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Shareholders of the pioneer automobiles assembler in Ethiopia, Holland Car Plc. (HC), have submitted a proposal to an appointed liquidity supervision commission requesting a second chance for the assembler to resume its operation.
The commission that was established under court order to supervise and liquidate the assets of the bankrupt assembler, has received a seven pages proposal on Monday March 16 that detailed measures for a possible recovery.
The two shareholders of Holland Car Plc., Trento BV and Tadesse Tessema (Eng.) who was also general manager of the company, have proposed that the company will settle all claims of creditors and clients within a year period if it is given a green light to commence assembling.
“We are presenting a proposal in which the loss of all creditors can be recovered within a period of 12 months after approval,” the owners pleaded for an opportunity to get back to work again.
According to the recovery plan, the car assembler will secure a capital injection from a foreign source which it says is adequate to commence the operation.
Holland Car was closed down in late 2012 after it declared bankruptcy due to lack of finance.
After the closure, creditors, including Zemen Bank, clients and other stakeholders including employees have pressed charges to reclaim their money from the company.
A court had instated a liquidity commission to verify the bankruptcy declarations of Holland Car. In the meantime, Zemen Bank had filed a claim to foreclose the company to secure its money. Nevertheless, a Cassation Bench rejected Zemen Bank’s request few weeks ago as redeeming can affect the interest of other stakeholders.
The recovery plan crafted by the two shareholders who have equal shares in Holland Car, stated that the company will start operation if the court accepts the proposal.
“We need another chance to settle the claims,” Tadesse told Capital on Friday March 20, 2015 by telephone from the Netherlands, where he resides.
He said that since the company halted its operation due to a financial crunch, the share holders have been assessing ways to revive it. “A year ago, we had submitted a proposal to Zemen Bank,” Tadesse said.
Holland Car made a request to Zemen Bank through its mediator, Professor Alemayehu Geda, an Economist at Addis Ababa University, for additional capital injection or authorization of a loan to revamp the company again; however, the bank was not willing to give more money to the company.
“The shareholders of HC have been studying various mechanisms to settle all debts for the satisfaction of all stakeholders and to have the bankruptcy procedure stopped, and give the possibility for the company to restart,” the recovery proposal reads.
“Based on our assessment, this can only be achieved if we find an external source who will inject finance which will be used to cover the whole cost for assembling and selling the products that are currently in stock and new cars. Once the factory begins functioning and the cars are assembled, the sale of these cars will cover the whole debt the company owes,” it further stated.
According to the proposal, the company has now got six million birr injected from a foreign source to reinstate the assembly, which is located in Mojo town, 75km East of Addis Ababa.
“We, as a shareholder and a visionary company, recommends the bankruptcy process to be discontinued. We strongly believe that the company will have value in the market if it only starts functioning,” the shareholders stated in their proposal.
The proposal mentioned that if the semi-assembled cars are finished and the various spare parts that are in stock are assembled to an end product, sales of these cars can pay for the whole debt.
The proposal takes into consideration the interest of all parties involved and current situations, the shareholders had noted.
The assignment of an independent manager by the commission during the recovery period is another offer listed in the recovery proposal. The company cited increment in the transportation cost of parts, price hikes by the original suppliers on spare parts, delays to access foreign currency for letters of credit (LC) from local banks, and customs’ charge increases are some of the major factors that have led Holland Car to default on its loan payments and deliveries. The shareholders had acknowledged that the company has an outstanding debt of 97 million birr that includes 10 million birr tax, 31 million birr bank loan, and 22 million birr customers’ advance payments. The total asset value of HC at the time of inspection by the Liquidity Commission is close to 160 million birr. Currently, 235 cars are stranded at the company’s assembling plant.
The proposal puts condition for a possible resumption of operation stating to sign a legally binding contract among all involved parties and Tadesse Tessema must be guaranteed free entry to Ethiopia.
Tadesse told Capital that the shareholders look up to a kind cooperation from the government. “We have submitted the letter to Prime Minister Hailemariam Desalegn via the Ethiopian Embassy in Brussels to get government support to enable us to settle the problems that crippled the company.”
Holland Car was established in 2005 through a joint venture between Tadesse Tessema and Trento Engineering, a Dutch company, with an initial capital of 11 million birr equally contributed by both shareholders to supply assembled vehicles for local and export markets. The company had 250 employees. During the ten years it was active in business, Holland Car had made a name for its Abay, Tekeze, Naomi and Awash automobile brands.