Due to the bankruptcy offer being rejected on Monday, liquidation proceedings will be initiated at Tungsram, however, the company will continue production, but has announced a collective downsizing of 750 people, the company informed MTI on Tuesday.
The six-month statutory deadline for the bankruptcy proceedings ordered in the spring expires in mid-November, but after EXIM Bank rejected Tungsram’s second bankruptcy settlement offer on Monday, the liquidation of the company will begin, which the court ordered ex officio.
According to the company’s intentions, it will continue to operate during the liquidation procedure, but due to legal requirements, on Tuesday, it announced the collective dismissal of 750 people at the relevant government offices, according to Tungsram’s announcement.
As they write: the representatives of Tungsram and the present creditors were “shocked” that EXIM Bank voted no, and thus “made it impossible to reach a bankruptcy settlement” at Monday’s second bankruptcy settlement hearing, at which the company submitted a revised bankruptcy settlement proposal. A valid settlement could not be reached without EXIM Bank’s yes vote, despite the fact that the majority of unsecured creditors voted for Tungsram’s repayment proposal at the first bankruptcy settlement hearing.
Tungsram’s legal team is currently working to deliver the necessary documents to the court, where a liquidator will be appointed, whose duties include the sale of the company’s assets. The management of Tungsram intends to fully cooperate with the liquidator, until then the company operates under the supervision of the trustee appointed during the bankruptcy proceedings.
In the announcement, it is stated that the company “has done everything possible to reach an agreement with its creditors and pay off its debt” to its suppliers, which are mostly Hungarian SMEs. That’s why he recommended that each creditor would pay 100 percent of its debts up to HUF 10 million, but EXIM Bank’s action prevented this, for which “Tungsram expresses its regrets to all its creditors”.
Tungsram expected that “a clean legal environment would be created with the acceptance of the bankruptcy settlement”, because the investors with whom the management held promising negotiations expected such an environment. This was not realized because of EXIM Bank, but the company’s management believes that, due to the interests of creditors and employees, a continuously operating company represents more value even in a liquidation situation than if only used machines could be sold, they wrote.
The company’s goal during the liquidation procedure is to reach an agreement with the creditors and recover from the liquidation, the legal possibility exists for this in the procedure. According to Tungsram’s intentions, it will continue to operate, take orders from its customers and pay the suppliers who provide the materials and services necessary for sales.
According to the announcement, thanks to the organizational transformations started in the past period, smaller subsidiaries have been established or are being established, which provide the opportunity for Tungsram’s “healthy business branches to remain alive”. Smaller companies are more attractive to investors, and if these investors can provide capital to the companies, then “workers can be employed in factories that can be operated profitably.”
Negotiations with such investors, such as the Swiss Business Creation, continue. However, in the absence of a bankruptcy settlement, successful negotiations with investors became significantly more difficult.
Due to these circumstances and the uncertainty normally associated with liquidation, Tungsram “must remain flexible and take into account all possibilities”, the company stated in its announcement, adding that it was, therefore, “forced to prepare for the worst case” to announce group downsizing at the relevant government offices on Tuesday morning. intention for 750 employees.
The company emphasizes: the notification is a “necessary step, but only a declaration of intent”, which is required by law. The decision is not final, its implementation is not mandatory.
The company also informed the trade unions and the employees about the announcement. Tungsram is doing everything in order to avoid downsizing and is preparing for investors to continue to employ the workers in the newly created subsidiaries, the company’s announcement reads.
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