Polygon backs down over British Energy

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The hedge fund Polygon abandoned its attempt to force British Energy to renegotiate the terms of its restructuring yesterday, apparently spooked by a barrage of legal writs from the nuclear electricity company and its creditors.

As part of a deal with BE, the rebel shareholder will vote its 5.6 per cent shareholding against the resolutions it tabled at next month's extraordinary general meeting. Polygon and fellow US fund manager Brandes, which holds a 6 per cent stake in BE, requisitioned the EGM in the hope of blocking the nuclear giant's restructuring, which will see its creditors take control of 97.5 per cent of the business.

Polygon said: "In light of BE's recent shareholder circulars Polygon has agreed to vote its shares against the proposed resolutions and not to further oppose the restructuring".

The hedge fund would not elaborate on why it had caved in, saying just that it saw "no commercial logic in proceeding with the EGM or supporting the proposed resolutions". Analysts believe Polygon has been overwhelmed by the legal actions launched by BE and its creditors, who are determined to see through the refinancing plan. One analyst said: "It would seem that Polygon took a knife to what turned out to be a gun fight."

BE welcomed the hedge fund's decision and said it would withdraw its legal action against Polygon as did the company's creditors. Both stressed no payment had been made to the hedge fund as part of the deal. BE will continue with its plans to de-list its shares as the company is not certain that it will defeat the rebel resolutions.

This leaves the focus on Brian Stark, the mysterious US investor, who is BE's largest shareholder, with a stake of 11.2 per cent. He has notindicated how he intends to vote.