Folli Follie may seek protection from creditors abroad

Troubled luxury jewelry firm Folli Follie Group (FFG) is reportedly seeking judicial protection from its creditors abroad in order to manage the restructuring of loans that have been issued outside of Greece.

The idea gained momentum after the termination of a loan agreement by a foreign creditor, which was accompanied by the forfeiture of a relevant letter of guarantee of the Athens-listed company on August 8, valued at 20 million euros.

This loan has the legal form of a Schuldschein, meaning that it is governed by German law. Folli has another such contract totaling 31 million euros.

The prospect has alarmed Greek banks, which were previously caught unaware when the company, without informing its creditors, entered the pre-bankruptcy process in July, in an effort to protect its assets. Its case will be heard on September 12 in Athens.

According to information, Greek lenders are concerned that if Folli Follie’s case is placed under Luxembourgian jurisdiction, their claims against the company might be undermined.

To prevent this development, they are reportedly considering securing a court order allowing the acquisition or the liquidation of their collaterals, particularly Folli Follie’s 35 percent share in Attica Department Stores.

Legal sources told Kathimerini that this request may be submitted at the September 12 hearing.

Greek banks’ exposure to Folli Follie is estimated at 47 million euros but the firm has many other creditors, including bondholders of two issues: one for 249.5 million euros issued by Folli Follie’s subsidiary in Luxembourg and the other for 150 million in Swiss francs.

In this context, Greek banks will seek to move swiftly to avoid being included in a group of creditors with aggregate demands of 550 million euros, where any restructuring of loans could mean accepting deep haircuts and a loss of their legal rights in Greece.

According to sources, economic prosecutor Yiannis Dragatsis is examining the decisions of the Capital Market Commission (CMC) which slapped the company and nine board members or officials with a fine of 4.02 million euros for market manipulation and violation of rules regarding data submission in early August.

The prosecutor may also investigate possible delays by the CMC in suspending trading of the company’s shares.