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First Warsaw-listed firm files for bankruptcy on FX options

Fri, Jan 16 2009, 18:23 GMT
http://www.afxnews.com

WARSAW, Jan 16 (Reuters) - Polish foundry maker Odlewnie Polskie said on Friday it was filing for bankruptcy, becoming the first Warsaw-listed company to face bankruptcy because of currency options.

In a statement Odlewnie said the filing was due to: "banking valuations resulting from the currency option deals which caused the value of our liabilities... to top the value of the company's assets".

Last summer the Polish currency soared to a record high against the euro and many Polish companies took out hedging contracts, effectively betting on further zloty appreciation.

As the currency weakened many of them found themselves with losses which some analysts said could be huge.

"The state of insolvency arose due to extraordinary circumstances caused by a rapid and unpredictable strengthening of the euro versus the zloty and by the speculative character of the currency options agreements offered by banks," the statement said.

"In theory, those agreements were supposed to secure the company from changes of the zloty versus other currencies and in fact they exposed the company to a big risk," it said.

Last month the Polish financial watchdog estimated local banks may need to take out as much as $284 million in provisions to account for client losses on currency options, which account for 155 million zlotys ($49.33 million) among Warsaw-listed companies.

Analysts cautioned, however, that the figure could grow as the zloty continues to weaken. The Polish currency is down almost 8 percent since the beginning of December and has shed more than 30 percent since the end of July.

($1=3.142 Zloty)

(Reporting by Adrian Krajewski and Gabriela Baczynska; Editing by Sharon Lindores) Keywords: POLAND ODLEWNIE/

(adrian.krajewski@thomsonreuters.com; +48 22 653 9709; Reuters Messaging: adrian.krajewski.thomsonreuters.com@reuters.net)

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