CG Hungary liquidation proceedings initiated
Hungary: CG Electric Systems Hungary Ltd. (formerly Ganz) has been declared insolvent.
Image for illustration purposes
Hungary: CG Electric Systems Hungary Ltd. (formerly Ganz) has been declared insolvent.
The matter has been referred to the Hungarian Metropolitan Court in Budapest for a liquidation decision and implementation. The decision was granted on 7 July 2020 and will be enforced and effective following the publication thereof in the relevant Hungarian gazette.
The liquidation decision in Hungary follows the decision of the Belgium courts earlier in this year to liquidate the CG Power Systems and CG Holdings business entities in Mechelen. This Belgium decision also had an impact on the CG factories in Ireland and Indonesia.
The former Ganz factory had been renowned for its well engineered, exceptionally sturdy and robust products. In 1885, the Ganz factory produced the first transformer in the world.
CG Hungary, lead by István Szebdrödi, established its operations in three locations. The CG factory in Tapioszele, some 98 km from Budapest, produced power transformers, rotation machines and GIS switchgear whilst transformer tanks and other steel structures were manufactured in Szolnok. The switchgear and steel structure operations had been terminated for some time prior to the liquidation decision. The EPC T&D turnkey and contracting division were based at the HQ offices in Budapest.
Szebrödi was appointed in 2017. Prior to his appointment, Szebdrödi had been the GM for the rotating machines business unit.
The Indian based Crompton Greaves bought the Hungarian Ganz factory in 2006 as part of their international expansion program. It was common knowledge within the industry that the Hungarian operations had been struggling for years. Efforts to restructure the business and return to profitability, or sell the business was not proven to be successful.
Yet, when the restructuring of the Hungarian switchgear operations did achieve success, a decision to lay off workers and close the switchgear factory, so as to enable the Indian switchgear factories to serve the global markets, was enforced and implemented.
Efforts to sell the Hungarian business in 2017 to Ganz Villamossagi Zrt and Alestor Holdings were unsuccessful. This deal, estimated to have been worth $43 M (€38 M), and which excluded the switchgear business, was extended several times but never concluded. The deal was terminated in May 2019. Subsequent interest and efforts by a Germany based private equity investor to buy the struggling non-Indian based CG factories also did not yield results. The investor withdrew from the process after their due diligence had been stopped mid way by a unilateral Indian decision.
It was a public secret that the Hungarian operations would not survive long without the financial support of either the Belgium or Indian entities. A bail out from the Hungarian authorities was not possible.
The financial turmoil at CG India following the widely publicised allegations of fraud and subsequent Board purge had a negative impact on their creditworthiness and ability to secure additional international funding to bail out Hungary.
The Belgium entities, working under instructions from India, had for a long period of time acted as a financial guarantor for CG Hungary. The liquidation of the Belgium entities implied it was simply a question of time before Hungarian liquidation proceedings would be initiated and implemented.
It is, however, understood that the Hungarian Government has declared the factory a strategic asset and will implement steps to take over the company. The Hungarian Development Bank still holds a substantial loan.
Further information is awaited.
Author: Chris Gerber
*The opinions expressed in this article are those of the author and they do not necessarily reflect the opinions or views of the Transformers Magazine and Merit Media Int.