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Published on 11/5/2004 in the Prospect News Emerging Markets Daily and Prospect News High Yield Daily.

Polska Telefonia to exercise tax call on 10 7/8% notes

New York, Nov. 5 - Polska Telefonia Cyfrowa Sp. zoo said it will exercise the tax call on its euro-denominated 10 7/8% senior subordinated notes due 2008.

The Warsaw, Poland, mobile phone company noted it already carried out a tender offer for the securities at 106% of par in which it bought back 73% of the issue. As a result, there is €36.437 million still outstanding.

The tax call is at par plus accrued interest.

When it announced the tender, Polska Telefonia said it was making the offer in response to a new tax treaty between Poland and the Netherlands. Under the treaty, payments by Polish entities on funds borrowed from Dutch entities are subject to a 5% withholding tax in Poland. PTC International Finance II, which issued the notes, loaned the proceeds to PTC International Finance (Holdings) BV, a Dutch company, which in turn loaned the proceeds to Polska Telefonia. There is a grace period under the new treaty to Jan. 1, 2005.

Polska Telefonia said it believes that it has the right to redeem the notes at par because of the new tax, but said it recognizes such an action would be "economically disadvantageous" to noteholders and consequently is carrying out the tender offer while reserving the right to exercise the tax redemption.


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