Lecico Egypt: French Operations To Apply For Court-Approved Bankruptcy
Lecico Egypt (LCSW.CA), in reference to its press release dated 21 October 2013, has confirmed that Lecico France has been unable to find a buyer for its companies on a going-concern basis and will therefore proceed with bankruptcy proceedings of all its companies, consisting of Lecico France, Lecico Distribution and Sarreguemines Bâtiment. Negotiations will continue with third parties to buy and continue the businesses under terms to be agreed with creditors.
Lecico France is the parent of Sarreguemines Batiment, an industrial business, which manufactures branded Fine Fire Clay products. It is also the parent of Lecico Distribution, a commercial business, which distributes the manufactured product as well as products imported from Egypt, and to a lesser degree outsourced from China.
Since Lecico bought Sarreguemines Batiment out of a bankruptcy procedure in 2006, the business has continued to suffer significant losses.
Several management changes and restructuring actions have significantly reduced costs but without restoring profitability as difficult market conditions have eroded sales volumes partially offsetting the cost savings.
Given the continued difficulties in France and the relative uncertainty of the political situation in Egypt, which has restricted the ability of Lecico to fund the French operations with the necessary foreign currencies, Lecico is not in a position to support these operations any longer.
Sustained efforts have been undertaken for the past several months to overcome the problem, which included identifying investors able to take over the business.
Lecico France and its subsidiaries will therefore shortly officially declare ‘Cessation de Paiement’ and will file with the ‘Tribunal de Commerce’ to approve the commencement of reorganization proceedings (Redressement Judiciaire) under the management of a court appointed administrator.
The works’ council of the French entities has been duly informed and consulted in respect of the process. Lecico France, Lecico Distribution and Sarreguemines Batiments will continue to trade during this period. Upon receiving the approval from the Tribunal de Commerce, Lecico will surrender ownership of these companies and face a write-off of approximately EGP 100 million in lost investments and intragroup debts.
The objective of Lecico, in these difficult times, has been to reduce overall risks at the cost of a significant write-off. However, there would however be a positive effect on earnings in future years by excluding the losses in Lecico France. Based on 2012 results, this would be around EGP 15 million in operating profits and EGP 20 million in net profits.
