Rebels back down but BE teeters on the edge

25 October 2004

Polygon Investment Partners, key rebel shareholders in British Energy (BE), have backed down from their opposition to the restructuring agreement meant to save the company from administration. The rebels had forced BE to schedule an extraordinary general meeting (EGM) for 22 October to vote on proposals to dump the agreement. The proposals would have allowed creditors to call in their debts – a whopping £1.5 billion that would make administration inevitable.

Polygon, which owns 5.6% of the UK nuclear generator, and Brandes, which owns 6% were dissatisfied that current shareholders would only be allocated 2.5% of the restructured business under the UK government's bail-out creditor restructuring agreement. They argued that the rise in wholesale electricity prices meant a better deal could be found for investors.

However, the BE board took the unusual decision to de-list the company's shares from the stock market, allowing assets to be disposed of without shareholder approval, thereby making Polygon's opinion more or less irrelevant. This move, combined with legal threats from bondholders, forced Polygon to reverse their position, saying they were 'astounded' by the de-listing and that they would vote against their own proposals. The Financial Services Authority cancelled the listing of BE's shares on 21 October.

The EGM still went ahead, and all the resolutions put forward by the rebels were voted down. Following the EGM, BE said it expected to complete the restructuring agreement by the 'restructuring long stop date' of 31 January 2005. A BE statement read: "Any extension to this date would require the approval of the secretary of state for trade and industry, BNFL and the requisite majorities of creditors and there can be no assurance that such approvals will be forthcoming." However, the statement warned that insolvency proceedings may still be taken if the company is unable to implement the restructuring before the long stop date.

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