Thu 04/08/2021 11:18 AM
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EBRD Press Release

Some distressed funds are considering buying the debt of Polcom, a Polish supplier of modular building solutions for the real estate development industry, sources told Reorg.

The company is privately owned and its capital structure includes about €150 million in bank debt, which is held mostly by Polish banks. Some investors expect the debt to trade as low as in the 40s. Polcom, its owners and its advisors did not respond to requests for comment.

Sources said that the group’s business, which was mostly focused on hotels, has taken a hit due to the collapse in demand for new hotels amid the Covid-19 pandemic. The group is now trying to move to other construction projects such as student housing and other residential housing but some investors say there is significant execution risk to this strategy. The liquidity of the company is threatened and it is unclear if the owners are willing to provide an equity injection, sources added.

Poland’s Griffin Real Estate in partnership with Pimco acquired a 70% stake in the company for an estimated value of 1 billion Polish złotys (about €220 million) in early 2019, according to press reports.

PwC and Rothschild advised the company and its shareholders on the transaction, according to the same press report. Polish law firm Rymarz Zdort is acting as a longstanding legal advisor to Polcom.

Following the transaction, a package of PLN 641 million (roughly €149 million) including a PLN 108.43 million loan (about €25 million) from the European Bank of Reconstruction and Development (EBRD) was issued to refinance the group’s 2019 leveraged buyout. The loan package was arranged by Santander Bank Polska, mBank and PKO Bank Polski, according to an EBRD press release.

The company set out as a furniture maker in 1989 and later developed into a manufacturer for the hospitality industry. In 2012, Polcom began producing fully furnished steel-framed volumetric building systems. Construction with modular building systems means that most of the building is manufactured off-site in smaller parts, which are called modules. The modules come with all finishes, fixtures and full interior and are then assembled on site. The modules are made from the same type of materials and are of the same standard as for conventional buildings. The company has manufactured modular construction parts for the citizenM and Marriott hotel brands, for example.

Polcom owns its own steel factory in Gdynia with access to open water and two more factories for the production of furniture and the modular fit-out in Chojnice.

Polcom has representative offices in the U.S. and the U.K. and serves customers worldwide, which have included Marriott, Hilton and the Intercontinental Hotels Group.

-- Aurelia Seidlhofer and Jack Laurenson
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