Mondi flops for Investcorp

24 September 1999
FINANCE

Investcorp, the Bahrain-based investment bank, has confirmed that its Munich-based subsidiary Mondi, the international designer, manufacturer, wholesaler and retailer of women's clothes and accessories, is in preliminary receivership.

'It filed for bankruptcy last Friday[3 September] and the receivers have moved in to do what is effectively due diligence,' says a source close to Investcorp. 'We are expecting them to report on 20 September.'

Investcorp and its clients initially took a50 per cent stake in Mondi in December 1992, before buying the remaining equity from the founders of the business the following year (MEED 8:1:93). The source says the bank has invested a further DM 200 million ($107.1 million) since its acquisition.

Mondi has not been profitable since 1994, with losses reaching a peak in 1996. A new long-term strategy was developed and Peter Littmann, ex- chief executive officer of Hugo Boss, was appointed executive chairman in July 1997. Losses were reduced in 1997 and 1998, but sources say the company took the view that the market was becoming increasingly competitive. They say that the business plan presented to Investcorp in April was viewed by the bank as having high implementation risks and funding costs, while offering returns not commensurate with the risk.

'The point was reached at which Investcorp could not justify further investment in a company that was still not profitable,' says one source. 'Investcorp has simply stood back from the business.' Attempts to find a strategic partner or purchaser for Mondi failed, and with Investcorp unwilling to risk additional capital, Mondi filed for bankruptcy.

The source says Investcorp is confident that its highly-valued client franchise will be unaffected, as the investors in Mondi were regularly made aware of the business' predicament. He adds the developments will have no negative impact on Investcorp's financial performance in 1999: 'Provisioning for this eventuality has been careful and consistent, profits will not be effected.' One Bahrain-based broker agrees and says that there is unlikely to be any negative impact on Investcorp's share valuation.

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