/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/001221.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, December 21, 2000, Vol. 1, No. 160 Headlines B E L G I U M LERNOUT & HAUSPIE: Swiss Insurer Implicated in Scandal LERNOUT & HAUSPIE: To Take Disciplinary Action LERNOUT & HAUSPIE: CEO Vows to Correct Problems C Z E C H R E P U B L I C KOMERCNI BANKA: Government Guarantee Key Sale Price F R A N C E WILSON: Flip Technology Files for Bankruptcy at Company Acquired I T A L Y ALITALIA: Unable to Find Partner Amid Financial Difficulties N E T H E R L A N D S AMICI: Vendex KBB Sheds Loss-Making Fashion Unit R U S S I A GAZ: Completes Debt Restructuring Agreement MIL HELICOPTER: Court Extended External Manager Term MOSKVICH: Mosenergo Gets Tough with Debtors U N I T E D K I N G D O M BREATHE.COM: Goes Up for Sale EQUITABLE LIFE: FSA to Inquire into its Handling of Scandal EXCEL RESINS: Liquidation Proceedings FII GROUP: Faces Financial Crisis FREESERVE: Write-offs Add to Losses GLADETECH ANALYSIS: Liquidation Proceedings GREEN ESTATES: Liquidation Proceedings J A HARKINS: Liquidation Proceedings JAMES LAMBERT: Liquidation Proceedings MALTINGS: Faces Financial Problems MEDCOT DEVELOPMENTS: Liquidation Proceedings MILLENIUM DOME: Legacy Dome Price Hinges on Meeting Cash Targets MIRACLE UK: Liquidation Proceedings POWERGEN: Aims to Cut Debts by 1 Billion Pounds SPRINGHEALTH LEISURE: Posts Pre-Tax Loss of 1.3 Million Pounds TADPOLE TECHNOLOGY: Posts Pre-Tax Loss of 1.46 Million Pounds ZORTECH LTD: Liquidation Proceedings ============= B E L G I U M ============= LERNOUT & HAUSPIE: Swiss Insurer Implicated in Scandal ------------------------------------------------------ Le Temps & World Reporter reports this week that the Swiss insurer La Baloise is the latest company to have become involved in the scandal surrounding the financial affairs of Belgian vocal technology specialist Lernout & Hauspie Speech Products NV. The US press has revealed that the Swiss company's subsidiary, Mercator & Noordstar (M&H), invested no less than $2m in the Language Development Fund (LDF) which in turn, financed 16 of the 30 letter-box or insolvent start-up companies which enabled the Belgian group to exaggerate its earnings and its share price in 1998 and 1999. M&H also granted a $10m loan to this fund and, mostly importantly, owns 6.9 per cent of L&H itself. Le Temps & World Reporter noted that in an interview with the Belgian press, M&H's manager Ronald Everaert acknowledged these facts but claimed that his company was deceived by the Belgian group. LERNOUT & HAUSPIE: To Take Disciplinary Action ---------------------------------------------- The audit said it was unable to reach any conclusions about L&H's operations in Korea, which it recommended should be referred to the authorities for further investigation, AFX reports this week. Investigations centred on "the difficulties or inability to obtain over 100 mln usd in cash purportedly being held in L&H accounts at Korean banks; the precise terms of the factoring arrangements between L&H and its banks; the earn out of 25 mln usd paid to John Seo (former CEO of L&H Korea) in early 2000; and the speculative or start-up nature of many Korean customers." It recommends L&H reverse all previously recognized Korean sales and record a provision to write down the remaining carrying value of the amounts to net realizable value. When asked about the missing 106 mln usd, Duerden said: "The money is not there." "We will take whatever steps to find out what happened to it and who is responsible." He blamed the company's present situation on the missing cash, saying: "if we had it we wouldn't have the problems we have today". The company won bankruptcy protection in the U.S. last month, although a similar request in Belgium was rejected. Duerden said L&H will appeal this decision this week, but that a decision is not expected before the end of the year, AFX noted. LERNOUT & HAUSPIE: CEO Vows to Correct Problems ----------------------------------------------- The chief executive of embattled Belgian speech technology company Lernout & Hauspie vowed to put right problems uncovered in an audit which found L&H had overstated revenues by up to $277 million. "The new management team is committed to rectifying all the areas of concern cited in this audit report," CEO John Duerden told a teleconference. Reuters reports this week that L&H released an 86-page