TCL's European venture files for insolvency
TCL Multimedia Technology Holdings, the world's biggest television maker by unit sales, said its European business had filed a declaration of insolvency because it was unable to settle outstanding debts.
TCL Multimedia's failed venture highlights setbacks for some mainland household names that may have been too aggressive when pushing for expansion in overseas markets.
Lenovo Group only started to show signs of recovery recently from the strain of its US$1.25 billion purchase of IBM's computing business in 2005 after making some restructuring efforts including layoffs.
TCL Multimedia has been burdened by the European business it inherited from a venture with Thomson Group, as consumers have been buying flat-panel televisions rather than the bulkier cathode-ray-tube models.
The Hong Kong firm's losses widened to HK$2.7 billion last year from HK$692 million in 2005 due to higher restructuring costs in its European operations.
TCL Multimedia yesterday said: 'The insolvency filing of the European venture is a significant step towards the company's recovery and turnaround in the future. As the operations of the European unit have caused significant losses to the company in recent years, the insolvency filing will provide closure to the company's involvement in the venture.'
Despite negotiations with creditors on debt reduction since March, the European venture remained unable to settle a number of outstanding claims, prompting it to declare insolvency, TCL Multimedia said.
'A judicial liquidator appointed by the French court will take control over the European unit within a week to 10 days after the filing,' it said.
'The liquidator will then be the sole person responsible for the liquidation.'
TCL Multimedia said last week it planned to raise HK$780.6 million by selling 1.95 billion rights shares at 40 HK cents each.
On Wednesday, the company said it planned to raise US$140 million by selling convertible bonds to repay debt.
Deutsche Bank had secured subscriptions for at least US$300,000 worth of the issue, and the bank may find other independent buyers for the bonds.
Shares in TCL Multimedia fell 1.75 per cent yesterday, closing at 56 HK cents.