A Belgian court today granted troubled software vendor Lernout & Hauspie Speech Products NV (L&H) temporary bankruptcy protection under that country's laws, after which the company quickly announced that it will lay off 1,200 employees within the next three months.
It was the second bid by L&H for concordaat, the Belgian equivalent of Chapter 11 bankruptcy protection in the U.S. The business court in Ieper, Belgium, rejected the first request last month but today granted L&H a six-month "observation period" in which the company is supposed to develop and fully implement a restructuring plan.
The Ieper court, which held a closed-door hearing on the new request two days ago, also appointed three trustees to work with L&H's management and oversee the company during the next six months. John Duerden, L&H's president and CEO, said in a statement that the court's decision gives the company "sufficient legal protection to implement a recovery plan."
"We've been given concordaat on a six-month provisional basis. During this period, we believe we can develop a recovery plan. That is all that I can confirm at this moment," said an L&H spokesman. L&H plans to hold a news conference in Ieper on Monday to flesh out the details of its recovery plan, he said.
An immediate step will be the layoffs announced today, which are due to be completed by the end of March. L&H is undertaking the job cuts "with regret," Duerden said. But he added that company executives "were unable to identify any alternatives to this measure" after analyzing L&H's financial resources.
Belgium-based L&H, which has its U.S. headquarters in Burlington, Mass., has already been operating under Chapter 11 protection here since late November. The vendor of speech-recognition technology ran into financial trouble last year after questions were raised about some of its reported sales to customers in Asia.
The questions prompted the U.S. Securities and Exchange Commission to launch an investigation of L&H's business and accounting practices. The company also conducted its own internal audit, which found "serious problems" inside the
company -- including the discovery that $100 million was missing from its Korean subsidiary.
Under the Belgian concordaat law, L&H can withhold payments for six months on a $400 million loan that it received last May from a group of banks to help fund the acquisition of Dictaphone Corp. The banks had originally requested the company be granted protection for just two months by the Ieper court.
L&H said the court could extend the concordaat protection for another three months after the initial period expires. The company added that it plans to propose a "retention plan" for its remaining employees by the end of this month.