report by its internal audit committee which said revenues had been overstated between 1998 and the first half of this year. The audit committee said its investigation found revenues which should never have been recorded or were recorded earlier than was appropriate, as well as unacceptable sales practices. L&H ordered the internal audit in September after the U.S. Securities and Exchange Commission said it was investigating the company's financial statements. The SEC probe followed allegations of discrepancies in the company's books, particularly focused on L&H's South Korean operations and its relationship with a number of start-up firms. =========================== C Z E C H R E P U B L I C ============================ KOMERCNI BANKA: Government Guarantee Key Sale Price --------------------------------------------------- The Czech government said it would guarantee up to 20 billion crowns ($518 million) of Komercni Banka's doubtful assets, taking a decisive step towards getting the last state-controlled bank off its books at more than a symbolic price. Komercni, the country's third largest bank, has been plagued by poor loan portfolio quality, prompting repeated bailouts after losses resulting from bad management, alleged theft, a weak legal environment and an economic downturn. A government document, obtained by Reuters on Tuesday after being presented to the cabinet by the Finance Ministry, said that expert estimates show that, with the guarantee, the state could get 35-45 billion Czech crowns ($0.9-1.2 billion) for its 60 percent stake. The government was under pressure to approve the guarantee before a new law takes effect in January, under which it will have to ask parliament to approve such bailouts. The guarantee covers assets in the three worst categories in the central bank's five- level asset quality scale. An end-third quarter report on Komercni's website (www.koba.cz) put the amount of loans in the doubtful categories at 27.3 billion crowns. According to the government document, Komercni will have to partly cover losses even if they do not exceed the limit of the guarantee, and that the full extent of the guarantee would be used only when losses reach 25 billion. Komercni will have to cover everything in excess of the guarantee. The guarantee will be issued by state factoring bank Konsolidacni Banka and is payable at the end of 2003. Konsolidacni will have the right to buy assets covered by the guarantee earlier, and to take over all the covered assets after the end of 2003. The bidders will conduct due diligence in the coming weeks. The sale is expected to be completed next year, Reuters noted. =========== F R A N C E =========== WILSON: Flip Technology Files for Bankruptcy at Company Acquired ----------------------------------------------------------------- French company Flip Technology, which distributes on-board instruments for heavy goods vehicles, has filed for bankruptcy at Wilson, a company it acquired in July. In a press release Flip Technology indicates Wilson is subject to several lawsuits not declared at the time of the sale and Flip Technology is taking action to get the sale cancelled, Les Echos reported last week. ========= I T A L Y ========= ALITALIA: Unable to Find Partner Amid Financial Difficulties ------------------------------------------------------------- Reuters reports this week that the board of Italian airline Alitalia was due to discuss a new industrial plan, two days after potential partner SAirGroup said partnership talks had been suspended, leaving a door open for Air France. Alitalia's board meeting also comes amid rumors of the possible departure of its Chief Executive Domenico Cempella, a spokesman said. The spokesman said a statement would be issued after the meeting, which has the company's industrial plan on the agenda. Swissair parent SAirGroup announced it had put negotiations with Alitalia on ice because financial difficulties at its French and Belgian units did not permit such a venture at the moment. It was the second alliance setback in less than a year for the loss- making Alitalia. In April, Dutch carrier KLM withdrew from a planned partnership. Alitalia later admitted it could not go it alone in the consolidating European airline industry and would look for a new partner, Reuters noted. ===================== N E T H E R L A N D S ===================== AMICI: Vendex KBB Sheds Loss-Making Fashion Unit ------------------------------------------------- Vendex KBB NV, a retail group, said it had agreed to sell its loss-making fashion unit Amici to Dutch peer Cool Cat for an undisclosed sum. The sale of the unit, which has 780 employees, is expected to be finalized in the course of 2001, Vendex KBB said. The company said Amici had an operating loss of more than seven million euros ($6.2 million) in the last financial year. Vendex KBB was formed in late 1998 by the merger of Dutch retailers Vendex International and KBB, Reuters reports this week. =========== R U S S I A =========== GAZ: Completed Debt Restructuring Agreement ------------------------------------------- JSC Gorkovsky car plant has completed an agreement on debt restructuring with all of its main parts and stuff suppliers from 15 till 20 months under the condition that it pay 60 percent of the current installment with a down payment of not more than 45 days. The general director of JSC GAZ declared that the company's sales have decreased by 25 percent since December. Current GAZ debt amounted to RUR 10.8 bln (USD 386 mln), of which 69 percent is owed to parts suppliers. The decrease in sales means that GAZ plans to turn to a cash-only basis with dealers, Skrin Issuer reports this week. MIL HELICOPTER: Court Extended External Manager Term ---------------------------------------------------- Mil Helicopter Plant avoided bankruptcy when a city arbitration court extended the term of external manager Vladimir Bogocharov by six months - angering the plant's creditors, who immediately asked the court to replace him. The Moscow Times noted yesterday that while the court said that it was unhappy with the progress made by Bogocharov, who took control of Mil two months ago, it confirmed his right to remain in his current post. The court also ordered Mil to pay its largest creditor, Mezhregionalny Investitsionny Bank, $2.4 million, despite Bogocharov's contention that Mil owes that bank nothing under an agreement he recently worked out with the State Investment Corp., or Gosinkor. The court, creditors and Bogocharov himself have all put Mil's total debt at 315 million rubles ($11.25 million). However, Bogocharov said that Gosinkor had bought all of Mil's debts, which he said amounted to just 165.5 million rubles. He gave no explanation for the discrepancy. Bogocharov said the factory's main shareholders are U.S. helicopter giant Sikorsky Aircraft Group with 9.38 percent, Rosvertol with 12.63 percent, and AKB Rosbank with 9.27 percent. The Property Ministry owns a 31- percent stake. MOSKVICH: Mosenergo Gets Tough with Debtors -------------------------------------------- Mosenergo, the main electrical power provider for the Moscow region, said that it is cutting off power to the Moskvich car plant and pledged to take similar measures against all of its debtors next year, The Moscow Times reported yesterday. "The core issue is that Moskvich is simply lying to us," said Mosenergo's director, Alexander Remezov, at a press conference. "We have signed three versions of an agreement and they have not followed through on any of them." Remezov said Mosenergo and Moskvich were placed on a debt restructuring deal and a schedule of payments a few months ago, but Moskvich management has failed. The Moscow Times noted that Moskvich's debt is 54 million rubles ($1.95 million). Moskvich, however, said it has been making a good-faith effort to repay its debt. "We handed Mosenergo a payment of 7 million rubles on Dec. 15," Moskvich's spokeswoman Valentina Parashenko said in a telephone interview. "Some power has been switched off and it has affected some lines making car parts. But our main assembly line is running, and we still have heat," she said. Remezov conceded that cutting off all of Moskvich's power would not be easy since one of its power lines is connected to the Moscow sewer system. Mosenergo also lashed out at several districts of the Moscow region that are on its blacklist. "The Serpukhovsky district, for example, refused to sign a repayment agreement," said Remezov, adding that Mosenergo will proceed with plans to sever the area's power. It was unclear how those measures might affect residents. Amid its yearlong drive to clear debts from its books, Mosenergo has sealed repayment deals with 52 of the Moscow region's 60 districts. =========================== U N I T E D K I N G D O M =========================== BREATHE.COM: Goes Up for Sale ----------------------------- Breathe.com joined Lineone and Freeserve in an early end-of- season sale of Britain's internet access companies. Unlisted Breathe, Britain's fifth-biggest internet service provider (ISP) opened its doors to PricewaterhouseCoopers administrators, after it became the latest dot.com to run into financial distress. Pricewaterhouse said it would try to sell the company as a going concern to avoid liquidation, and that it did not anticipate having to axe any of the company's 140 jobs for now, Irish Independent reports this week. LineOne was put on sale last month by co-owners British Telecommunications and United News & Media, with a price rumored to be around 340m pounds - about a quarter of the figure attached to Freeserve. Breathe, mainly owned by telecoms entrepreneur Martin Dawes, aimed at a flotation believed to value it at around 100m pounds several months ago. Freeserve said it did not plan to call Breathe but expected to be contacted about a potential purchase. EQUITABLE LIFE: FSA to Inquire into its Handling of Scandal ------------------------------------------------------------ The Financial Services Authority, the City's financial watchdog is to launch an inquiry into its handling of the Equitable Life scandal. The FSA's board will meet today to set up the investigation under the auspices of its non-executive directors. The move was announced by Melanie Johnson, the Economic Secretary to the Treasury, in a House of Commons debate into the mutual insurer's financial problems. But Opposition MPs said the move did not go far enough and that it failed to take into account the supervision of Equitable before the FSA assumed responsibility for policing the sector in January 1999. According to a leaked memo, which surfaced this week, the Department of Trade and Industry was concerned over Equitable's solvency as far back as 1998, The Times reports yesterday. A report into the results of the inquiry, which is expected to take several months, will be published after it has been submitted to ministers. The FSA's internal audit department will carry out the review. The Treasury will publish its conclusions. The FSA said that it would aim to give a full account of all its actions and will draw on the opinions of independent, external experts. The precise terms and the head of the review will be decided at today's board meeting. EXCEL RESINS: Liquidation Proceedings -------------------------------------- Company Name: Excel Resins Ltd Company No: SC Appointed on: 15/11/00 Type: Creditors Appointed by: Creditors Liquidators: Eileen S Blackburn IPno: 8605 Firm Name: HLB Kidsons Address: Breckenridge House 274 Sauchiehall Street City Postcode: Glasgow G2 3EH FII GROUP: Faces Financial Crisis --------------------------------- British footwear manufacturer FII Group Plc, whose shares were suspended in August, said it expected higher losses than previously forecast. FII said: "A combination of lower prices, reduced volume, and costs related to corporate activity will result in significantly higher than anticipated losses for the half year and full year. In turn, the higher losses will impact adversely on cash resources." Reuters reports this week that FII shares were suspended at 112 pence towards the end of August, valuing the group at around 26 million pounds ($38.08 million), pending clarification of the company's strategic objectives. Wright Investors' Service noted that FII Group plc designs, sources, manufactures and distributes private label and branded footwear. The company operates from the United Kingdom and Ireland. This company has paid no dividends during the last 12 months. The company also reported losses during the previous 12 months. FREESERVE: Write-offs Add to Losses ------------------------------------ Freeserve, the UK ISP that is currently being acquired by France Telecom-owned ISP Wanadoo in a 1.65bn pounds deal, made a pre-tax loss of 9.47m pounds on a turnover of 15.56m pounds for the quarter to 11 November 2000. This quarter's losses, which represent a 97.6 percent increase on the same period of 1999, bumped up the interim loss for the first half of 2000 to 28.30m pounds, while turnover for the six months stood at 30.15m pounds. Operating loss for the quarter at 7.86m pounds, was up 64 percent on 1999, while for the operating loss for the interim period at 25.06m pounds, was up 84.56 percent on the first half of 1999, Net Imperative