By the end of July the question of whether Agfa will or will not continue to be a viable entity should be answered.
According to Bing Liem, president and CEO of AgfaPhoto North America, the insolvency administrator in Germany must present a recommendation to the court as to whether to accept a go-forward plan for AgfaPhoto GmbH, the parent company, or, in the worst case scenario, suggest a dissolution.
Bing, and no doubt his counterparts from about 32 other Agfa sales operations located throughout the world, have been submitting plans, programs and projections to the administrator in Germany.
According to Bing, by German law, the administrator must report back to the court within 60 days of the insolvency filing with his findings and recommendations. The filing was done on May 25. The 60-day clock ends on July 25 but, according to Bing, the court could conceivably extend that deadline.
The announcement at the end of May that AgfaPhoto GmbH, Germany, filed for insolvency came as a big surprise in an industry small enough that one seldom gets surprised. There were no whispers in the wind on this one. Except for those few at the highest levels in German headquarters, what was going on behind the scenes was held completely under wraps.
Why was it kept so quiet? In an interview published in the Die Welt (The World), a major German daily newspaper, on June 21, (and freely translated by a member of Bing Liem's staff), Hartmut Emans, controlling shareholder of AgfaPhoto GmbH, stated, "everyone was confident that a solution to the financial situation could be reached and going public earlier could have aggravated the problem solving."
Even Bing Liem admits to being blind-sided on this one. There was little time to prepare for the crises but within a few days Bing issued a letter stating, "We are proceeding in a business-as-usual mode with no interruption in the delivery of products and services… We will not reduce our commercial activities…"
That Agfa was involved in an insolvency only six months after there was a management buyout of the consumer imaging operation from Agfa-Gevaert, is a shocker. We were told how well financed the new firm was and that the future was a rosy one. In the June 21 Die Welt interview, Hartmut Emans was asked for the reasons for the insolvency. His answer shed only a little light: (as translated) "In March AgfaPhoto GmbH still had €30 million as bank balance. Every spring the company has a significantly increased need for funds—for season reasons. In addition, money that had been promised by contract were not paid since April… For liability reasons an existing credit line couldn't be used. The consequence was illiquidity."
The answer somewhat begged the question and suggested other questions. Even Bing was not sure as to what happened. As to Agfa's assets, Bing said that the firm has a world-wide lease portfolio of €200 million and that overall Agfa assets exceed its liabilities—an unusual ratio in an insolvency.
I honestly do not have the credentials to understand the intricacies of the Agfa situation. As reported by Don Franz, in Photo Imaging News, a keen observer of international matters in the photo industry, the buyout of Agfa last November was set at €112 million, subject to an audit at closing. In other words the final-final price was yet to be determined.
From my vantage I see the whole event as a game of chicken and a ploy to get a better final-final number. We'll see. It's certainly hardball. In the meantime, the entire Agfa family is being affected with the potential of undermining customer relationships that have taken years to develop.
While one could hardly blame him if he chose to be unavailable until the matter was settled, Bing has taken the opposite stance. He has had 'town meetings' with his personnel and so far has held three conference calls to 140 people in the U.S., Mexico and Canadian Agfa companies under his control. He agreed to meet with me and answered all the questions he knew answers to.
He made it clear that AgfaPhoto U.S.A. was not involved in the insolvency (legally, that is) and that there has been no interruption in the business of Agfa. There were only a few days when orders were held, but all orders have been shipped and there is a steady flow of consumables to the field from the firm's two warehouses. Incoming shipments from Germany are on schedule. He said that North America was on track to increase sales by 20% over last year.
He indicated that existing customers have been "…very supportive. We haven't lost any customers among the independents, major mass retailers or buying groups." He said he even received email of support from competitors.He refers to the few days of uncertainty following the announcement of the German insolvency as "speed bumps."