Polygon ends opposition to British Energy debt deal

A disgruntled investor in British Energy today gave up its bid to derail the troubled group’s UK government-backed debt restructuring package.

Polygon Investment Partners said it believed there was no longer any commercial logic in trying to prevent BE delisting its shares and extending the time limit for agreeing the rescue deal, which expires in late January.

The decision means Polygon will end up voting against its own resolutions at the special meeting of BE in October that it called together with another institutional investor, Brandes Investment Partners – whose intentions today remained unclear.

The two investors had called the meeting after voicing opposition to BE’s £5bn (€7.3bn) debt restructuring deal, which has won approval from the European Commission.

They claimed the package, which would hand creditors control of the firm in a debt-for-equity swap, would leave them and other shareholders with an inadequate stake.

But BE said the agreement, which will reduce investors’ holding to 2.5%, was the only option left open to it.

It has warned it would face administration if shareholders succeed in derailing the package, leaving them with nothing.

It has already applied to delist its shares from the stock market in a bid to keep the deal on track.

BE today said it had dropped court action against Polygon in the US that it launched after the investment group called the extraordinary meeting.

It welcomed Polygon’s decision and called on all shareholders to vote against the resolutions at the EGM on October 22.

“The British Energy board continues to believe the agreed restructuring is in the best interests of the company and shareholders as a whole,” it said.

The government-backed restructuring was agreed last year, but has taken longer to complete because of the need for European Commission state aid clearance.

The plan, drawn up in October 2003, involved banks and bondholders agreeing to write off £1.3bn (€1.9bn) in debt in return for control of the group.

As part of the deal, BE pledged to improve reliability and its operational performance, as well as secure European Commission support, as the proposals will see the Government meet some decommissioning liabilities.

Brussels has approved the package on condition that any state aid is used exclusively to fund the decommissioning of BE’s nuclear power stations.