reports this week. Net Imperative reported that after writing off 11.75m pounds worth of investments, and gaining 2.73m pounds in tax credit and interest payments, the group reported a retained loss of 18.09m pounds for the quarter, and 31.14m pounds for the interim period. Included in the investments written off is a capital loss of 1.95m pounds in relation to the sale of Freeserve's stake in Streets Online to Kingfisher, and a 9.8m pounds general provision due to the continuing volatility of technology and internet stocks. GLADETECH ANALYSIS: Liquidation Proceedings -------------------------------------------- Company Name: Gladetech Analysis Ltd Company No: 3118661 Com. Business: Advertising Agency Appointed on: 15/11/00 Type: Creditors Appointed by: Creditors and Members Liquidators: Steven G Taylor IPno: 7953 Firm Name: Poppleton & Appleby Address: 4 Charterhouse Square City Postcode: London EC1M 6EN GREEN ESTATES: Liquidation Proceedings --------------------------------------- Company Name: Green Estates Ltd Company No: IR Appointed on: 15/11/00 Type: Members Appointed by: Members Liquidators: Eugene McLaughlin IPno: Firm Name: EML & Associates Address: Taney Lodge Taney Road City Postcode: Dublin 14 J A HARKINS: Liquidation Proceedings ------------------------------------- Company Name: J A Harkins (Transport) Ltd Company No: 2759736 Com. Business: Quarrying Stone/Plant Hire Appointed on: 15/11/00 Type: Creditors Appointed by: Creditors and Members Liquidators: Peter R Dewey IPno: 7806 Firm Name: KTS Dewey Address: 17 St Andrews Crescent City Postcode: Cardiff CF10 3DB JAMES LAMBERT: Liquidation Proceedings --------------------------------------- Company Name: James Lambert & Sons (1992) Ltd Company No: 2767776 Com. Business: Holding Co Appointed on: 15/11/00 Type: Members Appointed by: Creditors and Members Liquidators: Philip M Lyon IPno: 2108 Firm Name: Mazars Neville Russell Address: Cartwright House Tottle Road City Postcode: Nottingham NG2 1RT MALTINGS: Faces Financial Problems ----------------------------------- The Scotsman reported last week that when it opened 11 years ago, the Maltings arts centre was variously described as a white elephant and an oasis in a cultural desert. Since then the 327- seat Berwick-on-Tweed theatre has allowed audiences from the Scottish Borders and north Northumberland to see live performances. But although 40 per cent of tickets at the Maltings - the only arts centre within a 30-mile radius - are bought by theatre goers living on the Scottish side of the Border, none of the financial support vital to keep the centre operating emanates from Scotland. Now the theatre is waging a desperate battle for survival as Berwick Borough Council threatens to end a credit arrangement to pay the salaries of the seven full-time staff. The local authority, which provides annual core funding of pounds 100,000, has had to loan the arts centre a further pounds 62,000 to bail it out this year. A number of councilors have demanded the credit facility should be withdrawn. According to Frances Benton, marketing manager at The Maltings: "If the council pulls the plug we face insolvency and will have to hand back the keys." Bill Ferguson, the council leader, said full council meeting could decide to refer back the recommendation to end the loan facility. Mr Ferguson said Scottish Borders Council had been asked on several occasions for a contribution towards The Maltings' running costs, but had declined, The Scotsman noted. MEDCOT DEVELOPMENTS: Liquidation Proceedings --------------------------------------------- Company Name: Medcot Developments Ltd Company No: 3587575 Com. Business: Builders Appointed on: 15/11/00 Type: Creditors Appointed by: Creditors and Members Liquidators: Richard A Segal IPno: 2685 Firm Name: A Segal & Co Address: Albert Chambers 221-223 Chingford Mount Road City Postcode: London E4 8LP MILLENIUM DOME: Legacy Dome Price Hinges on Meeting Cash Targets ----------------------------------------------------------------- Legacy, the Irish-backed consortium which is bidding for London's Millennium Dome, is negotiating a deal under which it would not pay the promised 126m pounds price tag unless it got planning permission for its development proposals. Tony Blair's administration would only receive 60m pounds for the Dome when the deal is completed in February. It would have to wait two years to get the full price. The Legacy