A FINALISED ‘take it or leave it’ rescue plan for Orphanides Supermarkets is to be put to suppliers sometime in the next few days, and its rejection could spell the demise of the debt-ridden company.
A draft of the plan, drawn up by the company’s external auditors KPMG, was yesterday presented to the chain’s suppliers and to representatives of the Bank of Cyprus.
KPMG’s sustainability report is said to envisage the continued operation of the company for one to two months, by which time it should become apparent whether an “administrative restructuring” can keep the chain afloat.
Under the plan, priority would be given to repaying suppliers, with the rest of the revenues going toward paying salaries, the electric bill and other essential services.
It’s also understood that the current owners would be excluded from decision-making.
During yesterday’s meeting hosted at the headquarters of the Chamber of Commerce and Industry (KEVE), affected suppliers raised a number of queries and additional proposals.
KPMG said it would take these into consideration and formulate a final plan, to be put before suppliers and to the banks sometime over the next few days.
According to Panayiotis Loizides, KEVE secretary general, the finalised draft would be of the “take it or leave it kind.”
If the suppliers don’t go for it, then matters would take their course, he said, alluding to a winding up of the company.
“The plan is a last-ditch bid to save the company,” added Loizides.
Since the announcement that the chain was going into receivership, various proposals have been put on the table to keep the company running. The future looms uncertain as the company’s two main creditors, Popular Bank and the Bank of Cyprus – collectively owed at least €140 million – rejected the appointment of an administrator to oversee a restructuring.
Orphanides additionally owes €85 million to suppliers and €10 million to other creditors, and posted a loss of €17.7 million for the first three quarters of the year.
The company’s largest commercial creditors then proposed that a strategic investor take over and, failing that, the chain would be placed in administration.
But there is broad consensus that the company may be unsalvageable, and that the banks and suppliers would recoup their debt only if the chain’s assets are sold. The chain’s real estate is said to be worth about €340 million.
Another pitch would have the suppliers jointly buy out the company and use future revenues to gradually settle what they are owed. An initiative has been undertaken by the company Cypra Ltd for the creation of a new chain bearing the name “Orfanides Nea Epohi” (Orphanides New Era).
In the meantime a number of major suppliers are reportedly planning to sue the company for compensation. Others are invoking clauses in their insurance contracts relating to the company’s failure to pay them for a period more than six months.
Under these contracts, merchants are bound to stop supplying goods if they have not received payment for over six months.
Some 1,250 people are on Orphanides’ payroll, while 2,000 more work on the supply end. The closure of the island’s largest supermarket chain could translate into a €400 million loss for the economy, according to one estimate.
Cyprus Mail
