E-Star Falls as Suppliers Threaten Insolvency: Budapest Mover

E-Star Alternativ Nyrt. (ESTAR), a Hungarian energy company, fell after saying that payment demands from suppliers ahead of a bond maturity this month are threatening its operations.

E-Star’s share price dropped as much as 9 percent and closed 1.4 percent lower at 440 forint in Budapest, extending this year’s slump to 90 percent. The company said today it’s struggling to collect payment from Hungarian municipalities for providing heating services.

The company is suffering “daily” difficulties as suppliers seek to enforce claims before E-Star is due to repay a bond on Oct. 24, E-Star said in a statement to the Budapest Stock Exchange. The company is receiving orders to pay suppliers “on a daily basis or requests for starting insolvency process in some cases,” it said.

“The firm’s liquidity and financing situation seems more than challenging,” Peter Szentirmai, a Budapest-based analyst at KBC Groep NV (KBC)’s broker unit, wrote in a research report today.

Gabor Vilhelm, a spokesman for E-Star in Budapest, didn’t have any immediate comment when contacted by phone and e-mail by Bloomberg today.

E-Star’s bonds still offer value even given the threat of the company being unable to pay creditors, said the fund management unit of OTP Bank Nyrt. (OTP), Hungary’s largest lender.

OTP is holding on to E-Star’s bonds on the expectation in the event of liquidation the company’s assets will cover 30 to 40 percent of the amount owed to bondholders, said Csaba Szalma, who manages 21 billion forint ($96 million) in OTP’s Supra Derivative Fund at OTP Alapkezelo Zrt.

“From a bond holder point of view the situation looks rather hopeless,” said Szalma, who also oversees other bond funds. OTP doesn’t own any of the bonds due this month, he said.

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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