consortium, which is headed by British property developer Robert Bourne, is 85pc backed by Irish company Treasury Holdings. It has been speculated the bidders also have plans for the 15-acre site beside the visitor attraction. The consortium is proposing to covert the Dome into a technology business park for new media and electronic commerce companies, Irish Independent reports on Tuesday this week. The British government has come under fire for the perceived failure of its Millennium project because it has significantly missed projected visitor numbers and has soaked up stg?1bn of taxpayers funds. The sellers of the Dome have insisted on a series of "anti-embarrassment clauses" in the agreement which will see the consortium make larger payments should it receive permission for more than the agreed level of development. The sum of 126m pounds, which Legacy has offered, is made up of a combination of ground rents, cash payments when planning permission is achieved, when developments inside the visitor attraction start, and further funds when the development is completed. The British government is desperate to avoid the perception that it has been short changed over the sale of the Dome by allowing the successful bidder make excessive profits. Mr Blair's administration has been keen to stress office occupiers in and around the visitor attraction will pay about 12m pounds per year in rates, and that Legacy's schemes will have regenerative and employment benefits for the area, according to a report in The Sunday Telegraph. A spokesman for Treasury Holdings said he could not comment on the talks with the British government. The UK's Department of Environment & Transport said, "our position is negotiations are confidential." MIRACLE UK: Liquidation Proceedings ----------------------------------- Company Name: Miracle UK Ltd Company No: SC Appointed on: 15/11/00 Type: Creditors Appointed by: Creditors Liquidators: James D Macintyre IPno: 5894 Firm Name: James Macintyre & Co Address: Dundas Business Centre 38/40 New City Road City Postcode: Glasgow G4 9JT POWERGEN: Aims to Cut Debts by 1 Billion Pounds ----------------------------------------------- Ananova reported yesterday that Energy company PowerGen said it is cutting debts by 1 billion pounds. The electricity and gas group also confirmed it had successfully completed the acquisition of US-based LG&E Energy and said efficiency savings from the deal were likely to be better than expected. PowerGen is in the middle of disposing of assets as it attempts to reduce its 5 billion pounds debt by a fifth. SPRINGHEALTH LEISURE: Posts Pre-Tax Loss of 1.3 Million Pounds --------------------------------------------------------------- Springhealth Leisure (leisure) said pre-tax losses for the year were 1.30 million pounds. Again there is no dividend, The Times reported yesterday. Wright Investors' Service noted that Springhealth Leisure Plc (formerly Mazaran Leisure Plc) is involved in the management of health clubs and related business in the leisure sector. TADPOLE TECHNOLOGY: Posts Pre-Tax Loss of 1.46 Million Pounds -------------------------------------------------------------- Tadpole Technology (computer hardware) announced pre-tax losses for the year of 1.46 million pounds, The Times reports yesterday. Again there is no dividend. Wright Investors' Service noted last week that Tadpole Technology PLC is an international high-technology company which designs, develops, manufactures and sells computer software systems and components including computer circuit boards in the United Kingdom and worldwide. At the end of 1999, Tadpole Technology Plc had negative working capital, as current liabilities were 5.34 million pounds while total current assets were only 4.93 million pounds. ZORTECH LTD: Liquidation Proceedings ------------------------------------- Company Name: Zortech Ltd Previous Name: Zorland Ltd Company No: 1987848 Com. Business: Software Consultancy/Supply Appointed on: 15/11/00 Type: Members Appointed by: Members Liquidators: David J Pallen IPno: 5317 Firm Name: Ernst & Young Address: Rolls House 7 Rolls Building Fetter Lane City Postcode: London EC4A 1NH S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Lexy Mueller, Mercy Villacastin and Cristina Pernites Editors. Copyright 2000. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is $575 per half-year, delivered via e-mail. 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