The management board of German gravure giant Schlott Gruppe announced yesterday that it was unable to continue trading the company as a going concern.
In a statement, the board said: "Following the breakdown of negotiations with one of the company's investors at the end of last week, proposals put forward at a meeting with the company's banks for the purpose of securing additional funds for the sustained financing of Schlott Gruppe AG today also failed. Thus, the continuation of Schlott Gruppe AG as a going concern is no longer viable.
"The Management Board of Schlott Gruppe AG must now swiftly assess the possibilities of rescuing the company by way of insolvency proceedings in order to secure as many jobs and assets as possible and ensure that competition within the market is safeguarded."
According to the company's 2008/09 annual results, its turnover fell 22% to EUR 365.4m (£305.8m), while its net loss increased from €16.8m to €23.6m.
Meanwhile the company had combined liabilities of €414.8m (equity €130.9m, bank liabilities €173.1m, other liabilities €110.8m).
The move marks a significant development in the european gravure market, which has suffered from overcapacity for years, as it is the first time a major european group has failed to refinance its debt and been forced to turn to insolvency proceedings.
Nicholas Mockett, partner at Moorgate Capital, said: "This is a big company to have failed. Germany is seen as a strong economy in Europe so other printers need to take notice. It sounds as though the banks have asked shareholders to inject a level of new equity, which the shareholders have not been prepared to go to.
"The company is going through a (German) administration process but it is unclear if this will result in a liquidation. The company would still need finance to function if it emerges from this as some sort of going concern and its unclear if the present banks are likely to provide this.
"I suspect the competitors would be unlikely to buy the business as a whole - given market conditions - but may purchase some assets."
Schlott's failure to refinance with either its equity or debt providers is in marked contrast to the attitude taken by investors and finance providers in the past, as whenever a print group has failed to receive the ongoing support of its investors, the banks have been happy to step in and take ownership via a debt-for-equity swap, as was the case with Polestar in 2006.
