Mondex driven into insolvency by high rents in malls

"Everybody believes Mondex has piled up state budget debts as a result of the diving orders in the wake of the financial crisis, but starting April, the Sibiu-based firm has been practically stifled by the high rents paid for stores in mall-type commercial spaces or commercial galleries in the country". This is how the representatives of Relco Active, the administrator of Mondex Sibiu explain the insolvency of Romania's biggest producer.

With a 100-store network, the broadest in Romania, Mondex paid over 2m euros to retail space owners every year, according to ZF's calculations. Against an 11m-euro turnover, rents account for around 20% in Mondex' sales, almost 5% above what consultants say the optimal threshold for a store should be.

Calin and Virgil Vircolacu, the company's two shareholders, are unwilling to provide more details about the company's restructuring process, stating they are in the phase where they are considering any solution. The only ones that offered details about the process were the representatives of Relco Active, the administrator appointed by the Sibiu Court of Law in Mondex's insolvency case.

"We'll close 20-30 Mondex stores, where shopping gallery or mall owners will not cut rents, and we'll shift to other retail spaces. We'll give up the first Mondex stores in a matter of days. We'll focus on Bucharest more as it's a solvent market and we'll boost exports," said Relco Active representatives.

Mondex shareholders filed for insolvency with the Sibiu Court of Law, as the company was in default, having accumulated debts of around 700,000 RON (over 166,000 euros) since April until now, not including banking loans.

"(...) From talks held with special administrator Calin Bogdan Vircolacu, the company will sell none of its assets," stated Relco Active representatives. They also say they will draw up a final list of receivables by January 2010 and plan to pay all accumulated debts.

"We've so far managed to get most of the company's accounts unfrozen. (...) Mondex has banking contracts spreading over several years and a positive thing is the fact that banks have not put pressure on the company at the moment," said Relco Active representatives.

Mondex had total debts of above 54.5m RON (around 13m euros) in December 2008, according to Finance Ministry data. In 2008, the firm reported turnover worth 40.8m RON (11.6m euros) and profit of 71,000 RON (17,000 euros).

"Keeping a company afloat is very difficult if one does not have the support of state institutions. Mondex employees working in production will not be hurt, but part of Mondex store employees will be laid off," said Relco Active representatives.

They say reorganisation started on the 1st of September 2009. "Creditors have agreed to further support us, and Mondex clients have not lost their confidence in the company, even though it is going through one of the most difficult moments of its existence," say Relco Active representatives.