I'm glad I own the Open Book rather than the Kurzweil 1000. Lernout
produces the Kurzweil scanning system. When they finish paying off debts,
there may be nothing left of the company.
kelly
The Wall Street Journal
April 27, 2001
Lernout to Explore Selling Most Assets
To Help Repay Its Mountain of Debt
By JOHN CARREYROU
Staff Reporter of THE WALL STREET JOURNAL
The new management of Lernout & Hauspie Speech Products NV has all but
given up on trying to keep the company alive and has asked investment
bank Credit Suisse First Boston to explore a sale of most of its
assets to repay its mountain of debt, according to people familiar
with the situation.
The move is a likely prelude to the disintegration of L&H, as recently
as a year ago a highflying Nasdaq company and the pride of Flanders,
Belgium's Dutch-speaking northern half. The company, which makes some
of the most advanced speech-recognition and translation software,
filed for bankruptcy-court protection in the U.S. and Belgium in
November amid a mushrooming accounting scandal that erupted last year
over reports of inflated revenues.
Until recently, L&H's new chief executive, Belgian Philippe Bodson,
had been frantically working to turn the company around. But the
company's huge liabilities -- more than $600 million in debts -- and
the crash in technology stocks, which has severely devalued L&H's core
assets, are making that task close to impossible, the people familiar
with the situation said.
Mr. Bodson, who took the helm of L&H in January, is expected to tell
shareholders at a special meeting Friday that the chances of
maintaining L&H as a going concern are slim, the people said. As many
as 5,000 shareholders are expected to make the trip to Ieper, the
small Flemish town where L&H has its main headquarters. The meeting is
the first shareholder gathering the company has held since the
accounting scandal first came to light.
The decision to sell most of L&H's assets is bad news for the
shareholders, who have already collectively lost billions of dollars
from the collapse of the company's stock. L&H's shares were delisted
from the Nasdaq Stock Market in November and now trade over the
counter at a fraction of what they were worth a year ago.
Since bankers now deem L&H's assets to be worth far less than its
liabilities, L&H shareholders are likely to be left with nothing, once
the assets have been sold and the proceeds used to repay creditors,
the people familiar with the situation said. Deminor, a Belgian
concern that has taken up the cause of thousands of L&H shareholders,
has been trying to avert just such a scenario. But L&H is under
intense pressure from banks to which it owes hundreds of millions of
dollars. The businesses to be sold include a series of companies L&H
acquired when its stock was flying high. The biggest is Dictaphone
Inc., a maker of dictation devices founded by Alexander Graham Bell.
L&H bought Dictaphone for $504 million in stock in March of last year
at the height of the technology bubble. Dictaphone's original owner,
the buyout firm Stonington Partners Inc., has since tried to wrest the
company back from L&H through the courts, unsuccessfully.
_________________________________________________________________
Lernout & Hauspie: Long Road of Trouble
June 30, 2000: Lernout & Hauspie reveals nearly all of its overall
growth in recent quarters came from South Korean and Singaporean
business.
Aug. 8: Some Korean customers claimed by L&H say they do no business
with the company. Others said their purchases were smaller than L&H
reported.
Sept. 21: SEC probe of L&H's financial statements is disclosed.
Nov. 9: L&H says it will revise financial statements for 1998, 1999
and the first half of 2000 to make up for past accounting "errors and
irregularities"; Co-chairmen Jo Lernout and Pol Hauspie resign their
executive posts; trading of L&H stock is suspended.
Nov. 29: L&H files for protection under Chapter 11 of the U.S.
Bankruptcy Code, after $100 million is discovered missing in the
firm's South Korean unit.
March 4, 2001: L&H announces co-founder Jo Lernout has been forced to
step down as chief technology officer. He was the last remaining
senior executive from the time the accounting scandal broke.
April 27: L&H is expected to announce it will look to sell most of its
assets to repay its debts.
Source: WSJ research
_________________________________________________________________
Meanwhile, in open letters to shareholders published in a Belgian
newspaper Thursday, L&H founders Jo Lernout and Pol Hauspie and former
L&H vice chairman Nico Willaert denied having withheld information
from the company's regular auditor, KPMG , during audits. Earlier this
month, KPMG filed a lawsuit against L&H's former managers alleging
that they "deliberately" provided "false or incomplete information" to
it and conspired to obstruct its audits.
In their letters, Messrs. Lernout, Hauspie and Willaert charge that
KPMG acted not only as an auditor but as a consultant to L&H and, in
this dual capacity, helped craft the financial constructions and
revenue-booking methods that have since come under question. A
spokesman for KPMG said, "We are confident that shareholders will see
this for what it is: a desperate act by desperate men."
Messrs. Lernout, Hauspie and Willaert were questioned Thursday morning
by the Belgian prosecutor investigating the case, according to Belgian
radio. Jean-Marie Coppens, Ieper's district attorney, confirmed that
three former top L&H executives were being questioned by the
prosecutor but couldn't confirm their names. He added that, under
Belgian law, the prosecutor could detain them for as long as five days
if he sees fit.
-- Stefaan Lust and Mark Maremont contributed to this article.
Write to John Carreyrou at [log in to unmask]
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