© anton andronov dreamstime.com Electronics Production | January 26, 2018
Litarion GmbH initiates insolvency proceedings
Electrovaya’s German subsidiary, Litarion GmbH, has commenced a voluntary structured insolvency process.
The process is expected to result in the appointment of a provisional receiver/liquidator of Litarion and its property by the German court, a press release reads. As previously reported by the company, Li-Tec Battery GmbH, the owner of the premises occupied by Litarion, notified the company that it would terminate the lease as at January 31, 2018 unless certain conditions were met. While the Litarion intended to maintain the lease, the company’s cash flow was materially negatively impacted by the demands and garnishment processes initiated against it by the landlord. With support from Electrovaya, Litarion attempted to resolve the dispute with its landlord but negotiations ultimately proved unsuccessful, and it was determined that the only viable alternative was to have the managing directors of Litarion voluntarily place it into preliminary insolvency proceedings. The company expects to record a non-cash charge in the second quarter of fiscal 2018. It is expected the German court will shortly assign a preliminary insolvency manager to manage the transition of the operations and work to maximize value for the company’s creditors and shareholders. While current circumstances on the ground in Germany dictated Litarion enter into this process, Electrovaya believes that it ultimately no longer needs its own contract manufacturing facilities and, given alternate supply arrangements is in place, the company expects that the proceedings will not impact the its ability to continue to fulfill current and future customer orders for its customized cells, custom modules and battery systems. As previously disclosed, large battery orders from Litarion's OEM partners and other customers have taken longer than expected to materialise. As a result, the cost of maintaining Litarion's infrastructure negatively affected Electrovaya's financial results and liquidity position. The Litarion insolvency process is expected to reduce the company's overhead expenses.