Elsa derailed by closed credit lines

Elsa, the German graphics board maker, will decides this week whether or not it files for insolvency, following the withdrawal of credit facilities worth eur 38m on Friday, February 15.

A member of the loan syndicate of eight banks has also told Elsa that it will not extend credit facilities worth eur 10m when this line expires March 31, 2002. In addition it is expected to make an unspecifed payment to the syndicate by Friday - the sub-text is that it unable to make this payment.

Without credit, Elsa looks effectively paralysed. Unless a buyer turns up toute suite, the company has little option but to set the insolvency wheels turning.

Under German law, the management board of the company has to resign, making way for a new team. The decision to liquidate, sell assets, or carry on business as usual, is made by this new team. Of course, the latter is contingent on the company's ability to secure fresh debt financing.

Elsa last year stopped selling and marketing graphics boards in the US, withdrawing to its European redoubt. As well as graphics boards, the company also produces several connectivity hardware products. Founded in 1980, the company employs 600 people.