On 25 July 2024, the District Court for the Capital City of Warsaw took a decision to open sanitation proceedings for the Company PKP CARGO S.A. The sanitation (recovery) proceedings were initiated at the request of the Management Board of PKP CARGO S.A. It is aimed at rescuing the company and restoring its liquidity and competitiveness in the long term, while preserving as many jobs as possible.
As of the date of opening of the sanitation proceedings, the administrator of PKP CARGO S.A., Izabela Skonieczna – Powałka, has been appointed. The Company’s bodies (the Management Board and the Supervisory Board) continue to act within the scope of their competences, and PKP CARGO S.A. remains listed on the Warsaw Stock Exchange.
For the period of sanitation, the official name of the Company changes to: PKP CARGO S.A. in restructuring.
Reasons for the dramatic situation of PKP CARGO
Fatal management over the past 8 years has brought PKP CARGO to the brink of collapse. Despite the loss of the market and contracts, falling real revenues, costs and salaries were increasing, money that the Company did not have was being invested and spent. Debt grew dynamically, especially after 2021, to PLN 5.2 billion today. Today, sanitation is the only chance to save the Company, to restore its competitiveness and to grow in the future.
The positive decision of the court and the commencement of the sanitation proceedings give us a chance to save PKP CARGO S.A.. Sanitation is a kind of protective umbrella, which makes it possible to reach an agreement with the creditors without the pressure of sudden payment of multi-million liabilities.
Dr Marcin Wojewódka
Acting Chairman of the Management Board of PKP CARGO S.A.
During the 9 years of PIS rule, PKP CARGO has lost 90% of its value – in 2014 the Company was valued at over PLN 4 billion, in April 2024 at around PLN 600 million. The share price fell from PLN 90 in 2014 to below PLN 12 in April 2024. It is currently around PLN 15-16. Over the course of 10 years, PKP CARGO’s share of the Polish market (measured by freight work) has fallen from 60% in 2013, to less than 30% in Q1 2024.
Particularly acute and felt in PKP CARGO to this day are the negative effects of Prime Minister Mateusz Morawiecki’s so-called coal decision of July 2022. It directed PKP CARGO’s rolling stock to transport coal from the Baltic ports. This was done at the expense of abandoning other commercial and profitable orders. Contracts broken at that time resulted in customers turning away from the Company and not returning. In this matter, on 20 June this year the Management Board of PKP CARGO filed a notice to the Prosecutor’s Office on suspicion of committing an offence to the detriment of the Company by Members of the Management Board in the years 2022-2023; under Article 296.3 of the Criminal Code of mismanagement of a great magnitude and neglect of duties, which led to gigantic losses and problems in the Company that continue to this day.
Why sanitation?
PKP CARGO S.A. does not have bankruptcy capacity (as an entity established by law). Unfortunately, however, the Company is capable of ceasing to function if it loses its financial liquidity, which in practice would involve the loss of jobs by the majority of employees. Sanitation is the only effective route that offers a real chance of survival. Especially in the absence of an agreement with the social side. Sanitation will allow for the preservation of needed jobs, the restoration of the Company’s competitiveness in the market and its long-term development.
The Management Board took the decision to submit the application with the best interests of the Company, as well as its employees and shareholders in mind. In the Management Board’s opinion, the restructuring process under the supervision of the court will enable the Company to continue its operational activities in order to achieve the best possible results for its creditors, employees and shareholders.
Operation of the Company during the sanitation proceedings
I strongly emphasise that sanitation is a recovery procedure. One of its elements is to win new orders, increase revenues and restore competitiveness in the very demanding rail freight market. During the sanitation proceedings, PKP CARGO S.A. will execute all contracts and orders. It will also participate in tenders and public procurements.
Dr Marcin Wojewódka
Acting Chairman of the Management Board of PKP CARGO S.A.
The opening of sanitation proceedings affects labour relations – it has the same effects on the rights and obligations of employees and the employer as a declaration of bankruptcy, however the powers of the trustee are exercised by the administrator.
As of the date of opening of the sanitation proceedings, the property used to run the business and the property belonging to the debtor become the sanitation mass. Directing execution to the property of the debtor that is part of the sanation mass and the enforcement of a decision to secure a claim or an order to secure a claim on that property shall not be allowed after the date of the opening of the sanation proceedings.
The opening of the sanitation proceedings will allow, through cost reduction and other restructuring measures, to achieve financial equilibrium. An arrangement proposal will then be presented to the creditors and, once accepted, repayment of liabilities will commence.
Source: press release of PKP CARGO
