LID U.S. Files for Chapter 11

L.I.D. Ltd., NY filed for Chapter 11 relief in New York. LID has been conducting debt reduction negotiations with four of the banks it works with in the U.S. It is understood that refusal of one of the banks to allow the company to withdraw from its accounts triggered the action. LID, a DTC sightholder owed by the Elishayov brothers, is believed to owe the banks about $40 million.

“For the past few months LID, one of the world's largest manufacturers of polished diamonds and diamond jewelry, has been negotiating with four banks it has worked with in the U.S. regarding a plan for debt reduction while maintaining its full array of securities,” the company said. These banks are believed to include HSBC, ABN AMRO, Sovereign Bank and Bank Leumi.

“Following a disagreement on a restructuring plan on the part of some of the banks and as a result of a unilateral step taken by one of them, the company had no recourse but to file a Chapter 11 petition with the relevant U.S. bankruptcy court.”

“2006 is considered one the worst years for the diamond and jewelry trades in the U.S. Nevertheless, LID did manage to reduce its debts to U.S. banks during this year by some 18 million dollars plus interest,” the company added.

According to sources, LID’s bank debt in the U.S. is about $40 million and the trade is owed tens of millions of dollars. No confirmation of this figure could be obtained at press time.

The company has recently been reorganized, with changes in its managerial team and modified sales targets. According to the company, its debts to suppliers are “small scale” and the remainder of its debts is to banks only. The company will continue operations and deliver diamonds and jewelry to clients.

Jewelry manufacturing continues by a sister company in India operating a plant employing over 1,000 workers.

The restructuring program involves a refocusing of the jewelry line on the needs of independent jewelers, away from mass retailers, which will enable the company to sell higher margin items.

LID has retained the services of Tel Aviv law firm Amnon Shibolet, Itzhak Zisman as well of Benny Ushman, former Union Bank of Israel CEO to represent its interests.

“It should be noted that a similar action has been taken recently by M. Fabrikant & Sons Inc., one of the largest manufacturers of jewelry in the U.S. trade, who filed a Chapter 11 petition which was approved by the court three months ago,” LID stated.

The reference to Fabrikant in LID’s statement is understood to be motivated by the belief that “nervous banks” triggered the demise of the company. Whether that was the case with Fabrikant, or with LID, remains to be seen.