ZF English

Flamingo fate, to be decided this month

06.08.2009, 16:03 8

The fate of Flamingo International, the third-largest domestic retailer of electrical home appliances and one of the largest Romanian companies, with 202m-euro turnover in 2008, will be decided on August 17, when the company’s shareholders will choose between recapitalisation and operations shutdown.

Investment fund QVT, owner of 22% in Flamingo stock, announced and introduced on the agenda of the August 17 meeting the request to dissolve the company. As a reaction, the management and the other shareholders say they will support the company’s activities. Dragos Simion, Flamingo chairman, says that Dragos Cinca and Dan Adamescu, the biggest shareholders, will accept and participate in a bond issue worth 7m euros.

"QVT has disagreed in principle, asked for insolvency, but I am not ruling out their participating at the last moment," said Simion.

The bond issue started being prepared in February and was finalised after Q1 sales showed a 40% drop, to 23.5m euros, and debts reached 5.4m euros.

The company’s management says shareholders agree with the bond issue, expecting a subscription rate of at least 50%. "If the bond issue is approved, there will be no more questions about the company’s viability for a year and a half," explains Dragos Simion.

A capital injection of around 3.5m euros by shareholders will allow the company to attract new financing lines from banks and apply a business plan to survive during recession.

At the same time, Simion reckons players in this field will incur considerable losses this year and any of these companies may be forced to exit the market as consumer behaviour changes.

The retail of electronics and electrical home appliances has experienced a 35-40% decline this year, according to market players.

Simion added that, besides the direct financing of the company’s activities, there are other objectives in view as well, such as the company entering new shopping centres.

Flamingo announced as early as last year several stages through which the business will be restructured, including closing down small, unprofitable or low-return stores.  

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