PKP Cargo Management Board Loses Control amid Creditor Dispute

PKP Cargo is now under the control of court-appointed administrator Paweł Głodek, while the management board needs his approval to run the company. The restructuring of the Polish rail freight operator continues, with the company insisting that transport operations and customer services remain unchanged.

UPDATE: According to a reliable source, Zbigniew Prus is expected to resign today as Chairman of the Management Board of PKP Cargo. The information comes at a sensitive moment for both the company and the wider rail freight market, as business partners, particularly abroad, are reportedly watching further developments and the continuity of commercial relations with concern.

The management of Polish national rail freight operator PKP Cargo, including day-to-day operational management, has been taken over by court-appointed administrator Paweł Głodek. The PKP Cargo Management Board can therefore no longer manage the company without the administrator’s prior approval.

"The decision was issued as part of the ongoing restructuring proceedings and changes the rules governing the management of the company. PKP Cargo S.A. in restructuring continues its operational activities without change, including transport operations and customer service," PKP Cargo said in a statement.

Before that, however, the PKP Cargo Management Board issued a separate statement saying that it had taken "all possible steps" to reach an agreement with its largest creditors – the European Investment Bank (EIB) and railway infrastructure manager PKP PLK. At the same time, the board argued that the largest creditors’ expectations were unrealistic and incompatible with the interests of the company, which the board is required to protect.

PKP Cargo Fights for an Agreement with Creditors

"Reaching an agreement with creditors earlier could have brought the restructuring process to an end and allowed PKP Cargo to start using debt financing again. During the restructuring process, PKP Cargo has to cover all short-term liabilities from its own resources, which objectively represents a major challenge for a company of this size. This has led to a liquidity shortage," the Management Board said.

It added that it had been working with the administrator for many months on the final form of proposals for an arrangement with creditors. According to the board, it took seriously the views and expectations of creditors, particularly banks and financial institutions.

"The arrangement proposals were amended several times to meet creditors’ expectations. PKP Cargo made a number of far-reaching concessions to creditors. For example, the company withdrew its proposal to settle part of the claims of banks and financial institutions by converting debt into shares. In subsequent arrangement proposals, it then proposed an additional repayment mechanism, removing the automatic reduction of creditors’ participation in revenues that PKP Cargo lacks as compensation for government-ordered coal transport during the Covid crisis."

In the Management Board’s view, the expectations of the European Investment Bank and other financial institutions could lead to the complete collapse of PKP Cargo, preventing the company from responding to changes in the rail freight market and competing successfully.

"PKP CARGO is on the right path towards profitability and towards reaching an agreement with creditors. However, the EIB and infrastructure manager PKP PLK said ‘no’ to a rational and realistic recovery plan for PKP Cargo and made demands that we, as the Management Board, could not accept. Today’s court decision does not, however, invalidate the work we have done so far. PKP Cargo’s management will continue working on an arrangement with creditors," said Paweł Miłek, a member of the PKP Cargo Management Board.

PKP Cargo Changes Management as Operations Continue

An announcement from the administrator was also published yesterday evening, stating that PKP Cargo continues its transport operations and customer services and that the takeover of management will take place "in parallel with the company’s day-to-day work and the implementation of restructuring measures".

According to the announcement, the administrator taking direct control does not mean that the restructuring process has to start again from scratch. It will continue “in the same direction as before”.

"I do not expect a lengthy transition period. I will verify matters requiring additional approvals while corporate decisions are being made, working together with the management and employees. The aim is to ensure that the transfer of responsibilities proceeds smoothly while maintaining continuity of the company’s operations," said Paweł Głodek, administrator of PKP Cargo’s restructuring proceedings.

Głodek pointed out that the aim is to complete the remaining restructuring measures efficiently, bring PKP Cargo to an agreement with its creditors and secure final approval of that agreement.

"We are working to complete the restructuring and return management of the company to its corporate bodies. This can be achieved through operational decisions as well as further restructuring measures," Głodek added.

PKP Cargo Group provides logistics services combining rail, road and maritime transport. It operates independent freight services in Poland, the Czech Republic, Slovakia, Germany, Austria, the Netherlands, Hungary, Lithuania and Slovenia. In July 2024, a court opened restructuring proceedings, which have since continued under its direct supervision. Until now, however, PKP Cargo itself remained under the control of its Management Board. That has now changed.

Until yesterday, PKP Cargo was managed by a three-member board consisting of Zbigniew Prus, Chairman of the Management Board; Paweł Miłek, Vice-Chairman responsible for restructuring; and Michał Łotoszyński, Management Board member responsible for finance.

Rail freight could see further growth in connection with Russian war in Ukraine, including due to limited capacity at Ukrainian ports and the need to move some goods by rail rather than by sea. Polish ports and PKP Cargo could play a greater role in competition with Hamburg’s ports and rail freight operators including Metrans.

According to a reliable source, however, the current uncertainty surrounding PKP Cargo’s management is raising concerns that the Polish side could become less active just as rail freight volumes are expected to recover, as every individual decision within the company will now be subject to approval by the court-appointed administrator.