considering offering some form of assistance to the company and its Turkish chairman.