The Federal High Court Lideta Civil Bench suspended the foreclosure of Holland Car Plc. (HC) a day before the opening of the auction on Saturday 15th May 2015.
The pioneer car assembly that was declared bankrupt in late 2012 has been up for auction by a liquidity supervision commission that was instated by court order.
Sources told Capital that the court suspended the auction process on Friday May 15, while the bid was expected to be opened on Saturday morning at Zemen Bank’s headquarter, which is a major creditor for HC.
General Manager of Holland Car and one of the two shareholders of the company, Tadesse Tessema (Eng.), who returned to Ethiopia on Tuesday, May 12 after two and half years, appealed to the High Court to suspend the foreclosure. Tessema said that the court accepted his claim a day before the opening of the auction.
Tadesse told Capital that the court’s decision warrant that suspends the auction was issued on Friday afternoon.
The general manager returned to Ethiopia after the Ministry of Justice gave him guarantee that he would not be tried and should come back to calm the situation that occurred after the company’s announcement of bankruptcy. Tadesse, who was in the Netherlands, has submitted a recovery proposal to the liquidity supervision commission aiming to revive the company. At the same time, he was discussing the plan with the Ethiopian embassy at Brussels, Belgium and had sent a letter to the Prime Minister’s Office.
At the press conference held on Thursday, May 14 he said that he returned back to his country with the government’s support.
Tadesse told Capital on Friday that he will start discussion with relevant stakeholders as of Saturday, May 16 to find possibilities to settle outstanding debts.
The proposal Capital obtained about two months ago stated that the company got six million birr injection from a foreign source to reinstate the assembly which is located in Mojo town, 75km east of Addis Ababa.
“We, as shareholders and a visionary company, recommend the foreclosure 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 further 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 only can pay for the whole debt.
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.
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.
During the ten years it was active in business, Holland Car had made a name for its Abay, Tekeze, Naomi and Awash automobile brands.